Preparing for Alternative Business Structures, 2012 & beyond
Virtually all law firms began 2011 hoping that this year will be easier than the last couple of years and that profits will show some signs of returning to healthier levels. Having said that, in October this year we will see Alternative Business Structures being created which will provide new competition to a profession which is already finding the going difficult and there will be the continued evolution of on line and off shore legal solutions which are designed to undercut the traditional UK providers of legal services.
So what might a tired and bruised firm do to pick itself up and take on this new competition and to fight back with confidence? There needs to be a clear plan and strategy for the future which involves everyone and which everyone is happy to follow. So many firms are too busy dealing with a myriad of short term issues and there is no real vision for the future. It is time for the leaders to stand up and to provide some direction.
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How is the plan prepared?
When firms put a business plan together they need to consider all interested parties if the plan is to be achieved. The starting point is to consider the wishes of the partners who will want to make a good return for their efforts. But for this to be possible it will be necessary to think about what clients, staff, suppliers and the local community may be expecting. Addressing these competing needs will probably reduce the anticipated profit but will increase the chances of the plan being delivered.
It is important to involve as many people as possible in the development of the plan as this will encourage ownership of the plan, once written. It will be necessary to undertake some detailed research on the firm, its competitors and the market place. Obtaining this knowledge will always help with business planning but the knowledge is probably also important for the running of the firm on a day to day basis.
What do good business plans look like?
The plan should not simply be 5 years of budgets presented as an Excel spread sheet. There will be an executive summary that simply describes in overview what the firm is trying to achieve and how it is going to implement the necessary changes. This is important because everyone needs to understand the big picture even if they do not need to become involved in all of the detail. The detailed plan is likely to have sections on:-
- Profitability – what will be the sources of income, how will the levels of income be changed over time and how will the profit margin of these income streams be managed;
- Financing – how much capital does the firm need as it grows and how will this be provided whether that be from the partners, banks or new investors post October 2011. This section will also look at the management of lock up and the speed with which profit is distributed from the firm, the overall aim being to ensure that the firm never runs out of money;
- Growth – how will more high quality profitable work be generated and how will the firm start to remove the work that cannot be done properly or which can never be profitable;
- Staffing – achieving the plan is largely a function of having the right people in place. How will the firm gain, train and retain the best people to give itself a competitive advantage?;
- Productivity – in an era of increased competition and generally falling prices, how will the firm reduce the cost of the services being provided without diluting the quality of what is being offered to the client? This is likely to involve increased delegation, better use of technology and more recycling of knowledge.
Implementing the plan?
Actually implementing the plan is often overlooked and is always the most difficult stage. To succeed it is important that the budget incorporates the expenditure which needs to be made to achieve the longer term goals. It helps if as many people as possible are involved in the implementation as it should be seen as a firm wide initiative. As a timely reminder it is good practice to make sure that the business plan is the first agenda item at every internal meeting as this is what everyone should ultimately be focusing on.
It takes some time and considerable effort to produce and then implement a credible plan, but then nothing in life is easy. If you do make this investment now then perhaps you will look back on 2011 as the year when the firm came together and developed cohesively to create a much stronger and more profitable business.
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