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BUSINESS PLAN BEST PRACTICE

Each plan relates to an individual’s business which by its very definition is going to be a unique combination of clients, types of work and fees generated. This will also be platform dependent depending on synergies, associate bench, conflicts etc, however assuming a targeted approach it should not differ too much from one firm to the next. Most firms have a Business Plan template to go through with a sponsor partner, however it is advisable to draft your own business plan in advance to be used as a framework and reference point to aid and expedite the drafting of a law firm template business plan.

At its most basic, a business plan may just consist of a list of clients and likely billings, and this may well be enough for some firms, but most firms demand a more detailed document which will map out the business case and help them to reinforce what is, after all, a major investment on both sides.

Why the business plan?
It is vital that any modern law firm partner is able to demonstrate – and to back up at interview – that there is a viable business case for bringing them into a new partnership.

Looking at it from the law firm’s point of view, why would an organisation take on someone who is, from Day 1, only going to be a cost item for the business, whom they are going to have to feed with existing work?

There are 4 main reasons which this might be the case:

  • Skillset (ie skills that the law firm does not currently have and which it can afford to buy in)

  • Succession: i.e. retiring partners who will potentially leave clients unserviced.

  • Huge demand: the partner or aspiring partner may practice in an area where it is notoriously hard to find good people, i.e. pensions, aircraft finance

  • The specialism is viewed as primarily a support function, i.e. corporate tax being mostly dependent on business brought in through the corporate team

Either forms the basis for a suitable business case to be argued primarily from inside the firm and may circumvent the issue of following. It is worth noting that even in these circumstances, faced with the choice of a partner with following and one without, the firm will almost invariably, all things being equal, go for the former.

Getting the mindset right
It is very important to remember what you are trying to achieve in creating a business plan. This is not some abstract exercise. The purpose is to take your career to the next step, whether that be the borders of partnership, a mid-career move to a new firm or the last furlong of a successful career with a quiet retirement at its end.

That is why it is vital to get yourself into a positive, confident mindset before you begin the process. Law firms will be looking to hire people who are confident, relatively bullish, yet ambitious, yet realistic. With respect to the business plan, the firm you are approaching will undertake thorough due diligence and in many cases, as part of this, they may wish to speak with your top 2 or 3 client contacts at a very late stage.

First steps: analyse your business
The first step is to thoroughly analyse your business and ask yourself a number of key questions regarding your clients, your previous and projected billing figures:

  • What is my business proposition? Can it be summed up in a few succinct sentences?

  • What is my client market?

  • How diverse is my client base? To what extent is my client base dependent on one or two key clients? What percentage of my annual fee income do these key clients represent?

  • What new clients have I established a profitable business relationship with in the last year/two years/three years?

  • Are there any patterns to my activity which I can build on for a new firm?

  • What fees have my clients generated for other departments over the past few years?
  • What do I charge my clients? Are these rates palatable to the new firm? How might new rates affect my ability to retain and attract clients

  • What are my collection rates and debtor days?

  • At what level are my contacts within these clients (i.e. chief executive, finance director, head of legal, line manager)?

  • Am I comfortable naming these individual contacts in the plan?

  • What are the synergies and conflicts of my portable business with the platform provided by the firm I wish to join and their clients?

  • What is my current firms exit policy?

  • When would I anticipate joining my new firm and would I anticipate bringing key Partners or Associates with me?

  • How onerous is my current Restrictive Covenant?

The analysis of your current business – and which elements are portable from your existing home to a new home – will form the core of the business plan and will be the area which comes under most examination from a new firm. The degree of certainty regarding the portability of each client must also be considered and divulged.

Setting the parameters for the plan
A good executive summary to a business plan will include everything the casual reader needs to know about the plan and what to expect in the document. The executive summary should also contain a salient figure relating to your personal portable business. This is the figure referred to as your ‘following’. It must be robust and defensible.

What should also be fixed by you at the outset is the scope of the plan. Allow yourself an initial six months lead-in to begin with and project a modest revenue for that time. Try to work to months 7-18 for a true Year 1 picture. Try to look to Year 3 in terms of increased fee income and staffing.

Set yourself targets which are realistic and achievable. Your tendency will be to underplay, because everyone likes to overperform on targets. This is a mistake. It will not gain you anything in the long run and may seriously compromise your attractiveness from the outset. In any case, if you are budgeting nothing or next to it for the first six months, you have already given yourself some grace.

Be realistic, positive and confident in your plan. Law firms like entrepreneurial characters who give out positive energy. They want someone who is going to come in, get business and provide more business for the rest of the practice. You can of course, give yourself a range i.e. a lower, concrete ‘guaranteed’ figure and an upside, ‘wind assisted’ figure. One client may or may not have a particular need for your services in a year’s time. How do you know what is going to happen….?

