Tag Archives: business plans

Strategy on the Back of an Envelope

I’ve just participated in a two-week charity fundraising event, driving 40-year-old cars 5000 kilometres through the Australian outback to raise money for disadvantaged kids. The fleet consisted of 95 pre-1976 vehicles, no four-wheel drive, no engine modification allowed.

This event presented me with a useful metaphor for the business of legal practice. Nearly everyone made it despite himself or herself. About two percent of the field had a well-thought-out, well-executed strategy. The rest of us succeeded because our ability to get out of strife was a tiny bit better than our ability to get into it (sound familiar?).

So too law firms. Leaving aside the elite, how many firms really succeed as a direct result of a well-executed strategic plan? Not a lot, I suspect. In fact, between 1980 and 2007, it probably took effort not to succeed. To fail, one needed a dysfunctional partnership, a bad premises deal or a propensity to pay people way too much: these were pretty much the only ways to stuff it up. Oddly enough, some folk did manage the trifecta.

Times have clearly changed. Success doesn’t just happen by muddling through. Even small firms should invest in this list of must-haves:

  • A well-thought-out strategy – they know what they want to be and what they don’t want to be;
  • A leverage structure with a balance between relatively junior solicitors and senior solicitors – not all one or the other;
  • An understanding by all fee earners of ‘minimum acceptable contribution’;
  • A clear pricing strategy, regardless of methodology (fixed fees, hourly rates, scale, perceived value or whatever). The best performers keep all of these possibilities in their tool kits;
  • An understanding of cost of production;
  • A management structure with clear objectives and the support of partners;
  • Leadership as well as management;
  • Good financial housekeeping (price, WIP and debtor management).

My Edge colleagues and I have written, over the years, about all of the above. We continue to assist firms with pragmatic implementation.

For the benefit of those who are yet to invest in a robust strategy process, here’s a better-than-nothing, back-of-the-envelope approach to start the ball rolling.

Planning Is Key

In my experience, the best self-help first step in the practice-improvement process is planning. I am not talking about a multi-volume document brimming with colourful flow charts and management clichés. On the contrary, I am talking about a discussion that results in a one-page summary that tells every partner (or sole practitioner) where they are headed. The plan will guide those who have been delegated the responsibility of implementing it.

For this planning session, meet as a partnership (or with a key advisor if you are in sole practice) away from the firm, somewhere where participants won’t be distracted by staff or clients. Give each item full and frank consideration. Business plans in small firms are next to useless without consensus. Partners will simply agree in the meeting and then continue doing whatever the heck they want.

I recommend that the discussion revolve around the following decisions:

 

 

The Components

  • What type of work – refers to the type of matters the firm is seeking to offer. In considering this, look at those services that you offer now. Consider what you would like to stop doing – or to stop doing within five years. Having done this, consider what you do wish to be doing and add these offerings to the ones that you want to keep.
  • Partner numbers – refers to the number of equity partners. You may wish to include salaried partners here, but I usually put them into the “employed fee earner” section.
  • Gross fees – refers to the total fee billings of the practice (excluding disbursements).
  • Net profit per partner – refers to the desired profit per partner. When you are considering desired profit, remember that as a principal you should receive a reasonable pay for your time and effort, and a reasonable profit.
  • Employed fee earners – refers to the number of employed solicitors, associates, non-equity partners and paralegals. (Full-time equivalent, so someone may be 0.5 paralegal and 0.5 support.)
  • Support staff – refers to all support staff in full-time equivalents.
  • Space (sqm) – refers to the office space required. The average Australian firm uses about 25sqm per person (including public space like reception and meeting rooms). This is not ideal though. I suggest that you allow for about 18sqm/person. (We are told that best practice space utilisation is about 7sqm/person, but this requires significant cultural and operational change.)
  • IT commitments – refers to any foreseen expenditure on technology such as PMS, litigation support, marketing data base, etc.

The best way to approach these discussions is to fill out the actual numbers for this year, then do Year +5 first. Come back and do Year +1 next, then simply ‘join the dots’.

