So You Want to Start a Law Firm (Part 1)
The Truth (and a little advice) about a new practice
The idea to start my law firm came from a little kernel of a thought I had while skipping out on an afternoon of work and having a two-drink lunch on a rooftop patio with my boyfriend, about this time two years ago. I had given up early because my job was not satisfying, and I didn’t think anyone would notice or miss me. Over lunch, we tossed around ideas about how I might go about changing that situation. I thought back to the delight I had experienced brainstorming with a friend about a problem his small business was having. What if that was my job?
A lot of entrepreneurs can remember the moment it occurred to them that they should be the one helping others solve a problem. For lawyers, this can be a harder, more specific question to answer, because at the end of the day it is very difficult to quantify or measure objectively better lawyering. Still, attorneys with a vision for a different future must press on and find a way to add value or innovation to a marketplace crowded with underemployed licensed professionals.
My kernel of an idea eventually turned into a whole idea, which morphed into a manifesto word document / business plan. I knew plenty of people who had their own businesses, but none of whom were lawyers. Some had grabbed every contact from their address book on the way out of their last job. Others had accidentally landed a piece of freelance business too big to manage while working another full time job. All had some combination of a hope and a dream and an eventual faith-fueled dive into the dark abyss of self-employment.
No one spoke of spreadsheets or cashflow projections.
And so it was that a year later with a fistful of money in the bank, a website, and 3 clients, I said goodbye to the uninspired life of a lower-level corporate cog and hoped for the best. Cue cowgirl adventure theme music and a montage of me running around town to fruitless coffee meetings.
It turns out that not everyone does it this way. I reached out to some of my solo and small firm comrades-in-arms to learn their origin stories, and to find out the pressing answer to the question: How is it going?
Did you make a business plan?
Josh Barrett, of Create Legal in Portland, OR: Josh didn’t make a business plan so much as an action plan in the form of a detailed checklist. Once he had worked his way through the list, he knew he could transition into revenue-generating tasks and leave the other firm.
Jonathan Tobin, founder of Counsel for Creators in Los Angeles, CA: Jon’s “business plan” was more of a targeted approach at a certain market segment that he believed he could serve in a unique way. “I didn’t really have any practical knowledge upon which to base assumptions about projected revenue or resources needed acquire, retain, and get referrals from clients.” Trial and error helped him to develop a new business process that really worked.
DiRaimondo & Schroeder Immigration in Brooklyn, NY: On the other end of the spectrum D&S Immigration created a detailed business plan complete with one time start-up costs, recurring monthly expenses, and a 12-Month Profit and Loss Projection and Projected Cash Flow Statements.
David Holt, founder of Holt Law in St. Paul, MN: David’s approach was to research and create a formal business plan by talking with other lawyers in his area. The result was a working document complete with financial projections, although he admits it looks a bit cringe-worthy in hindsight.
Which financial factors did you consider in the planning phase?
Cash flow. Paying my rent.
The main financial factor I considered was whether I could personally afford this undertaking, and for what period of time. Aside from keeping overhead costs low and doing your best new-business hustle, some income generation is a little out of your control. You must prepare to wait while momentum builds, one-time consultations turn into regular clients, and referrals start bearing fruit.
Josh: Josh focused on his business and personal break-even. “I knew what I needed to keep the lights on (rent, software, supplies, etc.) and I knew what I needed to take home (mortgage, student loans, household expenses, etc.). Having that helped me price my services.”
Jon: Jon, too, focused on monthly cash flow concerns, understanding that he would be limited in his ability to grow if he didn’t make more than he spent in a month. Jon also wisely treats time as a “financial factor”. “It took a few months before I learned that not every potential client merited a trip across Los Angeles for an in-person meeting. I have had to learn to distinguish the tire-kickers from the people who are actually going to pay money for my services and be happy about it.” The time and energy you save avoiding the tire-kickers, he says, can go towards developing your business in other ways.
D&S: Dana and Sarah took the time to imagine both the ideal and the worst case scenarios, such as not having a single client for the first few months of practice. “It was helpful for us to see the numbers at their “bleakest” to decide whether this was something we could stomach.” They also factored in their personal finances in the projections, so that they had an idea of how long they could last in the building phase.
Where there any costs specific to your practice area?
D&S: Since a part of their planning process included leaving a big firm but continuing to work with a similar part of the market, Sarah and Dana took the time to understand their rights and obligations as departing attorneys. To do this, they decided to consult ethics counsel. “While this was a smart decision for us and served us well in the long-run, it ended up being one of our biggest and most unexpected initial expenses.”
David: Some costs don’t make themselves clear until they pop up as a part of a case. For David, this happened when he discovered that healthcare records are still handled primarily by fax (gasp!). He refused to give into the antiquated system and did not buy a fax machine, and found some solutions that were compatible with fax system but allowed him to stay paperless.
My “practice area” specific cost was a few items to update my work wardrobe. My clients are mainly designers, visual artists, creative directors, and similarly design-aware individuals. I need the right mix of polished and casual clothing to make the best first impression and to let them know that I’m a part of their community. This required a bit of a shift from my regular job attire when working in corporate America.
In Part 2, we’ll find out how those (somewhat carefully) laid plans compared to the reality of the first year in a new practice, and dole out a little advice.
Jenny Odegard is an attorney with her own practice in New York working with creative small businesses. She also writes for Lawyerist and teaches a class for freelancers and entrepreneurs at General Assembly.