For law firms about to begin their 2015 fiscal year, this is when they should be putting the finishing touches on their business plans and marketing plans for the new year. This post offers a few suggestions on business planning and marketing planning. If you adopt even one of these ideas, you will significantly improve the probability of successful results.
1. First of all, have a plan.
A shocking number of law firms -- even some large ones -- have never written a business plan, or, at least, nothing beyond a skeletal operating budget. Our firm's experience advising law firms worldwide on business planning and performance issues has been very compelling:
As a group, law firms that have a formal business plan -- even a mediocre one -- produce better financial performance and business results than law firms that have none at all.
Let's be clear about terminology. A budget is an extremely important tool for any business, but it is not a business plan. A budget forecasts financial results. A business plan documents how those results will be achieved.
2. Anticipate risks and ask What if...
2015 presents considerable uncertainty for law firms in most jurisdictions:
- If your economy is in a fragile recovery, will it hold?
- If your economy is sliding into recession, how long and deep will it be?
- What effects will you feel from economic problems in major foreign economies, such as Japan and Russia?
- What will happen to energy costs -- especially in the oil and gas sectors -- and how will those developments affect your clients and, shortly thereafter, your practice?
Planning should be more than taking last year's numbers and adjusting them by a hopeful percentage. To be successful in this era of change and uncertainty, it must involve a serious, well-informed conversation about what is happening in the world around us.
You do not need to develop elaborate plans for every possible contingency ("What if a herd of wildebeest stampedes through the IT department?"); but asking What if... about at least the most obvious risks is an excellent test of the intellectual strength and practicality of your plan.
Above all, do not adopt a philosophy of "We will cross that bridge when we come to it." If you are not prepared, there might not be a bridge that you can cross.
3. Shift to a rolling multi-year plan.
There are several reasons why we recommend to some of our clients that they adopt business plans and marketing plans that extend over two years, rather than the traditional one year.
- The most important economic trends usually take much more than 12 months to develop. Moreover, law firms tend to be "lagging indicators" of the business cycle. In other words, the full impact of the business cycle is not usually felt with full force until sometime after it appears in the rest of the economy.
- On the positive side, most worthwhile initiatives -- especially in marketing -- require more than 12 months to implement. A two-year plan is the best way to ensure that there will be adequate resources to support longer-range efforts.
- Most importantly, the mental discipline of planning for two years, rather than just one, adds clarity to your understanding of your business priorities. It also enables you to spot potential problems before they appear as full-blow crises 15 or 18 months from now.
We recommend a "rolling" approach to multi-year planning. For example, late in 2014, firms that do multi-year business planning or marketing planning are finalizing their plans for 2015-2016. During the fourth quarter of 2015, they will update their plans for 2016 and extend them to the end of 2017. A "rolling" multi-year plan gives law firms the benefits of the longer-range perspective, plus the ability to adjust the second year of the two-year plan to reflect the firm's experience in the first year.
Whether your firm wants to begin serious formal business planning or marketing planning in 2015, or you are ready to improve the sophistication and return on investment of your current planning practices, Walker Clark LLC can help you achieve better results through better business and marketing planning.