You’ve invested so much time into completing and graduating from law school and studying and passing the state bar exam. Maybe you spent years working at law firms, in government, or in corporate law. Now you’re ready to open your own firm, and you want to do it right so all those years of hard work pay off. You need a law firm business plan.
But do you know where to begin? What should your business plan include? What are the challenges you know and, most importantly, what don’t you know?
Start with the basics. What are your values? What do you want to achieve with your law firm? What will make your firm stand out?
Understanding your “why” will prepare you to open your firm and establish its operations—from case and document management to checking your firm’s growth profile. Well-defined goals, plenty of preparation, and the right tools can help you get answers to your business questions and create the best business plan for your law firm.
What Is a Law Firm Business Plan?
A business plan is a roadmap that accounts for your milestones, potential setbacks, and the overall growth of your brand. You may want to include strategies for marketing, finance, sales, and partnerships.
Generally speaking, it’s a summary of what goals you want to achieve as a brand. If you’re not sure of where you’d like to start with your business plan, think about:
- The purpose of your firm and what you want to do
- How you see your firm in five, ten, or twenty years
- The type of working environment you want to provide
- Management and organization of the firm
- What do you want to see come out of your firm financially
While considering each of these factors, keep your target clientele in mind. Consider your demographic, their needs, and expectations. This way of thinking can help keep you focused on providing top-notch client care.
Why Is a Law Firm Business Plan Important?
Making a business plan is a guiding principle for your goals and success. This way, you’ll be less likely to lose sight of your goal. When managing a firm, you have to worry about yourself, your staff, the brand and business as a whole, your partners, competitors, and of course, your clients. With all this responsibility, losing track of your mission seems almost inevitable. However, it doesn’t have to be. Referring to your firm’s values, your long- and short-term objectives, and your financial projections can help prevent you from falling behind.
Your firm is a business, so you must manage it as such.
Even though you should follow your law firm’s business plan, that doesn’t mean your goals won’t or shouldn’t change. Sometimes, things don’t go as intended, and you must adapt. For example, some marketing strategies may not be as popular with your target audience as intended. In that case, it’s time to go back to the drawing board and see how you can appeal to them.
How Do I Start a Law Firm Business Plan?
Getting started is almost always the hardest part of anything. However, if you start small, it’s easy to build.
When creating your law firm business plan, follow these steps:
Define Your Goals
Having defined goals sets the tone for how you manage and market your business. It may seem obvious to you, but when prospects do a search and land on your website, that might not be the case for them. When you articulate what drives you, these potential clients may be more inclined to look into what you can offer them.
If you’re unsure how to explain your goals for the firm, maybe come back to that later. Figuring out your services, marketing strategies, financial projections, management, and operations may help you come to a more concise conclusion.
Revenue/Value Estimation
Whether you’re asking for funding or want to build the firm from the ground up, you must figure out how to keep the lights on.
You’ll want to have an answer for the following:
- What are the costs associated with starting a law firm?
- What is the number of cases you need to break even? Make a profit?
- What is your profit-loss estimation?
Be precise with these numbers. That way, you can better gauge your success or lack thereof.
Billing Structure
Creating a comprehensive legal billing policy at the beginning will save your law firm a vast amount of non-billable hours and money.
First, you’ll want to get clear on items like your fees. Some firms charge a flat fee. Others charge by the hour. The fee structure can vary depending on the area of practice. For example, if you’re working in personal injury law, especially, you may go the contingency fee route.
Once you figure out which payment structure to use, you’ll want to create a process for how you’ll get paid. Automating your billing with legal workflows is a simple way to standardize the processes. This workflow should outline items like the invoice creation process, modes of sending the invoice, and how the client will pay.
PracticePanther’s automated legal workflows can be customized to trigger events throughout the billing cycle so you never have to worry about missing a step.
Identify the Risks
Just like the risk assessment you give your clients, the same should be done when starting a law firm. Identifying potentials risk during the planning process will help inform your business decision. While risks are not always avoidable, being proactive can limit the shock associated with surprise risks.
A few potential risks for law firms:
- Market share
- Pros and cons of your pricing structure
- Demand of services
What Is in a Law Firm Business Plan?
