Who here has started a law firm?

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Anonymous User
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Who here has started a law firm?

Postby Anonymous User » Tue Nov 22, 2011 6:12 pm

Who here has started a law firm (or else familiar with a start-up)? How long did it take to breakeven? Was your advertising minimal, or did you purchase the back covers of phone books and run electronic advertising, if so, did it work (how long did it take) and what was the approximate cost?

Would a $1M investment be enough to sustain the firm for two years? Startup cost: legal materials, desks, decorating, etc. $100K. Figure 4 attorneys each on a $70K draw. Two legal secretaries and a paralegal ($150K). Investigator via contract labor. Annual Office space (the best $70K-$85K a year would secure). Misc. expense $20K (dues, memberships, travel, etc.).

What else?

Understood that numerous variables were not covered above (market size, etc.). Thanks.

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Veyron
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Re: Who here has started a law firm?

Postby Veyron » Tue Nov 22, 2011 6:14 pm

Relevant to my interests.

Also, no way it costs 1m to start a firm (most places).

c3pO4
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Re: Who here has started a law firm?

Postby c3pO4 » Tue Nov 22, 2011 6:22 pm

Anonymous User wrote:Who here has started a law firm (or else familiar with a start-up)? How long did it take to breakeven? Was your advertising minimal, or did you purchase the back covers of phone books and run electronic advertising, if so, did it work (how long did it take) and what was the approximate cost?

Would a $1M investment be enough to sustain the firm for two years? Startup cost: legal materials, desks, decorating, etc. $100K. Figure 4 attorneys each on a $70K draw. Two legal secretaries and a paralegal ($150K). Investigator via contract labor. Annual Office space (the best $70K-$85K a year would secure). Misc. expense $20K (dues, memberships, travel, etc.).

What else?

Understood that numerous variables were not covered above (market size, etc.). Thanks.


You missed the only thing that matters. Clients. Your "strategy" is so lol I can't believe it. You don't hire 4 attorneys, two legal secretaries, a paralegal, and the "best office space 70k-85k could secure" when you start a law firm, unless you already have the work to sustain, and then you wouldn't need any "investment." Law is a service business, you don't need to invest anything but your time and marginal costs to startup (i.e. maybe 10k or less). You either have the ability to bring in business to sustain your firm, or you don't. Ever consider why law firms aren't bought and sold like tech companies --- they merge. Nobody gets 100x or even 10x earnings when merging their firm. They just keep working. So bottom line, forget your 1M, and either start a firm or don't. There is only one thing you need. Clients and/or ability to get them within the first month. Otherwise, shut your doors.

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Addy
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Re: Who here has started a law firm?

Postby Addy » Tue Nov 22, 2011 6:31 pm

I have to wonder what the chances are for bank (or investor/lender) financing. Take three or four rookie lawyers from an Ivy or similar prestigious school and put a prospectus together. Expenses are probably not to hard to project. The income projection, is another story. Perhaps one of the attorneys should have the credentials as a rainmaker (that might be a bit difficult to accomplish).

If this were, as noted above, for two years, you certainly would want enough dry powder [$$] to make sure you could last the two years. Not sure if $1M is the number, but it might be close.

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Grond
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Re: Who here has started a law firm?

Postby Grond » Tue Nov 22, 2011 6:47 pm

Anonymous User wrote:Who here has started a law firm (or else familiar with a start-up)? How long did it take to breakeven? Was your advertising minimal, or did you purchase the back covers of phone books and run electronic advertising, if so, did it work (how long did it take) and what was the approximate cost?

Would a $1M investment be enough to sustain the firm for two years? Startup cost: legal materials, desks, decorating, etc. $100K. Figure 4 attorneys each on a $70K draw. Two legal secretaries and a paralegal ($150K). Investigator via contract labor. Annual Office space (the best $70K-$85K a year would secure). Misc. expense $20K (dues, memberships, travel, etc.).

What else?

Understood that numerous variables were not covered above (market size, etc.). Thanks.


Do not poast ever again untill you google Jay Foonberg. TYIA.

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Veyron
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Re: Who here has started a law firm?

Postby Veyron » Tue Nov 22, 2011 7:25 pm

c3pO4 wrote:
Anonymous User wrote:Who here has started a law firm (or else familiar with a start-up)? How long did it take to breakeven? Was your advertising minimal, or did you purchase the back covers of phone books and run electronic advertising, if so, did it work (how long did it take) and what was the approximate cost?

Would a $1M investment be enough to sustain the firm for two years? Startup cost: legal materials, desks, decorating, etc. $100K. Figure 4 attorneys each on a $70K draw. Two legal secretaries and a paralegal ($150K). Investigator via contract labor. Annual Office space (the best $70K-$85K a year would secure). Misc. expense $20K (dues, memberships, travel, etc.).

