I am writing this article as a director of a brand-spanking, newly authorised entity for the provision of legal services to the general public, specialising in family law - and I would like to share some of the lessons I have learned along the way. Why? Because if you have a burning desire to go your own way but are, like I was, completely ignorant of what it actually takes to set up your own firm, you might find some of this useful.
A business partner you know and trust: Although I know of many solicitors who have set up on their own, I thought that that would be too much for me, and everything I have experienced so far has confirmed this. In my view, you need someone to share some of the workload, the stress and the responsibility. After all, do you really want to be the compliance officer for legal practice and financial affairs (COLP and COFA), the money laundering reporting officer, the data protection officer, the health and safety officer, and deal with HR? A trusted business partner is also a great sounding board, confidante, reality check and motivator.
Time: It will take at least six months from the start of your preparations to actually opening your doors. You will need to invest a huge amount of your time into the preparation, so unless you can afford to finish your previous job a few months before you start your new business, you will have to resign yourself to working a lot of evenings and weekends.
Money: It will cost a lot more than you think, and for those first few months after you open your doors, you are unlikely to be able to draw much from the business. I would budget for at least £25,000 before you open.
A good network of clients and contacts: You need to be confident that you will be able to find enough work to survive.
A sound business plan: A business plan not only gives you the methodology for finding enough work, but it is also a crucial document to show to your regulator, your insurer and your bank (if you need to borrow).
Corporate structure: Are you going to be a partnership, an LLP or a limited company? We found that a limited company worked best for us, particularly from a tax point of view.
Name: This comes near the top of the list because so many other things flow from it - for example, it's particularly important if you plan to incorporate. Choosing a name is really hard! Do you use your own names? If you do, are they recognisable? Easy to spell? What if someone else joins? Do you choose something that says what you do or just something completely abstract? Will it set you apart from your competition? Is your name already taken at Companies House? Even if not, does it fall foul of any registered trademarks?
Logo and colour scheme: The same principles apply here as with your name. Be bold! We outsourced this to a specialist graphic design company, who also helped us with our letterhead and business card design.
Corporate documents: If you are going with a limited company, obviously you will have the incorporation documents, but you will also need a shareholders' agreement (make sure it ties in with the articles, and provides properly for all of those unfortunate life events) and board minutes.
Authorisation: Which regulator? There is now a selection of authorised regulators to choose from. Each has their own pros and cons.
Tax and accountancy advice: This is essential, and a good accountant will be able to do so much more than just dealing with your accounts and VAT returns, for example, working on your financial forecasts (the regulator needs this as part of your business plan), helping your negotiations with the bank, and acting as a good sounding board on how you run your business financially.
Insurance: You need to cost this at an early stage and get a few quotes. The insurers will need to see your business plan and financial forecasts.
Practice management system: Although I have been at some law firms who make do with Word and Excel, it is impossible to run a modern and efficient firm without one. There is an almost bewildering choice out there. Get demos from at least four providers and check out the set-up costs, as well as the ongoing charges and data storage options. Cloud-based systems are preferable because of lower cost (you don’t have to buy servers), access and recoverability (from any device, anywhere) and functionality.
IT: You cannot set up and run successfully without proper IT support. As with many other functions, we have outsourced this to a good, small, local provider.
Employees: Can you handle everything yourself? Possibly, if you are on your own and have outsourced everything. However, who is going to put those bundles together, do the attendance notes, the standard documents, go to the post office, meet and greet the clients and, most importantly, get the sandwiches in?
Premises: It is pretty much essential to have a base and somewhere of your own to see clients. Think about location very carefully: for family law you need to be close to the right kind of client, with ease of access (but also discreet), ideally with plenty of free parking.
Stationery: Don't underestimate how much this will cost! A good practice management system may also help you stay mostly paperless.
Compliance / written procedures: An absolute must for running your practice with as little risk as possible, and because the regulator (and probably the insurer) will need to see your procedures.
Website / web developer: Some practice management systems have this included. We went for an independent developer. Make sure you own the domain and can edit your website once it is up and running. You need to be able to post your own blogs.
Banking: You are likely to need an overdraft or loan (a loan is definitely the better option) for those early days and months when cash flow will be a problem. The bank will not usually lend more than you are putting in yourself, and you will need to give personal guarantees.
Register with the Information Commissioner's Office: You are going to be a 'data controller', so this is a must. The role of data control officer is one more to share out with your business partner!
Judging from my own experience, setting up your own firm will be one of the biggest challenges you can take on. It will be harder, it will take longer, and it will cost more than you think. Is it worth it? I’ll let you know in the next instalment!
Full article first published on the Family Section website
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