Law Practice Management Asked and Answered Blog

Category: New Firm Startup

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Sep 20, 2016

Law Firm Startup – How to Get Started – Best Practices

Question:

I am a relatively new attorney. I graduated three years ago from John Marshall Law School in Chicago. After law school I started with a small firm in the northern suburbs. Now with three years under my belt I am considering starting my own firm. I would appreciate your suggestions on how to get started.

Response:

Owning your own practice will be much different that working for someone else. You will have to handle the nuts and bolts of running and operating a practice. You will not have people to do everything for you like you did in your last firm. You will need to learn how to be an entrepreneur and think like a businessperson. 

First, I suggest that you give some thought as to whether you have what it takes to operate your own firm and plan out your business. Read my article on Starting, Building, and Managing a Law Firm. Click here for the article

Then write your business plan.  Click here for the article

After your have developed your plan begin developing your business identity, firm name, tag line, website domain name, and related graphic package. 

For ideas download a copy of our best practices guide

Consider legal structure for the firm. Register with appropriate governmental and tax authorities.

Determine where you will practice, how you will staff your practice, and technology needs. Keep as much of your overhead as variable and low as possible. Consider virtual employees. At first do as much work yourself as you can. Add staffing resources as your firm grows. Don’t skimp on technology. 

Implement a first class website on day one.

Good luck.

Click here for our blog on new firm startup
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John W. Olmstead, MBA, Ph.D, CMC

Jul 22, 2015

Law Firm Dissolution – New Firm Startup – Steps to Be Taken

Last week a firm advised that their law firm was splitting up via a dissolution and forming two new law firms. I outlined some of the steps that would need to be taken to dissolve the firm.

This week I will discuss some of the typical steps that will need to be taken to start the new law firms. Some of these steps include:

ESTABLISH NEW LEGAL ENTITY 

  1. File articles or other documents for entity formation. (LLC, LLP, PC, etc.) 
  2. Obtain FEIN Number
  3. Open new bank accounts
  4. Establish line of credit with bank
  5. Draft operating agreement/partnership/shareholder agreement
  6. Agree on approach to partner compensation
  7. Draft a business and marketing plan for the firm.
  8. Obtain any required business permits.
  9. Obtain office space, if moving, and negotiate lease – or negotiate new lease with landlord of present space.

IT & SYSTEMS 

  1. Decide on equipment and software being retained
  2. Decide on billing and accounting system data conversion strategy.
  3. Decide on MS Exchange Server conversion strategy.
  4. Decide of document management system conversion strategy.
  5. Purchase new software that may be required as a result of licensing.
  6. Install, configure, and populate billing and accounting software.
  7. Obtain new internet domain name and e-mail addresses

NOTIFICATIONS 

  1. Notify courts
  2. Notify bar associations
  3. Notify all vendors
  4. Notify post office
  5. Notify insurance carriers
  6. Obtain malpractice insurance with tail coverage
  7. Notify Yellow Pages and other directories
  8. Notify phone company. 
  9. Obtain new phone number if needed
  10. Notify tax authorities
  11. Notify Westlaw/Lexis, etc.

HUMAN RESOURCES 

  1. Employee meetings
  2. Setup payroll system – in house or outsourced
  3. Deal with medical insurance transfer
  4. Deal with 401k and other benefit plan transfer
  5. Update employee handbook
  6. Update administrative policies and procedures manual

FACILITIES 

  1. Decide on whether the firm if staying in current space or moving. If staying, decide on how much space is excess
  2. If staying, decide on what space the firm will occupy and what space will be sub-leased or turned back to the landlord if possible
  3. Negotiate lease with the landlord
  4. Office signage
  5. Decide whether any space improvements are needed.
  6. Decide on internal move date and who will be in what locations (if staying)

CLIENT RELATIONS AND DEVELOPMENT

  1. Notify clients of dissolution – joint letter – both firms – in accordance with rules of professional responsibility
  2. Meet with clients
  3. Develop new sources of clients

PUBLIC RELATIONS AND MARKETING 

  1. Public relations campaign
  2. Business identity plan (branding, logo development, etc.)
  3. Create marketing collateral materials (letterhead, brochures, business cards, etc.)
  4. Create and launch new website
  5. Open house or some event

The tasks involved in launching a new firm are numerous, specific to each individual firm, and this is just a starting list. You can use this list as a starting point to develop your own project plan. Suggest that you create a central project plan to get everyone handling various tasks on the same page. The plan should include tasks, specific responsibilities and start and target completion dates.

