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June 28, 2022

Leading the Way: The Business of Law in 2022 and Beyond – Part 4

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Lead the Way by Predicting Your Firm’s Performance

About the Leading the Way Series

“Leading the Way: The Business of Law in 2022 & Beyond” from SurePoint Technologies is a series focused on helping mid-size firms understand their competitive advantage. Throughout this eight-part series, we’ll share tips on how forward-thinking firms can thrive now and in the years to come. In the latest post, we’ll look at how forecasting can make your strategic planning a reality.

Predicting Your Firm’s Performance: Where Planning Becomes Reality

Along with planning and strategizing, forecasting your firm’s performance gives you a competitive edge. Your forecast works with your strategy and goals to drive agility and growth, and based on your forecasts, allocate resources, and align your strategic goals.

Forecasting can help you predict:

  • Future revenue
  • Future expenses
  • The number of staff you’ll need
  • The skills you’ll require in the future
  • Where your resources should be spent

So how do you go about predicting your firm’s performance? Keep reading! Here are five essential steps to predict performance.

1. Make Reasonable Assumptions

The first step is to document what you know based on reasonable assumptions. Look at which clients you expect to continue working with your firm next year.

  • Who works with you year after year?
  • Who has come to you for one or two services but isn’t likely to return?
  • Of those who come to you year after year, how much have they spent in the past, and what are they likely to spend in the future?

For example, if a client has paid you $100,000 every year for the past ten years and nothing indicates they no longer need or want your services, you can safely predict they’ll pay $100,000 again this year. If it appears they may have more labor disputes this year and require more of your time, you can increase the amount you expect to bill that client this year. With a robust practice management solution like SurePoint Legal Management System (LMS) or Coyote Analytics, you can use built-in functionality to perform a profitability analysis and compare billings at the firm, practice, matter, and even attorney levels.

Armed with this information, you can create profitability models for projects, clients, matters, and practice areas. This gives you the economic facts to understand where profit centers are within your law firm. Conducting a profitability analysis empowers you to make the right decisions about which new clients to bring in and the practice areas to focus on. As competition for business increases, you can leverage these insights to shape your business development efforts and your firm’s growth strategy.

Understand Your Episodic Work

Do you have clients who contact you irregularly as they need you? Remember to allow for this episodic work. While this can be unstable you don’t know when it will happen or what resources you’ll need to manage it, you can still make predictions that will help you allocate your resources. Here are some things to think about:

  • How much episodic work has your firm done in the past few years?
  • Is there a level of consistency that you can use to make predictions?
  • What is your historical win rate for episodic work?

2. Look at Your Pipeline

The next step is to examine what’s in your firm’s pipeline. For example, if your firm closes 25% of its leads, and there are 20 leads in the pipeline, you can anticipate closing five new clients/projects. If it takes three months to move clients through the pipeline, you can use that to determine when you’re likely to close on clients or matters.

If your firm consistently brings in 15-20 new clients every year and loses a couple, you can predict that, barring any extraneous factors, you’ll sign at least 15 this year and likely lose two. You can use your financial and practice management software to review new clients and matters and financial trends related to them.

3. Allocate Your Resources

When you have your forecast, you can begin allocating resources. The information you have enables you to predict:

  • Matters your firm is likely to deal with in the coming months
  • Number of people you need to manage them
  • Skills those people need

This allows you to act now rather than scrambling in the future to find people. If your hiring process typically takes at least a month and you need a month to train new people, you’ll want to start the hiring process at least two months before you need to deploy them. Otherwise, you may find yourself making rushed decisions on the fly.

4. Use Technology to Help You

When forecasting, it is important that your information is accurate, reliable, and unbiased. Take the time to research the figures you’re basing your forecast on and confirm they’re accurate.

Spreadsheets and manual processes have their place, but they rely on stakeholders to ensure the data is input and transferred accurately. It also takes a long time to compile and analyze manual data. When you draw out the forecasting and budgeting processes, you risk presenting stale and outdated data.

This is where your legal technology can really help you. With the right systems in place, you’ll know e the information you have is accurate and it will speed up the process. Additionally, a platform that gives your data real-time visibility across the entire firm enables everyone to take ownership over the projections.

5. Analyze Your Forecasts

Take time to analyze what happened compared with what you predicted would happen so you can create more effective forecasts in the future. Examine the results to see whether your forecasts were on (or off) the mark. If they were off the mark, what might have been the cause?

Events beyond our control can result in huge disparities between the projection and actual outcomes. Think about the following:

  • Are those events likely to happen again?
  • Have those vents caused a reaction that shifts your future projections?
  • Was the data you based your projections on accurate, or were there errors and incorrect assumptions?

Forecasting enables you to anticipate what’s to come and make decisions proactively rather than reactively. It may be tempting to avoid forecasting because you don’t want to be wrong with your projections, but it creates a planning and resource allocation framework. Even incorrect forecasts give you a framework that you can improve.

Be sure to check out the next post in our Leading the Way Series – Predicting Your Firm’s Performance with Forecasting.

Read Earlier Posts in the “Leading the Way” Series

Are You Ready to Lead the Way?

Schedule a demo to learn more about how mid-size firms are leading the way, finding their competitive advantage, and unlocking higher performance with SurePoint.

About SurePoint® Technologies

SurePoint® Technologies is the leading provider of award-winning enterprise software that improves workflow and maximizes financial performance and profitability for law firms nationwide. Its distinctive cloud platform integrates client management, practice management, and financial management for powerful relationship-building and knowledge-sharing capability. With a community of more than 100,000 members, SurePoint continues to transform the legal industry by enabling law firms to unlock higher performance, freeing lawyers of administrative burdens so they can spend more time focusing on their clients and their practices. Learn more at https://surepoint.com.