June 21, 2011

Law Practice Case Study

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Rising to the Challenge




This case study is the inaugural installment in a new Law Practice series. We posit a scenario that many of our readers confront and ask selected experts to discuss solutions. The goal: To provide our readers with practical how-to approaches they can apply in the types of real-world situations that arise in lawyers' lives. Offering recommendations on the scenario are practice management advisors James A. Calloway and Reba J. Nance, law firm administrator Lori J. Kannenberg and two outstanding small firm lawyers—Stephen J. Harhai and Cory Furman.

THE SCENARIO Stephanie packed up her briefcase and looked around her office. Was this what she wanted? Working for a big firm, leaving the office after 8 p.m., trying to squeeze in a bit of free time before arriving back in 12 hours or less? She knew friends who had left and had either joined smaller firms or gone out on their own ... but she wondered if she was cut out for that. She was so accustomed to having everything looked after here at the firm —from technology to secretarial to accounting....

Wide Open Spaces: Advice for Starting Up a Solo Practice

... On the other hand, the prospect of being less structured, having a degree of control over her day, her life and her schedule, appealed to Stephanie. But she had so many questions.

If she left, where should she establish a practice? Downtown among all the other lawyers or a bit farther out in the burgs? Should she look for others to share expenses or simply open her own office? Maybe even have her office in her home? She knew that her client mix would change, but she wondered how long it would take before she built a thriving practice. Would she have to take whatever files came in the door, or could she be a bit more focused in establishing a practice?

Then her mind turned to the physical aspects of setting up an office. There was so much to think about: accounting systems, computers, word processing, desks and filing cabinets, time and billing. The prospect was daunting and she didn't quite know where to start. Then there were the cash flow aspects. She had some savings, but wondered if they would be enough to carry her through until she was comfortably in the black.

Perhaps she should talk it over with a few people first. She thought about who she should turn to.... OUR EXPERTS RESPOND


Lori J. Kannenberg, small firm administrator

James A. Calloway, practice management advisor

Stephen J. Harhai, solo practitioner

Cory J. Furman, small firm practitioner

Reba J. Nance, practice management advisor


Look to Your Circle of Support in Your Decision Making

Lori J. Kannenberg is a CLM and the firm administrator of Lawton & Cates in Madison, WI.

When planning to go solo, you need to have the support of your family and friends.
They can help determine whether you have the traits necessary to be successful as a solo practitioner. Those traits include an independent self-confidence, a burning need for personal involvement with clients, ingenuity, a desire to make a difference in the lives of others, an entrepreneurial spirit and flexibility.

Going solo, though, might mean that you do not have as much time to spend with family and friends until you settle into a routine. Discuss this together so they will understand that you will need to devote substantial time to getting your business off the ground and running.

Consult your banker, accountant, insurance agent and ethics advisor. After preparing a business plan and budget, which includes financial forecasting to the best of your ability, talk to your banker about establishing a line of credit to help deal with cash flow fluctuations. Bankers can also help with directing you to people who can help develop business plans and budgets, if necessary.

Your accountant can help you determine the type of business entity that is most appropriate. Accountants can also help with establishing a general ledger chart of accounts and can provide guidance in designing financial reports, such as income statements and balance sheets. You will likely need an accountant to help with taxes and possibly audits. You might as well start off with setting up a system that makes it most cost-effective in your dealings with your accountant.

You also need to have adequate insurance coverage, so talk to a qualified agent about your options. You will need professional liability, business/property and liability coverage. You may also need workers' compensation coverage.

Look to your bar association or ethics advisor, too. Determining ethical obligations to clients during a transition to another firm is crucial to avoid potential complaints or problems. You need to know how to appropriately handle client communications—there are some things that need to be done before leaving a firm and others that must happen

Make Your Target Client Base Drive Your Plan

James A. Calloway is Director of the Oklahoma Bar Association's Management Assistance Program.

There is a world of difference between practicing law in a large firm and as a solo. The most trivial difference may be the amount of hours one works. The most significant change may be in the type of work done. Even if one represents the same types of clients with all the same types of substantive matters, there will still be significant time spent on the types of administrative, management and marketing responsibilities that are handled by support staff in the larger firm.

A threshold decision is to determine the type of client services that your new law firm will provide. This will inform many of the other decisions relating to practice setting, technology, office equipment and so forth. Among the questions to consider:

• Will you continue to represent the same sort of clients?
• Will any of the clients for whom you currently provide services follow you to the new practice setting?
• Would a Fortune 100 business even consider being represented by a solo or small firm lawyer?
• Do you dislike the type of work you are currently doing and seek new challenges?

