This is the next post in my discussion on starting a law firm in 2015. My last discussion focused on why you are the most important asset to your new law firm. In this part of my
manifesto series I’m going to tackle a place where many start ups 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 this ol’ girl is feeling:
Now let’s make sure you got 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 the other 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’re going to start the race ahead of your competition because most are going to get it wrong.
Attorneys need to consider scalability when choosing a practice area for a new law firm
The idea of scalability is simple. It’s the ability to do increasing amounts of work without having to proportionately increase the resources being expended. If you can sell five widgets at a cost of five dollars then your cost is only a dollar a widget. If you can then increase your capacity to twenty widgets, for a total cost of ten bucks, then it’s only costing 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 are practicing criminal law and you have three matters on calendar, in front of the same Judge at 9 am, then you only travel to and from 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, as opposed to 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.
It’s easy to fall into the trap of “taking whatever comes in the door” when one is starting out. 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 realize that such an approach simply gets in the way of true success.
Many firms struggle at the outset, and continue to struggle for years, because they don’t take the time to develop a strong law blog or to build a real referral network. These firms spend years, and years, and years, and some more years, relying on paid advertising. This, in turn, kills profits. Why didn’t these firms develop and maintain a blog and referral network? The answer is time constraints. Early on in their practice they were so busy driving from court house to court house, drafting documents for differing legal areas, and doing research into new areas that they hadn’t handled before, that they were unable to 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, spent less time drafting documents because more of their old pleadings could be re-used, and less time would have been devoted to learning novel areas of the law. The moral of the story is that starting off and sticking to one practice area leads to a more profitable future.
Lawyers need to consider the future of the profession when picking a practice area for their new firm
Another thing to consider when picking a practice area for your new firm is the future of the profession. I looked at how many practice areas are quickly drying up when I discussed why lawyers should start their own law firm. 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 thing that is truly crucial is to look at an area and ask if societal or technological changes are impacting the number of cases which will be generated. If an impact can be expected then you need to ask yourself how substantial will that impact be. Chances are that it does not make long-term sense to compete over what is going to be an increasingly small number of cases in a certain 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. This means that while others are fighting it out for scraps, in shrinking areas, you can be in a pool that’s actually expanding.
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. If you don’t want to be successful then……..well……..don’t.
Why do you think attorneys start out a new firm by taking “whatever walks in the door?” Please chime in through the comment form below.