Contributing Factors (II): Imperatives of Strategic Planning by Law Firms
There are several other underlying factors that affect the economic circumstances of lawyers generally and make it difficult sometimes for Firms to honour their financial obligations including paying reasonable remuneration to junior colleagues.
One such underlying factor is lack of knowledge or understanding by most lawyers of the need for strategic planning. Most do not appreciate that a business plan is a prerequisite or an imperative for any start-up business including the business of a law firm and that such a business plan requires periodic updating and review if the enterprise must subsist as a going-concern. Most do not also realize that budgeting is a fundamental part of business planning and that budgets must be based on underlying conservative and realistic assumptions. Indeed, most do not even know that in its most rudimentary form, a budget is a composite of expenditure and income plans and projections and that the income projections feed into and service the expenditure plan.
The truth is that most Firms do not maintain proper financial records or books of account, if at all, which are the required and basic implements for making business projections, plans and analysis. Most do not study, understand and/or analyse current legal-related market and economic trends that would assist in making projections and plans for their Firms. In the end, the affairs of such Firms are piloted blindly, and it is always by Divine Providence that such Firms survive, with considerable difficulty to meet their financial obligations such as the payment of living wages to junior colleagues.
Yet, and in truth, there are remediation steps that the NBA can and should take to prevent such unhealthy circumstances and help Firms stabilize economically while operating as going concerns. The NBA could and should mandatorily include basic business and strategic planning and financial accounting modules in its Continuing Legal Education programs, all structured as part of Law Office Management courses.Ideally, such basic programs, in my view, should form part of the Law Faculty curricula in Universities, or at least at the Law School. Such mandatory courses, even if packaged as a post-Law School CLE program, would enlighten most lawyers on the imperative of strategic planning and make them realise that successful businesses, including law firms, do not come about by accident and indeed do not survive and thrive without set goals and implementation strategies.
In the process, more lawyers would be equipped with the relevant know-how to profitably manage their Law Firms in a sustainable manner that would ensure payment of reasonable and living remunerations to their junior colleagues.
To illustrate the issues that we raise in this piece, a strategic plan for a start-up law firm could, hypothetically inform the principals whether the Firm should operate as a niche practice in a specialized area or work as a general litigation and/or transactional practice and indeed the city where the Practice should be located seeing as the Firm’s earnings might depend on the city of its location and its area and type of practice. It would also inform an existing and even thriving Law Firm whether it should diversify into a new area of practice based on available needs analysis and profitability projections. The human capital and infrastructural requirements for the growth of the Firm would in such event be determined and based, not on guesswork, but on projections that are supported with facts coupled with fact-based analysis and assumptions. The principles and methodologies that would and should undergird such business projections, analysis and planning could and should form part of mandatory law office management programs in the NBA-mandatory CLE trainings. That way, poorly managed law firms could be salvaged and turned into profitable ventures with the attendant ability to pay and kit their lawyers well.
It would be useful, as a corollary to such required law office management programs, to include training modules in basic investment opportunities and investment planning. Such training would be very useful not only for lawyers whose incomes are seasonal and non-constant (e.g. those who specialize and work mostly on election-related matters) but for literally all of us. In particular, however, lawyers with seasonal earnings would benefit from such basic training that would expose them to investment opportunities and the planning of such investments based, amongst others, on relevant risk ratings.
With such empowerment, lawyers would be equipped to identify available and viable investment opportunities, determine their risk ratings and invest their earnings in such manner that it would see them through the business-dry seasons and guarantee the survival of their Firms as going-concerns with ability to pay their junior colleagues well.