Small Law Firms, Solo Practitioners

5 Year-End Planning Tips For The Procrastinating Attorney

While year-end planning is important, it does not have to be a multi-day ordeal, as Shannon Achimalbe explains.

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year end calendar month last day planning plannerSome may think that year-end planning efforts should have begun in late November. But you put it off because of work, Thanksgiving, Black Friday, Cyber Monday, Giving Tuesday, and Whatever Wednesday. And you have to attend various holiday parties, for business development purposes. So you procrastinate. And now it’s mid-December. What kind of planning can you do on such short notice?

While year-end planning is important, it does not have to be a multi-day ordeal. It should cover the basics: finances, profitability (or lack thereof), business development, and job satisfaction. So today, I want to suggest a few quick year-end planning ideas you can do while you wait for your lunch to be delivered to your office.

1. Figure out how much money you made this year (5 minutes to 1 hour). Most self-employed people I talked to do not know how much they made this year. This information is crucial because it tells you whether your business is profitable. It also provides the foundation to determine which aspects of your business need improvement and to set goals for next year.

If you use accounting software, then access your year-to-date profit and loss statement and look at the bottom line. Also, check to see what your biggest expenses were and think about feasible ways to lower them.

If you don’t use accounting software or don’t do any accounting at all, the least you can do is look at your business bank statements for the year. To get an estimate of your net profit, add up all of your deposits and from that, subtract deposits that are not income (such as transfers, refunds, or loan proceeds), and subtract your recurring expenses (rent, phone, insurance, bar dues, etc.). This method is not completely accurate, but it should cover most of the important items and give you an incentive to look in greater detail.

2. Last-minute tax planning (15-30 minutes). Once you know your profit for the year, estimate your federal and state tax bill. You can do this by doing an internet search for “income tax estimator” (some sample sites are here and here). Also, if you are self-employed, be aware of the dreaded self-employment tax, which is an extra 15% tax on your net profit on top of your income tax.

A quick way to save a few dollars on income taxes is to plan whether to accept payment and pay bills either now or in January 2017. Look at your net profit for the year and figure out what tax bracket you are in.

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Generally, if you are in a low tax bracket and anticipate making more money in 2017, then try to collect payment from your clients before the new year and defer spending money on business expenses until next year. By accepting payment now, you will only pay 10-15% tax on the income.

Conversely, if you find yourself in a high tax bracket, spend money on business expenses now and hold off on accepting income until next year. This way, you can avoid or minimize being taxed in a high tax bracket, or at least defer the tax payment until next year.

If you have more time, buy your tax professional lunch and discuss whether you should incorporate your practice or set up a tax-deferred retirement account.

3. Give gifts to clients and referral sources (5 minutes to several days). Show your clients (especially the well-paying ones) and your referral sources (especially those that send you the well-paying clients) that you care by sending them a gift of appreciation. If you want to be quick about it, you can buy everyone on your list gift cards.

Generally, gifts for referral sources are easy because they are not picky. Money always works.

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But whenever possible, try to get them something special. One colleague gave a client the hard to find Hatchimals for their children. Another colleague sent Hamilton tickets to a referral source who liked musicals.

4. Create or update your referral list (5-10 minutes). Since we are on the subject of referrals, you should also know at least one lawyer to refer a case that you do not handle. For the next few minutes, think about every practice are you can think of. And be more specific than “litigation” or “general practice.” Here is a list that I thought of in a few minutes:

  • Real estate (transactional)
  • Real estate (litigation)
  • Employment litigation
  • Bankruptcy
  • Business planning
  • Criminal defense
  • Estate planning
  • Tax disputes
  • Medical malpractice
  • Workers’ compensation
  • Social Security
  • Contract dispute
  • Construction defect
  • Immigration
  • Collections
  • Personal injury
  • Family law
  • Probate litigation
  • International law (whatever that means)

For most on the list above, you should know by memory at least one person who you can refer the matter to. If you do not, make plans to meet them. If you have some time, attend a local bar association’s holiday mixer and meet some new potential referral sources.

5. Evaluate your job satisfaction (At least a few minutes). One of my favorite quotes comes from Steve Jobs:

For the past 33 years, I have looked in the mirror every morning and asked myself: ‘If today were the last day of my life, would I want to do what I am about to do today?’ And whenever the answer has been ‘No’ for too many days in a row, I know I need to change something.

There are several questions you should be asking yourself to measure job satisfaction. Do you enjoy your practice area? Are you happy being an attorney? Or would you be happier doing something else? And are you willing to spend the time and effort to get there?

While every job has its bad days once in a while, if you remember your bad days more than your good this year, perhaps it’s time to change something.

I’m sure that I am missing other year-end planning ideas. But I am hoping the five quick tips above will serve as a starting point for more detailed action plans. After all, the first step to fighting procrastination is getting started. The rest will take care of itself.

Shannon Achimalbe was a former solo practitioner for five years before deciding to sell out and get back on the corporate ladder. Shannon can be reached by email at sachimalbe@excite.com and via Twitter: @ShanonAchimalbe.

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