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Guide to Starting a Law Firm
Starting a law firm may be the best decision you’ll ever make. In fact, it was for many of us! Unfortunately, most law schools are designed to teach you how to think like a lawyer and don’t devote much time teaching you how to start and run a business.
That’s where we come in. We’ve not only started and grown our own successful firms, but we’ve helped thousands of lawyers do the same. Of course, we could write an entire book on the subject (in fact, we did – check it out here), but we’ll use this guide to highlight some important points and get you started in the right direction.
Let’s dig in.
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Should You Start a Law Firm?
Your first question: Are you ready to own and run a business? Really and truly?
Law practice is a business and a profession. To start your own law firm successfully, you must agree to see it as both.
The skills that it takes to run a business aren’t the same skills it takes to practice law. While many of the skills you need to practice law will help you in your business, running your business will require you to tackle different problems than practicing law. And these challenges don’t go away as your business matures and grows. They just change and challenge you in new ways.
Think about his: One December 23rd, an exacerbated attorney called Stephanie, frustrated that the associate he had spent so much time training had just given notice. “Listen. I just want to practice law and maybe do some business development work. I don’t want to deal with all this other stuff!”
And this attitude is just fine — if you’re working within a firm that you don’t own. But owning a business will require you to deal with “all the other stuff.” Are you ready to take on those challenges? Of course, it’s absolutely OK to decide that you don’t want to or like doing the work of running a business and decide to not start a firm.
So, before you jump in, ask yourself:
- Do I actually want to be involved in the entire running of the business?
- Am I committed to being a business owner and leader – not just an attorney?
- Do I consider the time I spend working on the business as important as my billable work?
Got three yesses? Then read on.
Why You Can and Should Start Your Own Law Firm
If you’re a lawyer with an entrepreneurial spirit, a tolerance for risk, and goals around what you want to build, you can and should start your own law firm.
There are many benefits to being the proud owner of your own firm, including:
- The ability to do more than practice law. Sure, your legal services will be your bread and butter, but you’ll also be able to build your own business on your terms.
- Control when choosing your clients. Most attorneys have a specific type of law they wish to practice. With your own firm, you have a choice in the clients you choose to accept and the cases you choose to move forward with.
- The chance to develop a business model that works for you (and your clients and team). As someone else’s employee, you may have little control over the business model of the firm. As the owner of your own firm, you make the decisions, including those tied to your business model. You can build your firm around your personal and career goals, the solutions you want to offer your clients, and your own workplace culture for your future team built around your values.
While there are a ton of benefits, there are challenges, too. Starting a law firm can feel overwhelming at times—and that’s if you do it right.
As a new business owner and entrepreneur, you have to go all in. Be ready to put in the time and energy it will take to get your business off the ground knowing that everything you accomplish each day is investing in the future health and well-being of your firm.
With clearly defined goals, a smart strategy, the right tools, and hard work (and some help from the Lawyerist tribe) you’ll set yourself up for success.
How to Start a Law Firm: Goals and Strategy
First, what do you want out of your law practice?
Do not skip this step! Too many lawyers decide that they are good lawyers and they’d like to be their own boss – so why not just practice law on their own? They just follow the motions that they see everyone else doing and put little thought into what they are building and why. But, they’re failing.
We mean, look at these stats from Clio’s Legal Trends Report:
- Lawyers spend 2.3 hours per day (that’s 29% of an 8-hour workday) on billable tasks.
- Only 40% of firms that track time have hourly billing targets.
- Only 50% of legal professionals can bill a case based on a set budget.
- Lawyers spend 48% of their time on administrative tasks.
- 91% of firms can’t calculate a return on advertising investments.
- 94% of law firms don’t know how much it costs them to acquire a new client.
Startling, but not insurmountable.
You have the opportunity to build something great! A business that helps you fulfill your personal goals, provides exceptional client experiences and is an amazing place to work. But, that means breaking the mold. Thinking differently and being intentional with your business by deciding on the front end what you want to create.