Therefore, I urge an initial focus on the types of matters you wish to handle and types of clients you wish to represent, followed by determining your marketing strategy to build a practice representing these clients.

Taking everything that comes in the front door is simply not a viable business strategy in today's legal environment, where even those legal matters that used to be thought of as routine have increased in complexity. This is not to say that you will never venture out into uncharted territory. No doubt you will.

But a successful law practice will likely focus on two or three core areas. This impacts your overall strategy. Let's take office furnishings as just one example. Wealthy estate planning clients will expect a certain formal office appearance that communicates success. They will not appreciate a waiting room filled with scruffy-looking criminal defendants and mothers with crying children. Performers and creative artists may appreciate a certain offbeat flair. Court appointments and other clients of modest means will not notice that the office furnishings are basic and even somewhat worn. High-tech firms may rarely visit the office, preferring to transact business virtually.

The type of clients and style of practice will affect everything from staffing requirements to the technology used to your location. A bankruptcy or other consumer-oriented practice may benefit from a suburban location. A practice requiring daily court appearances needs to be located within walking distance of the courthouse.

You need to keep all of that in mind and view your marketing in a broader sense than just putting advertisements in the Yellow Pages or local newspapers. Marketing is about building relationships, both with potential clients and potential referrers of business. Paid advertising will be a significant component of certain types of practices, such as family law and criminal defense, and will be virtually useless for representing businesses and corporations. Marketing is a long-term enterprise and therefore must be done weekly, not just when new business is desired.

In terms of technology, there are two critical aspects, in my opinion. One is practice management software. A new lawyer establishing a practice simply cannot function effectively without it. Second, the purchase of a laptop computer rather than a stationary desktop seems to be critical for today's beginning lawyer. One cannot overstate the importance of having all of your client information, forms, calendar and other data with you at all times. This allows you to make use of what would otherwise be dead hours and to easily work from home when the occasion demands it.

Your first step should be to purchase the book How to Start and Build a Law Practice by Jay G Foonberg (its Platinum Fifth Edition was published by the ABA in 2004)—and read it.

Use Technology to Push a Competitive Advantage

Stephen J. Harhai is a solo family law practitioner recognized as one of the top 50 lawyers in Colorado.

You have the opportunity to start fresh in designing the technology you will use to support your practice. No legacy systems, no hard core users of obsolete software. So think this one through and you will have a real competitive advantage.

Look toward going paperless. You won't eliminate every scrap of paper, but all important client and administrative documents should be electronic. This will create great savings in staff expense for filing, space to hold all the paper, and more efficient use of time.

Be portable and free yourself from the office. If your client documents and research and production tools are all electronic, you and your staff can work from anywhere. Setting up remote access will improve your life by giving you greater flexibility and more options in staffing because you can use people who want to work from home or even other cities. Laptops can handle most any task you will need, and prices have become very reasonable. Consider using laptops for most or all of the staff so that they can take their "desks" anywhere they need to be. Throw in some small and light printers and scanners and you can set up a full-function office anywhere with an electrical outlet and Internet access.

Think Web applications. The contributors to this case study prepared this article collectively on Google Docs & Spreadsheets, a free online word processor and spreadsheet tool that can be accessed from anywhere with Web access. The model for applications is moving in this direction and you should consider what portions of your software needs can benefit from these new tools.

Plus, there are lots of virtual office environments springing up around the country in which you can have a phone number, mailing address and meeting space when you need it, but no permanent staff or office space. It's not for everyone, but if you need or want to minimize the risk and expense of starting a new practice, this might be a great way to go. In my firm, we have a "hybrid" arrangement in which we have permanent space at our Breckenridge mountain office, but all communication, staffing and back-office functions are handled at our main office in Denver. Remote access tools enable us to function in the mountain office exactly as we do in Denver, but without the overhead of a separate staff and infrastructure.

Find the Proper Balance to Stay Your Course

Cory Furman is a partner in Furman & Kallio, specializing in intellectual property law in Regina, Saskatchewan.

If you are capable of making the commitment to strike out on your own, you obviously have the drive and determination to make your new venture succeed. But making your business succeed without sacrificing other aspects of your life is key.

My recommendations center around things you can do to try to maintain balance as you develop your practice. Trying to balance home life and business life, overhead against the bottom line, marketing against billable client work, the demands of new clients against existing ones—it is all a high-wire act. A nascent law practice is a "demanding mistress," to borrow the term. For me, with the benefit of hindsight and wishing I had done some things differently, a key piece of advice is to keep time for friends, family and sanity.
One mistake that I made when starting my solo practice, with a view to keeping my overhead low, was to start with a small office in my house. I could never escape from work! The only one who resented this more than me was my wife. Moving my office out of the house was good for family harmony, and also good for my own sanity. There are lots of different opportunities to establish a virtual or small office space at relatively low cost.

