The business plan should be your first step when you consider opening your own practice. It will lay the groundwork for all other areas of starting your practice, and in some cases, is required. It is a written, organized summary of how your firm is going to get started, establish itself and then continue to grow. The plan should be your guide to directing the first three to five years of growth of your firm. Likely, any bank you approach for a start-up loan, as well as some suppliers and vendors, will require the plan to feel confident in working with you.
All of the goals established in the plan, and especially the financial goals, should be realistic and attainable. Establishing goals in the plan that at are impossible to meet will not help move your business forward, nor will setting goals that won’t challenge you. Visit the plan on a regular basis to gauge your progress. If you meet a goal before its established deadline, make the next goal harder. If a goal is not timely met, ask yourself why using an objective analysis, then take the necessary actions to put yourself back on track. Don’t ignore failing to achieve reasonable progress toward a goal, but don’t panic over it either.
Generally, business plans consist of four main areas: a business description, a financial plan, a management plan, and a marketing plan.
Business Description
- What type of law will be provided or client niche will be met?
- Why you are starting a law firm?
- Why will clients seek your representation?
- What are your business goals?
- Where will your office be located?
- What type of entity will your business be?
Choosing an Entity
Prior to starting a law firm in Missouri, attorneys must organize as an entity. The Missouri Secretary of State’s websiteprovides information on starting a business and choosing an entity. Law firms may choose to be a Sole Proprietorship, Partnership, Professional Corporation, or Limited Liability Corporation. But first, consider the following aspects of the business so you can make the best choice for your firm:
- Taxation – consult with a taxation professional, such as a CPA, if you are not one yourself.
- Liability
- Succession/dissolution
- Shareholders, officers, chief operating officer
- Members
- Specialized/General Practice
- Partnership/Formation Agreement in writing
- Capital/equity from partners
- Withdrawal/retirement issues
- Compensation and profit distribution
- Each partner’s role in the practice
- Managing Partner
- Rainmaker
- Others
Sole Proprietorships:
- May be created without involvement of the Missouri Secretary of State
- Individual ownership
- Sole proprietor owns all assets and profits of the business
- Sole proprietor is also responsible for all liabilities and debts of the business
Partnerships:
- Two or more individuals own the business
- May be a General Partnership
- Divided responsibility and management
- Created without the involvement of the Missouri Secretary of State
- May be a Limited Partnership (LP)
- At least one general partner must assume responsibility for partnership and business operations
- Formation requirements - Section 359.091, RSMo. – Must execute and file a certificate of limited partnership with the Corporations Division and Submit Filing fee of $105
- May be a Limited Liability Partnership (LLP)
- Majority of partners have limited liability regarding their investment and limited participation in management decisions
- Formation requirements - Section 359.172, RSMo. – Must file an application with the Corporations Division and submit filing fee based upon number of general partners, not all partners.
Professional Corporations (PC):
- Chapter 356 RSMo. sets forth requirements
- Only persons licensed to practice certain professions are eligible to be shareholders in this corporate entity
- Has formation requirements
- Submit the name of the Professional Corporation to the Clerk of the Supreme Court, including the names of the proposed lawyer-shareholders and $5.00 fee for each shareholder
- Upon receipt, the Court will provide the attorney with a Statement of Good Standing for each of the shareholders,
- File the Statement of Good Standing and the firm’s Articles of Information the Secretary of State’s Office.
Limited Liability Companies (LLC):
- Ownership by one or more managers who operate the business
- May operate under direction of its members
- Formation requirements – Section 347.039, RSMo. – Must file articles of organization with the Corporations Division. May complete the application on-line and pay the filing fee.
Financial Plan
- Projection of gross receipts
- Projection of overhead and expenses
- Projection of net receipts
- Cash flow projections
- Projection of hours worked
- Marketable experience
- Setting fees to make a profit
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- Annual income/billable hours goals
- Fee budgets per case
Accounting Needs
Nothing has the potential for harming your fledgling firm quite so much as unrecognized tax liabilities and poor tracking of both income and expenses. Take the time when creating your business plan to speak to an accountant if you do not personally have the expertise to analyze the considerations below. Consider:
- Consult with CPA
- Set up accounting procedures
- Chart of accounts
- Profit and loss statements
- Balance sheets
- Cash Flow Statement
- Quarterly and annual tax returns
- Payroll services
- Bank and trust accounting systems/reconciliation procedures
- Software compatible with accountant
Securing Start-Up Costs
Consider your possible resources for securing at least six month of business operating and personal living expenses. Possible credit sources include:
- Local bank/Credit Union
- Personal, business loan
- Home equity, home refinance
- Line-of-credit to be drawn upon as needed
- Lease, equipment loans
- Family loans/private investor loans
- Personal savings
Bank Accounts
The Missouri Office of the Chief Disciplinary Counsel’s (OCDC) annual report of disciplinary complaints has listed Rule 4-1.4 (Communication), and 4-1.3 (Diligence) as the top two most cited rules violated. Rule 4-1.15 – Safekeeping Property also ranks high. To get up to speed on handling Trust Account/IOLTA Funds properly, read the Missouri Lawyer Trust Account Foundation’s Lawyer Trust Account Handbook available at: http://www.moiolta.org.
