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Your guide to crafting a successful business plan for your law firm
Law practices do not often follow the traditional business structure. Sure, lawyers provide their professional services in exchange for money, but because of the nature of their industry, their obligations cannot be based on commercial concerns alone.
Additionally, lawyers want to focus primarily on their professional practice and billable hours (that’s what keeps the light on, after all). This often means that they hardly have the time to properly dedicate towards the business management side of their practices, such as marketing, financial planning, and business development efforts.
And that’s why it’s important to get it right from the very start. In this instance, it means nailing your law firm business plan!
The business plan is where it all begins. This document is essentially your breakdown of how you want your business to run. Every important consideration relating to your business must be clearly outlined here along with your process for dealing with potential issues. To say that the business plan can make or break your company’s growth and profitability is no understatement.
Why a law firm business plan is worth the effort
Regardless of your practice area, starting your law firm with a business plan is simply that smart thing to do. When you have a roadmap of where you want to go (both short-term and long-term), and how you intend to get there, things get done faster. Here’s why putting in the effort to craft a winning law firm business plan is definitely a benefit worth seeking:
1. Improve focus
One of the prevailing challenges in the legal services industry is focus. From time pressures and financial obligations to actual law practice to trying to maintain a healthy work-life balance — there’s no shortage of things that need attention on any given day.
That's why law firms with focused core practice areas are winning in the marketplace. These practice areas must be included in the initial business planning stage and clearly defined in the business plan. There’s not much sense in trying to be all things to every prospective client, especially since it can lead to a lack of identity, in addition to pulling focus in every direction.
It’s not even feasible for established sole proprietorships and small businesses, so how much more when you’re still at the startup phase. A well-designed business plan can focus your firm so you are spending time on things that really matter.
2. Foster accountability from all
Accountability is crucial in business development. When you have a roadmap of how your law firm should operate to achieve its short and long term goals, then it becomes easier to know who is responsible for what. This fosters accountability across the business and keeps everyone aligned to achieving the overall goals of the company.
The business plan also allows the firm to utilize its resources by immediately identifying areas that may need improvement. For example, if your law firm is struggling to attract new clients, then you can check the marketing strategy outlined in your business plan to see if it’s being correctly implemented.
3. Keep strategy and planning simple
A business plan helps you take on a few projects at a time that can be realistically accomplished. This simplifies not only the strategy and planning, but also the implementation. The company can then build upon initial successes to tackle more complex strategies and replace ineffective structures.
Also, because the business plan forces the law firm to think about business concerns that it otherwise would not have considered, the management can easily adopt structures that allow the firm to act decisively.
4. It can help with the firm’s growth and expansion
For many solo practitioners and small law firms, a business plan may be useful in securing financing and attracting the right lateral partners. In fact, some lending organizations will only approve a line of credit and other forms of business financing after they have thoroughly studied the firm’s business plan. In terms of attracting partners, it all comes down to the law firm’s core values, all of which have been clearly defined in the business plan.
Of course, there’s no point putting together a business plan if it is quickly forgotten. However, the mere act of creating one can give your law firm a direction head in and practical goals to work towards. Still, it is important to revisit your business plan every now and then. This way, the business considerations will remain top-of-mind and the firm will continually find ways to refine them for better productivity and profitability.
The most important considerations when creating a law firm business plan
There’s no standard recipe for success when it comes to creating a business plan. Success or failure often comes down to the reasoning behind the business plan in the first place. By taking a step back and reflecting on what you actually want to get out of your law practice, you will be able to create a meaningful, more specific, and ultimately more rewarding business plan.
With that said, here are the three main considerations when creating a law firm business plan:
What does ‘success’ mean to you?
Defining your success means understanding why you want to own a law firm in the first place. Remember that owning or running a legal practice isn’t just about having a job, but the freedom and sense of fulfillment that come with running your own business.
To determine what success means for your law firm, ask yourself these questions:
- What drives your passion for legal services?
- What does work fulfillment mean to you as a lawyer?
- How do you measure success as a lawyer? Is it by the number of clients served, or huge billable amounts perhaps?
- What’s your current financial situation like in relation to your long-term goals? Where are you planning to live? What are your most tasking expenses?
- What type of lifestyle are you looking forward to after retirement?
