The Legal Marketplace
Having left big law, and started my own law firm, I have learned a lot about the current market for legal services. With those experiences in mind I want to share what I know, and hope this information is helpful to all of you entrepreneurs out there. There is a lot of information available on the current and future state of the legal market. Generally, the legal market has been under attack from a business model perspective. The "billable hour" is under threat from companies like Avvo, Legal Zoom, and other online service providers. Law firms are finding it difficult to manage their overhead, particularly in large law firms, because law school is not training new lawyers for the work world. Many associates leave law school without the skills to do basic work, such as writing . Additionally, the legal market is experiencing a decrease in entry level hiring and larger firms are not filling positions vacated by senior attorneys. This slowdown has resulted in more private practice opportunities for former big law associates, and a more competitive market place. Overall, there are fewer opportunities for young attorneys.
The above are simply observations of a market that has become a bit more difficult to traverse. That being said, these changes have opened a space where successful small firms will be located. Future successful attorneys will be those who can adapt to the changes in the legal market. The key is identifying a niche that you love, and are passionate about. Owning a business is much about passion and heart as it is about brains and opportunity! Once you identify your passion, identify your target market, market yourself through social media, and stay on message.
Creating a Business Plan
Here are a few elements that should go into an attorney’s business plan:
A. AUDITING CURRENT ASSETS AND LIABILITIES
Success in the future depends on a thorough inventory of assets and liabilities; it will include a projection of how soon current obligations can be met from cash inflow received from the initial law firm practice.
B. INDEPENDENT CONTRACTOR/EMPLOYEE RELATIONSHIP
It is critical that the attorney who decides to start his own practice appreciates the extensive law applicable to independent contractors and employees. The alternatives for engaging legal assistance in these relationships include: hiring legal counsel; seeking guidance from State bar associations or programs; and enlisting the help of mentors.
C. MARKETING STRATEGY
There are many ways to develop clients, regardless of the size of your law firm; however, the greatest challenge is to identify a niche or market to pursue and be persistent. Without a steady stream of new clients, the attorney can be in trouble. It is important to employ all means, such as pursuing new contacts for referrals and marketing, using technology, producing newsletters and articles, attending trade shows and seminars and establishing reputation through public speaking and leadership within the community.
Start planning now for a successful beginning.
Deciding On the Right Practice Area
At this stage of the planning process, you’ve hopefully made a solid first step by choosing the type of legal structure for your practice, and creating a marketing system. Now we need to choose the area of law you want to focus on – that’s right: practice area.
In your business plan for your practice, it will be vital to identify the area of law that you will practice in. A few practice areas are golden out there. If you choose one of them you are likely to get clients relatively quickly. The real question of course is which area to choose? There are few ways you can select an area of practice:
Choose an Area Where There is Need This is probably the most practical way of choosing an area of practice. You want to look at your community of potential clients and see what legal services they currently need. If you live in America, you can go to the census website and then use their tools to look up the demographic of your area. You’ll be able to view information such as the makeup of the population, number of businesses broken down by size (employees) and even which industries are the most popular. It’s an incredibly valuable tool that will really give you totally different insight into the local area you will serve.
Know Your Interests Though the above is important, there’s no point in doing legal work that you have no interest in. Your passion has to align with what you’re doing or you’ll end up miserable and make millions, but just won’t live a fulfilled life. Financial success is important, but you also need other rewards from your work. For most of us – and certainly for the lawyers that I know that quickly grew successful law practices – that reward is helping people.
Having said this, you also need to know what your interests are in terms of practice area. That may seem like a silly comment, but some people have no idea what they really enjoy. Take time to explore what you are passionate about. Are you interested in the history of law? Find an area where you can research the law and write on the subject. Are you interested in politics? Then consider either criminal law or immigration law. Or are you a technology whizz? Consider Intellectual Property. Simply Google legal specialties and start researching the different types of law that are available to you and what those lawyers actually do.
Know What You Are Good At Last but not least, you need to know what you have an aptitude for. Sometimes, we just can’t help being good at things. I’ve always been good at numbers and had an aptitude for this. If you like working with figures, maybe tax or contracts law might be for you.
