Below are but 40 soul-searching questions the solo needs to review with his or her advisors before the doors are opened, the leases are signed, and, more than likely, the loans secured (notice it doesn’t start with just running to the bank or tapping your retirement accounts). If you ask and answer these issues (remembering to adapt them to suit your particular practice situation), then you will not only know what amount of money you need to make your deal work, you will also know and understand what kind of financing you might or might not need and who is most likely to offer it (e.g., your own savings, a financial institution, your 401k, Bank of Dad, etc.).
- What are your qualifications for operating this practice?
- Should you “go it alone” or go in with another new lawyer? A seasoned lawyer?
a. Should you have a “trial” period?
b. Should you share expenses or have an “of counsel" relationship?
c. What about your separate malpractice coverage?
d. Have you informed clients in written fee agreements that you and the other lawyer may not be the same firm?
e. Do you have complementary skill sets, both technically and personally?
f. Have you worked out “who gets what” on breakup (e.g., phone number, website, office space, files, etc.)?
g. Have you confirmed the other’s financial position/ability?
h. Have you obtained Abo’s “122 Point Checklist on Buy-Sell Agreements” from aboandcompany.com?
- Why go into this practice (increase wealth, purchase lifestyle, job vs. career)?
- How much money are you able to put into this practice?
- How much money do you need to borrow?
- Where will the office be (e.g., present location, incubator, sublet, other law office, at home, etc.)?
- Are you planning on providing legal services for “rent"?
a. Have you pegged a fair number of hours/billing rates to a fair rental?
b. Are the hours to be cumulative or non-cumulative?
c. Have you priced out other services/expenses available beyond just rent?
d. Have you delineated what type of work you pass on to include in such bartering? Can you say no?
e. Who will determine if hours are well spent or perhaps excessive?
f. Who sets priorities or schedules when hours are to be performed?
g. Are other nonlegal hours considered in trade (e.g., general research, form template preparation, technology assistance, personal matters, etc.)?
- Who will your clients be and why will they come to this firm?
- What competition does the practice have at this location and in the area generally?
- How does your fee structure compare to those of your competitors?
- Are you willing to work long hours without knowing how much you’ll make?
- Have you worked in a similar type and size practice?
- Have you considered strategic relationships with potential client referrers (e.g., banks, accountants, other lawyers, financial planners, insurance brokers, etc.)?
- Have you considered your Internet presence?
- Have you considered your staffing and other personnel needs?
- Have you worked in this type of practice as a manager/supervisor before?
- Do you know how much money you can afford to lend and tie up in this practice?
- Do you know how much trade credit you can get?
- Do you know where to get any remaining funds to purchase and run the practice?
- Do you know the minimum you need to personally live on?
- Have you compared this minimum to what you can expect to earn from the practice?
- Do you feel you’re realistic on the revenue projections and will have enough cash (if you need to borrow, it’s tough going back to the well)?
- Are you aware of local, state, and federal regulations that may affect your services?
- If applicable, have you asked and confirmed why the owner/partner is bringing you in?
- Do you have available all the services currently provided to the partner/seller at less than fair value (e.g., cheap rent, related vendors, family members doing services, etc.)?
- Have you visited the clients and then asked as many frank questions as you need to be sure about the legitimacy of the billings, profits, etc.? Have you conferred with them to see if they will continue to patronize the practice?
- Have you investigated the experience rating of unemployment as well as workers’ compensation insurance?
- Have you reviewed and obtained personal disability as well as life insurance?
- Do you know the partner’s/seller’s credit and collection policies (e.g., tightening terms may jeopardize service revenues)?
- Do you feel comfortable with all your advisors (e.g., CPA, banker, lawyer for the practice, insurance agent, other consultant, etc.) and feel comfortable with their negotiating skills, knowledge of the practice, and familiarity with the profession?
- Have you looked into similar practices that have failed and assessed their relevance to your contemplated operation?
- Have you considered the morale of existing associates/employees you plan to retain?
- Do you know the profitability of particular services (e.g., which ones will be money makers, which ones need volume, which ones are dogs)?
- Are you able to work in the practice prior to committing (temper with confidentiality agreements)?
- Can part or all of the wages you earn be applied to the buy-in/purchase price?
- Have you conferred with vendors to check their knowledge of the firm, the partner’s/seller’s payment practices, integrity and acumen, continuation of credit terms to you, etc.?
- Have you analyzed the partner’s/seller’s perks (i.e., necessary vs. additional compensation)?
- Have you conferred with lost clients and previous associates/partners, looking for “skeletons”?
- Have you considered how you will manage any remaining college or law school loans?
- Have you considered what will be Plan B if this doesn’t work out?