Law Firm Owner – Lawyer or Businessperson?

Question: 

I am the owner of a three attorney general practice firm in Chicago, Illinois. The other attorneys were recently hired associates right out of law school. We have two legal assistants, one paralegal, and a receptionist/bookkeeper. I manage the firm and practice law. I am finding it more and more difficult to do both and I am discovering that I enjoy managing and running the business more than I do practicing law. I would like to spend all of my time to running and managing the firm. Your thoughts are welcomed.

Response: 

You are not alone. This is a common problem in law and other professional service firms. I have similar problems in my own firm – it is very difficult to serve two masters – serving your clients and managing your firm. Eventually as you grow you have to pick one – client service (doing legal work) or managing and running your business – as the area that receives your primary focus. This is not to say that you should not do both – but you select the primary area that you are going to focus on and get help with the other area.

A question that I typically ask my new law firm clients – what do you want to be or do – be a business person or a lawyer. The answer to the question often provides a hint to how you should structure your firm. If you want to be more of a business person – hire legal talent to help with serving clients and performing legal work and spend more time working on your firm rather than in it. If you want to be more of a lawyer and do legal work and serve clients hire a legal administrator or business manager (this is more than an office manager) to manage and run your firm.

I have more and more owners of small law firms that are managing their law businesses and not practicing law. I believe the appropriate direction is what makes you happy and what type of work you enjoy doing. Your practice should support and fulfill your personal goals, what you want out of life and what makes you happy. If that is managing – then manage. If that is doing legal work – do legal work.

Two great books on this subject are – The E-Myth Revisited and The E-Myth Attorney – available on Amazon. The theme of both of these books is:

• Work on your business rather than in it.
• Small business owners wear three hats – entrepreneur (10%); manager (20%); and technician (70%)

Small law firm owners often spend too much time being the technician (i.e. lawyering) and not enough time managing and innovating. In the long term this can have a negative effect upon value when the owner decides or retire of otherwise exit the practice.

Think about where you want place the priority of your focus – working on your firm (business) or in it.

I believe that at your current size and your limited number of revenue producers you can’t afford to be a full-time manager until the firm grows to at least five lawyers and or several serious revenue producing paralegals (not dabblers but producing $150,000 – $250,000 per year). I suggest that you take a phased approach toward this goal. In the short term you may have to work harder as a revenue producer and a manager and business developer. In the meantime you will have to wear both hats. Be patient.

As AI continues to reshape all walks of life as well as the practice of law, firm management and innovation will become even more important to remain competitive. This is a strategic management area that will require more of your management time. Small law firms that have implemented AI are reporting efficiency gains that have translated into higher profitability and improved well-being.

• Increased Matter Capacity. Firms have reported 10% to 40% increases in matter capacity per attorney after implementing AI, leading to significantly higher revenue potential.
• Pricing Flexibility: High efficiency is allowing sole owners to move away from billable hours toward more profitable flat-fee or value-based pricing, which 38% of prospective clients believe will make services more affordable.
• Work-Life Balance: Instead of working 70-hour weeks to keep up, solo attorneys are using AI to reduce their hours while maintaining—or even increasing—their income

Good luck with your transition.

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