Changing seasons, breaking into new backpacks, and the reintroduction of all things pumpkin spice herald another milestone: the start of Q4 and the time to plan for the year ahead. While in Silicon Valley “move fast and break things” might be a popular operational mantra, in personal injury law, “move precisely and fill gaps” might be a better strategy.
Why Plan?
Planning is the art and science of making choices today that will enable your firm to succeed tomorrow. Waiting for certainty to make decisions will leave firms overextended or falling short of their potential. In the absence of a crystal ball, developing a business strategy backed by data and finely tuned projections will best position a firm for success. Developing specific growth goals, gathering the right information, understanding the competitive landscape, and creating a flexible budget are the cornerstones of planning.
Developing Growth Goals That Achieve YOUR Aspirations
What kind of firm do you want to lead? A strategy should reflect your personal career goals and firm growth goals. Be specific. Is your goal to maximize revenue and scale your firm 5x? Or would you prefer to be the best solo practitioner you can be, maintaining considerable client interaction? If you don’t know where you want to head, it will be impossible to set the strategy to get there. Before sitting down to craft your strategy, be clear on what success means to you.
If growing your firm is your #1 priority, planning the year ahead will revolve around three essential data points: volume (number of clients), rate (how quickly cases are resolved), and average fee.
Improving even one of these metrics will result in firm growth, but trying to improve all three at once may leave you overwhelmed. Instead, focus on one or two metrics and analyze the operational means through which they could be improved. Serving the same number of clients with a higher average fee = growth. Serving more clients with the same average fee = growth. Serving the same number of clients at the same average fee, but in a shorter time span = growth. There’s a pattern here.
For instance, to resolve cases more quickly, think about the tools and work that scheduling takes. Can depositions be held earlier, or can medical documents be acquired more quickly? To grow your client base, what levers can be pulled to increase the number of intakes? How can your marketing or referral strategy be better defined? To improve the average fee, which cases do you want to accept? How can you maximize the value of those cases?
Gathering The Right Information
Creating an estimate, or a range of estimates, of outcomes in the year ahead is made possible by reviewing the data of the year prior. Better estimates will enable smarter choices, making data the foundation of thoughtful business strategy. Here’s how to approach the essential data points of every law firm.
Number of Clients
How many people are you helping every year? This most basic metric will drive your
forecasts for revenue, headcount, office locations, and more. Supporting clients with active communication, evidence documentation, and case strategy costs money, so starting with the number of clients properly serviced in the past and present can help determine the future.
Rate
How quickly are cases resolved? Measure how many cases are resolved within a one-year period and the average amount of time it takes to resolve a multi-year case. How many of your client matters resolve in pre-suit, and how many months does that take? How many client matters require a lawsuit, and how many months, or years, do these usually take to resolve? Don’t forget, the longer a matter takes to resolve, the fewer clients you’ll likely be able to support. The faster you resolve matters, the more total clients you can support.
Revenue & Average Fee
How much money are you typically able to recover for your clients? Is it different if the
claim is resolved before or after you file a lawsuit, on average? What could you do to increase the average free you recover—select potentially more lucrative cases? Ensure clients are receiving all of the medical care they require for their injuries and that you are documenting it thoroughly? Adapt your strategy to negotiating with adjusters?
With most cases having a multiyear lifecycle, estimating 2024 revenue is surprisingly less complex at a law firm than at many other businesses. Much of your revenue in 2024, especially from litigation matters, will come from clients you’ve already retained. Here’s how to estimate revenue in the year ahead.
Step 1: Calculate the average fee of cases settled or won at your firm.
Step 2: Review existing case inventory and estimate the cases that will be resolved in the year ahead.
Step 3: Calculate the number of clients with cases retained and already resolved in the last 12 months. Unless you have made other strategic changes—hiring more lawyers, increasing your marketing spend, developing new referral relationships-assume that a similar number of cases will be retained and resolved next year as you were able to resolve this year.
Step 4: Add the number of clients from steps two and three, multiplied by the average fee. It’ll look something like:
((Existing cases + one-year cases) * average fee) = Estimated 2024 revenue
Understanding the Competitive Landscape
It’s important to stay up to date and take the time to learn from other firms through attending conferences and conversing with those in the industry. Don’t underestimate the worth of an informal conversation; hearing about how other firms are approaching case operations and firm expansion will set important context for your own plans. Together, we set standards and expectations for defense firms and insurance companies about how we will handle matters and the value of our clients’ cases.
That said, our industry is competitive. Keep in mind that every firm is doing its best to grow and provide the best possible services to clients, not just yours. If you plan to spend more on marketing or network more, remember that rival firms are likely doing the same. Goals and budget should be sure to take competitors into account: don’t assume you’re the only one making moves.
Creating a Flexible Budget
“Planning for a new year in Q4” is a bit of a misnomer. Planning should be a dynamic, continuous process that gets adjusted based what you learn as the year progresses. When building a budget against expected revenue for the year ahead, consider both fixed and variable expenses. Certain items, such as 5-year leases or other contracted commitments are immobile: other spend such as marketing expenditures or salaries, may be more flexible. If revenue is trailing, consider where there is variability and adjust expenses accordingly.
Onwards
Every law firm is unique and requires a different approach. However, inspecting key metrics and asking the questions outlined above are a foundation that every firm can use to think about the year ahead and make it a successful one. Whatever your goals may be, all firms are united in the #1 most important metric of all: getting clients the justice they deserve.
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