The Business Case for Law Firm Practice Management ROI

If the equation for return on investment (ROI) equals the gain from an investment, minus the cost of the investment, and in turn divided by the cost of the investment, then the ROI for law firm practice management could exceed 4000%.

This estimate comes from a report published by Blue Hill Research titled Building a Business Case for Law Practice Management. While results can vary from firm to firm, the research relies on generally conservative assumptions and interviews with 45 law firms (with 50 attorneys or fewer) to make a compelling business case for practice management.

Blue Hill Analyst David Houlihan, Esq., who conducted the research found law firms with a practice management implementation reported a reduction in non-billable time of between 4-8 hours. In addition, these law firms have the capacity to operate with “40% fewer support staff than firms without practice management.”

The research provides several scenarios for estimating the return depending on the variables.  On the high end of the estimate, assuming 100% conversion, the business case for practice management looks like this:

Assumptions:

• Median pricing for cloud-based practice management: $45 per month, or $540 per year
• Average estimated billing rate for law firms outside the AmLaw 200: $233.70

Equation:

• Billable hours gained per year: 96
• 96 x $233.70 = $22,435
• Less cost of practice management = $21,895 (the gain from investment)
• $21,895 divided by 540 = 4055% ROI

Even at the low-end of the estimate, and assuming a law firm sees just 25% conversion on its investment the ROI still nets to an impressive 419%.

(click here or image for higher resolution)

It’s important to note this particular equation, only examines gains purely by measure of billable time, where the report also found law firms with practice management solutions function at a ratio of attorneys to support staff of 2.8:1.  The report finds a 40% difference between law firms with and without practice management solutions, which adds up quickly on the median salary of $59,969 for a single legal support person.

The complete report examines the primary law firm business objectives and maps these to the benefits of practice management along eight areas related “to attorney and staff efficiency.” These areas include:

• Client or conflict management
• Scheduling
• Time tracking
• Billing
• Account reconciliation
• Matter management
• Collaboration
• Remote access

The LexisNexis® Firm Manager® team has secured distribution rights to this report after the research had been conducted and published. The team has made the report freely available for download with registration here.  Whether you choose a LexisNexis solution or not, this report is sure to be a valuable resource for making the case for law firm practice management.

If you enjoyed this post, you might also like:
Attorney Time Saver:  Firm Manager Releases Batch Invoicing