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Top KPIs Every Law Firm Should Track (But Most Don’t)
Most attorneys review their bank balance and call it a day. A few might open QuickBooks for revenue and expense reports.
But here’s the truth:
If you’re not tracking the right Key Performance Indicators (KPIs), you don’t really know how your law firm is performing.
KPIs are how you turn data into decisions.
They’re what separates reactive firms from strategic ones.
In this post, I’ll show you which KPIs actually matter for law firms, how to calculate them, and what each one tells you about the financial health of your business.
1. Net Profit Margin
Why it matters:
It’s not about how much you earn—it’s about how much you keep.
Formula:
Net Profit ÷ Total Revenue × 100
A healthy law firm should aim for a net profit margin of 20–30%. Anything lower may mean bloated expenses, poor pricing, or efficiency issues.
Tip: If your margin is too tight, audit your fixed costs (rent, software, labor) and reassess pricing models.
2. Revenue Per Employee
Why it matters:
This metric shows whether your team is generating the revenue necessary to justify their salaries and roles.
Formula:
Total Revenue ÷ Number of Employees (including you)
A strong solo practice might average $150K–$250K per person. As you grow, this number helps flag whether you’ve hired too fast—or haven’t delegated enough.
Tip: If revenue per employee is low, consider:
- Underutilized team members
- Inefficient workflows
- Too many admin tasks on your plate
3. Realization Rate
Why it matters:
This KPI tracks how much of your billable work is actually billed to clients.
Formula:
Billable Hours Billed ÷ Billable Hours Worked × 100
A realization rate below 85–90% means you’re losing revenue through discounting, scope creep, or inconsistent billing.
Tip: Review your time tracking and billing systems—especially if you offer flat fees. Time that isn’t captured is money lost.
4. Collection Rate
Why it matters:
Billing is only half the equation—collecting it is where cash flow lives.
Formula:
Collected Revenue ÷ Billed Revenue × 100
If you bill $100K but only collect $80K, your collection rate is 80%—and you’ve effectively given a $20K discount.
Tip: If this number is under 90%, tighten your payment terms, follow up on receivables weekly, and consider automated payment systems.
5. Client Acquisition Cost (CAC)
Why it matters:
This measures how much it costs you to bring in a new client.
Formula:
Total Marketing & Sales Spend ÷ Number of New Clients Acquired
If you spend $5,000 a month on marketing and get 10 new clients, your CAC is $500.
Tip: Compare this to your Client Lifetime Value (CLTV). If you’re paying $1,000 to acquire a client worth only $1,500, your margins are dangerously thin.
6. Average Case Value (or Client Value)
Why it matters:
This helps you understand how much revenue each new client is likely to generate.
Formula:
Total Revenue ÷ Number of Clients Served
This KPI helps you assess the ROI of your marketing, sales, and fulfillment efforts.
Tip: If average case value is lower than expected, consider upsells, expanded services, or bundling options to increase value per client.
7. Operating Cash Flow
Why it matters:
This is how much cash your firm actually generates from running the business—not loans, not draws, not trust funds.
Why it’s different from “profit”:
Profit is an accounting term. Cash flow tells you whether you can pay bills, make payroll, and invest in growth—today.
Tip: Monitor this monthly, especially if you’re offering payment plans or using trust accounts.
What Happens When You Track the Right KPIs?
You stop guessing.
You stop making emotional decisions.
You start making informed moves—like hiring, launching new services, or increasing prices—with confidence.
Tracking the right metrics helps you:
- Predict when you’ll hit cash crunches
- Understand what’s actually working
- Prevent overhiring or overspending
- Set goals that are tied to outcomes, not gut feelings
You Don’t Have to Track It All Alone
Most law firm owners don’t need more reports—they need the right ones, consistently reviewed and explained in plain English.
That’s exactly what we do at Prestige Accounting and Consulting.
We help attorneys:
- Identify which KPIs drive their business
- Review them and use them to make smarter decisions
Book a free strategy session and let’s look at the numbers that will actually move your firm forward.
