Start a Law Firm Archives - Solo in Minneapolis

May 20, 2011November 4, 2011

Starting a Law Firm | The Virtual Law Office

In considering how to start a law firm, you need to consider where you are going to be actually sitting and thinking when you practice law. In other words, you need to consider what kind of office space and setup you are going to have when you start a law firm.

Sounds obvious, I know. This post relates to my previous post about law firm overhead. A virtual law office arrangement equates to much lower overhead than paying for a lease or some other more traditional office arrangement.

Keeping costs to a nill is going to be key to ensuring that your practice is successful. Paying for a an expensive office lease is going to cost you money that you could be spending on other important things like a new printer/scanner/faxer. I’ve read on other blogs and in legal articles that paying for unnecessary overhead may be the biggest killer of a new law firm. I don’t know if this is true, but I do know that I don’t feel that I can afford the office rent at this point in my practice. Even if I could afford it, I don’t really want to pay for it when it isn’t necessary.

But, if you are going to start a law firm you need to have an office with office supplies in it. There is no doubt about this. For instance, I need a bunch of things surrounding me in order to be successful. I need a telephone, computer, a printer, a scanner, a copier, paper, writing utensils and various law books. That is the minimum, and I want these items to be easily accessible. I am always concerned about my time and how much I am spending doing things that slow me down or are unnecessary. When you bill by the hour, you have to be efficient. I take a lot of pride in being efficient, and my office set up should (I hope) reflect this.

Can all of these things be made available easily? Yes. Can you put them just about anywhere? Yes. Does it matter if they are in your basement or in a $1,000 a month, leased office space. No.

Now, I know that there are many advantages to having a professional office space. I hope to have one some day. I don’t want to practice out of my home or virtual office forever. But, this blog is about how to start a law firm and when starting a law firm you need to survive. The virtual office can be a great way to survive.

Chuck Newton, over at a blog I really enjoy called Third Wave Lawyer, has some great posts about offices built out of odd-ball materials like old office containers. This is not an example of a virtual office. However, they are cool and I invite you to check them out.

An example of my attempt to check out a virtual law office arrangement in Minneapolis is that I have researched on the internet and found some companies that advertise for virtual office space. The traditional arrangement goes something like this: you pay somebody a lower rate (say $200 a month) to have access to a conference room are other office space when you need it. Think: meeting with clients. The rest of the time, when you are not using the office, you are working from home. This is a virtual office as I understand it.

Virtual law offices are a great way to still have an office presence while still keeping overhead low. Starting a law firm is all about maximizing profit and making wise decisions. For many people, the virtual office is can be a very wise decision.

May 8, 2011November 4, 2011

Starting a Law Firm | Choosing Clients Carefully

When starting a law firm, you need to choose your clients carefully. I realize that this is much easier to say than to do, but I can not emphasis enough how important client selection is.

In my 3+ years of working as an associate for a small general practice firm, I took on a lot of different kind of cases. Probably too many different kinds of cases. Regrettably, nobody ever told me to be careful about the kinds of clients and cases I took on. I wish somebody would have because, for me, it could have been the difference between being a happy lawyer and being a miserable lawyer.

Clearly, if you start a law firm, telling yourself that you will only accept clients and cases you want to work on is a bit academic. After all, you have to eat. I also realize that I’m not always going to like all of my clients and they probably won’t all like me. That is just a given. But, being careful about client selection can make your lawyer life so much better. My general rule of thumb is this: don’t take on a dog just because it pays.

I wanted to write this article in my starting a law firm blog after reading a really interesting and well written article in my Indiana Bar Association magazine: Res Gestae. (I’d link to the publication online, but, unfortunately, it doesn’t have an online presence.) The article is by a regular columnist, Donald R. Lundberg, and is entitled “Choosing clients wisely: a key to fulfillment in the practice of law.” It’s in the April 2011 issue.

