Thursday, February 01, 2007

Starting A Law Firm

I am asked from time to time about the pros and cons (and nuts and bolts) of starting a private law practice as a sole practitioner. I received an email about this a few days ago from a recently-called lawyer in Toronto, and thought it might be useful if I posted my comments here on The Blog.

Here, then, are a few thoughts for the benefit of new lawyers considering "hanging a shingle."

Pros and Cons

For the right kind of person, starting your own law practice offers the opportunity to:

  • have increased flexibility and self-determination in career, lifestyle and family choices

  • take a lead role in complex matters that might otherwise be handled by more senior members of a larger organization

  • develop an individual and distinct persona in the profession

  • avoid all the vagarities and uncertainties that are typical of any employer-employee relationship
  • sidestep the "politics" reputedly found in large firm settings

  • develop solid, direct relationships with key clients

  • relate to entrepreneurial-minded clients and prospective clients as a genuine and empathetic peer

  • enjoy the gratification of building a practise that is genuinely "yours."

  • build equity that will represent a saleable asset at the time of your retirement
Starting your own law practice will not likely mean that you will work less hours - you will probably work more hours - or that you will have less worry - you will probably have more.

Building any new business requires ongoing engagement, time and effort. If you thrive on contact with people, however, the process will likely be quite enjoyable, much of the time.

The main downside of starting on your own is obvious. It will take a while for your practice - and your income - to ramp up. The eventual benefits may well be many, but if you are unwilling or not in position to absorb a potential struggle for a year or three, it might be better to consider a different option.

The Basics - Professional and Governmental Compliance

There are some foundational basics, of course, that will be necessary to attend to at the outset:

  • Law Society membership fees must be in good standing and professional liability insurance must be maintained

  • Register your business with Canada Revenue Agency, and obtain a GST registration number

  • Work with a competent and experienced legal bookkeeper to ensure that your firm's accounting system will comply from the outset with all regulatory requirements (there are software programmes now available that address all such issues)

  • Register your firm's business name, and consider what form of business organization you will work within

  • Choose a suitable and responsive financial institution to work with, and open a General bank account and a Trust account

Business Planning - Choose Your Area(s) of Practice and Choose your Clients

I am reminded of Jack Palance's word of advice to Billy Crystal in City Slickers. Asked for his prescription for success, Palance said: "One Thing. Just do one thing, and do it better than anyone else." (O.K. I'm paraphrasing)

There is a lot to be said for that approach. "One thing" however, may not necessarily mean limiting oneself to one area of practice. It may mean focusing on one type of client, one neighbourhood, one industry's needs, or one project at a time.

Decide where you want to go, and then determine the road map for getting there.

In other words, take the time to do the necessary business planning.

But also be ready to adjust for the type of client and issue that tends to walk in your door. That will play a big role in defining how your practice will evolve.

Infrastructure

What you will really need to start your office will be quite modest:

