How to Launch a Law Firm with Limited Resources
One of the most common excuses lawyers make for not starting their firm is money. Lawyers believe they need a war-chest of a million dollars in order to start a firm, and then a steady income from clients so they can pay the bills. This scenario is mostly false. Starting a law firm for no money is entirely feasible, as client development for a small firm is almost entirely free in the beginning. There are of course costs – typically for a domain name ($15-$20), a website ($50-$500), the usual office supplies, and then possibly a team member to assist with marketing and billing. I know plenty of 2-4 person law firms that do no advertising other than a website, charge five percent of collections for a legal assistant, and maintain a bare-bones office with outdoor alley access. They do quite well at $700+ an hour for work that requires virtually no overhead or capital intensive expense . Of course those kinds of firms need to have enough revenue to pay the rent and bills, but that is a manageable risk as long as the business and personal expenses are separated from one another. There are some articles that will frighten you into believing you need six-months or a year of savings to start a law firm. This may or may not be true depending on your financial management skills, but even if it is, it is often quite impossible. You have to be willing to take some risks in order to launch a new firm, so if you are lacking the risk-tolerance to start a law firm with limited funds then you must work for someone else. The good news is that even clients can sometimes get behind on payments, so if you are starting a firm with one or two clients that share with you an ethos about access to justice or litigating as an art form or legal business practices, then they can understand your plight, how you may need to structure some of your work differently than you did in the past, and they can understand when you need to limit new case work to keep the lights on.
Maximize Your Current Assets
Before you quit your day job, consider what resources you currently have at your disposal that will minimize upfront risk. You have valuable skills, experience, industry knowledge, and professional network. Use all of this to your advantage when starting your law firm. Do you believe you’re the best darn lawyer in town but no one knows it? Test your theories while you bring in work by leveraging your existing resources. If you are with a firm and don’t think you have a network in the community, talk to your most trusted clients about serving their needs directly. How about your assisted development pool? Are you mentoring other lawyers and sharing clients directly with them? You may have more potential clients than you think. Leverage lots of soft resources that don’t cost human capital or money. There are shared office spaces and co-working spaces with access to administrative support. These spaces usually include complimentary wi-fi, snacks, drinks some flex time, and even a conference room. Most of these modern facilities have younger counterparts to help guide you in the right way in procedures and technology. You’ll pay a flat fee and not have to worry about unexpected overhead costs. There are also software platforms, like Alexi, to help you set up a firm with vetted vendors for your payment processing, practice management software, and more. You’ll receive a special discount as a member but get step-by-step instructions on how to set up your firm. These vendors are available to help you start and assist you going forward.
Embrace a Lean Startup Strategy
While some may argue it is not always possible, one of the best ways to start a law firm with no money is to adopt a lean startup approach. In many cases, if you have money, you can avoid risk by paying for everything you need upfront. You can sign a 5-year lease, and start paying off your computers and furniture. You can hire 3 associates and another paralegal. You can spend thousands on a marketing campaign to announce to the world you are open for business.
But you don’t have that luxury because you have no money. What’s a broke attorney to do?!
The answer lies in the principles of a lean startup. If you cannot afford to be immediately profitable, you must make it a priority to reduce overhead.
Software as a service is a perfect example of how you can apply a lean startup approach to starting a law firm without money. In the past, attorneys would pay thousands of dollars for a legal case management software program like Amicus Attorney. Cloud programs like Clio allow you to pay a small monthly fee, without a contract, without cost of hardware, and their support is included. So you minimize your overhead.
Other ways you can reduce your overhead and avoid unnecessary spending:
Take Advantage of Free and Affordable Technology
Cloud-based case management software like Clio, PracticePanther, or Rocket Matter come with monthly fees, but there are free alternatives that can accomplish many of the same tasks for the cash-strapped small firm owner. You can create a system for your important case deadlines using free or low-cost project or task management tools like Trello, Todoist, or Clickup. Create boards with cards to check off when you’re done with a file or client’s task to free yourself from sticky notes, reminders on your phone, or simply relying on memory. Some cloud-based task management programs also allow you to assign tasks to others, so you can get input or delegate to your staff.
As remote work becomes more common, there is a growing number of free or low-cost tools to help you connect with your staff and other legal professionals from wherever you are. Many law firms rely on video conferencing platforms like Zoom or Skype for remote depositions, expert witness meetings, or client consults, and these programs typically come with an extra cost when you want things like screen sharing, virtual whiteboards, or large video file sharing.
Assuming you have your own computer with a webcam and a microphone – which you probably do if you are operating a laptop or tablet – you can also use Zoom, Skype, or other remote communication tools for free, or speed up video upload times by uploading directly to your YouTube account. The downside is that these programs aren’t HIPAA-compliant, so you have to take extra care when discussing protected health information with clients or witnesses. Another option is Google Meet, a free secure video conferencing tool that encrypts video and audio streams, but requires you and the person on the other end of the call to have a G Suite account to use.
Document security is another area where you may run into extra costs. Protecting client information via encryption, secure online document storage, or encrypted email platforms typically comes with a fee. While we can’t recommend any free alternatives that are HIPAA-compliant, it’s important to be aware of the requirements. The U.S Department of Health and Human Services website has a guide to help you determine what you need.