Some fields also have more future potential than others. That’s something to consider, but also know that you want to take into account your natural skill set. You can’t be all things to all people. Well, actually you can, it’s just that you will be spinning your wheels and really wasting tons of time.
Any of the above can be used to help you develop the right kind of legal specialization for you.
This is the second part in our series on starting a law practice from scratch. Stay tuned!
Location and Office Design
Location, location, location. We’ve all heard the old maxim when referring to prime real estate. It also applies to your law office. After all, you have to live and die by your location. Well, maybe not die, but I certainly wouldn’t risk my career over a mediocre location. So what are you looking for in a location?
My recommendation is to stick to mid-sized cities located either on the water or in the mountains, such as San Diego, Seattle, Portland, Denver, or Salt Lake City. If you live in one of these cities, that’s great. If not, try to move.
You may not need the whole 2,000 – 3,000 square feet described above. Oftentimes, law firms that began with 2,000 – 3,000 square feet have expanded into new suites to accommodate their growth. But you should start space-shopping for a location in a dense area with higher-end, middle-class demographics. Choose a locale where people constantly pass by your office—and by "people" I mean your potential clients. Good demographics are just as essential to a law firm as they are to any retail business. Therefore, you will want to be near the grocery store, a major chain retailer, a hospital, and an acquaintance or two.
The most important question to ask when considering an office location (or even just a lease renewal) is: Who is going to find our office?
In other words, if your office is a place where your clients never visit and they would have to go out of their way to do so, then it’s probably important to at least consider a new location.
One of the biggest mistakes I see people make in setting up their new law offices is getting too much space.
In addition to having a location that is conducive to building a large and successful law firm, you must maximize the use of that space. You certainly don’t want to pay $24 a square foot for space that could be utilized for staff, more attorneys, or fantastic client-facing meeting spaces.
When considering office space layout, you have to consider how you do business with clients who come to your office.
I’ll give you an example. In 1981, Susan B. Glatzer was contemplating building her own law firm. She found an open space on the first floor of a commercial building on the prestigious Wilshire Blvd in Los Angeles, CA. It had been previously occupied by a dentist who removed a few walls, and it was outfitted with a huge waiting room and large dental rooms and operatory rooms with sinks.
Now, most lawyers laughed. No one in their right mind starts a new firm in LA in the early 80s without a multi-million dollar investment, and certainly not in a space that was designed for a dentist!
Nevertheless, Susan purchased this space—which had been "designed for comfort, efficiency, easy flow of movement, cleanliness and professional appearance"—for $127,500, and moved down in May of 1981. She installed a phone system (back in the day of plug and cord telephones), a typewriter, and dated furniture. She didn’t even have a computer. But she had a killer location.
With little more than a business card on a bulletin board, a sign on the door, and a secondary phone number, within two years, Susan had $250,000 in fees. In 1983, her firm grossed about $500,000. By 1985, Susan B. Glatzer, APLC was a 16-attorney law firm with annual revenues of $1 million. She later remodeled the space and spent another $300,000. Today the firm does about $2 million annually. Many people in her industry scoffed. But Susan believed in herself, her location, and the space that others saw as an obstacle to overcome. She was a lawyer with a vision, and she got it done. Now, when I go to a dental office, I sit in the same space that Susan started from.
So location location location combined with careful layout and design can make or break your new law firm.
Establishing a Client Base
To be successful, you will need a plan for acquiring and maintaining clients. You also need to be able to develop the "social networking" aspect of your practice. That includes, of course, developing a referral base from your professors, judges and attorneys generally. In the old days (that is, before 2008) I suggested that students start by developing a marketing action plan as soon as they entered law school.
There are many different ways to market your practice to both clients and lawyers. There is a great range from the dry method of studying a large number of multi-volume treatises and putting things together in your head while knowing exactly what it is you are doing to a much more personal and informal approach.
