How To Run and Grow Your Law Firm Like a Software as a Service Company - Part Two - Client Retention and Client Happiness

How To Run and Grow Your Law Firm Like a Software as a Service Company - Part Two - Client Retention and Client Happiness



A paying client is a happy client, right? Not necessarily. Just because your client continues to pay your legal fees doesn't mean they are 1. happy with your services and 2. will be with you for years to come. To ensure consistent growth and prevent failure, you can improve your odds of survival by keeping track of a few key metrics.

For SaaS companies, churn, the amount of customers who leave in a given time period, is the enemy of growth. And the same is true for a law firm. If you are losing clients faster than you are acquiring (and expanding) clients, then eventually your law firm will go out of business.

The best SaaS companies constantly measure customer churn and customer happiness. Why bother? Because in order to grow, you need to increase happiness and increase retention. A happy customer continues to pay (and tell their friends), and thus sticks around a lot longer than unhappy customers. But how do these SaaS companies do this and what can a law firm learn from them?

It all begins with data. If you aren't measuring client retention and happiness, then how can you improve it effectively? Measuring client retention is easier than you may think. All you need to do is keep track of a few simple metrics:

  • Total clients beginning of the month
  • New clients added during the month
  • Lost clients removed during the month
  • Total clients at end of month

Now, unlike most SaaS companies, law firms don't typically add and remove clients each month. So it's best to keep track of this data over a longer period of time, like a year, in order for it to make sense for you. But it starts with monthly measurements, so start tracking it now.

Once you start tracking total client retention you'll be able to easily see if your client base is growing or shrinking. Here's an example using monthly data (again, you may want to use annual data as that's likely more relevant to your firm):

  • 20 clients beginning of the month
  • 1 clients added during the month
  • 2 clients lost during the month
  • 19 clients at end of the month

Your monthly client churn is 10% (i.e. 2 clients lost divided by 20 clients to start with). Assuming you continue the year at this rate, you'll lose a client each month. And, not factoring in client revenue churn, you're likely on a path to going out of business within a year or two unless you fix your law firm.

To make client retention data even more useful, you should also track client revenue retention (i.e. revenue churn), because you may be growing your client base but losing some of your biggest revenue producing clients along the way, which could spell doom and gloom for your firm if you lack a solid financial model to support all those new, lower paying, clients.


1. Acquire new clients, faster.
At the above client churn rate, finding new clients doesn't really solve your problems, but it will at least delay the inevitable. And getting new clients isn't exactly easy-peasy. As mentioned in our previous post, client's cost money to acquire.

So, you could spend more to acquire more clients, but quickly go bankrupt due to your client churn. Your churn has a significant impact on your LTV (Life Time Value): the higher the churn, the lower the LTV. At an unsustainable 10% monthly client churn, your average client will only be with you for 10 months (i.e. 1 / 10% = 10 months)! Now, compare that with a monthly client churn of, say, 2% (or 24% annually) and your average client will stay with you for 4 years! You decide which churn you want.

2. Expand your business with existing clients.
In the SaaS world, this is called negative net revenue churn. A mouthful of jargon, eh? If you've heard the words "land and expand" then you'll know what this is. To combat churn, you can try to increase your revenue with existing clients by offering new services, etc. Of course, you should always aim to increase client revenue when appropriate.

3. Find out why clients are leaving and fix the problems.
Making happier clients is by far the best way to reduce client churn and increase growth. But of course, increasing client happiness/satisfaction is usually the hardest thing to do. How do you measure client happiness anyway? By their smile? By their check size? By the amount of 2am emails they send you? None of the above.

You can get to the bottom of client happiness with a few qualitative and quantitative techniques. Note: This is NOT a quick, one-time fix. These techniques should become part of your law firm's DNA if you want to build a firm that constantly listens to and improves on the client experience. Let's discuss the qualitative techniques first.


Interview clients that left
It's hard to hear the truth, but the truth will set your poor client retention free! Give your past clients a call (and promise you won't bill them for the time! =). Once you get them on the phone ask them open-ended questions like:

  • "What initially drew you to our firm?"
  • "Why did you decide to stop doing business with our firm?"
  • "What, in your opinion, would you have changed with our service?"
  • "What are other firms, like us, doing that you think we should be doing too?"

