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How do I draft a business plan for a law firm?

A business plan is a road map for the first three to five years of a law firm’s existence.[1] It is an important business management tool as it allows your law firm to develop a strategy for making a profit before you even open your firm.[2] If you intend to ask for outside financing, banks and private investors will want to see your business plan before they will approve a loan.[3]

A traditional business plan contains the following nine sections: executive summary, company description, market analysis, organization and management, marketing and sales, service or product line, funding request, financial projections, and an appendix.[4] Your local bar association may have a business plan template specifically designed for law firms that you can use as a starting point. [5]

The business plan can be as detailed as your law firm would like it to be.[4] You only need to include the sections that are relevant to your law firm. So, for example if you are using a business plan to think through how you will setup your new law firm without obtaining outside financing, you may want to focus on the company description, market analysis, organization and management, marketing and sales, services, and financial projection sections as those are the ones that would help you map out the firm’s entity type, practice area, structure, operations, marketing, and financial needs.

Law firms should pay particular attention to both the Organization and Management section and the financial projection section as these are useful for both startup and long-term planning. The Management section should address items such as billing and collection practices, staffing needs, electronic and paper file storage systems, billing and bookkeeping software selection. The Financial Projection section should contain both a cash-flow and a break-even analysis.[3][6] The cash-flow analysis looks at actual and projected future revenues in order to identify foreseeable delays in payments by clients that could affect the firm’s ability to operate.[5] The break-even analysis looks at expenses and proposed rates to determine the amount of revenue the firm must bring in each month to break-even, e.g. to cover its monthly expenses.[4]

If you are using the business plan to obtain outside funding, you will want to make sure you include an executive summary and a company description. Keep in mind that when bankers review a business plan, they start with the executive summary first and only read the rest if they are impressed.[1]  So, it is best to make your executive summary as comprehensive and engaging as possible to encourage bankers to continue reading the plan.

If you would like help drafting a business plan, Score offers free mentoring for new businesses.[7]


References

1. Law Firm Business Plans
2. Tips for a Successful Small Business
3. Business Plan Outline
4. Write Your Business Plan
5. Law Firm Business Plan Template
6. Understanding Cash Flow Analysis
7. Score