When I began preparations to go solo four months ago, the most important thing I did was to create a business plan. I didn’t think I had time to do it— I would have rather continued to prepare my forms, create procedures and protocols, work on the website and try to secure more referral sources.
I do mostly plaintiffs’ personal injury (auto accidents, workers’ compensation and medical malpractice) and I was of course wanting to hit the ground running because of the long lead time for income in those cases. Settlements don’t typically happen for about nine-to-12 months in a routine auto case, and it can take longer if a lawsuit needs to be filed.
Four months out, however, the business plan is something I refer to at least once a week and I’m glad I made it.
My bank required one to accompany my application for a business line of credit. They told me to hire an accountant, an expense that was not in my budget (even before I made a budget), so I did it myself. Creating a business plan took me a full week of work and my line of credit was approved (I haven’t tapped into it yet, and I don’t intend to; it’s a nice safety net). An accountant probably could have made it better, but this is where the law of diminishing returns comes into play.
My business plan followed the pattern of “worst-case scenario.” (Worst case except for abject failure, anyway.) I tried to be conservative with all of my expectations; I deliberately underestimated the number of new cases I expected to receive every month, the amount of time from intake to resolution and the likely fee for each of those cases. I tried to overestimate my expenses. This is the plan I submitted to the bank.
For my personal use, though, I modified the plan to include my actual goals. These aren’t pie-in-the-sky hopes and dreams but goals that I believe I can attain by working really hard. It basically boils down to more cases and less expenses.
I track my actual numbers every month and compare them to my business plan to see how I’m doing. At the six-month mark, I’ll do a major revision of the business plan in light of my business history and make sure that I refocus on whatever is deficient.
A separate plan, for my use only, relied on my business goals. By far, the most difficult number to create and stick to is the marketing/advertising budget. We’ll talk about that in another post.
The other thing about the business plan, putting the numbers and financials aside, is that it forces you to put pen-to-paper (keystroke to word-processing program?) about what kind of firm you want. What are your priorities? How will you distinguish yourself from your prior firms and all of the other lawyers out there? It is important to consider your future firm’s philosophy with regard to client interaction, pro bono work and quality of life issues.
There are numerous online resources to help you create a business plan. Ask your bank for samples, talk to your accountant or entrepreneur friends, find a business school student, or shoot me an e-mail and I’ll send you mine.
For those of you have endured the growing pains of solo or small firm ownership: what advice do you have to share?
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