It has often been said, “Failing to plan is planning to fail.”
At its essence, planning is not only knowing where you want to go but being prepared for obstacles that may be thrown into your path. The Boy Scouts’ motto is: “Be Prepared” and we couldn’t say it any better.
Before your office ever opens, take time to prepare your business plan. Decide how your practice looks on paper. What and where is your target market? How will you reach out to these clients? Most lawyers when they open their new practice assume that they have to take in whatever comes in the door.
Michael Porter’s work at Harvard Business School would indicate that it is better instead to focus on a niche practice – which generally has higher margins and lower number of overall clients.
If you are not (yet) in a position to launch a niche practice, at least decide to grow into one and actively take a few steps every day to take you – bit by bit – towards your goal. Furthermore, by planning to move your practice to a niche practice, you can apply the other skills to assist you in organizing how you approach the business-side of your practice towards a stated objective.
There are many examples of success at planning and having a vision. Perhaps the most timely as this column is being written is that of Steve Jobs and Apple Corp. The New York Times stated:
Mr. Jobs was neither a hardware engineer nor a software programmer, nor did he think of himself as a manager. He considered himself a technology leader, choosing the best people possible, encouraging and prodding them, and making the final call on product design.
I am sure Steve didn’t have the final vision of any product in his mind at the beginning – like most projects, I would assume Steve’s vision was refined over time as they progressed and tried and learned. The New York Times continued:
“Toy Story,” for example, took four years to make while Pixar struggled, yet Mr. Jobs never let up on his colleagues. “‘You need a lot more than vision — you need a stubbornness, tenacity, belief and patience to stay the course,” said Edwin Catmull, a computer scientist and a co-founder of Pixar. “In Steve’s case, he pushes right to the edge, to try to make the next big step forward.”
That combination of vision, leadership and motivating drive is what will keep you moving towards your desired practice niche.
There are, of course, other details to attend to! For example, how will you finance your practice – not only from a start-up perspective but also from an operating cash flow perspective?
You need to do a budget and outline your projected setup and operating costs and income required to not only stay solvent but to meet your own income requirements. Most importantly you need to know how many billable hours you must work every day to generate the cash flow required to keep you afloat. Surveys such as the (now disappeared Lexis-Nexis Law Firm Economic Survey) have noted the average 105 day ‘lag’ between rendering an invoice and receiving payment – this delay in payment can and does cause cash flow difficulties for new and established firms alike. Knowing this lag allows you to plan your cash flow to pay bills that have a 30 day payment window while waiting for payment from your clients.
Planning extends to technology and office systems. Your network and information technology should support not only the production of excellent legal work but also the record-keeping and financial systems in the firm. A good integrated legal and trust accounting system will help you start out right, preferably if it is matched with an experienced bookkeeper – who can not only maintain your financial systems but provide valuable feedback on your financial health.
Lastly when you do get a new client – start out right by planning for success on the file. This means planning for not only a legal success for the client but also a financial success to you for handling the file well. You should outline the expectations that you have for the client in meeting the financial terms for doing the work – and incorporate those expectations in a written retainer agreement (signed by the client) together with an up-front retainer (“Ernest Money”).
Make it clear that continuing the legal work is dependent on the client upholding their financial side of the file. Anticipate how you will (legally and ethically) end the retainer if the client cannot keep up their side of the file and put those terms in your retainer agreement.