The Most Common Advice on Starting a Firm

Almost a dozen attorneys have been willing to talk with me and my partner about our law firm so far. Some attorneys have offered better advice than others, but it has all been valuable in some way. These are the three things that we have heard repeatedly from attorneys. But constant advice doesn’t mean good advice.

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Get Paid Up Front

Every single attorney we spoke to told us to get paid up front. It sounded like each one had a story about losing several thousand dollars at one time or another. We plan on balancing this advice with the need for experience. There is nothing wrong with taking a case for low to no fee in order to get the experience. In my opinion, now is the best time to do that sort of thing. Our overhead will be low and we don’t have to worry about paying anyone besides ourselves. And in some cases the experience will be invaluable.

Keep Overhead Low

Several of the attorneys we spoke to advised against racking up any kind of debt when opening a firm. Some even had horror stories about this person or that person who racked up lots of debt opening a big office with lots of furniture, only to go out of business shortly thereafter. We don’t plan on borrowing any money for the firm. We will each invest, at most, about three thousand dollars.

Right now the only “absolutely necessary” expenses we have are liability insurance and medical insurance. We expect costs to go up as time goes on, but there is no reason to shun this advice. I’m no accountant, but even I know that lower expenses mean more profits.

You Need an Office

In seeming contrast with the last piece of advice, most attorneys scoffed at the idea of a virtual law office. Our plan was to use the local bar association’s office and conference rooms in various attorneys’ offices to meet with clients. But after nearly every attorney recommended we have a permanent office, we are reconsidering. Now we have to weigh the cost and convenience of a home office with the benefits of a physical office. Most likely we will work from home for a few months, save some money, and rent office space when we can afford it.

But what do you think? Is this advice worth following?

Starting a Law Firm

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  • Judy

    I am also considering opening a home office initially. I don’t know if a physical office is truly necessary , especially to start off; however, this may make more sense depending on what type of law you are planning on practicing. For myself, I am planning on practicing criminal law and I can most likely go to my client. If necessary, I will probably look at share-space options or a “rental” office of some sort to keep the cost down.

    • http://lawyerist.com/author/joshcamson/ Josh Camson

      What do you mean by a “rental” office?

    • Judy

      Office space that can be rented on a day-to-day basis. I don’t know if these types of arrangements are still around, but they were. It’s kind of like renting a car, you rent it for a day while your car is in the shop.

      • http://lawyerist.com/author/joshcamson/ Josh Camson

        We definitely don’t have that in my suburban county. Although that sounds like it could get costly quickly, as opposed to an office sharing type of deal. It may be tough to budget too, since the cost will fluctuate month-to-month.

  • http://www.bryceaschmidt.com Bryce Schmidt

    You’ll be surprised at how much it actually costs to run a firm, even if you keep your overhead low. You may also be surprised at how long it takes to start generating revenue. When I started my own office, I didn’t have any portable business to take with me, and I started doing cases on a contingency fee basis. While some cases did payoff quicker than others, it took me several years to turn a profit. The first few years I took losses. I would suggest avoiding borrowing money if possible, but you need access to a line of credit. If I hadn’t had a line of credit available to me a few times, my practice wouldn’t have survived. Best of luck to you.

    • Judy

      Thanks, Bruce.

  • http://fabianip.com Jeff Fabian

    I’ve been operating with a virtual office for two years now (since leaving my first firm job), and I have no intention of moving into a permanent space – unless I get to the point that I need to take on one or more associates. I have a dedicated office in my home, and I am disciplined enough to be able to put in 8-9 hour days without getting distracted (which I understand is a problem for some people). The time and money saved are more than worth the occasional “hassle” of taking a mid-day 10-minute drive to the local FedEx dropoff, and the significantly reduced fee I am able to charge opens up my services to entrepreneurs and small business owners who otherwise wouldn’t be able to afford them.

