Starting a Law Firm | Tracking Expenses

As you can tell by the title of this post, I've been spending the last few days finalizing my law firm business plan, which means, at some point, trying to nail down the financials. For me, the financials include start up expenses, monthly expenses, and projecting income. And if you are like me, this is the most difficult part of the entire starting a law firm process.

The first part of determining expenses is figuring out what you are going to need to make your law firm work when you get started. A lot of this is common sense, but if you poke around on the internet you can find some pretty good information out there. I don't know about you, but I am an avid blog reader, and I have about 50 blogs in my Google Reader. Some are practice specific, some are lawyer specific, some deal with starting a law firm, some deal with law firm marketing, and some deal with entrepreneurship. From this information I am able to pick up a lot of helpful tips that I might not otherwise be able to.

For example, the other day I was thumbing through my reader and stumbled upon this post from Peter called Solo in Chicago. As the name suggests, this site is Peter's blog about his journey as a solo lawyer (he is doing quite well). If you click on the link you will see an outline of his expenses and income from the month of February. This is about the best look in you will have in building your practice, because you actually get to see what is absolutely necessary for this specific attorney to run his practice. And, because he is so forthcoming with information, I'm going to give a link to his website, where I'm sure he is a great Chicago divorce lawyer (by the way, giving links on your site to people who are doing a good job, with a keyword that you think represents their site, is about the best thanks you can give anyone on the internet - I will be discussing this more on my law firm marketing and website SEO site as time passes).

Anyway, back on topic. I put together a list of projected law firm expenses, both yearly and monthly. This is what I came up with (insurance, legal research, and rent are estimates because I haven't received all the information I've asked for yet):
Monthly -
1. Insurance - malpractice: $125

2. Insurance - premises: $50

3. Legal Research: $100

4. Marketing: $100

5. Website (hosting): $10

6. Office Supplies: $40

7. Rent: $1,000

8. Phone: $100

9. Fax: $20

10. Clio (online management and billing software): $49

11. Mozy: $20

12. Credit Card Processing: $25

13. Transportation: $50

14. Postage: $70

Total = $1,759

Yearly
1. CLE: $500

2. Attorney Registration: $100

3. Local Bar Dues: $215

4. Chamber of Commerce Dues (Seattle and surrounding communities): $500

5. Business Cards: $50

6. Accounting: $250

7. Technology: $500

8. Software: $200

9. Practice Area organizations: $200

10. Ironkey USB: $150

Total = $2,665 or $222/month (not all of these are necessary - I just wanted to try to figure out everything I would need).

Doing this gives me at least an idea of what I need to start making immediately just to keep my law firm open (plus, if all the business pundits are correct, about 10% more). The great thing is, when I boil it down to this, even $2,000 is a manageable number for a law practice (essentially one misdemeanor criminal case). So, if I can just get one person to sign up a month, the rest I can begin to invest back in the firm to make it the well oiled machine I envision.

The next step is to put together my law firm income projections for at least the next three years. And this is where it gets tricky, because so much about it is unknown. All I can be sure of are the rates I will charge. I have to project how many people will sign up, and when I'll actually be able to collect the money (thankfully most of my work will be up front flat fee, so I won't have to wait long to deposit it in the business account). When I have that done I'll try to figure out how to post a spreadsheet on here and give you an idea of what I expect to make my first three years after opening my law firm.

I think that's all for today. Once I get this business plan finished I should start to pick up my law firm marketing posts, and provide a lot more tidbits of information on here (there is a lot of great information out there). I think I will leave you with one thing though - at some point you are going to have to commit to doing what you want to do.

There are always going to be unknowns out there, but I can guarantee you there are a lot of attorneys out there running their own practice that at least make enough money to pay the bills, and they are not remotely as motivated, as smart, or as dedicated to success as you are (I've gone against a lot of these guys - trust me, there are a lot). So, keep working toward your goal and get your mind prepared to take that leap and get out there and start your own law firm!

I also wanted to thank the couple of people that left comments. I think the more successful stories people can hear, the easier it is to get over that fear of opening a solo law practice.