Starting a law firm costs money. In fact, we often hear the mantra from entrepreneurial gurus that it takes money to make money. But the question is how much, and in this case how much to start a law firm. The Law Offices of Jason E. Taylor, P.C. – Personal Injury Lawyers has some nice tips on this.
1) Startup Costs.
Also known as one-time costs, startup costs are the things that you spend money on to get the firm off the ground. These can include anything from business licenses to office space security deposits, and everything in between. Business licenses are relatively cheap, depending on the state and the type of business entity you choose. You will also want to consult an accountant for tax purposes, and potentially a business attorney. Office space, or virtual office space, usually requires an initial deposit. Additionally, you will need a computer, printer, and scanner. A good way to save money on a copier is to scan documents into your computer and then print them out. Make this a habit and you will also have a good file management system. Another good way to save money, this time on a fax machine, is to get an electronic fax system such as E-fax or Ring Central.
The exact requirements of your startup law firm will depend on your practice areas and practice setting. The key with startup costs is not to go crazy – the less you spend, the better. At the same time, you need to find a balance between saving money and being productive. The trick is to analyze how to be most cost-effective with your startup costs.
2) Ongoing Costs.
Also known as overhead, startup costs are those recurring costs necessary for the ongoing operation of your law firm. Ongoing costs may include payroll, rent for office space, any services payable monthly (i.e. electronic facsimile, online case management, marketing campaigns, etc.), malpractice insurance, postage, office supplies, and anything else that you need to keep your firm open and efficient. I encourage people to measure ongoing costs on a monthly basis. Again, the key when starting a law firm is to keep ongoing costs at a minimum and, really, you should be able to do that quite easily.
3) Periodic Costs.
Bar dues, continuing legal education. There isn’t a lot you can do with the periodic costs in an effort to save money. Your bar dues are usually mandatory. In some states, CLE’s are mandatory. Even in those states where CLE’s are not mandatory, it is a good idea to attend continuing legal education seminars on topics related to your practice areas because you want to keep up-to-date on the law.
Through analyzing these three things, you can get a pretty good idea of what it will cost to start and run your law firm. But you can’t forget that you also have personal bills to pay. So the financial capital needed to start your small law firm is only piece of the pie. In other words, you need to analyze your personal budget in conjunction with your business budget.