How to Start a Law Firm – A Complete Guide

How to Start a Law Firm – A Complete Guide

28-07-2020

As a practicing lawyer, starting your law firm may seem like the best decision you will ever make. Unfortunately, most law schools only teach you how to think and act like a lawyer and do not dedicate much time teaching you how to run the business side of a law firm.

It can be intimidating to start a law firm. You can be an outstanding lawyer, but starting your own business means creating goals, strategies, business plans, and much more.

Should you start your Law Firm?

A law practice is a profession and a business. To start and successfully run a law firm, you need to see your law practice as both – a profession and a business.

A law practice needs specific skills. Running a business also requires certain skills. Some of the skills you have as a lawyer can help the business side of your law firm. However, running a business requires you to deal with problems not related to the practice of law.

How do you know if you are fit to start your own law firm? Assess yourself and determine if you have the entrepreneurial drive, have goals that will motivate you to build a law firm, and the patience for risks. If you feel you have these qualities, then you are ready to start a law firm.

Owning your own law firm comes with many benefits:

• You can choose your clients. If you want to select and accept your own clients based on your chosen area of law, you will be able to do so with your own law firm. If you are an employee, you will have to work on any case thrown your way.

• You will be able to be a lawyer and a businessperson. While legal services will be your primary source of revenue, having your own law firm will also allow you to have your own business. It is a pride to have your own business that provides you with a lot of flexibility, not only with your law practice but also with your life. 

• You can create a business model that suits you, your team, and your clients. If you are an employee, you do not have control over how the law firm is run. If you own the law firm, you run the firm based on your goals (personal and career), workplace culture, and the approach to solutions you want to provide your clients.

Owning your own law firm, though, is not without challenges. As an entrepreneur and business owner, you need to put in a lot of energy and time to build and grow your business.

To succeed, you will need to have well-defined goals, the right tools, smart strategies, and the determination to work hard.

How a Law Firm Earns Money?

A law firm earns by providing legal services to individuals, organizations, and businesses. A law firm provides legal advice and represents clients at negotiations, trials, hearing, and all court events. A law firm also assists in the preparation of contracts and other legal documents.

Most law firms charge an hourly fee, the rate of which depends on the lawyer's experience, legal niche, and clients' wealth. Some lawyers do pro bono work (serving the neediest community members, free of charge).

1. Starting a Law Firm: Goals and Strategies

All businesses start with goals and strategies to achieve these goals. Many lawyers think that they are amazing and want to be their own boss, so they think of starting their own law firm.

It is not enough that you want to start your own law firm and go through the motions of building one. You need to know why you are starting a law firm. Starting a law firm allows you to satisfy your personal goals, have an awesome workplace, and provide superior client experiences.

• Personal Goals

What kind of life do you want for yourself and your family? Your business should provide an avenue for you to fulfill your personal goals and personal vision.

Ask yourself these questions?

• What are my priorities? My family, passions, friends, or hobbies?

• How many days in a year do I want to spend for myself?

• How much money do I need to be stress-free?

• What do I need to be physically and mentally healthy?

• What does success mean?

• When do I want to retire?

They say that in the law world, you need to work-until-you-drop. For a lawyer, everything revolved around work, sacrificing much of their personal life. You do not need to love such a life! With your own law firm, you will be able to have an ideal work-life balance.  

• Business Vision

What do you want to achieve with your business? Many people say the vision you have for your business should be a one-liner (something like a tagline) you can include in your marketing materials. Not exactly!

While your vision should be clear, easy to understand, and measurable, summarizing your plans and dreams in one sentence will confine yourself. Your vision statement is the foundation of the key performance indicators (strategies) for your law firm, which should include some of these concepts:

• Clear values and mission.

• Integrate into your strategy dynamics that impact your law firm and clients.

• A certified business model created around addressing client problems based on expectations provided at a reasonable price.

• You are incorporating key performance indicators to monitor your firm's growth regularly reviewed and updated.

• You are working on short-term goals that support long-term goals for your law firm.

• You must regularly conduct competitive analysis and adjusting strategies to be on top of the competition.

A law firm’s vision is not created overnight. Take your time. As you create your law firm’s vision, keep in mind that it should focus on client services using a profit-oriented business model and the latest technology to grow your profession.

2. Starting a law Firm: Planning your Business Structure

There are many ways to structure your law firm all boils down to:

• Which structure is best to deal with standard tax consequences?

• Which structure is best to protect you from personal liability (excluding malpractice)?

Research and then decide on the business structure you want to build your law firm. You have many options such as:

• Sole Proprietorship

This is common if you are setting up a solo practice. As the sole owner of the law, you and your business are considered as one entity. This gives you flexibility in managing the firm because you are accountable only to yourself.

