Summary
Expect to learn that when measuring success with AFA's it is essential to shift focus from recording hours to tracking billing realization rates, individual performance, project profitability, and efficiency metrics like utilization rate and velocity, aiming to continuously improve these KPIs for increased financial success and client satisfaction.
3 Key Takeaways from this Video
- Billing realization rates: By comparing your billing realization rates to industry benchmarks, you can assess the effectiveness of your alternative fee structure and identify areas for improvement, ensuring you are billing and realizing the value of your work efficiently.
- Individual performance and project profitability: Analyzing billing realization rates at the individual level helps gauge whether team members are working in their areas of expertise, leading to higher financial success. Additionally, examining billing realization rates for different project types allows you to allocate business development resources strategically to focus on more profitable areas.
- Utilization rate and velocity: Tracking utilization rate, which measures the time spent working on client files, helps assess productivity and resource allocation. Monitoring the velocity of file progression, from initial contact to final billing, enables you to identify opportunities to streamline processes, reduce turnaround time, and enhance client satisfaction, ultimately improving profitability.
Transcript
0:07 How do you measure your success when you move to an alternative fee arrangement? So no longer is it how many hours do you record?
0:18 What are your billings and your recorded time? It's a different way of looking at it. One way to look at it is if you continue to record time is to track billing realization rates.
0:30 So we know through Cleo's most recent trend report that the average billing realization rate in the U.S. right now is 84%.
0:42 So that's an industry benchmark. So if you look at how does the alternative fee structure work for you and you compare it to industry average, you'll start to see how you compare.
0:55 And so, so to take a step back billing realization rates are the time cost on a particular file just as if you were recording time at hourly rates versus what you actually bill.
1:09 So if you bill all your time cost and that's exactly your bill, it'll be 100%. I think it's helpful if you look at it by individuals and billing realization rates that tells you whether they're working in the areas where they have the skill set where they're successful, whether you put them in a place where they can succeed financially.
1:29 Look at the different project types. I think when you look at the different project types and your billing realization rates you also learn where to spend your business development dollars where the areas can be more profitable.
1:44 So one of the real, in my mind, one of the real KPIs is to keep looking at billing realization rates, what you bill and seek to keep increasing that over time until you're above 100%.
1:57 You might want to look at how much time are you spending working on clients' files, utilization rate, which is really still, am I recording time working on files, a significant amount of the day, is it like a couple hours or is it eight hours or what is it, so you could look at that.
2:15 Look at the time it takes to start a file and finish a file using different benchmarks when's the first time point which I had contact, when did I open the file, when did I complete the work, when did I send my final bill, when did I close the file, but the theory being that the more you can press that the quicker you do the work, better it is for the client and the better it is for your profitability. So, velocity is another KPI that I think can be a valuable one to look at.