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Central casting: Projecting revenue for law firms

While Sept. 1 may not coordinate to the end of the calendar year, it is the time when many businesspersons fully reengage, following the slower summer.  In many cases, Sept. 1 is the beginning of the fiscal year. And, at this time, a number of solo and small firm attorneys (whether just starting out, or having made more of their way) are taking their best stabs at projecting revenue for the forthcoming year, or quarter.

If you've begun to make your predictions, you know it's difficult work.  It's hard to project revenue in an accurate fashion.  But, there are some things that you can do to help to ground what can be, otherwise, amorphous guesses:

Look at the expense side first, because it's more tangible/graspable.

  • Once you have an idea of what you're going to spend, you'll at least know what you need to make to turn a profit.

Apply a historical analysis, on the revenue side, and look for trends.

  • Knowing what you've done in the past will help you to predict what you can do in the future. Reviewing a string of historical results will alert you to whether your revenues have been going up, or coming down. You can only begin to correct a downward trend if you know it exists.

Don't obsess over getting it right; attempt to be "in the ballpark."

  • It will be difficult for you to hit your projections exactly, or close to exactly; but, that's alright. If you can be near to predicting outcomes, and if you can spot and analyze trends, you're headed in the right direction.

Understand how your prospects become your clients.

  • With a better sense of how your potential clients come to choose you, or your firm, you'll have a better idea of what fruits your continuing efforts will bear. You can, then, more accurately forecast what your specific marketing presses will bring in, in terms of client numbers.

Create a conservative case and an aggressive case to compare.

  • Do this, and you'll be more likely to find an average. Perhaps you'll also be equally inspired to achieve your dreams and/or to work extra hard to avoid your subsistence figure. Use your knowledge of how you convert clients to keep the edges of these extreme predictions from bulging too far.

For more on nailing revenue projection, check out these additional resources:

  • Ed Poll talks about looking at expenses and managing a historical analysis, here.
  • Pragmatic Marketing explains some of the fundamentals of revenue projection, including the importance of understanding sales channels, and of being "in the ballpark," here.
  • Entrepreneur.com advocates for the formation of conservative and aggressive projection models, here.

Tip courtesy of Jared Correia, Law Office Management Assistance Program.

Published September 8, 2011

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