Answering these questions will not be as easy as you may think. But it’s important that you answer them nonetheless so you can establish clear goals for your law firm and achieve them.
How much revenue will your law firm need to be successful?
The previous consideration was about your personal and financial goals. Now it’s time to consider the short and long term financial goals for your law firm.
Often, you’ll hear people say things like, “if we’re making $200,00 a year, then we’d be really happy.” In truth, $200,000 is a considerable sum, but when you factor in important expenses like the law office setup, tax, staff remunerations, retirement plans, capital projects, and emergencies, that amount doesn't seem so high anymore.
That’s why financial projections take up a significant part of any business plan. As long as it’s a business, cash flow will always be a paramount consideration. When estimating the costs of your goals, be generous with the forecasts so there is ample room to accommodate emergencies and unforeseeable circumstances.
How many cases will you need to meet your revenue goals?
This is an important consideration because it gives you an idea of how much work you’ll need to put in to make your business succeed. If you’re only able to take on three or four cases a month, then they’ll need to be high profile enough to meet your revenue goals. The number of cases you’ll need will depend on a number of factors, such as your practice area and the location of your law firm.
Balance is key here. Obviously, most startups and solo practices want to handle as many cases as possible so they can hit the ground running and establish their name. But it’s also important to pick your cases based on your capability. This way, you don't get stuck and end up feeling completely overwhelmed.
The primary components of a successful business plan
As mentioned earlier, there’s no standard success recipe for business plans. However, there are certain elements that are present in every successful business plan.
Most authorities agree that a sound law firm business plan should adequately address the following broad areas:
Overview of the law firm
This section covers the basics of your law firm — company name, branding information, practice area(s), legal structure, leadership roles, and so on. The idea here is to establish the firm's identity, as well as its aspirations. This means including other important information like the mission statement, vision statement, and any other important philosophies that guide the firm. These info are usually included in the executive summary.
This section is all about defining your potential clients (demographics, needs, and motivations) so you know the best way to reach them. Understanding who your prospective clients are makes the rest of your planning much easier.
For example, if your main practice area is in real estate law, then your target market will comprise individuals and organizations that dabble in real estate. Now you’ll need to figure out the best way to reach this target market. It’s also important to know how to position your client service to stand out in such a crowded marketplace.
Every marketing plan should begin with an in-depth analysis of your industry. You already know that having a sound marketing strategy is non-negotiable, but in order to actually put one together, your market research must be on point.
This section should also cover the latest business trends affecting the industry and how they can impact your firm’s bottom line.
No matter what form of legal service you offer, you can expect that there will be competition. This section is about identifying your major competitors and outlining how you intend to make your law practice stand out from theirs. For example, you could offer a slightly lower pricing structure for your services for the time being until you start to have a regular stream of clients.
You need to know what kind of tactics to employ, what marketing channels to focus on, what kind of content to publish, and so on. For example, if you’re planning to do social media marketing (you definitely should), then obviously you’ll need to figure out how to do marketing on relevant platforms like Linkedin, Twitter, and Reddit.
On the other hand, if you already have a few regular clients, you could ask them for referrals. Because of the nature of the industry, word-of-mouth referrals for law firms are a very potent marketing tool.
This is one section that will receive a lot of scrutiny, especially from prospective financiers and potential partners. Your financial plan must be thorough and include details on not just how you intend to make money, but also how much you intend to spend over a given period. This means accounting for the firm’s fixed and variable costs, profit margins, monthly overheads, assets and liabilities, 12-month profit and loss financial projection, and so on.
This section focuses on addressing key operational issues regarding your law firm. Things like office location, lease, equipment purchases, and IT upgrades are important considerations. By addressing them in the business plan, you can better organize your priorities and avoid wasting resources on stuff that doesn't really matter.
Our best tips for nailing a successful business proposal
Now that you have an idea of the most important sections to cover in your business plan, it’s time to draft the document. Here are some helpful tips to get you through to completion:
1. Get the format right
The prevailing standard for the business plan format goes like this:
Table of contents — Your business plan is a formal document and so deserves a well-structured table of contents. You don't have to go overboard with the layout. Just make sure people know where to find what on the document.
