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Working from home full-time has fast-tracked a new perspective for many of us. Freedom from the commute, less office politics and no more drawn-out operational meetings with stale sandwiches has given many lawyers a taste of working with more flexibility and independence. If you relish having more control over the type of work you do and the type of clients you deal with, perhaps it’s time to think about starting up on your own? You could join the increasing ranks of the freelance lawyer by joining an existing virtual or dispersed law firm, such as Scott-Moncrieff. But if you’re equally motivated by billable time, the practice of law and running a business then here is our checklist to finally writing that business plan and making your own law firm possible.
The cornerstone of your business plan should be a clear vision of who you will help, in terms of clients, and what legal services you will offer. How will you identify, acquire and manage clients? What process and documentation will you need to put in place? In which practice areas can you operate? Is there a sustainable market for what you do? Who are your competitors and how will you differentiate? The answers to these questions will form the heart of your firm’s identity as well as your communications, sales and marketing strategy. Think very carefully about your ethical and confidentiality obligations when leaving a firm and remember it is an offence under the DPA to take any personal data. Be aware that it may be more challenging than you think to bring in new business.
Now you have defined what the business will offer, get the right structure in place. Clients are increasingly accepting and seeing the benefits of virtual law firms where lawyers operate from satellite offices or their own homes, saving on infrastructure and property overheads. Keystone Law for example have a ‘geographically agnostic structure’ meaning client matters can be managed from anywhere, lawyers are mobile and transactions are paperless. Legal services can also be offered through an Alternative Business Structure (ABS) such as early convert Irwin Mitchell. An ABS is worth considering if you are seeking outside investment or shared ownership with non-legal managers, although note that ABSs are subject to SRA regulation as well. If you set up as a limited company or LLP you’ll need to register with Companies House and HMRC whereas partnerships and sole traders are only required to notify HMRC.
If you are based in England and Wales, the Solicitors Regulation Authority will need to authorise the new firm. There is a fee to pay as well as an eight to twelve-week authorisation process. If you intend to undertake financial services or conduct services that are subject to money laundering regulations you will also need to authorise a COLP (Compliance Officer for Legal Practice) and a COFA (Compliance Officer for Finance and Administration). Read the guidance and consider who can hold these roles – it’s not just nominating the people who aren’t in the room when it is discussed. You will also have to comply with the Solicitors Accounts Rules. Expect to spend a third of your time on management and compliance, including risk management and contingency planning.
How will the business will be funded, whether loan, private investment or other financing? What does the cash flow forecast look like? Get an accountant on board early to help you with the tax planning and VAT and if you are recruiting employees a PAYE scheme will need to be in place. Insurance is a must - the SRA will require a quote or certificate so be sure that you have adequate professional indemnity insurance including run off cover (insurance for claims made against a law firm after it has ceased trading). You will need to allow for other professional expenses including practising certificates, CPD and training for yourself and any team members. You will also have to think about pricing, billing and handling client money.
For legal marketing a professionally designed website and email marketing software is the minimum. Assuming you already have the hardware (printer, scanner, laptop with remote back up), you’ll need to investigate and purchase legal software and online services that will meet the needs of the practice and the clients including practice management, accounting, time and expense recording, case management, document creation and legal research tools. Many of these are now delivered through the cloud, even so robust back-up systems need to be in place.
It’s a daunting and sobering list and probably not the ideal climate at the moment. But it can be motivating to think about freeing your professional practice from the pedestrian, risk-averse culture of some existing organisations and launch an innovative and entrepreneurial firm allowing clients to flourish. Let’s face it, we’ve got plenty of time to think about it.
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Amy is an established writer and researcher, having contributed to publications, such as The Law Society, LPM, City A.M. and Financial IT. Her role at LexisNexis UK involved leading content and thought leadership, as well as writing research reports, including "The Bellwether Report 2020, Covid-19: The next chapter" and "Are medium-sized firms the change-makers in legal?"
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