Do you need to employ other lawyers?
The point of this post, as with all posts in the series, is a challenge to throw away all the “traditional” options, and assess critically all available options. Do you really need to employ expensive resources in your firm – are there any other options?
Even today, law firm profitability is linked strongly to “leverage”, i.e. the ratio of fee earners who do not share in the firm’s profits to those that do. Very simply, (providing work is available) a sole practioners is more profitable doing less work him or herself and delegating to assistants, than he or she would be if they tried to do all the work themselves. Bluntly, the key to profitability is paying your staff less than your client’s pay for your staff’s time.
So, all other things being equal (essentially the availability of work), it’s more profitable to have 2 or 3 assistants to whom you delegate, than to try and do all the work yourself.
However, employees are a big responsibility (read “expensive”!) which you might not want to take on at first. Do you need to employ anybody?
Virtual Law Firms were “all the rage” a few years ago. While the exact nature of the arrangement varies, they usually have a few things in common. Typically, their lawyers are not employees, but “contractors” who share back office costs, and have a fee sharing arrangement among themselves, and with the virtual firm. Very much an “eat what you kill” approach to organising a firm. However, typically, they also carry out work for other solicitors. So if you do not need a full time assistant – could a virtual law firm provide a “contractor” to do the work you need done on an ad hoc basis? This might also work where a client needs a specialisation you don’t have – perhaps one of the “contractors” at the virtual law firm can provide that service?
However, this might be too loose an arrangement, or you may feel you will have enough work from the outset to justify an assistant or two. But again, who do you want to employ, and is the traditional employer employee arrangement the way to go?
You need to think very carefully about the firm you want to create, and why you want to create it. If your target market requires high volume low margin transactions, then employing paralegals might be the best option. However, if you are working at the bleeding edge of the law, on high value transactions, you will need to employ highly skilled (read “expensive”) solicitors to assist. What arrangements might you negotiate to persuade them to join you? What about incorporating your practice and giving them shares? In this way they have an equity stake, but (providing you keep control, and they are not directors) no say in running the business. Might that motivate them more than a large salary?
If you are planning to sell your business, share options are another possibility.
So, while good people will always be your greatest asset, they are also your most expensive. Is there a way to get the assistance you want, without the downside of employing expensive resources?