Here’s what to think about.
Step #1: Personal Goals
What kind of life would you like to live?
Your business should exist to serve you and allow you to fulfill your personal vision and your career goals. Our Labster, Megan, knew she wanted to travel with her family. And we mean real trips — where she could explore a new country for four weeks and her practice wouldn’t fall apart while she was gone. To do this, her business plan emphasized great support staff and clear systems the staff could follow in her absence. It worked: She was able to take a month-long European vacation while her firm thrived at home.
So, you’ll need to dream a little about the life you’d like to create for yourself and your family. Some questions you might ask yourself:
- What’s important to me? My family, friends, travel, hobbies, passions?
- How many days off (and we mean true days off – not working while vacationing) do I want a year?
- When do I want to retire?
- What do I need time for in my life to be physically and mentally healthy?
- How much money would I need to make to not stress?
- What does success look like?
In the law world, the mantra seems to be to focus on work-until-you-drop. A couple of us actually completed billable work from the delivery room when we – or our spouses – were giving birth. You’re probably chuckling at that part because you’ve done the same or similar. It doesn’t have to be that way. When you start a new firm, you have the chance to make your personal life just as important as your work life.
Step #2: Business Vision
What do you want to create with your business?
You’ll hear people say that your vision needs to be a snappy one-liner you can throw out during networking parties. We don’t agree. Yes, your vision should be clear, measurable, and easy to talk about, but condensing your dreams and plans into one sentence can be confining. Use this time to write as much as you need.
To complete your firm strategy, you’ll be able to check the box next to some of these concepts:
- Your mission and values are clear and documented.
- You have a documented business model built around solving client problems in line with their expectations at an appropriate price.
- You understand trends that affect your firm and clients and you incorporate what you know into your strategy.
- You’re working on projects and short-term goals connected to your long-term goals for your firm.
- You use a set of key performance indicators (KPIs) to monitor your firm’s health and help you predict your future success. You review and update your KPIs regularly.
- You occasionally conduct a competitive analysis and adjust your strategy to win in your market.
- You’ve surrounded yourself with a supportive peer community or expert coach.
Consider, too, that you’re not going to figure this all out in one sitting. Take your time. Let your vision evolve over days, weeks, or even months.
As you start dreaming about your firm’s vision, keep in mind that your firm — and all law firms — should offer client-focused services, stay current with technology, use profit-oriented business models, and (hopefully) help our profession move the needle on access to justice and inclusion. We believe that these are the key elements to building future-forward firms.
Tip: If you want to know how your firm will measure up, check out our Small Firm Scorecard.
How to Build a Law Firm: Marketing & Client-Centered Services
Now that you have a vision for your personal life and your new business, it’s time to start putting the pieces in place. You’ll need to decide what kind of practice you’d like to build and how you’ll best serve your clients.
You’ll need a solid strategy to attract the right clients to your firm. Then, you’ll want to make sure you have systems and procedures and the right technology in place to consistently deliver a superior client experience.
Step #3: Client-Centered Services
Most lawyers would proudly tell you that their entire firm is focused on their clients. While in one sense this is true – lawyers do represent their clients and take care of their legal needs – that’s not what we mean by client-centered services.
It is time to reframe your law firm from your client’s perspective. What would it look like to create a client experience that shows you care about your clients, that you understand who they are and what they need, and that you are the right person to take care of them?
Building a firm focused on your client might require you:
- Design your prices, rates, and fees based on the goals and needs of your clients. This means billing by the hour might not be your friend.
- Put systems in place to make sure you keep client diversity, access, and inclusion in mind.
- Communicate with clients using methods they prefer while following your data security needs.
- Draft client communications and legal documents in a reader-centric way, with emphasis on plain language and readability.
- Create a seamless intake, onboarding, and delivery experience for your clients that reflects the kind of client experience they want.
- Structure a process for capturing client feedback to understand their level of satisfaction and you actively work to improve.
