Starting a law firm is all about generating revenue and cash flow in order to survive.
It is very important to instantly have cash available so that you can do things like pay for your telephone, rent, internet, and all of the other costs associated with starting a new business. How do you instantly develop cash flow? You start a firm which caters towards the market. The most common fields for market driven clients are probably family law and criminal law. Many attorneys practice in both of these areas – especially when starting their own law firm.
For this post, I will discuss family law as the practice area to choose when specifically focusing on a field that lawyers starting their own firm can use to instantly generate revenue.
Here is an example: a person calls your number and says he is looking for a divorce attorney. You talk to them a little bit about their problem and quote them a rate for a retainer. If they agree to your retainer, you typically will meet with them in your office in a few days. That is usually when the client will pay you.
When the client comes to your office, you negotiate your billable rate, the scope of representation, and how much it will cost. Also, you must make sure that you are competent to handle the matter and that you feel that you have something to offer the client. If you are not able to ethically represent the client or handle the matter competently, you shouldn’t take on the case. If the client agrees to hire you, you have him or her PAY YOU FROM THE START and you place the retainer money into a trust account. After that, you should feel free to start working on their case.
For each unit of time that you work, you charge the rate of your agreed billable hour. So, if the client gives you a $2,000.00 retainer, place it in trust and then bill the client on a monthly basis at your billable hour rate. If your billable hour rate is $200 an hour, you should likely charge in increments of .2 or something like that. .2 of an hour is equates to about twelve minutes. Thus, if you put in twelve minutes of time working on the client’s case, you charge them .2 on their bill. .2 at $200 an hour is a bill of $40.00.
On the client’s monthly bill, you must be sure to type in what you did to earn that money. This is important to you, your client, and the ethics committee of your jurisdiction (to determine if the charge was reasonable – and, yes, this can come up.) Here is an example of a .2 charge for a divorce case: “Telephone call with Mr. Smith re filing of Petition for Dissolution of Marriage.” Enter that information into your billing software (you do have billing software don’t you?) and, viola, you’ve just created an acceptable and reasonable bill. If the client doesn’t pay your bill at the end of the month, you can now transfer the money from the trust account to pay your bill and then refund any remainder to the now fired client.
Again, when starting a law firm you must know how to ethically and reasonably bill your clients in order to generate immediate and business saving cash flow.