Good luck with your new firm!

 

Click here for our blog on succession

Click here for out articles on various management topics

John W. Olmstead, MBA, Ph.D, CMC

 

 

Sep 16, 2014

Law Firm Staffing & Growth Models – Mergers (Small Firm Acquisitions) & Branching

Three weeks ago I was asked by the managing partner of a 16 attorney insurance defense firm about staffing and growth models for an insurance defense firm and I listed the following models and discussed the first model – grow your own associate staffing. Over the past two weeks in other posts I have discussed models 2-5.

Attorney staffing/growth models include:

  1. Grow Your Own Associate Staffing
  2. Lateral Associate Staffing
  3. Contract – Staff Associate Staffing
  4. Lateral Partners (Equity or Non-Equity)
  5. Of Counsel (Various Approaches and Purposes)
  6. Mergers (Or Small Firm Acquisitions)
  7. Branching

This week I will outline the pros and cons for number 6 and 7 – Mergers and Branching.

Mergers (or small firm acquisitions)

PROS

  1. Quicker access to talent, expertise in a new practice area, and client book of business.
  2. Access to infrastructure and resources.
  3. May enable the firm to fill in weak spots quickly.

CONS

  1. Risks of a wrong business marriage. (The larger the target firm the greater the risks)
  2. Issues involving integrating the firms.
  3. Control issues.
  4. Conflict of interest issues.
  5. Compensation – money, approaches, etc.
  6. Cultural incomptability
  7. Management time to evaluate the feasibility of the merger.

Branching

  1. Using approaches listed above.

The appropriate strategy is often a mix or combination of the above approaches. Need to drill down into the financials and review past experience concerning breakeven point for profitability of your attorneys, costs/overhead, fee collections, time, and profit margin.

Often the WHO dictates the WHAT (specific strategy)

Click here for our blog on law firm mergers

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John W. Olmstead, MBA, Ph.D, CMC

Dec 03, 2013

Starting a Law Firm – Going Out On My Own – The Most Important First Step

Question:

I am a non-equity partner in a small law firm in Washington D.C. I have been with the firm for 15 years and there is no opportunity to become an equity partner. I am thinking about going out on my own. If there were one first step that I should take what would it be?

Response:

Create a business plan – even if only a few pages – for the firm. Your plan will serve as a roadmap for your practice. Your mission should address what services you are selling, where you are selling them, and to whom. Your plan should address your competitive strategy – how you will be different than your competitors. It should also identify your core values. A vision for 5 years out into the future as to where you would like to see the firm and specific goals and objectives should be formulated.

Your plan will give you a good indication as to whether you should start a practice or not.

Click here for other ideas and tips 

Click here for our blog on law firm strategy

Click her for links to our articles on other topics

John W. Olmstead, MBA, Ph.D, CMC

 

 

 

Dec 18, 2012

Law Firm Start-Up – First Steps

Question:

I am a non-equity partner in a large law firm in LA. I have been practicing for 15 years and with the recent economic turmoil we have experienced in our firm, downsizing, and overall uncertainty I have recently been considering starting my own firm. What are initial steps in starting up a law firm?

Response:

While there is an entire list of start-up steps that need to be taken when launching a law firm here are a few to get you started and the order to be taken:

  1. Create a business plan – even if only a few pages – for the firm. Your plan will serve as a roadmap for your practice. Your mission should address what services you are selling, where you are selling them, and to whom. Your plan should address your competitive strategy – how you will be different than your competitors. It should also identify your core values. A vision for 5 years out into the future as to where you would like to see the firm and specific goals and objectives should be formulated.
  2. Select your firm name. Think long and hard about your firm name. What name will have staying power as you grow? Will it play well with internet search engines? Can you get your firm name as a internet domain name? Determine organizational form and incorporate into firm name and branding.
  3. Staffing. Determine whether you will hire staff initially and your staffing needs going forward. Incorporate into your office space, furniture and furnishings, and equipment needs.
  4. Office. Decide on office space, negotiate your lease, and obtain your business address. Commence on the process to make space ready and furnish and equip.
  5. Business Identity. Hire a graphic design firm to begin the design of your business identity and carry this design plan into all of your collateral marketing materials including web site, letterhead, office signage, business cards, etc.
  6. Banking and Registrations. Obtain FEIN number(s), register business with required organizations, file organizational documents, open bank accounts.
  7. Website. Develop a first class web site that demonstrates expertise.
  8. Furnishings and Equipment. Begin selecting office furniture and furniture as well as equipment, computers, software, etc.
  9. Insurance. Obtain all needed insurance including premises liability, malpractice insurance, medical, life, workers compensation, disability, etc. Insure that you obtain appropriate tail coverage with your malpractice insurance.
  10. Start-Up Project Plan. Maintain a project plan for all of the activities and tasks and monitor weekly as the plan unfolds.

