Starting a Law Small Firm

Starting a Law Small Firm

Starting a Law Small Firm? Lawyers who’ve been there, done that, offer their advice

Karmah Elmusa was the associate editor at California Lawyer

As the headlines never cease to remind us the legal job market is dismal – opportunities at big firms are fewer and farther between, and consequently plenty of lawyers are considering going solo or opening a small firm. We interviewed attorneys at seven law firms with ten or fewer lawyers, asking for their advice on running (and maintaining) a modestly sized practice. Though many we spoke with say valuable training can be gained by working for someone else first, they also appreciate that in this day and age, that may not be an option. The bottom line: Whether you’re striking out alone after 20 years at a behemoth firm, or the day after you pass the bar, do your homework (starting with this article). There’s a lot involved in getting set up.

Pay Attention to Finances

The first thing small-firm lawyers say when asked for tips about money matters is this: Remember that you’re not just running a law firm, you’re running a business.

“You have to learn to recognize the difference between a luxury and a necessity,” says Lisa M. Martin of Weiss, Martin, Salinas & Hearst. “It’s totally different than being at a big firm, where you don’t really feel the impact because the cost just gets absorbed by the entity.” Martin and her three partners run an eight-attorney professional-liability defense firm in Fresno.

True, launching a small-scale practice requires sinking a substantial investment up front, but you can’t overspend on ancillary items (extra support staff, extraneous travel, and perks like sports tickets are a few examples).

“We each contributed significant funds, and to really set up an office you need that,” Martin says. “You have to meet with insurance people, phone people, meet with the person who you’re going to rent your copier from. You need the start-up capital to accomplish all of that. And before you’re bringing in income, you still have to pay everyone who is working for you.”

Linda Somers Smith, of Duggan Smith & Heath in San Luis Obispo, agrees that it’s important to monitor discretionary costs, but she says making a confident investment is key. She advises securing up front a decent office space and the technology or computer system you need to run a successful, credible business. “You tend to stick with what you start with, even if you think you’re going to upgrade later,” she says. “So be cost conscientious, but don’t skimp on the important things.”

Once your office is up and running, keep track of every penny – it’s the only way to keep it afloat. Gary Lafayette, of Lafayette & Kumagai in San Francisco, says an experienced bookkeeper is a must. “Make sure you have someone competent to handle the finances, whether that’s a lawyer or an office manager or an accountant you hire, and then task that person with making a monthly expense report,” he says. “At the beginning, we scrutinized those every month to make sure we were on track as a business.”

Carolyn E. Henel, of Roisman Henel in Oakland, urges new firms to establish a solid system for billing clients early on, and stick to it. “I know a lot of lawyers and small firms who have horrible business practices. We, on the other hand, bill our clients monthly,” she says. “That keeps them used to receiving bills, and gives an opportunity for us to find out sooner rather than later if they are unhappy. We have a clear policy, so we’ve never had to go to collection with a client because we’re very up-front about our billing practices.”

Choose the Right People

Unless you’re going solo, odds are you’ll start your firm with a partner or two. Choosing those people can make or break your success, says Somers Smith. “Know whom you’re going into partnership with,” she says. “If it’s two or three people, that’s your life – that’s who you spend a lot of your time with. It’s a marriage of sorts.”

Henel left Crosby, Heafey, Roach & May (now part of Reed Smith) with Margaret R. Roisman to start Roisman Henel, their small trusts-and-estates firm in Oakland. (Their move may have been even smarter than they suspected, in light of news that Debevoise & Plimpton is dropping its trusts-and-estates practice.) Roisman was Henel’s mentor, and they decided they’d both like to take a stab at the small-firm way of life.

Henel points to the amicable split she and Roisman made from the larger firm – no shady dealings, no sneaking out, and no siphoning clients away without clearing it with your former partners. Staying above board, she says, made the transition to a small firm infinitely easier: They had the backing of their erstwhile colleagues, and a list of potential clients and contacts.

The final element of their success: Henel’s close working bond with Roisman. “I am so thankful to my partner,” she says. “We have a great system. When work comes in, we figure out who’s the best attorney for the job and who has the time to do it.” This relationship, Henel says, is the foundation for a well-functioning firm, and working with like-minded souls is hardly optional in the intimate small-firm space. “There’s no way to hide from personality issues the way you can at a big firm,” she says. “We have great staff, including an incredible office administrator. I would say, as soon as you can afford an office administrator, get one. But it’s got to be the right person. Ours really fits into the culture of our firm.”

Lafayette also puts a premium on hiring the right people – even one bad addition can have a very adverse effect on your business. “Think about it,” he says. “If it’s a four-person firm and you have someone who’s not working, that’s a quarter of the firm. When you’re hiring, take the time to make the right hire, and if [it turns out you haven’t], deal with it quickly.”

Somers Smith even suggests offering on-the-job training, if needed, for the right team member. “Even if they don’t have the skill set, if it’s someone you can work with, teach them,” she says. “That method has always worked out for us.”

Finally, if you’re starting your firm as a relatively new lawyer, find a mentor or more seasoned lawyers to tap when you’re unsure of something. Robyn A. Lewis, who runs J. Lewis and Associates in Riverside with her husband Jonathan, recalls that when he started out as a solo, he rented the cheapest office available on an executive floor that he knew was crawling with lawyers. “He had access to the conference room for client meetings, and more importantly, he had access to all the other attorneys,” Lewis says. “He would go around and talk to them and ask for advice. He even volunteered to work on cases for them, and in return, he learned a ton.”

Networking Builds Your Practice

When it comes to Lewis’s marketing spiel, it sounds a lot like her husband’s experience with mentors. In fact, most of the lawyers interviewed suggested a variation on this theme: Although traditional methods of advertising are fine to experiment with, if you want to get your name out there, network, network, network.

“I’m a former president of our bar association, and that was one of the things I’ve done for our firm,” says Lewis. “If you’re brand new, talking to other attorneys is the best way to expand your client base. All your work will come from referrals, and the only way to get referrals from other attorneys is to meet other attorneys.”

Brooke A. Brigham, an Oakland-based attorney who since 2004 has been a telecommuting partner in her father’s Ukiah civil law firm, started her career as a sole practitioner doing a mix of family law and criminal and juvenile defense work. She toyed with various marketing techniques including ads in phone books, but ultimately she concluded that the best way to market her talents was by joining organizations and meeting people.

“When I practiced criminal defense, I was a member of Women Defenders, a group of Bay Area women criminal defense lawyers. I also joined my local bar association,” Brigham says. “It sounds kind of cliché, but I think word of mouth is really the best thing. Other lawyers and former clients are going to get you the greatest number of new clients.”

Several small-firm attorneys offered this suggestion: Network with lawyers outside of your practice area. That way, when their clients or friends have a legal problem that’s in your field, they’ll refer them to you instead of taking the case for themselves and having to get up to speed.