How to Analyze Your Law Practice Marketing

August 29, 2016

You are spending money are marketing, and you have more income coming in then you are spending. Everything seems great on the surface, but all of a sudden you aren’t getting as many clients as you used to and you have no idea why. Maybe you never even see a slowdown, but you wonder where all your clients are coming from. Wouldn’t you like to know which marketing methods are the most effective?

In order to effectively analyze each marketing method, you need to know the following three things: how much you are spending on each marketing method, which marketing method you clients are coming from, and the expenses you have for each client. Once you know these three things, you can look at a profit and loss statement for each marketing method and see insights like where you are getting most of your clients from, how much a client from each marketing method is worth, which marketing types result in a lot of expenses, which marketing methods are not resulting in any paying clients, and more.

The key to making this easy to figure out is to turn on locations or classes in your QuickBooks software. When you do this, you can set up a class for each marketing type. For example, you can set up referrals as one class, Google AdWords as another class, and direct mail as a third class. Then, when you spend money on each marketing type, you fill in the class field in QuickBooks. So let’s say you are doing a direct mail piece, and you pay XYZ Advertising Agency to design your law practice a postcard that you are going to mail out to people who have recently been in an accident. You enter the vendor information just as you normally would, but since you have turned on classes, you have another field that you can fill out. In this class field, you mark it as Direct Mail. You also buy a list of people to mail to, stamps, and the actual post card. This all costs you $1000.

Now you start getting calls back, and you ask each client how they heard about you. Or if you are really going after it, you have a separate phone number for each mailer so you know exactly the results you are getting. Regardless, you figure out that you have five new clients that came from the mailer. Great job! Every time these clients pay you, you fill in the payment just as you normally would, but you also fill in the class with Direct Mail. These clients paid you a total of $5,000.

You also have some expenses with the cases. You hired an expert witness, you took photographs, you made copies, etc. Maybe you had to hire a temp worker to come in and make copies and file paperwork. All in all, these expenses cost you $2,000.

Since you entered in classes for all these transactions, you can now run the Profit and Loss by Class report. In the above example, it will show that your law practice had a profit of $3,000 from direct mail, or 300% return. In other words, every dollar you spent on direct mail made $3 in profit.

Now let’s say you also were tracking AdWords. You spent $40,000 on AdWords, collected $70,000, and had expenses of $10,000. That would mean it had a profit of $20,000, which is way higher than the direct mail, but it only had a return of 50%, which is way less than the direct mail. What that means is that, for every dollar you spend on AdWords, you make $0.50 profit. Would you rather make $3 or $0.50 per dollar you spend? Of course you would rather $3, so you should put more money into direct mail.

Tracking the marketing method your clients come from is vital for figuring out where to stick your advertising dollars. By using classes, you can make this reporting easy to see, and it will be easy to figure out how to most effectively use your advertising budget.

If you would like to find out more ways about how to implement this strategy in your law practice bookkeeping, I can help. Once you become a client of Legal Ease Bookkeeping, LLC, I can set up your QuickBooks to track this information and help you analyze reports so you can easily see which marketing methods are the most effective. Click here to schedule a free 30-minute consultation to see how I can help you.

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