What else?

Understood that numerous variables were not covered above (market size, etc.). Thanks.


You missed the only thing that matters. Clients. Your "strategy" is so lol I can't believe it. You don't hire 4 attorneys, two legal secretaries, a paralegal, and the "best office space 70k-85k could secure" when you start a law firm, unless you already have the work to sustain, and then you wouldn't need any "investment." Law is a service business, you don't need to invest anything but your time and marginal costs to startup (i.e. maybe 10k or less). You either have the ability to bring in business to sustain your firm, or you don't. Ever consider why law firms aren't bought and sold like tech companies --- they merge. Nobody gets 100x or even 10x earnings when merging their firm. They just keep working. So bottom line, forget your 1M, and either start a firm or don't. There is only one thing you need. Clients and/or ability to get them within the first month. Otherwise, shut your doors.


This post seems generally credited. However, clients are a revenue stream. Say you can bring over enough buisness to keep 4 lawyers and 2 paras busy - you still have to foot the bill for start-up costs like office space, utilities and salaries at the beginning until you are geared up enough to capitalize fully on your existing lines of business.

c3pO4
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Re: Who here has started a law firm?

Postby c3pO4 » Tue Nov 22, 2011 8:02 pm

Veyron wrote:
c3pO4 wrote:
Anonymous User wrote:Who here has started a law firm (or else familiar with a start-up)? How long did it take to breakeven? Was your advertising minimal, or did you purchase the back covers of phone books and run electronic advertising, if so, did it work (how long did it take) and what was the approximate cost?

Would a $1M investment be enough to sustain the firm for two years? Startup cost: legal materials, desks, decorating, etc. $100K. Figure 4 attorneys each on a $70K draw. Two legal secretaries and a paralegal ($150K). Investigator via contract labor. Annual Office space (the best $70K-$85K a year would secure). Misc. expense $20K (dues, memberships, travel, etc.).

What else?

Understood that numerous variables were not covered above (market size, etc.). Thanks.


You missed the only thing that matters. Clients. Your "strategy" is so lol I can't believe it. You don't hire 4 attorneys, two legal secretaries, a paralegal, and the "best office space 70k-85k could secure" when you start a law firm, unless you already have the work to sustain, and then you wouldn't need any "investment." Law is a service business, you don't need to invest anything but your time and marginal costs to startup (i.e. maybe 10k or less). You either have the ability to bring in business to sustain your firm, or you don't. Ever consider why law firms aren't bought and sold like tech companies --- they merge. Nobody gets 100x or even 10x earnings when merging their firm. They just keep working. So bottom line, forget your 1M, and either start a firm or don't. There is only one thing you need. Clients and/or ability to get them within the first month. Otherwise, shut your doors.


This post seems generally credited. However, clients are a revenue stream. Say you can bring over enough buisness to keep 4 lawyers and 2 paras busy - you still have to foot the bill for start-up costs like office space, utilities and salaries at the beginning until you are geared up enough to capitalize fully on your existing lines of business.


Clients are not like other revenue stream. An iPad for example, which requires you design it and build it and market it before you can sell it to consumers---requiring capital.

A law firm, or a marketing agency, or an insurance broker barely needs any startup capital. Your buddies, if they aren't bringing clients, should not get 1 million spread over 2 years. Hire them once you can, not at first. No bank or sane investor will ever capitalize a law firm with this plan.

Like I said, you either start because you have clients, or you start and get clients immediately within the first month, or you shut your doors.

BeenDidThat
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Re: Who here has started a law firm?

Postby BeenDidThat » Tue Nov 22, 2011 8:16 pm

Local bar associations should have events and such where you could meet real live lawyers who have hung a shingle. They will probably have better answers than us.

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Veyron
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Re: Who here has started a law firm?

Postby Veyron » Tue Nov 22, 2011 8:25 pm

c3pO4 wrote:
Veyron wrote:
c3pO4 wrote:
Anonymous User wrote:Who here has started a law firm (or else familiar with a start-up)? How long did it take to breakeven? Was your advertising minimal, or did you purchase the back covers of phone books and run electronic advertising, if so, did it work (how long did it take) and what was the approximate cost?

Would a $1M investment be enough to sustain the firm for two years? Startup cost: legal materials, desks, decorating, etc. $100K. Figure 4 attorneys each on a $70K draw. Two legal secretaries and a paralegal ($150K). Investigator via contract labor. Annual Office space (the best $70K-$85K a year would secure). Misc. expense $20K (dues, memberships, travel, etc.).

What else?

Understood that numerous variables were not covered above (market size, etc.). Thanks.


