Author: JMF

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Starting a Law Firm | Billing Your Clients

Starting a law firm is all about generating revenue and cash flow in order to survive.

It is very important to instantly have cash available so that you can do things like pay for your telephone, rent, internet, and all of the other costs associated with starting a new business.  How do you instantly develop cash flow?  You start a firm which caters towards the market.  The most common fields for market driven clients are probably family law and criminal law.  Many attorneys practice in both of these areas – especially when starting their own law firm.

For this post, I will discuss family law as the practice area to choose when specifically focusing on a field that lawyers starting their own firm can use to instantly generate revenue.

Here is an example:  a person calls your number and says he is looking for a divorce attorney.  You talk to them a little bit about their problem and quote them a rate for a retainer.  If they agree to your retainer, you typically will meet with them in your office in a few days.  That is usually when the client will pay you.

When the client comes to your office, you negotiate your billable rate, the scope of representation, and how much it will cost.  Also, you must make sure that you are competent to handle the matter and that you feel that you have something to offer the client.  If you are not able to ethically represent the client or handle the matter competently, you shouldn’t take on the case.  If the client agrees to hire you, you have him or her PAY YOU FROM THE START and you place the retainer money into a trust account.  After that, you should feel free to start working on their case.

For each unit of time that you work, you charge the rate of your agreed billable hour.  So, if the client gives you a $2,000.00 retainer, place it in trust and then bill the client on a monthly basis at your billable hour rate.  If your billable hour rate is $200 an hour, you should likely charge in increments of .2 or something like that.  .2 of an hour is equates to about twelve minutes.  Thus, if you put in twelve minutes of time working on the client’s case, you charge them .2 on their bill.  .2 at $200 an hour is a bill of $40.00.

On the client’s monthly bill, you must be sure to type in what you did to earn that money.  This is important to you, your client, and the ethics committee of your jurisdiction (to determine if the charge was reasonable – and, yes, this can come up.)  Here is an example of a .2 charge for a divorce case:  “Telephone call with Mr. Smith re filing of Petition for Dissolution of Marriage.”  Enter that information into your billing software (you do have billing software don’t you?) and, viola, you’ve just created an acceptable and reasonable bill.  If the client doesn’t pay your bill at the end of the month, you can now transfer the money from the trust account to pay your bill and then refund any remainder to the now fired client.

Again, when starting a law firm you must know how to ethically and reasonably bill your clients in order to generate immediate and business saving cash flow.

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Starting a Law Firm | Experience

Starting a law firm is not easy and it isn’t for the faint of heart.  My first recommendation to all graduating law students is that starting your own law firm after law school is not your best bet for making it as a solo attorney.

Experience is the key to hanging out your own shingle.  Why?  Because, law schools don’t do a very good job of preparing lawyers for the practice of law.  How do you get experience?  For starters, you need to be licensed in your particular jurisdiction.  After that, in general, most graduating law students do one of two things: (1) they get a job in private practice, or (2) they get a job in the civil or government arena.

Getting a job in private practice. 

Hopefully, you can find a job as an associate in a law firm after graduation.  Your first job will make a big difference on the kind of experience you obtain.

If you start a job with a large firm, you are not likely to have client contact right away and you, therefore, won’t need to worry as much about the procedural minutiae of practicing law.  Conversely, if you get a job with a small law firm, you are more likely to get practical experience quickly.

After you get your first job, my recommendation is to get as much client and courtroom contact as possible. You should also ingratiate yourself with an older attorney.  Establishing a mentor relationship can prove invaluable.  After that, if you work hard, and keep your nose to the grindstone, you may be ready to start a law firm.

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Starting a Law Firm | Market Research

I probably haven’t talked enough about market research when starting a law firm.  I did quite a bit of market research when I was first thinking about starting a law firm.

Mirriam Webster defines market research as:

“research into the size, location, and makeup of a product market”.

