Solo & Small FirmCommittee What I Know Now... Opening a Small Firm Practice – Year 1 Note: Part 1 of this two-part series will explore what is involved during the first year of establishing a solo practice. Part 2 will take a look at a solo practice from a five-year perspective.
I Heather M. Meglino, Esq.
t has been almost a year since the opening of my law firm and, wow, that time flew by! I wanted to write this now, while I am still fresh, before I forget what it was like to be in the trenches and starting my own firm. Below is a candid look at the struggles, the successes, and the tools I used in the process. The Planning This was not something I just decided to do one day on a whim. This started out as a multi-year plan, which was later condensed to about six months. I spent countless hours, along with a previous law partner, working on items well before we decided to take the leap. We made lists, and more lists of items to be accomplished before we would decide to leave our current jobs. We were like sponges, reading and listening to just about any resource we could get our hands on. We also met with countless solo practitioners to pick their brains and try to avoid any mistakes we could by learning from those who did it before us. The Surprising Camaraderie The camaraderie among solos and small firms is amazing. It is as though I joined a secret, maybe not so secret, society by joining the ranks of other attorneys who have their own practice. It feels like a badge of honor; I think we can all look at each other knowing we have all been through a similar experience. This is also a shameless plug for the OCBA Solo & Small Firm Committee, which has provided a wealth of camaraderie and knowledge for me. It’s Always About Money That’s right. I am going to go there because I think, too often, we as lawyers feel that if we are not rolling in the dough, our ability is somehow diminished. I know so much about many solo practitioners, but I have no idea what anyone makes. I am a sole provider for myself; I have no additional income from a spouse or anyone. This can be quite scary at times. I do not mention this for sympathy, but it is simply a reality that going out on your own may not be possible if you do not have savings or the other financial support. I am fortunate to have my parents to help with paying bills if I get in a crunch. However, even with that support, when you are used to having
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a check deposited into your bank account every two weeks no matter what, it is quite the lifestyle change to work solo, and you should be prepared for that. My advice is to reduce your cost of living expenses as much as possible prior to going out on your own. Budget, Negotiate, and Budget Some More Because of this, my previous law partner and I carefully budgeted every single expense we could possibly think of. We met with an accountant to have our budget reviewed and eventually came up with a start-up cost for our investment. We budgeted conservatively and negotiated every single contract we could. Surprisingly, we were quite successful in economizing and keeping our startup costs to a minimum. For example, we started with a six-month lease for a virtual office to keep our overhead down as we were building our client base. We also negotiated as many short-term contracts as we could. It did not make sense to sign a three-year contract when we had not even been opened six months. We also requested additional language be added to our contracts that would allow us out of the contract in the event our firm dissolved. Some may think this is pessimistic, but we all have seen the statistics on start-ups. Our point was to make sure we were protected in even the worst case scenario. Once our services were in place, the key was to have reserves that would give us time to survive while we built our client base and began billing. For example, we knew if we opened on August 1, we would not be billing until the end of the month, and clients would have 30 days to pay. So even if we had paying clients on our first day, we would not see any money until about October. Obviously each firm has different fee schedules, but given the system we were implementing, we knew we would have to account for covering our overhead during the lag time. We were so fortunate to be able to get clients right when we opened, but if we had not had a budget and a sense of our overhead costs, we would not necessarily have made it. Even with our careful planning, our quite conservative budget fell short. Although we have been profitable every month since our opening, and have maintained our overhead, we are obviously not paying ourselves as much as we were making before. Things can get tight! If you do not have a large rainy-day fund set up prior to opening, I recommend identifying some potential cash re
theBriefs August 2017 Vol. 85 No. 7