• Partnership

This is common if you are setting up a law firm together with two or more lawyers. Each partner shares in the liabilities and profits of the partnership.

• Corporation

Lawyers who want to have a corporate shield opt for this business structure. The owners and shareholders are mostly deemed to be separate. There are corporate formalities involved in this business structure.

• Limited Liability Company

Most law firms prefer this business structure because it is a hybrid entity. It has the flexibility of a sole proprietorship and provides the safety shield offered by a corporation. This is not without its risks.

It is important to make sure that you comply with your Bar Association and Local Rules when you start your law firm.

3. Starting a Law Firm: Start-up Capital

A law firm is a business and therefore needs start-up capital. Your start-up capital should include funds to set-up a physical office, money in the bank, and budget for initial advertising such as:

• Licenses, permits, and insurances

• Office furniture, equipment, and supplies

• Continuing legal education

• Hardware and software

You will need money in the bank to pay for employees' salaries while you are still working on acquiring clients. It will take some time for your business to take-off, so you will need to have some funds to sustain your business.

You will also need to have some personal money to sustain yourself for the first six months of your law firm.

4. Starting a Law Firm: Start-up Checklist

Starting a law firm can be an intimidating task. It is not just about your practice of law. It includes setting up an office, hiring the right staff, and much more. Here is a basic checklist to start with. You may need additional items depending on how you want to run your business.

• Think of a Name for your Firm

In many ways, this is one of the most important decisions you need to make. The name of your law firm is what you will use to create and build a brand.

Typically, it includes the name of the lawyers. However, many lawyers feel this is not as appealing and catchy to potential clients as going for the practice area for a law firm name. The same goes for choosing the domain name for the website of your firm.

• Picking an Office Location

While the location of a law firm's office is not as critical as for a retail store or restaurant, it remains to be a significant consideration.

While you can start working from home to save on start-up expenses, running a law firm, and meeting clients from your home is not a feasible long-term solution. To save on start-up costs, you can choose to share an office space.

• Identification Numbers, Permits and Licenses

You are starting a business after all, so you will need a federal Employer ID Number (EIN) and the necessary state or local business permits and licenses.

• Hiring Staff

You can be a hands-on lawyer for your solo practice and take care of the administrative staff while dealing with your clients' needs. Remember, though, that administrative functions such as paying bills, preparing client invoices, answering phone calls, and more can take much of your time, and the time you could spend on billable hours.

Hire at least a secretary who can double as your receptionist to deal with all the time-consuming administrative work.

• Office Equipment

Of course, your office will need some basic furniture and equipment including:

• Telephone Service

• Internet Service

• Computers, Printers, Scanners, Software

• Photocopying machine

• Filing cabinets

Decide on your office layout and choose appropriate office furniture. Only buy office furniture that you need to get started. The fancy stuff such as expensive espresso machines, art and decor, and decorative furniture can come later as your law firm grows.

• Library

This is a staple requirement in every law firm because lawyers can never be separated from law books to function correctly. It can be expensive to build a decent library. It is an ongoing expense, too, because of the regular law updates.

For starters, you can choose an office location with access to a nearby library. You can also choose to rely on online resources.

• Office Supplies

You will need necessary office supplies, including:

• Paper

• Envelopes

• Pens and pencils

• Sticky notes

• Colored sticky tabs

• Staplers

• Staple removers

• File folders

• Two and 3-hole punchers

• Date stamps

• Tapes

• Paper clips

• Rubber bands

• Business cards

A visit to an office supply store will complete your list. During start-up operations, opt for decent office supplies that are not too expensive. Your law firm will be judged depending on your legal services and not by your office supplies.

• Set-up Office Systems

Establish the day-to-day operations of your law firm to ensure a smooth flow of business transactions.

Case docketing. You need to have a system that is most likely an electronic system for case docketing and calendaring. A lawyer cannot solely rely on memory on anything concerning his work.

Filing.  Being able to access client files and documents easily is of utmost importance to an organized lawyer. You can opt to go for the ever-reliable filing cabinet or choose to have an electronic filing system you can access from anywhere.

Tracking of time and billing. A reliable monitoring of time and billing system will keep your clients happy while ensuring the right revenues for your law firm. It can be stressful to have clients call and complain about billings. Bill clients regularly and promptly to avoid conflicts.

Accounting System. There are many accounting software available to ensure the easy recording of financial transactions of your law firm. Hire a bookkeeper and an accountant to monitor the financial health of your law firm as well.

