But even if your law firm is not prepared to move to two-year business planning, the suggestions in this article will help you to improve successful results next year.
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 the risks and ask What if...
As we pointed out in another recent World View article, multiple, seemingly contradictory, probabilities in the geo-political, economic, and business spheres have become the new daily reality. The law firms that are already successful in navigating through uncertain waters are the ones that have developed multiple scenarios for their most probable futures and plans to address each one if it arises -- or, more disturbing, if more than one of them arise at the same time. They also have identified the less probable scenarios that nonetheless can have potentially destructive -- not just merely disruptive -- consequences.
Business planning must be more than taking last year's numbers and adjusting them by a hopeful percentage. To be successful in this era of continuing 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 -- as defined by their probability and the seriousness of their consequences -- 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 four reasons why we recommend to some of our clients that they adopt business 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 as long as two or three calendar quarters after it first appears in the rest of the economy.
- On the positive side, most worthwhile initiatives -- especially in marketing and business development -- 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.
- The more sophisticated and complex matters that clients present to their law firms usually do not respect the confines of a fiscal quarter or a single fiscal year; and they can have multi-year implications for practice management and profitability.
- 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-blown crises 15 or 18 months from now.
We recommend a "rolling" approach to multi-year planning. As a calendar-year example, in late 2018 a law firm finalizes its business plan for 2019-2020. During the third or fourth quarter of 2019, it updates the plan for 2020 and extends it to the end of 2021. 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 move your business planning to the next level of effectivness in 2019, or you are ready to consider a two-year business plan, Walker Clark LLC can help you achieve better results. Contact us to learn how.