November 2011 • Volume 99 • Number 11 • Page 560
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Law Practice Management
Planning to Succeed
How many lawyers really know where they want to take their practices? How many have a strategic plan, complete with a mission, goals and an action plan flowing from that mission, and a system for measuring success? Here's why you should be one who does.
John W. Olmstead, a past chair and member of ISBA's Standing Committee on Law Office Management and Economics, isn't the first and won't be the last to liken the business of law to a journey.
"You don't take a vacation or trip without a road map," the St. Louis-based president of Olmstead & Associates, Legal Management Consultants says. Similarly, Olmstead says any business, including a law practice, needs a road map of its own, termed a business or strategic plan, so that lawyers can get where they want to go.
In one of his weekly Wednesday "Best Practice Tips" on Illinois Lawyer Now, Olmstead explains what he means when he speaks of strategic or long-range plans for businesses.
A plan defines who you are, where the firm should be heading, and how you get there. It helps focus you as well as your staff and improves productivity, accountability, and alignment with your goals. It identifies what work your firm does (or sometimes more importantly) what it does not do. In essence it outlines what services you are selling, to whom, and where. Your plan then lists out the steps you should be taking to move to your desired future.
All lawyers can benefit from preparing strategic plans, he says, whether they're just opening an office or they've been practicing for years without a plan.
The strategic plan is an internal document, Olmstead said in an interview. It differs from business plans, often used for start-ups, that may be drafted to market a firm's services to potential clients or to obtain financing from banks or other institutions. The latter are by their nature intended for an external audience review; the strategic plan is an internal document, used by firm personnel alone.
Strategic plans are generally quite a bit shorter than business plans intended for submission to financial institutions. "They don't have to be as complicated," Olmstead says. "You don't need extensive summaries, as extensive financial statements or market analysis, or as much narrative and supportive detail. Their primary purpose is to focus the efforts of the people in the firm." Most strategic plans that Olmstead helps his clients prepare are in list or outline form, he says, and typically run 10 pages or fewer. "I have seen excellent one page plans," he notes.
The vision thing
Olmstead broke down the components that he recommends lawyers include in their strategic business plans. Begin your plan with statements of your mission and vision, he says.
Your mission statement, sometimes also referred to as an "executive summary," defines in a paragraph or two your reason for existence and your core values. It will outline what you intend to do in your law practice. It should be straightforward, not fancy. Olmstead offers this example: "I have a general civil practice, handling anything except criminal matters. Though most of my current business comes from two or three suburbs, my market is the entire Chicago area." Your mission statement will tie into your "elevator speech" that you should have prepared to quickly apprise people of who you are and what you do, Olmstead says.
Next comes your vision statement, "your aspirational statement of where your firm is going and what it wants to become in the next few years," in Olmstead's words. The vision statement of the lawyer in his example might read something like this: "I will establish a stronger presence in my community and the surrounding Illinois counties by expanding my client roster and increasing business from existing clients. In the next five years the firm will enhance its brand throughout Chicago and surrounding Illinois counties as a boutique litigation firm by focusing on the needs of the trucking and transportation industry."
Your firm's long-range goals follow its mission and vision statements. Here, you should identify how your firm will achieve its vision. What goals do you want and need to accomplish to carry out your vision? Enhancing office productivity might be one long-range goal to help a firm get where it wants to go, Olmstead says, as might facilitating marketing at both firm and individual attorney levels. Strengthening relationships with existing clients might be another long-range goal, by, for example, developing a client feedback system, he suggests.
Measuring the unmeasurable
Devote particular time to your firm's objectives and expected results in the next section, Olmstead says. "These are the metrics - the scorecard for your business. Always carry this page with you. It's the dashboard to tell you whether you're moving down the road toward your business's goals."
Any business's general goals are to make money and grow. Toward achieving those goals, Olmstead wants his clients to provide concrete, specific numbers as their strategic plan objectives for the next few years. Think SMART goals and objectives, he advises, using an acronym standing for Specific, Measurable, Attainable, Realistic, and Timeline. "Maybe you can't determine where you will be five years from now, but where would you like to be? You have to be able to measure things."
