- Matthew Sullivan
Late to the Annual Financial Planning Party? Don't Worry, but We Should Get Started.
Ok, so you didn’t get around to making your financial plan for 2023. Is it that big of a deal? I think so, especially for 2023. But don’t worry; it’s not too late and common within the legal industry, especially for small and solo law firms, to be just getting started. To make you feel better and illustrate how typical it is, I’ve listed a few of the more common reasons firms of all sizes do not fiscally plan. The responses usually go as follows:
· “I’ve never put together a financial plan before, and I don’t know where to start.”
· “I’ve never put a financial plan together, and it’s always worked out fine.”
· “I’ve financially planned before, but I never checked in on it. It was a waste of time.”
· “I’m too busy and don’t have time to sit down and create a financial plan every year.”
Regardless of where you are in your journey, Unravel Legal is here to help - in any capacity. Our goal is to have you take something new away with every blog.
Over next few weeks, we will provide a series of blogs detailing how to set up a financial plan for your law firm in a simple and uncomplicated manner. Instead of getting bogged down by the intricacies of the math involved, we will focus our attention on the thought process behind the plan and how to execute it. But be forewarned; we will talk about some basic math because we are creating a financial plan, after all. We will cover topics like revenue, costs, profit, savings, and cushion, among many things. But remember, our focus is strategy, not math. Some of the strategic questions we will be answering relate to who we are planning for, what we should think about, and why. Approaching planning from this perspective is much more fun, I promise. I know my audience. You went to law school, so you wouldn’t have to do math, right?
The blunt truth is that you need a plan no matter where you are on your journey. You need a financial plan just like you need a plan before you step into a trial, a deposition, or write a motion. As lawyers, you do everything with a plan or a strategy in mind. For some reason, many lawyers don’t bother making a plan for their business. It seems strange. However, I find it promising because you are all planners at heart.
Interestingly, what you are currently planning for, in a legal context, is much more complicated than what we will be discussing. Each of you is capable. We must make it enjoyable, provide relevant information, and clearly describe its benefits to make you all want to plan. In all fairness, no one has taken the time to provide these resources to you in college, law school, or the internet (that is easily accessible). As I see it, this will be my job now, and I hope to be that resource for all of you.
If there is any year to plan financially for your firm, this is the year to do it. We’ve all heard the commentary about a recession. This could be unlike any other year we’ve had in a while, requiring you to need plans A, B, and C. Today, you should consider strategies that might include cost cutting, understanding your free cash flow position and runway, and alternative revenue options like pricing, clientele, and practice area profitability, to name a few.
Let’s take off the table your worry about when. Many of you may be bothered that your financial plan didn’t commence as the year started. I am here to tell you that it is OK. It is better to have planned late than not at all. Further, the beauty of a plan is you can make a strategy for any timeframe. Often, we plan in much smaller increments than annually, like, days, weeks, months, quarters, etc. Therefore, whenever you are reading this blog, it can and should apply to you wherever you are in your journey.
As a financial planning PSA, I’d like to let it be known that your plan doesn’t need to be perfect. In fact, throw the idea of a perfect plan right out the window. We aren’t planning to be perfect; we are planning to be close-ish. Also, know that your plan isn’t going to go accordingly, so don’t be frustrated when it happens. The plan, to your plan, is to check in on it frequently and make adjustments as you go. Know there is no right or wrong, only variances to the benchmarks you’ve created. If you don’t like where your plan is going, you can always change the benchmarks.
By working with me, my objective is to take the complication, stress, and need to be perfect out of the equation regarding your law firm’s finances. This blog and Unravel Legal is a place for you to think about your law firm finances differently, experiment, and hopefully, learn. So, let’s strip financial planning down to simple, actionable plans and strategies, make it easy to understand and implement, and concentrate on how to think about your finances.
Next blog let’s visit how to think about building your plan and the essentials you need to build it. I am looking forward to seeing you there.