    • Judy

      Thanks, Jeff. I had just read an article about virtual law offices and an attorney who also provides mentoring/training for opening one. I really would like to start out in this way, or at least to some extent. I think my husband would feel better about the cost of it too! :) I don’t think I would mind the occasional trips to FedEx as it would create a short break for me.

      • http://lawyerist.com/author/joshcamson/ Josh Camson

        Judy,

        You don’t have any contact info on here but please drop me a line so we can discuss our respective practices off-line.

  • http://lawyerist.com/author/samglover/ Sam Glover

    I don’t think you have to have an office, but a good office space with lawyers who have complementary (not the same) practices can be a huge advantage, both for resources and referrals.

    I started working out of my home, and moved into an office with other consumer lawyers after about five months. It helped focus my practice, resulted in lots of referrals, and was a big part of whatever success I have had.

    • Judy

      Hi Sam,

      I have given thought to the advantages of a “firm” environment; however, I don’t believe that option will be available for me as I am above the preferred age for new lawyers in a traditional firm. However, I do acknowledge the importance of being able to tap into other attorneys for their advice, suggestions, etc. and I am trying to build a mentor list through my group connections as well as personal connections.
      Thanks.

      • http://lawyerist.com/author/samglover/ Sam Glover

        For what it’s worth, I don’t think age has anything to do with it. I rent my space out to several other lawyers who are a wide range of ages. It’s nice to have the variety.

  • SU LAW

    I am in a very similar position. I Left the law firm I worked for about one year ago; working from my home since. Business has grown but am currently caught in the vicious cylce of late billing by my part. I am currently seeking office space to rent in order to hire an assistant for my billing and administrative work. Honestly I like to do all my work personally but I have found myself spending way to many potential billable hours working on pure office clerical work.

    I constantly read this blog in order to get ideas for my practice. So far we’ve been on the same page.

    Thanks for the constant advice.

  • http://www.lawschoolsuccesstips.blogspot.com Ian

    All very good pieces of advice. For number 1, I would stick with what the others have said and get paid up front. Also, I am not really clear how the need for experience has anything to do with getting paid. You can always do pro-bono work where you know you are not getting paid if you want experience. For paying clients I do not think I will assume the credit risk. Also,you can very easily open a merchant account so clients can easily pay with check or credit card. I just looked into this and I think it is around $20 per month. (and the commission fee of course).

    For number 2, great advice. I am also a CPA and often see people underestimate the importance of low overhead.

    For 3, I absolutely agree with everyone that has said you should get a “real” office. You should just ensure that you get it with a group of lawyers as you can get great referrals. Also, it is nice to have other lawyers around to bounce ideas off of. When I looked at virtual offices, I was surprised at how expensive they were given that they were not offering much. (some of what they were offering I could have gotten for free – for example conference room space). I just signed a lease for office space with a group of lawyers and although expensive in NY, I am glad I made that choice. I am sure it will pay off.

    So when is that malpractice insurance post coming?

    • http://lawyerist.com/author/samglover/ Sam Glover

      You missed it. Here’s the malpractice insurance post: http://lawyerist.com/purchasing-malpractice-insurance/

    • http://lawyerist.com/author/joshcamson/ Josh Camson

      I don’t think getting paid and getting experience are mutually exclusive. I was just saying that although everyone advocates payment up front, it’s a good idea to take a case pro bono now and again in order to get the experience.

  • http://blog.simplejustice.us shg

    While Josh mentioned it in his earlier posts, it probably would have been helpful if he included it again here: he plans to practice criminal defense. This means that his practice has some elements that are different from others. He cannot use contingent fees. The virtual office model won’t work at all. It’s rarely a good idea to have criminal defendants come to your home office. Getting paid up front is a matter of long-standing practicality, as the clients tend not to be susceptible to suit afterward and are occasionally disinclined to pay if they don’t have to.

    Josh’s advice is directed toward the needs of his practice. Your mileage may vary.

