Practice 'business' to practice success

Starting a new firm, several aspects of which we've discussed in our last four columns, is something quite distinct and separate from practicing law. It brings the lawyer face to face with what I have often called "the business of law."

The biggest mistakes most lawyers make when starting a new law firm inevitably involve a lack of good business practices. That encompasses a host of shortsighted errors, created by neglecting the key points we've made in this series: failure to grow your cash, failure to plan your infrastructure adequately, failure to create an effective marketing plan.

A book could be written about any of these issues, but I don't want to end this series with the implication that starting a new firm is too tough to do successfully. A growth plan for the new firm doesn't have to be complicated or cast in stone, just as an estate plan is not cast in stone.

A plan is a guide for the future, not a guarantor of that future. In such a plan, knowing what to avoid must be combined with knowing what to achieve in the future if the new firm is to be successful. There are ten common characteristics of successful law firms that I have uniformly observed in decades as a lawyer, coach, executive and consultant. In these firms the lawyers:

1. Have a comprehensive business plan.

2. Remember that the client comes first. Without clients, there is no reason for a lawyer to exist.

3. Sell solutions ("provide value") to clients, not sell time as expressed in billable hours.

4. Begin each matter with an engagement letter — a written agreement outlining the scope and responsibility of each party, including the client's responsibility to pay.

5. Prepare budgets for each matter: tasks, events, timing and resources to be used for the benefit of the client. This requires early analysis and client signoff.

6. Understand that their inventory is not "billable hours," it's the cash those hours represent, and they focus on collecting accounts receivable and maintaining a high realization rate.

7. Practice effective cash flow management by getting funds into the bank as quickly as possible.

8. Recognize that technology — e-mails, blogs, cell phones and voice mail — cannot replace personal relationships, personal integrity and rapport with clients.

9. Work with a coach or mentor to achieve business and practice success more quickly.

10. Have a disaster plan in place and keep it current. Business survival, business continuity and, ultimately, business succession cannot be left to chance.

Put all these lessons together with the tips from our previous discussions, and everything creates one fundamental message.

To have a successful new firm, view your practice as a business as well as a profession, and take a businesslike perspective to provide your clients with value. Doing that will ensure your new firm's long-term future.