Business planning for 2021 – not all doom and gloom?
by Andrew King
(originally posted on the Law Society website)
Andrew King explains why it’s critical to start your business planning now for the next 12 months. But amidst the economic uncertainty, there are still opportunities to develop your business for the future.
It’s now October, and most law firms will be half-way through the financial year. It is essential we take time to pause, reflect on the year to date and then begin to plan ahead. Given the unexpected challenges all firms have faced in the six months, this process is even more important at this moment.
Pull out the 2020/21 business plan and review it. If you have been focusing on simply ‘delivering’ the last six months, consider rewriting your business plan for the remainder of the financial year and tying it together with a plan for the following year, taking you through to March 2022.
The next 12 months (and likely, beyond) are going to be uncertain and unpredictable. None of us know what is truly around the corner for the economy and the impact that will have on our firms.
Having been through one complete lockdown already, you will have experience of the immediate impact that can have. There are two specific lessons to be learned from this, I think.
A lockdown can have an instant impact on a firm’s ability to undertake work, to invoice and collect cash. It may not need a full lockdown for this impact to be felt with the economic future uncertain. My tip would be to ensure you have a clear cashflow forecast available that is being continually updated – it is vital that you understand the numbers and can anticipate any deviations ahead of time.
Establish what your typical monthly outgoings are (rent, staffing costs, insurance etc) and aim to build a cash balance that you feel comfortable with, to serve as a safety net if your income fell off a cliff overnight. I would think of this in monthly cycles, so if your typical monthly outgoings are £100,000 and you would be comfortable with a two-month safety net, aim to build up a cash balance of £200,000. Difficult though this may be to achieve, once in place, it will give reassurance.
How will your firm continue operating? Learn the lessons from the first lockdown and avoid repeating any mistakes that may have been made. Consider:
- where staff will work from
- how they can complete that work
- how you will deal with the logistical issues of, for example, receiving documents from clients
The uncertainty of what the next year holds is going to cause plenty of concern. But there will be opportunities to develop your practices and to improve your business.
Reflect on the need for office space. What has the post-lockdown experience taught you? Communicate with your staff and identify how they have found office and home working.
Be careful not to get caught up in the media hysteria about the “death of the office” in 2020. My view is that we have not seen the end of offices. There are lots of benefits in homeworking, but it creates its own challenges, such as training, supervision, support, not to mention the negative impact it can have on mental health due to isolation.
You may deem your office space surplus to requirements, or perhaps in the last six months you’ve managed to downsize. But don’t be too rash in handing back the keys to the office.
What opportunities are there for developing additional work within your practice areas? There have been reports of significant numbers of redundancies from larger law firms following the announcement that the furlough scheme will come to an end at the end of this month. There are also extremely high numbers of students completing their studies, but unable to secure employment due to the reduced number of vacancies available.
Consider what services you are offering clients. Is there is scope for developing that further, whether with an experienced lawyer joining the team, or by bringing in a trainee? There is an awful lot of talent in the marketplace looking for an opportunity so, if you can justify it, now would be a great time to recruit.
How did your IT stand up in the last six months? If your firm relies heavily on paper, now is the time to seriously review this and take steps towards paperless / paper-lite working. You need to be futureproofing your firm against how your firm will choose, or be forced, to operate in the last few months of 2020 and into 2021. Lockdown, remote working for staff, remote access to your services for clients – these all justify a need to leverage the technology and improve your resilience.
2020 has been an extremely challenging year for many, and with more uncertainty to come, it is essential to be prepared for what lies ahead.
Andrew is a Director and is head of our Dispute Resolution and Personal Injury and Medical Negligence departments. Connect with him on LinkedIn and follow him on Twitter. If you have a situation where you need our advice, talk to our team on 01494 773377 or [email protected]