ON THIS PAGE
- How to Start a Law Firm Business
- How Big is the Law Firm Industry?
- What are the Key Segments of the Law Firm Industry?
- What External Factors Affect the Law Firm Industry?
- Who are the Key Competitors in the Law Firm Industry?
- What are the Key Customer Segments in the Law Firm Industry?
- What are the Key Costs in the Law Firm Industry?
- What are the Keys to Launching a Law Firm?
- What are the Typical Startup Costs for a New Law Firm?
- How much do Law Firms make?
- Legal Customer Research
- Legal Market Trends
- Growing Your Legal Practice
- Failing at the Finish Line (How Law Firms Lose Prospective Clients at the Front Door)
- The One Simple Rule for Succeeding in a Law Firm
- Your Essential Guide to Law Firm Marketing
- Helpful Videos
- Additional resources in the Law Firm Industry
How to Start a Law Firm Business
If you’re looking to start a Law Firm business, you’ve come to the right place. Since we’re going to show you exactly how to do it.
We’ll start with key Law Firm industry fundamentals like how big the market is, what the key segments are, and how revenues and profits are generated.
Then we’ll discuss keys to not only starting a Law Firm business, but succeeding in it!
How Big is the Law Firm Industry?
There are 445,427 Law Firms in the U.S. with revenues of $277.2 billion. Over the next five years, industry revenue is expected to increase at an annualized rate of 0.6% to $286 billion.
What are the key segments of the Law Firm Industry?
Commercial Law Services is the largest revenue segment of the industry. The remaining sources of revenue include:
- Criminal Law, Civil Negligence and personal injury
- Real Estate Law
- Labor and Employment
What External Factors Affect the Law Firm Industry?
A number of factors affect the performance of the law firm industry. These drivers include:
Corporate Profit: When corporate profit is high more likely companies are to engage in high-cost litigation and is expected to increase in this recent year depicting a high opportunity for the industry.
Initial Public Offering: Significant fees are received by most major law firms from working on initial public offerings (IPOs), mergers and acquisitions and capital-raising activity. As a result, investment activity and law firm revenue rises and expected to increase its annual sales volume of IPOs.
Number of Businesses: A growth in the number of businesses with employees can signify to an increase in work for law firms which is expected to increase by the recent year.
Crime Rate: Increase rate in reported crimes means higher demand for legal advice which results to increase industry revenue. However, crime rate has decline over the past years due to aging population and is expected to decrease which can bring potential threat to the industry.
Who are the Key Competitors in the Law Firm Industry?
Small firms and lawyers in private practices comprise the majority of the industry, but the top four firms are:
- Latham & Watkins LLP
- Skadden, Arps, Slate, Meagher & Flom LLP
- DLA Piper
- Baker & McKenzie
What are the Key Customer Segments in the Law Firm Industry?
The largest customer segment in the law firm industry are businesses and corporate clients, followed by households.
What are the Key Costs in the Law Firm Industry?
Wages – Like most industries in the professional services sector, wages represent the largest cost to industry enterprises. Attorneys are highly educated and knowledgeable and employees often specialize within a legal sub-sector, such as securities law, which requires further experience and expertise. Work in this field also requires personal service and face-to-face contact with clients.
Other Costs – Many law firms lease office space and larger firms often incur higher rental costs because they are located in geographically important regions. Other significant expenses include insurance costs, costs associated with the outsourcing of temporary or contract labor, administrative expenses and travel expenses. Purchases in this industry are minimal, accounting for an estimated 1.8% of industry revenue. Depreciation is also minimal, as this industry has a low level of capital intensity and capital expenditures are generally related to computer and office equipment.
What are the Keys to Launching a Law Firm?
1. Determine your specialty
Choose a practice area, and work to become the go-to firm for this legal issue. If you don’t want to stick to just one practice area, consider partnering with another attorney whose expertise complements yours.
2. The Name
Your firm will be identified by its name, so carefully consider whether you want it to have your name, or whether you want it to give an idea of your practice area.
3. Startup Capital
You will need a cushion of funds to get you through the first few slow months. Many attorneys recommend saving enough to cover 6 months’ personal and business expenses.
4. Choose your fee structure
Will you bill hourly? By the task? Or will you have flat fees and contingency fees? Once you’ve settled on the fee structure, be sure to inform your clients before work is begun.
5. Set up two bank accounts
The first account will be for expenses, and the second account will be for holding clients’ payments in escrow. If you accept credit cards, you need to follow this same procedure: set up one account for operating expenses, and the other for retainers.
6. Simplify or outsource administrative tasks
Get appropriate software and/or hire an assistant to do the everyday tasks so that you can focus on doing billable work.
What are the Typical Startup Costs for a new Law Firm?
Estimate start-up costs for a new law practice will range from $3,000 – $15,000 in start-up expenses.
How much do Law Firms make?
Revenue varies widely, depending on the firm size, but most firms make about $500,000 per attorney on staff.
Failing at the Finish Line (How Law Firms Lose Prospective Clients at the Front Door)
The One Simple Rule for Succeeding in a Law Firm
Your Essential Guide to Law Firm Marketing
How to get Started with a Law Firm Marketing Plan
Law Firm Marketing Mistakes: Do You Make Them?
How To MANAGE a Small Law Firm: How To Sell Legal Services
Additional resources in the Law Firm Industry
For additional information on the car dealership market, consider these industry resources:
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