One thing that is worthwhile to think about and examine is the implementation of a program that will help you keep in touch with your referral sources, your clients and those whom you have met in a less frequent contact role. Even if you don’t develop your own plan, it is worth looking at having a resource that can assist you in developing and maintaining an easy way of helping you and your staff maintain regular, non-obtrusive contact.
There is no question that meeting people is important. Many people spend an inordinate amount of time networking without a real idea of why they are doing it or how to apply the practice as they develop. Typically, when you meet someone, you remember them fairly well for a short period of time. After you get home, you forget about whom you have met. Some people are just plain very good about remembering people they meet.
After the first meeting is over it is important that you continue to make an impression on the other person’s mind so that when the occasion arises you might be considered for a referral. This may mean at the very least, sending out a letter of introduction to the organization, a contact or other person at which you have met. It may be possible for you to follow up by telephone and talk about a prospective client, tell about something interesting that you have seen, suggest a meeting to talk or just get together for lunch or drinks. All of those things help you achieve your goal of getting and keeping in touch with a prospective referral source.
Marketing and Promoting Your Practice
Once you have the basic infrastructure in place, you need to begin marketing your practice. Now, although the thought of marketing yourself may be somewhat foreign to the mindset of what you have been trained as an attorney, it is an important part of owning a business (which is clearly what a law practice is, even if most lawyers don’t like to think of it that way). To that end, a few thoughts on "marketing your practice" are in order.
Firstly, see to it that your web presence is not only robust, but that it is the proper "presence" for your market. If you cater to high end clients or businesses, your site should reflect that. If you cater to a general clientele, have a basic web presence that showcases who you are (think RGB Law, for example). In either case though, your site is your calling card, and as a result, you must make certain that when people come across your site, it accurately reflects who you are and how you do business. This is very important – and most lawyers’ websites utterly fail in this regard. Make sure to do it right for your practice!
Secondly, assuming that you have the website taken care of, I highly recommend that you use social media for your practice. It is not really so much about what social media can do for your practice, but all about what it cannot do . For instance, it is no substitute for sending a client a very easy to craft hand written note. A note expressing sympathy for the loss of a loved one can go further than you might ever realize. A simple note can be kept and cherished by the recipient for years. A note of thanks or congratulations sent following the closing of a major transaction is a very nice touch. A simple note can go further than any number of auto generated e-mails or texts.
However, using social media whole heartedly can show your practice off to best advantage. Consider the following: In your practice, you likely have newsworthy events that occur from time to time. These can be social occasions in the life of your practice, such as a firm anniversary, a move to new office space or the recognition of one of your team members. You can also add a little "life" to your online presence through recruiting efforts – if you bring in a new associate, you can use that as an opportunity to announce the new hire on social media. If you give away candy canes at Christmas, you can take a photo and post it to the firm’s page. If one of your clients wins a huge verdict, you can post an update to your firm’s page. All in all, providing a well-rounded glimpse into your practice through social media is a great way to add some "check out what we did" type of marketing to the mix.
Financial Management and Billing
A crucial aspect of starting a law practice is learning how to manage finances from the get-go. The fundamentals entail prudent accounting practices, accurate and timely billing, and monitoring cash flow. Setting up a trust account should be a priority in advance of opening your doors for business. All client funds must be deposited into a trust account, and this account must remain separate from your law firm checking account. Trust accounts can usually be no more than $100 that you maintain as an operating balance. It is recommended to have a separate trust account for your law firm to handle personal funds if you plan to serve as fiduciary for clients. The problem with serving as fiduciary is that it is a trust accounting nightmare and your firm could be blamed for any mistakes. You will want to charge the same hourly rate as you would for a billing client. Firm policy dictates that you are permitted to charge for time spent on billable work. However, I derive no pleasure from spending three hours to draft a short cover letter and order submitted within a case. Be judicious in assessing how hard you press to get repaid. Many clients need to support their children or other family members after getting a divorce and will need time to catch up on bills. Granting them some latitude allows you to build goodwill toward cash flow increases down the road when you have more leverage. It is ideal to have local clients because you can easily visit business directly and talk with them on the phone. You will have a phone system that can route calls to your cell when you are out of the office. It is acceptable to route calls during the day if you cannot take them after hours. Clients need to know that you value their business and will meet with them in advance of hearing dates.
