Opening a start-up law firm is not a simple undertaking. There are so many items to consider and for which you must plan. All law firms start with great ideas and good intentions, yet not all new law firms succeed. Thomas Edison once said, “A good intention with a bad approach often leads to a poor result.” Starting a law firm without a business plan is a plan for failure. A business plan is a roadmap of where you want to go and the route you are going to take to get there.
Right now, you are probably thinking, “How do I develop a business plan to start a law firm when I have never owned my own firm?” If you are asking yourself that question, then you have just realized the importance of a business plan.
In its simplest terms, a business plan describes the goals that you want to accomplish, gives structure to your ideas, and helps you plan out the financial aspects of achieving your goals.
So why do you want to start your own law firm? Here are some questions you should ask yourself that will help you decide if you are doing this for the right reasons:
- Am I motivated to own my own law firm?
- Do I have good organizational and time management skills (or am I willing to hire someone who does)?
- Am I aware of my strengths and weaknesses?
- Do I have a vision for the future of my new law firm?
- Do I have attainable personal and professional goals?
- Have I weighed the risks and benefits of starting my own law practice?
- Am I committed to being successful?
If you answered “yes” to these questions and have decided to take the leap of faith and start your own law firm, let’s go through the important items to address in your business plan:
EXECUTIVE SUMMARY. Although this is the first part of your business plan, it should be written last as it will summarize everything in your business plan.
BUSINESS DESCRIPTION. This is a generalized but brief statement that generally includes the name of your firm, the areas in which you will specialize, and who your target client base is, at least initially.
VISION STATEMENT. The vision statement for your firm should be to attract and retain new clients through a marketing strategy focused on the firm’s area of specialty, to establish the firm’s presence in the legal community, and to establish a referral system within the legal community.
MISSION STATEMENT. Your mission statement should be to provide exceptional legal services to all clients so they will be repeat clients when necessary and refer others who require your services to the firm.
INITIATIVES/OBJECTIVES/GOALS. Everyone wants to be successful. No one in his right mind would start a law firm without the goal of being successful. Like your marketing strategy, your business strategy will evolve. In this section, identify your long-term goals (usually your five-year goals), as well as your shorter-term goals (such as your three-year goals, one-year goals, and six-month goals).
CLIENT DEVELOPMENT/MARKETING OPPORTUNITIES. Before developing this business plan, perform market research to determine the competition in your community. If there is a particular target market, such as an ethnic group (for example, if you speak Spanish and want to target that market) or an age group (for example, if you practice elder law), you might consider preparing a client development strategy for that particular segment of the public. Research and examine the marketing that other law firms are doing. Really think about the message you want to convey to potential new clients, and consider what your budget is to get that message out there to achieve your goal. It is important to plan a marketing strategy separate from this business plan. Your marketing strategy should include your marketing budget and potential marketing strategies that will not cost you anything. Several forms of social media, for example, are available at no cost except your time.
COMPETITIVE ADVANTAGES/STRENGTHS. What will you offer your target market that will attract clients to your firm? Do you have some special experience in a particular area? If, for example, you want to do personal injury work and you have a medical license, this might be an advantage over your competition.
COMPETITIVE DISADVANTAGES/WEAKNESSES. You may be wondering why we are even addressing disadvantages and weaknesses. Starting a law firm requires a significant emotional investment—for the rest of your career. You cannot go into this with blinders on. The reality is that you should acknowledge your weaknesses, not so they will stop you from opening your firm, but so that you can plan to overcome them. A disadvantage or weakness for all start-up firms is the already-strong presence that other law firms have within the community. But this is something that you can’t change, so don’t let it hold you back from reaching for your dreams. You can overcome weaknesses such as lack of presence in the community and less experience than other lawyers. Meet the challenges head on, eyes open. Acknowledge the weaknesses in your business plan, and it will help you overcome them.
OPPORTUNITIES. Identify the opportunities for success. Did you come from a larger, well-known firm in which you were able to network with business people in the community? This is an opportunity. Were you born and raised in the same town in which you are now opening your practice? This is an opportunity, as well. Are you well known within a particular practice area? Identifying these opportunities can also help you determine how best to market your firm’s services.
THREATS. Identify anything that would be a threat to the success of your firm, with the intention of planning to overcome it. Are you lacking in financial management skills? Is there a similar type of firm just down the block from your intended office location? You cannot stick your head in the sand about obstacles that are present. The plan here is not to acknowledge them and walk away from your goal of starting a firm. The intent is to identify threats or obstacles and plan to overcome them.
INDUSTRY ANALYSIS. This does not have to be lengthy or comprehensive. You should conduct a market analysis to identify new opportunities.
FINANCIAL PROJECTIONS. Every business is driven by money—income and expenses. While you cannot plan how many new clients will retain the firm in the first six months of business, you can project with some accuracy your business expenses, such as rent, utilities, marketing, etc.
ACTION PLAN. This is the point in your business plan at which you itemize what you are going to do to accomplish the goals laid out in the plan.
A business plan is necessary when planning a new business venture. Like your budget, it is a plan for where you are going and how you will get there. A business plan will:
A business plan is necessary when planning a new business venture. Like your budget, it is a plan for where you are going and how you will get there. A business plan will:
- Define the purpose of your business;
- Identify the operational needs to make the business a success;
- Provide structure to your business ideas; and
- Help you plan your business execution.
I first decided to open my own firm nearly 25 years ago. I had worked at large firms, small firms, and medium-sized firms; I had worked in the government; I had worked for a university as a law professor. But nothing I had done had prepared me for the business of owning and operating my own law firm. It wasn’t until I realized that I would require a line of credit for my firm and asked for one from the local bank that I was informed I would need to create a business plan. The bank would not consider making me a loan without one.
Years later, I appreciate the value of that prerequisite. So, if no one has made that suggestion to you yet, I make it now because we both know how very important it is that you create a business plan and revisit it regularly over the years to revise it in order to achieve the goals you have set for yourself. Consider it a living document that can—and should—be altered as your goals change.
You would never take a road trip to a new destination without Google Maps, or at least a roadmap. Think of this as taking a road trip to your new firm—you shouldn’t do that without a roadmap either!
