|Oregon State Bar Bulletin OCTOBER 2010|
Riding the Wave:
So You Want to Hang Out Your Own Shingle?
By Randal Acker
Whether due to the economy, technological advances, or clients demanding individualized attention, more and more attorneys are contemplating hanging out their own shingle. Starting your own practice resembles learning to surf. The following is intended to help others benefit from my experiences catching the wave as a sole practitioner and riding it as manager/owner of a small law firm.
The Business of Law
Law school may have taught us general legal principles, research skills and even how to speak legalese. Few, if any of us, learned how to run a law business. Many attorneys have started but were unable to continue their own practices, because they never understood a fundamental concept: a law firm is a business. Like any other business, you have to focus on things like keeping revenue up and costs down. If you went to law school to only practice law, then you should not start your own firm.
Most of my clients are business owners. So, running my own business seemed a natural fit. I could better identify with the problems facing my clients as a fellow business owner. Also, operating my own practice was a good selling point. Few business lawyers can claim that they have successfully started and run their own business.
You must also have the skills or willingness to learn the many aspects of running a business. A few large firms have hired non-attorney CEOs to run their firms as businesses. As a sole practitioner or owner of a small firm you will have to be your own CEO.
Before Acker & Associates, it was just Acker (myself). I answered my phone, prepared my own billing and emptied the trash. As a sole practitioner, you will perform such tasks, at least until you have the finances to hire others. By performing all tasks of your business, you will both save on overhead and become acquainted with the different facets of your business to help you better manage others in the future.
Some may want to immediately hire others to perform non-legal tasks. However, you need to make sure that you have adequately budgeted for any such costs. I started my own practice as an experiment, to see if it would work. I was convinced I would join another large firm and did not want to invest any funds into my practice. I used a card table as a desk, borrowed a computer, and used a small back office next to the building’s bathroom for minimal rent.
I watched some of my peers suffer from more aggressive financial practices. One of their biggest mistakes was spending fees before actually collecting them. It may be tempting to start your business by buying new, fancy furniture and equipment on credit. However, high start-up costs can sink your practice.
Perhaps the best financial approach is somewhat less conservative than the path I chose. You will need to attract clients, and your surroundings must exude a degree of success and stability. I eventually realized that the card table and back office did not provide that impression.
What Are You Selling?
Like any business in the service industry, you need to decide which services you are offering. At one extreme is the general practitioner that will work on any legal matter that comes through the door. Aside from the possible malpractice issues, this approach may prevent you from specializing in any particular area. Consequently, not only will you be unable to convey the expertise demanded by a prospective client, but you will prevent yourself from efficiently providing a service. You will constantly face steep learning curves in each specialized area and may have to substantially reduce your fees to remain competitive.
At the other extreme is overly restricting your practice area. You may find yourself without any work. You also risk discarding the challenge or intrigue of a more varied practice, which can result in the domino effect of less enthusiasm, lower client satisfaction and fewer referrals.
Set parameters for your practice but maintain some flexibility. Although my experience and interest was in business law and litigation, during the first years I broadened my practice to include criminal defense. I received indigent criminal defense cases from the state. The experience was invaluable, even for my commercial litigation practice of today. It sharpened my litigation skills and provided me with familiarity with the courtroom and staff.
On your own, there is no ceiling to what you can earn. However, there is also no basement. Some just do not have the stomach for running a business. Others thrive. It all depends on your personal risk tolerance as well as your personal circumstances.
When I started my practice, I was single and without any dependents. I could work long hours and survive without a steady paycheck. Now, married and with four children, I do not have the same risk tolerance.
A common misconception of owning your own business is that you do not have a boss. You actually have many bosses — your clients. They pay your salary and can fire you. Hence, good client relationships are invaluable for your business. Each of your clients should feel like your only client. Clients are not interested in your other matters or your schedule, except to the extent it involves them. To succeed with your practice, you must be responsive to your clients. You must answer their calls or return their calls promptly. Many of my clients came to me from other firms because of the lack of individualized attention.
Your own clients can be your best referral source. In my experience, clients from referrals are already sold on me and my firm before they even enter my office.
Like investing in stock, you should try to maintain a “portfolio” of many clients. This will ensure that you have a steady stream of work. Many sole practitioners, as well as law firms, find themselves working primarily for a single client. This can become dangerous for the viability of your business. You may become too dependent on this single client, who may then acquire leverage to negotiate down your fees. Worse, the client could decide to use another firm or take its needs in-house, effectively putting you out of business.
At the beginning, you may be anxious for any work. As another attorney once said to me, “It’s not the clients you have but the ones that you turn down that make your practice.” If you intend to make money with your practice, like most of us, make sure that you and your client have the same expectations regarding payment of your fees, and make appropriate arrangements to ensure you will receive such fees. Only take on matters/clients that interest or motivate you. Otherwise, your services will be subpar and you will not enjoy your work.
Inevitably, you will need to bounce ideas off of another attorney. In a large firm, you need only walk down the hall. As a sole practitioner, you will need to make more of an effort. Form your own informal network of attorneys. I have been pleasantly surprised at the lengths other attorneys will go to assist each other. You just need to initiate the contact.
I was fortunate to be surrounded by other sole practitioners in the building where I began my practice. We shared everything from business ideas to office equipment. I especially enjoyed the lunches. Around noon, we would usually grab lunch together, which served as a good social break as well as the opportunity for feedback and the exchange of ideas.
As a service provider, your time is your primary commodity. If you spend all of your day doing administrative work, you are not billing and not making any money. On the other hand, if you work on client matters but do not send out bills, you will not get paid. At the beginning, you may not have many client matters. However, you should still put in a full day of work.
If I did not have enough billable work, I devoted any extra time to marketing. I remember thinking, when I first started on my own, “I can go see a matinee.” Eighteen years later, I have not yet seen that matinee.
Make lists and prioritize items on the lists. You can use your PDA, computer or even a pen and paper. Check off items on your lists to give you the satisfaction of completion and so that you can look back on your day and evaluate your productivity. While the practice of law requires diligence in performing tasks and adhering to deadlines, running your own firm takes such discipline to an even higher level.
Separating Work & Play
Avoid burnout. Harness your initial enthusiasm by occasionally taking breaks, even just to eat, sleep and socialize. You will come back rejuvenated and with a fresh approach.
I made a conscious effort to keep my worlds separate to avoid burnout and preserve my sanity. I have always maintained a separate office from my residence and tried to keep work at the office. I also am a proponent of the “monkey suit” as opposed to casual Friday attire. By putting on my work clothes, even if I do not have court or a client meeting, I keep my worlds separate. Also, appearances can be important, especially if you are interested in attracting clients.
Keep at it. I had worked briefly for a large firm and decided to hang out a shingle as an experiment. I made below-poverty-level income for the first year (after a large firm salary) but noticed an upward trend. So, I rode the wave and, 18 years later, I am still on that board. No longer a sole practitioner, we are now a small firm. Instead of a card table in a back office, we now have our own building. The seas may be choppy or calm. Yet, over time, your network and client base grows, and so will your practice.
Hanging out a shingle is not for everyone. Like surfing, with a little balance and finesse, it can be both rewarding and fulfilling. Surf’s up.
ABOUT THE AUTHOR
Randal Acker has a B.A in philosophy, politics, and economics from Claremont McKenna College and a J.D. from Cornell Law School. Currently, he is the managing attorney of Acker & Associates P.C., a small firm that specializes in business law and litigation. For more information or to contact Randal go to www.ackerlaw.com.
© 2010 Randal Acker