The Lean Law Firm: How to Start A Law Practice On A Budget

The risk of failure is particularly high when you are just starting up a new law practice. You likely won’t have a steady stream of clients yet, and you probably don’t have the funds in your bank account to spend on marketing or lead generation. It’s basically just survival mode in the early stages. Careful planning and keeping expenses under control are critical to your livelihood. In this post, we’ll show you how to run a lean law firm that maximizes efficiency and profitability, while keeping expenses to a minimum. Here are our 6 tips for how to start a law practice on a budget.

1. Consider a shared workspace or virtual office

Normally, the single largest line item on the monthly expense sheet is going to be that penthouse office suite that law firms alway tend to occupy. When you’re just starting out, a penthouse is out of the question, so don’t even try.

A nice office is really just a way to impress clients and convince them you’re worthy of their business. It’s important for a law firm to come across as professional when meeting with clients, since trust is such a key part of the relationship. But that being said, nice office space is only one piece of the puzzle.

These days, shared workspaces are becoming a lot more common for solo entrepreneurs, freelancers, startups, and even professional services like lawyers and accountants. There are many benefits of using a coworking space as your first law firm office, with lower monthly rent being the obvious one.

But shared offices also come with other perks and shared resources, such as access to high speed Wifi, nice furniture and decor, printers/phones/fax machines, a receptionist to greet clients, etc. These things make shared office space a great option for the new solo lawyer on a budget.

If you’re really trying to be lean, you might even consider becoming a fully virtual law firm, and conducting all your client meetings online via Skype or Google Hangouts. Firms that work with tech savvy clients are well positioned for this type of arrangement, and your clients will appreciate the ease of communication and accessibility.

2. Don’t hire staff until it’s absolutely necessary

One of the biggest mistakes that any new business can make is hiring too quickly, or hiring the wrong people. Law firms are no exception to the rule.

In the early days, your goal should be to wait as long as humanly possible to start hiring support staff or bringing on associates. It might feel like you need somebody to help out, but if you hit a slow month, or slow several months, your entire firm will be in jeopardy.

It’s pure survival mode when you’re starting out lean, remember? Taking on the substantial, additional overhead necessary to pay staff members before you’re ready is one of the easiest ways to fail when you start your own law practice.

You should really wait until the last possible moment, when you have so much work piling up that you physically cannot get it all done, before you hire anyone full time. Instead, bring on extra help gradually as you grow, and start off with part time or outsourced workers to reduce costs.

One excellent option to consider is using a virtual receptionist service instead of hiring someone in house. Taking phone calls from clients can occupy a ton of time, but it’s also really important to pick up the phone in order to provide good customer service.

When you have someone else taking these calls, it will free up more of your time, while also keeping your clients happy. And best of all, the cost is only a few hundred dollars per month, unlike a full time staff member who needs a $40K annual salary. We recommend Ruby Receptionists, who are the top of the line in the virtual receptionist space.

3. Find a niche and own it

The next piece of advice for how to start a law practice on a budget is to start out in a niche area of law. The tendency early on is to practice “Door Law,” i.e. I’ll take any client that walks in my door. But this can actually end up hurting you in the long run.

It’s beneficial to find one particular area of focus as soon as possible. When your practice is focused on a niche type of law, there are 3 major benefits that result:

  • You become an expert in your domain and establish a reputation more quickly
  • It’s easier to network within the industry and generate referrals from existing and previous clients
  • It’s easier to target specific types of clients with your marketing and advertising messages

The key to getting your firm off the ground is to build a client base. But if you don’t know who your target clients are because your target client is anyone with a legal problem, it’s difficult to establish the relationships you need, build trust, and reach the right clients with ads or other content.

When you’re starting out, look for current legal niches that are hot. For example, in 2008 with the housing bubble, bankruptcy lawyers were making a killing. With the growing prevalence of the internet in our daily lives today, privacy issues, security, and IP are gaining momentum quickly. Marijuana law is hot as well with more states starting to legalize the sale and distribution of it.

