Just like any other independent business venture, starting an independent law firm can require a large initial monetary investment. Whether fresh out of law school or leaving an existing firm to strike out on their own, independent lawyers are turning to law firm financing for start-up costs, litigation costs and otherwise financing their firm until it begins to turn a profit.
The bare minimum needed to begin an independent law practice, in terms of office expenses, is office space rental, utilities and research services (if not provided at no cost by your bar association). While personal savings may be sufficient to cover some of these costs for a few months, it most likely will not stretch to cover the following additional daily operating expenses, as well.
- Equipment: computers, fax machines, copiers, phone lines
- Supplies: paper, pens, stationary, desks, chairs
- Personnel: secretary, receptionist, paralegal
- Marketing: business cards, websites, blogs, newspaper ads
- Insurance: liability, renters, legal malpractice
- Electronic data backup services
While some of these items, such as equipment, require replacement only every couple of years, others require resupply on a more regular basis, and still others require ongoing monthly payments. In practically every case, these expenses occur before the attorney acquires the first paying client, which is one reason why law firm financing is becoming more popular.
In addition to everyday business operating costs, lawyers also incur the expenses associated with the litigation of actual cases.
- Fees for filing the case with the courts
- Fees for filing case related documents
- Document copying fees
- Costs related to the use of expert witnesses
- Costs related to medical and psychological examinations
Ideally, the client reimburses the attorney for these expenses once the case is completed; however, until that time, the independent lawyers are responsible for these and other expenses involved in successful litigation. Because clients often pay in installments until the case is concluded, law firm financing makes it possible for independent lawyers to make ends meet until such time as the case is favorably resolved or the client has completed payments.
Most independent law firms won’t turn a profit in the first year, sometimes longer. This is why many independent lawyers are turning to law firm financing, rather than working through their personal savings or heavily mortgaging personal property, to get their practices up and running. A variety of law firm financing options exist, and with a little research, it’s easy to find one that’s right for your practice.