GPSOLO October - November 2008
The Key to Business Planning: Put It in Writing
Did you write a business plan? That’s a question that brings angst to most business owners. As a business counselor, I have observed that unless entrepreneurs are forced by the bank or investors to write a plan, few of them do it. I wondered if this was true for lawyers. Do most lawyers just “hang out a shingle,” or do they write a plan for their law practice?
Surveying a group of attorneys who subscribe to my newsletter, I got a clearer picture. When asked if they wrote a plan for 2008, 85.7 percent said no. Why not? Reasons ranged from “I always plan to write a plan but I never do” to “Running a practice is just common sense” or “I don’t have time to write a business plan. No follow through. No need. No time. No plan!”
Seventy-seven percent of the attorneys were not convinced that having a written plan would help their practice. Some responded that their work plans itself. Yet 84.2 percent said they did some kind of planning either daily, weekly, or monthly. Both the lawyers and the entrepreneurs I have counseled do some business planning; they just don’t put the plan in writing.
How Could a Written Business Plan Help?
A written business plan has a structure that forces the writer to look at the different aspects of his or her practice in a systematic and strategic way. Have you ever wanted to see what impact a change to your practice would have before implementing the change? Writing a plan is the way to do that. It can show you what the change will do to your bottom line, your marketing efforts, and your staffing so you can decide if the effort will be worth it. All this before you spend a dime. Still not convinced? Let’s review the process to see what else can be accomplished.
Define your practice area(s). The first step in business planning is to make some decisions about your practice. At this point you will just be making notes about these decisions. Later you can use your notes to write the plan based on your final decisions about the business environment, the market, the competition, and your own vision of success.
If you have been in practice for many years, you probably already have one or two areas of law in which you specialize. Instead of mechanically accepting your choices yearly, ask yourself if these areas are still right for you. Look for trends in each practice area. Some market research might be necessary here. Is there something in the environment that tells you one practice area will be slow or one will really pick up this year? What impact do the trends have on your practice? What part(s) of your practice promise the most work this year? The answers to these and similar questions are vital for your marketing plan.
If you are a new attorney, you’ll need to think about your practice area(s). Which will you choose?
- Do you have a passion about certain areas of the law or certain types of clients?
- Do you have a network of contacts that points you in a particular direction?
- Do you have some experience in an area and a desire to build on that experience?
New attorneys often want to start their practices with whatever shows up. They are usually eager for any business. It may seem counterintuitive to set boundaries around the type of work you will do in your practice. To have a financially successful practice, however, you need to work quickly and accurately. By specializing you will get proficient and knowledgeable in specific areas. Because your practice will require immense focus and dedication, choose work and clients you enjoy and care about.
Identify characteristics of your target market and unique offerings. Once you know your specialty, there are three important questions to ask:
- What is the target market for your practice?
- Who is your ideal client?
- What makes your practice unique?
Your target market consists of the group that buys your services. It may or may not be the client. The more you know about your target market the better you can predict:
- where to find them;
- who also works with them or sells to them;
- what publications they read;
- what media they regularly use to get information; and
- what they do for fun.
Begin by describing each target market. Get a really clear picture of the group you are targeting by describing them using demographic and psychographic (interests) information. This will help you to choose the right marketing methods for your practice.
Once you have this information, you will be equipped to develop your marketing plan. By understanding your target market you are less apt to go with the marketing idea du jour and more apt to select the ones to which your potential client responds.
One more word about the target market—not every member of that group is a good client for you. You may have other criteria for your ideal clients: Can they afford your services? Do they pay bills on time? Are they punctual? Do they follow through on their promises? Thinking about this now, putting it into writing, and committing to your specific profile will save you from problem clients in the future.
Next think about the third question. What makes your practice unique? How can you distinguish your practice from others with the same specialty?
It could be the way you practice. A lawyer in my area has a van he uses as an office. He drives to his clients’ businesses, thus making his services convenient and memorable.
Perhaps it is a novel approach to your practice. A business lawyer I know has a legal checkup on her website. The checkup, a series of questions for small business clients, is relatively inexpensive (she knows members of her target market don’t have a lot of money), and the clients get a full report and explanation. Clients have enough information to make a decision about which issue(s) would require the attorney’s services.
Another possibility that can give you an edge in your practice is additional experience or training. There are real estate brokers who become real estate attorneys, human resource people who become employment lawyers, and financial planners who are estate planning attorneys. This additional related experience sets them apart.
Not sure what would make your practice unique? Do some market research. Talk to some members of your target market. By asking them directly about their experiences with other attorneys (what they liked and didn’t like about the experience), you can find key differentiators for your practice.
Can’t find people in your target market to talk to? That is a red flag. Your target market must be easy to locate and large enough so that converting a small percentage to clients will result in a busy practice for you.
Start writing the plan. Now that you’ve thought about the basics of your practice, sit with it for a while and visualize your practice. If you could have the practice of your dreams, what would it look like? What would you be doing? Who works with you? Where would you be working? Daydream about it.
