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By Kevin Wheeler

As we enter the second half of the financial year, law firms should be turning their attention towards their annual business planning and budgeting round. Those with December year ends should already be well into the task.

Generally speaking, business planning is not something that law firms do well. Partners tend to think in terms of short time horizons, usually the end of the current financial year, and their “entrepreneurial” approach to practice development tends to put more emphasis on the opportunistic rather than the planned. It is perhaps therefore not surprising that so few law firms have managed to pull away from the pack to become genuinely distinct in the way in which they do business – most major commercial law firms still look and feel the same.

When the legal market was booming and there was plenty of work for all, such a sloppy approach to planning didn’t really matter. But now that the market is so competitive, and given that most of the major firms are so large and complex in their organisational structure and jurisdictional coverage, good business planning is essential. The adage, “Fail to plan, plan to fail” has never been more apt!

Planning choices

In law firms you tend to encounter two types of business planning. The first of these is what I call the “rocket science” approach. Usually, this is a planning exercise driven by a non-lawyer member of the management team, often MBA-educated, who constructs an elaborate plan for the firm, complete with wonderfully complicated models and charts, and packed full of business clichés and management jargon. Because this elaborate plan does not have buy-in from the partners, or is remotely practical, it languishes on a shelf destined only ever to collect dust rather than to provide the basis for driving the business forward.

The second approach to business planning is at the opposite end of the spectrum and is much more common – this is what I call “back-of-a-fag-packet” planning. Here the process is just about banging out a budget for the next financial year. So, for their marketing plan, each of the firm’s departments is allocated a budget which is pro-rata to their anticipated share of the firm’s fee income for that year. Whilst such an approach is seen by many partners as “fair” – the more fees you earn, the more money you get to invest in marketing – it makes no sense from a business planning perspective because it does not take account of investment in areas identified for future growth but where the firm currently does relatively little business. This centrally-allocated budget is then taken by the department and divided across a list of marketing events for the year. This inevitably produces “a list of the things that we did last year” rather than an innovative marketing approach geared towards setting the firm apart from its competitors. The dead-hand of the finance function is often to be found behind such unimaginative approaches to planning.

Of course, the best approach to business planning lies somewhere between these two extremes, resulting in the formulation of a strategy which is both simple and practical, but which allows for sufficient probing of the firm’s competences, competitor threats, and market opportunities so that the plan produced will give the firm a clear competitive edge.

Dovetailing marketing with the firm’s strategic business plan

Any organisation’s strategic marketing plan should not sit in isolation – it should be dovetailed with the corporate strategy and business plan. Therefore, any marketing plan should be prefaced with an outline of the corporate mission, corporate objectives and the corporate values of the company. Marketing activity must then be aligned with these.

Unfortunately, in the legal sector, many marketing/business development directors find themselves without such a corporate strategy or plan as a point of reference, or with a plan so vague and lacking in detail that it is of little value. As a result, I have come across many law firms where de facto the marketing plan is the firm’s business plan.

In a way, this does not matter as most law firms are fairly simple businesses: 

• Comprising a group of lawyers – the recruitment and retention of which is an HR issue.
• Based in offices – a facilities issue.
• Servicing a portfolio of clients – the winning and retention of which is a marketing/business development issue. 

So, from a business planning perspective, marketing/business development is pretty much at the core of what most law firms are about. 

Hierarchy of plans 

In a law firm, there should be a hierarchy of marketing plans: 

• A firm wide marketing plan.
• Practice area, office and sector plans.
• Individual partner marketing/business development plans. 

To be effective, all of these should be integrated and in most firms the process to achieve this will be part top-down and part bottom-up. I am fairly relaxed about the balance between top-down and bottom-up, as long as the process is based on a rigorous assessment of the firm’s positioning in its key markets. 

It is important to engage with the partners during the planning process, so that they feel some ownership for the plans and are therefore more likely to implement them. It goes without saying that commitment to the planning process by the firm’s senior management is also crucial to success.