Business Planning for Lawyers
Reprinted from Volume 19, Number 1, January/February 2002 issue of Internet GP Solo Magazine
Businesses fail because the owners fail to focus their energy on the business; most business owners are technicians, not entrepreneurs, according to Michael E. Gerber, best-selling author of The E-Myth Revisited. Law is a profession; in order to succeed, lawyers must act in a businesslike way. But Gerber may be right-lawyers tend to be technicians who want to do what they love doing: negotiating, drafting, litigating, etc. They don't want to run a business, they don't want to spend time seeking new clients, and they don't want to do business planning. Anything but planning.
As famed UCLA basketball coach John Wooden said, "Failing to plan is planning to fail." Or as it says in Proverbs, "A people without a vision will perish." Or as Yogi Berra says, "When you come to a fork in the road, take it."
The planning process is the business owner's job, although the technical tasks may be the medium of interaction between the business and the customer. In order to exceed the expectations of clients, lawyers must plan their businesses to include service elements and procedures that will encourage consistently high standards of client interaction, such as the following:
- Establish a return phone call policy. Return or have an assistant return clients' phone calls within four hours.
- Create a client-friendly office environment. Have informative literature in the waiting room, and make sure it's available in languages that reflect your client's primary languages.
- Role play and otherwise prepare your clients for interactive events such as negotiation sessions, depositions, and testimony so that clients know what to expect and are prepared for what might happen.
- Generate billing statements that are easy to understand and clearly list actions taken on the client's behalf during the previous month. (Keep in mind that clients want to pay for value received, not for time expended, even if time is the unit of measurement.)
- Regularly ask clients for feedback about whether they are pleased with the firm's services.
The Warning Signs
Most lawyers begin to realize that they are in trouble only after the money ceases to come in the door. However, cash flow cessation is usually the last symptom of a downward spiral that started long before.
An example of warning signs can be taken from the world of sports: Your law practice is like an athlete who is exercising in hot weather. Hydration-maintaining adequate body fluids-is critical to an athlete's performance and health. In fact, dehydration can lead to serious medical problems such as heat exhaustion, heat stroke, and ultimately death.
Unfortunately, the body's ability to detect dehydration is slow. There is a lag between the time the body becomes dehydrated and when it sends the thirst signal to head to the nearest water supply to do something about it. Knowledgeable athletes anticipate this problem by drinking plenty of fluids before and during exercise, even if they are not thirsty.
A law practice works the same way. The point when cash stops coming in the door is much too late to start wondering if you may have a problem. You do. The seeds of the problem were undoubtedly sown weeks, months, or even years earlier. Like the overheated athlete, you need to think about the business side of your practice before you run into problems.
Planning is important not only for cash flow but also when dealing with a banker about a loan. Bankers normally request a business plan in order to facilitate a loan. Even if you have "challenges" in your business, you need to address them in a plan.
The Five Planning Steps
- Prepare and agree to the plan. In a law firm, it is important that all of the key players agree on the direction of the firm. If the partners are not clear about the overall goals as well as specific objectives and strategies, then the planning process is bound to be sabotaged and of little use. Partners need to "buy in" to a plan. Solos are not immune from this requirement either. They must get a spouse or "significant other" to accept the general direction of the firm. That is why the first element of any plan is to agree to make and abide by the plan.
You need to gather a certain amount of historical information so that you can analyze it and start thinking about realistic modifications for the future. You will be primarily interested in marketing and financial data in the form of documents, statistics, reports, survey results, and, when there is nothing else, your best guesses. All this data will give you a snapshot of your or your firm's marketing and economic health in the present.
- Identify goals. If you do not decide what type of practice you want, you will wind up with one reflecting whatever walks in the door. Serendipity or whim may make you successful, but it is doubtful. You need to decide what you want to be and what you want to do, both professionally and personally.
- Create the marketing plan. Since your practice is dependent on clients, then getting them and keeping them is critical to your success. A marketing plan helps you to see who these elusive people are and how to attract them to your door.
- Create the financial plan. The financial plan is the culmination of all of your earlier information gathering, thinking, and planning. The financial plan is the statement, in financial or monetary terms (the language of business), of your dreams and goals.
- Evaluate and revise the plan. Good planning is not static; it is meant to be a guide against which you can judge actions or outcomes. If you begin to notice that a certain aspect of a plan is not working or needs some adjustment, change it. The beauty of a flexible plan is that it can be revised to better reflect the reality of your specific situation and to help you get to your desired outcome. Planning is an ongoing process.
This Article is listed under the following categories:
"Through Ed's invaluable coaching and no-nonsense approach, he enabled me not only to stay employed at the firm, but to make partner and have a future with the firm."
JM, Los Angeles, CA
- Driverless Cars: Not a Good (role) Model for Law Firms
- Keep Clients Happy: Don't Nickel 'n Dime Them
- Get Busy in August
- Summer's a Good Season to Think About Marketing
- Ghosts? Proper Business Procedures Ward Off Scary Occurrences
- Loans: Learn How to Negotiate for Mutual Benefit
- Things are Looking Up -- for Now
- Think Twice About Retirement
- Hope for the Best, Prepare for the Worst
- A Strong Firm Knows No 'Us and Them' -- Only 'We'