One of my favorite quotes is from famed UCLA basketball coach John Wooden: “Failing to plan is planning to fail.” Intuitively we know this is true, yet many in business feel that planning is not possible in these volatile times, and that the best any organization can do is a form of white water rafting as events carry you downstream.
Regrettably, such an attitude is too prevalent in law firms. It’s no secret that lawyers tend to be individualistic (and thus reluctant to give up personal control or direction), reactive (believing they must be flexible to accommodate variables that can’t be anticipated) and short-term (focusing on the contract, case or negotiation they have today). These traits undermine a successful planning process.
However, planning must be done if a firm wants to thrive. Those firms without a plan merely hop from one paycheck to another. If they’re successful, it is quite by accident.
Steps to a plan
For planning to happen, all of the key players must agree on the direction of the firm. If there is no agreement on overall goals and specific objectives, then the planning process is bound to be sabotaged and of little use.
Once partners “buy in” to the plan, all members of the firm – including associates, paralegals and staff – should have input into the planning process. The buy-in for sole practitioners can encompass a spouse, significant other or entire family.
After buy-in has occurred, the next steps are for leadership to commit to support the plan, gather data and develop realistic modifications for the future. The firm must then agree on the plan, and an assessment of progress toward plan goals must follow.
The last step is crucial because good planning is not static; it is meant to be a guide against which to judge actions or outcomes. If a certain aspect of a particular plan is not working or needs some adjustment, it should be altered to better reflect changing situations. Even junking a plan is acceptable when circumstances warrant. But a replacement strategy should be developed before this is done, or the firm will again be adrift.
Plans within a plan
A broad strategic plan with a forward-looking set of goals and objectives must encompass several secondary plans. These identify desired business outcomes within a given time period, define what is necessary to achieve those outcomes, and work toward them consistently.
The marketing plan should focus on the firm’s ideal clients, with the demographics, location, financials and other characteristics that define desired work. The number one place to find these ideal clients is on the current client list. Every marketing plan should emphasize what work is done for these clients, how profitable it is and how to get more of it.
The collections plan is simple: never let accounts payable accumulate. One study shows that a bill that is over 60 days past due can still be collected about 89 percent of the time. However, that drops to a 67 percent likelihood of collection after six months and a 45 percent likelihood after one year.
Promptly identifying who is not paying their bills and contacting them is the heart of the plan. Lawyers should aim to collect at least 90 percent of what they bill; anything less jeopardizes the firm’s financial future.
The cash flow plan is a financial guide to profitability that prioritizes, anticipates and allots revenues and expenditure of funds. The plan should cover a rolling period of 12 months into the future, and ideally should be revised weekly (and no less often than monthly) to enable the firm to spot developing problems and take remedial action.
The disaster recovery plan aims at business survival. It should encompass a risk assessment that reviews readiness and looks for weakness, including everything from insurance coverage to a comprehensive internal emergency communication system for lawyers, staff, clients and vendors.
Other elements include planning for temporary office space, arranging lawyer referral support and securing offsite backup and storage of electronic and paper records. A comprehensive recovery team should oversee who does what in a disaster situation.
A succession plan is essential to clarifying how clients will be taken care of as any lawyer approaches retirement. Failure to have such a plan puts clients at risk.
In large firms, succession planning means training younger lawyers not only to service clients but to begin marketing and bringing in clients of their own. Client transitioning is just as important in small firms and solo practices, where planning options can range from closing or selling the practice to grooming a successor or hiring a lateral who will assume the practice over a period of years.
These specific plans should not end up being rarely consulted binders or PowerPoint presentations. Plans are meaningless if people are not held accountable for maintaining them. One forceful approach would be to determine compensation on the basis of plan development (a realistic and aggressive plan merits more compensation) and achievement of plan goals.
Ultimately, every law firm is a business, and a business that lacks overall goals and specific benchmarks to measure them lacks any realistic chance of long-term survival.
A coach, syndicated columnist and speaker on topics relating to The Business of Law,® Edward Poll, J.D., M.B.A., CMC is a strategic law firm planner whose ideas have helped thousands of lawyers increase their revenue, improve their profitability and enhance their satisfaction with the practice of law. Contact Ed at (800) 837-5880 and see more at www.lawbiz.com, www.lawbizblog.com and www.lawbizforum.com.