Legal Software. You will need tools critical to the daily operation and the optimum productivity of your law firms such as Google Suite or Microsoft Office, timekeeping and billing software, law practice management software, and legal research tools. 

• Other Important Matters

Do not forget to have these items in place before starting launching your law firm:

• Obtain the need for insurance products. Having malpractice insurance (professional liability) and other applicable insurance is crucial for your law firm.

• Open the necessary bank accounts for your business, such as a regular account, a working bank account, and trust accounts.

• Create marketing and advertising strategies such as signage, business cards, brochures, newsletters, and online advertising.

Starting a law firm is exceedingly rewarding, yet it can be a tedious and challenging task. There will be a start-up and growing pains, just like any business. However, with an entrepreneurial mindset and the ability to offer top-quality legal services, your law firm is on its way to success.

5. Starting a Law Firm: Client-Centered Legal Services

With a clear vision of your personal goals and the mission and vision of your law firm business, you are ready to create your marketing strategies for the kind of practice you want to build.

This should also include the best practices you intend to implement to serve your clients in the best possible manner. Start your marketing strategies with how you intend to attract the right potential clients. Complement these strategies with the right systems and procedures and technology to ensure the delivery of top-of-the-line client experience.

• Client Generation and Acquisition

It is no longer enough to rely on your reputation to bring clients knocking on your door. Referrals from past clients, family, friends, and fellow lawyers are no longer enough, too. While referrals will always be a great source, potential clients have changed how they seek lawyers to solve legal issues.

Your law firm, just like any business, needs robust sales and marketing strategies to grow and continuously grow your business. You need to implement sales and marketing strategies that will make you effectively use your money and time to attract ideal clients to your law firm.

An ideal law firm marketing plan should include your ideal client profile, where to find your ideal clients, and how to formulate the right messages to attract ideal clients to your law firm.

Answer these questions, and create focused sales and marketing strategies, complementing your firm's key performance indicators.

These should be your target results:

• A well-written, easy-to-implement, and measurable marketing plan.

• A system to easily track if the marketing plan is reaching your potential clients, referrals, existing clients, and past clients.

• A solid reputation in your community for your law firm so people who refer potential clients can talk about positive experiences.

• To use offline (traditional marketing strategies) and online marketing activities to best communicate your law firm's message to attract your target, ideal clients, convert them into leads, and ultimately into paying clients. 

• Your firm has a fast-loading and mobile-friendly website that focuses on communicating your message.

It can take a lot of brainstorming to create a marketing plan for your law firm. You should not rush to build one because your marketing plan is going to be the core of your business crucial to its growth and success.

Look at all avenues that can allow your law firm to attract potential clients, including:

• Traditional marketing strategies (print, TV, and radio ads, billboards, flyers, business cards, etc.)

• Digital marketing strategies (website, email marketing, online newsletters, SEO, etc.)

The goal of your marketing plan is to identify your ideal client, how to reach them, and nurture them through your sales funnel until they become paying clients.

• Documented Systems and Procedures

Your law firm is going to be a fast-moving organization. As such, you will need to build dependable systems and procedures to ensure consistency and the best possible legal services to your clients. These systems and processes should be documented and not be just in your mind. 

Documented systems and procedures are essential to creating client-centered legal services. These approaches ensure positive client experiences and more natural work processes and make it easier to manage your team to ensure the growth and success of your firm. 

Office management can be a lot easier through the implementation of these principles.

• Implementing documented systems and procedures that are in line with your business model.

• Documented systems and procedures should include workflows for both administrative tasks and client services. These systems and methods should be regularly updated and perhaps automated for better implementation.

• Personal time and productivity practices.

Office management looks complicated, but with systems and procedures in place early on, you can focus on other areas of the business to grow your law firm.

• Setting-up and using Technology

Basic technological competency is crucial to your law firm. You will need technology that can help you be a more competent lawyer. After creating your firm's system and procedures and workflows, search for the right software that can support these processes.

Technology should function to support the goals of your law firm, which means you should:

• Be competent in the use of technology.

• Use technology to scan and file all documents and paperwork.

• Always be updated on technology systems relative to your law firm.

• Ensure technology security for your law firm and clients.

• Create and implement data security practices within your law firm.

• Allow lawyers to access law firm data remotely.

Data privacy of clients should always be of utmost concern.

• Client-Centered Legal Services

Lawyers provide solutions to their clients' legal problems, and law firms work to offer such services. Being a client-centered law firm works more than just providing legal services to clients.

A client-centered law firm approaches providing legal services from the perspective of the client. This means creating a client experience focusing on showing that you understand who your clients are, care about them, know what they need, and the right person to handle their needs. This allows your law firm to give a more personalized service required for an excellent client experience.

