Andrew Abramowitz

I got a call from a legal recruiter this week (it felt like 2006 all over again), asking if I was interested in joining up with one of a few more established law firms that he works with. I politely declined, saying I was happy doing what I was doing. He said that my choice to go out on my own took a lot of “cojones.” I guess that’s all relative, corporate law not being the bravest career choice out there, but I appreciated the sentiment.

Many attorneys with big firm backgrounds dream about striking out on their own, but don’t have cojones in this sense – they can’t take the leap of faith involved in expecting that clients will want to hire them. But I think another impediment for a lot of attorneys is that the practical aspects of launching a firm just seem too overwhelming to contemplate. My experience, however, is that while there was some legwork involved, it wasn’t too bad. Below is a short checklist of the main items to be addressed. Of course, I can recommend specific people to help in each area, for those who are interested.

• Formation – You’ll want to form a limited liability entity, like a PLLC, via a short filing with your state’s Department/Secretary of State, which unlike a regular LLC requires that you submit evidence that you’re in good standing with the state bar. You’ll also need a single member operating agreement, which is boilerplate. Obviously, if you partner up with others, the operating agreement would be more intricate.

• Space – You’ll need to rent office space, and arrange for the things that fill it (phone, internet, fax, computer, etc.). This is substantially simpler in a virtual law office context, needless to say.

• Insurance – To sleep at night, you’ll want professional liability insurance. There are brokers who help in connecting you with insurers. There are certain practice areas that are considered higher-risk than others (securities law is one), but you’d probably be surprised how low the premiums are, given horror stories you’ve heard about physician malpractice insurance.

• Banking – You’ll need a firm bank account, which includes an operating account and a separate escrow account to hold client funds. Once you’ve had some business experience and income, you can obtain a business line of credit to help smooth out choppy cash flow.

• Engagement Letter – Prepare a form of engagement letter for clients (required in New York for matters involving $3,000 or more in fees), which you’ll need to adapt for different situations (e.g., hourly vs. fixed fees).

• Accounting and Billing – I use QuickBooks Online for this, which is really easy to use and generates professional-looking email invoices. When I started, I did the entries myself. Now I outsource those functions just to save me time, not because I can’t do it in a technical sense. There are also timekeeping products out there, which I don’t use. I just keep track of time on regular spreadsheets.

• Website/Marketing – At the very least, even if you don’t initially do things like blogging, you’ll want to have a professional website ready to go before you launch the firm. Then when you blast out the announcement by email to everyone you even barely know, and post it on Facebook, LinkedIn, etc., you can include a link to the website, and your friends can forward that to others. The website should, ideally, have the information that most people would want to know about your firm – expertise, your professional background, contact information, etc.

When I speak with other attorneys about my firm – and most of the attorneys I know are not in small firm/solo practices – they often ask, “What do you do to bring in clients?” The phrasing of the question indicates that they are thinking of active/pounding the pavement-type activities, such as making speeches, writing (like this) or even cold calling prospects (shudder). While I don’t always know the process by which my clients determined to hire me, the reality in my case is that it’s a more passive process. Most of the time, it’s a referral scenario where a potential client asks someone for a recommendation for a corporate lawyer, and fortunately that someone thinks of me and makes the introduction. The recommenders come in all shapes and sizes: existing clients, other attorneys, various friends and family.

While I refer to this process as passive in the sense that I’m relying on people to call me rather than the other way around, in reality none of this happens without a lot of active laying of groundwork. First and foremost, the majority of my career was spent in a few large firms, and I think I made a good impression on my colleagues at those firms as well as other deal participants that I worked with over the years. If I don’t come off as smart and, perhaps more important, reliably able to meet client demands, I’m not getting the referrals. Then, I needed to make sure people are aware of my practice such that they think of me when asked by a potential client, and I accomplished that by letting everyone I even vaguely know that I was starting a firm, and on an ongoing basis I try to keep in touch with friends and colleagues generally, even without a definite expectation that any particular relationship will lead to business.

Some of my referral sources are hoping for, and a few directly ask for, tit-for-tat referrals back from me, which obviously I try to do when it’s appropriate for the particular circumstance. But it’s unrealistic to expect cross-referrals to be equal in scope going each way. Even if you’re more a “taker” than a “giver” in a particular cross-referral relationship, if you do a bang-up job for the client you took, then you’re making the giver look good.

While paying fees for referrals can be an ethical no-no, there are permissible relationships that serve a similar function. For example, a small firm that doesn’t have corporate/securities expertise can have a corporate solo attorney act as part-time “of counsel” to the firm (I’ve done this with a few firms), and because the economic arrangement involves the working attorney keeping some but not all of the fees paid by the client to the firm, the firm who would otherwise refer the work out is also compensated.

I spent over five years of my career at Greenberg Traurig, LLP, a law firm of about 1,750 attorneys. Pretty big. Other large firms are content to maintain a smaller attorney count and grow only organically, not through lateral partner hires or mergers.

…

Optimal Law Firm SizeRead More »