Starting a personal injury law firm is easy.
Starting a successful personal injury law firm is another story.
If you're considering going solo, then its critical for you to analyze the assets you currently have -- before going solo.
While it truly takes a special breed of person to bet on themselves, you want to be strategic with starting a personal injury practice. If you go solo too soon, then you may be taking too big of a risk.
This post will help you figure out if now is the right time to go solo and, if not, when is the right time.
Is the market oversaturated with PI Law Firms?
Probably. However, that's irrelevant.
The market will never be oversaturated with high-quality lawyers and trustworthy personal injury law firms.
If you have the skills and the passion to turn clients into happy customers, then you need to be sharing your gift with as many people as possible. Heck, I'd argue that you have a duty to start your own personal injury practice!
How strong is your referral network?
The ideal situation is having your law firm make money from a strong referral network. By receiving word-of-mouth referrals, you won't need to pay for advertising and, as a result, will make more money on each case (compared to law firms that are paying for their clients through ads).
Before you venture into solo PI practice, ask yourself the following questions:
- How many clients per month am I currently bringing in from provider referrals?
- How many clients per month am I currently bringing in from previous-client referrals?
- Can this flow of cases support my law firm?
For example, before I started my own virtual law firm, I was bringing in regular cases to the firm that I was working at. I suddenly realized that if I were to direct these cases to my own law firm, then I should be able to bring in enough fees to maintain my current lifestyle.
Put simply, I had cash flow before I even went solo. This is how I was able to make over $100,000 in the first 10 months of going solo.
Do you currently have cash flow?
If not, not all hope is lost.
You have two options. On one hand, you can hold off on going solo so you can build your referral network. On the other, you can focus on the other two factors in the post so that you can make up for not having a strong referral source.
Learn how to get referrals from providers
If you want to learn my "secret sauce" to getting providers to send you their personal-injury patients, then check out the Personal Injury Playbook!
How much money do you have before going solo?
Having enough money saved up acts as a cushion to pay for growing pains as you establish that referral network.
It takes a while for a Personal Injury case to pay out. You may be waiting 3+ months before you see a penny. During this time, you'll need to devote the first several months of your firm to building a referral network.
Unfortunately, the race is on. If you're solo without cash flow (i.e., a referral network), then you're going to need money to keep you afloat while also covering your expenses.
Things get even riskier if it takes a few months for your first case to come in. In that scenario, you may be without income for 6 months or longer.
Therefore, if you do not have an establish cash flow, then it is probably safe to have enough money saved to pay your salary for one year. Obviously, this comes down to your risk tolerance. The more saved, the safer you'll be.
You could also take out a loan to fast-track your business instead of saving, but that's going to add more risk to the equation.
In my situation, I had little money saved, which was not ideal. However, my referrals sources quickly remedied that issue.
Again, if you can hold off on going solo until you either have cash flow or saved cash, then you'll be starting your firm on the right foot.
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Tip: Know the expenses to running your law firm
How much is your overhead going to be each month?
If you don't know, then now is the time to do the research.
For me, I had little startup money.
Fortunately, by starting a virtual law firm, my law firm was up and running for less than $2,000. Moving forward, this setup cost me less than $125/mo to maintain. You can see my exact setup by watching this YouTube video.
For a while, my ego resisted having a virtual law firm. Instead, I wanted the fancy office that overlooks downtown.
Luckily, once I crunched the numbers, I came to my senses.
If you're resisting going virtual, then here is a video covering 7 reasons to go virtual first (you can always get the office later).
Do you have the experience?
The experience you need to run a solo PI practice involves the knowledge to handle a PI case from beginning to the end.
The valuable experience from taking a phone call from a prospect, converting them into a client, and all the way to resolution is critical.
A PI case has four stages: Intake, strategizing, maximizing the case, and resolving it. You need hands-on experience dealing with liens, insurance, and subrogation- the full PI case spectrum.
Sadly, big law firms often limit associates’ scope of work to a single stages in the lifespan of a PI case. For example, some lawyers only handle intake and never seen what happens afterwards.
Yes, intake is critical because it’s about signing up good cases and filtering out bad cases. But there is also more to a PI case than intake.
Knowing how to handle all stages of a case is an x-factor when deciding whether it’s time to go solo.
If you’re lacking in experience, you may have to fill the gaps by taking an online CLE course or getting a mentor or coach. Either way, learning how to handle all aspects of a case costs time, which may not be a luxury for new law firms.
In other words, spending time to gain experience can take time away from growing your referral network. This can be detrimental. You don’t want to spend much time researching and, as a result, neglecting the cases that need to come in.
Is it time for you to start your own personal injury law firm?
Scenario #1: If you are strong on all three factors, then it is now time for you to start your PI practice! A strong network referral, enough capital, and valuable experience will fast track your success. This is best case scenario.
Scenario #2: If you have a strong referral network, but little capital (and let's say average experience), then you are probably in a good position to go solo. Your existing network should provide cash flow, which can compound as you get more clients.
Scenario #3: If you have capital but not cash flow, then this scenario comes down to your risk tolerance. The more money saved up means more time to build your network so you can begin to cash flow with referrals. I recommend being conservative with your expectations.
Scenario #4: If you have no clients and no money saved up, it doesn't matter how much experience you have. It's not a good idea to start your PI practice quite yet. Instead, now is the time to either start saving money or building your referral network (or both).
Takeaway: Knowing when to start a Personal Injury firm is crucial.
Going solo requires you to analyze your assets before you start your own law firm. Otherwise, you are taking on serious risk that can be a recipe for disaster.
Check out Personal Injury Playbook, an online course dedicated to personal-injury lawyers who want to build a PI firm on a budget. It is simple and easy to follow, with step-by-step guidelines for a successful personal injury practice.