How to Create the Perfect Business Plan for Law Firms

Unlike many business types, it takes relatively little to start a law firm. You don’t even need a physical location if you’re satisfied with working from your home office. Once you’ve earned your degree, you can hang out your shingle, right? Not so fast. If you really want your law firm to stand the best chance of success, you need a business plan.

Why do law firms need business plans?

All businesses need a business plan. That includes law firms. Your business plan serves many different functions, including:

• Outlining your overall strategy for scaling

• Summarizing what you want to achieve

• Explaining how you’ll run your law firm

• Highlighting your strategy for gaining and then managing clients

You can think of your law firm’s business plan as a combination map and marketing collateral (for potential partners and other stakeholders). As you can imagine, it must be created correctly. A great deal goes into building the perfect business plan, but we’ll cover the basics below.

Your law firm business plan: An outline for success

There is no one-size-fits-all guide to law firm business plan creation. That’s because every firm is different. You’ll need to create a plan that’s tailored to your vision for the firm. However, all business plans have specific things in common.

Set your goals

When you get right down to it, the entire point of a business plan is to define your business’s goals and how you intend to reach them. It’s no different for law firms. What are your goals? What do you want to achieve? What drives you to serve your clients? This will inform the entire plan but will be particularly important for your mission statement and core values. Not sure what your goals are? Don’t worry, you can define them with relative ease if you answer a few basic questions.

• What drove you to study law in the first place?

• What impact do you want to have on your local community? On the legal industry as a whole?

• What are your particular passions, talents, and interests and how do they relate to your firm?

What sets you apart?

Unless you’re practicing in a small town, you’re not the only law firm around. Chances are good you won’t be the only firm focusing on your specialty, either. So, what sets you apart from those other firms? Are you small and agile? Are you completely focused on client outcomes? 

The goal here is to codify your “unique selling proposition”, or USP. The more you can set your firm apart from others out there, the more easily you’ll be able to market and build your brand.

Defining your cash flow requirements

All businesses exist to make money. You’ll need to pay yourself at a bare minimum. As your firm grows, you’ll have team members, rent, office equipment, and more. That doesn’t even cover the costs you’ll incur while serving clients that you’ll need money to cover until the client pays their bills. 

Where will you get those funds? How much will you need? How many cases will you need to break even, cost-wise? What about making a profit? Do you have a profit-loss estimation? Be as accurate as possible here so you can track your progress moving forward.

Fee/billing structure

Once you know your cash flow requirements, it’s time to turn your attention to how you’ll meet them. This entails creating a legal billing policy. Otherwise, you run the risk of wasting a lot of time and money. Here are a few questions to help you clarify:

• What is the fee structure for other firms in the same area?

• Will you work on contingency? (This really only works for firms within specific legal niches, like personal injury).

• Will you charge by the hour or a flat fee? 

• How will you handle slow-to-pay and nonpaying clients? What’s your collections strategy?

Know the risks you’ll face

Getting any business up and running comes with significant risks, and building a law firm from scratch is no different. However, the risks you’ll face may be very different from those a similar firm faces two towns over or in a neighboring state. Some risks are geographic, and others relate to competition. Yet others are based on your firm’s specifics. Risk factors that affect all law firms include your pricing structure, competition/market share in your area, and the demand for the services you offer.

Components of your law firm business plan

Now that you know a bit more about what goes into creating a business plan for your law firm, let’s touch on the actual structure you’ll need. It should look something like this:

• Executive summary: This includes your mission statement, values, USP, and a description of you and your law firm.

• Market analysis: This section will include information about your target clientele, competitors in your area, financial projects for growth, and overall industry trends.

• Billing and finances: This section is self-explanatory and devoted to explaining your financial structure and how you’ll make money.

• Management structure: Who’s in charge? What’s the overall hierarchy in the firm? Who fills other roles?

You may also want to spell out other things, like the technology you’ll be using, the services you’ll offer, and the marketing strategies you’ll follow.

The helping hand you need for success

Creating a new law firm is a significant undertaking. Creating the perfect business plan is just one step. You’ll also need help to get it up and running, particularly if you’re going solo or will have minimal staff. 

Smith.ai offers a 24/7 legal answering service to ensure that you never have to worry about communications. Our virtual receptionists can also take other tasks off your plate, such as appointment setting and lead intake. Our goal is to handle behind-the-scenes tasks so that you can focus on delivering the best client experience possible. 

To learn more, schedule a consultation or reach out to hello@smith.ai.