See yourself as wildly successful. Think about how that feels. Actually feel the confidence, enthusiasm, and energy that your vision of your practice generates. Use that energy and excitement now to write down your vision. Why write it? Writing makes it concrete. If it is not written down, it becomes a moving target. When you confront an obstacle, it may be easier to adjust the vision than to overcome the challenge. Don’t settle for less than your dream. Write the vision down and commit to it.
A business plan does not have to be elaborate. If this is your first business plan, start with this simple, three-part structure:
- business description;
- the market and marketing plan; and
- projected cash flow and budget.
More experienced business plan writers may cover other parts. For now, use this simple plan to discover the value of a written plan in building your practice.
With your vision written down, you have your business description almost complete. Your notes on target market, ideal client, and your uniqueness will help you further define your practice. You are on your way.
The plan also will include the steps involved in making your vision a reality, so ask yourself what do you need to do to get from where your practice is today to your vision. Write down those steps as part of the plan.
Describe the market and develop the marketing plan. What does the market look like in each of your practice areas? The market research you did when selecting your practice area(s) will be helpful here. Writing this section should convince you that you have a large enough market for you to easily achieve your revenue goals.
Now that you know what the market looks like, how are you going to develop it? What are the marketing activities that you plan to do on a regular basis?
If you are already in practice, then you probably know the marketing methods that are most successful for you. Do some analysis of past methods to determine the ones to include in this year’s plan.
New lawyers will need to brainstorm a list of all the methods possible. Networking, referrals, websites, blogs, presentations, and writing articles are a few of many possible marketing activities. Use your target market information to help you decide the most appropriate marketing techniques to attract your ideal clients.
Put these marketing activities on a monthly calendar. Decide on both actions and follow-up actions for each month and put them into the plan. Use this schedule of marketing activities in your practice. It is an operations document as well as part of the plan. We’ll talk about measuring success later.
Determine financial health using cash flow projection. In the financial data section you will need to do a cash flow projection month by month. If you dread this part, hire an accountant to help you. The cash flow shows the incoming revenue to your business and outflows of cash. Budgeting for outflows is fairly simple. You have certain fixed expenses that you know about, and the variable expenses will be based on how much new business comes in. You will need to make some assumptions here. Always keep a record of assumptions.
If you are writing this plan for 2009, then start with January and list the amount of monthly incoming revenue (from the cases you are anticipating getting paid for in 2009 and the new ones that you are forecasting) and then all your expenses for each month.
Forecasting new business is often something my clients resist. It is, of course, impossible to know for sure, but you can make a calculated guess. If you have been in practice for a while, you can look back over the last year to get a sense of how many cases come into your firm on a monthly basis and what the value in dollars of an average case is. (It may be different for your different target markets.) Less experienced attorneys may need to make an estimate based on market research and conversations with other attorneys. Check to be sure the marketing activities in your plan support your forecasted revenue. Many people do three different forecasts: wildly optimistic (inspiring), middle of the road (most probable), and conservative (easy to accomplish but worst case). Again, keep track of your assumptions and write goals for yourself.
Measuring success. Now that you have written the plan, what do you do with it? There is an old saying: “What doesn’t get measured doesn’t get done.” Here is a huge benefit that comes from the written plan. Now you can go back to the list that you wrote of steps that are necessary to accomplish your plan and decide which steps you need to measure regularly. Measuring success will ensure that you are staying with the plan and achieving good results.
Some other suggestions would be to look once a month at your cash flow. How are you doing against the plan? Is your projected income more or less than your actual? Now is the time to take corrective action if you are behind. Although most of us might think the issue is not enough clients, it could be a billing or customer service issue, so the first step is to diagnose the root cause and then do something about it.
Another area you will want to check at a minimum of once a month is your budget. How are you doing against the budgeted expenses? If there were unexpected expenses, you may need to adjust your budget going forward.
Pick out other challenging areas such as collections (realization rate), revenue (number of new cases), and billable time (hours billed), to name a few.
The plan is a guide. Used on a monthly basis, it keeps you constantly connected to your practice in a strategic way so there are no year-end surprises.
As you get more experienced, your forecasting will be more accurate. You’ll know what marketing methods bring in revenue with the least amount of effort. You won’t waste precious time using marketing actions that do not produce results.
Dream It, Write It, Do It, Measure It
At this point you may be saying, “I do all this. I just don’t write it down.” I encourage you to take that extra step. Otherwise the plan is apt to shift without your noticing. The beauty of a written plan is that you can verify your original intention. It is there in black and white in your business plan.
If you are planning on a daily, weekly, or monthly basis without a written business plan, you risk drifting into a practice that is not what you anticipated. Spending the time necessary to write a solid business plan and using it to guide your practice makes success more likely.
The plan I have described is a basic one. Start simply if you have never done one before. As you see the benefits, you will want to add other sections, such as ones on competition, product/service description, or staffing. Whether your plan is simple or complex, taking the time to write a business plan is a good investment in yourself and your practice. Write an excellent plan and plan on excellent results.
Alvah Parker is a business counselor, career transition coach, and practice advisor for attorneys; she may be reached at email@example.com. Parts of this article are based on the author’s “Do You Really Need a Business Plan?,” which appeared online in 2002.