  • Technology - a computer, printer, internet connection, fax machine or programme, a good scanner, and the necessary software.
  • A reasonably credible mailing address that will at very least offer boardroom facilities where you can meet with your clients, if not a formal, full time office. Consider using such a mailing address/boardroom facility while working from home for the first few months to reduce immediate overhead. Many environments will be reasonable about such arrangements if approached.
  • When you are ready, share space. Look for a small office within a law firm environment that houses other lawyers who are complimentary to your philosophy and practice areas. They are your built-in mentors and referral sources, so choose carefully. Don't spend too much, but don't skimp to save $100.00 per month and find yourself in a lesser environment that offers fewer opportunities.
  • Think twice - no, think five times - before you allocate any budget to an opulent, showcase office. It is truly not necessary when starting your practice.
  • Location is something to carefully consider. There are highly-evolved business centres in virtually every corner of the Greater Toronto Area. "Downtown" still has allure with certain lawyers and clients, but it is no longer key to be located on Bay Street to establish street cred. And neighbourhood or storefront law firms also occupy an important role in serving a community directly. Overhead costs vary, as do opportunities in each area. Demographic research can be useful in understanding the many options presenting. Careful assessment of your goals, including lifestyle questions around travel time, will help guide you.
  • Once again, technology has changed everything. Get a Blackberry or Palm, and treat it like it is your primary desk. Be accessible.
  • If you don't intend to work with a laptop that you will carry around. LogMeIn and GoToMyPC are two miraculous technologies that will allow you secure, lightning-fast access to your main desktop computer via the Web from any computer in the world with internet access.
  • While many online resources discuss the "necessity" of a bank loan to start your firm, I strongly urge that any extensive financing be avoided at all costs. You are probably already carrying a numbing student loan. You don't need the added headache of a fickle banking system and revolving-door account managers whose influence and relationship with your practice may actually be quite limited.
  • As an alternate financial strategy, I suggest this: Don't spend it if you don't have it. Let your practice's organic growth dictate when and how you upgrade. Start small and grow. Don't start big and wait to catch up.
  • Go virtual from Day 1. Bell Canada (and I suspect its competitors) offers a virtual phone number option. This phone number, which will forever be yours, can be seamlessly and remotely forwarded to any land line or cell line, and can migrate with you if you subsequently relocate to any local destination.
  • Make sure you demand and get a "good," easy-to-remember phone number when you negotiate your phone service.
  • Also get a toll-free number. It is free, and you will be charged only for calls you receive on it.
  • And.. but for the occasional law firm I encounter that still "doesn't get it," I wouldn't feel the need to mention that voicemail is a necessity.
  • Go paperless. Scan every document and have it available on your computer for reference, review or printing at any time. The legal profession is rapidly migrating to email as its primary and preferred mode of correspondence with colleagues, clients and court and government offices. Email attachments are increasingly utilized to move documents from point "A" to "B." The courts will eventually move to electronic filing, just as the land registry offices and corporate filing offices already have. Get ahead of this curve.

Operating Budget

Take the time to crunch the numbers in terms of necessary expenses. You will need to cover the following essentials:

  • Law Society dues and Errors and Omissions Insurance. These can be paid monthly

  • Rent (if any)

  • Phone expense (including Blackberry or Palm), High-Speed Internet access, Quicklaw, GoToMyPC charges

  • Office supplies, postage and occasional couriers

  • Bookkeeping and accounting fees

  • The costs of any client disbursements that are not met by retainer funds paid in advance
  • At least some budget for continuing education courses in your primary area.

  • Miscellaneous and non-recurring costs.

That's it. No lunch budgets. And no filtered water coolers just yet.

And needless to say, no staff. You know how to use a computer. You know how to answer a phone. You know how to make a photocopy and send a fax. And you know how to make a phone call or send an email. Later in your career, staff will be a blessing and a necessity. They will be involved professionally in most aspects of your work and dramatically improve the quality of your firm's services and your professional lifestyle. For now, though, she who helps herself is queen.

As your practice begins, track your docketed time, billings, revenue and expenses on a daily, weekly and monthly basis. Be aware of where you are financially. As appropriate, establish goals and targets.

And take the time to notice and appreciate your small and larger successes as they happen. They will not be an accident. You will have earned them.

Finally - save for income taxes. They will come very soon - probably faster than your cash flow. They will not get paid on a prayer, and C.R.A.interest and penalties are very expensive.

Marketing

Branding is more than a current marketing catchphrase. It is the public personification of your firm, and it defines the image and personality you will project to the public and the profession.

Branding is one area where I recommend allocating a bit of budget for help from a professional marketer and graphic designer. A dignified, but impactful firm logo will engender respect for you and your firm from the outset.

First impressions will make a difference.

And whether that first impression comes from a logo on a brochure, business card, or letterhead received, it will be a big part of how you are sized up. While it is true that people will recognize that you are just starting out, they will be justfiably impressed because of your branding by how "together" you have it at such an early stage, and perceive you as a bit of an up-and-comer. That is where you want to be.

