Business Plans: A New Reality

A couple of weeks ago, I was a panelist at an event sponsored by the New York Bar Association. The event was designed to help attorneys learn the importance of, and how to produce, a business plan.

Ten years ago when I first became a legal recruiter, business plans were not a regular part of the screening process for lateral partners. But as lateral movement became more common and the number of interested partners grew, law firms added more criteria. And now that the legal industry is reeling from losses, layoffs and downsizings, lateral hires are being run through an even more stringent gauntlet. Many firms now want to see business plans from all lateral partner candidates.

As Jon Lindsey and Jacquelyn Knight, my colleagues at Major, Lindsey & Africa, wrote in a recent National Law Journal article (“Partner Placements: Beyond Bankruptcy,” May 4, 2009), “With more partner candidates on the market, and with firms becoming more selective with respect to portable business thresholds, law firms are looking for candidates with a well-written, concise business plan that includes biographical profiles reflecting the partner's current practice, along with a representative case list or transaction summary sheet.”

Law firm managers want to be assured that new partners will deliver big returns quickly. They want to know exactly what they offer from a business standpoint. The firms are laser focused on the bottom line. If a firm is considering hiring someone to start up a new practice group, the plan becomes even more critical ' the firm wants to know how that business will be built and managed. Even if the attorney already has an impressive book of business, he/she should be able to forecast how many existing clients will be retained and describe the prospects for attracting new ones.

Clients Are Key

Producing a business plan will force you to think through important issues you might not otherwise consider. Think about your practice as your business and answer the following questions:

• Who is your target audience?
• Who are your existing clients?
• Who are your potential clients? How will you bring them on board? How do you intend to grow your business?

By target audience, I mean who are the types of individuals and/or companies that need your services? Though you may think this is obvious, put it down anyway. When you list your existing clients, be sure to mention the cases you handled, the dollar amounts you billed, any amounts recovered, if you are on retainer, and if they have referred other clients to you. Provide as many details as possible; don't make it just a list of names.

As for identifying potential clients, ask yourself who (which companies and/or individuals) you could possibly win over. Then list them according to their attainability. Include the names of the firms they currently use and, if possible, why you think they chose them. This last item will demonstrate that you know the market and are carefully monitoring your potential clients' behavior.

Now comes the hard part; explain how you will win their business. What will it take to get them to switch firms and give their business to you? This usually involves a variety of activities, all of which should be spelled out in your marketing plan ' e.g., finding out the groups they belong to and going to events where you can rub shoulders with them; tracking mentions of them in the press and then contacting them (if the publicity is positive, a simple congratulations will do; if it is negative, perhaps you can offer assistance or a chance to meet and discuss some other options that may be open to them).

Strengthen connections to their industry. If you're a patent attorney, and you want to get noticed by the managers of high-tech companies, write articles for and advertise in the magazines and journals they're likely to read, submit yourself as a speaker at their groups' annual meetings and regional conferences. If they run a business that you or someone you know could benefit from, become a customer. Then let them know about the experience, and use the opportunity as a way to introduce yourself and your services.

Know Your Competition

Now that you've identified your clients and figured out how to get more of them, you need to vet your competitors. Who are your competitors? What distinguishes you from them?

Identifying and learning as much as possible about your competitors is key ' not only to your business plan but to how you will manage and grow your practice going forward. You need to know what you have in common and what is different. How do your fees compare? What is the experience level of their attorneys? How many cases have they won/lost? What is their client retention rate? What do their clients like/not like about them? You should already know this about your own clients. If you aren't conducting regular debriefings with your clients, you should start. Ask them for their comments (either over the phone or via a simple form) so you can continuously improve your services, and demonstrate that you're interested in their feedback.

The process of determining what distinguishes you from your competitors should ultimately enable you to produce your “unique selling proposition” (USP). This is one step beyond an “elevator pitch.” In the latter, you are introducing yourself to someone for the first time and briefly telling them what you do. A USP assumes your listener already knows who you are but not how unique your services are. You need to boil down into user-friendly prose how your services will benefit them. Think about what you do from their point of view. Think about how your services will impact them, make their lives or companies better, protect them, rid them of problems, etc. Focus on what makes you different. Are you willing to adjust fees? Do you win more cases than your competitors? Have you won an important case in their industry? Do you provide one-on-one service throughout the process? Your USP should convince them to dump their current firm and give their legal business to you or at least add you to their legal counsel roster.

Monitor Costs, Project Profits

The next section is the trickiest for most lawyers. After all, lawyers are typically not business people; that is often why we went into law ' to avoid having to worry about the bottom line. Well, we can no longer hide our heads in the sand; lawyers today must understand how their law firm operates. They must think about how much money they're spending and how much they're bringing in.

Though most law firms do not expect you to turn in a business plan full of numbers or cash-flow analyses, including a projection of your costs and showing that you recognize the importance of making a profit can only elevate you in their eyes. These questions should help:

• How many people do you need to support you? What are their salaries?
• What are your costs/expenses vs. billing expectations?
• What are the short-term prospects for your business?
• What are the long-term prospects for your business?
• What does it take to run your practice?