That does a pretty good job summing up what I am trying to do with my market research.  I know my location.  The town where I hope to open an office is Apple Valley, Minnesota.  As with all big cities, there are many suburbs of the Minneapolis/St. Paul area in the Dakota County area.  Also, I don’t want to limit myself to one specific town or county, but I know from my prior practice in Indiana that it is best to develop a network in a specific county when starting a law firm.  You need to get to know the other attorneys.  You need to know the judges and their staff.  You want your office to be close enough that you are spending too much travel time getting from your office and to the courthouse.  All this involves detailed market research.

The size of my market is larger than I am used to in Indiana.  Obviously, the Twin Cities are much bigger than South Bend, Indiana.  I don’t know what challenges that will bring.  I have been through the Apple Valley courthouse and know it’s general layout.  It isn’t terribly different than all the courthouses I have ever been to.  Also, there is a great law library attached to the courthouse.  This should be very helpful in establishing a form library.  I’ll talk more about the need for a form library in a later post.

I also know the competition in my area.  There is one large law firm with about 30 attorneys.  My guess is that they eat up a lot of larger, business type work.  They are a bit out of my league as for as the clientele I want to attract, but I think I know who the big dog in town is.  Otherwise, there are many solo and small law firms in the area.  It doesn’t seem to be overly saturated with lawyers.  I’m not there yet, but I don’t think it will be terribly difficult to get a foothold.  I do find it interesting that there seem to be a lot of solo practitioners in the family and criminal law area.  I know the legal job market isn’t the best, but I was surprised at the number of solos.  Again, I hope that isn’t a problem for my new law firm.

One good thing about Apple Valley and the Dakota County area is that driving and transportation is very easy.  I am used to an older town with some crazy city plans.  It isn’t a big deal, but I earn my money by the hour and I want to be able get to the courthouse or to wherever my client needs me to be quickly.

Finally, I think I know the marketing and advertising structure of the attorneys in my market.  I am happy to report that I think I see some avenues of getting my name out there quickly that other attorney don’t appear to be taking advantage of.  It is both a blessing and a curse of all attorneys who start a law firm that they inevitably have more time on their hands to market themselves than more established attorneys do.  Would I rather have the problem of having too many clients and too much to do?  Yes.  But, I’ve got more time to make that dream a reality.

As I’ve stated in prior posts, I’ve already begun networking with attorneys in the area to get feel for things.  If my wife and I could just find a home and move there, things would be a little easier in my quest to start a law firm.

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Starting a Law Firm | More Guest Blogging

It has been blog, blog, blog lately for me in my fledgling quest to start and build a law firm.

I will be guest blogging on several more websites, with the most recent being LegalJob.com.  LegalJob is a website dedicated to helping law students and young lawyers learn about what it takes to be a successful lawyer.  That kind of blog is certainly something that I’m interested in and I hope you are too.  Please follow LegalJob in the near future to look for my posts.  I’m hoping to post during mid-week as I’m already scheduled to blog on Friday’s for another website (not to mention my own blogging duties).

I haven’t started my guest posts for either the Law Street Journal or LegalJob.com, but you should check both websites out soon for my material.  As I’ve written about in prior posts, when trying to start a law firm, it is so very important to network with people in your chosen niche area.  Right now, since I am not licensed yet in Minnesota, my chosen niche area is blogging about how to start a law firm.

I’m getting the word out now to like minded people in my niche area.  That’s how I plan to start and grow my practice.

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Starting a Law Firm | Blogging

In my continuing quest to start a law firm, I have been thinking a great deal about blogging and internet marketing.

I have learned a great deal about starting and building a law firm and the real purpose of blogging.  My naive thoughts when I started this blog was that it would be a fun way to share what I am going through with whatever poor sap was interested in reading my posts (my wife, my mom).  Then I started to dig deeper into this vast morass of keywords, SEO, USG, and content-driven-marketing.  (yes, I may have too much time on my hand while I wait to start studying for the bar exam).

