How to Build a Successful Solo Law Practice

Episode Notes

Transcript

Intro:  Before we get started, we’d like to thank our sponsors Alert Communications, the Blackletter Podcast, Scorpion, and Smokeball.

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Male:  Welcome to the Digital Edge, with Sharon Nelson and Jim Calloway, your hosts, both legal technologists, authors and lecturers, invite industry professionals to discuss a new topic related to lawyers and technology. You’re listening to Legal Talk network.

Sharon D. Nelson:  Welcome to the 170th edition of the Digital Edge Lawyers and Technology. We’re glad to have you with us. I’m Sharon Nelson, President of Sensei Enterprises, an information technology, cyber security and digital forensics firm in Fairfax, Virginia.

Jim Calloway:  And I’m Jim Calloway, Director of the Oklahoma Bar Association’s Management Assistance Program. Today, our topic is How to Build a Successful Solo Law Practice. Our guest today is Mark Bassingthwaighte, who is going to risk manager with ALPS, the nation’s largest direct writer of attorneys’ malpractice insurance since 1998. In his tenure with the company, Mark has conducted over 1,200 law firm risk management assessment visits, presented over 550 continuing legal education, management ethics and technology programs. He’s a member of the State Bar of Montana, as well as the American Bar Association, where he currently sits on the ABA Center for Professional Responsibilities Conference Planning Committee. Thanks for joining us today, Mark.

Mark Bassingthwaighte:  Well, thank you for having me. It’s a real pleasure and honor to be here.

Sharon D. Nelson:  Well, Mark, let’s start with this. Why would a risk manager with a legal malpractice insurance company develop a Getting Started Solo Guide?

Mark Bassingthwaighte:  It’s important to know that prior to joining ALPS, I hung up a shingle with a fellow law school classmate and we made every mistake in the book. In time I made the jump to ALPS and while I’m a risk manager with ALPS, I’m not a traditional risk manager. My responsibilities aren’t to directly manage our corporate risks. I am really hired to be a risk manager for our insureds and even the bar at large. So, much of what is set forth in this guide are the things I wish I would have known prior to hanging up that shingle and things risk guys like me think are important to know prior to going solo. In short, this guide is meant to be a valuable risk management resource that insureds and potential insureds can use.

Jim Calloway:  Well, Mark, I get to hear a lot of those stories about things that went wrong, but not everybody else gets to hear though. So, why don’t you tell us a little bit more about what went wrong when you started out?

Mark Bassingthwaighte:  Honestly, I naively thought it by simply sort of joining forces with one of my law school classmates, you know, finding an affordable space close to downtown, investing in a high-end custom made sign out front and buying some nice furniture was really all it would take to start a successful law practice. Turns out, it takes a bit more than that. And for example, one humorous situation I will never forget, was we went out and purchased a large fireproof safe without giving any thought to how we were going to get it up the stairs into our newly decorated second floor office, and we just scratched our heads struggled with this and we ended up hiring a couple of members of the university football team.  And even those guys had one heck of a time muscling that thing up. So, again, every mistake in the book.

Sharon D. Nelson:  It’s too bad we don’t have video footage that would play well today. Well, let’s talk about some of the things, Mark, that you think are important to know. What are some of those?

Mark Bassingthwaighte:  Focusing really on two key tasks. It’s turning the desire into a reality and starting out on the right foot. So, in my mind, it’s about establishing a firm, a solid foundation, something that can promote success over the long haul. I don’t care how great a lawyer you are. Anyone is. I mean, if going into this you have no idea how to run a small business and manage the associated risks, the likelihood of building and maintaining a successful practice over the long haul is going to be less than it otherwise would have been. So, for me, it’s about creating and implementing this vision of what you want your practice to be coupled with developing really good risk management habits from the get-go.

Jim Calloway:  Mark, why do you think it’s so important to start with the vision?

Mark Bassingthwaighte:  Well, honestly, Jim, as I see it, if you don’t know where you’re headed, how are you ever going to end up in the right place?