Good luck on your journey!

Click here for our archive blog on new firm start-up

Click here for our articles on other topics

John W. Olmstead, MBA, Ph.D, CMC

Aug 08, 2012

Law Firm Owners and Partners – What is Your Primary Focus – Business Person or Lawyer?

Question:

I am an attorney in Chicago. I am the sole owner of an estate planning practice consisting of 4 other attorneys, 4 paralegals, and 2 administrative support staff members. We have reached a size where I am having problems handling and balancing the demands of serving my clients and managing my firm. It seems I am working day and night and have no time for anything but work. I am frustrated and it is driving my crazy? I would appreciate any thoughts that you may have.

Response:

You are not alone. This is a common problem in law and other professional service firms. I have similar problems in my own firm – it is very difficult to serve two masters – serving your clients and managing your firm. Eventually you have to pick one – client service (doing legal work) or managing and running your business – as the area that receives your primary focus. This is not to say that you should not do both – but you select the primary area that you are going to focus on and get help with the other area.

A question that I typically ask my new law firm clients – what do you want to be or do – be a business person or a lawyer. The answer to the question often provides a hint to how you should structure your firm. If you want to be more of a business person – hire legal talent to help with serving clients and performing legal work and spend more time working on your firm rather than in it. If you want to be more of a lawyer and do legal work and serve clients hire a legal administrator or business manager (this is more than an office manager) to manage and run your firm.

I have more and more owners of small law firms that are managing their law businesses and not practicing law. I believe the appropriate direction is what makes you happy and what type of work you enjoy doing. You practice should support and fulfill your personal goals, what you want out of life and what makes you happy. If that is managing – then manage. If that is doing legal work – do legal work.

Two great books on this subject are – The E-Myth Revisited and The E-Myth Attorney – available on Amazon. The theme of both of these books is:

Small business owners often spend too much time being the technician (i.e. lawyering) and not enough time managing and innovating.

Think about where you want place the priority of your focus – working on firm (business) or in it.

Click here for articles on other topics

Click here for our archive blog on strategies

John W. Olmstead, MBA, Ph.D, CMC

Jan 24, 2012

Starting a Law Practice: Challenges and Tips – Partnership – Phase III

Over the last two weeks I responded to a question concerning starting a new law practice and I outlined the first to phases of start-up. Eventually, you must address and face Phase III.

Phase III – Partnership – Internal/Other Firm

Eventually the question of partnership arises – weather sooner based upon the need or desire to transition an associate into a partnership or to add a practice area by acquiring a lateral partner with his/her book of business. Maybe you are thinking about merging with another firm. Or maybe you have been solo or a sole owner for your entire career and are now contemplating retirement and are looking for a succession/exit strategy and now must either bring in a partner, merge with another firm, or sell your practice. Partnership with another attorney creates another set of interpersonal dynamics and another set of skills that will need to be developed at this stage of your practice.

Phase III Survival Tips

1. Partnership is like a marriage. You must marry the right person. Most partnerships that fail do so as a result of partnering up with the wrong partners. Compatibility is critical. Consider:

a. Long term goals of both parties

b. Work ethic computability

c. Common interests

d. Money and compensation

2. Thinking of merging? Research indicates that 1/3 to 1/2 of all mergers fail to meet expectations due to cultural misalignment and personnel problems. Don't try to use a merger or acquisition as a life raft, for the wrong reasons and as your sole strategy. Successful mergers are based upon a sound integrated business strategy that creates synergy and a combined firm that produces greater client value than either firm can produced alone. Right reasons for merging might include:

a. Improve the firm's competitive position. .Increase specialization – obtain additional expertise.

b. Expand into other geographic regions.

c. Add new practice areas.

d. Increase or decrease client base.

e. Improve and/or solidify client relationships.