Apportion your time. As my practice has grown, I have come to appreciate that the most precious asset you have is your time. The allocation of various tasks to the time available will change over time—but one of the primary things to keep your eye on when you are starting a law practice is the proper allocation of your time to the various tasks that must be completed. Making sure that you keep some time for yourself is critical as well. One way that you can, to a limited degree, expand the amount of time available to accomplish professional tasks is by staffing and delegation. While this is not necessarily an infinite expansion model, my experience has been that it is good to be slightly overcapacity and overstaffed rather than constantly understaffed. That is obviously a hard decision and metric to stay on top of, given that staff costs eat into the bottom line, but having enough staff to get the work done during the day provides significant peace of mind.

Get legal-specific tech tools (and use them). I would not propose to give specific advice on choices of technology, since there are literally hundreds of great tools available to accomplish any number of different office tasks. But I certainly recommend that you consider purchasing a legal-specific billing program as well as case management software early in your practice. In terms of billing, if you have the proper software and wish to keep your costs to a minimum, you may not need any accounting staff until you become quite busy. Most of the products that are available now in small practice versions are simple enough to use that you can do your own basic timekeeping and billing and maybe just have a bookkeeper come and do your accounting a couple of times a month. These products will mostly grow with your firm, which is a mixed blessing because—if you wish to preserve a forward-expansion path—it becomes even more essential to choose a product that will accommodate your medium-term needs when you start out.

My other technology advice—beyond saying, "Use it!"—is that in determining the solutions or products you will buy, you need to factor in the value of your time and pain in the design and implementation of any particular legal solution using custom or off-the-shelf products. You may be rewarded by spending a bit more money on products that are specifically designed for what you intend to use them for, rather than trying to bootstrap something together.

Of course, the value proposition that you intend to offer to clients is paramount. Is it lower overhead resulting in lower cost, expertise in a specific market niche or practice area, being able to spend more time with individual clients knowing and understanding their businesses? This is something you can revisit over time, but having this goal or objective out there at the start gives you a touchstone against which to assess all of your business decisions.

Fight isolation. Endeavor, from the outset of your business planning process, to build a strong support network. If you leave your existing firm on good terms, you may be able to rely on your former colleagues for advice—and you may even be able to generate referrals from them. Try to engage a larger group of other lawyers, business associates and friends as well, who may all, in a more tangible way, serve as referral sources, but also provide you with people to lean on from time to time. As a solo practitioner, something as simple as going for coffee with someone can be important. The solo practice environment in its extreme can be emotionally isolating, particularly for those who are outgoing and used to interacting with people frequently.

Strive to Create a Mind Like Water

Reba J. Nance is Director of Law Practice Management and Risk Management at the Colorado Bar Association in Denver.

The one thing I would add to my colleagues' excellent comments is to get your firm infrastructure in place. Most specifically, I believe that every lawyer—without exception—should use practice management software. I use it to manage my life. I couldn't live without it, and I don't even practice law! Research the applications, pick one, get it set up properly (which may require a consultant), and get training. Practice management software will ensure that nothing ever falls through the cracks. Absolutely everything should be entered into this software—your contacts, deadlines, phone notes, to-do lists and ideas.

I am a firm believer that you can't choose what to do until you are comfortable about what you are not doing. In other words, if you are trying to draft a brief, how can you possibly focus on the brief when things keep popping into your mind such as, "Did I calendar the deadline for the response to interrogatories?" Or, "Don't forget to call the accountant with the total mileage for last year."

Strive for "mind like water." Write absolutely everything down and review it all at least once a week to keep it fresh.

I highly recommend David Allen's book Getting Things Done: The Art of Stress-Free Productivity (Viking, 2002). Unlike other books that give advice like "handle a piece of paper only once," Allen's book provides a system for capturing absolutely everything you need to do, and it shows you how to manage the work flow so you truly can handle a piece of paper only once.

With Allen's system, you can also make sure that you have balance in your life by spending time on your personal goals as well. If you want to spend more time with your family, come up with a list of the specific activities you could do with your family. As you plan the upcoming weeks, schedule time each and every Tuesday night, for example, from 7:00 to 8:00 p.m., and slide in one of the activities to achieve your goal of spending more time with your family. If you find you never seem to have time for things like professional reading, it may be because you don't have a time scheduled for it on your calendar!

Truly—read Allen's book, get practice management software, and see how it will change your life.