Leaving an established law firm to start your own practice can be an exciting career move. You may already have clients who trust you, years of experience practicing law and a clear idea of the type of firm you want to build.
What you may not have is the infrastructure that existed around you at your former firm.
At a larger law firm, attorneys can spend years practicing without having to think much about the systems operating behind the scenes. Someone else handles insurance, cybersecurity, HR, vendor management and many of the other operational risks associated with running the business.
When you start your own law firm, those responsibilities become yours.
That doesn’t mean a solo or boutique firm needs the same infrastructure as a large law firm. It does mean new law firm owners should understand the risks that now sit much closer to them and decide how they want to manage them.
Here are seven areas worth thinking about when making the transition from Big Law to your own firm.
1. Professional Liability Doesn’t Start With Buying a Policy
Legal malpractice insurance is likely one of the first types of insurance a new firm owner will consider, but managing professional liability involves much more than purchasing a policy.
Think about how your new firm will handle conflicts checks, engagement letters, calendaring, documentation, client communication and deadlines. If you hire another attorney, consider how work will be reviewed and supervised.
Your malpractice policy is there for situations when a client alleges that your professional services caused them financial harm. Your internal procedures can help reduce the likelihood that some of those situations happen in the first place.
Both are part of protecting the firm.
2. Your Cybersecurity Infrastructure May Look Very Different
A large firm may have an internal IT department, outside cybersecurity resources, security protocols and systems controlling who can access sensitive information.
A new boutique firm may rely on a collection of cloud-based platforms, laptops, mobile devices and outside vendors instead.
That can work very well, but someone still needs to think about security.
Law firms routinely handle confidential client information, financial information and, depending on the practice, instructions involving significant financial transactions. A compromised email account or fraudulent wire instruction can create a problem very quickly.
New firm owners should understand how data is being stored, who has access to it, whether multifactor authentication is being used, how funds-transfer requests are verified and what happens if a system or account is compromised.
Cyber insurance may be part of that strategy, but the controls surrounding the technology matter too.
3. The Contracts You Sign Now Belong to Your Business
When you own the firm, you’re no longer only reviewing contracts for clients. You’re signing them for yourself.
Office leases, technology agreements, vendor contracts and even agreements with clients can create obligations for the firm. Some may include insurance requirements, indemnification provisions or other responsibilities that have financial consequences.
This becomes especially important as the firm grows and begins entering larger agreements.
Before signing, understand what the business is agreeing to and whether your existing risk strategy actually supports those obligations.
4. Hiring Your First Employee Changes More Than Payroll
Your first hire is a major milestone, but it also introduces risks that didn’t exist when you were practicing alone.
Now you’re responsible for hiring practices, supervision, workplace policies, employee access to sensitive information and decisions involving discipline or termination.
If the person you’re hiring is another attorney, there’s another layer to consider. Their work is being performed under your firm’s name, which means their mistakes can potentially become the firm’s problem too.
As your team grows, your internal processes and insurance program should grow with it.
5. Handling Client Funds Requires More Than Trust
Law firms can be particularly attractive targets for criminals because they may handle sensitive information and significant amounts of money.
Business email compromise and social engineering schemes are designed to take advantage of exactly that.
A fraudulent request can look remarkably similar to a legitimate email from a client, vendor or other party involved in a transaction. That means protecting the firm isn’t simply a matter of telling employees to “be careful.”
Verification procedures matter.
Who is allowed to approve a transfer? How are new or changed wiring instructions confirmed? Does the firm require a second method of verification before money moves?
Those procedures can be just as important as understanding how your cyber or crime insurance would respond after a loss.
6. Bigger Clients and Matters Can Change Your Exposure
The insurance program that made sense when you opened the firm may not make sense three years later.
Maybe you started as a solo attorney and now have four lawyers. Perhaps your revenue has doubled. Maybe the size of the matters you’re handling has increased considerably, or you’ve moved into a new area of practice.
Those changes can affect the amount and type of risk your firm is carrying.
This is why I don’t believe business insurance should simply be purchased once and renewed automatically every year. A growing business changes. The protection around it should be reviewed as those changes happen.
7. Not Every Risk Needs to Be Insured
This may sound strange coming from someone who sells insurance, but the goal isn’t to buy a policy for every possible problem.
Risk management is about understanding what could materially affect the business and deciding how you want to handle it.
Some risks can be reduced through better procedures. Some can be transferred through insurance or contracts. Others may be small enough that the firm is comfortable absorbing the financial impact itself.
The important part is understanding the tradeoff.
A business owner who intentionally decides to retain a risk is making a very different decision from an owner who discovers the exposure for the first time after something has already gone wrong.
From Practicing Law to Owning the Firm
The biggest adjustment when leaving Big Law may not be practicing independently. It’s realizing how many decisions were previously being made around you so that you could concentrate on practicing law.
You don’t need to recreate a large firm’s entire infrastructure to build a strong boutique practice. You do need to decide what the right infrastructure looks like for the firm you’re building.
That means asking questions about your people, technology, contracts, procedures, finances and insurance before a problem forces you to.
Insurance is part of that conversation, but it isn’t the entire conversation.
The goal is to understand the risks that come with owning the firm and make informed decisions about which ones you prevent, which ones you transfer and which ones you’re comfortable keeping.
Because once you leave Big Law, you aren’t only practicing law anymore.
You’re building a business worth protecting. The Bunker is here to help you protect it, if you want to get started click here to schedule some time.