Develop an internet presence. Secure your intended internet domain name right away, whether or not you will be building an extended website at first. At very least, get a starter website up using your logo and a clean and easily navigated layout. Provide a basic description of your firm, the services you offer, your relevant biography, contact information and a bit of public education about the areas of law in which you have knowledge. It is your online business card, and an absolute must.

As an even easier entry point to the internet, start a blog. There is no expense, and the publishing tools are easy to learn and master. This blog uses Google's "Blogger" service. Registration is easy. Go here to get started.

Consider providing simple services such as notarizing documents at reasonable cost to supplement your major areas of practice. Publicize this service online and through direct contact with interpreters, immigration consultants, community organizations and paralegals. Work on developing this area to build cash flow and perhaps more importantly, an email list of potential, future clients with whom you can build rapport and maintain contact through newsletters and other information pieces. This works - a former tenant of ours had a veritable, daily stream of such clients sustain and build his young practice through a well executed and thought-out internet strategy for notary services.

I have never seen the Yellow Pages as a worthwhile investment. Now that the internet and Google have arrived, they are even less so. Don't bother. You can get much better return on advertising investment elsewhere, unless you are planning to buy multiple, full-page spreads like certain well-known personal injury lawyers in this marketplace.

Finally, build your own list of personal contacts - family members, friends, professionals and lawyers in your personal circle who may be in position to steer referrals your way. And when your logo-adorned shingle - virtual or otherwise - gets hung, tell them all. Loudly. Repeatedly. Cheerfully. By email. By phone. By message in a bottle or airmail. But tell them.

Stay in touch with your clients once you have completed your work for them. Send birthday greetings. Do quarterly email newsletters. Help them to remember your firm and the various ways you may assist them and their contacts. Stay top-of-mind with your previous clients - they are your most likely clients of the future.

Give your business card out everywhere. Every clerk in every store you visit is a potential client. Say hello. Your charm will no doubt work for you every time (or at least once in a while).

Let people know what you are doing. And don't be shy about it.

Knowledge Base

While it is probably true that the profession is increasingly becoming specialized, and there is more to know now than ever before, it is equally true that information has never been easier to locate and obtain.

Law books have essentially been relegated to a rather quaint role as props to be dusted off for for lawyers' photo-ops. One of the good new developments for starting lawyers is that a law office budget for library resources need not be extensive. That used to be quite a challenge.

Statutes, topical articles, and most current Canadian court judgments are easily found online via Google and the courts' websites. Many law firms have excellent websites and blogs that contain quite extensive, high-level discussions as to many of the issues that are current in their areas of practise.

Having said that, there is still no substitute for QuickLaw when it comes to researching a specific legal issue. While I have no intention to do a "free commercial announcement" for Lexis-Nexis, the reality is that, irrespective of your area of law, with QuickLaw, the answer to any question of law is only a mouse-click away.

A monthly subscription to QuickLaw is a necessity. Budget for it.

Use all Available Resources

  • When challenges arise, ask your peers for their input.
  • Seek and explore other viewponts and perspectives, so that you can assimilate good arguments and develop strategies to counter worthy, opposing views, as required.
  • Go to Continuing Education programmes offered by the Law Society and Canadian Bar Association.
  • Get on newsletter mailing lists, to stay up-to-date. These are offered by Bar-Ex, and many law firms via their websites.
  • If you have a mentor, even better, but remember that a true mentor's role is not to give you answers. It is to offer ideas and to facilitate your process of analysis. The Law Society of Upper Canada offers a Mentorship Initiative to match lawyers with suitable mentors in their practice areas. Call them.
  • Use the internet and Quicklaw frequently for the wealth of information you will always find.
  • Ask your accountant and other experts and professionals, where you have a question.
  • And at the end of the day, get used to trusting in your own skill, judgment and instinct. It is what you are selling, and it is probably your key asset.

Serve your Clients Well

You've gone to law school, done the Bar, articled and now you're really a lawyer. That is quite an accomplishment, and in most cases means you have all the tools required for success.

