Business Planning for Law Firms
The SRA published on 30 November 2010 a paper entitled “Indicative cost benefit analysis”. It is focused on assessing the Cost Benefit Analysis of the regulatory proposals, most notably the move towards outcomes focused regulation (“OFR”).
On page 2 it states:
“In future, the SRA may require all applicant firms to provide a business plan and compliance plan. This would be a one-off cost. Firms and ABS reported that if required the production of these plans would be costly, but did not attribute these costs to the new SRA regulatory regime. This was because indemnity insurance and bank financing would be impossible to obtain without such plans, and because no firm could or should be admitted to the profession that was unwilling to undertake these planning exercises.”
At that moment I had Duncan Bannatyne’s words ringing in my ears:
You mean to say that, absent a business plan, in whatever prescribed form, that no firm would be able to trade?
But in a sense it only reinforced to my mind the URGENT need for the profession to thoroughly modernise itself. It is hard to imagine any business, large or small, trading in a vacuum: you know the old saying if you don’t know where you are going how will you know when you have got there?
Here we are counselling our clients on the need for good corporate governance, shareholder agreements, terms of trading with suppliers, dealing with insolvency and employment issues; but I wonder how many firms have got their own house in order in relation to these and the bigger, much more important issue of having a 3-5 year business plan? And even where firms have set out their stall, I wonder how many of them have produced something for the benefit of the business as opposed to the benefit of the equity/fixed share partners?
I can recall at least two firms talking endlessly about the PEP as if nothing else mattered. There might have been some excellent client specific material interwoven in the business plan, ideas on innovation or a planned new strategy (it usually was a play on the “We want to be the best at …..”) but they got buried by the weight of partner expectation about profit.
Nought wrong with that you might say. Profit, after all, is the sine qua non of any law practice, especially if it is going to grow and develop but there is always this sense that the other factors – investment in IT, infrastructure and people – were just being faux paradaded to justify the PEP.
In fact many people didn’t believe a lot of the hype and there was more than a perception of under-investment particularly around the development of people.
Although an MBA is not as valuable as it once was, I wonder how many law firms have made it mandatory that all equity partners study and pass it (or something equivalent) before they could be admitted to the partnership? Very few I suspect.
This may seem too partner-centric but just imagine the impact on the profession; or even if the MBA was a step too far how about a career plan forevery person so that they reached their absolute maximum potential. People must be the most wasted asset in any law firm.
“Are you the most of anything?”
It sums up as succinctly as I know the business planning process. Law firms should focus all their blood, sweat, guts and passion on looking at the firm and deciding what is in the best interests of the firm and the (current) people that serve their clients.
Vision statements should be aligned with core values, serving clients brilliantly and profitabilty and abetting the sustained growth of everyone in the firm. No stone should be left unturned.
Every new and thrilling opportunity investigated. And a sense of energy needs to be injected.
If the default position is going to be that which is imposed upon the profession then, as cynical as it might sound, lawyers being lawyers they will do what they have to do to comply but no more. All this will mean is that firms will continue to operate the (safe) middle ground and leave themselves exposed to much bigger competitors coming along and hoovering up their markets.
Of course there will be lots of managing/senior partners who will say that now is not the time to mess about with a successful business model – “OK it needs polishing up but there is no need to go too far, too quickly”.
But this won’t work. In a world of widespread uncertainty and rapid change the only thing that won’t work is too little change or experimentation especially with so many firms in the market all looking and feeling the same.
Business planning should be a time to re-examine every facet of the business, provide a clear direction for the firm and to make sure that everyone shares the same values.
- What is your own experience of business planning?
- Should all firms be compelled to produce a business plan?
- Will business plans have any impact on how quickly the profession adapts to competitive change?
- What is the most important aspect of the business planning exercise.
It would be great to do a follow up post to this one in the next few weeks to get a sense of how fundamental this issue is.
For more on developing profitable business, innovating in professional practice and implementing social media, subscribe to the RSS Feed of my Blog. Follow me on Twitter at @0neLife, or @Ju_Summerhayes connect to me on LinkedIn or friend me on Facebook. If I can help you or your practice, check out my coaching and consulting firm via LinkedIn, email me on juliansummerhayes [at] gmail [dot] com or call me on 075888 15384.