Client expectations are evolving fast. Small and solo law firm owners should reimagine and laser-focus on client service in order to deliver.
Step #4: Client Acquisition
The days of being a great lawyer and relying on your reputation for greatness to bring in all the clients you need are over. In a similar vein, many lawyers seem to think that referrals from other lawyers and clients are the only marketing sources they need.
In today’s world, clients are changing how they find lawyers and while referrals will always be a source of new business, this is only the start. We encourage attorneys to take a broader view and take advantage of the many avenues potential clients are using to find help solving their problems.
First, let’s get one thing clear: Marketing and sales aren’t dirty words. There are some basic marketing and sales strategies you can put in place that will help you effectively use your time and money to attract your ideal clients.
One more caveat: Your marketing activities should be just that – strategic! Too many lawyers run around doing things in the name of marketing without really understanding their costs or whether they are working. Similarly, these lawyers hear a colleague say they are killing it on [fill in favorite social media here] – and then they run out and start doing things with a plan or real understanding of how that tool works.
Your marketing should be part of a larger, strategic plan. Sure, there is room to experiment to see what works, but even then it should be measured on the front and back end so you know if it is actually working.
The first step in any marketing strategy is asking yourself what an ideal client looks like, where those ideal clients currently look for solutions, and what kinds of messages resonate with them. With these questions answered, you can start putting together a strategy that is focused and easily adjusted based on measured results.
When you’re done, here’s what success looks like:
- Your firm has a glowing reputation in your community. People who refer you talk about how easy it is to work with you.
- You have a written marketing plan and you use objective data to determine the success of your marketing activities.
- You track your marketing efforts. You know how your marketing is reaching potential clients, existing clients, former clients, and referral sources
- Your firm has a modern, mobile-responsive website that’s focused on communicating your brand message.
- You use a variety of online and offline marketing activities to communicate your value in a way that resonates with your target client market, converting them into leads.
- You have a system for converting potential clients into paying clients.
Branding and developing your marketing strategy takes time but is critical for the growth of your new law firm. Investigate all potential marketing avenues for your firm and then commit to implementing those that work best based on your firm’s overarching goals.
If you need some extra help, our coaching program, Accelerator, focuses specifically on marketing – who your ideal client is, how to market to them, and how to create a successful sales funnel.
Step #5: Systems and Procedures
Law firms can be complex and fast-moving organizations. In light of this, you should be focused on building systems to deliver consistent, high-quality, and error-free legal work to your clients. Unfortunately, for many firms, their systems and procedures live in the attorneys’ heads.
Lawyers building client-centered firms recognize the importance of documented systems and procedures. You’ll optimize your work, create a better client experience, reduce mistakes, delegate work easier, better manage your team, and build a firm that is easier to scale and eventually sell. Forward-thinking lawyers get ahead of their office management needs by focusing on a few important principles:
- Your firm follows clear, documented systems and procedures that reflect your core business model.
- Your documented procedures include both administrative and client service workflows and you have a system for regularly reviewing these workflows to find opportunities for automation and improvement.
- You follow personal productivity and time management practices.
Office management sounds stuffy, but it’s so important to get right in the beginning. Dive deeper into key areas to streamline your office management and set your firm up for success.
Step #6: Technology
To be a good lawyer in the twenty-first century (OK – even to be a mediocre one), you need basic tech competency. Period.
But just having technology isn’t the end goal. You want tools that allow you to solve problems and be a better lawyer. We have a saying here: Buy technology based on your workflows, instead of creating workflows based on your tech. That means sketching your ideal systems and processes and then buying the right software to support those systems.
As a new firm, create goals and determine the best way for your technology to support those goals. At a minimum, this also means:
- Work hard to be technologically competent in general.
- Conduct training often in your technology systems and tools to remain up-to-date with changes.
- Run a paperless law firm to scan and digitally file all paperwork.
- Run a mobile law firm to work productively and securely from outside of your office.
- Conduct data security threat assessments to have an up-to-date threat model, develop a written security policy, and follow good data security practices.
