How Can You Build a Budget Before You Know the Work Involved?

One of the most common questions I’m asked is the one that heads this article: How can you build a budget before you fully understand the work involved?

Issues are similar whether you’re aiming to present a fixed-fee estimate to a client or figuring out for your own practice how you’ll approach the work.

It seems impossible, right? But it’s a common real-world problem — not just for legal, but for any professional services organization, and indeed at some level for almost any commercial exchange.

First, let’s leave the “it’s impossible” for ivory-tower folks. This is the real world, and clients demand you figure this out. If you won’t, they’ll take their business to someone who will — and they’ll do the same if you insist that you must price the work high enough to cover all possible contingencies. So let’s classify this as a hard problem that you must solve as effectively as possible.

I can offer a number of potential solutions. Not all are applicable to all situations, but undoubtedly you can use one or some combination of these strategies in almost any matter.

I’ll run through these in a few paragraphs each in a series of articles over the next two weeks. I also explore the topic and cover some of these strategies in detail in my book Legal Project Management. In addition, I spend some time on them in my seminars and Master Classes. Finally, I offer a training session that goes into detail on all of these, with attendant exercises – either hypotheticals or  built from problems your practice is actually wrestling with.

Here’s what’s coming up in these future articles that will make up this series:

• Strategy 1: Work in Phases
• Strategy 2: Utilize Risk Premiums
• Strategy 3: Do Analysis Work Up Front, Paid or Unpaid
• Strategy 4: Do What You Can for an Agreed Amount
• Strategy 5: Mine the Wisdom of Crowds
• Bad Strategies
• One Last Risky Strategy

Stay tuned.