Few practicing attorneys haven’t, at least, considered the notion of going out on their own. Having your own practice particularly comes to mind when you are dealing with a challenging boss or coworker. The fantasy of throwing that shingle out there, however, is usually shattered by the paralyzing fear of being solely responsible for the bills coming in. In the weighing of toxic environment against freedom, a guaranteed paycheck, regardless of how productive you are or aren’t, often wins the day.
Here’s the secret though, when the choices are sink or swim, we all start paddling like crazy. The decision to start your own law firm begins with believing in yourself. When you started college from High School and you became responsible for managing your own time and schedule, there was a learning curve, but you did it! That 1L year in law school was a beast, but you graduated, right? The bar exam struck fear in all of our hearts, and yet here we are being called, “Counselor.”
The truth is, by the time you become a lawyer, you have a 100 percent success rate at surviving intense challenges and pressure. If you can get to be a lawyer, you absolutely have what it takes to run a practice. That being said, there are some things that make it a lot easier.
As someone who started a law firm on a wing and prayer, let me tell you first-hand, that is not the way to do it. Can it be done yes, should it be done, no. Take the time to make a plan, starting with saving capital to start yourself off. The expenses are many when you are starting your own firm, even a solo practice. You will need to form a legal entity, obtain an EIN (tax ID number), open a business operating account, trust account (IOLA/IOLTA), and should maintain a savings account to segregate funds for quarterly taxes. You’re additionally responsible for maintaining malpractice insurance, and in this tech era, best to have coverage for cyber security insurance as well. You need to secure domain names if you want a website, and will need to pay a designer to create and maintain the site. All, in addition to running a practice.
This is where having a plan comes in. You are one person, with a lot of responsibility. Identifying tools to streamline your tasks early on will make a huge difference. However, the reality of limited funds means that you need to triage your need by level of import. For example, accurate accounting of client funds and avoidance of comingling funds are tasks of vital import because it can impact your license to practice law. Accordingly, making sure you have a clear method to manage your accounts is a top priority.
Fortunately, you don’t have to pay $75 per user, per month on fancy office management software that you don’t really need as a solo practitioner or small firm, in order to reach this important goal. M&T Bank, for example, has a dedicated team trained specifically to meet the account needs of attorneys. Nota, a digital platform that allows for the notation of operating and trust accounts for attorneys, is powered by M&T Bank so the bank keeps those numbers straight and account balanced for you. The attorney just marks which client matter each transaction applies to, and can even create account statements individualized to each client. Nota also has safeguards to ensure you don’t take more funds than any one client has given you. Beyond that, the Nota team serves as a bank concierge to assist you in any other financial service you need from the bank, from credit cards, to loans, or anything in between.
Money and time saved by having a bank that actually understands the demands of attorneys, can be devoted to any of the many other tasks on your plate. Additionally, by having your account information straight, you have the additional ability to really track your finances and set a reasonable budget.
When budgeting for your firm, it is important to know you firm goals. Is your goal to grow and expand your business to a multi-attorney firm, or are you happy with simply maintaining your own practice. It’s important on this point to know yourself, first and foremost. There are skilled marketing reps who will push you to believe that if you don’t grow you are failing. That simply isn’t the case but is a great tactic to convince someone to give you ten grand for a marketing campaign.
There is nothing wrong with not wanting the stress of having to make payroll. As your own boss in a solo practice, you have full control over what cases you take, how much you take on & consequently how much you make. Conversely, the more people you take on, the more personalities and the more demands and overhead you command.
Yes, the more people you employ, the more work you can take on, the more money you can make. But golden handcuffs come with that money because it isn’t just that you can make more money, its that you have to make more money because you have payroll you have to make. It is desperation to make payroll that has caused attorneys to make unethical decisions with client funds, that sometimes even ends up getting them disbarred. Make sure that your client base is sound and steady before taking on employees, and make sure that working with other people is something that you want. There is no sense, to the dollars and cents of it all, if it doesn’t make you happy.
The core decision that must be made before opening your own firm is, “Am I more comfortable as a leader, or a follower?” There is no judgment with respect to the answer to this question. There are people who are simply not comfortable in the spotlight, they don’t like public speaking, they don’t like making decisions, they don’t like handling conflict – if that’s you, running a law firm probably isn’t for you.
The world is a beautiful place, full of diverse people, and there is a role and function for everyone to contribute. There is absolutely nothing wrong with making the decision that you are more comfortable with someone else taking on this stress, and you just show up and get paid.
Conversely, if setting your own hours, furthering your own vision, and being control over your own practice sounds exciting, don’t let fear stand in the way of your dreams. Make a plan and take the plunge. Invest in yourself and build a law firm consistent with your vision and values.