07 Mar So You Want To Build Your Own Law Firm
Deciding to build your own law firm is an enormous decision that could end up being one of the most rewarding choices you ever make, but it is not something you should rush into. The fact of the matter is most law schools are, understandably, geared toward teaching the practice of law and training students to think like attorneys. Most law school curriculum does not devote much time for teaching the business end of the legal industry.
At Lexicon, we consider ourselves experts at managing the business side of law firms. We’ve been helping firms grow for more than 15 years and understand the pain points typically encountered when starting and managing a law firm.
In this article, we outline key considerations to keep in mind if you are considering launching a firm, including possible pros and cons, financial factors, tips for success, and more.
Should You Build Your Own Law Firm?
The first question to ask is also the most obvious one: Are you truly ready to own and run a business?
You might know everything there is to know about practicing law, but the skills needed to be a successful attorney aren’t necessarily the same ones needed to operate a profitable business. Starting a law firm might seem like a fun concept, but will you have that same level of motivation as you are putting together a marketing plan, purchasing office supplies, dealing with IT issues, and working your way through the million other odds and ends that come with operating a law office?
Before you even start to build your own law firm, here are three simple questions to ask yourself:
- Do you actually want to run your entire business?
- Are you committed to being more than a lawyer?
- Do you consider the time spent working on the business side of your law firm as important as your billable work?
If you struggle coming up with a “yes” answer to any of those, you might want to reconsider whether this is the right path for you.
Pros And Cons Of Starting A Law Firm
Let’s run through some of the biggest pros and cons of starting your own law firm.
Pro: It Fires Your Entrepreneurial Spirit
Starting your own law firm can be incredibly rewarding. The challenge in and of itself is an opportunity to learn and can foster personal growth. Taking on an ownership role can push you to grow in ways that aren’t possible when you are only focusing on practicing law. For many attorneys, there is nothing more fulfilling than building a law firm from the ground up and watching it prosper.
Pro: Increased Flexibility And Control
As the founder and owner of your own law firm, you call the shots regarding hours, fees, where your office is located, and everything else. For many attorneys who set out to build their own practice, it is frustration with processes and workflows at their previous firm that pushed them to make this move. Now, you control the direction of your business.
Pro: You Pick Your Clients
This goes hand in hand with increased control, but you also get to pick the clients that your firm accepts and the projects you want to focus on.
Con: Practicing Law Is Your Passion
There is probably a reason you decided to go to law school rather than get an MBA. Owning your business means juggling every single thing about how your firm operates. It’s understandable if you prefer to focus on your own casework.
Con: Increased Risk
It’s like that Superman quote, “With great power comes great responsibility.” If you elect to build your own law firm, the reward could be great, but all the risk and responsibility falls on you. If any mistakes are made, that means you shoulder the blame.
Con: Work-life Balance
While you might have more control and flexibility, you are still going to have to pour a whole lot of hours into making sure this is a success. If you hire additional staff, you will have their training and well-being to consider when making any sort of business decision as well, which is obviously a lot of responsibility. You need to make sure you are in a good place in your personal life and ready for this challenge so that you do not bite off more than you can chew.
Cost To Start Your Own Law Firm
Determining an estimated or average cost to starting a law firm is impossible because there are so many variables to consider. Geographic location, scope of your practice, your own liquidity, and other factors can drastically impact the final number. Estimates found online range anywhere from a few thousand for a firm that operates remotely to more than $1 million for large-scale firms.
So rather than fixating on coming up with an estimated dollar amount, we want to give you some of the key factors to consider that should help you get an idea of the cash needed to get your firm off the ground.
Money In Your Account
On top of the amount it costs to launch your business, you need to make sure you have enough money to live off since it could take some time before your firm is in position and you are able to pay yourself a salary. It’s a good idea set aside enough money to cover at least six months of living expenses.
Licensing And Registering Fees
Inevitably, there will be fees to ensure you have your firm properly registered and you have the licenses and permits needed to run your business. These can vary by state so you will need to do your research.
Office Space And Supplies
Unless you plan on operating your law firm virtually, you will need to scope out an office space for your firm. This can be a significant amount or minimal, depending on the size of space needed and the real estate market conditions in your area and even the employee and client experience you want to portray.
Many jurisdictions require insurance coverage for attorneys. Others only require that attorneys practicing without malpractice insurance disclose that information to potential clients. Many state bar associations offer discounts so be sure to check for possible savings.
You will obviously need to pay your attorneys and any other personnel such as secretaries or paralegals. It might be advantageous to utilize a staffing agency, so you do not have to worry about tax and labor compliance rules or paying for a full-time employee and benefits when their isn’t full-time work yet.
This encompasses everything from hardware such as computers, document scanners, printers, and phones to practice management software, web hosting platforms, timekeeping and billing tools, Quickbooks, and more.
Finally, you’ll need to figure out how much to invest to draw in new clients. (Not to mention managing your firm’s relationship with them.) You’ll be best served doing some preliminary research to gauge the channels where you are most likely to reach your target audience. For example, many digital marketing campaigns can be run at a lower cost than traditional advertising such as TV or radio, but if your clientele skews older then those marketing dollars could be wasted.
How Lexicon Can Help You Build Your Practice
Managing every aspect of a law firm’s business is a daunting task. You might not have the capacity to tackle everything, but fortunately that’s not necessary.
Lexicon has served law firms, and only law firms, for well over a decade by providing practice management software, marketing services, appointment setting, recruiting, process and procedure development, and more. Our practice management software allows you to manage your entire practice from anywhere on one comprehensive platform while our unified suite of features and services can help free you from the admin work to focus on the practice of law.