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#557: KPIs for Lawyers: Measuring Your Law Firm's Financial Health with Bernadette Harris

May 1, 2025

Join Bernadette Harris, a finance coach at Lawyerist Lab, as she shares insights into law firm financial health. Discover how to interpret key performance indicators (KPIs) like net profit margins and utilization rates. Bernadette emphasizes the importance of effective invoicing to improve cash flow and productivity. Learn how understanding revenue by practice area can strategically guide your firm’s future. Get ready for actionable tips that will help you transform your practice into a financially thriving enterprise!

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INSIGHT

Understanding Net Profit Margin

Net profit margin shows the percentage of revenue your firm keeps after expenses.
A healthy firm typically maintains a 20-30% net profit margin.

ADVICE

Include Owner Compensation

Always factor in your own compensation in expenses to avoid skewed profit margins.
Paying yourself fairly gives a clearer and more accurate financial picture of your firm.

INSIGHT

Maximizing Utilization Rate

Utilization rate measures how much of your team's working hours are billable.
For attorneys, a 70-80% utilization rate is ideal to maximize productivity and capacity.

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Unlock a clearer view of your law firm's financial health in the latest Lawyerist Podcast. Join host Stephanie Everett as she dives into the essential key performance indicators (KPIs) that can transform how you understand your practice, guided by the expert insights of Bernadette Harris, Lawyerist Lab's finance coach.

You'll gain practical knowledge about five crucial areas that directly impact your firm's success. Understand your net profit margin like never before – not just the surface numbers, but the true profitability that informs your strategic decisions. Explore utilization rate and discover how to optimize your team's time for maximum productivity. Learn the critical importance of your realization rate and practical steps to ensure you're capturing the revenue you've earned. See how mastering AR aging can directly impact your cash flow and create financial stability. Plus, uncover the strategic advantage of understanding your revenue by practice area, empowering you to make smarter choices about your firm's financial future.

For straightforward, actionable insights into these vital financial indicators – the kind that can immediately help you manage your law firm more effectively – tune in to hear Bernadette Harris share her expertise.

Listen to our other episode with Bernadette Harris:

#457: Healthy Profits: Understanding the Story Your Numbers Tell, with Bernadette Harris Apple Podcast | Spotify | Lawyerist

#523: Financial Red Flags: Are You Hiring Too Soon?, with Bernadette Harris Apple Podcast | Spotify | Lawyerist

#418: More Income, Fewer Taxes, with Bernadette Harris Apple Podcast | Spotify | Lawyerist

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If today's podcast resonates with you and you haven't read The Small Firm Roadmap Revisited yet, get the first chapter right now for free! Looking for help beyond the book? See if our coaching community is right for you.

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Chapters:

(00:00) Introduction

(04:36) Diving into Key Performance Indicators (KPIs)

(06:38) Understanding Your Firm's Profitability: Net Profit Margin

(10:47) Optimizing Team Productivity: Utilization Rate

(15:51) Maximizing Revenue Collection: Realization Rate

(21:21) Improving Cash Flow: Managing AR Aging

(25:36) Strategic Insights: Revenue by Practice Area

(28:32) Working with a Financial Coach and a Special Announcement

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