Annual Planning Best Practices for a Law Firm
Annual planning can feel like just another box to check off during your busy schedule.
However, taking the time to do annual planning for your law firm contributes to your overall success in many ways. With a bit of effort, it can be something you look forward to each year.
Whether you’re building on a super year or bouncing back from challenges, annual planning helps you focus on what’s most important. But if not done with care, it can be inefficient and even stressful.
We’ll share some strategies which are best practices in the industry. So, grab your favorite drink and some trusted team members and let’s get to work!
Why Annual Planning Matters for Your Law Firm
You probably know the basics, but let’s give them a quick review in case you need to convince anyone on your team why this is worth their time. A well-thought-out plan allows you to:
Fulfill your goals - with a clear direction which can be referred to as often as needed
Allocate resources - so everyone is on the same page and understands the thought process behind plans and how they will maximize impact.
Anticipate challenges and create strategies to overcome them - less reactively putting out fires, more proactively planning and improving
Keep your team aligned and motivated with a shared vision - so even mundane tasks are clear in how they tie into the larger vision and everyone’s success
Without a plan, it’s easy to get stuck reacting to day-to-day demands instead of proactively building a stronger, more successful firm.
Best Practices for Annual Planning
1. Reflect on the Past Year
Before looking ahead, take a moment to review the previous year. What went well? Where did you fall short? A thorough evaluation of your firm’s financial performance, client relationships, marketing efforts, and operational efficiency can provide valuable insights to guide your planning.
Ask yourself:
Did we meet our financial targets? If not, why?
What types of cases were most profitable?
Were there inefficiencies or bottlenecks that slowed us down?
How did our client retention and acquisition efforts perform?
How was the team feeling? Stressed and burned out, or growing professionally while maintaining their mental health?
Did our work align with our company and personal values?
This reflection will highlight areas to celebrate and opportunities to improve.
2. Define Clear and Measurable Goals
Goals are the heart of any good annual plan. To make them effective, use the classic SMART framework—specific, measurable, achievable, relevant, and time-bound.
Examples of strong annual goals for law firms include:
Increase revenue by 10% by focusing on higher-value cases.
Improve client retention by 15% through better communication and service.
Streamline billing processes to reduce uncollected days by 20%.
Increase pro bono hours by 10% to play a role in improving our communities.
Each goal should tie back to your firm’s overall mission and vision. The clearer your goals, the easier it will be to track your progress and keep your team focused.
3. Budget Like an Annual Planning Boss
A detailed budget is essential for turning your goals into reality. Annual planning is the perfect time to review your firm’s revenue streams, expenses, and investment opportunities. Break down your budget into categories like:
Revenue projections: How much income do you expect from various practice areas or case types?
Operational expenses: Rent, utilities, software, salaries, etc.
Marketing and business development: Allocating resources to client acquisition and retention efforts.
Professional development and staff retention: What would empower staff to reach greater heights professionally, and what incentives will be in place so that they stay?
Growth initiatives: Investing in new technology, staff, or practice areas.
ESG: Will the firm allocate resources to improve its impact in categories including environment, social and governance categories?
Donations: What finances can be allocated to support local communities?
Budgeting allows you to allocate resources strategically, ensuring you have the financial backing to meet your goals.
4. Engage Your Team
Annual planning isn’t meant to be undertaken like a nefarious supervillain alone in a darkened room. It’s a team effort where everyone has valuable insights to contribute. Involve key team members in the process to gain diverse perspectives and foster buy-in for your goals.
Here’s how you can engage your team:
Hold brainstorming sessions to identify challenges and opportunities.
Share firm-wide performance metrics to provide context for planning.
Assign ownership of specific goals or initiatives to team members.
Determine which areas may be out of scope for team members and seek outside support.
When your team feels involved and invested, they’re more likely to work toward the firm’s objectives with enthusiasm.
5. Focus on Key Performance Indicators (KPIs)
Tracking the right KPIs ensures that your annual planning isn’t just wishful thinking but a data-driven roadmap. Some key KPIs to consider include:
Financial KPIs: Revenue per matter, unbilled days, operating cash flow, net income as a percentage of revenue.
Operational KPIs: Billable hours per full-time equivalent, staffing ratio, average bill rate.
Marketing KPIs: Client growth rate, average fee per client, marketing cost per client.
These metrics provide a clear picture of your firm’s performance and help you adjust your plan throughout the year as needed.
We’ve written a more complete blog post on KPIs for law firms you can review.
6. Prepare for the Unexpected
No matter how airtight your plan is, surprises will come your way. Building flexibility into your annual planning ensures you can pivot when needed. Create contingency plans for common challenges like:
Sudden changes in client demand or case volume.
Staff turnover or unexpected absences.
Economic or regulatory shifts that impact your practice.
A little foresight can save a lot of headaches later.
Annual Planning in Action: An Example
Imagine your firm’s primary goal is to increase revenue by 10% this year. Here’s how you could approach it during the annual planning process:
Review last year’s revenue: Identify which practice areas brought in the most income and where there’s room for growth.
Set a revenue target: Define how much income you need to generate to meet the 10% increase.
Allocate resources: Invest in marketing campaigns for your most profitable practice areas, hire additional staff if needed, and improve billing processes to reduce uncollected days.
Track progress: Use KPIs like client growth rate to measure how well you’re doing throughout the year. Adjust and revisit the annual plan as needed.
Let Accounting Girl Supercharge Your Annual Planning
Annual planning is easier with a specialist in your corner. At Accounting Girl, we specialize in helping law firms streamline their financial management, track performance, and set actionable goals for success. From budgeting and KPI tracking to financial strategy and beyond, we’ve got your back.
Contact us today to see how we can help make this your law firm’s best year yet. Taking the financial stress off your shoulders is our superpower, so you can focus on making each year your best one yet!
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