Enhancing your legal practice

When was the last time you benchmarked your legal practice?

Benchmarking is the process of comparing your practice against other similar firms in the profession or your local area (external benchmarking), or by comparing your current performance against your historical data or goals (internal benchmarking).

It is an ongoing process that should be carried out at least annually, if not more frequently.

Benefits of benchmarking

Some of the key benefits of benchmarking include:

• Identifying areas for improvement: Pinpoint areas where your practice lags behind competitors or industry standards. This information then informs strategies for improvement.
• Staying ahead of the competition: Identify new trends and best practices that can allow you to maintain a competitive edge in the dynamic legal practice landscape.
• Improving efficiency and profitability: Identify cost-saving opportunities and enhance productivity to boost the overall efficiency and profitability of your firm.
• Setting realistic goals: Benchmarking helps set realistic goals by comparing your performance against other successful practices; or your own past achievements.

How to benchmark your legal practice

There are several ways to benchmark your legal practice:

• Financial ratios: Use financial metrics on an annual basis such as billable hours per lawyer, revenue per principal or, simply income compared to expenses. Compare these ratios against industry benchmarks or similar-sized practices.
• Non-financial metrics: Gain insights into operational efficiency, customer satisfaction, new client acquisition, service quality, employee engagement and personal satisfaction. These metrics may be more difficult to compare against industry benchmarks, but they can still be valuable for identifying areas for improvement within the practice.

How effective is your benchmarking efforts?

• Identify the most critical key performance indicators (KPIs) for your legal practice. What specific data points are you currently tracking in your practice?
• Consistently record and track your practice’s data and performance.
• Have you previously benchmarked your practice against other legal practices in Queensland or your own historical data? If yes, what valuable insights did you learn?
• What challenges do you face in benchmarking your legal practice?

Where to find benchmarking data

Reliable benchmarking data can be difficult to locate. Sample data sizes may be small or not representative of your practice size or practice areas.

Advertisement

• The QLS Annual Report often contains a snapshot of membership, including the number practices by size – sole, micro, small, medium, large or other. It includes demographic data – age, gender and years post-admission.¹
• The Future Ready Report also provides valuable insights across sole, micro and small legal practices capability to deal with disruption.²
• Lexon Insurance makes broad gross fee income data across the Queensland profession available, revealing areas of practice that have reduced, and those that have experienced growth over the previous 12 months.³
• The Queensland Small Business Commissioner publishes a series of health checks including finance, marketing and digital health checks.⁴
• The Australasian Legal Practice Management Association (ALPMA) publishes an annual benchmarking report that compares the performance of legal practices across a range of metrics.⁵
• Practice management software producers often publish industry insights gathered from a cross-section of the profession.

Conclusion

Regular benchmarking is an invaluable tool for legal practices. It aids in the systematic review of performance and identification of areas for improvement.

By leveraging both financial and non-financial metrics, legal practices can ensure their practices remain competitive and positioned for sustained success.

The QLS Practice Advisory Service supports principals of legal practices across Queensland. Our consultants provide guidance on the crucial key performance indicators tailored to the needs of each individual practice.

They also assist in formulating strategic goals and improvement strategies to ensure practitioners are equipped to optimise the performance of their practice.

To further assist the development of your practice, the Practice Advisory Service offers follow up consultations at three, six or 12-month intervals to assist you in implementing and monitoring changes within your practice.

In addition to the QLS Practice Advisory Service, members can access business advisory experts for up to two hours at no cost through the Business Advisory Service by referral from the QLS Ethics & Practice Centre or QLS Practice Advisory Service.

Advertisement

Footnotes
¹ Queensland Law Society, Annual Report 2022-23 (Report, September 2023) 28-29 <https://www.qls.com.au/Pages/Annual-reports/Annual-report-2022-23> (‘QLS Annual Report 2022-23’).
² Future Ready Report (Final Report, March 2023) <https://www.qls.com.au/Content-Collections/Reports/Future-Ready-Report>.
³ See QLS Annual Report 2022-23 (n 1) 56.
⁴ See ‘Resources’, Queensland Small Business commissioner (Web Page) <https://qsbc.qld.gov.au/resources/>.
⁵ ‘Legal Industry Financial Performance Benchmarking’, ALPMA (Web Page) <https://www.alpma.com.au/legal-industry-financial-performance-benchmarking/>.