Consider these aspects when setting up bank accounts for your firm:
- Trust account (separate account)
- IOLTA account, if applicable
- Business operating account for expenses/payroll
- Short term savings
- Safety deposit box
- Firm credit card
- Investments
- Checks, deposit slips, endorsement stamp
- Set up account to accept credit cards
- Retirement plan
Management Plan
- Draft a Partnership or Management Agreement and include provisions to determine what restructuring and compensation will look like if any of the attorneys retire or leave the firm. Important considerations when preparing a “leaving lawyer” plan:
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- Notification of clients
- Client continues with firm
- Client goes with leaving lawyer
- Client goes to new firm
- Disposition of client file
- Restrictions on practice after retirement
- Division of Fees on separated clients
- Create an organizational chart to determine how the firm will be managed and who will do that managing (e.g., managing partner, managing executive, by committee, etc.)
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- Will the firm have a managing partner or be managed by more than one or all partners equally?
- Will the firm have an office manager?
- What types of tasks will be handled by individuals in these managerial roles (e.g., developing and enforcing office policy, billing responsibility, etc.)
- Designate a manager or managing committee in the firm to be responsible for:
- Staff management
- Preparation, supervision, review and/or implementation of:
- Billing guidelines
- Social media policy
- Personnel hiring and training
- Procedures forms (Basic Letters, intake forms, form contracts, etc)
- CLE compliance
- Procedures addressing ethics complaints, fee disputes, malpractice claims
- Disaster recovery plans
- Establish reports to assist with firm management:
- Finances
- New business
- Work in progress status
- Personnel
- Facilities management
- Professional development
Marketing Plan
- Identify how you and your practice are different than other lawyers’ practices. Each lawyer has a different background and serves a different set of clients. Analyze your current and past client list and try to identify the likenesses. That is how you and your practice are different. If you don’t have clients yet, be mindful of this as you accept clients and schedule an annual review of your client base. Your differences may change throughout your practice!
- Get involved in Industry specific organizations that fit your experience. Differentiate your practice from others by focusing on the industries or groups in which you have experience. The fewer attorneys who are involved, the better, unless attorneys are your clients. Aspire to be on the Board! Don’t forget to invite connections on LinkedIn.
- Join the legal community! Volunteer with Bar Association committees, volunteer for lawyer-related charitable organizations (ie: Volunteer Lawyers for the Arts) and any other charity that makes you feel good. Don’t forget to invite connections on LinkedIn.
- Expand your contacts beyond what is listed in #2 and #3. Connect with old classmates, co-workers, family, etc. Develop a way to keep in touch – even if it’s through social media at first.
- Develop meaningful and interesting content. Once you’ve develop it, exploit it:
- Post to your website
- Post snip-its to social media, with the link back to your website. Don’t stop at one. Post a different snip-it from the same article more than once.
- Share with your contacts in your database, even if that database is only your contacts list. Link to the full article on your website.
- Share with specific media partners, industry groups or Bar Associations. Suggest that they reprint it/share it and link to your website.
- If it’s relevant, repurpose it later. Link back to your website.
- Develop a schedule of communications with your clients/friends/potential clients/media. If you plan ahead with 12 months of content; step 5 above will be easier.
- Entertain one client per week/month – your identify the schedule but stick to it. Start with your best clients and work down the list. If you run out of clients, identify potential clients and media members. This can be coffee, lunch, golf, ballgames, a drink at a conference. Entertain in a way that is comfortable to you. Be intentional with your entertainment time.
- Do not underestimate the power of Google. Every time your name or firm name appears online it counts and helps potential clients find you and your services. The more committees you are active on, articles you write, your name is listed as an expert in the media, speaking engagements, honors you receive – it all counts! Make it your goal to be on the first page of Google searches for your specific practice. To do this, identify the keywords that others might use to find you and ensure you use those key words in all content, your website, social media posts, etc.
- Also don’t underestimate exceptional client service. Don’t just say you offer this, show how you offer it. Ask your clients, post-matter, how you did and what you can do better – then, be better! Better yet, put them on the list for “entertainment”.
- Develop referral procedures. At a minimum, acknowledge those who refer business by thanking them. If your business is mostly based on referrals, proactively analyze how and why you are referred business and figure out how to replicate those efforts.
For more information on Business Development Tips for Lawyers, click here.
Use The Bar Plan As a Resource
We are here to help. Lawyers will always have questions about their professional duties or malpractice risk throughout their careers. The Bar Plan’s Risk Management team is here to help lawyers answer those questions, along with any questions pertaining to starting your practice. Our Risk Management Hotline is free and confidential. You do not need to be an insured of The Bar Plan to use this service. Call 1-800-843-2277 x103 or email rmseminars@thebarplan.com.