3. I would start by thinking about your reasons for wanting to merge and your objectives. Ask yourself the following questions?

a. Do you want to practice in a large firm? If not, what is the largest firm that you would want to practice in?

b. What is driving the desire to merge?

c. If the desire to merge is being driven by a desire to retreat from internal problems – what have you done to address these issues internally?

d. Is your name being part of the firm name important to you?

e. What are your expectations and objectives for a merger?

f. What are you looking from a merger partner?

g. Make sure that you look for a complimentary fit. If you are weak in firm leadership, management and administration – look for a partner that is strong in these areas. Strong leadership, management, and administration may be hard to find in a firm under 25 attorneys.

Are you ready for the challenge?

Click here for our blog on mergers

Click here for articles on other topics

John W. Olmstead, MBA, Ph.D, CMC

Jan 17, 2012

Starting a Law Practice: Challenges and Tips – Phase II

Last week I responded to a question concerning starting a new law practice and I outlined the first phase of start-up. Eventually, you must address and face Phase II.
If you are successful in Phase I you will eventually need help whether it be administrative, paralegal, or another attorney. Now you must manage others as well as yourself. More office space will be required – especially if you are currently in a home or virtual office. A new set of skill sets (people skills) is now required.
Some Lawyers Never Develop the Skills Needed or Desire to Go to This Level and Firm Growth is Restricted as a Result.
I refer to this phase as Sole Owner Phase. I have client law firms in this phase than consist of an attorney owner, a handful of employed associates, paralegals, and staff. These firms may have 3 to 4 people or ten or more. I have sole owner law firms with over 100 employed attorneys and staff.

Phase II – Taking the Practice to the Next Level – New Challenges – New Skills Required
1. Additional People
a. Know what to look for
b. Know how to compensate attorneys and staff
c. Decide whether you are looking for long term vs. short term hires and relationships
2. Develop Skill Sets in the Following Areas – Managing Others – Finding, Managing, Motivating, Training and Retaining Talent
a. Hiring and Firing
b. HR Function
c. Devote time to managing others
d. Delegation of work
e. Supervision of work
3. Use the Following HR Tools and Processes
a. Job Descriptions
b. Performance Reviews and Evaluations
c. Office Policies and Procedures
d. Office Meetings (Meeting Management)
e. Personnel Records
f. Payroll and Reporting
g. Salary Administration
Key Challenge in Phase II – Knowing When You Have the Business and You Are Ready for This Phase

Click here for our blog on marketing
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John W. Olmstead, MBA, Ph.D, CMC

Jan 10, 2012

Starting a Law Practice: Challenges and Tips – Phase I

Question:

I am an associate in a 6 attorney firm in Cleveland, Ohio. I have been a practicing attorney for four years and have been with my present firm since law school. I am considering starting my own firm. What is your advice for someone like me starting up a practice on a shoestring?

Response:

I receive at least ten calls a week from attorneys that are in solo practice or are the sole owner of a small law firm with similar concerns and frustrations. However, there tends to be different needs and challenges depending which phase of development the firm is in. Here are a few survival tips for the first phase:
Phase I – Solo Startup

In this phase it is all about you. More than likely initially you will not have office staff. If you are a new attorney right out of law school you must learn your trade and develop competencies in lawyering and client service. Your first priority will be to supplement your law school education with nuts and bolts practice skills – and you will have to do it quickly. Since you won’t have a senior partner in your firm to mentor and train you – you will have to reach out to resources outside of your firm. You will not have an accountability partner in your firm. Your second priority will be getting clients. You will have to actively marketing and promote yourself and your practice. Funds may be limited so your largest marketing investment will be your non-billable time devoted to marketing and client development activities. Finally, your third priority will be getting paid by your clients. Self discipline and exceptional time management and time keeping skills are critical success factors.
Phase I Survival Tips
1. Create a business plan (strategic plan)

Create a plan before even starting the practice even if it is a one page plan. This will serve as a roadmap for your practice. See Helen Gunnarsson’s article in November 2011 Illinois Bar Journal.

