A business plan is one of the most important tools to explain your practice, relationships, and strategy to another law firm. You should put together a business plan before even pursuing opportunities to preemptively answer questions that you anticipate encountering throughout the lateral placement process.
Why are business plans necessary in conjunction with their shorter brethren, LPQ’s (Lateral Partner Questionnaires), which deals almost exclusively with historical and projected business generations, conflicts, and key relationships? The answer is simply, the LPQ is your one-sheet resume, with just enough details to diligence a conversation on a lateral partner. The business plan on the other hand, is your opportunity to market your practice and walk the firm through your strategic process to achieving your goals.
There are a multitude of guidelines to adhere to when composing a business plan, but here are the six of the most crucial principles to consider:
1. The Format. There isn’t one set way to compose a business plan, but generally the best business plans we see follow this structure:
Summary: The summary highlights your practice and experience in a neat 100-200 word package, giving the firm an overview of your past achievements, and your expectations for your practice over the next few years. This is the time to brag about yourself, are you Chambers ranked? Did you win a high value or newsworthy case in the last year or two? These are eye-catching details that belong in the summary. The summary is your hook so be judicious about the material you include.
Strategy: Your strategy section should outline your vision for your practice at the firm. This is not the time for ambiguity; if your strategy calls for additional associates to service extra work, include this in your strategy. Context is vital to this section. Your strategy should detail current market trends and forecast future ones to synthesize a strategy that accounts for potential growth or decay in your practice.
Track Record: Your track record is simply a breakdown of clients by year and fee origination. This should be succinct, there is no need to delve into the fine details. A chart that lists your major clients and the revenue generated from them each year is sufficient.
Revenue Projection: This section is perhaps the most difficult and of the most interest to law firms. Completing this section requires straddling a fine line between over and under-projecting. The chart in this section should break down your work by category. For example, Outbound Lit, IP Lit and Inbound Lit, could be three sections under your category heading. Your next column should be projected revenue. If you anticipate an increase or decrease in your historic revenue, be sure to list why, as firms will examine this section carefully. The next column should list the percent of work serviced specifically by you. Your last column should be the amount you personally bill. As long as your projections are reasonable and you justify any projected growth then your business plan will be deemed credible.
Marketing Plan: The marketing plan is your opportunity to demonstrate your long-term plan for growth with the company. This section can easily span several pages and should include a market analysis across all your different specialties. In this section you want to identify trends in the market to anticipate legal demand. You should also list specific corporations and your plan for targeting them to gain their business. Structure matters here. It is easy to meander through two pages of epiphanies before you realize you have incoherent drivel. Outline this section before you write to save yourself an hour of revisions.
2. Identify The Why. Firms are looking for partners for different reasons. While some firms buy books for accretive growth, others have succession planning concerns in mind. Some have platform expansion on their minds or an appetite to build a practice that cross sells nicely with an existing client base. Whatever the reason, firms prioritize certain hires for various reasons. Determine the value you bring to the firm and vice versa. Connect the dots and communicate a strategy. For example, if you are nearing the retirement age, the firm may question your ability to pass down your business to the next generation of partners. If this is the case, your business plan should focus on the long-term viability of your practice and envision a seamless succession plan to help the firm retain the clients after your retirement.
3. Don’t Exaggerate. One of the biggest mistakes a lateral partner can make is to overestimate their potential. Your reputation and credibility are everything. Firms generally peg partner compensation at 33% of their business generation if under a $5mm practice. As the practice grows, there are more costs required to service the practice, and the percentage typically diminishes with scale. Given this formula it can be tempting to overestimate, or become overoptimistic of your chances to retain a client.
Firms run pro formas based on years of historical originations to determine future compensation. Since firms are not privy to every detail of your dealings, they might be unaware that your clients expect their demand to drop significantly—and in turn, diminish your book. If you fail to temper their expectations of future potential drops in earning potential, a disappointing year-end bonus could be the least of your problems.
Similarly, if your inflated estimations are the tipping point of your acceptance, you may find yourself being pushed back onto the market soon after if your business generation is comparatively disappointing to your estimations. You don’t want to start a job with a target on your back.
4. Don’t Understate. While the preceding section may sound unduly ominous, you do not want to underestimate your business potential out of fear of overshooting your true potential. Like any job interview, your goal is to communicate your potential, which means remaining cautiously optimistic while tastefully bombastic, i.e., credible to the decision maker who decides your compensation and role with the firm. Don’t expect firms to give you the benefit of the doubt. In fact, expect them to take a haircut off your numbers and poke holes in your strategy. That said, remain confident without exaggerating.
5 Give Them A Vision. Most AmLaw firms seek to expand their presence or influence around the globe by bringing on profitable partners. It is probably the main priority of a firm chair in his or her strategic plan. Figure out what the firm’s vision is and see how you can contribute and how the firm platform might increase the pie for everyone.
For example, if you have potential business in Mexico City and your current firm does not have a Mexico City office but the prospective firm has a strong Latin American practice, walk the prospective firm through how you plan to cross-sell an international platform to your current client base to service additional business you are leaving on the table. A business plan marries your past performance with your future potential, showing how you plan to continue to grow your practice given new synergies.
6. Address Issues Upfront. If you have something that needs explaining, you should take the opportunity to explain it upfront. Get ahead of the issue and make sure the firm understands what to expect. I am not suggesting that you should highlight your weaknesses, but at least, address issues that you can expect the firm to ask during the conversation. This can save major embarrassment later, and if the backlash is strong enough to push you from the partner ranks, it can be difficult to find another lateral job after that.
Writing a business plan is cumbersome, especially after a long day in the office. Between tailoring the message and the determining the structure, the whole affair can stretch out far longer than anticipated. My fellow recruiters and I at Lateral Link have ample experience to guide you through the process, help craft your motifs and structure your plan effectively. Feel free to reach out to me at firstname.lastname@example.org for more information.