    • Judy

      Learning that Josh is planning to practice criminal law is heartening as that is the area of law I am going to go into. I agree that a fully virtual law office may not work, which is why I was planning on looking into a rental office space or shared space strictly for meetings with a client (outside of jail, that is. lol). However, that being said, virtual can still work through the use of Skype, etc. I have not compared the costs between the two – physical vs. virtual – yet. Just saying the options.

  • http://constructionlawva.com Christopher G. Hill

    I am at an office suites location where there are multiple businesses, but also several other solos who do work in areas that I don’t practice in. It’s become a great referral network. I agree with all of this, deposits are key, overhead is key and personally, I’d have trouble focusing in a home office, but this last is a personal choice.

  • http://mylawlicense.blogspot.com BRIAN TANNEBAUM

    This whole “you don’t need an office” thing is awful advice. Let’s put money aside for a moment (because if your goal is only to save money and do everything on the cheap, you’ll have a cheap practice with cheap clients) and think about the practice of law.

    Don’t you want to be around other lawyers? Do you like staying home all day? Will that help you develop business? When that client calls and says “I need to see you ASAP, what do you do? Put the dog away, turn off the washing machine and sweep up a bit?

    Aren’t you trying to build something?

    So you can’t afford an office, try an office suite situation, or find some lawyers that have a closet or something and hang out there. Go where lawyers are. Be with real people, go grab a sandwich with the downtown crowd. Jeez people, is your whole life sitting at home and downloading apps and watching Castle?

    This whole notion that office space is a bad idea or that “you can work from home” is terrible. Sure, you can also walk to work, pick your own vegetables, and wear potato sacks for clothes. There’s a lot of cheap ways to live, but this notion of “stay small” in all aspects of a practice is just dumb.

    • http://lawyerist.com/author/samglover/ Sam Glover

      I think it does depend at least a little on what “working from home” means. I know a few lawyers with true home offices who have no plans to ever get a “real” office. They are serious lawyers with good reputations and strong practices.

      But they aren’t working from the couch with one hand on an iPad and the other in a bowl of Cheetos, either, and they have developed strong networks for referrals and peer mentoring despite spending most of their time at home.

  • Guest

    Every lawyer must present an office to the world, or the world will not consider him to be a serious lawyer. At this point you need an office for credibility with new clients, but you are not going to have enough new client interviews to keep you there 30 hours a week. So you should rent an office by the hour from either another lawyer, or from a Regus type virtual office establishment. (Obviously you don’t tell clients that it is an hourly rental). It is better if you can rent from other lawyers for the networking and mentoring opportunities. Sometimes you can reach an agreement where you cover court dates for another lawyer in exchange for use of an office.

    Brian’s point about having a serious practice for serious clients is well taken. Lawyers with a nice office have the credibility to charge higher fees from middle class criminal defendants than those without. But being honest, no white collar criminal, or even a doctor with a DUI, is presently going to hire you regardless how cool your logo (which I like) or how beautiful your office. Street criminals and young hoodlums with misdemeanors are going to hire you. A permanent office is for the future. At present, its a sunk expense.

  • http://www.PAinjurycase.com Dave S.

    First, I would have said if you don’t have a set minimum of capital or credit to start up a law office, you shouldn’t do so. But, I know you are past that point of the process.

    Having “real” office space (not a home office or a virtual office) is a cost of starting up a law firm in my view.

    If you have a tight budget and don’t think you can rent your own space, then the next best thing in my opinion is to look to share office space with other lawyers. This helps you in rent costs, office furnishings and perhaps most important, potential for overflow business from the other lawyer(s). Another possibility would be to consider sharing space or sub-leasing at a location from a non-lawyer. Same positives.

    Another big consideration is the effect of moving your location – it has a huge impact on bringing in clients and marketing. So, starting out at a location to save a few dollars if you don’t intend to stay there for at least a year is a mistake in my view, because the savings will be outweighed by the potential loss of business associated with moving.

    • http://lawyerist.com/author/joshcamson/ Josh Camson

      Right now we just have a PO box. We aren’t giving our home addresses to clients. So once we get the office (which is definitely happening at some point, just a question of when), we will keep getting mail there.

