Typically, lawyers starting a new firm have come from established firms where they had the benefit of a full complement of support staff and legal practice management systems. However, there is no greater period of uncertainty in starting a new firm than day one.
The worst mistake practitioners can make when starting their own practice is to spend too much, too soon, on hiring staff and investing in infrastructure. Here are four strategies that will help you start lean and let your overheads follow, rather than lead, your revenue growth.
1. Don’t hire your first staff member until you have reached a targeted level of revenue
Your first hire usually sets an important precedent in how profitable your practice will be during its lifetime. For example, hiring your first full time employee when your practice is generating $150,000 in revenue rather than $200,000 says a lot about how much money you will make from the practice. There is not one level of revenue that is the correct benchmark for every type practice. You’ll need to do your own financial modelling and be satisfied with your earnings in order to determine your own benchmark.
2. Hire part-timers, casuals and use flexible resourcing methods
Practice revenue will go up and down during the course of the year and also from one year to the next. There will be times when you can justify having an extra member of staff but maybe not for the whole year. The classic way to deal with this is to build your staffing needs with a flexible workforce
3. Don’t hire people, hire software
Making better use of software can delay the need for expensive labour. It’s always the easy way out to hire a person to a job, without first exploring how software can be used to make existing staff more efficient. It’s worth every dollar to be trained as much as possible in your software’s capabilities. A common comment I hear is, “I didn’t know the software could do that”.
4. Buy easily-scalable software
Building on-site IT infrastructure can be a costly exercise. There are two strategies that will alleviate this problem. First, use cloud software as much as possible. This enables you to minimise your on-site IT infrastructure. Second, even if you are not using cloud software, there are software companies that allow you to increase and decrease your licences without penalising you.
Faced with the uncertainties of starting a new firm, the key to survival and maximising profit is to apply a disciplined strategy to your hiring decisions