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Strategic Planning Means Looking Before You Leap
by Barbara Lewis MBA and Dan Otto MBA

All too often, attorneys’ future planning (aka strategic planning) is for the next few months only. Most attorneys rarely plan for one to two years in advance. However, this short-term perspective has critical ramifications that can substantially affect profits.

Take, for example, the law firm whose lease expires in six months. The partners start talking about whether they should remain in the same space or they should lease larger offices. They believe that they will probably grow during the next five-year lease and hastily decide to take offices with 20 percent more space. However, little strategic planning has gone into the decision. They have not taken the time to research trends in their practice area, examine economic forecasts or investigate any external threats or opportunities that may impact them. In fact, according to Forrest Blake, Vice President at Cresa Partners, which represents tenants, "Seventy percent of companies signing leases do not stay in their space through the completion of the lease term."

The first problem is that there is no plan to grow into the space. The partners have not mapped out the new business that they need to acquire, or the number of attorneys and support staff they need to hire to support that business. Essentially, they have picked a growth number off the top of their heads.

The second problem is that firm has put itself into a poor negotiating position. The current landlord may not be willing to give any concessions to extend the lease or expand the lease to additional space, either contiguous or non-contiguous, since the firm is negotiating in the final hour. "Time is your asset and the less time you have the more that asset turns into a liability," continues Blake.

The same scenario exists with the new landlord who determines that the move-in date will be in 120 days. Since most firms need tenant improvements that will take between 60 to 120 days to complete, the tenant will always lose in this situation. The partners have lost a considerable amount of leverage by not beginning negotiations 18 to 24 months prior to the lease expiration.

The firm needs to vacate its current offices quickly and takeover the new larger space in an uncoordinated and poorly planned move. The telephone equipment and lines won’t be operational for two weeks after the move in date and the computer network situation is worse. The firm didn’t have the time to negotiate over 50 landlord-oriented provisions of the lease. The firm was forced into a harsh sublease agreement that limits the their ability to find a suitable sublease candidate. The partners are stressed, the staff is frustrated and the clients are ready to leave their unprofessional counsel.

Another law firm meets for their annual strategic planning session and carefully maps out future growth. Based on three years’ historical growth, with no projected constraints on future growth, the partners estimate the next five years’ of revenues. They decide to invest in case management/billing technology, which will reduce the attorney/support staff ratio. Then they determine the number of associates, paralegals and staff necessary to support the revenues. Based on the staffing requirements they determine that their current space should be expanded by about 30 percent.

The designated partner begins discussions with the landlord 18 months prior to the expiration of the lease. The partner is able to secure favorable lease terms because of the excellent negotiating position. The firm has several alternatives: vacate the current premises and relocate or renew its lease in the current offices. The first alternative is valuable because there is sufficient time to execute a move. The value decreases as the current lease term reaches expiration. They decide to move to new spaces and request a first option for refusal on any space, contiguous or non-contiguous, that comes available in the building during the lease period as a buffer for rapid growth.

The move is well planned and coordinated. The firm is off-line for a weekend, but is completely operational from one business day at the old space to the next business day in the new offices. The move is smooth and relatively easy.

While strategic planning can dramatically affect space requirements, many other areas are impacted by strategic planning such as the number of employees who need to be hired, marketing, resource allocation, operations, financial metrics and other even such tactical items as the web site.

For example, unless a firm knows its strategic intent of whom it will market to and the type of work it will perform, the web site may not have the appropriate focus. Yet, many attorneys’ first order of business is the brochure or the web site, not the strategic plan, which should precede most other actions in the firm.

The strategic plan is the key for a successful firm, just as the blueprint is important for building a house. As the real estate adage "location, location, location," advises, the attorney adage is "plan, plan, plan" and planning begins with the strategic plan.

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