How many administrative assistants, paralegals and librarians do you need, full-time and part-time? If you use one-quarter of your firm's librarian's time, add that to your calculations. In addition to salaries, office space and equipment, consider all the additional costs you tend to incur ' e.g., the periodicals you subscribe to, the groups you belong to, your professional travel and entertainment expenditures, etc.

Put down your historical billing rates and then project what you think you will do in the short term and what you could potentially do in the long term. Do not guarantee a certain level of business or specific clients because you never know what the future will bring. You can only provide best guesses. You should offer a range of estimates based on different scenarios ' if the global economy tanks; if the industry you serve goes into a tailspin; if one of your clients' new products turns into a best-seller. Explain that you are not averse to retooling if the economy demands it ' e.g., switching from structured finance to debt work, or from commercial litigation to bankruptcy. Show that you understand the opportunities and threats that lie ahead and that you have the flexibility and versatility to handle both.

Finishing Touches

Timing can be important. Don't hand your plan over to a hiring partner before you are well along in the interview process. And be careful about revealing too much about clients and/or contacts. You never know who will see your plan. Some firms ask lateral partner candidates to fill out questionnaires during the screening process, which typically cover your billing history, clients, etc. Having your own business plan will provide the framework for answering those questions.

Before you give your business plan to anyone, be sure to proofread it. Just like any other professional document, it will reflect your ability to present yourself on paper and reveal your attention to detail. Check for spelling, punctuation and other grammatical errors. If you are not good at this, ask a friend or mentor to do it for you. Ask another lawyer to read it, too, to make sure it makes sense. Something that seems obvious to you may need to be more carefully explained.

If you need assistance, there are several places to turn. Go online or to a bookstore and review some sample business plans. Meet with a career coach, recruiter or other professional experienced in business and career development.

Once you have completed your business plan, remember to regularly update it. Some law firms are starting to ask attorneys to turn in business plans to justify promotions, salary bumps and bonuses. Make sure it is always ready to share with a manager or if you want to move to another firm. And though this article has focused on partners, it's never too early to start on a business plan. A senior associate with a carefully constructed business plan will stand out as someone who understands what it takes to succeed and has a plan to get there.

Remember the goal of every business plan should be to demonstrate that you offer a needed service, have a plan for keeping existing and winning new customers, and have a clear shot at making a profit. It's really that simple.

Sharon Mahn is a Managing Director in the New York office of Major, Lindsey & Africa, a legal search firm. She can be reached at 212-201-3963 or [email protected].

A couple of weeks ago, I was a panelist at an event sponsored by the New York Bar Association. The event was designed to help attorneys learn the importance of, and how to produce, a business plan.

Ten years ago when I first became a legal recruiter, business plans were not a regular part of the screening process for lateral partners. But as lateral movement became more common and the number of interested partners grew, law firms added more criteria. And now that the legal industry is reeling from losses, layoffs and downsizings, lateral hires are being run through an even more stringent gauntlet. Many firms now want to see business plans from all lateral partner candidates.

As Jon Lindsey and Jacquelyn Knight, my colleagues at Major, Lindsey & Africa, wrote in a recent National Law Journal article (“Partner Placements: Beyond Bankruptcy,” May 4, 2009), “With more partner candidates on the market, and with firms becoming more selective with respect to portable business thresholds, law firms are looking for candidates with a well-written, concise business plan that includes biographical profiles reflecting the partner's current practice, along with a representative case list or transaction summary sheet.”

Law firm managers want to be assured that new partners will deliver big returns quickly. They want to know exactly what they offer from a business standpoint. The firms are laser focused on the bottom line. If a firm is considering hiring someone to start up a new practice group, the plan becomes even more critical ' the firm wants to know how that business will be built and managed. Even if the attorney already has an impressive book of business, he/she should be able to forecast how many existing clients will be retained and describe the prospects for attracting new ones.

Clients Are Key

Producing a business plan will force you to think through important issues you might not otherwise consider. Think about your practice as your business and answer the following questions:

• Who is your target audience?
• Who are your existing clients?
• Who are your potential clients? How will you bring them on board? How do you intend to grow your business?

By target audience, I mean who are the types of individuals and/or companies that need your services? Though you may think this is obvious, put it down anyway. When you list your existing clients, be sure to mention the cases you handled, the dollar amounts you billed, any amounts recovered, if you are on retainer, and if they have referred other clients to you. Provide as many details as possible; don't make it just a list of names.

As for identifying potential clients, ask yourself who (which companies and/or individuals) you could possibly win over. Then list them according to their attainability. Include the names of the firms they currently use and, if possible, why you think they chose them. This last item will demonstrate that you know the market and are carefully monitoring your potential clients' behavior.

Now comes the hard part; explain how you will win their business. What will it take to get them to switch firms and give their business to you? This usually involves a variety of activities, all of which should be spelled out in your marketing plan ' e.g., finding out the groups they belong to and going to events where you can rub shoulders with them; tracking mentions of them in the press and then contacting them (if the publicity is positive, a simple congratulations will do; if it is negative, perhaps you can offer assistance or a chance to meet and discuss some other options that may be open to them).