- Executive Summary — This one-pager is a high-level overview of what your business plan is about. The typical law firm business plan covers a lot of information, so it’s important to not fixate on a certain aspect over others. Keep things simple, yet informative. One thing you can do is to write the executive summary last. This way, you would have broken down all the main points in the document and it’s, therefore, simpler to summarize them.
- Firm description — This is a company summary of your law firm. The aim here is to provide important details about your law practice — type of legal service offered, core values, history, legal structure, law firm office location, unique selling proposition, etc.
- Strategy — This is where you detail your various analyses and strategic plans for your law firm. Basically, this section should outline your vision for your practice and a detailed breakdown of how you will actualize it. Context is vital here and your strategy must be practical. It should take into account current market trends as well as forecasts.
- Financial projections — Though it’s part of your overall strategy, this deserves special mention because of its importance. You might even need to hire a finance expert to break down the figures as this section is often a struggle between under and over projecting.
- Marketing plan — Another section worth highlighting separately, the marketing plan should suitably demonstrate how you intend to attract potential clients to your law firm. You should have a detailed market analysis for each specialty that you offer, as well as a breakdown of market trends that can influence demand.
2. Clearly explain your ‘why’
Your business plan is a roadmap for how your business will operate and be profitable, but it should also communicate why you’re going into that business. Anyone reading this document should immediately grasp your passion for the practice.
And remember that because you’ll need to update your business plan from time to time, your immediate ‘why’ can also change over time. For example, a lawyer nearing retirement may want the business plan to delve deeper into the long-term viability of the practice along with plans for a smooth succession.
3. Don’t exaggerate, but don’t understate either
You know your strengths and weaknesses. Craft your business plan around them. What processes can amplify your strengths and what personnel or tools can negate your weaknesses? It’s easy to overestimate one’s potential and before you know it you’re up to the ears in unfinished projects and processes while also trying to successfully run the business.
That being said, it’s important that you don't understate your capabilities either. Don't let the fear of overshooting your genuine potential keep you from doing all you can do and being all you can be. The more stuff you can get out of the way in the startup stage, the faster your law firm will grow.
4. Address potential issues upfront
It’s very likely that the people reading your business plan are industry experts and have already seen their fair share of business plans in the past. Therefore, they already know what potential may arise based on the strategy described in the business plan.
If you want more than a nonchalant glance over at your business plan, you must be able to think ahead. What comes next once I set up this law firm? What are some issues that pose a threat to your plans? How do you intend to tackle them?
Even if you’re not writing the business plan for the benefit of outside readers, having answers to these questions will go a long way in helping you scale your business quickly and steer clear of avoidable issues.
How long should my law firm business plan be?
This will mostly depend on the size of your law firm and the primary purpose of the business plan. For example, if you’re using the business plan as part of the supporting documents required for enlisting investor funding, it must be concise while also fully covering various technical details.
In any case, the length of your business plan document should be as simple or as comprehensive as you need it to be. However, remember that the more you put into it, the more useful it will be in the long term because you’ve laid out a clear strategy to follow.
With that said, no one really wants to read through a massive document, let alone write one. That’s why it’s a good idea to peg the document to a reasonable length. At the very most, 15 to 20 pages. As long as you have dutifully covered all the territory you need to, aim to keep it short.
How often should I review my law firm business plan?
Again, there’s no standard answer here. However, your business plan should fall among the categories of working documents. That means you should be able to refer to it from time to time and make revisions as your business situation changes.
Now the actual interval is something you’ll have to decide for yourself. Whether it’s once a year or once every quarter, you’ll need to take a cold hard look at your current situation and measure how it aligns with your business plan and reflects its intended future direction. Outlooks change, new opportunities arise, unforeseeable issues set in — revise your business plan accordingly.
To make things easier, you could save your business plan into a template so you can make any needed changes without having to go through a lengthy document filing and storing process. Save a copy of the original business plan. This will serve as your template base. Every sample business plan is then built on that.
Truth be told, writing a business plan can be quite cumbersome, especially if you’re juggling work and other important concerns. Between crafting the perfect message and working out the structure, the process can often stretch out far longer than you might have anticipated. Nevertheless, this is something you’ll need to get done if you hope to own a successful law firm.
Now you know how to do it, so what are you waiting for?
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