Best Practice: Creating a law firm budget for 2015
Asked and Answered
By John W. Olmstead, MBA, Ph.D, CMC
Q. I am the managing partner of a 12-attorney firm in Springfield. We have never had a financial plan or budget but I have been thinking of creating one for next year. I would appreciate your thoughts as to whether the time invested in putting one together is worth the effort.
A. I believe that successful firms:
1. Are focused
2. Have a sense of where they have been and where they are heading
3. Have a vision and a strategy
4. Have business and financial plans
5. Have goals and measured attainment
6. Foster accountability from self and others
7. Are proactive
8. Work the books and aggressively managed and balance the RULES (Rates, Utilization, Leverage, Expenses, and Collections)
Lawyers that fail to focus their practices; set goals, measure accomplishment, and foster accountability will fall short and not meet their financial objectives.
Attorneys need to begin focusing their practices, setting firm and individual performance goals, measure accomplishment, and implementing systems to instill accountability from all members of the team – attorneys and staff alike. Budgeting is a tool that can help you measure goal attainment and how well you are doing.
What is measured is what gets done
With budgeting law firms and attorneys can:
- Reduce worry and stress at home and at the office
- Improve productivity and profitability
- Increase accountability – yourself and others
- Focus the practice
- Improve balance between personal and professional life
- Maximize practice value for eventual practice transfer/transition
Keep in mind that budgeting entails both financial and non-financial goals.
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John W. Olmstead, MBA, Ph.D, CMC,(www.olmsteadassoc.com) is a past chair and member of the ISBA Standing Committee on Law Office Management and Economics. For more information on law office management please direct questions to the ISBA listserver, which John and other committee members review, or view archived copies of The Bottom Line Newsletters. Contact John at jolmstead@olmsteadassoc.com.