After practicing for 3+ years at a general practice firm, I never did this kind of thing.  I wasn’t starting a law firm.  I did network quite a bit and tried my darnedest to get my name out there.  And it worked.  But, I didn’t do blogging.  I didn’t do internet marketing.  And I should have.

Of course, there is the fact that my firm was well established in the community.  Starting a law firm wasn’t an issue then.  The phone would ring there and I would often take a cold call.  I got a lot of work that way.  After a while, I started to think:  “what makes the phone ring?”  Why are people calling this number?  The phone book?  The internet?  Reputation?  Probably all of the above.  But, I never thought about a blog.

When thinking solely about starting a law firm, blogging is a wonderful way to quickly and organically develop a readership.  Those readers know people.  Those readers may need a lawyer.  The readers’ friends may need a lawyer.  Those people may call the telephone number.  Blogging is a sort of instant networking – that is, as long as you write good content and then share it with your friends, family, and colleagues.  How do you share it?  Twitter, Facebook, StumbleUpon, Digg, and so many other social media websites.

Now, I will be the first to admit that I was somewhat ambivalent about social media.  I like social contact better.  But, like it or not, social media has a purpose and it (in my humble opinion) is leading the forefront of a new form of marketing.  I’m going to ride the wave and see where it takes me.  I have a feeling that it is only going to help me start and build my law firm.

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Starting a Law Firm | Guest Blogging

I wanted to share some exciting news with readers of how to start and build a law firm.  I will be writing as a guest blogger on The Law Street Journal.

The Law Street Journal (LSJ) is a new website and blog dedicated law students and providing information to them about law school and beyond.  I guess I come in on the “beyond” part related to starting a law firm.  I will be writing a weekly guest column related to taking the bar exam.

As I have stated in a previous post, I am signed up for Bar-Bri (yay!) and will begin studying for the Minnesota bar exam in July.  I plan to post my thoughts and advice throughout the process.  I hope that law students get something out of it.  I know I didn’t have a clue what I was doing when I took and passed the Indiana bar exam in 2007.

I am excited about this opportunity.  Be sure to check my posts on LSJ.  I’ll be sure to link to them here and tie in information on starting a law firm.

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Starting a Law Firm | Raising Your Children & Starting a Firm

I would feel remiss if I didn’t mention at least once in my blog about starting and building a law firm that I have a son.  His name is Benjamin and he is a beautiful three-month-old boy.

I thought of this post last night while laying awake, feeding Ben from a bottle, and thinking about whether I can really start a law firm in Minneapolis, MN and whether it can actually be successful.  For those of you who have kids, you know raising them is hard work.  It is fun work.  It is rewarding.  But, it is work.  My worry has been that I won’t be able to start a successful law firm and raise Ben properly.  I am at home a lot with him right now and I cherish the time I have gotten to spend with my new son.  I worry that if I start my own law firm, that Ben won’t have a parent at home with him.  My mom stayed at home with my brothers and I and I still remember that fondly.

Now, I would also be remiss if I didn’t mention that I have a beautiful and talented wife.  She is my partner in this little joint venture and she is always available for Ben when he needs her.  The way our move from Indiana to Minnesota is shaking out, she has also managed find a way to be home a lot with Ben and I.  So, Ben has got it pretty good right now.  But, my wife will be starting a job as a new family medicine doctor in August and I know she is going to be working a lot.  I am taking the bar exam in July so I will  be home but studying before starting a law firm.  Will little Ben be ignored and get the attention he needs?  Will we find a reasonably priced baby-sitter in Minnesota that cares about him?  Should I just stay home and take care of him and forget about starting a law firm?  Tough questions – all.

I should also admit that Ben is really not that much work right now.  He has his basic needs of eat, sleep, go-to-the-bathroom and then repeat the cycle.  He does play a little bit, but he is really a very easy, good boy.  We are lucky.

I think the answer that I have come up with is that each family finds their own way.  I am not going to give up on my dream of starting a successful law firm, but I am also going to be cognizant to my responsibilities to my special little boy – Ben.

