Am I Ready To Start A Law Firm?
How to assess your readiness from people who know the numbers.
Attorneys are no stranger to work-related stress and job dissatisfaction, but the call to entrepreneurship and self-employment is as tempting as ever. After 18+ months of pandemic-related adjustments, the entire American workforce is at an inflection point, trying to regain control over their time, their health, and their work-life balance.
Is owning your own law firm the answer? It’s up to each individual to decide for themselves. Starting a business is not just about tolerating risk and “taking the leap”. In Part One of our series: Am I Ready to Start a Law Firm”, we offer more specific questions to assess your readiness.
Are you ready to be the boss?
What it means - To be the boss, you have to be prepared to run an entire business. You may be the best attorney in your field, but if you aren’t willing to add some variety to your job description, this is not the path for you. The idea that you can simply outsource any activity you don’t want to learn or do is not realistic, at least not at the beginning. Being the boss is about self-education, experimentation, and professional development, regardless of your degree or formal training. If you are motivated to work ON your business, you will find success.
What it doesn’t mean - Anyone can buy a designer logo, an expensive box of business cards, and call themselves a “Boss”. The title itself doesn’t give you instant credibility or authority. In fact, those business cards are only going to put more pressure on you to earn revenue and justify their purchase. The title of Boss is earned, not made. Prepare to do everything you can to limit unnecessary expenses, build your business first, and don’t be surprised if you work longer hours than you did at your regular job. If your goal is to instantly improve your lifestyle AND call the shots, you are better off shooting for a promotion, not entrepreneurship.
Are you prepared to invest?
What it means - Saving money is great but limiting all your expenses is not a realistic strategy. Starting a business takes money, although not as much as you might think. To open a law firm, most professionals advise having $5,000-$15,000 in starting capital. This can come from your own savings, a bank loan, or outside investment. Keep in mind that number is separate from funds needed to cover your living expenses. Having at least 6 months of living expenses in a savings account (or another comparable revenue stream) can substantially reduce stress in your first year of business.
What it doesn’t mean - One of the biggest mistakes new law firms make is following the temptation to rely on credit card debt for start-up financing and living expenses. Any lawyer who ever took out a student loan understands the crushing pressure of debt. Our accounting teams have worked with many successful firms that still struggle to pay down credit cards after 5 or more years in business. Be patient with yourself. It is a great idea in theory to use someone else’s money, but first-time entrepreneurs often find themselves at a disadvantage when doing so. You are better off focusing on revenue generation and self-funding as much as you can.
Do you have revenue-generating opportunities?
What it means - New law firms, like any business, must have revenue. Put in the work to secure clients (or at least tee up opportunities) BEFORE you officially launch. This is especially helpful if marketing and sales do not come naturally to you. You can find new revenue opportunities via freelancing, volunteering, or simply spreading the word among trusted friends in your professional network. Word-of-mouth referrals and business relationships are still the most powerful way to gain new clients and you might be surprised how much others are willing to help.
What it doesn’t mean - more revenue means more options, particularly when it comes to marketing and advertising. However, there is a limit on how far paid advertising can go to secure new business. Transactional law practices like real estate closings often find success with Google Ads and comparable services. Other law firms have a longer sales cycle and require relationship building over time. Do not misjudge clicks to your website for new revenue opportunities. This is a good first step, but for many, the sales cycle has only just begun.
Firm Numbers is an accounting and bookkeeping firm dedicated to helping pull law firms and entrepreneurs out of decision-making based on emotion and get the necessary data to objectively run their business. We don’t claim to know everything about running a successful law practice, but we can provide the numbers to support smart decisions.
Book a free consultation online to find out how our bookkeeping and accounting packages can help you be the boss, not the bookkeeper.
