The Starting Point for Planning is Information

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In my previous column, I touched on the seemingly basic but vital concept of planning as an essential part of your business ("This year, resolve to plan," Jan. 12).

So the New Year is here, and you've finally decided to create a business plan. You've assembled a planning group and set a date.

That's great news, but now you must make sure that nothing interferes with the decision. You must be prepared in your meeting by gathering the relevant information to guide the planning group and serve as the starting point for discussing the firm's future.

  1. Assemble the firm's financial information.

    Gather as much information as possible about past financial performance, including:

    • financial statements for the past five years, if applicable, usually consisting of a balance sheet, income statement, and possibly source of cash or changes in cash or cash flow statements;
    • tax returns for the last five years, if available — these may be on your Schedule C, the law partnership return, or the professional law corporation tax return;
    • aging of accounts receivable, if any;
    • billing records, including ledger cards showing billings and payments over time by individual clients, as well as reports available from the firm's billing software;
    • checkbook register showing all checks written, names of payees, amounts and types of expense;
    • previous fiscal plans or projections prepared by or for you; and
    • bank statements for your general account and for clients' trust accounts.

  2. Gather general marketing information.

    Assemble items such as the following for purposes of discussion and comparison:

    • articles and statistics about legal trends, such as corporate counsel shopping for lower prices for outside counsel, growth sectors of legal business, and "hot" practice areas (regulatory, intellectual property, elder law, etc.);
    • bar association and consultant firm surveys showing size of firms, revenue per attorney, types of practice in your firm's region, etc.;
    • basic demographic information about your current client base, such as number of clients, types of businesses served, scope of services provided, legal requirements, etc.;
    • basic demographic information about prospective clients, e.g., industry, size, type of services; and
    • information and articles about your client pool's businesses or industries, derived from trade associations, websites, business magazines and the like.

  3. Collect additional facts.

    Add to the above by assembling additional economic information that will help you picture your firm:

    • number of people working at your firm as of the end of last year, broken down by partners, associates, administrative staff and clerical support staff;
    • number of contingency, hourly fee or fixed-fee cases or other alternative billing matters;
    • average hourly rates for partners/shareholders and associates as well as for different areas of law;
    • annual average number of billable hours for the same groups for last year;
    • write-offs, both before billing and after billing, for the past few years; and
    • effective billing rates.

    You may not be able to readily answer all of these questions, so you will want to do a simple survey and encourage the appropriate parties to fill it out as honestly and completely as possible. The more information you have, the easier it will be for you to see strengths, weaknesses and areas for improvement at your firm.

  4. Keep a list of extra items for discussion.

    While gathering all this information, make a running list of things for discussion later. Open a file on your computer, title it something like "Changes/Needs/Opportunities," and record notes about the following:

    • obvious problem areas;
    • areas of opportunities; and
    • any fact, observation or "flash of enlightenment" that could be useful in fine-tuning the plan.

Finally, get ready to embark on the critical process of determining goals and discuss them at length during the planning process.

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