- Possess technology systems that reflect your firm’s security needs and those of your clients.
Take a breath. You don’t have to meet all of these goals in a day. Instead, make them a critical part of your overall strategy.
How to Manage a Law Firm: Business Operations
Once your firm is established, the work of running and growing your firm continues. Too many lawyers delegate the management and financial operations of their firm to a third-party. This is a mistake. While bringing help is important, you want to make sure you understand your business from the inside out.
Step #7: Finances
As a business owner, you’ll need to understand the numbers.
We’ve heard too many attorneys suggest that they choose law school to avoid numbers. (Sound familiar?) As a business owner, you should be excited about your numbers. Your business exists to make a profit. You want to know that your firm is profitable and financially healthy, and if not, what levers you’ll need to pull to change things.
To do this, put sound financial practices for your business in place. This means:
- You have a documented long-term financial strategy and profitability model that aligns your short-term budgets and reports with your firm’s long-term goals.
- You have access to sufficient capital and cash flow to fund your firm for the foreseeable future (more on this below).
- You follow written budgets and regularly monitor consistent financial reports and financial KPIs.
- Your invoicing, payment, and collection systems focus on your clients’ payment preferences so they will pay their bills on time.
- You pay yourself a consistent market-rate salary, separate from bonuses or distributions, and you’re investing an appropriate amount of your pay towards savings and retirement. Paying yourself isn’t optional.
Healthy finances mean happy years down the line. Developing financial skills now will power your new law firm with financial health and stability.
Step #8: Hiring & Staffing
Although staffing might be the furthest thing from your mind, the second you start thinking about adding to your firm (independent contractors, part-time employees, bookkeeper, office manager), you need to consider your values and how you’ll treat those who join you. This means:
- You have a written organizational chart that includes everyone in the firm and their reporting structure.
- Your organizational chart and job duties allow employees to delegate work to those who do it more efficiently, focusing on what they do best.
- You hire people based on how they fit with your firm’s mission, values, and roles in your organizational chart.
- Your compensation and benefits structure is fair, rational, and encourages the right long-term incentives that reflect your values.
- You have systems in place to ensure your staff your firm with diversity, access, and inclusion in mind.
- Managers can manage others skillfully and you train them in people management often.
- Your firm’s culture reflects your values.
- You have firm-wide team meetings frequently and communication is always open and honest.
- Have systems in place to support themselves—and everyone else—with self-care, wellness, addiction support, and mental health needs
How Much Does it Cost to Start a Law Firm?
When an attorney we know started his law firm, he tried to apply big-firm principles to small-firm practice. Quickly, he realized this was disastrous. He adopted tools he didn’t need and overcomplicated processes. Despite best intentions, he hemorrhaged cash.
This is a cautionary tale, but don’t panic. Yes, it’s going to cost more money than you’re comfortable with to start a law firm. But no, you don’t need to go broke. With smart planning and mindful planning, you can finance this dream.
As you get started, prepare to invest both time and money to help you outfit your new business. It’s important to understand what you need and then plan how to pay for it. The hard truth is this: If you can’t get what you need, it’s not time to start your practice.
But, we know plenty of attorneys who started with hope and a few thousand dollars. We asked our Lawyerist Insiders what they had in the bank when they started their firms:
Overwhelmingly, most attorneys had less than $5k in the bank when they started. So it’s possible, but let’s break it down.
The Practical Minimum to Start a Law Firm
Money in the Bank
In addition to the money it will take to get your business off the ground (we’ll cover those next), you’ll need to keep yourself housed and fed. It may take a while for your business to be in a solid position and able to pay you a salary or distribution. You should have some money saved to cover your personal living expenses for the first 3-6 months.
Start-up Costs
When you start a practice, you will need to spend some money at the outset—it isn’t optional. According to our experience and data over the years, $3,000 is an okay starting point, but $5,000 to $15,000 is more realistic when opening your first law firm. The cost depends on a wide range of variables such as location, practice area, advertising, and more.
