Anyone for Hanging out a Shingle?

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The job market for attorneys is so challenging right now that the majority of recent articles in the ABA Journal have focused on law firm layoffs and unemployed law school graduates suing their law schools for misrepresenting job prospects. Many who are qualified to practice law, but are unable to secure employment, decide to hang out a shingle and open their own law firm. These sole practitioners run the gamut from enthusiastic entrepreneurs to reluctant individuals simply “buying themselves a job.”  Regardless, to be successful in the business of practicing law – and don’t kid yourself, it is a business – one must stick to fundamentals and properly plan in order to be successful over the long haul and avoid becoming a business failure statistic.

Self-employment is an idea that many people ponder at some point in their career.  The thought of having control of your destiny, setting your own hours and being your own boss conjure up images of riches, power, freedom and independence.  However, the realities are often quite different.  An independent business owner, to be successful, will likely work harder than ever.  While there may be no time clock, the owner only leaves when all of the work is done and, when not actually present at the business, she is likely thinking about it – 24 hours a day!  Instead of not having a boss, there are many.  Clients, employees, bankers, government agencies, suppliers and vendors all look to and rely on the owner for decisions, support and immediate action.

The simple truth is that most businesses fail – over 80% within the first five years. Business failures are primarily due to:

  • the owner’s eventual realization of entrepreneurial realities;
  • insufficient business management skills and
  • a lack of proper planning.

Insufficient Business Management Skills

Regardless of the type of business pursued, there are three general categories of knowledge or skills one must possess to be successful:

  • Technical Knowledge (Industry Specific) – Here, beyond the obvious ethical implications, if you’re going to run a law firm, you better know your ex partes from your ex post factos.
  • Generic Business Knowledge (Applies to ALL Businesses) – This includes a basic understanding of accounting, operations, personnel management, customer service, marketing, governmental regulations and all other facets that are universal to every business regardless of industry type.
  • Entrepreneurial (Business Specific) – Information pertaining specifically to your business.  For example, who your target market is and how you plan to reach them, where your best vendors and suppliers are, your hours of operation – All the information that will be in your business plan.

From strictly a business perspective (and for illustrative purposes momentarily ignoring the legal and practical implications) it may surprise you to know that technical skills are the least significant measure of a business’ likelihood of being successful.   The reason for this is that you often can hire the technical expertise your business requires but you can’t abdicate the organizational duties or having a working understanding of your business operations if you want to stay in business.

To illustrate this point, consider an automotive repair shop.  If a good mechanic decides to open her own shop, it’s reasonable to assume she could competently provide repairs to customer vehicles.  To run the business, however, she needs to attract customers, maintain proper accounting records, keep good customer files, create a website, decide between DSL, cable and satellite Internet connection options and ISP providers, find parts suppliers and uniform vendors, design marketing and advertising strategies, manage personnel, etc., as well as comply with such agencies as the EDD, OSHA, BAR, IRS and BOE to name a few.  As you can see, the skills required to run the business on a day-to-day basis have little to do with knowing how to properly diagnose and repair a car.

To bring the point home, just because someone may be the best litigator in the world, or knows how to write an ironclad contract, doesn’t mean that person will be successful running a law firm because the skills are different.

The bottom line is that you should be realistic about your strengths and take advantage of the many educational opportunities available to help fill the gaps.  Anyone possessing a technical skill can be successful owning a business if they take time to learn about the business side of their business.

Proper Planning

When heading to an unfamiliar place, you likely first Mapquest or otherwise locate the destination and then study to determine the best route to take.  If this process is bypassed, there’s no telling where you’ll end up.  Alternatively, you could just start driving and go  wherever the road happens to lead.  But clearly, the probability of reaching your desired destination is not very good and, even if you were lucky enough to eventually reach that destination, you most certainly would not have taken the most direct route.

The same process should be used when starting a business.  It’s important to know where you want to end up so that you can determine the optimum way to get there. Not every entrepreneur has the same goals. Based on one’s stage of life, long term personal goals or other factors, the business’ objectives will be reflective of that difference.

In business, rather than a map to reach a destination, there is a plan to identify goals and objectives.  This plan – the business plan – includes the basic outline of the business, how it will operate, a marketing plan and initial financial projections.  When properly prepared and implemented, it serves as a “road map” to the business’ goals and objectives.

When preparing the business plan the entrepreneur is able to examine his existing and anticipated circumstances in depth.  This often leads to an awareness of needed operational adjustments, resource enhancements, marketing ideas to consider or a host of other “fine tuning” opportunities that may exist.  It is a rare occasion when the business as ultimately described in the plan resembles the business owner’s initial concept or idea.

While the plan establishes the initial direction, it is and always will be a fluid, “working” plan, which may be subject to adjustment as market conditions or other circumstances dictate.  Fundamentally it should not change.  However, it should be flexible enough to allow course corrections that allow the business to remain competitive and profitable.

Once completed, the business plan serves many functions.  A well thought out, properly prepared business plan instills confidence in the business’ stakeholders regarding the business and its owner(‘s) ability to perform. The business plan is often shared with prospective lenders, suppliers or other trade creditors and employees so that they can realize, share and participate in the attainment of the owner’s vision and the business’ goals.

Download this sample business plan outline, which includes a brief definition of the general categories that should be incorporated.  Not all of these will necessarily be relevant.  Once you’ve collected and assembled all of the data referred to in this outline, you should be well on the way to ensuring that your new law firm will not end up as one of the “statistics”.


Stephen Gizzi, of Gizzi & Reep LLP in Benicia, is a longtime business owner, mediator, mediation instructor, and practicing attorney. He is the former vice mayor and city councilman for the city of Benicia. He has also chaired the Benicia Planning Commission.

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