Client Following: what will follow you?
Remember, clients are not required to follow you from one firm to another. Nor, despite what many firms may try to enforce, are they required to stay with your current firm. Your firm may try to enforce restrictive covenants on clients following, but legal opinion is divided as to whether they are enforceable. Clients do not generally take kindly in any event to being told which law firms they can or cannot instruct, and your knowledge of your firm and your clients will be of vital importance here. It may be that you have non- solicitation clauses, which are generally fairly specific and can be actionable. If in doubt, take legal advice on these.

In order to give an indication of whether fees are likely to follow, many law firms like to see a ‘hot’, ‘warm’ or ‘cold’ rating beside each client name, this can take the form of a weighting of confidence the specific clients will follow, i.e. 100%, 75%, 50% and possibly 25%, or A,B,C,D with a definition given for all 4. People will base figures on ‘hot’ and ‘warm’, i.e. 100% and 75% likely to follow, and the colder clients will be viewed as target clients. Ensure that you are able to articulate cogent reasons why you might be able to gain work from specific clients and perceived threats. Suggested criteria for hot and cold clients:

Hot Clients

  • Clients who consistently instruct you
  • Clients whom you bill the most from

  • Clients who you are very certain will follow

  • Clients whom are self contained and self generated

  • Clients who have expressed their loyalty to you and not your firm

  • Clients whom you have a strong personal and professional relationship with

  • Clients from whom you have been promised a large instruction soon

Cold Clients

  • Clients where you are not the main client partner

  • Clients with whom you have not done much work with recently

  • Panel Clients who will be contractually obliged to work with a certain group with no impending review date

  • Institutional clients, perhaps you could bring a tranche of repeat work, but not the client itself

  • Clients who do not have a large annual legal spend (i.e. some OMBs and SMEs)

Structure of the Business Plan
A typical basic skeleton structure could be:

Introduction/executive summary
Setting out the proposition and headlining the main points from the rest of the plan; should also include some form of the proposition.

Market overview
Your personal view of your personal marketplace. Please keep this relatively succinct. The firm will be more interested in you than an essay about the economy.

Business analysis
The crux of the plan. Here you will talk about your personal practice. Give billings for the last three years by client, perhaps in a table, resulting in a salient figure for each year which shows the development of your practice through the three years and which you can use in the executive summary.

Be sure to draw a distinction between your Matter Partner Billings (which you are responsible for) and your Client Partner Billings (work your clients will bring to the firm as a whole). Client Partner Billings are every bit as attractive to a new firm as Matter Partner Billings. This is the most important sector and must avoid too much rhetoric. People want to see numbers in boxes!

Client analysis
Go through your clients one by one, giving a description of the client, your contact, some detail on your relationship with them and (it does no harm) repeat the billings figures for the last three years (where possible). Tag each client ‘hot’, ‘warm’ or ‘cold’ (or some other measure) and give an estimated figure for a first full year’s revenue from that client (months 7-18, as stated above). That will in turn lead to a first full year’s target for you. You can also work backwards from that point – if, for instance, you feel you need to generate £600,000 in fees in order to justify your £200,000 package, you need to figure out how you’re going to get there…BUT remember that is HAS to be defensible and ultimately achievable – perhaps SWOT Analysis (Strengths, Weaknesses, Opportunities and Threats) is a methodology you would like to apply to prove you have considered all angles.

Business development
What does your business require in order to grow? What kind of support from the law firm’s existing resource? What kind of marketing support? Remember the classic 80/20 rule. 80% of your marketing resource should be spent on existing clients, 20% on getting new clients.

Future business
Make any developments in the plan realistic and achievable. In order to grow revenue significantly you are probably going to have to take someone on. Think about how your clients are likely to develop. What happens if your key clients are taken over? How might you replace the work if it went elsewhere?

Tailoring the Plan to the Target
Inevitably, joining a partnership involves two parties, namely you and the firm. Your business plan must compliment their business plan. The target firm will also have resources to bring to bear, issues, obstacles etc which will be relevant.

Your consultant will endeavour to shed as much light as possible on this front. Most firms will work with you if they are sufficiently interested, in order to establish a business case to ensure synergy and a symbiotic relationship will ensue from the hire. Make sure you have a standard format directed towards a target market, and tailor this to each firm you approach within this market.

Finishing Touches
And as always, use your recruiter as a sounding board for the plan. We at Noble Legal pool our resources and our experience. Between us we have viewed many business plans and have a good idea of what works and what doesn’t work. It may be that we can offer constructive suggestions for improvement or in fact the business plan is of excellent standard and relevance, in which case you can be at least reassured that it’s on the right track! Either way, we are keen to be offered the chance to make suggestions. It is up to you, whether you take all, some, or none of the advice given.

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