Benjamin Franklin, one of the Founding Fathers of the United States, once said that failing to plan is planning to fail. And he couldn’t be more right. Whether in business, personal lives, work projects, etc., it takes proper planning to achieve your desired goals within a specified time frame.
Today, we focus solely on creating a business plan for your law firm. This is the first and most definitive step for every law practice looking to succeed in this highly competitive legal industry. You may have the passion and knowledge for practicing law, but you also need to master the business management aspect of your firm, lest you make irrational decisions that may hurt your revenue.
Building a business plan for your business is all about having a formal document detailing your goals, how much capital you need, why clients should choose your firm over the competition, among other details. We’ve created this comprehensive post to help you understand the importance of having a business plan and how to build one. So, let’s get down to business!
Why Does Your Law Firm Need a Business Plan?
Here are the top six benefits of creating a business plan for your law firm:
- A written business plan allows you to set realistic goals and focus on achieving them. This is where you list your financial, professional, and personal goals, including a timeline for achieving each milestone and how you’ll do it.
- The document provides accountability to get things done according to the plan. It creates a clear-cut road map, so you never get stuck in an unproductive habit of “I have no idea what to do next.”
- According to a study, you’re 42% more likely to achieve your goals if you write them down. Having a business plan detailing your law firm business goals forces you to focus on what you want to accomplish and motivates you to complete tasks necessary to realize your desired success level.
- Sharing your detailed business plan with your partners and staff makes them as committed to striving towards the firm’s goals as you are.
- The document motivates you to manage the firm from a business perspective and not just as a passion or hobby. That way, you can generate revenue consistently and predictably from your practice.
- A business plan also eliminates guesswork from the practice. For example, you get the idea of how many cases or billable hours plus how much you need to charge to achieve a certain profitability level.
How to Build a Law Firm Business Plan
While there’s no denying that different law practices have unique needs, some aspects cut across. In that regard, we’ve created this section-by-section business plan creation procedure comprising all key sections any law firm needs to have in an in-depth plan.
Section 1: Executive Summary
The executive summary provides a concise overview of your plan’s key information on one page and should contain such info as:
- Mission Statement – one or two sentences about your organization’s purpose.
- Major Goals – what’s the big dream behind your law practice?
- Core Values – two to four sentences describing what drives your firm every day.
- Unique Value Proposition – what tells your firm apart from other organizations in similar practice areas?
Section 2: Firm Description
The second section is a preserve for documenting critical details describing your firm, such as:
- Mission statement and values. Restate your core values and mission statement here.
- Location. State where your offices are geographically located and what vicinities you serve.
- Legal structure. Here, you should identify the ownership structure of your firm. For example, are you a sole proprietorship, a partnership, a multinational, or any other legal entity?
- Firm history. If you’re drafting or updating a business plan for an existing entity, here’s the place to provide a brief history of the firm, summarizing its achievements and highlights.
Section 3: Market Analysis
Conducting market analysis or research is necessary to get you off on the right foot. It helps you identify what your prospects are looking for, how many firms offer similar services in your location, how much you should charge your clients, etc. In essence, you need market analysis to point out your competitors’ weaknesses, devise an appropriate marketing strategy, and stand out to your prospective clients.
The section should include:
- Target audience. What categories of clients do you want to serve in terms of their ages, location, gender, occupation, needs, etc., and why?
- Competitive analysis. Here’s where you list everything about your competitors. What are their strengths and weaknesses? How can you improve on their weaknesses and gain an edge over them?
- Industry description. Where is your specific legal niche today in terms of market size? Where has it been previously? And what trends are likely to influence the future?
- Projections. How much can your clients spend on legal services? How much should you charge per service?
Section 4: Organization and Management
Here, you should provide details about yourself and any other person with an ownership stake in the firm. These may include:
- What’s your academic background?
- What active practice experience do you have?
- Why are you the perfect person to manage the firm?
Section 5: Services
As straightforward as the title suggests, here’s where you provide details of the legal services your firm offers. When listing your services, it’s critical to consider:
- What problems do your prospects need help with?
- How will your services benefit your clientele?
- Why would a prospect prefer your services over similar ones provided by the competition?
- Which other firms or solo practitioners provide the same services as you do? And what can you do to outperform them?
Section 6: Marketing Strategy
Your law firm business plan should consist of a marketing strategy touching on the three P’s:
- Pricing. How much will your services cost? What value will your clients receive for the price? Is your pricing consistent with the range within the legal industry and your niche-specific practice area?
- Positioning. How will you position your firm and services? What should you say to place your firm in the limelight? What statements can lure a prospect to seek your services?
- Promotion. What marketing channels will you leverage to promote your firm’s services? Who will oversee strategizing and marketing?
Section 7: Financials
The last section of a comprehensive law firm business plan is the financials. It’s a necessary part of the plan, especially if you intend to seek funding for your practice. However, it’s still in your best interests to include the section even if you don’t intend to seek financing; you need to know your exact financial position before beginning your practice.
Essentially, your financial plan should reflect on budgeting and forecasting. These questions should help you provide the details:
- What’s your starting capital projection?
- How much practice operating expenses (OPEX) should you incur monthly?
- How many cases would you need to break even and attain profitability?
- What’s your annual profit and/or loss projection?
And that’s it for drafting a detailed business plan for your law firm! Hopefully, this post was insightful, and you learned a thing or two about why a business plan is essential and how you should create one. Remember, it all begins with an executive summary, then you proceed to the firm description, market analysis, organization and management, services, marketing strategy, and wrapping it up with financials.
After securing funding, and you’re ready to open your offices, it’s critical to point out that you’ll need some software solutions to make your legal practice more efficient, fulfilling, and rewarding. Among other tools, you’ll need software for accurate billing, expense tracking, reporting, and time management. And that’s where LawBillity comes in handy!
If you’d like to discover how LawBillity can improve your firm’s productivity and profitability, start your 14-day FREE trial today!