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If you see where I’m going. And that again was one of the many mistakes I made. At a minimum, you need to determine your focus. You need to know who your target market is, how you’re going to find these clients. You need to have sufficient financial resources in place. Have a support system in place. And you need to think about and identify any risks that may prevent all this from playing out. Then you need to really turn to that vision. And I should say turn that vision into a plan, which means writing out a business plan, setting a budget, creating a marketing plan, et cetera. The final step really is working the plan and it starts with asking and answering a number of questions.  Questions like is this going to be sort of a brick-and-mortar practice? Am I going to rent? Am I going to buy? Or is this going to be a virtual practice? It could even be a hybrid, I guess. Where are you going to locate your practice? We need to think about not locating where it’s convenient for us but where it’s going to be convenient for your clients. What are you going to name the firm? What organizational structure are you going to have? A sole proprietor, LLC, PLLC. Where are you going to bank? What types of tech will you need? And then how will you address the risks you begin to identify?

Jim Calloway:  Before we move on to our next segment, let’s take a quick commercial break.

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Sharon D. Nelson:  Welcome back to the Digital Edge on the Legal Talk Network. Today, our subject is How to Build a Successful Solo Law Practice. Our guest today is Mark Bassingthwaighte, Esq., who has been a risk manager with ALPS, the nation’s largest direct writer of lawyers’ malpractice insurance since 1998. In his tenure with the company, Mark has conducted over 1,200 law firm risk management assessment visits, presented over 550 continuing legal education seminars throughout the US and written extensively on risk management ethics and technology.  So, Mark, can you fill us in on developing good risk management habits from the very beginning and tell us why this is so important to you.

Mark Bassingthwaighte:  Having been a risk manager with ALPS now for over 24 years, I’ve learned quite a bit. One of the first things that I just felt so honored and privileged to have experiences is to discover that a significant majority of lawyers in practice really are good people, competent lawyers, trying to do all they can to try and serve their clients well from all the consulting I’ve done however. It also became quite clear that a lot of lawyers have developed more than a few bad habits over time. And, you know, working with the malpractice carrier, we learned and see quite a bit. Sometimes, those bad habits can lead to trouble. So, my hope is that by emphasizing the development of good risk management habits upfront, others will be able to avoid having to deal with similar claims problems down the road. So, I’m talking about things like understanding how to set up an independent redundant calendaring process and understanding what that means. Committing to using engagement letters and close your letters so that we document things like scope of representation, very, very important. Establishing a formal conflict checking system, a formal client screening process, and then taking the time to understand the inherent risks of relevant technology in order to responsibly use that tech.

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You know what I find is lawyers are very good at looking at technology and seeing the benefits, and we’re not always taking the time to really understand the risks. And the rules talk about understanding benefits and risks with relevant technology. And so, this list goes on. Speaking frankly, when I was starting out again, I didn’t have a clue about any of this. My partner and I really were flying by the seat of our pants and I eventually started to realize, one of these uh-oh moments, this isn’t a good idea or wasn’t a good idea. And so, again, I would want to do it differently.

Sharon D. Nelson:  I have to interject that I did the whole business plan thing with John when we started the company. About six months after, we had started our business and the business plan hadn’t been looked at once. I said, “John, whatever happened to that business plan.” And he said, “We’re three years ahead of it.” So, for some people, it occasionally works.

Jim Calloway:  Mark, you mentioned identifying the risks, and I’ve noted also, again, most lawyers do a great job of it. But some are better at identifying the risk to their clients than the risk to themselves. So, could you expand on that a little bit?

Mark Bassingthwaighte:  I’m a risk guy in so many ways. I’m starting to think it’s in my genes. But here again, it’s another mistake that I made. So, to minimize the chances of your plan failing, you really do need to try and identify possible ways things you could go wrong. That’s, as I see it again, the only way you can be prepared to navigate any unexpected rough water. So, for instance, what would happen if your cash burn rate turns out to be higher than expected? What happens if you become ill or if you have to deal with a computer breach? It could be all kinds of things there in terms of malware. Planning for these kinds of unexpected things can help assure that you reach your destination. So, let’s take a computer breach as an example. A common misperception or perhaps incorrect assumption among many subtle and small firm lawyers is that they aren’t going to be on anyone’s radar due to their small size. And running with an assumption like that can all too easily lead to a lack of concern in terms of prioritizing cyber security best practices. If I can help lawyers moving into the Solo Space recognize and understand that there is a risk here, my hope is they will make better and more informed decisions about how to mitigate that risk. And of course, that also increases the likelihood of long-term success with your firm and what you’re trying to build here.

