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Four Questions to Answer Before Hanging Out Your Own Shingle
Courtesy of Bloomberg Law Reports
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In our recent economic downslide, law firms were hit as hard, if not harder, than any other industry. As a result, lawyers of all different experience levels have found themselves pondering the difficult decision of whether to start their own practice. We've tried to make that decision a little easier by proposing the following four questions for you to answer for yourself: What type of law firm do I want to start? What do I need to get started? Where do I find my clients? What do I need to be successful?



What type of law firm do I want to start?



Surprisingly, we do not mean what type of law you will practice or what type of clients you will take (see more about that later). Rather, we mean how will you set up your law firm? In our experience, there are three general "models" to choose from when you are first starting out.
The first is a solo practitioner. The solo practitioner has more unilateral freedom and control over his or her practice, including everything from cases and clients to business procedures. If you have ever had a difficult partner, there is definitely something to be said about limiting one's responsibility solely to oneself. However, the solo practitioner often finds it difficult to take on complex litigation and, more disastrously, to take vacation. A heavy schedule combined with a lack of partners or associates to help carry the load can make for a limited social life and an extremely stressful work life. A lack of partners also limits your ability to quickly consult with another attorney when brainstorming trial strategies or to have another person help share the costs and overhead of a law practice.



The second general "model" is sharing space and resources with other attorneys, but not combining finances. This is referred to in the industry as the "eat what you kill" model. With this type of firm, no one ever has to worry that one of the partners isn't carrying his or her weight. Unfortunately, "eat what you kill" is difficult from an accounting standpoint and also makes for difficult growth since the partners don't necessarily produce the same revenues and thus, are not always capable of supporting any increase in overhead.



The third and final "model" is the pure fiduciary partnership. Here, partners are truly partners and share everything from cases and clients to bills and bank accounts. This is the form of our practice and we find that it provides for maximum growth and flexibility. However, it takes a great degree of trust in one's partners to effectively facilitate this arrangement. Bank accounts are typically joint and, on any given month, one partner might have to cover a share of another's salary. In order for this business model to work, the personalities must be complimentary. Determine which of you is the extrovert that enjoys networking and cultivating new business and which of you excels at the grinding research that will be necessary to win your clients cases. And, more importantly, which one of you is detail oriented enough to keep up with the tedious bookkeeping and billing that is so critical to a successful business. Know your and your partner's strengths and weaknesses and play to them appropriately. The idea is that each partner is working for the success of the firm, not the individual.



What do I need to get started?



This is your overhead portion of the firm. To determine how much you will need in your locale, consider the following start-up necessities and find out what each will cost. The total should be close to your required opening overhead (plus or minus incidental costs, of course).
First, you need to organize a business entity. The decision between LLC, corporation, LLP, etc. should be made with an attorney and an accountant. Once you file the requisite paperwork with your state's version of the Secretary of State or Department of Assessments and Taxation, you will need to obtain a Federal Employer Identification Number from the IRS. With those two documents, you will be able to open bank accounts, create websites and business cards, and hang out that shingle!



In most states, lawyers are not protected by a "corporate veil," so the second thing you need to find is an affordable professional malpractice policy. There are hundreds to choose from. Just be smart. Shop around and use common sense when determining a type and amount of coverage. If you intend to take on multi-million dollar class action torts, you will need considerable coverage. If, on the other hand, you intend to limit your practice to criminal defense, you may not need as much coverage. Either way, do not get more or less than you need.
Third, you will need to find office space. While it is certainly possible to forego office space at the beginning, it will eventually become impossible to find somewhere appropriate or cost-effective to do client intake meetings. We have found that you generally have two options when it comes to office space. You can rent your own space and purchase your own furniture, set up your own phones, fax and internet, lease your own printer/scanner/copier, etc. Or, you can find one of an ever-growing number of "office parks" that will allow you to sublet pre-furnished office space at a single, monthly fee which covers your phone, internet, fax, copies, etc. Personally, we found that when first starting out, the cost-benefit analysis can favor an "office park." The extra cost is generally not prohibitive and it cuts down on a huge chunk of overhead related to furniture, office equipment and communication systems. This option also cuts out the stress of dealing with time consuming vendors for things like phone and internet. By having these services provided from day one, you can start
working for your clients immediately. If you have plenty of time in advance of your big move, you can put a little away each paycheck to save for the purchase of furniture and equipment. However, no matter how you spin it, equipping your space on your own will require the outlay of a substantial amount of money all at once in the very beginning of your new practice.



