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So you're getting ready to start a law firm.
It's an exciting time. This is your opportunity to make a name for yourself, make lots of money, and make your own decisions for the progression of your career.
If you're a good lawyer, with ample experience, you should have no trouble tackling the responsibilities that will make your clients happy and earn you the respect of your peers.
But unfortunately, being incredibly skilled as a lawyer doesn't necessarily translate to being incredibly skilled as an entrepreneur.
Starting a business is hard. Keeping one running is even harder.
But both of these objectives are much easier to handle with a thoroughly written, well-researched business plan in place.
Why are business plans so important for starting law firms?
And how do you write a good business plan for your law firm?
Let's start by addressing why it's so important for a law firm to have a business plan before it starts up.
There are nearly half a million law firms in the U.S. alone. Many of them are gargantuan corporations with decades of history and massive geographic footprints.
That's a lot of competition.
If you're going to be successful in the legal field, you need a way to carve a niche for yourself among these competitors. You also need a way to uniquely appeal to your target clients – not to mention define who your target clients actually are. And on top of that, you'll need to plan your law firm's finances carefully so you can continue making a consistent profit.
These aren't things that you can improvise your way through. And your legal skill mastery probably isn't going to help you with them either.
A business plan will help you address these key challenges, and in several ways.
· Research and planning. Writing a business plan practically forces you to thoroughly research the business environment you plan to enter. It's your opportunity to uncover new facts, better conceptualize the economic landscape you’re in, and plan your law firm more effectively.
· Strategic clarification. This is also a chance to clarify the strategy of your law firm. Yes, you want to attract lots of clients and do good work; but what does that mean from a planning perspective? How does that translate to day-to-day activities? Will your law firm make enough money to support hiring paralegals, assistants, and other staff members?
· Anticipation of potential challenges. Your law firm is going to face massive challenges. But what exactly are those challenges, how obstructive are they? And how can you overcome them? Writing a business plan for your law firm will help you identify key challenges and address these points.
· A stronger pitch. Are you planning on inviting other lawyers to your firm? Are you going to seek external funding? Either way, your business plan is going to function as a kind of pitch document. The better your business plan is, the easier it will be to attract great talent to your law firm.
· Direction and guidance. Additionally, your business plan is going to serve as the founding document for the development of your law firm. It's going to continue providing you with direction and guidance, potentially for years to come.
How do you write a business plan for a law firm?
These are the steps and strategies we recommend following, at the highest level:
· Start with a template or an outline. Most people have a much easier time writing a business plan if they start with a template or an outline. If you're not sure where to start, you can follow the outline we provide across the next several sections. You can compartmentalize your approach, focusing on one aspect of your law firm at a time, until your business plan is complete.
· Do your research (and provide support). You might already have some ideas about how your law firm will operate and what its core challenges will be, but a business plan isn't something you can write off the top of your head. You need to do your research and provide support for everything you introduce.
· Be as objective as possible. In line with this, you need to remain objective. Naturally, you're going to feel optimistic about your chances of success in the legal world, but that doesn't mean you can afford to ignore real challenges and threats. There will be risks and hurdles you encounter as you research your business plan; don't neglect them, and don't overestimate your chances of success.
· Strive for conciseness. Good business plans are concise. But then, you've already learned the basics of concise writing in law school. Make sure you apply those skills here.
· Avoid jargon. You might have other lawyers reading your law firm’s business plan, but it's still a good idea to avoid including jargon. If you can't put a concept into simple words, you may not fully understand it.
· Be honest. Some entrepreneurs use a business plan as a platform to extol the virtues of the business they're about to create – and generate hype about their products and services. Unfortunately, this leads them to overstate certain aspects of the business and, in rare cases, even lie about financial matters to make the business look better than it actually is. Do not do this. Your business plan needs to honestly and accurately reflect your research findings.
· Make edits and refinements. The business plan for your law firm should not be a static, unchanging document. Instead, it's something that you should constantly revisit, edit, and refine. In fact, you'll likely make edits and changes to your business plan document as you learn more across various sections; for example, after finalizing your budget, you may discover that you have enough money to hire a paralegal from the outset, which could change your organizational structure.
· Put it to use. A business plan isn't a document to stuff in a drawer once you have your office set up. It's something you should refer to regularly, and something you should update as needed to keep the business on the right track.
In the sections that follow, we'll be providing tips and guidance for how to write the most important sections of your law firm's business plan.
The executive summary section is designed to be a high-level overview of the business, drawing in some of the most important takeaways from each section that follows.
Think of it as the TL;DR section.
Because this section draws so heavily from other areas, many entrepreneurs choose to write it last, even though it's going to be the first section of your finished business plan.
Good executive summaries include at least the following:
· A description of the business. What type of law firm do you want to create? What services will you offer and who will you serve?
· Your mission statement. What is the mission of your law firm? What is your vision of how the law firm is going to grow in the future?
· Your core values and main goals. What are the core values of your law firm and what does it stand for? What are your personal main goals for developing this business, and where do you see it in the next 5 or 10 years?
· Your UVP. Your unique value proposition, or UVP, is a concise statement that explains why your core product or service is valuable, and why it's differentiated from similar products and services offered by your competitors. In other words, what do you offer that clients will not be able to find elsewhere?
