Pros and Cons of Starting Your Own Law Firm
Like other entrepreneurs, lawyers that want to start their own business have to evaluate the pros and cons of starting their own law firm. While being the owner of your business may give you complete control over the business and all its assets, operating a business comes with its own set of challenges.
Most lawyers who start their business think it is all about “practicing law”. What they don’t realize is that they apart from the legal responsibilities, they would have to deal with staffing needs, financing, accounting and marketing the law firm. Before starting your own law firm, you need to evaluate whether you have the necessary skills and attitudes to do so.
What this article covers:
- Should You Start Your Own Law Firm?
- Starting a Law Firm: Business Plan
- Small Law Firm Marketing: How Do You Market a Law Firm?
Should You Start Your Own Law Firm?
The allure of going solo may be strong but you need to weigh the pros and cons before you start your own law firm.
Pros of Starting a Law Firm
Enjoy Freedom and Control
Starting your own business allows you to make your own decisions and set your priorities. You enjoy flexibility and freedom that you would not enjoy as an associate with a larger firm.
Having more freedom, however, does not entail that you would be working lesser hours. On the other hand, you would be working harder than ever. However, by doing so you would be directly enjoying the fruits of your labor.
Take on Interesting Projects
While initially, you may take on any client, later you may have the opportunity to take on more interesting projects. You can make the decisions about which cases to take on and choose to focus on a specific practice area.
The costs of starting a law firm are getting lower with technology and cloud options. If you decide to practice from your own home, the cost of starting your business can be as low as a $3000.
Most lawyers starting their own practice want to move away from the cutthroat politics of large firms and avoid the ambiguities that invariably exists at large law firms.
Cons of Starting a Law Firm
Never Go Back to Working at a Large Firm
Unless you have specific skills that make you invaluable, most solo practitioners can never go back to working in a large law firm again. This may be due to the negative perceptions that the solo practitioner’s skills are no longer good enough, they are unable to work with others or they do not have the skills to work in a large firm.
Do the Legwork
Opening your own business means all the work now falls in your plate – from soliciting clients to hiring more staff, finding an office space and getting your finances in order. Unfortunately, not many lawyers have that entrepreneurial mindset that may allow their law firm to succeed. Be wary of your overhead costs until the cash flow catches up with the new firm.
Isolation and Lack of Mentorship
A major drawback for lawyers wanting to go solo is the loss of camaraderie with other attorneys, especially when you’ve been part of a larger firm. You may depend on the relationships that you have built to provide you with a support system. Starting your own smaller firm may require developing a new support system and seeking mentor relationships.
Starting a Law Firm: Business Plan
Before you open the doors to new clients, you need to create a business plan. Careful planning helps you avoid surprises that cause many new practices to fail. The challenge is to build a practice that goes beyond solving the clients’ problems.
A business plan describes your practice in detail. It defines how you will operate, your marketing strategies, the nature of your competition, and your financial structure.
The first section contains your executive summary, the description of your law firm, your firm’s structure, its goals and strategy, partners and key staff, your particular areas of practice, and how you will make your firm successful. You must also highlight the unique characteristics of your firm.
Clients and Competition
In the next section, outline the types of clients that you will be serving, who they are and why they need your firm’s services. You must also list your major competitors, including information about whether they would be competing with you across the board, or just for certain services and clients. The competitive analysis should also outline how your services will compare with your competitors.
Operations and Finance
The last section of your law firm’s business plan is the operations and finance section which shows how you plan to run your business on a day-to-day basis. It includes the financial data such as your projected balance sheet, income and cash flow statement, including a break-even analysis.
Here’s the breakdown of the business plan:
- The executive summary
- Description of the firm
- Firm structure
- Practice areas
- Market strategy
- Competitive analysis
Operations and Finance
- Financial data
Small Law Firm Marketing: How Do You Market a Law Firm?
An effective marketing plan for a law firm should answer the following questions:
WHY: Define the objective of your marketing plan and set quantifiable goals such as 10 to 15 clients per month. While assigning metrics to your goals, you need to set proper expectations keeping in mind the market you’re operating in, your advertising budget and your expectations.
WHAT: What will your marketing plan include? Once you’ve defined the goals of your marketing plan, you need to define the components including the projects and the campaigns. For example, are you using an email marketing campaign, promoting your business through content marketing or networking with other lawyers and clients?
HOW: How will you implement your marketing plan? Will you outsource it or do it in-house?
Law Firm Marketing Plan Sample
In the digital age, it’s important for law firms to invest in an online presence, SEO and build referral networks. However, before investing your time and effort in marketing, consider your practice area and your clients, and what works best for them.