How to Measure ROI on Legal Technology Investments

8 min read

Because a legaltech investment that doesn’t produce a return is pointless.

Legaltech has an ROI problem: Namely, most legal technology sold today is sold on a promise, not on proof. Legal teams in corporate, real estate, estate planning, estate admin, and in-house legal departments often feel the frustration that comes with having bought a tool that doesn’t actually change how work gets done.

The core problem is that ROI (return on investment) in legal isn’t as obvious as it is in other industries, like sales or marketing. In more competitive industries, measuring ROI on technology investments is standard. But in legal, it’s seen as an afterthought.

If you want your legal technology to actually produce a return, it’ll require you and your practice to shift from tools-focused thinking to workflow-focused thinking. It also means knowing what signals to look for and how to actually measure the changes your legaltech investment is meant to bring. 

Legaltech can and does bring ROI. (Want proof? According to contract automation platform Concord, using contract processing software can reduce contract processing time by 75%.)

Here’s what you need to know about measuring the ROI on your legaltech investments.

Why ROI in Legaltech is So Hard to Measure

Legal technology ROI is a challenging measurement for a number of legal professionals, but not only because they aren’t typically trained to think in terms of ROI. There are several reasons why ROI in legaltech is hard to measure:

• Legal Work Isn’t Revenue-Linear
  In-house teams and practice groups focused on risk don’t tie output directly to revenue—so gains are harder to quantify.
  

• “Hours Saved” Doesn’t Equal Value
  Saving 3 hours means nothing if that time isn’t reallocated to higher-value work or increased file volume.
  

• Fragmented Systems Hide Wins
  When your data lives in silos, efficiency gains get diluted—and no one sees the full impact.
  
• Adoption Gaps Skew Results
  If only half your team uses the tool properly, your ROI will look cut in half too.
  

The takeaway here is that if you measure the wrong things, your ROI will always look disappointing.

The Shift from Tool ROI to Workflow ROI

When measuring the ROI on your legal technology investments, it’s easy to take an isolated tool-only view. But if you want to have a full, holistic picture of how your legaltech investments are impacting your business, it’s critical that you look at workflow ROI. This means examining your workflows to determine how, at a workflow level, legaltech affects your work.

At the workflow level, ROI can take many different forms:

• When closing a real estate file, ROI could look like reduced time-to-completion
  
• When managing an estate, ROI could look like less duplication of records
  
• When maintaining corporate records, ROI could look like fewer errors 

Once you understand what ROI looks like at a workflow level, then it’s time to determine where technology should actually intervene. You can use technology, for instance, to automate tasks like document generation, data entry, approvals and handoffs, and even compliance tracking.

Now that you have a list of tasks where technology can and should intervene, you should focus on creating system-level improvements – reducing steps in your processes, eliminating errors, preventing duplication, etc.

Legal technology doesn’t create value on its own, better workflows are what create value with legaltech investments.

The Metrics That Actually Matter

When measuring ROI on your legaltech investments, you’ll want to make sure you track the right metrics to make sure you’re measuring actual changes that relate to business outcomes, not just superficial surface-level metrics.

One great metric to track is time to completion. How long does it take for a matter to go from start to finish through your firm? Track this metric both before and after tech implementation, and you’ll see how much faster you can complete matters.

You can also track throughput to measure your capacity before and after legaltech implementation. How many files or matters can your team handle each week? This is especially relevant for the staff who touch these files more often than your senior lawyers.

Another key metric to track is your error rate and how much rework goes into any given matter. Track things like missing fields, incorrect filings, and version control issues. This will enable you to see direct efficiency gains as legaltech reduces your errors.

You can even track manual touchpoints – how many times does a human have to intervene in your processes? The goal here is to eliminate unnecessary steps in your workflows.

Finally, you can track your data reuse rate. This refers to how often data is entered once and then reused across documents and workflows, and it’s a strong indicator of overall system maturity.

