A law firm is no ordinary kind of business. It can only succeed when the owners and partners are passionate about practicing the law and, equally importantly, how to run its business side. Bringing these factors together requires meticulous planning and the ability to accommodate every brilliant idea that supports the cause.
Most lawyers are time poor so creating an annual business plan for the law firm is often seen as an annoying (but necessary) distraction that is often placed on to one side – administration, finances, marketing, lease and equipment, and business development, it is a lot. However, a law firm without a solid business plan is doomed to fail or at least have stunted growth.
And yet, these business functions are responsible for bringing in the business that pays the bills. Therefore, a profitably run legal firm must have business elements in front of their mind.
Benefits of an Annual Business Plan
To a law firm, an annual business plan is a utilitarian document that forces the firm to think about and cover all business matters that keep the firm focused on its mission. Here are the three core benefits of creating an annual business plan for your legal firm.
- It Provides Structure and Defines the Firm’s Objectives
The primary purpose of a business plan is to shape the direction the law firm takes and what it grows into. It defines the management, marketing, and business practices to keep the firm on track with operational milestones and client satisfaction. When properly created and regularly consulted, an annual business plan helps measure the priorities and focus areas of the firm.
- Clarifies and Delegates Critical Decision Making
Writing a business plan is important as it clarifies the hierarchy of decision-making processes on key aspects of the firm. Decisions such as capital investments, resourcing, leasing, and talent can only be made a handful of times in the year but will affect the firm forever. A good business plan will help identify the critical priorities of the firm and which milestones to focus on.
- It Helps Secure Top Talents
There is a cut-throat competition out there for the freshest and brightest legal minds. Top firms grow on top talents, and hunting and finding them is challenging. The business structure that the annual business plan provides should cover the firm’s management objectives, as well as guidance on how to hire the right staff. Better still, the business plan can help define the firm’s vision and mission to new team members.
Steps to Create the Perfect Annual Business Plan
An annual business plan is an evolving document that must be updated every year as the conditions and nature of business change. Here are the six steps it takes to create a winning annual business plan for a legal profession firm.
Step 1: Define the Firm and Its Objectives
You will need to invest lots of energy and time to create the perfect annual business plan for your firm. The first step you should take is to write an overview of what the firm is, what it stands for, and why it exists. These will cover the name and location of the firm, its legal structure, areas of practice, partners, and leadership positions. The overview should also include deeper information defining the firm’s identity and aspirations.
As a rule of thumb, the annual business plan should include:
- The firm’s mission statement
- Recitation of the firm’s short-term and long-term vision statement
- Notable aspects of the firm’s history
- Important philosophies the firm believes in
Step 2: Market Analysis Report and Projections
Like every plan, an annual business plan must include an analysis of the past and a projection of the future markets and how to capitalize on it. This section of the business plan should use the business trends of the last one or more years that affect its practice and consider ways to catch up or keep up with them. Invest more effort in learning how the competitors deal with the same issues and strive to create a better marketing plan.
Step 3: Focus on the Client
To stay competitive, a legal practice firm must understand and value its customers. In this section, you will identify the firm’s target clients and group them based on important characteristics such as demographics, location, and nature of cases. Once these details are outlined, it will be easier for the firm to create a roadmap for the next year and provide personalized and high-quality service to its existing clients.
Step 4: Plan Finances Properly
The firm’s financial plans determine how well it projects to perform. This is pretty much the heart of the business plan. It must detail the firm’s variable and fixed costs, realization rate, collection rate, expected monthly overheads, and assets and liabilities over 12 months. It is also good business practice to prepare a projected monthly, quarterly, or semi-annual profit and loss statement and performance milestones for the same period.
Step 5: Streamlined Operations
In this section, take the time to address key operational issues such as equipment purchases, office leases, technology plans, and talent acquisition. The partners can also meet up and discuss roles and the human resource needs for the firm over the next year. It is also critical to research and discover developments in the law firm software niche and to automate as many of the firm’s operations as possible.
Step 6: Marketing
Many law firms do not grow as fast as they can because they get the marketing part of the business wrong. Consider the importance of marketing and how it can be used to reach new customers and retain existing ones. The marketing plan must include client acquisition targets for the next year and the costs the firm expects to incur in the process.
Different firms will have different formats of the annual plan, but the six covered in this guide are the most necessary. An annual business plan can be quite an in-depth document that demands time and attention to create.
Luckily, the benefits it offers are worth the effort for the firms that care about and invest enough in the future. Discover how time management and billing software can help you save time so you can focus on things that matter, such as creating a business plan. Try LawBillity for free for 14-days to see for yourself.