Before I dig too far into the importance of setting goals, and setting them the right way, let’s get this out of the way:
The Goal of any business system, process, or workflow is to derive Profit for the business by delivering Value to the customer.
This is undeniably true. Now Profit, as I explained in one of my earliest posts, isn’t just about money. But in the broadest sense, you need to be deriving some Profit from your practice or else there’s no point in having one.
(This notion of “The Goal” is taken from a book by that name by seminal Lean thinker Eli Goldratt, father of the Theory of Constraints. I’ve written lots about that theory, and will certainly do so again. Also, it’s the basis of the book The Lean Law Firm that I recently reviewed).
So while earning a Profit is “The Goal” for your practice, you still need to be able to articulate some other goals to help you know whether you are on track to finding (and maximizing) that Profit.
Let’s also touch on “the money thing” before we get too far. Yes, there are many types of Profit, and many of them are more important than money. But not all of them are going to pay your rent next month.
So yes, I get that money is important, and we’ll account for it. But if making more money is your only goal, then my concepts probably aren’t for you. It’s a little like trying to see a shooting star—if you go looking specifically for one they can be elusive. But if you put yourself in the right situations, with the right attitude, then a number of them will become apparent to you.
That said, let’s start with a money goal. How about “I want to have a $500,000 a year law practice.” That’s a fine goal, and one that is totally achievable for many lawyers in many markets. Some of you may have already blown past it.
There’s just one problem with it: It isn’t really a goal, it is an aspiration. Or maybe a hope, or an intent. But it isn’t a goal, at least not by my definition.
Here’s why: In my experience (drawn from the teachings of many intelligent folks before me), a goal isn’t a Goal unless it is a SMART goal. Which is to say, it contains the following elements:
Specific
Measurable
Actionable
Realistic
Time-bound
Let’s evaluate that half a million a year law practice in light of those criteria (note: there are other answers for some of the letters, but this is my blog and I like these).
Is it Specific? Kind of. The number is finite, but what do you mean by your law practice? Is it just you? Is it 10 people? What types of products and services are you selling? Where? To Whom?
I’m not saying you need to go deep into the weeds (that’s what sub-goals are for—more on that in a minute), but having at least a high-level sense of where that money is gonna come from would be better. Maybe “I want to build a $500,000 a year family law practice with just my current team.” (Could be Immigration, or Estate Planning, or Employment Litigation—you get the idea).
You might also be missing an important part of the picture with a straight revenue goal—will that practice be profitable? Generating $500k in gross revenues and reaping $250k in net profits are very different goals. You can’t just assume that one will necessarily lead to the other, so better to be clear about which is more important to you.
Is it Measurable? Again, kind of. Yes, you can calculate your revenue per year pretty easily, and for this high-level goal that is probably enough. Here too, however, we’ll want to develop some sub-goals that will help you gauge whether you’re on track to this big one.
Is it Actionable? That’s a little less clear. One does not simply go out and find half a million a year, at least not in most industries. Part of this depends on where you are today. If, for example, you are already grossing $20k/month ($240k/year for you math-phobes), then maybe you can get there, but the goal itself, as stated, doesn’t show you the way.
What if instead you set a goal to grow those $20k revenues by 3% per month? That means finding another $600 in month one; that seems like something you can do, right? And then another $620 in month 2, $640 in month 3, and so on. Now you’re not going to hit those numbers exactly—some months will be a little over and others will full short.
But, through the miracle of compounding, if you average that 3% monthly growth over the course of a little less than two years you’ll have doubled your revenues to that $500k/annual target.
How about Realistic? Again, depends on your starting point. If you hung your shingle last week fresh out of law school, then you probably want to find a smaller interim milestone to shoot for. If you just left your big-law gig after 10 years with a $500k book of business, then it should be a softball.
But other factors come into play too. If you‘re projecting 30% growth out of a rural practice in a community with 18% unemployment and a couple other lawyers in town, you may want to reconsider. If you have a national profile evaluating cryptocurrency ICOs for SEC compliance risk, then your projections might make more sense.
(As an aside, strong growth is possible in both of the above situations, even the less likely one. Just not necessarily with your current business model. More on that in a future post).
Finally, is it Time-bound? For the $500k/year goal as originally stated, the answer is no. Sure you want that kind of revenue, but by when? Establishing a deadline is the key difference between a goal and a hope.
Setting a time limit is also important to setting the context of the other parts of the SMART framework. Is $500k/year realistic next year? Sure, if you booked $450k last year, but not if you’re new to practice. Same goes for Actionable. For that newbie, a goal of hitting $500k/year by year 5 of your business might make more sense (although that kind of long-term forecasting is hard to make actionable in the short term).
One final thought on timing: whatever your long-term plans make sure you break them down into sub-goals between 30 and 90 days long? Why? Some experts believe there is something about the human psyche that makes it hard to have an actionable plan for something that will happen more than 90 days in the future.
The problem is that for short-term goals then we can imagine our current selves being in that future state. But beyond 90 days we tend to think of that future-me as another person entirely, therefore it is harder to relate to that person.
Which is a great segue into sub-goals. This post is already long, so I won’t dive down too many rabbit holes, but know that you need to nest some sub-goals in under your main goals if you want them to be truly actionable.
Going back to my 3% monthly growth example, where is that growth going to come from? If you currently make your money on the back of 20 in-progress matters, (giving you an average monthly revenue of $1,000 per matter), perhaps your sub-goal is to add one high-quality matter to your mix above your replacement rate in the next month (meaning if you close 2 matters in that time, you need to pick up 3 new ones).
Can your team handle that increased volume? If not, perhaps you need to set a productivity goal to make sure you have the necessary capacity. Fail to improve your productivity and you may need to add resources (like hiring someone) in order gain the capacity to hit your target.
Is your marketing able to deliver enough high-quality leads to bring in that extra matter? If not, you may need to invest in an upgrade. Or maybe you don’t have a strong sales technique to convert your existing leads to clients, or your intake is so sloppy that you’re not able to realize revenue from those clients as quickly as you ought to.
(This, by the way, is getting back into Bottleneck Theory: Once you have a goal, you need to find the single bottleneck in your system (and there is only one) that is preventing you from meeting that goal.)
I’ll leave it there for now, but hopefully you get the idea.
Those last ideas, by the way? They’re not really goals, they’re strategies. Improving productivity, enhancing marketing, increasing conversion: all are techniques you can try to help you hit those high-level goals. Put another way, they are experiments you can (and should) run to find out what is going to work. And, as experiments, they should have their own measurements and targets, but more on that in my next post.
In the mean time, think about what you are trying to accomplish this year as a firm (or team, or with your specific practice) and try to frame them in the context of some SMART goals. The process of thinking through them will clarify things for you and help you develop a realistic action plan for hitting your specific, measurable, and time-bound targets.
Want help? Need someone to bounce your ideas off of, or even to hold you accountable to your progress? That’s what I do. Don’t hesitate to reach out and start a conversation with me.
[…] I prefer to articulate goals that naturally flow from the mission (ideally using the SMART-goal framework). One might be to “grow the number of estate plans we deliver to tri-state residents each month […]