Measuring the ROI of Business Development – Even if it’s Possible, Does Anyone Care?
ROI serves as calculation of the capital, time and other resources invested in a service that yields a profitable outcome, and should be measured systematically and deliberately by law firms. While math isn’t necessarily the forte of attorneys and legal marketers alike, times are changing with the legal market shifting from a demand to a supply economy. No longer does the generation of unending call for legal services exist—rather, the landscape of the legal market today is in a downflow with lay-offs and hiring freezes. This compels law firms to change tactics and rid themselves of self-constraints in order to stand out among the pack. There are many well-trained attorneys with legal expertise so how can law departments distinguish themselves? Clients are looking for more in an attorney than just an understanding of the law and a lower billing rate. Other major considerations are client focus, predictability, communication and management of expectations and efficiency, all qualities that remain measurable and can be raised through the use of statistical analysis tools.
Measures of ROI as Relative and Over Time
In its simplest terms, ROI is measured as the (gain from investment – cost of investment) / cost of investment. ROI is a relative, not absolute, measure of performance and serves as a function of the resources available to law firms. A firm can invest x or y to obtain the same results so x and y remain variable opportunities in competition with each other and one firm’s successful outcome is another firm’s failure. In order to determine which is most fruitful, each variable’s ROI must be measured against alternative investments. Moreover, each alternative must be measured over time as a mere snapshot in time remains insufficient to determine the full impact on revenue down the line. For example, a firm that issues a newsletter every month may as a result eventually gain a new client and this time span and the client’s reads should be tracked.
Measure and Report Metrics that Matter
ROI matters and should be measured for such law management and marketing strategies as attorney memberships and legal events for resource allocation and departmental reporting purposes. By measuring internal and external data through statistical analysis, law firms can narrow their scope of vision to the successes and misses.
Memberships and Associations Value Chain
One way law firms can save on resources and stay within the constraints of business development budgets while still maintaining a proactive presence in the legal community is to conduct an audit of its attorneys’ enrollment in bar associations to determine ROI. At the top of the chain in descending importance are attorneys who lead their associations as leading experts and engage in such activities as serving on board committees. Next are attorneys who take advantage of bar memberships to demonstrate their expertise, such as speaking at conferences. At the bottom of the chain are attorneys who are enrolled in associations for the purposes of networking and education and may attend to earn CLE credits. The lower down the chain attorneys go, the more minimal the ROI and while attorneys who use their memberships for updates on the law are certainly benefiting—these expenses should be drawn from education costs as opposed to business development budgets. Moreover, law firms can set goals for attorneys who use firm expenses to attend association meeting, such as targeting particular people and obtaining a certain number of business cards. Thus, law firms can quantify the benefits of paying for bar memberships and make the most of their budgets.
Legal Events and Sponsorships
For educational law events such as seminars and conferences that draw clients, there remains a window in which law firms can count retaining new clients as a result of holding the event. While sponsoring a legal event may not serve as a direct causation of retaining a new client, law firms can determine if such events increase the rate of landing a new client. By tracking the costs of investment in holding the event as well as the number of days it took to close on a client, the probability rate of an event’s influence in generating clientele can be estimated. In turn, a best practice checklist can be created from such data that can target different factors to create the most lead-generating event and invitees who have the most potential to become future clients. If certain factors are found to lead to a higher probability of generating clientele, then honing in on these factors and measuring them can lead to maximum profit.
Measuring Productivity Takes Time
In solving for the highest number of wins at the lowest costs, it is not necessary to be a statistical analyst but it remains imperative to have a methodology in place. Remember to use the following procedures:
1. Plot all activities
2. Plot all practices
3. Track marketer time against all practices
4. Compare to strategy plan
5. Review resource allocation with firm management
The information in this article was derived from a presentation by Timothy B. Corcoran, Principal of Corcoran Consulting Group, LLC.
Summary written by S. Merchant