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Taking Care of Business

Table of Contents

1. Introduction

2. Low Overhead

3. Promote Growth

4. Don't Get Isolated

5. This is a Business
 

 

1. Introduction

Has it always been your ambition to go it alone? Or would you rather just get a job and get on with practising law? Unfortunately if you are in the latter group you may have found that jobs are hard to come by and that even though you know you have great skills, you may in fact be forced to open up on your own if you want to have the opportunity to practise law.

It is not a great idea to start a project out of a sense of defeat so take a very careful look at how you would go about opening a practice before you actually make the decision that you are going to do so. Then once you have made the positive decision you can approach it as the great adventure that it is; assembling all your gear, planning your route, checking out your equipment, and finally setting off on the journey. Nobody is going to tell you that this is going to be an easy journey, but on the other hand after eight years of recession, there is quite a group of travellers who have been there before you and lived to tell the tale. You just have to listen to their stories.

The first and probably the most important thing you need to have with you at all times is Flexibility. No matter what arrangements you are making, make sure that you can remain flexible so that as things continue to change in the world and in your life, you can move on to something better or adapt what you have to fit your new circumstances. For example, ten years ago a lawyer just starting out would want to negotiate a good long-term lease. But now, if you must have a lease, examine carefully how you can get out of it : you might find a great opportunity in another place, the market may not be what you had expected where you are, your spouse may get the opportunity of a lifetime at the other end of the country, and you may want to terminate the lease. Similarly with your office sharing or partnership arrangements. A partnership may seem desirable, but if your and your partner's lives start to move in different directions, you will want to know how you can extricate yourselves from your arrangements. So keep them flexible. Even the desire to lease or buy equipment can have the same paradigm applied. "Can I keep my practice flexible with this arrangement?"

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2. Low Overhead

You will find that it is not difficult to generate business; many people have legal problems for which they would welcome your assistance. But how many of these people can afford to pay you? And if they can pay you when they retain you, what is the likelihood of their being downsized just at the time when you are asking for the retainer for the trial? Therefore in order to be able to take on cases based on professional considerations rather than just financial ones, you will need to keep your costs of doing business as low as possible. For one Ottawa practitioner who is coping fine with continuing difficult times this may mean delivering the letters by hand if he walks home past another lawyer's office rather than using a stamp. If that offends your sense of what is right and proper for a lawyer, then you just may find yourself in trouble financially before the practice has fairly got off the ground.

Deciding to practice from home instead of renting space may be another low overhead option for a lawyer. The main issues with which you will have to deal concerning the municipality and your neighbours are zoning, signage and parking. Personally, you will have to deal with issues of personal and family privacy and safety, confidentiality for the client, and professional appearance. In certain types of practice you will not want to have the client at your home, but perhaps you can rent the boardroom at a local lawyer's office or make some other similar arrangements for meeting with your client. Using technology rather than staff in order to run your practice also reduces your overhead considerably. (But do read Paul's article on how to use the technology.) In speaking with many young lawyers who have started out on their own, there seems to be a general feeling that the business really moves ahead once you can get yourself to the point where you can hire staff. Even though your clients may perfectly understand the fiscal constraints of practising law, they will still be reassured, impressed, comforted, and assisted more by a real person in your office than by your computer. So when you have grown to the point where you can hire staff, consider that to be the next step, and work on doing it properly; use the CBA schemes for providing benefits to small firm staff, take up references, supervise properly, remember that once you have staff you add the position of Human Resources Manager to the many hats you are wearing as the owner of a small business.

One of your major overhead costs will involve keeping yourself up-to-date with the law. You will need to decide at the outset what level of technology you will be aiming at for this, and this could be anything from deciding to visit the local library on a regular basis, to investing in the latest CDROM technology and having all your statutes and case law on-line.

There are certain overhead items that you can't cut back on, namely, your Law Society fees and insurance, your accountant, and your bookkeeper. So check these out carefully before you start.

Even though you will be carrying with you everywhere you go and applying to every purchase, the idea of keeping your overhead low, nonetheless you must not ever confuse low overhead with undercapitalisation. You can't open a business without consideration of the capital you need (again see Paul's article).

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3. Promote Growth

Everything you do should be aimed at promoting growth in the business. To promote growth you will need to market. This is something you would not have thought too much about in the initial stages of the practice ten years ago. Now however you will find a plethora of books, seminars, CLE programmes, and other lawyers' visible efforts from which you can learn how to market yourself. You will also promote growth by having the business on a sound administrative and financial basis. Running the business side well is now recognized as key to being a successful lawyer. You just cannot afford to let money slip through your fingers as you declare that your clients come first and you can't be bothered with the business side of the practice. Strangely enough, the clients get better service when the business side of the practice is sound than they do when practice is seen as a spiritual pastime! To promote growth you will need to have an idea of where you want the practice to go, or, if you are just waiting to see what will come in the door, after a while you will become selective in what you take in. You will know what is valuable work to you, whether in terms of income generation, goodwill generation or personal satisfaction, and you will reject what you know will drive you crazy, be uncollectable, or diminish your reputation. Ask yourself about anything you do, "will this Promote the Growth of the practice, given that I know in what direction I want it to grow?"

