Opening Your Own Shop: Ten Things You Should Know
Opening your own shop is an exciting but risky adventure. Craig Nicholas and I opened Nicholas & Butler, LLP, in March 2005 in San Diego, California. In the course of starting and building a civil litigation firm, we have learned a lot about what works and what does not in running a small firm. This list is a compilation of the top ten things we learned, and you should know about, when opening your own shop. It is by no means an exhaustive list. Your situation may involve different areas of practice or particular circumstances that require unique action. However, this should be a good starting point to plan your success.
If you would like more information about one of the following topics, many of them are covered in more detail with 101 Checklists on the ABA-YLD GP/Solo Committee website. There are also several full-length books written on the topic, including How to Start and Build a Law Practice by Jay Foonberg, which is an ABA Law Practice Management and Law Student Division sponsored publication. These types of books can be tremendous resources for opening your own firm. But the best resource is fellow lawyers who succeeded in opening their own firm.
Build Your Network
The practice of law is a service-based industry. National, state, and local bars heavily regulate lawyer advertising for good reason. In light of restrictions on advertising, you will need to build a network of happy former clients, colleagues, professionals in other industries, and friends who can refer you business. Networking will also help you when challenges arise in the practice of law, or in the running of a business. Networking can be done in many different ways, but should involve activities in three main areas. First, you need a plan for casting your net. Activities focused on meeting new people will likely result in a larger network. Second, you need a plan for keeping current clients and contacts happy. Obviously, maximizing the quality of your service increases the likelihood that your clients will refer people to you from their network of contacts. Third, you need a plan for follow up. That plan should include ways to effectively conclude cases, encourage referrals, and build new contacts.
Share or Sublease Office Space
Our firm subleases office space from a medium-size firm. With one payment, we receive access to a full law library with practice guides, copy machines (at a price per copy), furniture, a phone system, access to conference rooms, a full kitchen, and the option to use receptionist services as well. We also have the advantage of a month-to-month lease. So, if we grow out of the space, we can move easily. This type of arrangement is a tremendous advantage to a small firm. It saves money and maximizes resources. If there are no firms in your area looking to sublease, then investigate the option of sharing office space with another lawyer or two.
Modern technology makes it possible for your firm to compete with the largest firms in the country. You can instantly communicate with your clients or your office. You can work on a brief on your laptop in Miami and save it to your server in San Diego. You can email your client in New York from an airport in Portland. You can delegate tasks to your legal assistant while you are on a site inspection. All you need is a computer system that allows you remote access, a laptop, a phone with email and internet capability, and the necessary software to run particular programs. Most of all, you need a reliable computer consultant. These resources require an investment of time and money, but they are well worth it. In the long run, the technology will make money for you by drastically increasing your productivity and efficiency.
Practice Good Hiring Habits
You may not need staff at first. Even so, you will likely need staff at some point. Resist the urge to be cheap when hiring staff. There are a few steps you can take in the hiring process to ensure productivity from your staff. First, increase your chance of hiring good people by creatively advertising for the position. Use internet sites like Craigslist.com, Monster.com, and others. Second, interview more people rather than less. Do not hire the first person who shows interest . Again, the interviews will take your time, but if you get good employee(s) it will save you time and money in the long run. Third, hire on an hourly basis instead of salary. If an employee consistently proves themselves, you can move them to salary. Hourly pay increases the employee’s desire to be at work, decreases tardiness, and decreases days taken off of work. It also can provide you flexibility if you want to hire someone for 30–40 hours a week, so you can save some money when business is slow.
Spend Time Managing
No doubt billable hours are important to bring in money. Keep in mind, however, that a law firm is a business. If you do not manage your business, it will fail. No business can succeed without adequate management of finances, marketing, and staff. Do not let your desire to maximize billable hours prevent you from doing what is necessary to manage the business.
Choose Areas of Practice Wisely
Sony chooses its products carefully. They don’t try to sell cars. They sell electronics. They spend the time and money to research and develop new products in that industry while continuing to successfully sell established products. Your firm should be the same, only with services. If you do corporate formation work well, continue to offer that in your new practice. To expand, you could research the possibility of expanding into tax law. If your experience is in the defense of civil litigation matters, continue those services in your new firm. But don’t be afraid to investigate a case that you could represent a plaintiff. Be sure to expand your practice in small, gradual steps. Don’t try to be a litigator if your experience is in corporate work, and vice versa.
As a corollary, always be ready to explain the work you do to colleagues, professionals, friends, or even a new person you meet in the real world. Short examples of your work are effective marketing tools. A lay person may not know what “employment litigation” is, but will know what you mean when you say “I handle lawsuits between employees and employers related to overtime pay.”
Choose Cases Wisely
When you take a risk, do it with your eyes open. If a potential client contacts you about a contingency case, consider the case as though you were launching a new product line. Ask questions of yourself like “How much of my money will have to go into this case?”; “How many hours will this likely take?”; “What do I think are the chances of success?”; “What are the chances that I can end the case with a happy client?”; “Is the potential gain enough to justify the risk?” A good business person asks these questions. So should a good lawyer.
On an hourly case or matter, investigate your own client. Be sure that you are confident that your client can afford the costs of litigation, and the attorneys’ fees that are necessary. If it is a transactional matter, be sure that your client can afford any fees associated with the transaction, and the attorneys’ fees. Remember, Sony doesn’t give plasma televisions away for free. And you don’t give your services away for free.
Use the Joint Venture
One way to minimize risk is to joint venture with other attorneys. The joint venture is best used in larger cases or matters. It is also helpful if you are expanding your practice into an area that you do not normally practice. If you have a potential securities litigation case, and you have never handled one before, then a securities litigator could be your cocounsel. This is particularly helpful to litigators on plaintiff’s cases. Your small firm might not have the resources to litigate a large securities case, but the case would be manageable with another, larger firm involved. Be creative with this idea. See if there is a way to do it in your practice area.
Require a Retainer
Collection is the biggest risk for a small firm. You cannot afford to work for a year on a case, and end up getting stiffed on your fee. Your challenge is to find ways to avoid such a circumstance. The first line of defense is to require a certain amount to be paid up front. If the client is unwilling to pay a retainer, then you are probably going to have collection problems.
Most lawyers are good at requiring the retainer up front, but will not continue to collect the retainer. Your second line of defense is continuous replenishment of the retainer. That way, you shift the timing of any collection problem forward. If a client will not replenish the retainer, then you know you need to be on alert in the following months. If the client falls behind, it is time to start talking about withdrawing from representation.
Maintain Files Well
Organization is key to successfully running your firm. Choose a filing system and structure that you enjoy using, and make sure that every piece of paper gets into your filing system. If you have staff to maintain the filing, be sure that the protocol for filing is well established. Have the protocol in writing so that it is easily passed on to the next file clerk.
Matthew B. Butler is a founding partner in the law firm of Nicholas & Butler LLP in San Diego, California. Mr. Butler has practiced civil litigation for the past eight years. He has significant experience in complex litigation including business litigation and construction law.
Originally published on the ABA Young Lawyers Division website at www.abanet.org/yld/101practiceseries/solosandsmallfirms.shtml. Copyright © 2008 by the American Bar Association. Reprinted with permission.
© Copyright 2008, American Bar Association.