The article brought up some great points that I want to briefly summarize here. The author advises that every time a new or old client brings your law firm a new matter, you should consider a number of things, including:

Your Competence to handle the matter
Past lawyer history on the case (are you the second or third or fourth lawyer on the case?)
The client’s emotional connection to the case (are they too close and not able to distance themselves from it?)
The problem dump (is the client wanting to dump their problems on you so that it is now your problem and not theirs?)
The micromanager (this one should be self-explanatory)
The needy client (also known as the constant caller)
The non-payor and/or the slow-payor (in my experience, this one usually encompasses all of the above).
Conflicts of interest (this one is obvious, but I point it out to say that it is also a good way to explain to the client why you won’t take their case)

That is the list. I think it is a pretty good one. There are probably other items to add, but I think you get the point. Being a lawyer can be tough. When you make yourself miserable by working on cases you don’t like, or for clients you can’t stand, your job starts to feel like a noose. I’ve been there. It’s not fun and I’ve thought about quitting the practice because of it.

If you are going to start and build a law firm you are going to need clients. You are also going to work on some cases at the beginning that you probably won’t take later. That is ok. But, if I can recommend anything, it is to enjoy your job as much as you can. Choosing your clients and cases wisely is the way to start your law firm the right way.

May 7, 2011November 4, 2011

Starting a Law Firm | Law Firm Bank Accounts

I have been talking with several lawyers about the whole “how to start a law firm” project and this blog. One comment was that I should focus more on the basics of getting a law practice up and running. So, in an effort to cover more of the basics, here goes.

If you start a law firm, you are going to need bank accounts. My firm currently has three different accounts: (1) checking; (2) savings; (3) IOLTA trust account. The last one, the IOLTA, is the most important one. Those are the basic three that I would recommend to get your practice running. (As an aside, I have been thinking seriously that my firm needs a credit card so that I can more easily track expenses. This is important for knowing what is and what is not a tax write-off.)

So, the bank accounts. I chose one particular bank in Indiana because the Indiana Bar Foundation told me I had to. The bank is on a list of approved IOLTA banks in the State of Indiana. I have checked, and this process is very similar in Minnesota. Obviously, I went to this bank to start my law firm bank accounts. The bank was familiar with the process and they made everything pretty easy for me. I was paranoid about screwing up the IOLTA account somehow because all I read in bar journals and other legal sources is that lawyers often lose there law license for screwing up the IOLTA account. Of course, it turns out that lawyers lose there law licenses because they steal from said account, not because they set it up improperly.

I realize this is pretty simple, but bear with me. I chose a checking account with large, business-size checks for firm expenses. I use the checks to pay bills. I use the checks to pay for court filing fees and other expenses. If I use the firm’s money to pay expenses for a client, I make a charge on my billing software on the particular client’s file. This is how I know I will be reimbursed by the client when I send out monthly billing. This account is also what I use to deposit money from my clients when they pay their bills. I use this account a lot and this is how I ultimately pay myself.

I don’t use the savings account much, but I think it is useful. I make sure I have a minimal balance in savings in case of an emergency. I don’t know what that emergency would be, but it’s there and I feel good about it.

Finally, the IOLTA. This is probably the most important one and the one you need to be very diligent about. If you want to know what IOLTA accounts are all about, click here for Indiana guidelines. I have checked around in other states and the guidelines are very similar between jurisdictions. There is some variation and it isn’t mandatory in every state as far as I can tell. Basically, the interest from the money earned on a client’s trust money is used to fund various pro bono and other causes in your particular state. I like the IOLTA program. I think it makes a lot of cents.

Once you set up the IOLTA, you usually have to report the fact that you created an IOLTA account to your particular state. The bank I worked with was very familiar with the process and they did this for me the day I signed up for an account. Now, there are also rules for closing an IOLTA account and I need to go over them again as I prepare to wrap up my Indiana practice and move to Minnesota. Once you have an IOLTA account up and running you can begin to place client retainer or trust funds into it.

There are many many rules and case law and advice about how to properly maintain your firm’s IOLTA account. I’m not going to discuss them here. My rule of thumb is I’m a fiduciary, it’s very important that I take care of it, and I don’t ever mingle funds. If you went to law school, you should know what being a fiduciary means.