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Starting a Law Firm | Marketing Yourself on the Internet

I must admit that I am totally new to this whole internet marketing thing when trying to start and build a law firm.  I mean, the concept seems simple enough, but where to begin?

As I’ve discussed, I am moving to Minnesota and I hope to start a practice there when I become licensed.  I plan to start a law firm and do primarily divorce and family law work while trying to focus on estate planning and probate as time goes on.  As I’ve also discussed, I don’t really want to be focused on family law for the long term.  I would love to be a successful probate and estate planning attorney, but that kind of work isn’t market driven and I haven’t been around enough to expect any kind of real work coming my way for a while.

But, this post isn’t about my chosen practice area.  Instead, I wanted to talk a little bit about my most recent struggles to learn how to internet market when starting a law firm.  As an aside, it has been difficult for me to blog or post articles in support of the family law firm I will be starting.  This is because I am not licensed in Minnesota yet and I can’t talk about Minnesota law until I’m licensed there.

Therefore, my recent struggles have been strictly related to learning how to internet market. This is a completely new and fascinating world to me.  As with so many things, there is a steep learning curve and I am just starting to climb it.  I didn’t market on the internet with my old law firm, and, now that I have some more time on my hands, I am just starting to realize what an amazing marketing world is out there.

Here is what I have found so far:  there are many solo attorneys out there doing internet marketing.  Particular fields that have heavy internet marketing are criminal law, personal injury, and family law.  It isn’t that there are lots of law firm advertisements either.  No, I am talking about user-generated-content (USG).  Oh, you’ve never heard that acronym?  Well, neither had I until yesterday.  Or, maybe I just revealed how behind the curve I am.  USG, in large part, amounts to blogging or other blogging-like activities.  Many attorneys out there are cashing in on USG, internet marketing, and search engine optimization (SEO).

Ok, I realize this post hasn’t been terribly helpful on the internet marketing front, but what I wanted to point out is all of the information that you have to learn when starting a law firm. It is an organic sort of marketing that appeals to the entrepreneur in me.  One of the great things about staring your own law firm is the challenge and the new ideas and things you learn in order to plant a seed and make your new law firm grow.

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Starting a Law Firm | Malpractice Insurance

Anybody out there who is going to try to start and build their own law firm is going to need their butt covered by legal malpractice insurance.  Don’t leave home without it.

Apparently, some jurisdictions (Indiana) allow you to practice law without malpractice insurance. Although I can see the argument on why the state bar association or legislature doesn’t want to interfere with how people do business, the fact is that not getting malpractice insurance when starting your law firm is just dumb.

After practicing for a little over three years, I can tell you that I was sure glad I had insurance to cover any mistakes I may have made.  I was never sued, but I dealt with a lot of clients who were often not educated, not very nice, and willing to do what it takes to make a quick buck if they can.  When starting a law firm, we lawyers deal with people.  People have a lot of problems often caused by their own behavior.  Just because you are helping them with a legal problem, that doesn’t mean that they won’t stop liking your help and decide to sue you.  It is just that easy.  You may know you didn’t commit malpractice, but it doesn’t matter.  You just got sued.  How are you going to pay defense costs?  Do you know anything about malpractice defense law.  I don’t.

I am trying to scare you a little bit here.  I am a young attorney and I know the temptation is there to say “I don’t need malpractice insurance for a while.”  It is too expensive and I’m not going to get sued after I start a law firm.  That is the wrong attitude.  I don’t have the cite here, but I have read that every lawyer can plan on being sued for malpractice at least once during their career.

Another thing to consider when thinking about starting your own law firm is that you may be a young attorney.  You may not know too much.  You are going to make mistakes.  When you make those mistakes, you will not have a partner or older associate there to ask for help.  Remember, when starting your own law firm, you are on your own.  But, you should know this – if you have malpractice insurance, the provider often has an attorney or staff of attorneys that you can call for advice.  It comes with paying for the insurance.

