It doesn’t matter what business you’re running. The services and products you provide are the most important thing, but they’re not the only important thing. Actually running the business matters, too. That’s the case for small legal firms just as much as it’s the case for a bakery, a jeweler, or a software developer. One of the most essential parts of running the business to get to grips with in the financial aspect of it. If you can’t keep your balance healthy and make good use of the funds you have, it doesn’t matter how great your casework is.
Know the bare minimum and start from there
Actually starting the business and taking it out of the “preparation” phase can be a very daunting prospect indeed. You might be paralyzed thinking about what you genuinely need to start practicing. The truth is that it’s not all that much nor does it need to cost you a lot. The bare minimum might be considered the following: an office (not necessarily one you have to pay for), a computer, a printer, and a scanner. Those are just about all the resources you truly need. To actually get the office up and running, then you’re going to need a website and potentially practice management software, which isn’t essential but it is a tool that most law firms wouldn’t go without.
Advertise economically
There are a lot of opportunities to turn to freelancers and other businesses for your marketing needs. However, on the internet, it’s not always crucial. Advertising economically means learning how to do more in-house. Search engine optimization, social media management, outreach, email campaigns, blogging. These aren’t necessarily parts of your marketing strategy you need to hire someone to handle. Instead, you can learn how to build your own online presence, like attaching a blog to your site, growing that blog, and producing content that your future clients are likely going to want to read. If you’re willing to invest more time in building your online presence, you don’t necessarily need to invest a lot of money into it, too.
Invest in a suit, but not immediately
That doesn’t mean that you’re never going to need to pay for a quality brand. At some point, you should expect to fork out some cash. That means making your office look professional. It means buying a sharp looking suit. It also means creating a quality law website that has some web design expertise behind it. Just make sure that you have enough to keep the business going before you drop everything into these kinds of marketing. They are not going to return immediate results. Don’t feel like nailing down the business image is the first place your money should be going.
Don’t pay over your head for books
You’re going to constantly be looking through the books for the information you need on a case. If you’ve practiced law before then that should be of no surprise to you. But what is surprising to a lot of new practices is the immediate cost that is acquiring those legal texts. It’s no exaggeration to say that they might be the single most expensive part of setting up business. Every single one, in physical form, can cost well into the three-digit numbers. Instead, consider going digital and buying legal eBooks instead. Most texts you might possibly need are available in that format and more often than not a lot cheaper.
Be careful with debt
You need money coming in to keep the lights on and your team paid. But sometimes, you’re waiting on the results of a trial or settlement as part of your payment agreement. How do you manage to keep running until then, especially in a lean period? You can cover yourself with some of the following tips, but you should also consider how you can get extra funding. Don’t fall into the pit of taking on debt that, unmanaged, can sink the business. But there are options that can help you avoid debt entirely. Plaintiff funding is almost always an advance, not a loan. That advance comes with a return for the funder, but it’s not a loan you have to pay back even if you don’t get the settlement you wanted from the case. Always look for the safer alternatives.
Keep it separate and keep it recorded
Debt isn’t the only way that your money management might get you in trouble, either. It might very well be down to how you organize and manage your finances, instead. One tip that every business owner should learn is to keep their personal and professional finances separate and in separate accounts. Not only will it stop you from accidentally dipping into funds and jeopardizing your finances on either side. It also makes it a lot easier to account for when tax season comes around. Keeping organized and dated transaction records of all your outgoings and incomings will also make it a lot easier to meet the big financial deadlines.
Watch out who you work with
You might occasionally need to outsource part of your work. It might be court reporters, contract managers, accountants, marketers, PR people, or even just virtual assistants. Outsourcing can help you manage a larger workload without paying the added costs of hiring an individual and dealing with all the responsibilities of an employer that come with them. But make sure that you do your research on anyone you work with. See what past work they’ve done and that they have a large body of testimonials to support them. It’s not right or fair to assume freelancers or outsourcing companies are all dishonest, but there are scams to avoid when outsourcing.
Lawyer those vendors
Besides clients, freelancers and outsourced companies, some of your most long-term relationships are going to be with your vendors. These are the people who give you the services you need to run, supply the office, and provide software that helps you do your job more efficiently. In the work of business 2 business transactions, however, you will find there is almost always a little wiggle room. As time goes on, don’t be afraid to re-evaluate the contract with your existing vendors. Look at other options, yes, but if it’s more convenient, then take the time to talk with existing providers. A lot of them are up for negotiation with their longer-term clients. Retaining you at a lower profit can be a much better deal for them than seeing you go to a competitor.
Be ready for almost anything
The legal world sees a lot of ups-and-downs, so the same should be no surprise for the legal teams that inhabit it. Budgeting for a contingency fund should be a priority for every business. You might end up losing a claim that you had every reason to believe you could depend on. Your office might suffer a crisis that sees you spending a lot of money to get things back on an even keel. If you’re not anticipating the unexpected and leaving some funds aside to deal with it, you are at the mercy of forces beyond your control. Of course, some of these risks can be covered by the insurance you purchase for the business, but you shouldn’t assume that’s true of all of them.
Be better at billing
Above, we looked at how securing more reliable funding can help you manage the money coming into the business. But it’s not only about how you keep the money coming before a case is settled. You should also consider how you deal with clients whose work is done and gone. Your realization rate is something you should always be looking to improve. Billing time for clients is often prioritized more than the process of actually receiving the money for the time billed. There are a lot of valid times that realization rate might decrease besides complaints and disputes from clients. Your staff members taking longer than they should, inconsistent billing, and write-offs for certain clients all contribute. Running a tighter crew can help you avoid these costly wastes of time.
Treat the team right
Of course, your employees are not just pawns to be moved as you please. An employer has to always consider how they value, support, and help to develop their team. Those are the key parts of retaining your employees. Without putting any focus or money into helping to develop junior members of staff or to show appreciation for your most skilled attorneys, you are going to be losing them. Not only can that decrease the effectiveness of the business as a whole. Each time you have to replace someone, you have to pay the costs of the hiring, negotiation, and training process.
Reducing overheads, investing in the right places (and people), and managing an effective supply of funding. The rules of finances in a law firm might seem a lot like managing finances in other businesses but with a little specialization. That doesn’t mean it’s any less essential to practicing law successfully.