  • http://www.courtneyallenlaw.com/ Courtney

    Re: having an office
    I moved my practice into my home 18 months ago and it has been a great experience. I have an office front where my mail goes and I meet clients. There is always a receptionist to greet people who walked in. Overall, I’m glad I set it up this way for a while, but now the time has come for me to get an office. The tipping point has come as business has picked up recently and I’m having to leave my home and go to the office multiple times during the week to meet with clients. It is a huge interruption to my workflow and now the benefit of having an office outweigh the cost, for me at least.

    • http://lawyerist.com/author/joshcamson/ Josh Camson

      There was a Godfather marathon on recently, and that’s the first thing I thought of when you mentioned an “office front.”

    • Judy

      This is exactly the type of thing I was thinking of – the office front for meetings and mail. Is your receptionist full-time, temp. or part-time?

  • William Chuang

    I am in favor of having a real office for your legal practice. The entire mentality that you can start your law firm for $3,000.00 really has to stop, or at least neutered. Primarily, it does not take into account opportunity costs. You could be working for someone else instead. That matters because the $3,000.00 figure does not include feeding yourself and paying the rent in the start up period.

    Starting a law firm requires a huge commitment, and great dedication. Going in with the idea that you only need $3,000.00 will force you to go out of business before you’ve had a chance to recoup your investment. I mean, you buy your laptop and multi-function printer, then sit around for three months before realizing that you are getting hungry and the cupboard is bare. Then you stop your practice and find another job. You might as well just throw the money away. (Or send it to me.)

    You will need adequate capitalization. The number one reason small businesses go under is failure to keep enough money to operate your business AND YOUR LIFE. (I made that statistic up.) Three thousand dollars isn’t adequate.

    Also, some jurisdictions require a physical location for law firms. A PO box is not enough. I think New Jersey and New York have that requirement. Look into that and whether or not you want your clients to know where you live.

    • http://lawyerist.com/author/samglover/ Sam Glover

      Whoever wrote that post about starting a law practice for $3,000 is a moron. Or else regularly misunderstood (for the record, I said you can start a practice for $3,000, not should).

    • Guest

      I started a criminal defense practice for less than $3,000.00.
      You need, at minimum:
      1. A computer with a scanner and high speed printer.
      2. Unlimited minutes for your cell phone to take calls.
      3. A subscription list for people arrested (unless you pull the names and addresses from the court computer yourself).
      4. Stamps and envelopes.
      5. High deductible malpractice insurance.
      From this you can start sending out solicitation letters to the criminals. Before the great recession, one dollar spent on stamps and envelopes generated at least three dollars in business. (That was my number. I spend 3 years as an ASA so I was an “aggressive former prosecutor” on the advertising; and I’m a good salesman; other people’s numbers may differ) The ratio has narrowed since the recession.
      After the money comes, in you can spend money on:
      1. An office.
      2. A secretary to fold the mailers for you.
      3. Higher end litigation.

      Nothing stops you from working part time while you wait for the phone to ring, so there is no opportunity cost. There is another opportunity cost to keeping a job. You may get to the point where you get used to a six figure salary and then can never leave (because you won’t make six figures your first year out). Then you are stuck being a permanent slave to another lawyer.

  • RC

    Just a couple of thoughts from the criminal practice here in Tennessee. Sometimes it is not practical to expect to get paid up front. Here a lot of times the representation gets divided up between the General Sessions court dates (the misdemeanor/preliminary hearing court) and the Criminal Court. Most attorneys will quote one lower price for the “downstairs” court appearance and explain in their contract that that fee won’t cover entry of appearance on the criminal case after indictment. After the indictment is returned, then the client will need to pay X amount for the “upstairs” case, with the GS fee counting towards that fee. If the client can pay the whole amount at one time, great. But that is the exception not the rule. Normally, the client (if not in custody) and his mother and grandmother will show up at your office with the GS fee and the rest will have to come out of a line of credit or loan on the grandmother’s house, if she can get one, or the family passing the hat. The bound-over period before the case gets “upstairs” generally will allow the family to get the remainder of the fee together before the arraignment date. Of course, your jurisdiction may vary on how cases are handled or if you can expect an indictment within a month of the case being sent to the grand jury after preliminary hearing.

