Planning for 2009--know your numbers.

• Author: Hendrix, Mary

In a tight economy, it is imperative that time and money be spent on those actions that bring the highest return to an organization, while keeping in mind short- and long-term objectives. Because we are an evolving profession, legal marketers regularly have the task of not only creating value but also documenting the processes that the firm will use to determine benchmarks of value. Once the process for determining value is agreed upon, it is then incumbent on us to use that knowledge to plan future efforts with a focus on increasing that value on a consistent basis.

The Basics

One of the best ways to document our value is to provide regular reports to our clients (the attorneys) in terms they understand--money. In order to effectively create those reports, however, we must understand some basic financial terms and processes.

* General ledger accounts are accounts used to track expenses that are similar in nature (i.e., payroll, advertising, event tickets, client entertainment). Most law firms further "define" these expenses by coding each entry with established parameters being tracked by the organization, such as the office, practice group or individual that benefited from that specific expense.

Each firm creates unique "subcodes," also known as user defined fields, that track areas of interest to the organization. For example, my firm tracks office, practice group and requesting attorney as subsets of each general ledger item. So an advertising cost incurred in the Lexington office at the request of our corporate group would be coded: 59110-02-210-0000, where 59110 is the general ledger number, 02 is the code for the Lexington office, 210 is the code for our corporate group and 0000 indicates that there is no one attorney who benefits from the expense.

Reports can be generated based on each of the sub-codes identified.

* Return on Investment ("ROI") is a measure of the revenue or benefit received against the cost of an activity. Simply speaking, if you sponsor an event on "xyz" area of law and an attendee hires the firm for a project in that area, one could value the ROI as a ratio of cost of sponsorship versus revenue related to that matter. Obviously, other items such as brand recognition, attorney reputation and prior business relationship with the client factor into the calculation, but ROI can be a valuable tool when determining whether a firm should consider continuing or discontinuing a specific activity.

* Realization is a key...