Sharon D. Nelson:  I think you’re right, Mark, and I think part of the problem is that they don’t realize that there are inexpensive solutions that do constitute a reasonable protection against the risk, and that’s just something that they need to get some education on. So, I know your company does a lot of that. So, that’s a very good thing. So, you’ve been talking about making all kinds of missteps when you were first starting out, and you’ve shared a few of them. In light of all your experiences over the years, what do you know now that you really wish you had known back then?

Mark Bassingthwaighte:  Going beyond the basics of all we’ve been discussing thus far, there are two topics I think are particularly important for every lawyer stepping into this Solo Space do have a thorough working knowledge of. The first is malpractice insurance and the second is trust accounting. Don’t put off the process of obtaining malpractice insurance. Read a specimen policy. Ask questions about coverage. The reason I say this is too many believe it by purchasing a malpractice policy. They are covered for everything they do as an attorney. And that just isn’t true. You also need to understand that you can’t sort of postpone this decision to buy coverage for a while and then try to pick up something and try to get some coverage once you realize a misstep has just occurred. It matters not that the client isn’t aware or they haven’t been served yet with papers. And yes, some lawyers have tried this, you can’t insure — I mean, got a malpractice policy, but you can’t insure the house once it’s on fire. So, particularly, she’s going to be excluded.

In terms of trust accounting, mishandling other people’s money is a fast-tracked disciplinary trouble. I mean, we see that quite a bit. If one really isn’t fully up to speed on the trust accounting rules and has no idea what a double reconciliation is, it’s time to get out. Your license is on the line here. And also understand that you can’t just go out and turn over full oversight of client property to a non-attorney and wash your hands of any responsibility. This isn’t how it works.

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I know more than a few attorneys who have lost their licenses for doing just that. Of course, that happened after their non-attorney staff person misappropriated client funds. So, it’s important to remember here, Rule 5.3, responsibilities regarding non-lawyer assistance is going to be in play. So, those are two fundamentally important things for me.

Jim Calloway:  Can we go a bit further with your malpractice concerns? I would imagine that a question you get a lot particularly by new lawyers is about the amount of coverage they should buy and often that’s kind of one of those hindsight things too, Mark. But what are your thoughts on this?

Mark Bassingthwaighte:  Yeah. I do get into this conversation. Oh, lots and lots. Here’s sort of the answer to it. First, we need to understand that the risk associated with the lawyer just starting out is substantially lower than that of a lawyer has been in practice for 10 years or more. You know, when you first start out, on day, you have no clients. The risk to the insured is quite low. This is why the premium for any given level of coverage will be lower for a new lawyer, the new Solo versus what an experienced lawyer is going to be charged. Now, of course, for the next six, seven years, there will be sort of an annual step increase in premium as you take on more and more matters and your risk if you will mature. All things being equal; however, your premium should level out after that time. So, I sort of start to say that just to understand it’s not as expensive starting out as you might think. Now, to the question of how much coverage is enough. Well, truth be told there is no easy answer here and I need to be very clear. Minimal coverage is better than no coverage if that’s all one can afford. And while I’ve never sort of come across a standard mathematical formula, here’s one way to kind of approximate what might be enough. And you should have asked yourself this question.

So, if we’re just starting out, do you know that we have a year ahead of us here now. What might the loss be if three of the most significant matters you might take on during your first year of practice, where to go south big-time. Total that and set your limits at 80% of that total. Now, just starting out, I can appreciate that can be a little bit of a headache to try to — I’m going to say guesstimate at best. So, if working that problem seems too difficult, the best I can say is you really try to purchase an amount of coverage that fits the budget, that’s affordable, but also allows you to sleep reasonably well each night. I mean, at the end of the day, it’s about trying to create some level of comfort.

Jim Calloway:  Thanks, Mark. Before we move on to our next segment, let’s take a quick commercial break.

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Welcome back to the digital Edge on the Legal Talk Network. Today, our subject is How to Build a Successful Solo Law Practice. Our guest is Mark Bassingthwaighte, which we’re all having trouble pronouncing, who has been a risk manager with ALPS, the nation’s largest direct writer of lawyers’ malpractice insurance since 1998. In his tenure with the company, Mark has conducted over 1,200 law firm risk management assessment visits, presented over 550 continuing legal education seminars throughout the United States, and written extensively on risk management ethics and technology.  Mark, I know that as a risk manager, you get more than a few calls from attorneys thinking about going solo. So, what are the most common questions that you hear?