A client-centered law firm has these qualities:

• Has rates, prices, and fees based on the needs and goals of your clients. This means hourly billing may not be the right choice.

• Communicates with clients through systems they prefer as long as your firm’s data security is kept at bay.

• It creates a cohesive intake process, on-boarding, and superior client experience based on the client's needs and wants.

• Create client communications and documents in a manner that can easily be read and understood by the client.

Expectations of clients pertinent to legal services are fast evolving. Your law firm should not have all these qualities at once. They should, however, be part of your business plan and strategies.

6. Starting a Law Firm: How to Manage your Law

You do not have to wait for your law firm to be running before thinking of managing it. Managing your law firm should be part of your business plan.

You are a lawyer and will most likely not have any background in managing and growing your business. 

While you can delegate management and financial functions to your staff, you need to know and understand your business's ins and outs.

• Hiring your Staff

It is not just a matter of hiring permanent employees, part-time employees, independent contractors, a bookkeeper, and other related staff. You will need to hire those you feel will complement the core values, goals, mission, and vision of your law firm.

• Have a clear organizational chart, including everyone in the firm, with a clear definition of their line and staff functions.

• Have a fair and rational compensation and benefits plan that can motivate employees that reflects the core values of your law firm.

• Have an open line of communication with your staff to ensure the swift flow of operations.

• Have a corporate culture that reflects the values of your law firm.

You should ensure that your law firm has the right systems to support the needs of your staff in wellness, self-care, and mental health.

• Understanding the Finances of your Firm

Many lawyers say they went to law school because they hate numbers. Business owners love numbers, and as a business owner, you should, too. Your law firm is a business that needs to be financially healthy and profitable. You should, at all times, be aware of the financial health of your law firm.

To ensure the financial health of your business, you need to have sound financial practices in place:

• Sufficient cash flow to fund your law firm.

• A long-term financial strategy.

• An invoicing, collection, and payment system that focuses on the clients’ payment preferences to allow them to pay on time.

• Have a written budget and regularly monitor income and expenses.

• Pay yourself a market-rate salary, including and bonuses. Think of this as investing for your retirement.

Managing your law firm is a crucial function you will need to perform as a business owner. If you want to concentrate on your law practice, hire the right staff, and have all financial processes in place. Working hard to acquire new clients and servicing their legal needs are futile exercises if you do not have the right administrative, finance, and operation staff to support your efforts.

7. Starting a Law Firm: Creating your Law Firm Website

While traditional marketing strategies still work, Digital Marketing is the way to go. Most of your prospective clients rely on the Internet when searching for legal services. Thus, you need to be where your potential clients can find you.

A professionally-built website should include all pertinent information about your law firm, including office address, contact information, operating hours, and email addresses. More importantly, your law firm website should include your professional profile and that of other lawyers in your team and the areas of law specialization.

Your website should also include your law firm logo that symbolizes the legal services of your law firm. You can engage the services of a professional graphic designer to create your law firm logo.

Your firm’s website should include a Homepage and Service Pages (for each legal service you offer), an About Us Page (includes how your law firm was established and should consist of the mission, vision, and core values of your firm). 

It is also essential to include a Contact Us page or a Chat support service so prospective clients can get responses to urgent inquiries and an effective Landing Page.

8. Starting a Law Firm: Creating Legal Marketing

Your marketing plan should focus on how to acquire clients for your law firm. Your website is your most crucial tool in acquiring new clients. Your website needs to be optimized to ensure it will be in front of prospective clients when they are searching for legal services within your area of specialization.

Invest in Search Engine Optimization (SEO) to gain a top rank in Search Engine Results Pages (SERPs). A high position in SERPs will ensure prospective clients will provide a substantial internet presence for your law firm.

You can opt to do SEO yourself, but it will be wise to engage the services of a third-party provider.

SEO will include:

• Determining targeted keywords that describe the legal services of your law firm.

• Articles and blogs about the legal services of your law firm.

• Presence in social media platforms (FaceBook, Twitter, LinkedIn, and more) to allow you to engage with prospective clients.

• Listings in legal directories

• Other SEO efforts deemed necessary.

You can also acquire prospective clients through online ad placements (online banners) and Per-Per-Click Advertising (you pay Google each time a user clicks your ad), and through Pay-Per-Lead Generation (buying leads from Lead Generation Companies.)

There should be a permanent staff assigned to receive and engage prospective clients, or you can hire a third-party provider to engage and nurture clients through your website and online platforms.