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4. Don't Get Isolated

Before you open up, you will have done a lot of preparation. Make one of the things you do the preparation of a list of all possible sources of help. Find out whether your Law Society offers any help to lawyers starting a practice, explore what your Bar Association offers for the areas of law in which you want to practise, or for mentoring in general. Think of all the lawyers you have come across in the past, "on the other side" on a file you handled, in the firm where you articled, those you chat with at the Registry Office, or while waiting for your turn in Court, friends from Law School, those whose office systems have impressed you, those whose legal knowledge has impressed you. Make a list and consider these people your major resources. If you cannot find a support group, then start one yourself. Agree to meet with a few other practising lawyers once a month, come what may, to talk honestly about what has been going on in your practice. Ask for advice or help on difficult matters, find what resources others have found useful, and be supportive of one another.

Keeping in touch with other people will keep your difficulties in perspective, and get you help when you need it, and keep your spirits up. Imagine for a moment a business where the CEO, the CFO, the comptroller, the secretary, the bookkeeper, the IS person, the manager of H.R., the whole Marketing Department, and Shipping are depressed. How successful do you think this business is going to be? When you are a sole practitioner you are all those people, and if you get isolated and let your mental health deteriorate, your business will not be successful. So keep an eye on what is happening to you emotionally and don't get isolated from friends inside and outside the profession.

As your practice builds up, you will realize more and more how everything is dependent on you. It is almost impossible to leave the practice for a moment. What if you have to leave it because of illness or accident, or want to leave it to take a vacation? It is worthwhile to consider these issues early on and start making your arrangements. If you are in a space-sharing or other small group arrangement perhaps you can arrange with another of the lawyers in the group to take on the "buddy" role in the event of your absence. This entails a willingness to deal with client telephone calls, correspondence, e-mail, and handle any emergency matters that may come up during your absence. You could also consider hiring a temporary lawyer from an agency to replace you. Agencies generally have a wide selection of lawyers with every imaginable kind of expertise and level of experience. In either event, you will want to let your clients know that you are going to be away and try and schedule motions for after your return. This is difficult of course. You may find that long weekends or one-week holidays are a lot easier to manage than a nice three-week trip. However once you build up the practice and have more people around you, it will get that much easier. What about your trust account? If you were in a coma would anybody have the ability to access it to release funds for a closing? Can your Law Society get an order to deal with it? Check your own jurisdiction's statute; in Ontario for example the Law Society can't touch the trust fund of a lawyer who is in good standing unless the lawyer has died, disappeared, or left Ontario. Consider therefore a power of attorney over your trust account in favour of another lawyer, to be exercised only in the event of your disability. Set it up so that the bank has a record of this power of attorney. And, incidentally, do you have your own Will in order and a personal power of attorney? It is difficult to think about these sorts of things when you have so much else on your mind as you open the practice, but the practice can easily collapse if you are not there, and personal or family emergencies can happen to anyone, so be prepared.

If you keep lots of contacts in the profession and help other people out when necessary, you will find you are not short of people who are willing to help you , and You Will Not Get Isolated.

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5. This is a Business

You are probably somewhere on the continuum between independently wealthy and totally asset-less with large debts. The nearer you are to the latter end of the spectrum, the more you should pause before getting yourself into a business venture. Money really is a major factor in whether or not you can get the business off the ground. Many new lawyers have to make the decision that opening a practice is not going to be possible for them because they just do not have the personal finances to make it possible.

Having said that however, you must apply good business principles to the business if you do decide to open up. You can plan, have a vision, watch the bottom line, practice fiscal responsibility, but above all, be in control of the business side of the practice.

The area of financial control is where many lawyers fail. You will not be able to make every single bookkeeping entry, neither should you do so, but you must know what is going on with the business side of the practice, and this means taking control at certain key points.

• The first key point is ensuring that anyone working in the practice, yourself included, is meticulous in recording the basic financial transactions - the cheques, deposits, the accounts to clients and the expenses you incur for the practice and for your clients. If these transactions are recorded correctly (which means putting all details of the transaction in the record including file number and name as well as client name, and having serial numbers for accounts) then the records will be accurate and all expenses will be charged off to income and everything possible will be collected back from the clients.
   
• The second key point is the receipt of the two bank statements each month. They should come to you and be reviewed by you even though your bookkeeper always does the reconciliation. If the business gets very busy, you may want an arrangement with the bank that you have your statement on line (but remember the bank does not know how much money you have in your account - only you know what cheques are outstanding, so only you know what you have in the bank, and your daily or weekly planning should be based on your own books and records, not those of the bank).
   
• Your third control point is the review of the trust listing and trust bank reconciliation which should be done each month by you, the owner of the business.
   
• Finally, you receive your report on your month's activities as well as your year-to-date, and you then implement control by dealing with anything that needs action.

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Patricia Rogerson – Called to the Bar in 1980 after a life before the law. Appointed for one year as a Law Clerk to the Chief Justice of the High Court of Ontario. In 1981-1984 Practised law in downtown Toronto with the firm of Cooper, Jarvis. Primarily family law, but also general litigation, estates and wills, and some real estate. In 1984-1988 Sole practitioner in downtown Toronto. In 1988-1992 Staff Trustee in the Department of Audit and Investigation at the Law Society of Upper Canada. In 1992-1997 Director of the Practice Advisory Service at the Law Society of Upper Canada.