    I agree with an earlier poster, get a credit card machine and take the hit on the commission and prices. If a family has one, you don’t have to worry about a loan approval from the bank.

    I’ve known some attorneys try to get paid on a “payment plan” method in a criminal case, but have rarely seen it work out well. Generally the case moves faster than the client expected, or more often than not, client is barely hanging on to begin with and adding the additional monthly expense of “paying the lawyer” won’t happen. Some judges here are more generous granting Motions to Withdraw based on “Rule 1″ violations than others, meaning you could get stuck doing a bad case for free if your payment plan falls through. No amount of experience is worth doing a felony murder case for free because the judge won’t grant your Motion to Withdraw for not getting paid, like I recently saw happen in my county.

    The first point leads to the second. When the family does finally get the money together to pay you, they aren’t going to call you and make an appointment. They are just going to show up with an envelope full of cash. If they have to try to hunt you down to pay you, the odds are significantly less that the cash will end up in your office. I have been in court on several occasions when the receptionist at my office share will call and say that “so and so is here and wants to retain you on his criminal court case.” It’s happened enough that now I’ve established a written procedure on how I want her to handle this specific transaction in the future. Because of this experience, I agree with everyone that if you are going to practice criminal law, you should probably try to find an office share where there is a permanent receptionist/legal assistant during regular office hours. I say share because it will be cheaper to share this expense with others than to try and have a receptionist on your own as you are starting out. Further, you hope to start building up commitments and court dates soon, so having someone always answering the phone is the best way to try to get clients into your office to talk about retaining you. If all they get is a voice mail system, they aren’t going to be able to make an appointment.

  • http://www.sofloridaestateplanning.com/ David Shulman

    I started my own solo firm in February 2009, after 7 years with the IRS, a year off to get my LLM, and then 3 years and a mid-size law firm. When I started, I had the “brilliant” idea to work out of my home to save overhead. My practice was -and still is- going to be focused on estate and tax planning. I’d go see clients and their homes and places of business, or even at Starbucks.

    It was the biggest mistake I ever made, and it took me 7 months to figure it out. Reasons why it was a horrible idea.

    1) Clients want attorneys with offices. Not just criminal law clients, but clients. They don’t want their attorney coming to their home or their office, or meeting them in Starbucks.

    2) I’m more productive in an office. There’s something to be said mentally about getting up, getting dressed, and going to work. As time passed in my “home office” I became less and less productive. I wasn’t working, I was watching TV. Maybe you’re the type of person who can work at home all day, every day when you need to, but I couldn’t.

    3) I got LONELY. Even when I was productive, I was still by myself – all day. It was so boring.

    Now, I have an office in an executive suite. It’s not a “part time” or “virtual” office. It’s a real office with a door and a locking desk and filing cabinet and my diplomas on the wall. It’s a permanent office. The fact that it’s in an executive suite means that my rent covers the space, the phone, the electricity, the internet, and a shared receptionist.

    It’s in a high rise in one of the nicest buildings in downtown Fort Lauderdale. Almost every time a client comes to see me, they comment about how nice it is. My office says, “I’m a real lawyer.” Also, the fact that it’s an executive suite is great too. There are probably 50 or so other professionals on the floor in the suite (it’s pretty big). They’re all lawyers, CPAs, small businessmen, etc.

    You say having an office is expensive? I say about 20% of my revenue comes from referrals from my officemates -more than what I’m paying in rent.

    I know that everyone tells you that the most important thing when you’re starting your practice is to keep overhead down. And I agree – to an extent. But you have to ask yourself what type of lawyer do you want to be? I thought I wanted to be the “online Starbucks lawyer” that Brian likes to make fun of. But you want to know why he makes fun of them? Because they aren’t practicing law. I learned that I wanted to be a lawyer that has clients. And to do that, you need to get up, get out of the house, and go to your office – and make sure your office has other people in it too.

