Law Firm Business Plan Basics

When you are starting a new practice it is essential that you first have a viable Business Plan in place. Even if your firm has been up and running for years, a fresh look back to business plan basics can help your bottom line tremendously. Remember that your firm is a business and must be run like one. Your Business Plan is a tool that will keep your firm on course, by keeping you focused on your business goals, and financial obligations. It is also a guide that will help prepare you for future difficulties and opportunities. Keep in mind that when there is a change in your firm's status, whether an expansion or a downsizing, your Business Plan must also change to reflect your firm's new or adjusted goals.

A Business Plan is not just an internal document to help you keep your firm running on course. The practice of law is competitive, and prospective clients are business savvy; they will want to know that you know how to run your business, before they trust you with theirs. Additionally, in today's banking climate, when applying for a line of credit or lease financing, one of the first things that your bank will ask to see is your Business Plan. Therefore, your Business Plan should succinctly set forth your current business objectives, strategies, values, and long-term goals.

Executive Summary

Begin your Business Plan with an Executive Summary. This brief synopsis of your business should include your firm's name and business structure, date established, location, contact information, description of your practice areas, management structure, and team. Provide a brief narrative of your firm's management philosophy, and the procedures you have in place to execute it. It is equally important to highlight your firm's operating and risk management procedures. Your Executive Summary is the window into which its readers will view your firm.

Mission Statement

Your Mission Statement should clearly define the reason that you are in business, and outline the services that you provide. To be effective, your Mission Statement should not be long-winded; it should be brief and to the point. Brevity is essential, so that your attorneys are able use it as their “elevator speech” to pitch clients. A brief mission statement is also a valuable tool to assist your clients, prospective clients, friends, and family in spreading the word about your firm.

Marketing Plan

The first step in instituting a Marketing Plan is to identify your market, understand your clients' and potential clients' needs, and ensure that you have the resources to service them. All too often a firm will begin its marketing initiative by developing a pricey firm brochure. This can be a costly mistake. Developing a marketing brochure first is putting the cart before the horse.

Prior to choosing your firm's marketing initiative direction you must first analyze your business performance. Moreover, before instituting a firm-wide marketing program, you need to have an astute understanding of and laser-sharp focus on your business needs. The time you devote to marketing is intangible. Marketing dollars are costly, they eat up non-billable time, and the fruits of those dollars may take years to germinate. Before creating your Plan, it is critical that you identify the intended purpose of your marketing initiative. Of course, the primary goal of your marketing program is to increase your profit margin. But in order to fine-tune and understand your marketing direction, you should answer the following questions. Is the purpose of your marketing program to:

• Increase business from existing clients?
• Market a practice area expansion?
• Market a new practice area?
• Distinguish your firm from the competition?

In order to distinguish your firm from your competition, it is essential that you have a clear understanding of their clientele and pricing structure and a familiarity with their marketing. With this knowledge in hand, you will be better able to set your firm apart from the competition. Once you have fine-tuned the elements of your marketing program, it is time to focus on your marketing budget. Project what the cost of your annual marketing budget should be, and then allocate it among your partners. Depending on your firm's structure, you may allocate a certain amount of marketing dollars to each partner, or choose to allocate marketing dollars to each practice area. Whichever approach you choose, the key to a successful marketing plan is not only the consistent implementation of the undertakings outlined in your Plan, but also the measurement of results at the back end. Build into your plan regularly scheduled assessments of marketing results so you will determine what worked, what did not, and adapt and change as needed going forward.

Staffing

Before deciding on the size of your staff, you must do a thorough analysis of the skill sets required to properly service your clientele. Once you understand your staffing needs, the next step is to prepare and include detailed job descriptions for each required function in your Plan. These two staffing elements are your road map to a successful hiring plan. Overstaffing results in lost profits, and understaffing or inefficient staffing can result in lost clients.

Financial Plan

Having a solid understanding of the law and excellent lawyering skills does not necessarily translate into knowing how to run a profitable law practice. The only successful path to a successful business is a solid understanding of law firm finances. There are many elements involved in a law firm financial plan, including that your accounting firm be experienced in law firm accounting. Incorporating your firm's financial plan into its business plan will demonstrate to prospective clients and bankers that your firm has a solid grasp on running your business.

Management Plan

When bankers and prospective clients approach your firm, their assumption is that you are a firm comprised of competent attorneys. What they do not know, and what you must convey and convince them of, is that you are also a firm comprised of competent, business-minded attorneys. Begin by describing your management structure and how problems will be addressed and decisions made. Identify your management team; include a summary of their backgrounds, and the reasons why each person has been chosen to become a member of the team. It is important that you demonstrate that your management team is a group of leaders who are able to manage your business, so your clients will trust you with theirs. Bear in mind that bankers and others will assume that you know the law. They will be looking for evidence that you also know how to manage a business. Your management plan, when read together with your financial and marketing plans, will demonstrate that you have laid down the foundation on which your practice will be built and thrive. In short, a business plan is your first step to achieving financial stability. At the end of the day, a mismanaged law firm will have the same result as a mismanaged candy store ' lost profits.

Susan C. Finelli, a member of this newsletter's Board of Editors, is the executive vice president of AGL Associates, a consulting firm that specializes in law firm consulting, business development and training for lawyers. She has a dynamic management career building and leading top-performing organizations, combining strategic and financial expertise with measurable achievements in operations/organization design, cost reduction, productivity/process improvement, and is a skilled trainer and educator. Finelli is the author of the novel, “Behind the Shadows.” She can be reached at [email protected].