Strengthen connections to their industry. If you're a patent attorney, and you want to get noticed by the managers of high-tech companies, write articles for and advertise in the magazines and journals they're likely to read, submit yourself as a speaker at their groups' annual meetings and regional conferences. If they run a business that you or someone you know could benefit from, become a customer. Then let them know about the experience, and use the opportunity as a way to introduce yourself and your services.

Know Your Competition

Now that you've identified your clients and figured out how to get more of them, you need to vet your competitors. Who are your competitors? What distinguishes you from them?

Identifying and learning as much as possible about your competitors is key ' not only to your business plan but to how you will manage and grow your practice going forward. You need to know what you have in common and what is different. How do your fees compare? What is the experience level of their attorneys? How many cases have they won/lost? What is their client retention rate? What do their clients like/not like about them? You should already know this about your own clients. If you aren't conducting regular debriefings with your clients, you should start. Ask them for their comments (either over the phone or via a simple form) so you can continuously improve your services, and demonstrate that you're interested in their feedback.

The process of determining what distinguishes you from your competitors should ultimately enable you to produce your “unique selling proposition” (USP). This is one step beyond an “elevator pitch.” In the latter, you are introducing yourself to someone for the first time and briefly telling them what you do. A USP assumes your listener already knows who you are but not how unique your services are. You need to boil down into user-friendly prose how your services will benefit them. Think about what you do from their point of view. Think about how your services will impact them, make their lives or companies better, protect them, rid them of problems, etc. Focus on what makes you different. Are you willing to adjust fees? Do you win more cases than your competitors? Have you won an important case in their industry? Do you provide one-on-one service throughout the process? Your USP should convince them to dump their current firm and give their legal business to you or at least add you to their legal counsel roster.

Monitor Costs, Project Profits

The next section is the trickiest for most lawyers. After all, lawyers are typically not business people; that is often why we went into law ' to avoid having to worry about the bottom line. Well, we can no longer hide our heads in the sand; lawyers today must understand how their law firm operates. They must think about how much money they're spending and how much they're bringing in.

Though most law firms do not expect you to turn in a business plan full of numbers or cash-flow analyses, including a projection of your costs and showing that you recognize the importance of making a profit can only elevate you in their eyes. These questions should help:

• How many people do you need to support you? What are their salaries?
• What are your costs/expenses vs. billing expectations?
• What are the short-term prospects for your business?
• What are the long-term prospects for your business?
• What does it take to run your practice?

How many administrative assistants, paralegals and librarians do you need, full-time and part-time? If you use one-quarter of your firm's librarian's time, add that to your calculations. In addition to salaries, office space and equipment, consider all the additional costs you tend to incur ' e.g., the periodicals you subscribe to, the groups you belong to, your professional travel and entertainment expenditures, etc.

Put down your historical billing rates and then project what you think you will do in the short term and what you could potentially do in the long term. Do not guarantee a certain level of business or specific clients because you never know what the future will bring. You can only provide best guesses. You should offer a range of estimates based on different scenarios ' if the global economy tanks; if the industry you serve goes into a tailspin; if one of your clients' new products turns into a best-seller. Explain that you are not averse to retooling if the economy demands it ' e.g., switching from structured finance to debt work, or from commercial litigation to bankruptcy. Show that you understand the opportunities and threats that lie ahead and that you have the flexibility and versatility to handle both.

Finishing Touches

Timing can be important. Don't hand your plan over to a hiring partner before you are well along in the interview process. And be careful about revealing too much about clients and/or contacts. You never know who will see your plan. Some firms ask lateral partner candidates to fill out questionnaires during the screening process, which typically cover your billing history, clients, etc. Having your own business plan will provide the framework for answering those questions.

Before you give your business plan to anyone, be sure to proofread it. Just like any other professional document, it will reflect your ability to present yourself on paper and reveal your attention to detail. Check for spelling, punctuation and other grammatical errors. If you are not good at this, ask a friend or mentor to do it for you. Ask another lawyer to read it, too, to make sure it makes sense. Something that seems obvious to you may need to be more carefully explained.

If you need assistance, there are several places to turn. Go online or to a bookstore and review some sample business plans. Meet with a career coach, recruiter or other professional experienced in business and career development.

Once you have completed your business plan, remember to regularly update it. Some law firms are starting to ask attorneys to turn in business plans to justify promotions, salary bumps and bonuses. Make sure it is always ready to share with a manager or if you want to move to another firm. And though this article has focused on partners, it's never too early to start on a business plan. A senior associate with a carefully constructed business plan will stand out as someone who understands what it takes to succeed and has a plan to get there.

Remember the goal of every business plan should be to demonstrate that you offer a needed service, have a plan for keeping existing and winning new customers, and have a clear shot at making a profit. It's really that simple.

Sharon Mahn is a Managing Director in the New York office of Major, Lindsey & Africa, a legal search firm. She can be reached at 212-201-3963 or [email protected].