The holiday season is rapidly approaching—which means year-end is right around the corner.
Looking ahead to 2020, it’s prudent to start planning for the future of your firm now. This is your opportunity to begin the New Year prepped with a fresh outlook and strategy.
You can start paving the way for your firm’s future success by creating new goals—perhaps to increase profitability in your business, gain financial stability or accelerate growth.
So how do you prepare to reach your goals? Ask yourself these 3 questions:
- What do I want to achieve?
Write down 1 to 3 main goals for your firm in 2020 by honing down on what you actually want to achieve. Research shows the more precise your goals, the higher the chance they’ll be accomplished. Accordingly, a 2018 Dominican University of California study reports that you are 42% more likely to attain a well-documented and defined goal.
- How much capital will I need?
Budgeting is a key component to having resources in place to reach your goals—now and in the future. Having too much capital for your firm can be just as damaging as having too little—especially if the cost of capital is high.
By having a budget in place, you can protect your firm from spending well over what is reasonable or worse, taking on more debt than you can’t repay.
If you have a trusted accountant, bookkeeper or CPA, you’ll likely task them with building your budget. However, it’s just as easy to create one yourself even if you don’t.
Specify how you will use capital to achieve your goals
Here are some common ways plaintiffs’ practices use funds:
- Expanding the practice—whether opening more offices, hiring staff, or taking on additional clients
- Advancing case expenses
- Evening out cash flow gaps
- Marketing and advertising
Calculate your current revenue and expenses
It’s imperative you know how much it actually costs to run your practice.
Be sure to break down by month your expenses, including “fixed” costs—rent, payroll, insurance, office leases, utilities, etc. and “variable” costs—office supplies, advertising, auto and travel expenses.
You probably also incur “extra” costs that are often overlooked but need to be accounted for. Some examples are liability insurance, bonuses, income taxes, accounting fees, property and other miscellaneous taxes, annual bar dues and CLE costs.
Finalize your needs
Now that you have a clear picture of your expenditures, go back through and determine where you’ll need to increase your spending.
This will give you a realistic idea of your “new” expenses and help you settle on the right amount of financing you’ll need to reach your ultimate goal.
- Do I have the resources to fill my capital needs?
If you find there is a shortage of capital to meet your primary goal based upon your projected income and expenses, you may want to consider getting a loan, line of credit or other type of financing from a third party like any other business would.
A revolving line of credit, in particular, is a great option for contingent fee practices. You can draw from the line to fund your new initiatives, but will only be charged interest on the amount you actually use. Alternatively, there may be other financing source better suited to your firm’s business model, such as a non-recourse advance, a post-settlement loan or even bootstrapping.
If your current source of capital can’t keep pace with your new ventures, compare other solutions to see if making a change would be beneficial.
Like any business, a law firm is continually changing, as is the legal landscape. It logically follows that how you operate your firm in 2020 may need to evolve too. With some simple planning, you can adapt to a new plan effortlessly. As Thomas Edison said, “Good fortune is what happens when opportunity meets with planning.” Most law firms can make good sense of such promising foresight.