Examples of metrics Olmstead suggests listing as strategic plan objectives include increasing the number of ongoing clients for whom the firm bills a certain annual minimum, increasing the amount of fee collections each year to specific dollar targets, increasing net income by a certain percentage each year, maintaining a certain ratio of support staff to lawyers, maintaining a minimum client satisfaction rating of, say, 4.3 or greater on a five-point scale, and targeting a specific number of articles published or seminars given per year or month to potential clients.
Every practice is unique, Olmstead notes, and the objectives for one firm may not fit another. Perhaps your firm bills certain types of cases at a flat fee and does not require time sheets. Increasing billable hours, then, will not be among your firm's goals and objectives.
"How are you going to measure what your associate is producing?" One answer might be to measure the number of closed cases or additional business that associate generates for the firm. Another might be to measure the time elapsed between opening and closing a client matter. Or you might measure the extent of the associate's activity in bar associations and the community, including organizing or putting in work for matters that heighten and enhance the firm's visibility and reputation.
In an uncertain economy - and, indeed, when is the economy ever certain? - how can lawyers determine such specific percentages and dollar goals? Accept that you can't know what the future will bring and your predictions will, accordingly, have to be educated guesses that will be subject to change. John Marshall Law School instructor Clifford Scott-Rudnick, who teaches a class on how to start a law practice, observes, "If you open up the paper, you can see that hardly anyone can successfully predict their revenue. You just have to give it your best guess."
As important as determining your firm's goals and objectives is determining the key issues that might keep the firm from achieving those objectives, Olmstead says. New lawyers may find those issues rushing into their heads as they set them down on paper: "I have no clients, no associates, no experience, and no reputation."
So may established lawyers who are inclined toward self-examination: "My firm lacks focus and direction. Our financial performance is unsatisfactory. We need to differentiate ourselves from other firms. We lack sufficient client work, or attorney and paralegal resources, to achieve our goals. Our firm needs to improve its internal strategies and procedures."
Putting the plan into action
Having identified your firm's challenges, the final step in the preparation of the strategic plan requires lawyers to come up with tangible strategies for overcoming them. "Look for low-hanging fruit," Olmstead urges. "You want to identify ways that your firm can immediately increase the volume of its work."
For each of those strategies, lawyers should develop a plan for action, broken down by specific tasks, Olmstead says. "Identify who's responsible for each task."
Perhaps one of your firm's strategies for distinguishing itself from the competition is commencing an active article-writing campaign. "There are lots of steps and tasks to that," Olmstead points out. Such tasks include identifying specific topics, getting commitments from other attorneys in the firm for those topics, or possibly hiring a ghostwriter, he notes. Be sure to put in the date by which each task is to be done, he adds.
Perhaps you've decided you need to hire one or more associates as part of your strategy for handling or increasing your firm's business. Think about what kind of person you're looking for and include that in your written plan, Olmstead says. "Do you want people to bring in business or to do the work?"
Or perhaps you're thinking of branching out into a different substantive area of law, or into litigation from a transactional practice. "Changing the type of business you're going for may also change the type of personality you're looking for in associates that you want to hire," Olmstead notes. "Do you want someone to do uncontested divorces, or someone to handle personal injury cases?"
Lawyers may tweak the strategic plan model to fit their personal circumstances. For those in larger firms, "You may want three plans," Olmstead says: one at the firm level, one for each practice group, and a personal business plan of, say, one page, for each lawyer. At each level, the plans should support the plan at the higher level. The goals of each lawyer's personal business plan and the strategic plan for each practice group should not fall outside the goals and vision that the firm has as a whole.