  • http://consumerlawyer.mn/cgi-sys/suspendedpage.cgi Randall Ryder

    Getting paid up front is a great way to avoid a cash flow problem. But if you only get paid up front, that can skew case and client selection, to the point where you end up with problem clients or bad cases. In other words, don’t just use money as a filter.

    I work a fair amount from home, but I would strongly urge that you get an office. Even if it is a broom closet, I think the positives are well worth the additional cost.

    • http://blog.simplejustice.us shg

      crim-in=al. crim-in-al. Don’t get paid up front means don’t get paid. And it’s a terrible filter for people who like to work and not get paid who do crim-in-al.

  • Bruce Godfrey

    Bar newsletters often have ads for attorney space, some of it shockingly inexpensive, especially if it’s a shared situation. In the Baltimore County Bar Assn newsletter, there’s an ad for 1/2 time space this month for $195 a month. It’s OK to work from home in terms of getting work product done (many attorneys with A-grade space of their own do so sometimes) but it’s worth it to take on a part-time job at night delivering pizzas to pay the rent for “money space” until cash flow bridges the gap.

    I’d also suggest beginning sets of checklists for every area of your practice: opening files, paying bills, reconciling escrow per local rules, ordering supplies, etc. The sooner you systematize such procedures, even early in a small practice, the more time you can spend thinking about the most important things in the practice (and in life.) Increases your ability to reconstruct after disasters, to take vacations, to train future staff or make your law partner able to step into your shoes for a week if you get hit by some other lawyer’s future DUI client, etc. Might be a good topic for a future post on The Shingle Life.

    • http://lawyerist.com/author/joshcamson/ Josh Camson

      Thanks for the tip Bruce. I actually already have such a post in “draft” form right now. I had never thought about using it for the day-to-day office procedures though. I had only considered the check lists for substantive/procedural things like filing an appeal, properly presenting a pre-trial motion, etc. But using them for these office procedures makes perfect sense.

  • Gabe

    I am planning to start my own law firm by the end of the year. At the moment I have a job, but have been planning for about 2 years. I’m just waiting to have about 2 years of my present income saved. At first I thought that I could start by working at home, but after thinking it for a while I decided that I want a real office, so I can put my law books in a shelf, have a proper desk and talk to other people. Thanks a lot to all of you for your posts as they have enlightened me a lot. Any other tips or suggestions are welcome.

  • http://www.4alaw.com/business/litigation/ Terry.A

    My dad keeps telling me son you an office where clients can come to see u… Trouble is I think He might be right. As for getting paid we now take card payments anywhere we have an Internet connection!

  • http://www.shatterbox.biz/ Jay Pinkert

    While largely an urban phenomenon, co-working spaces like those targeted at tech start-ups are affordable, practical, and offer business development opportunities (think of all the small businesses that need legal services).

  • http://viviancrodriguez.com/ Vivian Rodriguez

    I think it’s a matter of preference and the practice area. I’ve owned or shared office space for nearly 20 years and then switched to a home office where I do most of the work, and meet clients at a virtual office. And yes, I’ve also met clients at Starbucks (but I don’t think that is the proper venue to get real work, it’s been mostly for the convenience of the client who has not been able to make it to the virtual office).

    But the poster who posted about self-discipline is right; you still need to do what you need to do on a regular basis. And Bruce Godfrey’s advice about checklists is also a good one, especially when it comes to billing for work.

  • http://www.ecbanadu.com Erin

    On the topic of payments – Ive used the Square app on my tablet to take credit card payments, you get hit with a small percentage, but its convenient to have on hand at all times. The app and device is free.

    I am just starting as well, dont have an office space yet, but am looking for the right fit. So, while I have your attention — if anyone is in Boston and has space available, please contact me!