Finally, you will need to make the decision whether to hire support staff from the beginning. The advantage of support staff is, obviously, that you will be able to handle more clients and thus, make more money. The disadvantage of support staff is you have another mouth (or more) to feed. Also, having staff presents additional administrative headaches that will take time away from finding and serving clients (most significantly, benefits and payroll taxes). Nevertheless, we found that hiring and training support staff from the start will pay off in the end. Find someone energetic and motivated and train him or her to be your support staff. Allow him or her to grow in your firm environment and to participate in the firm's success. Trust us... If you have a small to mid-size law firm, your bottom line absolutely rides on the skill and devotion of your support staff. Never ask your employees to do something you would not do and they will always feel like an integral part of your machine... because they are.
Make these four decisions, add up the cost, and you have what you need to get started.



Where do I find my clients?



There are a number of ways to find clients when establishing a new practice. If you have already been working at a firm, check with your firm to find out what their standard policy is for letting you take your clients with you. Ultimately, however, the decision lies with the client. If a client agrees to go with you, get their decision in writing so that there can be no mistake later. Send them something as simple as a postcard that they can sign and send back to you.



No clients to transfer? Look to referral panels to generate initial work. Criminal defense attorneys are always highly sought after to handle overload and conflict cases for local public defender's offices. Local bar associations maintain lists of attorneys that are willing to handle cases for reduced fees or on a pro bono basis. While neither of these sources is going to make you rich quickly, it will undoubtedly generate future paying clients and referrals after the indigent clients you help rave about your high quality of representation.
Solicitation letters can work but there are rigorous ethical requirements to which you must strictly adhere. Check with your local Attorney Grievance Commission or your jurisdiction's corresponding entity, to find out what is permitted on solicitation letters and what reporting requirements they have before you send out your letters. Otherwise you may find yourself having to defend your letter and risk the status of your license.



Yellow Pages and other methods of advertising get expensive fast and do not necessarily set you apart from the other myriad attorneys listed there. Check with colleagues to find out which publications actually generate the best business for them before committing to a full page ad. Set up a social networking page on a site like Facebook, where you can advertise for free and encourage all of your friends and family to help spread the word. Most of these social networking sites allow you to blog, post comments, and initiate discussions. This is a good way to interact with peers, colleagues, and clients.



What do I need to be successful?



First, you need materials. For research materials, you need to decide if you will immediately create your own library and subscribe to relevant print and online services. Alternatively, you could look into the services offered by local bar associations and public interest organizations. Almost every state has some sort of free legal research service for members of the bar as well as libraries at local bar association offices.



Second, you need to notify the courts and relevant associations that you exist. Send them all notice of your new practice and contact information. Trust that it will prevent a ton of postal problems down the road.



Third, once you start getting your first group of clients, you need to do fantastic work for them. You will have the time at the beginning, even if you end up with a busier practice in the end. The reason you need to wow this first group of clients is because referrals, referrals, and referrals will always be your best source of business. No matter what marketing efforts we have made, referrals remain the vast majority of our client source. Treat your clients very, very well. Unhappy clients make for an inefficient practice. Involve them in the litigation. Let them know why decisions are being made instead of simply making decisions for them. It will pay off through loyal and dedicated clients who will demand that friends and family use you as well.



Finally, you need to develop systems and routines. Things will be chaotic for several years. You need a detailed and organized calendar system and a near-compulsive bookkeeping system. Get in the same routine of documenting and re-documenting everything. It will pay off because, ultimately, the buck now stops with you.



Now, you may notice some pertinent questions seemingly left out here. For example, we did not suggest you need to decide what type of law you'll be practicing. Don't worry about it. Certainly, you will have your general focuses based on prior experience and desire. However, this question will be answered for you by your clients. If you get more family law clients, your practice will cycle that direction. If you get more criminal clients, it will go that way. You have to be willing to adapt and learn new areas of law. At the beginning, if you want to quickly build a referral base and "book of business," why in the world would you handicap yourself by limiting the type of law you practice? Take almost everything that can produce profit at the beginning. It will pay off to put in the extra hours learning a new type of law. If you don't feel comfortable, find a mentor or participate in one of many continuing legal education courses offered on the applicable subject. At our firm, we do everything other than immigration and intellectual property. Remember that the key to your success will be your client interaction and communication, not the type of law that you practice. Certainly, you don't want to bite off more than you can chew. However, if you have the opportunity to cultivate a new practice area, it is a poor business decision to NOT learn how to do it.



Starting your own firm can be daunting and certainly challenging. But with careful consideration and planning it can also be very rewarding and successful. Of key importance is honestly evaluating your strengths and weaknesses as well as those of your potential partners. Working with those strengths and weaknesses toward the common goal of a strong partnership will ultimately lead to a flourishing legal practice. Good Luck!
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