So, the next question becomes “how much malpractice insurance do I need to start my own law firm?” Honestly, I don’t know the answer to this question.  I can tell you that I currently have $100,000.00 in single claim coverage and $250,000.00 in aggregate coverage.  My deductible is $1,000.00.  Now, I only have the bare minimum coverage because I only have about ten clients and most them are wrapping up before my move to Minnesota and starting my own firm.  I did the math and figured out that I didn’t have a client who likely could have a compensable claim against me for more than $100,000.00.  I do a lot of divorce work and my clients’ marital estates simply were not worth that much.

$100,000.00 is probably not enough insurance to have a full time law practice.  One source I was reading said that any full-time practicing attorney should have at least one million dollars in single claim coverage.  I only have the bare minimum because I am not practicing full time.  I plan to get more when I am in Minneapolis starting my own law firm.

The next obvious question is “where do I get malpractice insurance?”  The American Bar Association (ABA) has website devoted to this legal malpractice insurance and they break it down by every state. Pretty cool. Here are my choices for Minnesota insurance for when I move from Indiana and (hopefully) become licensed there.

Another important point is that you want to actually research the companies on a list like the ABA’s.  I suspect most of them are just fine, but you don’t want to sign up with a company like AIG who eventually folds and leaves you in the dark after your start a law firm.  I don’t know if this happens, but as a risk adverse attorney, I am going to put some due diligence into my search for a malpractice carrier.  Furthermore, I want to have a relationship with them because you never know where referrals are going to come from.

In sum, I didn’t get my current malpractice insurance from any of the companies listed in the ABA’s list. I got it the way I want to get clients.  I got it from a business colleague and friend of mine in Indiana.  He sells insurance.  He hooked me up with a good deal.  I gave him some business and he has in turn given me some business and referrals over time.   This kind of relationship is how I want to ultimately use to start and build my law practice.

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Starting a Law Firm | Informing Clients of Your Move

As I have posted previously, I am still a licensed attorney in Indiana and I have several client matters that I am taking care of before I start studying for the Bar Exam and (hopefully) starting a law firm in Minneapolis, Minnesota.

Trying to handle old client matters, like divorce work, can be difficult when you have a firm deadline for moving and starting a law firm. In my case, my wife ends her job as a medical resident in June.  I need to start studying for the bar exam in May.  We sold our house, so we have to move to a temporary housing location in June.  After that, we need to find a new place to live in Minnesota.  There is a lot to do before I can start a law practice

In the meantime, I have about six open files right now that are mainly family law work.  Several of them should be finished by the end of this month (April).  However, I cannot set any matters for trial beyond the middle of May and there is no guarantee that these cases are going to settle.  I think they will, but I just don’t know.

So, I have a duty to inform my clients of my situation and that they may want to seek new counsel before I start a law firm.  I was on top of things, and I have sent out a letter to all of my clients essentially outlining my situation.  This is an important step if you are leaving a firm, starting a law practice, or transferring jurisdictions.  We attorneys have an ongoing ethical obligation to our clients – no matter what our situation is.

Before you start and build your law firm, some important things to remember in the letter are:

(1)   Tell the client about your impending move
(2)   Tell the client they are entitled to new counsel
(3)   Recommend to the client that they obtain new counsel if they don’t want to stick with you.
(4)   Tell the client they are entitled to their case file with you or your office
(5)   Tell the client about important dates and deadlines
(6)   Tell the client that they may receive back any retainer funds currently held with you or your office and explain to the client that they are still responsible for any outstanding bills.
(7)   Tell the client about how the withdrawing your attorney appearance process works with the court and when you expect the judge to withdraw your appearance upon the filing of your motion.

That pretty much covers it.  You can add any other information, but those are the basics.  Of course you need to do all of this in writing.

After you have informed your clients of your move, you can then proceed towards moving and hopefully passing the bar exam (or waiving into your jurisdiction) and starting and building your own law firm.