How to Calculate ROI, Made Simple

Calculating your ROI on your legal technology investments can seem daunting. But there’s actually a pretty simple way to make it happen.

• Start with your baseline data. (Even a rough estimate is better than nothing.) For example, if each estate file takes about 10 hours on average from start to finish, that’s your baseline.
  

• Measure post-implementation changes. Don’t look for perfection. Instead, look for incremental improvements.
  

• Translate improvements into value. Time saved, for instance, is an indicator that your team has increased its capacity. Fewer errors is an indicator of reduced risk exposure. And faster turnaround? That indicates a better client experience.
  

• Do the math. The formula to use is: (Value gained – cost of tech) / Cost of tech.

ROI isn’t an accounting exercise; it’s a strategic one.

A Practical Example (Before vs After)

Let’s take a look at this ROI calculation using a real estate transaction workflow as an example.

Prior to implementing a real estate workflow solution, your team will have to deal with multiple systems, repetitive data entry, manual document assembly, and frequent back-and-forth corrections.

But once you’ve got a workflow automation system like Appara, you can leverage a single source of truth, automate your document generation, pre-fill your data across all of your forms, and reduce back-and-forth across your team and with clients.

Let’s assume that, by leveraging Appara, you can reduce time per file by 50%. (That’s the exact benefit that Jerome Tsang, Notary saw when they implemented Appara Real Estate.)

So the value gained is that you can produce 2X more files in the same amount of time. This means increased file capacity per staff member, and it also means fewer errors and last-minute fixes.

2X more files minus the cost of Appara, divided by the cost of Appara, equals substantial ROI.

Common Mistakes That Kill ROI

Now, legaltech can produce great ROI, but just because you use legaltech, that doesn’t necessarily guarantee a return. There are several ways that your legal practice can implement a legaltech solution and still not see any ROI:

• Buying tools without redesigning your workflows – layering tech on top of broken processes just means more rework later
  

• Measuring too early – when you try to measure your ROI too early, you fail to take into account the adoption curve; the time during which your team is still learning how to use the legaltech in question
  

• Ignoring change management – training and buy-in are a key part of ROI
  

• Over-focusing on cost instead of impact – if all you focus on is how much a tool costs, you’re not focused on getting the highest ROI per dollar spent
  

• Billing on a time basis instead of a value basis

If your legaltech is helping you get the work done faster, it often means less revenue when you bill hourly, which masks the true ROI of legaltech. When implementing legaltech that saves you time, you can maximize your revenue by implementing value-based pricing.

(We discuss this in depth in our FREE guide on going from hourly billing to value-based pricing, produced in conjunction with AltFee.)

Where Tech Platforms Like Appara Fit In

 

The right technology platform will help you produce ROI in a variety of ways.

First and foremost, ROI improves when systems are connected. When you can share data across your Corporate, Estates, and Real Estate practice areas, it means less rework, less data entry, and more time saved.

Secondly, workflow automation compounds value. Even small process efficiencies can stack across an entire workflow, rendering exponential benefits.

And thirdly, visibility enables measurement. When your workflows are all centralized in one place, it’s easier to track them, so you can measure and improve your ROI over time.

Key Takeaway: ROI on Legaltech Investments is a Design Problem

1. Most ROI issues trace back to poor workflow design, not a technology failure or a reporting issue.
   
2. The legal teams that win are the ones that focus on systems, not just tools.
   
3. Want to get started with measuring ROI on your legaltech investments? It’s easy! Pick one workflow, automate it, and measure the improvements.

Are you ready to discover how workflow automation, document automation, and entity management can help you cut costs, reduce errors, and boost productivity? We can help. Book a demo to unlock your FREE trial of Appara today and discover how you can cut your document drafting time in half.

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Are you ready to discover how workflow automation, document automation, and entity management can help you cut costs, reduce errors, and boost productivity? We can help. Book a demo to unlock your FREE trial of Appara today and discover how you can cut your document drafting time in half.