It’s time to continue the discussion on starting your own law firm.
In case you haven’t checked it out yet, my last discussion focused on why you’re the most critical asset to your new law firm.
In this part of my series, I’m going to tackle a place where many startups get it wrong: picking a practice area for your new firm.
Getting it right can help you look like this lively chap:
And the best part is that you can look that way without all the stress that she’s feeling:
Now let’s make sure you get off on the right start.
Starting a law firm, or any business for that matter — is heavily dependent on how you begin.
Getting off on the right foot means two things:
First, you won’t be trying to fix past mistakes later on.
Second, you’ll have a leg up on your competition right out of the gate.
Ask yourself this simple question — would you rather start a race ahead of your competitors, right in line with them, or from even further back?
Hopefully, you picked the first option. Picking the right practice area means that you’ll start the race ahead of your competition because most of the others will get it wrong.
Considering Scalability For Your New Firm
The idea of scalability is simple.
It’s the ability to do increasing amounts of work without increasing the resources being expended proportionately.
If you can sell five widgets at the cost of five dollars, your cost is only a dollar for one widget.
If you can then increase your capacity to twenty widgets, for a total cost of ten bucks, it only costs fifty cents per widget and your profit margin increases.
As simple as this concept is, lawyers don’t apply it to their law practice, and they miss out on income as a result. Let’s make sure you don’t do this.
The best thing you can do early in your firm is to focus on one practice area. This allows you to “scale-out” the time you spend generating pleadings, going to court, etc.
If, for example, you’re practicing criminal law and you have three matters on the calendar in front of the same judge at 9 am, then you only travel to and from the court once to complete three hearings.
This is opposed to the “general practitioner” who has a family law hearing in front of one judge, a criminal matter in front of another judge, and a civil matter in front of a third judge.
Having to travel to handle three cases instead of one means more time wasted and a lower profit margin per case. In the end, focusing on one practice area puts more money in your pocket as more of your fee is profit.
Don’t Try To Handle Every Type of Case
It’s easy to fall into the trap of “taking whatever comes in the door” when starting.
And the reasons why new law firms do this are obvious — the need for revenue. If we stop and look at it for a minute, however, we can see that this approach simply gets in the way of real success.
Focusing on the Areas That Matter Most
Many firms struggle at the outset and continue to struggle for years because they don’t take the time to create a healthy, strong law blog, or build an entire referral network.
These firms spend years, years, years, and then some more years rely on paid advertising.
This, in turn, kills profits.
Why didn’t they develop the previously mentioned blog or referral network?
The answer is time constraints.
Early on in their practice, they were so busy driving from the courthouse to the courthouse, drafting documents for differing legal areas, and researching new areas that they hadn’t handled before — that they couldn’t devote time to the things that build lasting success.
What if they had focused on one practice area?
Then they would have spent less time:
- In the car,
- drafting documents (because more of their old pleadings could be re-used),
- and learning novel areas of the law.
The moral of the story is that starting and sticking to one practice area leads to a more profitable future.
Considering The Future of Your New Practice Area
Another thing to consider when picking a practice area for your new firm is the profession’s future.
I looked at how many practice areas are quickly drying up when I discussed why law firms fail. Changes to marijuana law, health care, and improved safety technology are drying up the number of cases available to those who practice criminal defense, bankruptcy, and personal injury law.
One genuinely crucial step is to look at an area and ask if societal or technological changes impact the number of cases that will be generated.
If an impact can be expected, you need to ask yourself how substantial your impact will be.
The chances are that it doesn’t make long-term sense to compete over a shrinking field.
If, for example, you enjoy transactional work, then you may want to choose issues regarding probate rather than bankruptcy; one is growing due to baby boomer retirement while one is decreasing due to the Affordable Care Act.
Consider that, as a whole, the lawyer population is dropping year by year.
One reason for this is the aforementioned shrinking areas of practice. And the ones who are left? They’re going to be fighting it out for the scraps. Instead of jumping into the fray, you can join the areas that are expanding instead.
If you want your new firm to be successful, then pick a practice area and focus on it.
It helps for that area to be growing rather than contracting. But feel free to pick a shrinking area if you’re not a fan of success.
Here’s a rough representation of the profits for firms in those shrinking practice areas.
Why do you think attorneys start a new firm by taking “whatever walks in the door?“ Please chime in through the comment form below!