Practical Tips on How to Start a Law Firm

The above checklist on how to start a law is as comprehensive as it can get. Here are some practical tips to further ensure the successful launching and continued growth of your law firm.

1. Plan in Advance

Having your own law firm is synonymous with hard work. Prepare a start-up capital and enough capital to keep your law firm going for the first six months.  When starting a law firm, have a business and marketing plan. More importantly, know how much your law firm needs to earn to break even.

2. Focus on your Area of Expertise

You cannot be a lawyer to everyone, so avoid taking any type of case that comes your way. This approach will take you nowhere. A better strategy is to identify your niche and focus on the area of law specialization.

Focusing on your specific niche, you avoid having every lawyer as your competitor. Focusing on your particular niche will reduce your competitors to your area of law specialization. It will also be easier to build a referral network because they know exactly what you do.

Focusing on a specific area of specialization will also be more comfortable for clients to remember you.  Potential clients and other lawyers will also better remember you as ago-to-lawyer for a particular legal problem.

Besides, lawyers who focus on a practice area have in-depth and extensive knowledge to help solve legal problems more efficiently.

3. Carefully Pick Your Office Address

You should have an office address where you intend to stay for a long time because it is an essential factor in your law firm's success.

These days, Google Places identifies the physical address of your firm. Frequently moving from one office address to another will negatively impact your Digital Marketing efforts, which allow prospective clients to find you online. Additionally, search engines should easily find your office address.

4. Join Lawyers’ Associations

Networking is a crucial aspect of your law practice. Join your local Lawyers’ Association. If your law firm is in California, join the California Employment Lawyers Association (helps employees settle workplace disputes). You can also join the local chapter of the American Bar Association.

5. Enlist in Online Lawyers’ Directories

Most lawyers’ associations have a listserv (email list management software) that includes the email address of all its members. Make it a point also to be listed on your local online lawyers' directories such as Nolo.com, FindLaw.com, Justia.com, Avvo.com, and others.

6. Build a Network

While most of your prospective clients will be generated through your Digital Marketing efforts, you cannot discount the importance of referrals from family, friends, and fellow lawyers. Make it a point to join lawyers associations and some social groups in your community as these are suitable venues to generate prospective clients.

As you meet many lawyers, many of them more experienced than you, they will be willing to help by referring to some prospective clients. 

Another way to network is to collect business cards before launching your law firm and entering them into a database. Write each one of them to announce that you are open for business and ready to serve clients.

This activity does not mean you are soliciting business, but instead, you are announcing that your law firm is now open to serve their legal needs. Include the name of your firm, contact details, location of your office, and a brief description of your legal services. You can also include some of your business cards.

7. Stay Away from Negative People 

It can be challenging to get new clients when you are a start-up law firm. Many people will discourage you from starting a law firm. Sad to say, most of them are close to you in the guise of being concerned.  They may be right to a certain extent, but if you remain focused on your goals, you will hurdle most of the challenges of starting a law firm.

You will learn from your mistakes, not repeat them, and do better next time. That is the best way everyone should move forward in business and life.

8. Be Confident

Be confident of your knowledge and skills, and be willing to do all the hard work to grow your law practice and law firm. Be confident that you have a solid goal, mission, vision, and all aspects in place to launch and grow your law firm.

A start-up is a difficult phase in business. Hurdle these challenges as they come your way, and your law firm will be on its way to success.

9. Pay Attention to the Latest Trends in Technology

Make it a point to be conscious of the latest trends in technology relevant to the legal industry. As a lawyer, you need to be equipped with technology skills because these will make your work faster and more efficient.

10. Watch your Start-up Expenses

Many people believe in "beginner's luck. Even if you can acquire sufficient clients immediately after launching your law firm, avoid too much spending.  It will take about six months before your law firm will start to have a regular income.

During the first six months, stick to the overhead cost you projected in your business plan because funds have been included as part of your start-up capital. Hourly billing and other revenues may not be immediately collected. So, watch what you spend.

Final Thoughts

Starting a law firm is not as daunting as many people say it is. Armed with the right character, abilities, and confidence, you are on your way to building a law firm based on your goals and core values.

Many lawyers always ask, “When is the right time to start a law firm?" This question has three answers, "Maybe next year," "Maybe never," "Now." The best solution is, "Now." When you decide to start a law firm now, be ready, be focused, work smart, and in no time, you can see your law firm on the right path of success. 

Related Articles:

The Importance Of Legal Bookkeeping For Law Firms

The History Of Law And The Law Profession

How Much Do Attorneys Charge Per Hour?

ATTORNEYS : SUBSCRIBE TO OUR NEWSLETTER
Subscribe to Our Newsletter