But, when you’re starting a law firm, it’s important to understand the bottom line. You will very quickly learn that you can’t make sustained guesses about expenses and revenue, when all your bills remain due every month.
A lot of start-up law firms avoid financial management as a defense mechanism, waiting until their new venture is viable before looking at a more pleasant set of numbers. But, in the first instance — and especially for start-up law firms without a definable source of income — it’s important to at least get your arms around your expenses. If you can create a list of expenses (monthly and annually), you’ll know what you have to make to meet them. And, that’s the first step in building a viable business.
It’s important not to get stuck trying to create the perfect format — which is a way that lawyers regularly get themselves stuck. Start by figuring out what your initial costs will be. Then, define what your monthly costs will be. Lastly, take those down somewhere — whether it’s on a document or a spreadsheet or a notepad, it doesn’t matter. Know and understand your numbers, and compare them to actual expenses on a monthly or quarterly basis, and at the end of the year. Then re-do your entire budget for the new fiscal year. If you pay the bills in your house, include those expenses, too — on a separate sheet. Once you know how much you need to pay, you can figure out how much you need to make.
And, you don’t need to be a math major to figure that out.
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If you want to start your own law firm, join me for an exclusive workshop, coming up in Boston (August 24-26) and New York (September 7-9).
For more information, visit the official site: www.buildyourownlawfirm.com.
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