Opening a law firm is an exciting prospect, but one that also requires due diligence on your part to consider the business in the big picture.
It can be deceptive to determine how much it really costs to open your new firm- after all, you probably already have a computer and cell phone. For a bootstrapped firm, that might be a temporary solution. But it’s far more likely that you’ll need more than that to get started and to remain successful.
A list of practical minimum requirements to start your firm includes:
- A business address or an office space
- Office supplies such as yellow pads, copy machines, file folders, and pens
- Dedicated phone line for the office
- Software to track time and communicate with clients
- Malpractice Insurance
Having an office in which to meet clients keeps things organized and presents a professional space. While you might add in other expenses over time, you should start your law firm with a physical office address at a minimum. Working from home is also an option if you are comfortable meeting clients there and have a specified room for your home office so the space is deductible. However, you will want to stay away from listing your personal and home address on your pleadings, stationary, email signature block, etc. Co-working spaces such as LawBank are a great option for an easy “plug and play” way to start a firm.
Law Firm Ownership Basics
Aside from finding that perfect office space or even just address, don’t neglect important considerations like:
- Bar association memberships
- CLE requirements and professional development costs
- Business entity selection
- Malpractice insurance (note, this is the second time I have said this)
- Name, logo, tag line
It’s a good idea to have all these organized by the time you launch.
Creating a Budget for Expenses
An established law firm has the benefit of referrals and proven marketing strategies. As a new firm, it’s up to you to test out new options and to create regular marketing channels. Nationally, most law firms spend between 2.5% to 3% of their annual gross revenues on marketing. When you launch, you might need to set aside more of your expected revenue to generate buzz. There will be extra costs for notifying the press of your new firm, your alumni associations, and also your professional groups such as bar associations, trade associations, and non-profits you are a part of.
The good news is that the trial and error of testing marketing strategies doesn’t fall to you alone- partnering with an experienced marketing firm will help you weed out tactics that are less effective in order to zero in on your target audience.
Some of the items that should be considered for your initial budget include:
- Events and seminars
- Directory listings (AVVO, FindLaw, Super Lawyers, Martindale, etc.)
- Collateral materials
- Attendance at trade or professional association meetings
- Client entertainment and gifts
- Networking activities
- Direct advertising
- Website design and maintenance
- Graphic design and branding costs
While this list might seem daunting, recognize which parts of the process you should control, like business entity selection, and which ones should be outsourced to experienced professionals, like marketing.
Need help? Email me directly at Meranda@DenverLegalMarketing.com