In the second of a series of articles examining the issue of financial stability for law firms, Karen Hain, head of the professional practices team at Chiks and MHA, explains how risk management and strategic planning can put practices on a firmer financial footing.
With alternative business structures now a reality, forward-thinking firms are developing business plans and strategies aimed at securing their future success.
A business plan is a crucial development tool – a blueprint for the future, setting out in detail how you will translate your ambitions into reality. It enables you to harness your energies and resources in a way that drives profitability and operational effectiveness.
Using the Legal Services Act as a financial springboard
Some law firms have already taken proactive action by launching new services to take advantage of deregulation under the Legal Services Act.
They are using the new regulations as an opportunity to introduce external (non-lawyer) investment and fundraising which allows firms to become more financially focused.
Increased competition will ultimately make the legal profession stronger, but it will also give firms a number of different business model options, including incorporations, joint ventures, mergers, acquisitions, franchises, outsourcing and even shared services. Whichever route you choose, it should be an integral part of a meticulously thought-through strategy.
Developing a business plan to address risk management
Risk management should not be viewed as a one off assignment, but a constantly evolving process, led by a senior person, that perpetually informs your long-term strategy. Successful firms will make risk management one of their top priorities.
A business plan will also analyse where work is going to come from and how you can get more of it.
Look at your referral structure and professional networks and examine who is referring work and why. Ensure you are maximising cross-selling opportunities and make clients aware of other service lines they could benefit from.
Looking ahead strategically to a profitable future
In addition, an effective strategy will consider potential mergers or takeovers. It will explain what sets you apart from your competitors and how you communicate these key selling points to raise bottom line performance.
By setting out the future direction of your firm, you’ll be able to focus more effort on the most profitable work streams and vital areas of activity. This will also make it easier for your business development and marketing teams to target work.
If you would like to discuss a legal practice financial management issue, please call Karen Hain on 01772 821021 or e-mail [email protected]