2. Setup your practice and office
This includes everything from the selecting a suitable name and legal form for your practice; setting up your office whether it be a home or virtual office, a space share arrangement, or lease office space; acquisition of office systems, etc. (I have a start-up checklist available. E-mail me if you would like a copy.)
3. Develop competencies in law and business
a. Find an experience attorney to serve as a mentor. The ISBA Mentor Center has mentor program available for members.
b. Consider a business coach
c. Take all the CLE you can
4. Getting Clients
Time must be developed to business development. To be successful in private practice attorneys must be finders (originate new business), minders (manage client matters and relationships) and grinders (worker bees that work on client matters, provide services, and generate fees). You must manage and balance your time in a way that you cover all three of these bases.
5. Client Development/Marketing
a. Actively network with the general public, other attorneys, and other potential referral sources
b. Ask for referrals
c. Implement a first class website that demonstrates expertise
d. Implement a contact database
e. Develop a personal marketing plan (contact plan)
6. Getting Paid
a. Use engagement letters and fee agreements
b. Ask for retainers and replenish
c. Accept credit cards
d. Establish client selection criteria
7. Financial Management – Work the Books
Learn key metrics and “red flags” for your practice area, set goals, and measure your performance against these goals. Take corrective course actions as needed. Actively manage your cash flow. Remember – profit as reflected on the income statement and cash flow are not the same.
8. Manage Your Self – Self Discipline and Accountability
9. Partner with Other Solos

Click here for our blog on marketing

Click here for our published articles

John W. Olmstead, MBA, Ph.D, CMC

 

Oct 06, 2010

Characteristics of Successful Law Firms – Basic Building Blocks – Block 7 – Marketing

For the past six weeks I have been discussing the characteristics of successful law firms and introduced the following basic building blocks that successful firms typically have in place:

Partner relations, leadership, management, partner compensation, planning, and client service blocks have been discussed. 

The seventh and final basic building block is marketing. Successful firms have an effective marketing infrastructure and program in place.  

Gone are the days when attorneys simply practiced law. Today, they face increased competition, shrinking demand for services and increasing supply of professional talent, availability of service substitutes, and marketing of professional services. Marketing can no longer be ignored if small law practices are to survive in the future.

Based upon our observations working with client law firms over the past twenty six years we have concluded that marketing is poorly understood and ineffectively implemented in many small law firms. In addition, the following obstacles are at play:

Time – There is no time for marketing or any firm developmental activities. Production is king and non-billable activities such as marketing are discouraged.

Uneasiness With Marketing – Attorneys are uncomfortable with marketing. This is primarily due to lack of understanding, training, and experience with the process.

Lack of Marketing Understanding – Many attorneys confuse marketing with advertising. Marketing is not advertising. Marketing activities can exist without any promotional components such as television advertisements, radio spots, tombstone magazine advertisements, or direct mail. Marketing is the broader process concerned with the development and delivery of legal services and is part of the firm's long range planning process. It provides answers to the questions what are we selling and to whom are we selling. It involves maintaining relationships with existing clients as well as creating new relationships with prospective clients. In fact, a major objective of many successful marketing plans is obtain additional business from existing clients.

Focus and Accountability Problems – Frequently law firms experiment with marketing and engage in isolated promotional activities not integrated with the firm's business plan with the expectation of immediate results after the one-shot activity. The firm engages in fits-and-start activities that are completely unfocused, unrelated to an overall plan, unmeasured, inconsistent and often inappropriate.

Cultural Issues – The typical culture of many law firms discourages investment in long-term developmental activities. The focus is on billable hours and production. Everything else is of secondary concern. The consensus governance model typical in law firms hinders change and timely decision-making at the firm level. In addition, effective marketing in law firms requires marketing at the firm, practice group, and individual attorney levels. This requires effective training, mentoring, follow-up, and accountability at each of these levels.

Reward and Compensation Systems – RMost reward and compensation systems focus on short-term production and discourage participation in longer term (non-billable) firm investment activities or projects.

Click here to read one of my articles on marketing

Click here to read my blog postings on marketing

I hope you have enjoyed the series. Next week I will resume posting questions and answers received from law firms. 

John W. Olmstead, MBA, Ph.D, CMC
www.olmsteadassoc.com

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