Mark Bassingthwaighte:  Boy, I tell you, I could talk about this one for quite a while.

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But let me give you a couple of quick things. So, what comes immediately to mind is office sharing. There are a wide variety of situations and/or reasons that a lawyer might be considering an office share situation. Regardless, these calls often end up with me because a prospective insured really doesn’t seem to understand the coverage problems that can be created by a proposed course of action. The bottom line is office sharing is very doable and can be an effective way to reduce startup cost for someone going solo. The key here is in focusing on the (00:20:41) separation, addressing any conflict of interests concerns among the group, prioritizing and maintaining client confidentiality and complying with the advertising rules. Meaning, no misleading advertising. And this misleading advertising piece is one of the things that really keeps coming up. Another common question comes from lawyers transitioning into the Solo Space after practicing at a firm. Here, it’s often about tail coverage. Most of the time I need to explain that tail coverage is something of a misnomer. You’re not buying a policy and lawyers tend to think it’s a tail policy. I prefer the term extended reporting endorsement, which helps them begin to understand just what a tail does and doesn’t do at its most basic level. And ERE is we call in the business here, simply extends the time that a claim may be reported under the final policy that was in force. So that would be the policy that was in force when an attorney leaves a firm. The tail would attach to that.

Jim Calloway:  Well, I just finished discussing that with a lawyer last week, Mark, so that’s a common question, I think. One final question, is there one piece of advice you think stands above all else? What do you think every lawyer considering going solo needs to know?

Mark Bassingthwaighte:  This is the most important thing I can say and something I get asked time and time again. I mean that’s technology. Going solo is going to be crazy, exciting, stressful, scary, challenging, maybe even at times an overwhelming experience. Don’t forget to have a life as you travel down this path. Work to have a life. Don’t live for work. As I see it again, life is too short as it is. And finally, prioritize wellness in all aspects of your life. And don’t forget to nurture your support systems. After all, it’s hard to feel the joy in finding this long-term success if there’s no one there to share the experience with once it plays out, that taking care of yourself.

Sharon D. Nelson:  Mark, can I ask you to share with us or share with our audience how they can get a copy of your book?

Mark Bassingthwaighte:  To get a copy of this, and it’s free for anyone. You don’t need to be an ALPS insured. Just go to www.alpsinsurance.com/insurance/solo-attorneys#sologuide. It is my understanding the link will be posted as well. So, free, available, anyone have at it.  hope you find it useful.

Sharon D. Nelson:  Well, we sure thank you for joining us today, Mark. We’ve been friends for many years and it was nice of you to come and talk to us. I was, as you know, a solo for many years before I ran into John Simek and decided to do something else with my life. But I appreciate how sound your advice is and I wish I had known a lot more about it. I was reasonably successful, but I don’t think I was as well-prepared as I could have been and had I had some of your knowledge, I think I would have been in a much better position as a solo than I ended up being. So, I think you’ll straighten out many other people and get them on the right path right away. So, thanks for joining us.

Mark Bassingthwaighte:  Thank you for your kind remarks, and it is indeed bit of pleasure. So, I look forward to seeing both you and Jim at some point out on the road and some conferences, and stay in touch.

Sharon D. Nelson:  And that does it for this edition of the Digital Edge Lawyers and Technology. And remember, you can subscribe to all the editions of this podcast at legaltalknetwork.com or on Apple Podcasts. And if you enjoyed our podcast, please rate us in Apple Podcasts.

Jim Calloway:  Thanks for joining us. Goodbye, Ms. Sharon.

Sharon D. Nelson:  Happy trills, cowboy.

Outro:  Thanks for listening to the Digital Edge. Produced by the broadcast professionals at Legal Talk Network.

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Christohper T. Anderson:  The Un-Billable Hour podcast is devoted to all aspects of managing your law practice outside of your client’s responsibilities. I am Christopher T. Anderson, a lawyer and host of the podcast. At each episode, I invite industry professionals to discuss best practices for marketing, time management, client acquisition, and everything in between. For actionable and practical information to refine your practice, turn to the Un-Billable Hour on the Legal Talk Network.