OTLA Trial Lawyer Winter 2021

25 Trial Lawyer • Winter 2021 cringeworthy. Hopefully, it never hap- pens to one of us. This can be avoided by intentionally planning and limiting the firm to services its lawyers actually know how to deliver. Another question which should be asked during conception of the nascent law business is, “From where will our clients come?” We know a predictable inflow of work is necessary for success. But how do we generate that inflow? Few small law businesses can rely solely on their reputation, especially during the early years of their practice. Far more often, a business development plan is necessary. This includes cultivating sources of case referrals, networking and discussions of business-promotion and advertising. It would be nice if we sat at our desks and clients just materialized in regular intervals. But that is not reality. As lawyers, for our law businesses to suc- ceed, we must develop and manage sources of business that will provide us with opportunities to serve clients. Finance In order to survive, the law business must also pay attention to, and plan for, the financial realities of running its prac- tice. This is especially so for law busi- nesses where work is done by contin- gency fee, an arrangement with which many of us are familiar. There will be a natural lag in cash flow which will be particularly acute as the firm is starting up. The firm will need financial reserves in order to operate. Alternatively, the owners can secure lines of credit. Though, those come with risk. Most banks will require the owners of the law business to personally guaranty a line of credit. Money will be needed for equipment, furniture, rent, payroll, insurance, sup- plies, computers, software, utilities, permits, memberships, licenses and many other categories of expenses. In many cases, client litigation expenses will need to be advanced. All of this requires de- tailed budgeting and attention to expen- ditures. An accountant can help set up the law business’ books, but the business will suffer whenever it takes in less than i t spends . To keep the bus ines s financially healthy, its owners will need discipline in their spending and owner compensation. Proper budgeting and revenue projec- tion will play a large role in determining whether the new law business can survive its early years. Many of the law business’ expenses will be incurred before fees are even collected. Lawyers with a vision to start a new law business must consider how that business will be capitalized and at what point cash flows will meet ex- penses There must be an honest, thor- ough and realistic discussion of how much it will actually cost to operate the business and whether revenues will cover that cost and leave a little some- thing left for the business owners in the form of profit. The law business must also have a realistic view of its antici- pated revenue and the time frame for realizing that revenue. Staffing Hiring staff is another area where business principles come into play. The small law business will not likely have the budget for a human resources depart- ment. The job of recruiting, hiring and compensating the law business’ team members will likely be done by the owners. Staffing in a small law business bal- ances several factors. These include such things such as the economic cost and benefit of employing staff, the skillsets of the teammembers, and what some firms call the “fit” issue. Does the team mem- ber’s personality and style work within the small law business? Taking on staff involves cost to the small business in the form of payroll, taxes and fringe benefits. The small law business must consider whether there will be enough work to keep each teammem- ber fully occupied and whether that team member’s work will create sufficient economic value to justify the expendi- ture. The business will suffer if the pay- roll outflow exceeds the economic value of the team members’ work. When a good team is assembled and the lawyer can delegate tasks and offload work, the small law business can take on more business and operate more effi- ciently. The lawyer/owner is freed up to perform his more essential legal work and also the administrative management of the business itself. All of this requires careful hiring, appropriate compensa- tion, and attention to the needs of the team and its members. Good legal staff is essential to the success of the small law business. The application of time, attention and care to the hiring and mentoring of staff members will drastically increase the likelihood of success for the small law business. Conversely, haphazard hiring can result in frequent turnover, an expen- sive impediment to success. Conclusion Taking legal knowledge, applying that knowledge to a client’s particular legal need, and then delivering that service for compensation is a business process. The small law business is a conduit for deliv- ering legal services. Running the small law business will be rewarding if we apply some of the same basic business practices and prin- ciples used by businesses whose products are not legal services. These principles include attention to client needs, effi- ciency and sound financial practices. Delivering high-quality legal services to our clients is just as rewarding as running any other small business enterprise. Paul Vames is a partner in the small law business known as Vames/Wang Injury Lawyers, 5920 NE Ray Cir., Ste. 145, Hillsboro, Oregon 97124. His professional focus is personal injury cases. He is an OTLA Guardians membe r at the Guardians Club level. He can be reached at [email protected] or 503-669- 3426.