We’ll cover the basics and some areas that you may cut for the time being.
Office & Supplies
The office comes next. We’ve known attorneys who started out of their house with a desk, a computer, and a few boxes. Whatever gets you started, do it. Don’t waste too much time trying to find the perfect office space before getting started. You can get caught up in buying furniture, technology, and supplies very quickly — and soon find that you’re drowning in minutiae and overhead.
Many more attorneys are finding success with a virtual practice. This is a great option because it keeps your overhead low and allows you to determine how much space you need before you lock yourself into a long-term lease. If you plan on securing a physical space, give yourself a buffer and a timeline. A common timeline is to plan to have a space and rent money 6-12 months after starting your practice. Do whatever feels right to you.
As you purchase office supplies, only buy what you need. We’ve all gotten excited about a new space and bought fancy chairs and expensive espresso machines and art and on and on. Buying cool office decor can be a great distraction from working on your actual business plan. Don’t fall for it!
Try to rein in the urge to make your office look expensive. If you have clear, client-centered services and a human touch, your clients won’t care what your office looks like.
Professional Expenses
Plan for professional expenses such as licensing, continuing legal education, conferences and events, malpractice insurance, and memberships. Both licensing and legal education aren’t optional. You’ll also need different types of insurance.
Hardware
In your office space, you’ll need a computer, back-up drive, document scanner, printer, and a phone. If you’re not sure what basic hardware is best for your solo or small firm, check out our Legal Technology Buyers Guide.
Legal Software & Services
Legal software and online services will be the tools you use the most on a daily basis in your practice. You’ll need a wide range for optimum productivity, including:
- Google Suite or Microsoft Office for email, calendar, and documents
- Paperless office tools such as a remote backup and external hard drive
- Law practice management software
- Accounting software
- Timekeeping and billing software (if it is not part of your practice management software)
- Legal research tools
Legal Marketing
As you build out your marketing strategy, you can identify which avenues you’ll use initially to attract new clients. At a minimum, you’ll need to budget for marketing staples such as business cards, someone to design and build your law firm website, and activities to start attracting your ideal client. Your budget likely should include dining with leads and potential clients, and a plan for experimenting with other paid marketing options.
Insiders can get started with our Law Firm Budget Template.
How to Manage Everything On Your Own
OK, though we just mentioned staffing, there will be lean times at the beginning of your journey where you might be on your own. Heck, even when you have a fully-staffed team, business owners often feel like they are on an island with the weight of the business on their shoulders!
It’s true that starting a law firm is not for hesitant hearts. The good news is that you don’t need to do this on your own — and you probably shouldn’t. There’s a reason gym newbies work with a personal trainer. You could adopt the same mindset for business and business coaching. A business coach will:
- Help you structure your starting plan
- Hold you accountable for the tough work ahead
- Connect you with others working on the same ideas
- Encourage and motivate you to keep going when you want to quit
- Offer advice, expertise, and tools to keep you sane
There are a number of coaching programs out there (including our own, Lab) to consider when you get into the nitty-gritty of starting your firm.
Keep these takeaways in mind:
- Go all in.
- Always trust your instincts, but back them up with research.
- Ask for advice, build relationships, and read, read, read.
- Understand what you’ll do when you don’t make any money.
- Ensure you know where to go when you don’t know how to handle something.
- Be brutally honest with yourself, often, about your drive and dedication.
- Get paid upfront.
- Spend smart money on your team, training, tools, and technology to unlock your superpowers.
- Don’t be wasteful or frivolous.
- Avoid burnout by planning non-negotiable days off and vacations — and creating systems so you can enjoy them.
- Always be honest with your clients.
You now have all the tools necessary to create a sound strategy and launch your new firm with confidence. Congratulations on becoming a legal entrepreneur!
Don’t Go It Alone: Get a Roadmap
As you grow and progress towards success, know that you’re not alone. Together, we can help you through the process. Good news – we literally wrote the book on this! Grab the first chapter here.