When you are starting a new practice it is essential that you first have a viable Business Plan in place. Even if your firm has been up and running for years, a fresh look back to business plan basics can help your bottom line tremendously. Remember that your firm is a business and must be run like one. Your Business Plan is a tool that will keep your firm on course, by keeping you focused on your business goals, and financial obligations. It is also a guide that will help prepare you for future difficulties and opportunities. Keep in mind that when there is a change in your firm's status, whether an expansion or a downsizing, your Business Plan must also change to reflect your firm's new or adjusted goals.

A Business Plan is not just an internal document to help you keep your firm running on course. The practice of law is competitive, and prospective clients are business savvy; they will want to know that you know how to run your business, before they trust you with theirs. Additionally, in today's banking climate, when applying for a line of credit or lease financing, one of the first things that your bank will ask to see is your Business Plan. Therefore, your Business Plan should succinctly set forth your current business objectives, strategies, values, and long-term goals.

Executive Summary

Begin your Business Plan with an Executive Summary. This brief synopsis of your business should include your firm's name and business structure, date established, location, contact information, description of your practice areas, management structure, and team. Provide a brief narrative of your firm's management philosophy, and the procedures you have in place to execute it. It is equally important to highlight your firm's operating and risk management procedures. Your Executive Summary is the window into which its readers will view your firm.

Mission Statement

Your Mission Statement should clearly define the reason that you are in business, and outline the services that you provide. To be effective, your Mission Statement should not be long-winded; it should be brief and to the point. Brevity is essential, so that your attorneys are able use it as their “elevator speech” to pitch clients. A brief mission statement is also a valuable tool to assist your clients, prospective clients, friends, and family in spreading the word about your firm.

Marketing Plan

The first step in instituting a Marketing Plan is to identify your market, understand your clients' and potential clients' needs, and ensure that you have the resources to service them. All too often a firm will begin its marketing initiative by developing a pricey firm brochure. This can be a costly mistake. Developing a marketing brochure first is putting the cart before the horse.

Prior to choosing your firm's marketing initiative direction you must first analyze your business performance. Moreover, before instituting a firm-wide marketing program, you need to have an astute understanding of and laser-sharp focus on your business needs. The time you devote to marketing is intangible. Marketing dollars are costly, they eat up non-billable time, and the fruits of those dollars may take years to germinate. Before creating your Plan, it is critical that you identify the intended purpose of your marketing initiative. Of course, the primary goal of your marketing program is to increase your profit margin. But in order to fine-tune and understand your marketing direction, you should answer the following questions. Is the purpose of your marketing program to:

• Increase business from existing clients?
• Market a practice area expansion?
• Market a new practice area?
• Distinguish your firm from the competition?

In order to distinguish your firm from your competition, it is essential that you have a clear understanding of their clientele and pricing structure and a familiarity with their marketing. With this knowledge in hand, you will be better able to set your firm apart from the competition. Once you have fine-tuned the elements of your marketing program, it is time to focus on your marketing budget. Project what the cost of your annual marketing budget should be, and then allocate it among your partners. Depending on your firm's structure, you may allocate a certain amount of marketing dollars to each partner, or choose to allocate marketing dollars to each practice area. Whichever approach you choose, the key to a successful marketing plan is not only the consistent implementation of the undertakings outlined in your Plan, but also the measurement of results at the back end. Build into your plan regularly scheduled assessments of marketing results so you will determine what worked, what did not, and adapt and change as needed going forward.

Staffing

Before deciding on the size of your staff, you must do a thorough analysis of the skill sets required to properly service your clientele. Once you understand your staffing needs, the next step is to prepare and include detailed job descriptions for each required function in your Plan. These two staffing elements are your road map to a successful hiring plan. Overstaffing results in lost profits, and understaffing or inefficient staffing can result in lost clients.

Financial Plan

Having a solid understanding of the law and excellent lawyering skills does not necessarily translate into knowing how to run a profitable law practice. The only successful path to a successful business is a solid understanding of law firm finances. There are many elements involved in a law firm financial plan, including that your accounting firm be experienced in law firm accounting. Incorporating your firm's financial plan into its business plan will demonstrate to prospective clients and bankers that your firm has a solid grasp on running your business.

Management Plan

When bankers and prospective clients approach your firm, their assumption is that you are a firm comprised of competent attorneys. What they do not know, and what you must convey and convince them of, is that you are also a firm comprised of competent, business-minded attorneys. Begin by describing your management structure and how problems will be addressed and decisions made. Identify your management team; include a summary of their backgrounds, and the reasons why each person has been chosen to become a member of the team. It is important that you demonstrate that your management team is a group of leaders who are able to manage your business, so your clients will trust you with theirs. Bear in mind that bankers and others will assume that you know the law. They will be looking for evidence that you also know how to manage a business. Your management plan, when read together with your financial and marketing plans, will demonstrate that you have laid down the foundation on which your practice will be built and thrive. In short, a business plan is your first step to achieving financial stability. At the end of the day, a mismanaged law firm will have the same result as a mismanaged candy store ' lost profits.

Susan C. Finelli, a member of this newsletter's Board of Editors, is the executive vice president of AGL Associates, a consulting firm that specializes in law firm consulting, business development and training for lawyers. She has a dynamic management career building and leading top-performing organizations, combining strategic and financial expertise with measurable achievements in operations/organization design, cost reduction, productivity/process improvement, and is a skilled trainer and educator. Finelli is the author of the novel, “Behind the Shadows.” She can be reached at [email protected].