"Many firms are now starting to use lawyers' and even other employees' personal, individual business plans as commitments in their annual performance reviews," Olmstead says. For example, a lawyer might have two firm and two personal goals, each of which might be worth, say, 2.5 percent toward the employee's annual bonus, whether that employee is a lawyer, a support staff member, or an administrator. "That can be very helpful where you have an office manager where you can't measure revenue or billable hours, but you can measure project accomplishment" such as the implementation of a document assembly system within the next 12 months.
"Strategic plans can help you focus back on what you need to be doing," says Olmstead. "Sometimes we don't remember, so we go back to the plan to remind us of what we decided."
When you make a plan, follow the plan
Olmstead describes a conversation with the owner of one small firm he's worked with who made a decision some years ago to focus his firm's practice on estate planning and elder law. "He told me that his associate said maybe we should take PI cases and asked me what I thought about it. I asked him what his plan said. It said, 'We're an elder law firm.'" Olmstead pointed out to the lawyer that personal injury work had nothing to do with the objectives for his practice as expressed in his strategic plan.
"I asked him, do you want to change your strategic plan? He said no. I said well, then, the choice is obvious: you don't take PI cases. The strategic plan keeps you from drifting into situations like that. It keeps you on course."
Another lawyer might have responded differently to Olmstead's question and said he did want to change his strategic plan. What then? "Plans don't have to be solid," Olmstead says. "The world changes, and the external environment changes. You might take a trip and find out that there's highway construction, so you have to make a detour." You might even find that you like the detour. Or you might start out on the road to one practice goal and, halfway there, decide that you want to pursue a different area because you enjoy it more and you can make money at it.
But neither of those eventualities, Olmstead says, is an excuse for not having a plan. "A firm should have some idea of what it does and doesn't want to do. It's critical to realize that it's OK not to do everything and not to try to be all things to all clients."
In addition to focusing lawyers' efforts on developing the practice they want, Olmstead says strategic plans will put in place basic goals and accountability. "In most smaller law firms, there are no goals and no expectations. What do you tell people you expect of them?"
Olmstead sees benchmarks as critical to aligning individual lawyers' and support employees' activities for the benefit of the firm. In the case of the elder law firm that decided against its associate's suggestion to branch out into personal injury law, Olmstead said, "We increased revenues by over 50 percent over two years, just by putting in expectations and goals with a strategic plan. Now, everyone in the house has their own goals, their goals are measured, and they get bonuses for achieving them."
You can't get there if you don't know where you're going
Preparing strategic business plans will help lawyers assess everything they propose to do in terms of whether it advances or doesn't advance their written mission, vision, goals and objectives. If an activity will help to advance the plan, it probably makes sense for the law firm to do it. If it doesn't help to advance the plan, that could be a sign that it's not a good idea - or that the firm needs to change its plan.
Still, Olmstead says, before preparing a strategic business plan, "Sometimes you have to focus on a personal life plan first. Are you single? Do you want a family? What kind of time commitment do you want for your practice?" Lawyers might even incorporate the answers to those questions into their strategic business plans.
"Building your business or practice without a road map? Yes, you can do it, but you may not be too happy when you get to the end of the road." Olmstead says he's finding an expanding market for his firm's services in counseling lawyers nearing retirement on how to realize some value from their practices. "If you'd planned that practice right, it might be a very different story when you get to the end of the road."
Helen W. Gunnarsson, a lawyer in Highland Park, is an Illinois Bar Journal contributing writer.
Business planning resources
In addition to his regular posts on ISBA's Illinois Lawyer Now, John Olmstead has a number of articles on his website on strategic business plans for lawyers:
Law Firm Strategic Plan vs Business Plan http://blog.olmsteadassoc.com/olmstead_associates_law_p/2011/05/law-firm-strategic-plan-vs-business-plan.html
Implementing Law Firm Strategic Plans: Accountability and Follow-Thru
Using Effective Firm Meetings to Improve Accountability and Boost Productivity
Law Firm Strategy: Where to Start
Changes and Challenges Ahead For Law Firms and Lawyers
One handy and free business planning site recommended by several lawyers is maintained by the U.S. Small Business Administration at https://www.sba.gov/tools/business-plan/1. There you'll find easy-to-follow instructions for completing a template for a business plan. At each stage the site provides an explanation of what you should include and what anyone reading it should understand. On completing all sections, you'll be able to click a button to generate your own business plan that you can save to your computer and print as you please.
