The road to a successful and profitable law practice should be planned on paper well before you open your doors (and for those who are already in practice – there is no time like the present for a financial makeover). A business plan is your roadmap to the future – you can show it to banks, suppliers and others you deal with to start up or grow your practice. A business plan tells them that you have done the necessary homework to launch or reinvigorate your practice.

What is a law practice business plan and what does it consist of? It is a concise and organized summary of how you intend to start and remain in business. It is composed of four main areas: a general description of your business, your financial plan, your management plan, and your marketing plan. A detailed outline of what should be included in a business plan is available at http://www.practicepro.ca/practice/financesbookletprecedents.asp. Use this outline to create your own business plan.

Be precise, especially in the finances or budget part of the plan. Budgeting and managing your cash flows will be a big part of remaining in business. It is an old adage that what gets measured gets done: If you have set out straightforward goals and expectations to be met within a reasonable timeline, you will be able to judge for yourself if you are meeting, exceeding or falling behind your goals. On an ongoing and regular basis, review the goals you have set, and if you find yourself falling behind, take corrective action before it is too late. If you ignore the initial signs of trouble, you may find that you are quickly out of business, and possibly facing even greater debts than when you started.

A budget will be an important part of your financial plan. When you are starting out, you need to sit down and prepare a detailed month-by-month budget for at least the initial 12 month period. To assist you, a sample budget spreadsheet is available at http://www.practicepro.ca/practice/financesbookletprecedents.asp.

Your budget should include all expenses that you know of and/or can anticipate, and when they must be paid. Include an amount for unexpected expenses, since it is Murphy’s Law that costs will always be greater than you expect, particularly as the volume of work increases. Build in marketing time and expenses. Most of all, build in your draw: If you don’t look after yourself, no one else will. Compare the total expenses to your anticipated revenue. If you do not have an historical basis to forecast income, make an educated estimate based on your marketing plan.

This article was adapted from managing the finances of your practice, one of practicePRO’s managing series of booklets that focus on specific areas of law practice management. This booklet is available at www.practicepro.ca/managingbooklet