I read three articles today about lawyers leaving their firms with a few colleagues from the same firm to start new law firms. Having started a new law firm some three-and-a-half years ago (wow, time flies!), I understand some of the things that motivate this move, and I wouldn’t trade a day of the time I have spent with Valorem. But starting a new firm is not without pain and suffering, so I thought it might be useful to talk about some issues relating to starting a new firm in the new normal.
1) Choosing a name. In law school, some of my classmates created the firm of their dreams: Bucci, Beyer, Schreier, Tate, Lieb & Debyshire. It had a certain ring to it. But choosing to operate and Smith & Jones does not give you the same brand heft that Kirkland or Skadden did. A person’s surname says nothing about the firm, and if you haven’t spent decades building meaning for the name, your firm name says and means nothing. Think about something more descriptive, or at least memorable.
2) Decisions, decisions, decisions. Plan to spent enormous amounts of time on things like insurance (malpractice, general liability, renter’s, business interruption, employment and others required by many leases). Insurance applications are so interesting. And plan to meet lots of bankers. When it’s your money, the difference in interest rates actually matter. The amounts of personal guarantees matter. What kind of computer set-up are you going to have, and who is going to keep those babies running when viruses come calling?
3) Building a brand. You’ve chosen your name, and the clients who left ABC firm with you know who you are. But no one else does, and your carefully scripted name of Smith & Jones means nothing to people who buy legal services. They might take a call from Skadden or Kirkland, but not from Smith & Jones. Do you know how many firms there are out there? Think grains of sand along the beach. Your name and background will not separate you from the other grains of sand. You actually need to figure out what you stand for and why, and then you need to figure out how to get someone to associate those traits with your firm. Oh, and you need to get them to believe you.
4) Developing relationships with prospective clients. In-house lawyers may hire Kirkland or Skadden without knowing the specific lawyer at the firm they need. No one will hire your new firm based on reputation (you have none) or because you used to work at Kirkland. Kirkland provides CYA protection. Being formerly of Kirkland does not. So if you’re assuming your former big-firm affiliation counts for anything, you are barking up the wrong tree. You need to get out, meet lots and lots of people with business and invest the time to make them want to hire you. Big, big investment.
5) Who do I call about that? You used to have internal e-discovery resources and people who made really great demonstrative exhibits. Accounting questions? Covered. Want to know the tax implications of something? No problem. Now? Not so much. Who do you call? Try calling your former partners and you’ll learn whether they are true friends or were faking it.
6) Pricing. Before, the managing partner set hourly rates for everybody in the firm, and the accounting department multiplied your hours by your hourly rate and sent a bill out. Now, you’re the managing partner (actually, when you’re in a new, tiny firm, titles are a bit pretentious, so let’s call you the decider), and your clients don’t want to pay by the hour anymore. So how do you price? Bet on being wrong. The value of pricing experience cannot be overstated.
7) How do I identify and unlearn bad habits? If you’ve been in a firm that bills by the hour, virtually everything you’ve become accustomed to doing is wrong because the habits are designed to increase, not decrease, the time you spend getting to results. How hard is it to unlearn these bad habits? Ask somebody who smokes how hard it is to quit, and multiply by 1,000. Maybe more. No, definitely more.
8) Learning the name of every unemployed or tenuously employed lawyer in your geographic area. Every one of them will call, email or send a letter. You’ll be shocked by the number. All being “just perfect for [fill-in name of firm].”
9) Billing. Yes, somebody actually has to figure out what each client is going to be billed each month and actually prepare the bills and send them out the door (or out electronically). And you’ll learn this amazing concept: if bills don’t go out the door, money doesn’t come in the door.
10) Vendor relationships. In your new venture, you’ll have the chance to learn the names and background of every court reporting company, legal process outsourcer, copy service provider, messenger service, temp agency, marketing consultant, management consultant, etc. because every one of them will call you. Repeatedly. Endlessly. And trust me, a firm “no” is not a deterrent to future calls. I still get a call every month from some firm selling corporate artwork. No matter what I’ve tried, she still calls. So now I just tell her to tell me about her offerings, and then I put the phone down and keep working. After an hour or so, I look back at that line and she’s usually gone.
This list could easily go on and on. For pages and pages. And I still haven’t discussed the most difficult challenge—finding time. If you have a family and some friends, you will need to work that much harder at finding time to spend with them.
The reason to share this is not to discourage anyone from doing what we’ve done, but rather to make sure this important decision is made after due reflection and in the clear light of day. And if the headaches I’ve outlined are not your cup of tea, remember that there are lots of firms out there now who are part of the new normal. You may want to explore alliances with one of them before you start down your own road. If you’re entrepreneurial enough to leave your current firm, you may well be a good fit with others just slightly further along the entrepreneur’s curve.
Patrick Lamb is a founding member of Valorem Law Group, a litigation firm representing business interests. Valorem helps clients solve their business disputes and coping with pressures to reduce legal spend using nontraditional approaches, including use of nonhourly fee structures, coordination with LPOs or contract lawyers, joint-venturing with other firms and implementation of project management tools to handle lawsuits or portfolios of litigation.
Pat is the author of the the recently published book Alternative Fee Arrangements: Value Fees and the Changing Legal Market. He also blogs at In Search Of Perfect Client Service.