LPM Tip
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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To learn more about the Law Practice Management
Section, which is complimentary for all MBA members,
contact LPM Section Chair Thomas J. Barbar or Vice
Chair Stephen
Seckler.