You missed the only thing that matters. Clients. Your "strategy" is so lol I can't believe it. You don't hire 4 attorneys, two legal secretaries, a paralegal, and the "best office space 70k-85k could secure" when you start a law firm, unless you already have the work to sustain, and then you wouldn't need any "investment." Law is a service business, you don't need to invest anything but your time and marginal costs to startup (i.e. maybe 10k or less). You either have the ability to bring in business to sustain your firm, or you don't. Ever consider why law firms aren't bought and sold like tech companies --- they merge. Nobody gets 100x or even 10x earnings when merging their firm. They just keep working. So bottom line, forget your 1M, and either start a firm or don't. There is only one thing you need. Clients and/or ability to get them within the first month. Otherwise, shut your doors.


This post seems generally credited. However, clients are a revenue stream. Say you can bring over enough buisness to keep 4 lawyers and 2 paras busy - you still have to foot the bill for start-up costs like office space, utilities and salaries at the beginning until you are geared up enough to capitalize fully on your existing lines of business.


Clients are not like other revenue stream. An iPad for example, which requires you design it and build it and market it before you can sell it to consumers---requiring capital.

A law firm, or a marketing agency, or an insurance broker barely needs any startup capital. Your buddies, if they aren't bringing clients, should not get 1 million spread over 2 years. Hire them once you can, not at first. No bank or sane investor will ever capitalize a law firm with this plan.

Like I said, you either start because you have clients, or you start and get clients immediately within the first month, or you shut your doors.


Yes, but this is ignoring that some clients are just too large to service with one guy and too large to leave off the table.

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vanwinkle
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Re: Who here has started a law firm?

Postby vanwinkle » Tue Nov 22, 2011 8:41 pm

I could run a law firm out of my sister's garage if I had clients.

Clients matter more than anything else, and attorneys willing to accept a $70K salary won't have clients they can bring with them. If you had no clients but a lot of startup funds, the single best place to spend it would be on a partner who had a fat client book and a desire to start their own firm. You convince them that your money plus their clients will provide success. That way you become partners. Otherwise, without clients or anything else to offer, you'd be one of their $70K-or-less lackeys.

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Cupidity
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Re: Who here has started a law firm?

Postby Cupidity » Tue Nov 22, 2011 8:50 pm

It is also worth noting that practice area will dictate feasibility to a large extent. If we are talking employment discrimination, litigation costs are simple and yellow-pages/social-media advertisement will be sufficient to bring in enough money to feed yourself. (Assuming you are skilled enough to actually litigate)

If, however, you are talking about intellectual property, or god forbid, anything that requires expert testimony, it will be significantly more costly to put up initial payments for discovery costs, which most firms cover and are then reimbursed for. Even if you want to be an ambulance chaser, do you think Mr. Gothitbyacar can afford the $400.00 per hour it costs for a surgeon to testify?

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Addy
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Re: Who here has started a law firm?

Postby Addy » Tue Nov 22, 2011 10:56 pm

With most service driven businesses the salespeople are responsible for generating revenue. I assume that in a law firm the lawyers are the salespeople (their clients, referrals, etc.), with the exception of call-ins (from advertising or walk-ins).

At year’s end I presume the lawyers split the pie on the profits. However, if one lawyer brings in a million dollars and one lawyer only brings in fifty-thousand (not enough to cover his/her salary (or draw, as referred to above), I would imagine that there is a formula covering those situations. Perhaps someone who has started a law office will chime in. Reading one of the books noted above would be wise, but it will have to wait until after exams!

LawIdiot86
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Re: Who here has started a law firm?

Postby LawIdiot86 » Tue Nov 22, 2011 10:59 pm

Anonymous User wrote:Who here has started a law firm (or else familiar with a start-up)? How long did it take to breakeven? Was your advertising minimal, or did you purchase the back covers of phone books and run electronic advertising, if so, did it work (how long did it take) and what was the approximate cost?

Would a $1M investment be enough to sustain the firm for two years? Startup cost: legal materials, desks, decorating, etc. $100K. Figure 4 attorneys each on a $70K draw. Two legal secretaries and a paralegal ($150K). Investigator via contract labor. Annual Office space (the best $70K-$85K a year would secure). Misc. expense $20K (dues, memberships, travel, etc.).

What else?

Understood that numerous variables were not covered above (market size, etc.). Thanks.

There are so many things wrong with this plan besides all the things posted above. 150k for 3 employees? 100k on desks, westlaw and pictures? 70k for offices. All of those are far far above what a first year business should be spending. A model that sounds slightly better is 1 lawyer, 10 legal secretaries with the lawyer spending all day in court arguing the tiny cases processed by the secretaries. Most likely an ethics gray area, but far more likely to succeed.