There you are, a basic break down of starting a law firm bank account(s). I’ll admit that I’m new to the bank account process and I am still learning what works best for me and my firm. I suggest you do the research and find out what works best for you when you start your law firm.

May 4, 2011November 4, 2011

Starting a Law Firm | Getting Paid for Your Work

A common problem that I, and anybody starting a law firm, will have is getting paid for your work. The easy answer to always getting paid is to ask for a large enough retainer for the work you know you are going to be doing. Easy, right? Good luck getting a lot of work, I say.

Here is the problem: other attorneys will charge less than they should to get a new client. An example: Attorney 1 says to the potential new client that I charge $2,000 for an initial divorce retainer. Attorney 2 says to the potential new client that I will $1,500 for an initial divorce retainer. Who is the client going to choose? Most of the time, I would bet, the potential new client will pick lawyer 2. It’s a simple market issue.

Now, let’s say you sometimes lower your retainer to stay competitive in the market. The problem that this can create, and which I have often faced in my own practice, is that clients often pay the initial retainer and that’s all you are going to get. You can sit there and recite the trust account, bill-by-the-hour, security deposit speech to the potential new client until you are blue in the face. The client will even sit there, appear to be listening, and nod his or her head like they understand. Then, three months down the road when the initial retainer runs out, the client doesn’t pay another bill. Another month goes by and no payment. You get the idea.

To combat this problem, a useful to call the client and say: “Hi Joe, your divorce is going fine and I think we are close to an agreement. I’d like to get this finished up, but I am waiting for a payment. When do you think you will be making this payment so we can get this finalized?” The client is often sightly embarrassed and may respond: “Oh, sure, I’ll pay that off in a couple weeks.” That doesn’t sound too evil does it?

I don’t condone not finishing work all the time. Your first duty should always be as an officer of the court. If a judge or another attorney is expecting you to do something you should do it – and you should bill for doing it. Afterwards, you can always call the client and tell them about what you just did for free and how you won’t be doing much more on their case without a payment. If they still insist on not paying you, send them a nice withdrawal letter, file a motion to withdraw with the court, give them their client file, and wish them luck. (If they owe you a lot of money, many jurisdictions allow you to file an attorney’s lien on the case so you can hopefully get paid after you withdraw).

When starting and building a successful law firm, you must always be concerned with getting paid. That is how you pay the rent, the utilities, the paper costs, and all the other fun overhead expenses. I’m sure I don’t need to tell you that you get paid by collecting these fees for your law firm as well.

April 26, 2011November 4, 2011

Starting a Law Firm | Good Busy v. Bad Busy

As anybody reading this blog may know, I have a lot more time on my hands while I wait to be licensed in Minnesota and the official s tarting of my law firm.

The extra time has allowed me to do a lot more blogging and research into how to start a law firm. I think this has been good. I know I need to do these due diligence kinds of things before I start a law firm in Minneapolis. I also know that I have come a long way towards learning how to optimize technology to help build my fledgling law firm. It has been work, but I have enjoyed it for the most part.

Yet, taking all of that into account and not dismissing it out-of-hand, I am starting to wonder whether there is such a thing as good busy versus bad busy? For example, I have begun to question how important some of this internet marketing and blogging stuff is. Shouldn’t I be out there hustling, lunching with people, joining trade associations, utilizing person-to-person networking, and generally trying to rake up real, tangible work? Isn’t that a little more useful than focusing so much on my internet presence? Maybe, maybe not. It could be good. It could be bad.

I call this “bad busy”. Good busy is serving my clients, doing great work, and getting paid what for your efforts. Bad busy is focusing too much on things that aren’t important when trying to start a law firm.

