Back in July, my firm celebrated its fourth anniversary. I can’t believe it has been that long. It seems like yesterday that I was sitting at my desk at Quinn Emanuel, thinking about cases worth millions of dollars but still too small to be economically handled by traditional Biglaw firms. I wondered if I might try to serve a growing market hungry for less expensive, but still high quality litigation. Not long thereafter I was conspiring with my partner over the details, drafting business plans, and conducting informal marketing surveys.
As my firm approaches its fourth anniversary, it’s interesting for me to think back to my early plans and consider what worked, and what did not. What happened as I predicted or hoped, and what was unexpected…
When I first started working on a business plan for a boutique litigation firm, I highlighted my client contacts and my prospect of obtaining business from those clients. But direct client contacts did not become important for my business until it was 9-12 months old. Until then, along with business we had taken with us when we started, referrals made up the lion’s share of our work.
Also, for the first six or nine months, we were trying to perfect our administrative processes. Until we did that, we probably would not have had the bandwidth to handle too many more serious matters anyway.
Over time, the percentage of business my firm got from referrals steadily declined. It declined steadily over the years from approximately 100% in the first year to about 40% today. Maybe we became dramatically less popular to our peers, but, seriously, the trend is encouraging. As the firm became more focused on direct client pitches, it necessarily began handling bigger matters, crowding out smaller referred matters. As our minimum amount at stake increased, so, too, did the percentage of our business not based on referrals.
One pleasant and unpredictable surprise was how relatively easy it has been to generate meaningful business in the market my firm has targeted. As far as I can tell, the keys to our bus dev success has been an attractive, competitive fee structure vis-à-vis our attorneys’ experience and expertise, coupled with an approach of believing what you’re selling based on honesty and candor.
I also have been surprised by the financial success of my firm, which surpassed my expectations. My firm has been able to thrive on very low overhead, largely thanks to the savvy insight of my partner. We have a prime location next door to Oracle and Electronic Arts, Grade A office space at a very competitive rate, state-of-the-art IT and telecommunications, and yet we spare no expense to have competitive systems and processes for handling sophisticated litigation. That we have been able to do so cost-effectively has not only increased our profitability, it also has allowed us to charge lower rates to our clients, perpetuating a beneficial cycle. This is something for which I am particularly grateful, especially in light of the “new normal” economics of legal services.
Four years ago, I hoped that working in a litigation boutique handling cases worth less than eight figures would offer more interesting and substantive experience. In that regard, I have not been disappointed. I cannot count the number of depositions, hearings, and various court appearances, including trials, my firm’s attorneys have had in the last few years.
In some ways, however, my expectations were off. For example, I learned that growing a firm organically, one hire at a time, is more difficult than I expected. In a small firm, the stakes for adding each employee are proportionately higher. A four-attorney firm considering adding a fifth faces a weightier decision than does a 600-attorney firm considering a single lateral hire. Small firms have less room to absorb mistakes when each employee added can have a dramatic impact.
Also, the job requirements for associate attorneys at a small firm can be more onerous than in Biglaw. At a boutique, there is precious little room to hide on large, document-intensive cases. Junior attorneys at some small firms get more substantive experience, more quickly, than they might get in many Biglaw shops. Due to the demands necessarily made of a junior or mid-level associates, it becomes that much harder to build a team that is just exactly perfect.
All this has proven to make it difficult to grow the firm because it takes more than ample business to grow a firm. Even if a small firm’s attorneys all have more work than they can handle, that doesn’t mean that hiring another attorney becomes simpler or less important.
I’ve also been surprised at how enjoyable it has been to run a business. I knew I loved being a lawyer but I thought that running a business was just a necessary evil. Instead, I’ve found it engaging to try to make and execute decisions aimed at creating an enjoyable, profitable enterprise that can be proud of its service. I didn’t expect to enjoy the business aspect so much.
Four years have flown by quickly, and of course I’m pleased that my firm has managed to survive and thrive. I can’t deny that times have gone by and I never had doubts or thoughts of regret. On the other hand, as a business we remain very much a startup, with the same level of excitement coupled with healthy trepidation. It seems an appropriate time to reflect on my firm’s anniversary and look forward to the future.
This article is the copyrighted material of Tom Wallerstein and is reposted with the express written consent of Tom Wallerstein. Tom Wallerstein lives in San Francisco and is a partner with Colt Wallerstein LLP, a Silicon Valley litigation boutique. The firm’s practice focuses on high tech trade secret, employment, and general complex-commercial litigation. He can be reached at firstname.lastname@example.org. He authors a number of articles for Above the Law. To read more of Tom Wallerstein’s articles, click here.