There’s no set formula for creating a picture-perfect business plan. However, these things may put you on the road to success:
Executive Summary
This section gives an overall view of your plan. It includes:
- Mission statement, noting your inspiration and drive for your law firm
- Core values, describing what you’ll use to serve your clients
- How you stand out, discussing what you’ll bring to the table that others may not
- A company description, articulating how you got started in law, your educational and professional background, etc.
Refrain from making general, overstated platitudes. Every other firm promises how they’ll strive to deliver the results their clients need. Be specific and tell them how you will act.
Market Analysis
Who will you represent, and how will you get paid? These questions can help you determine how you’ll carry out a market analysis:
- Target clientele: What demographic do you want to serve? Think of age, location, status, occupation, or gender.
- Financial projections: How much would this demographic reasonably spend on your services?
- Industry: What are the trends in this industry? What’s the market size? What’s its potential for growth or lack thereof?
- Competition: Who are your main competitors? What are their/your strengths and weaknesses?
Law Firm Billing and Finances
What are budgets and revenue going to look like? Think about how much money you’ll need to start up and keep the firm running every month. How many cases will allow you to break even or make a profit?
Assess how much you project to make this year and every year thereafter.
Management Structure
Now is the time to think about how you’ll operate. Yes, you want to create a healthy work environment, but how will you do that?
If you’re opening this firm, you probably have the educational background and experience to hit the ground running.
However, serving clients and running operations are two different things. Are you the right person to manage the firm as a whole? It’s okay if you’re not sure. Maybe you would benefit from hiring an office manager or other employees to keep things running.
Legal Technology
The more clients you take, the more paperwork, documents, and overall assistance you’ll need. You may not need to hire an employee to take care of such matters per se. As such, you may want to consider purchasing law practice management software to keep track of every detail of your business operations. These cloud-based solutions make it easy to work from anywhere while maintaining collaboration with staff or outsourced workers.
Managing your law firm is made easy with an all-in-one solution. PracticePanther comes equipped with all of the resources your need to efficiently manage a profitable law firm. Native features like custom reporting to track expenses or cash flow, legal document management for accessibility and paperless filing, legal billing software to accurately manage your billing and invoicing, case management to streamline your cases, eSignature to quickly send documents for electronic signature, and online payment processing to get paid faster and enhance the client experience.
Other law practice management platforms may require costly monthly subscriptions for essential business features like online payment processing or eSignature. With PracticePanther — they’re free to activate and included with your account.
Legal Services
Your services are the bread and butter of your firm. What problems are your potential clients experiencing, and how will you help them?
Here, you can also differentiate yourself from your competitors and discuss the advantages of hiring you.
Law Firm Marketing
When you market your firm, think about how you will present it and entice a prospect to hire you. What services will you provide, and at what cost? Show potential clients that your firm is worth every penny and that you will go above and beyond for them.
Creating a law firm marketing strategy with proven tactics and goals is key. Traditionally, firms have relied on word of mouth. However, to remain profitable — law firms should utilize modern channels such as social media, paid advertising, and search engine optimization or SEO.
Use your executive summary and market analysis as an initial guide for your marketing strategy then continue to measure and adjust your strategy.
Sample Law Firm Business Plan
Organizing your law firm’s business plan can seem like a big maze. However, if you have a document template that allows you to break everything down step by step, it won’t be as scary.
PracticePanther offers a white-label template for you to write out your goals for your firm. You can even customize it with your logo, ensuring your professionalism and brand recognition. This feature also stores your business plan in one place.
What’s more, if you have several potential business plans, you can easily store them within PracticePanther as a template or file. This way, if you need to adjust your plan (which is highly recommended that you monitor your business plan) you can easily access it.
Outlook on the Business of a Law Firm
It’s great to have short-and long-term goals and objectives when you’re forming a law firm business plan. Still, these plans should be flexible and adapt to the market.
Having an understanding of how to scale and market your law firm with modern processes will ensure the overall profitability of your business. With PracticePanther’s five-minute law firm growth quiz, you can find your growth profile along with a strategic growth roadmap for success.
Modern legal technology makes it easier than ever to practice and manage a law firm today. Ready to get started? You can schedule a custom demo with PracticePanther to see how our features support your firm’s success.