Anonymous User
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Re: Who here has started a law firm?

Postby Anonymous User » Wed Nov 23, 2011 12:07 am

These numbers are laughably random. I'm not bashing the idea -- it's my dream to start a firm after getting (at least) a few years of experience in a firm. But this post proves how little business sense most attorneys have.

What practice area? Plaintiffs work (personal injury, mass torts, 1983 suits, employment) requires a larger "war chest" because you make money on contingency. By way of contrast, industry standard is for criminal defense to be paid up front, possibly in the form of a retainer -- usually right after the consultation.

Why would you hire four attorneys off the bat without clients? Will you be taking a book of business, or starting from scratch? If you're hanging a shingle with no book of business and then calling up your friends and twiddling your thumbs while waiting for your google adwords to bring in clients, you'd be a terrible business person to hire four attorneys.

"Legal materials," fixtures, and decorations for $100k? I'll gladly tender a bid for furnishing your office.

The point is, these numbers are bogus and are indicative of an underlying misunderstanding of how a business functions. Work at a firm, preferably a small one, and get a feel for how it runs. Put together a spreadsheet. Research commercial leases (or office shares) for small furnished offices in your area. Determine a practice area and the attendant capital requirements. Research marketing expenses. Etc, etc. Put it all in a spreadsheet and run some numbers. It can and should be done on a fraction of the costs you've estimated. You'd really want to focus on MINIMIZING overhead. Read the Foonberg book.

Anonymous User
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Re: Who here has started a law firm?

Postby Anonymous User » Wed Nov 23, 2011 1:52 am

Starting out you will be surprised how much one attorney can get done without having to bother with personnel management and such. I worked for a solo practitioner as a paralegal, and his overhead costs were very low. He focused on one area of law only, and he now has four offices with 3 attorneys and 5 paralegals/receptionists (after about 5 years). While I worked there three years ago he had me and that was it. The costs were really low, overall.

$1000 /month for the accountant/billing person on contract,
$800 /month for a really nice three-office space with ample parking in a downtown mid-sized market,
$400 /month unlimited area-specific westlaw,
$400 /month phone (cells and office phone as well as a fax line and a 1-800 number) & internet
$150,000 / year on his and my salaries
$800 /month website through westlaw (awesome SEO)
$300 /month on office supplies

Start-up costs were roughly:
$500 / computer (we had 3 and a server comp)
$400 for a printer/copier/fax
$400 on two other printers
$500 on desks from the Habitat for Humanity Store which he and I stripped and refinished
$2000 on other decorations and furniture, mostly stuff we found at random used places and fixed up to look fancy
~$5,000 on misc. stuff

As stated previously, clients are the most important part. We got most of our clients from the website which advertised free phone consultations. The attorney would give the free consultations while he drove to and from court. The awesome SEO made it to where we were the first site that came up when you searched for the area of law and the city's name in google. By being awesome, we were able to eventually bring in more clients by word of mouth. This gave the attorney the capital he needed to open more offices (one is an office share type situation that he meets people at when he is in one specific city). It can be done, but you have to be smart about it. Don't go in spending tons on decorations and furniture. You may end up making less than your furniture is worth. Keep in mind that you can do a lot with not much money. Walking into my old boss' office you would never know that he spent so little on it. Everything was nice and looked brand new and expensive. You can buy the expensive crap once you have clients.

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romothesavior
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Re: Who here has started a law firm?

Postby romothesavior » Wed Nov 23, 2011 3:27 am

LawIdiot86 wrote:
Anonymous User wrote:Who here has started a law firm (or else familiar with a start-up)? How long did it take to breakeven? Was your advertising minimal, or did you purchase the back covers of phone books and run electronic advertising, if so, did it work (how long did it take) and what was the approximate cost?

Would a $1M investment be enough to sustain the firm for two years? Startup cost: legal materials, desks, decorating, etc. $100K. Figure 4 attorneys each on a $70K draw. Two legal secretaries and a paralegal ($150K). Investigator via contract labor. Annual Office space (the best $70K-$85K a year would secure). Misc. expense $20K (dues, memberships, travel, etc.).

What else?

Understood that numerous variables were not covered above (market size, etc.). Thanks.

There are so many things wrong with this plan besides all the things posted above. 150k for 3 employees? 100k on desks, westlaw and pictures? 70k for offices. All of those are far far above what a first year business should be spending. A model that sounds slightly better is 1 lawyer, 10 legal secretaries with the lawyer spending all day in court arguing the tiny cases processed by the secretaries. Most likely an ethics gray area, but far more likely to succeed.

10 legal secretaries per lawyer? lololol




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