The list goes on and on. The key is asking open-ended questions and bracing for the truth. Don't get defensive and don't try to win them back. Now's not the time for that. You want to see what went wrong, so you can fix it for future clients. If some of your old clients come back after you've plugged the holes, great, but don't count on it. The point of the calls is to listen and learn. And you'll learn a TON of interesting things on these calls.

You may find that your past client wasn't happy with your billing process. Maybe there are too many steps. Then try switching to something more modern like SimpleLegal which makes managing legal bills a breeze.
You may find that your past client wasn't happy with how you managed your deals. Maybe the constant back and forth of emailing MS Word docs with new revisions drove them insane. Then try switching to a better way of managing deals by using something like Lawpal.
You may find that your past client couldn't stand needing to print, sign, scan, and email-back (or, gasp, fax!) every single legal contract you sent them. Then try using something like Shake, which makes it incredibly easy to create, sign and send legally binding agreements in seconds.

And so much more. Keep an open ear, and an open mind, and you'll see the holes worth plugging in your leaky bucket.

During these interviews, you may want to sneak in a valuable quantitative question too. Here it is:

"On a scale of 1 to 10, ten being amazing, how would you rate your overall experience with our firm?"


Write. This. DOWN! Keep this stat in a spreadsheet, because it's your client satisfaction number, or NPS as its called in SaaS, and you'll want to track it religiously.

You've probably seen this kind of question asked before by various businesses you've encountered in your life, right? It usually goes something like this, "On a scale of 1 to 10, ten being highly likely, how likely are you to refer XYZ company?" That's called a Net Promoter Score survey or NPS for short. You may want to refer to it as your Client Satisfaction Score or CSS.

You can get your CSS over the phone. You can get your CSS in an email. You can get your CSS on your website. You can get your CSS in the mail.

What's important is that you get it, track it, and compute it. Here's how you compute your Client Satisfaction Score (CSS).

First, track the scores.

  • 0-6 = Detractors = these are unhappy clients who can damage your reputation (people talk 5x more about bad experiences than good ones).
  • 7-8 = Passives = these are satisfied clients, but aren't thrilled clients.
  • 9-10 = Promoters = these are your super-fan clients. They love you and will recommend you to all their friends. And give you amazing foot rubs (okay, we made that last one up, but you never know!).

Next, compute the scores.

To calculate your firm's CSS, take the percentage of client's who are Promoters and subtract the percentage who are Detractors. For the calculation, pay no attention to Passives.

Here's an example:

  • 5 of your clients give you a score between 1 and 6 (i.e. Detractors).
  • 3 of your clients give you a score between 7 and 8 (i.e. Passives).
  • 2 of your clients give you a score between 9 and 10 (i.e. Promoters).

Total clients who gave you scores = 5 + 3 + 2 = 10.

20% = Promoters (i.e. 2 / 10)
50% = Detractors (i.e. 5 / 10)

Your CSS is...drum roll...

Not good =(

Your CSS is -30% (i.e. 20% - 50%). A negative score is bad. It shows you have work to do. And that's why you track it, so you can improve it without doing too much guess work.

But how often should you track your CSS? Every time you speak with your clients you should end each conversation with the CSS survey...just kidding. That would be incredibly annoying =)

So track your CSS every three months with the goal of improving it every quarter. The only way you improve your CSS is by fixing the holes in your service offering. Talk to your clients. Listen to their issues. Fix the issues. And measure the results. Rinse, repeat.

Because if you don't act, someone else will. And these days, as the supply of firms is greater than the demand, it's easier than ever to switch law firms. Businesses today are demanding more transparency, better pricing, and efficient workflows. It's your job to make sure you deliver on those demands, so you become the go-to firm for decades to come. And you do that by measuring your own data: CAC (Client Acquisition Cost), LTV (Lifetime Value), ARPC (Average Revenue Per Client), Retention (Churn), and CSS (Client Satisfaction Score).

If you've read this post and our previous one, you are now practicing LaaS (Lawyering as a Service) with a focus on key metrics that will help you compete and grow your law firm of the future. Good luck out there!

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