The Three Kinds of Law Firms

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Law Firm BusinessAbout half of the lawyers in the United States have some form of ownership interest in their law firm.  Both by choice and by chance they find themselves in the position of starting a business, attracting clients and providing a service.  While some of these folks are better suited for business ownership than others, all of them are filled with hope for the future.

In the past few years I have personally met with or spoken with over 1,000 of these lawyers.  Each of them has some degree of fear of the unknown, each of them has some level of confidence in their ability to practice law and each of them still has hope for their future earning potential.  Where they differ is in their reasons for being a law firm owner.  Some became law firm owners by chance some became law firm owners out of necessity and some became law firm owners out of pure ambition.

When we first meet I ask them what kind of a law firm they want to build.  This question puzzles most lawyers.  It is akin to asking: “Where do you see yourself in five years?”  Most people don’t have a clue.  They have not given any thought to next month, so looking out five years is something that makes them uncomfortable.

Since this question requires some thought, and since answering it is a healthy exercise for anyone who owns a law firm, I have prepared a brief summary of the three types of law firms for you.  Read through them.  Reflect upon them and decide which best fits the plans you have for your future.

The Temporary Law Firm

This is where your law firm serves as a transitional vehicle at various points during your career.  You may have been laid off from a job in a big law firm and you want to find another job in a big law firm.  Since those jobs take time to find, you set up a legal entity and you help the people you know with legal work.

These lawyers spend about 75% of their time looking for their next job.  While they focus their attention on the few matters they actually handle, they never focus the direction of their practice (because it is just temporary).  This leads to a great deal of uncertainty and frustration.

If this is you, I encourage you to dedicate yourself to building a book of business. Even a small roster of clients will help you land a job at a large firm.  It is easier for a firm to make the decision to hire you if you come with clients who will fund your salary.  Once you make the decision to focus on this task with 100% of your effort, you will be amazed at how things seem to come together. No matter what you decide to do in the long run, having a book of business is helpful and necessary.

The Lifestyle Law Firm

Starting a law firm is a great way to control your own destiny.  Many lawyers go out on their own because they want to live life on their terms.  They love the law and they love helping clients but they also love spending time with their family.  Income is important to the lawyers who start a Lifestyle Law Firm but it is a means to an end.

A Lifestyle Law Firm is usually focused on one or two tightly defined market niches.  This allows the lawyer to command a fee premium because of his experience.  Generally there are less than ten people working in this type of law firm.  It will often have a family feel to it and compensation for everyone is, in some way, tied to the financial performance of the firm.

Lawyers in a Lifestyle Law Firm can spend as little as 20-30 percent of their time on business development and still do well (depending upon their practice area).  Most of the attorneys who build this kind of law firm live well and enjoy what they do.

I work with lawyers who want a Lifestyle Law Firm to make their vision a reality.  We carefully review their goals and we develop a plan that allows them to grow at a comfortable pace.  Business and personal goals are often intertwined as this is important to the lawyers who build Lifestyle Law Firms.

The Enterprise

This is a law firm for the attorney who is highly ambitious, aggressive and has a desire to build something that will last beyond his lifetime.  This is going to be a full blown business with employees, administrative issues and management challenges.  The lawyer who builds an Enterprise is going to spend 80-90 percent of his time on business development and management.  At some point practicing law will not be an option.

The greatest benefit of creating an Enterprise is wealth accumulation.  Just like creating any other business, a big law business can enrich the owner and eventually be sold.  I caution anyone who wants to undertake this challenge that it takes a special type of person to lead this charge.  Few people come through the development of an Enterprise with their lives, health and family in the same form as when they made the decision to begin this task.  Building this type of law firm requires time, energy and dedication.

I help lawyers who build Enterprise practices by focusing them on controlled growth.  We put a plan in place and we aggressively attack each challenge while minimizing the drama that can often accompany the growth of a large firm.

Start by Making a Decision

You will notice that no matter which kind of law firm you decide to develop it all begins with a decision.  You must decide what you want from your law firm.  You can use your law practice to get a job, to have a great life or to build something bigger than you.  But first you must make a decision to get going.

If you need help deciding which option is right for you or if you know what you want and you need help getting it, call my office.  We understand the business of law and we help lawyers make it work for them.