For law firms operating on a calendar year basis, a large part of the next 20 to 30 days will be (or at least should be) consumed by putting the finishing touches on the business plan for 2014.
While you're at it, why not write a 2-year business plan?
Of course, some of the details of the plan for 2015 might be a little hazy. That is to be expected, but even an imprecise vision of months 13 through 24 is far better than none at all. If your firm has even a mediocre set of financial records and even if your partners are only barely conscious of the economic, political, and regulatory trends that are likely to shape the demand for legal services in your market, you should be able to construct a reasonably plausible structure of your firm's expected performance and investment priorities for the next 24 months.
This time next year, you would update your original plan for 2015 (the one that you wrote this month) and extend it to include the first draft of your business plan for 2016.
There are numerous advantages to multi-year business planning. Some of the most practical benefits are:
- It is more realistic. The most important trends in the financial performance of law firms do not confine themselves to neat 12-month blocks of time.
- It is easier to link the firm's business performance to the achievement of strategic goals, most of which usually require more than 12 months to achieve.
- A multi-year plan -- even if it becomes a little sketchy after the first 12 months -- gives you a more accurate view of the long-range return on the investments that you make this year, in areas such as marketing, professional talent, and facilities.
- Multi-year planning is a more reliable way to anticipate and manage long-term risks, such as erosion of the client base or increased competition for a relatively stagnant or shrinking demand for legal services.
- Multi-year business planning is essential if your firm wants to engage in well-informed succession planning and to manage intelligently your firm's career flow from associates to partnership.
In short, a business plan that includes forecasts, objectives, and budgets for 2015 will help your firm make better-informed decisions about 2014.
Norman Clark