Watch for broader trends in other industries and in society as a whole, and try to predict how the law will adapt as a result. Those are the types of niches you want to think about when starting a new law practice.

4. Learn how to do content and email marketing

The biggest challenge in getting a new law practice off the ground is bringing in clients. Until you have established a reputation and built up your referral network, it’s tough to generate business. That’s why learning how to market yourself online through content and email marketing is key.

Online marketing is the most cost-effective way of attracting clients to your law firm. There are so many different resources online that can enable you to reach people like never before, and many of them are extremely affordable or even free (see our list of top free law firm marketing resources).

In the online world, the content you produce is what creates awareness and reputation for your business. But producing content doesn’t have to take up all your time. You can set up a law firm WordPress blog in under an hour and start publishing articles immediately.

If you write just 1-2 articles per week for 6 months to 1 year, you’ll probably start to rank for some highly targeted Google searches related to your law practice. That means that when prospective clients are searching for information, there’s a good chance they will land on your article. And if you’ve optimized properly for conversions, they’ll be likely to contact you.

You should also collect email addresses and send out newsletters and updates to your list periodically. Email marketing is key to building relationships with prospects online.

This type of content and email marketing really just costs you time. And early on, you’ll probably have more time to spend than you’ll have money. Read more in our $100 per month law firm marketing plan.

5. Go completely paperless

Paper is wasteful. Not only in terms of killing trees, but also in terms of money and time. Think about all the items you need to purchase if you’re using paper to manage your work:

  • Printer
  • Paper (ongoing expense)
  • Ink (ongoing expense)
  • Scanner
  • Fax machine
  • Filing cabinets
  • File folders (ongoing expense)
  • Paper clips (ongoing expense)
  • Staples (ongoing expense)

Those items alone are likely to cost more than a few thousand dollars upfront. Plus, once you do get up and running, using paper is costly in terms of time because sifting through paperwork and folders to find information is extremely tedious.

You can save a lot of money and hassle by using software to manage all your documents and files. Here are a couple software products you can use to help eliminate paper:

  • Google Drive for document management/storage (about $5/mo, plus includes email service)
  • Lexicata for digital intake forms and e-signatures (about $40/mo)

A lot of small law firms have already made the switch to become paperless, or as close to paperless as possible. It’s not always reasonable to be completely paperless, but the closer you can get, the more lean and streamlined your operations will be.

6. Automate and streamline the admin tasks

Finally, there are the admin functions required to run a law firm. These are the things that nobody likes to do, but that are mandatory to manage the business. To run a lean law firm, these things should be automated and streamlined as much as possible, cutting down on expenses and wasted time.

Here are a few examples of daily admin tasks that you can find ways to streamline:

  • Scheduling appointments and managing your calendar
  • Responding to emails
  • Preparing client forms and letters
  • Sending communications to clients
  • Time tracking and generating bills and invoices
  • Accounting and bookkeeping

And here is a list of ideas or software products you might use to automate and streamline these processes (in the same order):

  • Use scheduling software like Acuity to let clients book their own appointments
  • Set aside 2-3 windows of time per day to power through as many emails as possible (read more in our email productivity guide for lawyers)
  • Use document assembly or automation tools such as HotDocs or Lexicata’s document system
  • Create email templates to save time drafting basic communications (follow up emails, thank you emails, case updates, etc.)
  • Use a case management system to track all your billable time and automatically generate bills from it
  • Same as above, and also consider using Xero or Quickbooks online for accounting software

Summary

Starting a new law practice comes with many risks, unknowns, and challenges. But it’s sure to be a rewarding experience when you finally make it.

By keeping these 6 tips for how to start a law practice on a budget in mind at all times, you’ll keep your law firm lean, reduce overhead, save time, and maximize your profitability. All of those things are key to survival early on, and ultimately will guide your firm to longevity and financial success.

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