This is a start – a bit rough and ready but better than nothing.

By the way, our “Annual Variety B to B Bash” raised 2.25 million dollars for disadvantaged Aussie kids – admittedly despite most of us, not because of most of us.

Next year I’ll be one of the planners.

 

Helping Partners Jump Hurdles

Screen Shot 2016-06-27 at 6.09.25 PMJust about every law firm strategic plan requires some degree of business development planning and activities.

For three reasons, however, lawyers often find the related areas of marketing and business development difficult hurdles to jump.

THE PROBLEMS

Doing what we have always done

For decades, lawyers have been able to restrict their marketing strategies and activities to previously successful formulae, unconsciously applied. Successful businesses were built up on the back of the firm’s goodwill and a database of existing clients developed slowly over many years by dint of instinctive marketing, opportunistic activities and haphazard relationship building. In the past, and (for some lucky firms) even now, there has been little need to do anything different, despite the fast-moving and increasingly competitive age in which law firms now find themselves.

The introspection of The Technician

The second issue is that the behavioural patterns endemic in most law firms conflict with a methodical marketing ethos. These behaviours result both from the technical attributes and traits which characterise the good lawyer, and from the ‘chargeable hours’ culture which has developed in law firms in recent years.

After all, most lawyers took up the law in order to practise their chosen technical profession, and doing and concluding a piece of professional work is what they find most interesting. By virtue of both training and inclination, lawyers can be or may become introspective and focused on precedent. And for those who developed their client bases in the dim and distant past, there can sometimes seem to be little incentive to go out and ‘do some marketing’. What is more, the cerebral and analytical traits expected of professionals can militate against taking an entrepreneurial and wider view of life. In short, lawyers are not typically good at picking up the phone and making a cold call, or in following up an identified prospect. Furthermore, if lawyers are rewarded and valued mainly for client work and profitability, the pressure is inexorably applied to the achievement of short-term, chargeable targets and objectives, rather than long term non-chargeable business development activities.

The problem of differentiation

Successful marketing depends, at least in part, on being able to demonstrate that the services on offer are sufficiently attractive to dislodge the competition. The problem is that the services of one law firm or individual lawyer are relatively difficult to differentiate from the services of another.

In the face of these natural barriers, many firms long ago decided to make greater strategic investments in their marketing departments, with the idea of focusing their professionals on the legal work which they clearly like and are best at. Investment may have helped, but the introduction of sophisticated marketing professionals has also provided a cop-out, allowing professionals to abrogate to the specialists their responsibilities to manage their own careers, to build client relationships and to develop pipelines of business

There are three long-term measures to help partners face up to their responsibilities.

THE SOLUTIONS

  1. Catch them young

Competence in Business Development is now seen as a key skill for all lawyers and has become a critically important criterion in assessing promotion prospects and – for partners – their compensation. Hence, exposing young lawyers early to the principles, practice and mindset of developing their own business is easier than trying to teach old dogs new tricks.

  1. Value and reward the rainmakers

It may seem an obvious point but many firms seem still mainly to value personal revenue production. To an extent, good rainmakers will always do well if and so long as their business development efforts result in good revenues for themselves, but one rainmaker recently told me that he was becoming frustrated at the lack of any value or recognition for business brought in by him for others in the firm.

  1. Personal business plans

For a firm to achieve success, the strategic objectives of the firm must cascade down to teams and individuals.  A well drafted personal plan helps to set practical and detailed goals which link with the firm’s objectives, including its plans to develop new business. The existence of written goals and objectives has been shown to improve performance. From my own observations of hundreds of law firms across the world, only a few partners have written objectives in place and even fewer regularly review those objectives. It is widely accepted that professionals who take time to consider their ambitions and to crystallise their plans into written objectives perform better than those who have no written goals.

Unlike trees, plants and animals, law firms do not grow in substance or in size as a natural result of the passage of time but need careful development.  Whilst the best work comes as a result of successful work done for satisfied clients, the last three decades have shown that business development effort has to be made at the levels of firm, practice group and individual in order to help the firm prosper.