The next section should be a description of your law firm. Here, you'll go into more detail about the business aspects of your law firm, including what you offer your clients and how you're going to generally operate.
· Your specialty and services. Does your law firm have a specialty area of practice? What types of legal services do you offer? What types of legal services do you not offer?
· The legal structure. You'll also need to define the legal structure of the business. Is this going to be an LLC? A partnership? A sole proprietorship? There are pros and cons to each type of available business structure, so do your research and consider this carefully.
· Leadership within the firm. If you're the one writing the business plan, chances are good that you're going to be the main decision maker within the law firm, or at least one of the main decision makers. Still, it's a good idea to detail the leadership structure within the firm, at least generally; you'll have a chance to expand upon this in a future section.
· Location of the firm. Where is your firm going to operate? Which areas does it serve?
· Your unique approach. Finally, briefly detail the unique approach you're going to take with your law firm. How is this firm going to be different from other, competing firms in the area?
The market analysis section is going to help you identify and better understand both your target demographics and your biggest competitors. The better you understand this landscape, the better you'll be able to position your law firm inside of it.
· Your target audience. Market research is indispensable for fueling this section. Consider the services you offer as well as your competition, and come up with customer personas that best represent the types of clients you're going to serve. Who are these people? Where do they live? How do they think? How can you best appeal to them?
· Your market size. Next, look at your market size. How many people fit your customer persona descriptions within the geographic area you plan on serving? This should help you ballpark how many clients will seek your services and how much revenue you can ultimately generate.
· Your top competitors. You should also include a section detailing who your top competitors are, including both direct and indirect competitors. How are you going to gain a competitive advantage over these rivals?
· Current trends. Make a note of any important trends relevant to your market. For example, are people increasingly gravitating toward smaller, more independent law firms? Are there certain legal services that are falling out of fashion?
· Pricing expectations. You'll dig into the financial aspects of your business in a future section, but for now, you can briefly cover your pricing expectations. How much will you be able to charge for services? Keep in mind that you'll need to be competitive if you want to appeal to customers, but you'll also need to be profitable if you want to stay afloat.
The organization and management section is a description of everyone who will be launching your law firm with you, and how those people relate to each other. For each person within your organization you can currently identify, provide a full name, a background description, and a biography. Explain why each person is crucial for the success of your law firm and briefly describe the responsibilities they're going to have.
Depending on the size of your law firm, it may also be helpful to have an organizational chart. This will allow readers to, at a glance, understand the hierarchy within your law firm and identify who answers to whom.
You probably already have an idea of what services you want to offer, especially if you've written other sections before this. But here, you'll provide much more thorough detail.
What are the core services and specialties that you offer? What are your prices? Are you going to charge a flat fee, hourly, or something entirely different? How will you provide services and ensure client satisfaction? How are you going to invoice and track those invoices?
This is also a good opportunity to further detail any responsibilities associated with your other team members. And will you be hiring more team members in the future?
Your law firm probably isn't going to be successful without some kind of marketing plan in place. After all, without marketing, there is no way for potential clients to learn that your law firm exists.
· Audience considerations. In marketing, everything starts with consideration of your target audience. A marketing strategy only works if it's highly relevant and focused on a specific demographic. Who are your customers and how can you best reach them?
· Branding considerations. It's also a good idea to consider the brand of your law firm. What types of visuals and what tone of voice are going to communicate your core values effectively? What are the characteristics of your brand that will carry through all your marketing and advertising tactics?
· Key strategies and tactics. How are you going to promote your law firm? There are many viable strategies and tactics to consider, including search engine optimization (SEO), pay per click (PPC) advertising, social media marketing, email marketing, and more.
· A budget. How are you going to pay for your marketing and advertising? And how far can you scale your efforts at the beginning of your operation?
The financial plan section should detail the high-level finances of your law firm. If you research this section carefully, you should walk away with a clear idea of whether or not your law firm can be profitable.
· General financial projections. How many cases do you think you'll be able to take on? Will there be sufficient demand for your services? And if so, how much money will you be able to bring in and how much profit will you make?
· A budget. What are your main expenses? What are your fixed and variable costs? How will you pay for them?
· A cash flow statement. A cash flow statement is a document that attempts to concisely summarize how money is moving in and out of your business. How will your cash flow change in the first few months of your operation?
· Revenue goals. How are you going to grow your business? What revenue targets are you going to strive for?
Finally, you'll need a short section that details your startup budget. In other words, how much money are you going to need to launch the business? Here, you'll include one-time expenses (like buying a laptop for each employee) as well as initial monthly expenses (like rent).
· Your physical location and core needs. Start by covering your physical location and core needs. How much will you pay for office space? Utilities? Critical services? Devices and technology?
· Software. What types of software are you going to need to run your business effectively? Management software? Accounting/invoicing software? Legal AI software?
· Salaries. How many people are you going to hire and how much are you going to pay them? Will they be hourly or salaried? Are you sure you can afford them at the start?
· Insurance. Most law firms carry malpractice insurance. How much will it cost you on a monthly basis?
· Marketing. What marketing and advertising strategies are going to help you at launch? How will you expand those over the first year or so?
Writing the business plan for a law firm is tough.
But it's even tougher to put it into action.
That's why we offer tools and strategies that help lawyers all over the country save time, save money, and serve their clients better. If you're interested in learning more, check out a free demo of our legal AI software today!
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