Every lawyer who has thought to jump into the deep end of a pool without a life preserver should start their own law firm. You’re probably thinking, “What kind of advice is that?” My answer: the best advice you will ever get! Now mind you, I didn’t say to do it without planning for it—but rather take these five necessary steps before opening your own law firm. Then get out there and do it!
Before you take that leap, first you must:
- Prepare a Strategic Business Plan: This is something that can start out as notes on a computer or a legal pad as you think of things that you will need to do or be prepared for. Do not plan to hang your own shingle and leave the stability of an established law firm (which will write you a paycheck even if you don’t reach your monthly billable quota) without a plan. This plan will include your goals, the strengths and weaknesses you bring to the table, and your vision.
- Decide What Area of Law You Want to Focus On: What areas of law are you experienced in that will enable you to make a living once you open your own law firm? Even if you decide after opening your firm that you would like to add another area of law to your experience, make sure from the get-go that you choose an area of law that will financially sustain the practice. Once your firm is stable and hopefully showing a profit, you can explore other areas of law that might complement your current practice.
- Consider Your Target Client: If you want to handle personal injury claims, your target market will be individuals who have been injured due to the negligence of another individual or corporation. If you want to do civil and commercial litigation, your target market will be individuals and businesses involved in legal disputes. Focus your energies on getting those clients, rather than saying “yes” to every cold call.
- Choose a Mentor: Find someone who has taken that leap of faith and opened his or her own firm. Invite your prospective mentor to lunch and explain ahead of time why: “I want to find out everything I need to know to open my own law firm.” If you choose wisely, you will find someone who will be happy to share his or her experiences with you. This will save you some headaches and missed opportunities along the way.
- Decide What Fee Structure You Will Use: Right now, you are thinking, “That’s easy—it’s either contingency or hourly” Right? Wrong. The economics of managing the business of practicing law have changed drastically in recent years. Clients are scrutinizing legal expenses more than ever. Alternative fee structures are being used to keep firm costs low and clients happy:
- Hybrid contingency/hourly retainers—You agree to a lower contingency percentage and charge a very reduced hourly fee (usually $50 or $100 per hour).
- Flat fee—The client pays up front the pre-determined fee for the services provided. Uncontested divorces often fall into this category. However, we all know that, just because a client tells you a divorce is uncontested, it often isn’t. One way to save your bottom line is to have a “but, if” provision in your agreement. For example, the divorce will be flat fee through mediation, but if mediation fails, the case converts to an hourly rate.
- Value billing—You and the client agree on specific parameters of what will and will not be billed and have a budget for what the fee will max out on.
Above all else, remember to manage the firm—do not let it manage you. If you keep control of the things that matter most to your firm, while your experience will not be without peaks and valleys, you will be prepared to make your firm a success.
So, take these tools and pull the trigger. There is no better time than the present to start living your dream!