There are several platforms that allow you to share encrypted documents with your clients for free or $10 a month but come with some caveats. One option for simple document encryption is nCrypted Email by NetCitadel, which can encrypt emails sent from any web-based email client like Outlook, Yahoo, or Gmail. It also allows you to share documents and files via a client portal. While this may seem easier than signing up for a paid subscription service, the security and confidentiality protections offered by paid services will be much better. NetCitadel is set to launch a paid service that they boast will outperform the competition.
If you have Microsoft Office 365, you also get Microsoft Teams for free, a secure file-sharing and messaging tool that can help you communicate with staff and others more securely than regular email.
Establish an Online Presence
These days, potential clients will look for legal services online. That is why the first step in your plan should be to establish a presence: a website and a presence on social media. Websites have become pretty standard, with basic choices of being like a blog, with you writing about the law and current events and answering questions that can be provided via the Internet. Depending on who your target market is, you could also have a question and answer forum on there. Having a free contact of some sort through your website is also helpful. Your potential clients need to feel like they are able to connect with you easily and with little effort on their part. These days , having a social media presence is almost necessary as well. Most people already have a Facebook profile and will search for you there first if needed, so having a page and group (as well as the right privacy settings) is important. Be careful with what you post, however, and make sure that your page truly does reflect you and your thoughts and feelings about the law area you are involved in. Legal directories are also important – you are going to want to make sure that you fill out the information and have a presence on as many legal directories as you can. While it will take some time to build up your rating, this will be important as people search for lawyers online these days. These credibilities will help you earn more clients without costing you much – if anything at all.
Collaborate and Build Your Network
Building relationships with other attorneys is a great way to build a successful law firm. Utilizing low-cost or free networking opportunities will help facilitate that. Attorneys are also great sources of good referrals for clients in need of legal assistance. Local bar associations and networking groups provide excellent resources for making connections with other attorneys and building your referral base. It is important to start the process before you open your firm, so you are able to hit the ground running after you’re up and running. Joining a local bar association is an excellent way to get connected. Most bar associations have discounted or free membership opportunities for new lawyers, which encourages their support. Local bar associations provide networking opportunities, mentorship access and resources needed to start your journey into legal entrepreneurship. Attend networking mixers and other opportunities, invite other attorneys to lunch or coffee and invest the time needed to establish rapport with key people in the community. Joining a bar association is a low-cost way of meeting colleagues that may need a referral source for a case outside their area of expertise, or would like guidance from someone who specializes in a certain area of law. Networking with colleagues and building solid relationships should be one of your top goals year-round.
Creative Financing and Income Generation Strategies
In today’s digital world, lawyers can leverage their skills to bring in quick funding from alternative sources. Crowdfunding is a popular trend among small business owners seeking capital. A crowdfunding platform lets you create a pitch on their website that includes the amount of funding you need, your goals, and a little about you. Then you share your campaign on social media and through your network, asking people to contribute.
You can also barter your legal services with other business owners who might benefit from your knowledge. Perhaps a graphic designer in your network would charge you less or even forgo payment in exchange for free legal advice on their business structure or trademark. Knowing how to barter can also help you negotiate better rates with vendors or in other areas.
Finally, you can try to obtain pro bono help from someone to get things up and running-from a virtual assistant to help with answering phones to a programmer to handle your website to a CPA to walk you through the basics of accounting. Some law schools also have legal clinics where you and other solo practitioners can get advice on the business side of running a law firm.
Success Stories and Examples
To provide some real-world context, I reached out to readers of this blog through my social media channels, and I received a number of stories from them about how they have gone out on their own with very little in the way of capital, working to build their client base and either starting out debt-free or getting out of the red as soon as possible. Here are a few of their stories, paraphrased to protect their privacy: "This is my second firm, and like the first, I went out on my own with no money. My previous firm had been coping with downsizing and litigation took a toll on our retaining capacity. My dream was to start a very small firm with a few choice clients with a very modest cash flow goal of $200,000 . . . My first task was to call all of my hand-picked referral sources and explain to them my situation, let them know I don’t do litigation and please think of me for drafting or consulting. In my first few months, I kept a very small office and only hired one secretary." "When I went out on my own, my employer’s firm did not pay into my 401k for three consecutive years so I had less than $2,000 saved and no way to borrow against it . . . As a single parent with limited support from my ex-husband, I did not qualify for traditional financing. I read a lot, made a lot of mistakes, worked 80-100 hours a week , and did freelance work to make ends meet. It took more than 10 years to pay off the debt and build the business up to the point where it is now successful." "I remember the night I decided to leave my job as Special Deputy Counsel for the Department of Children and Family Services to have my own practice. It was October of 2013. I had been reading the book "Rich Dad, Poor Dad" and saw only a few positive quotes by Mr. Kiyosaki about having your own business. I went to bed that night and dreamt that I could make money doing simple petitions for divorces. At 3:00 a.m. I wrote a petition for dissolution of marriage by referring to the Indiana rules for dissolving marriage. I got up the next morning, immediately filed a DBA, picked my corporate name and registered the name, and filed my paperwork at the courthouse. I put flyers everywhere and got a flood of clients!" "I was one year out of law school when I took the plunge and opened my own firm. It was a little scary, but my plan was to do family law as well as a few non-criminal legal services for people. I haven’t been able to do many non-criminal cases, but my side of the load more than pays my bills and allows me to raise my kids comfortably. It was hard work to start and continues to be hard work, but now I have clients that have come back to see me now that they have gotten their first DUI taken care of- they want me to help with the second one, and I have confidence that I can represent them to get favorable results. I would not have the experience I have without starting this way, and my freelance experience gives me something to add to my resume."