- Helen W. Gunnarsson
Strategic planning - the view from the trenches
What does strategic planning really entail? There's nothing like hearing how lawyers who actually prepared strategic plans for their own practices went about creating and using them.
A hard but common-sense process. When they started their practices, former solos T.J. Thurston of Chicago and Melissa Maye of Yorkville used how-to books from their local libraries or bookstores for their plans. "There's a mindset that there's a special set of rules that only businesspeople know," says Maye. "But a business plan is just making it up as you go. There are no equations; you have to use common sense and figure it out on your own. I sat at my desk, waiting for the phone to ring, and wrote my business plan. It took me not more than two or three days. I used a spiral notebook."
St. Louis lawyer Nalini Shivram Mahadevan, who now teaches a class in law practice management at St. Louis University, practiced without any written business plan for several years. When she left her firm to go solo, she decided she needed a website.
"That's what made me think I needed a business plan. I wondered, 'what am I going to put on my website?'" Preparing a strategic plan "made me ask lots of questions I'd never even thought to ask before. Law school was all about liability management, not practice management. Now more than ever, it's important for lawyers to think like businesspeople. You cannot practice with a plan in your head anymore."
Educated guesses. Figuring out what questions to ask and answering them was very difficult but proved invaluable, Carbondale lawyer Martine Polynice-Jackson said, when she and Shari Rhode decided to form a partnership in 2001 to practice employment law. "Most industries have sample plans that you can download. Not attorneys." They ended up hiring a consultant to write a plan for them.
Jackson said she wanted information about other lawyers' practices and experiences so she and Rhode could know what to expect. "When you're starting from scratch instead of coming into an existing firm, you have to figure it out for yourself. What hourly rate do you charge? How many clients can you expect, how do you get them, and how many can you actually handle? What ratio of staff do you need to generate a certain amount of dollars?"
Because law firms do not readily share those numbers, and because, in any event, figures vary depending on the type of practice and the region of the state, writing the plan required a number of educated guesses. The lawyers also had to think about what they'd do if their projections didn't pan out. "What if we don't get a certain number of clients per month?"
"[W]ork it and change it." As your practice progresses and you get more information, Maye says, you start to see how realistic your plan projections were. "Then you can start tweaking your plan." Jackson says she compared her initial plan financial projections for each month, quarter, and year with what actually happened and then tried to figure out why in order to understand what was and wasn't working. "Putting a plan in a drawer does absolutely nothing. A business plan is a living, breathing document. You have to work it and change it and continue to improve it."
Maye added "There's something about putting something down in writing. It makes you more accountable, even if it's only to yourself. My plan helped me feel more in control. It gave me the permission to say no to matters I didn't want to handle."
All four lawyers said that lawyers in any practice setting, whether private practice, in-house counsel, or government, can benefit from preparing strategic plans. "Doing your own strategic plan will help you even if you're an assistant prosecutor. It forces you to do a self-assessment and determine whether this is really the career path you want to embark on and whether you're truly happy doing what you're doing. It forces you to be true to yourself," says Jackson.
If you're in a firm, do one even if your partners don't see the need, Thurston says. "Going through the process of writing a business plan will teach you about business just as CLE will teach you about the law. It will focus your practice and, if you're in a firm, may give you some real hardcore recommendations to take back to your partners. For example, you may find things you or your firm are doing aren't profitable or aren't worth the money you're spending on them."
Still dithering about preparing a strategic plan? Though Jackson relied on professionals for her own plan, she's happy to talk to lawyers about plan components. "Call me," she says. "Business plans are common sense to me, but I'm a business major who went to law school. I'm more than happy to help anyone. I remember how hard it was when I was trying to figure out how to start a business." - Helen W. Gunnarsson