Legal Software and Tools
A good lawyer needs to be equipped with the right technology tools to run an efficient and productive practice. A few examples of these tools are:
- Computer – A primary vessel for organizing, accessing and storing data, including traditional word processing functions, and more specialized, custom tracking software (e.g., case management).
- Phone – A phone system which best suits your needs, whether a cell, a computerized system for handling multiple phone lines, or otherwise.
- Internet Connectivity – ISP, including email service.
- Website – A website which provides information on your practice, and allows people to contact you directly.
- Software – Specialized software (e.g., computer forensics, time/billing, phones/voicemail systems, etc.) is largely driven by the nature of the practice, or needs in a given context (such as research, data management, etc.).
- Secured Backup – Automated backup of your primary data assets.
- Chat & Text Management – e.g., texting, chat line for remote access.
- Mobile Apps – Additional, customized apps for secure access.
- Security – Multiple security layers for all of your assets.
Continuing Education and Networking
Even for the most seasoned lawyer, there is always something new to learn and to keep abreast of. As a new solo, that means everything! Sure, you went to law school and learned about the law, but did you learn how to run a small business, deal with IT, file your taxes with the IRS and a slew of other much needed skills? Much like a doctor is required to take Continuing Legal Education (CLE) courses, lawyers are too. Many states have CLE requirements for licensing renewal. That means they have to stay on top of their game! You are no different.
To keep up with continued education, sign up with the ABA and your Bar Association. They send you information on CLE courses taking place across the country as well as on webinars and online courses. In addition, many of the vendors you shop with subscribe to industry publications and provide the latest technology and other information. Read them.
Networking is also key! Networking gives you the opportunity to meet people who can help you, and vice versa. For example, by networking with a colleagues, you may be able to refer your client to them for expert assistance in a specific area. Colleagues can also refer clients to you if they do not practice in your area of the law. Networking also means your practice will grow through word of mouth. Don’t be surprised if your scheduled fills up quickly and you have to refuse business! You can now refer clients to people you refer to, and they can refer you back! Hence the saying, "You give a little, you get a little." Stay in touch with your network. They are your lifeline.
Compliance and Professional Ethics
As a new solo practitioner, it is important to follow the rules that govern all lawyers. This means paying your bar dues on time, meeting continuing education requirements, and following all court rules. When you’re starting out some of these rules can seem confusing, maybe even pointless. For instance, many jurisdictions require you to associate with a law firm rather than opening your own for 2 years. This can seem a bit pointless when you are a sole practitioner. Furthermore, some states say you cannot advertise or set up a physical office for the first year after passing the bar. Of course, this means that many people have a mailing address with their parents, friends, or a well-connected acquaintance. While these rules may seem silly, your state bar office needs to have clear and understandable rules to follow. Many times, the reaction to those who feel they can cheat the system is for the bar office to impose longer requirements for those who come after. If you take the rules seriously, you will be able to build your law firm on a solid foundation, and you will save yourself from headaches down the road. There are other legal requirements that you will need to fulfill. For example, you have to care for client funds properly . You will need to open an IOLTA account, which is a separate account in which you keep your clients’ money. This is a requirement of all state bars so that if something goes wrong and you lose a client’s money, those people are able to get their money back. Without this basic requirement, your mistakes could cost you your license, but the big cost is a devastating loss of credibility. After all, it is so much easier to gain a client than to replace their lost trust. The same is true of staying up to date on the applicable laws and regulations related to your practice area. If you are operating on bad information or gut instinct, you could easily be sued for malpractice, or worse. In addition, clients are smart. If your practice appears unethical or your rule compliance lax, they will be able to figure it out, and your reputation could be ruined. Developing and maintaining good relationships with clients, and getting positive reviews and experience with local county judges will make you a great candidate to be the go-to attorney in your area of practice. You can’t operate on rumors, or speculation. Keep good notes, know your limitations, and be honest about yours and the court’s deadlines. Always follow ethical guidelines to maintain your credibility in the community.