As I’ve stated in other posts, what I learned in 3+ years of practice is that you have to get out there and you have to sell yourself and your skills. You gots to hustle. I think I am pretty good at that. However, lately, I have been more focused on internet marketing and blogging because it is easier and fun. It is also a medium of marketing that I needed to get better at. Before about two months ago, I would have laughed at you if you told me I would get a Twitter account. I’ve got one now and I can understand the effectivness of it. Building that knowledge is good busy.

But, and there is a real fine line here that I sometimes can’t see, I can focus too much on things like Twitter and blogging and social media. I bet a lot of lawyers and idle procrastinators out there might also have this problem. It’s not that your lazy or you don’t mean well. It is just that sometimes we all can be too focused on bad busy when trying to start a law firm. Bad busy is bad.

April 25, 2011

Starting a Law Firm | Public Defender Contracts and Getting Paid

I am not one for short blog posts, but I want to share some disturbing news I was reading over the Easter weekend related to my fears about starting a law firm.

While visiting family in Iowa, I was reading the Cedar Rapids Gazette’s business section. There was a disturbing article about lawyers not getting paid for their public defender contract work by the State of Iowa. Wow. If you can’t rely on the state to pay your attorney’s fees bill, who can you rely on?

I have a constant fear of not getting paid. I do a lot of family law work and I have had a lot of clients who do not pay their bills. As a young attorney worrying about whether I can start and maintain a successful law firm, I worry about how I am going to get paid all the time. One thought I have had when I consider how to make my new law firm successful is to sign up for the public defenders program in Minneapolis, MN. But, if a state supported program isn’t going to pay the bill, why would I want to do that?

Another reason for sharing this article is that it discourages me in the respect that I might not be able to make it on my own. If you read the story, one of the lawyers apparently couldn’t afford to pay her secretary and her home mortgage because of the State of Iowa’s failure to pay her public defender bill. That should scare anybody who wants to start their own law firm.

April 25, 2011November 4, 2011

Starting a Law Firm | Overhead

Starting a law firm is all about keeping costs down and profits up. Simple statement, right? Well, it’s easier said than done.

Here are some questions I keep asking myself and which I believe are common questions all solo attorneys have: Don’t I need an office to be legitimate? Don’t I need a secretary right away? Don’t I need a computer, printer, paper, pens, pencils, three-hole-puncher, and so much more? Don’t I need a fancy suit and lots of expensive business cards to hand out?

When answering questions like those above, ask yourself another question: How am I going to pay for these things? I find that once I start with thinking about a budget and how much I can afford, the supercilious things tend to melt away a little bit. The obvious overhead killers are office space and support staff. I don’t have the end-all-be-all answer to those questions, but here are my thoughts.

(1) Office Space

I’ve been practicing out of my own home office now for about three months. It creates some definate challenges, but my clients don’t seem to care at all. My lease payment is $0.00 and I use the phone line and internet connections that my wife and I are already paying for. (As an aside, I do need to worry a bit more about internet security now that I have client files on my home/office computer. I’ll talk more about that in a different post). So, my at home office cost is nill and it keeps overhead extremely low. Right now, I pocket most of what my clients pay me which is pretty cool.

There are some drawbacks. I don’t feel very professional. I don’t put on a shirt, coat, and tie like I did previously. I also don’t get mentally prepared to hustle every day like I did when I was at my old law firm. I find that missing step to mean I’m less motivated to use time in the optimal fashion. I bill by the hour and every minute that I’m not hustling feels like (and probably is) lost money. Now, I’ll admit that the stress level has gone down significantly and I no longer have a constant back ache.

Another drawback to the home office is that I get calls on my personal cell phone and I get mail constantly in my home mailbox. Is this a big deal? No, but it is annoying. It cuts off the home/work separation. I miss going to work, hustling all day, and then coming home to my work-free sanctuary. I found that an actual office puts my mind in a different place which is directly related to working hard and billing hard. Both of those things are integral (in my mind) to having a successful law practice.

