4 Things to Know About Creating a Law Firm Budget
Fundamentals to Create a Law Firm Budget
Want to start your law firm, I guess you have picked your area of law. You have decided upon the people you would want to work with. What’s next? Where are you getting the money from? Where and how are you going to spend that money? Well, you need to create a Law Firm Budget. Make those spreadsheets! Here are four fundamentals that you’ll have to know about while creating a Law Firm Budget.
If this is your first time creating a law firm budget, extensive research has to be done. Certain fundamentals have to be adhered to while you finance a law firm, and you need to understand them well. Set your goals and strategies. Jot down your requirements and think about how you want to meet these requirements. Fix some tentative prices on the services that you are going to provide. The key to a successful law firm budget is when you can anticipate the future (at least a year) and strategize it accordingly.
Take help from family and friends who own a firm and understand how they work out their budgets. You can also research on top law firms and their finances. Or you can always take the help of a consultant who will help you figure out your way through it.
Revenue and Expenses
Plautus once said, “You must spend money if you wish to make money.” But be careful.
There are two very important steps while creating a law firm budget that you have to understand. Firstly, finance before you sell. Figure out a way to get initial investment to build a law firm. It could be your savings, credit cards, or borrowing either from friends or banks. After figuring out initial investments, decide on a tentative number that you will require to start a law firm because how will you ask when you don’t know how much to ask for. That’s where your second most important step kicks in, and its called expenses. There are usually three kinds of expenses that you need to keep in mind before you start creating a law firm budget
(i) Fixed expenses,
(ii) Variable expenses and
(iii) One-time expenses.
Fixed expenses are those whose numbers remain constant throughout, and therefore, it is easier to estimate them. For example, rent, internet fees, phone services, insurance, etc. Variable expenses are the ones that vary every month; expenses such as advertising, events, travel, contractor fee, printing and client costs, etc. come under this category. There are also other expenses such as malpractice insurance premiums, bar licenses, and bar association dues that you don’t want to miss out on. One-time expenses mostly include equipment based expenses. You need not include them in your long-term budget because you are not going to spend again on these things for a while, like computers, phones, logo designs, furniture, office supplies, and website design, etc.
After figuring out your revenue and expenses, you will get an idea as to the amount of money you need to establish your law firm. Then, create your law firm budget accordingly.
“Stopping advertising to save money is like stopping your watch from saving time” – Henry Ford.
Build your website! This category is new and has emerged with time. You cannot compromise on a good website in this time and age. It still stands true that ‘consumer is king.’ And consumers today are smart. They will research and weigh the pros and cons even before approaching you. And with the already existing competition among law firms, it is ideal that you raise aloft and step up your game.
Before that, it is essential to understand the country’s stand on law firm advertising. Initially, according to Rule 36 of Section IV of the Bar Council of India, 1975, an advocate was not allowed to solicit work or advertise. But with the judgment of V.B. Joshi v Union of India, the course is changed. The current position of law allows only 5 pieces of information can be advertised on the internet – (1) name of the firm, (2) address, telephone numbers and email id, (3) (a) enrollment number, (b) date of enrollment, (c) name of State Bar Council were originally enrolled, (d) name of the State Bar Council on whose roll name stands currently and (e) name of the Bar Association of which the advocate is a member, (4) professional qualifications and academic qualifications and (5) areas of practice.
The website is the pillar of any firm, and it would be great if you have a separate budget allocated for the same. Make a solid digital marketing plan and invest as much time and money as possible on it. Digital marketing doesn’t stop at just a website. Consumers these days, look beyond the website. They will research the advocates that work in the firm and on you. So it is ideal for providing them with all the information on the website and with ease. To satisfy these requirements, you need to set certain marketing goals and meet these goals through strategies and tactics.
This holds true after a quarter or half a year has passed since you started the firm wherein you have analyzed your daily, weekly, and monthly expenses. This is the stage where you meet reality. Your budget may have varied when you practically started your expenditure. Therefore, this is your time to adjust your numbers with reality and plan the rest of your year accordingly.
Read Also: Strategies for lawyers advertising in India
It will help if you discuss your law firm budget with your friends and family, who will actually listen to you and give feedback. It is even better to discuss it with your entire team and derive ideas from them that could help. Re-adjust your law firm budget every month. By this, you will know when you are diverging away from your target, and then you can cut off some costs and make certain changes that can increase your revenue.
A law firm, budget is a very crucial and significant part of whether you are starting a new law firm or you want to improve the finances of your already existing law firm. The greatest hack when you create a law firm budget is something called the ‘rainy day funds.’ It can come handy when you have expenses that you weren’t expecting at all. It is a clever move, and you will not regret it. And the greatest secret of it all is to always stick to your budget because why make one if you don’t stick to one. You will always have that little extra money, and you will want to spend them, but no, your law firm budget does not allow it. So, listen to your law firm budget and let it make decisions for you.