14 Tips for setting up your New Law Firm

Written By Karen McDonald

Are YOU thinking of setting up a new law firm? In this article, I have noted some things you might wish to consider before handing in the resignation that gives you a comfortable monthly income!?

I have helped to set up many businesses, including many law firms and here are some things someone thinking of setting up a law firm might keep in mind!??

I have written it in point form for you to easily convert into a checklist of things you need to cover.

1??????Document your Vision

• Why are you starting? If it is just because you are sick of being a staff member, think again!
• Is your game plan economically viable? You can’t check this too often.?
• ?Get as much of your current passion down in writing.?Later, when you are making big decisions, or the going gets tough, this will help enormously!
• What is your point of difference? What type of law will you focus on??

2??????Carefully consider your Marketing

Where are your clients going to come from? Do not pass here until you have answered the questions in detail! Hanging a shingle does not guarantee that any business will walk in your door.

a)?Website

• Who will organise your domain name and build your website???
• Have you written the content for your website??

b)??Generating New Business

• How will you generate new business??
• What if the trusted source of new business dries up – what will you do?

3?????Licencing

As a lawyer, when will you have your Principal's Practising Certificate??

• Do you have more study to do to be able to apply for a Principal's Practising Certificate from your local law society?
• Once you have ticked all the boxes to qualify for a Principal’s Practising Certificate, you will need to have determined your structure (see the following point) before finalising.
• What other licences do you need??
• Do you need approval from your local council to carry on business at your chosen location???

4?????Set up the Correct Structure

Get advice on the best business structure if you are not familiar.?Your accountant can recommend the best structure for your situation, be sure to prompt them to include future planning for changes in ownership (even if it is the furthest thing from your mind now).

Setting up a corporate structure gives you much more flexibility later. If you are in a company or a unit trust, you can change the ownership later, and the entity continues without having to set up new books and/or trading entities.?

• If you set up as a sole trader and take on a partner, the sole trader business has to cease, and a new entity starts in the new structure.?
• If you set up as a company or a unit trust and you take on a partner, it is simply a case of issuing new Shares or units and advising the local law society, banks, etc.
• If something happens to you as a sole trader and the business needs to continue, you need to set up a new entity in a rush which is never good!?

5????Funding

How are you going to fund the set-up??

• How long will it be from when you open the doors to when the business is paying its way??
• Where will you get your customers from? (yes, I have asked this before)
• Have you learnt how to generate new business in your current role?
• Do you have a network of people to refer you work???

6?????Do a Business Plan?

This takes a lot of work but is very useful!

A business plan walks through most operations of the business and can often get you to think about things you haven't yet focused on.?

Some of the more important parts will include the following:

a. Where are the clients going to come from??(Do you feel like this question is a broken record?)

b. How will you keep the flow of clients coming??

c. Will you have a restraint of trade from your current employer??

There are very useful business plan templates and guides available from government bodies.

USA:

Australia:

New Zealand:

7?????Computers & IT

What Information Technology set-up will you have?

Do you understand what cloud computing is??

How much will you do yourself??How much will you outsource??

• ?Where will you safely and securely store your group data??
• ?Do you understand how to back up a computer?
• So the data is safe if the Hard disk dies?
• To restore in the event of accidental file deletion??

How do you protect your client's data from:

• Hard disk failure?on YOUR computer.?Yes, they do die, generally in the first six weeks or when they make funny noises. Personally, I have had several die on my own main computer, AND I have replaced several on my backup server.
• Cyber-crime & Hacking
• Cybersecurity is a huge risk for any law firm today.?

8??Practice Management Software

?This decision is huge.?It is like a marriage!??A Good choice is heaven, a bad choice you will hate every single day.?

This is a very specific area to consider, so we have an article all about it coming soon!

9?????Premises

Where will you work from??

Business premises? Home? Serviced Office? Share an office with someone else??

If you use a serviced office, at what point does it become cost-effective to move to leased premises??How disruptive would a move be in the first 12 months of trading??

How disruptive is it to move premises after you have started trading??

10?????Insurances

There are a number of insurances you need to consider.?

a)?Professional Indemnity Insurance (PI Insurance)

Depending on your jurisdiction, your local law society might dictate whom you are required to use for your?professional indemnity insurance.?(For example, in Queensland, Australia, you must use Lexon Insurance)?

If your jurisdiction allows you to choose your PI Insurance provider, it is well worth shopping around, as prices will vary extensively.

b)?Worker’s compensation?insurance?to cover staff

c)?Key Person Insurance or Sickness and Accident insurance?to cover yourself in case of sickness or injury

d)?Business Insurance?to cover your business premises, loss of profits in the event of an incident, burglary, etc. The list is extensive.?

The business owner needs to carefully think each of these risks through in terms of what they would do if any of the events occurred and they didn’t have cover because the insurance on some of these items can be quite expensive.

11??????Staffing

Staffing can be the key to a great legal practice. Get it wrong, and it will make your life hell.?

a)?Secretarial

You need to carefully look at the staffing you really need. You have worked with a personal secretary for the last 5 years – can you do what they do and still focus on legal work, or do you need them?

b)?Bookkeeping

What will you do for the bookkeeping tasks? What about trust accounting?

Yes! It is great to keep control of the money by doing it yourself, but if a task that a bookkeeper or accountant can do in 2 hours is going to write off your Saturday – is it worth it? Is it worth the stress of putting your wordsmithing brain into number mode every week???

From my experience, most lawyers are best to outsource the bookkeeping but ask enough questions after the work is completed to stay on top of what is happening in your business.?

c) Legal Staff?

• When do you expect to start hiring legal staff??
• How will you pay them??
• What sort of restraint of trade will you put in their employment contract?
• What will their employment contract look like?

12??????Taxation & Finances

There are 2 things certain in life, death and taxes.

Any new business owner needs to make sure they are on top of the finance and tax regulations in their area. More articles on specific areas are coming.

13??Record Keeping??

How are you going to manage client files and your record-keeping obligations??

As a legal practice, you will be subject to a high level of compliance audits.?The best way to reduce their burden is to keep on top of your record-keeping requirements.??If you are organised and tech-savvy, it is much more efficient to go paperless as much as possible.??

14?????Holidays & Self-care

Last but definitely not least, how will you make sure you get time to yourself (where you are not working)?

How will you make sure you get to take a holiday??

It is critically important to look after yourself and not let the new baby (business) overtake you.

What else?

What else do you need to consider??What advice do lawyers already in business have???

I look forward to your questions, comments and feedback.

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