A few more comments, then, on doing your job well:

  • Get used to one key reality - you won't know the answer right away a lot of the time, and you don't need to. It is perfectly reasonable and highly responsible to request adequate time to research and consider options before offering potential solutions. This will never change. It is part of your job description, and in no way implies that you don't have the right stuff.
  • Your clients come to you for solutions, but they do not usually expect quick-fixes (they've probably tried those before consulting with you).
  • Take the time required to really listen to you clients. Understand what the world looks like through their eyes, and communicate your understanding of their needs, along with your objective, professional point of view in "plain English." Use an approach that your clients can and will assimilate. Mostly, be human.
  • Read between the lines. Be diplomatic, but ask tough questions. Give bad news, where you must, but offer reassurance, support and workable advice in all circumstances.
  • Be careful about the unscrupulous client. Say "no" when your ethical thermometer tells you to.
  • From the beginning, organize your computer system so that the key information you need will always be be easily found and accessed. Colour code your paper files, if this will be helpful to you. Be in a position to get the information you need, when you need it.
  • Keep your clients in the loop. With email, that is easier than ever. There is no reason for your clients to be uninformed by you. It is bad lawyering and bad business. And all-too-often, it leads to misunderstanding and a loss of confidence by the client.
  • Be up-front about billing practises. Have written retainer agreements. Obtain adequate and reasonable retainer payments in advance. Bill regularly.
  • Keep extremely detailed time dockets of all your professional activity. Be specific about the recorded event, the time involved and the details of any discussions you have, however insignificant they may seem at the time. You may need this information later.
  • Do not let unpaid accounts continue to mount. As time goes on, collection will become increasingly doubtful.
  • There is almost no error that can't be fixed, so relax (with one eye vigilantly on the ball at all times, of course), but there is one major exception to this: Do not miss limitation dates. Institute a tickler or diarized reminder system. This type of error will be costly and generally, irreversible.
  • And finally, prepare and be prepared. When it's show time, be ready. Judges can tell if you are fumbling for information and so can your clients and opposing parties and counsel and everyone in the court. You want results. There is no substitute for preparation. And it's a nice feeling when the court reporter who has just watched you in court asks for your business card.

There is no greater satisfaction than a happy client - except, possibly, when that happy client refers someone new to you. Referrals are the ultimate vote of confidence. And they are a good measure of how you are doing in the key area of client satisfaction.

Web Resources

There are a number of tremendous online resources about starting a law firm, from various North American jurisdictions.

Here are a few:

Starting a New Firm: Top 10 Mistakes to Avoid and Top 10 Tips for Success (Canadian Bar Association - Ontario)

Getting Started: Opening Your Law Office (British Columbia Law Society)

How-To Kit: Open a Law Practice (Michigan)

Starting a Law Practice Web Directory (Oklahoma Bar Association)

My Shingle - Online Guide ( articles from various jurisdictions)

Conclusion

"If you build it, they will come."

So said Kevin Costner in Field of Dreams, a sentimental favourite of mine.

I remember starting out myself, back in 1986, a somewhat frightening twenty-one years ago.

I had no work to do at all, until a relative of mine who is a lawyer referred three or four cases to me, all at once, including my first family law matter.

Suddenly, it was real. I called it my "practice in a briefcase," but I was damned proud of it.

Soon, the phone rang again. A colleague from law school was working in a large firm, which needed some help on a massive affidavit of documents.

Another file.

An accountant I knew referred a client of his, a building contractor, for action in a construction-related matter.

Then, an opposing counsel in another construction matter was impressed by my cross-examination of his own client (a lying scoundrel, if there ever was one). He began to send counsel work to me.

And so on.

I still act for some of the clients I met through those early contacts.

As in any small business, there have been good years and occasional not-as-good years. And while the skill of running a bigger, but still-small practice probably will take a professional lifetime to master, it is very fulfilling to see the fruits of your work in continued growth and development.

I hope these remarks will be of some assistance to those reading them. With planning, patience and committment, it is highly likely that opening your own law practice will prove to be a decision you will be glad to have made.
Good luck.
- Garry J. Wise, Toronto
Visit our Website: http://www.wiselaw.net/

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