Those are the main drawbacks of a home office. In the main, I highly recommend a separate room in your home be dedicated as your office. Failure to separate the room will result in less work getting done. Other than that, working from home isn’t so bad. The getting calls on my personal cell phone is easily solved by getting a new land line or cell phone completely dedicated to the law firm. The getting work related mail at home problem is easily corrected by getting a P.O. Box. Once those problems are corrected, the difficulties created by a home law office are lessened a great deal in my opinion.

(2) Staff

I don’t want to sound demeaning or rude in any fashion to administartive or secretarial staff, but I often found that when I was at my old law firm that I could do things more quickly and efficiently when I did them myself. I also got the results I wanted without having to worry that a mistake had been made which could create major headaches and more work down the road for me. So, I ended up doing a lot of things myself. Did it get old? Yes, but I did it, and I made a lot of money for the firm.

Now, a lot of the staff issues can be resolved by the use of technology. There are so many things out there that make an attorney’s life easier. For instance, I just got clued in on Dragon Dictation which is an automatic dictation software which records your voice and the changes your voice to writing. I haven’t tried this yet, but I am dying to get it. I did a lot of dictation at my old law firm and this option would be a lifesaver at times. Furthermore, there are many different tools out there to modifying your firm into a mostly paperless office. This cuts down the need for secretarial time quite a bit.

Do I alway want to go without staff? No, no, no. But, at the beginning of my starting a law firm venture, I know that I need to keep overhead low while I build up a client base. Failure to keep overhead low can be the death knell to a fledling law practice. I don’t want the death knell.

One last thing about staff – you will need them eventually. Answering the phone, typing your own letters and pleadings, and handling mundane details like mailing and copying is both extremely annoying and time-consuming. Getting back to my earlier comments about time, an attorney has to have good staff to do things quickly and efficiently in order to properly structure his time. Time is money. This is never more true than for somebody who makes their money billing by the hour.

In sum, keeping overhead low at the beginning of your law practice is of the utmost importance. Leverage technology and get efficient with it. Keep the money you make and don’t spend it on things your new firm can’t afford. Will you need to put more money into the firm for a while as your are building it? Sure. But, you don’t have to go crazy and you can watch your budget. Now, just keep your financial head on straight and keep on hustling as you start and build a successful law firm.

April 23, 2011November 4, 2011

Starting a Law Firm | Getting to Know the Court Staff

One of the cardinal rules of being a lawyer – and I’m talking about every kind of lawyer – is to remember to be polite to a fault to the court staff and clerks. This takes on even more importance if you are litigator or in court often, and it is of the utmost important when starting a law firm.

I won’t give specific examples, but I will say that the clerks would often call me if a filing mistake had been made or something needed to be corrected. That kind of courtesy can be a true lifesaver and the court staff does it because they know you and they like you.

During my time in Indiana, I was also able to get court dates scheduled, for the most part, when I wanted them scheduled. My clients liked that, I liked that, and the court staff was willing to accommodate. Many times, I was also able to make as many copies of court documents as I pleased without having to worry about paying for paper. That might not sound like a big deal, but when you are in court every day and going through a lot of paper, it is great. I even had one of the clerks call me and remind me that I had a minor collection hearing that I had forgotten about. The clerk didn’t have to call me, but she liked me, so she did.

For the most part, I think the court staff liked me because I made and effort to talk to them about their day and was always ready to help them with their jobs. One good way to get the court staff to like you is to always file your own court pleadings. That way, you are able to meet with the court staff face-to-face and talk to them. They get to know you. They get to know about your wife, your children, your home, and everything else about you. You get to learn the same things about them. I try to treat the court staff with the utmost respect (as I do with my clients). My attitude is that people are people wherever you go. If you try to be gregarious and helpful, people are going to like you.

I also don’t see anything wrong with using people skills to help build your law practice. That is what being a solo attorney is all about – networking with people. I think that is why many attorneys decide to start a law firm, because they like people. A lot of solo attorney work is dealing with clients, the court staff, and your own employees on a personal level. I like that. That is what I want to continue to do as I go down the path of starting my own law firm.

April 22, 2011November 6, 2011

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.

April 21, 2011November 4, 2011

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.