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Small Is Beautiful

By Megan Kinneyn | Nov. 2, 2006


Law Office Management

Nov. 2, 2006

Small Is Beautiful

What makes small firms successful? Attorneys throughout the state discuss their practices and the challenges faced by firms with fewer than 20 attorneys. By Susan E. Davis

By Susan E. Davis
     
      Eleven ways to make a small firm work
      It's the occasional fantasy of most attorneys at large or midsize law firms: downsizing to a smaller shop (so as to lead a kinder, gentler life), or launching their own darn firm (so as to become their own darn boss).
      Over the past five years, the share of California attorneys reporting that they work for small firms has stayed fairly level. In 2001, 36 percent of the respondents to the State Bar's Member Services Survey reported working for small firms (split equally between firms of 2 to 5 attorneys and firms of 6 to 20 attorneys); in 2006 the figure rose slightly to 38 percent of respondents (22 percent for firms of 2 to 5 attorneys and 16 percent for firms of 6 to 20 attorneys).
      But as midsize firms turn into large firms and large firms turn into mega firms, more and more attorneys may be attracted to the smaller model. What does it really take to succeed in a small firm? To find out, we interviewed partners in small firms all over California-and in all sorts of practice areas.
     
      Get Along
      If we heard it once, we heard it a dozen times: Partners in small firms truly have to work well together. Otherwise the firm won't thrive. In fact, it might not even survive.
      "You have to choose partners like you would choose a spouse," notes Tony Paikeday, managing director of Silicon Counsel, a three-attorney firm in San Francisco that focuses on corporate transactional work. "That is, you have to choose very, very carefully."
      Glen T. Jonas, of Los Angeles—based Jonas & Driscoll, which does criminal defense and civil litigation, puts it more dramatically. "If you don't love and respect your partner, you run into all sorts of problems: bickering and arguments and all that. Conversely, in my career, there is nobody I would rather ride into battle with than my partner, Christopher Driscoll. We both have the same attitude: We want to help people, and we'll fight, fight, fight to do that. Next to me, he's the smartest guy I know!"
      Harmony doesn't come just from having similar IQs or perspectives on justice, however. It also involves having compatible money-management styles. "Law firms split up over finances as often as work styles," notes Michael Shimokaji, founding partner of the intellectual property boutique Shimokaji & Associates. "You can't stay in partnership with someone for a long time when you don't see eye to eye on financial decisions."
      Can't partners just go out and find another partner? Not easily, says Paikeday, whose own firm suffered the loss of two partners in its first year in business. "Law firm partnerships are complex organizations," he explains. "A breakup can be so time-consuming and distracting that it affects a firm's business."
     
      Nurture Associates
      While large firms often have lockstep timelines for advancement, smaller firms can give associates more personal attention and training.
      "We don't necessarily wait for, say, the third year to let an associate take a deposition, or the fourth year to let them lead a mediation," says Teresa Renaker, who was an associate with Oakland-based Lewis, Feinberg, Renaker & Jackson for six years before she made partner. "Right from the start, we help them recognize their strengths, develop their weaker areas, and advance as they are ready. We see them as whole people, not billable hours."
      Some small firms, in fact, don't even have billable hour minimums. "It has to do with the way we balance contingency fees and our hourly rate work," Renaker says simply. "Besides, with the litigation cycle, we know that sometimes people won't be working as hard."
     
      Keep Overhead Low
      Small firms boost the bottom line by avoiding high overhead costs. Some do this by keeping the number of full-time staff low. For example, Silicon Counsel and Shimokaji & Associates have no full-time administrative staff.
      Other firms rent offices in executive suites, which can be cheaper than both leasing stand-alone offices and hiring employees. And some firms end up buying their own buildings. One such firm is Chavez & Gertler, a seven-attorney firm in Marin County that specializes in consumer class actions, civil rights, wage-and-hour cases, and catastrophic personal injury cases. Founding partners Mark A. Chavez and Jonathan E. Gertler bought a 100-year-old building in Mill Valley after the firm's lease at a premium office building in San Francisco expired—just when commercial lease prices were spiking.
      The growth of legal technology in the past decade is also helping smaller firms keep costs down. A number of the attorneys interviewed cited savings from computerized time and billing systems, for instance, as well as the ability to do legal research online rather than investing in print law libraries. "We try to leverage every technology we can," Paikeday says.
      Shimokaji & Associates uses technology and minimal office space to run a virtually virtual office. Though the firm does have a brick-and-mortar presence in Irvine, seven of the firm's nine professionals—which include six attorneys and three patent agents—work in locations that are as far flung as New Jersey and Massachusetts. "With high-speed connections and networking technology, I don't need everyone working in the office all—or even any—-of the time," says Shimokaji.
     
      Do Good Work at Lower Rates
      Less overhead often translates to lower prices, which can be very, very attractive to companies seeking legal help—especially if those low-overhead firms do high-quality work. "There's still plenty of room for small firms who are doing good-quality work to stand out and actually prosper," Shimokaji says.
      "In our own firm," he adds, "we really focus on the quality and timeliness of the product. We make sure we deliver our products on the client's schedule. More often than not, in fact, we deliver it ahead of schedule."
      Similarly, Silicon Counsel finds that "large companies know that small firms can do very high-quality work while giving the client a high level of attention," Paikeday says. "There's an increasing recognition that what matters more than the name of the firm is the caliber of the attorney and the client-attorney relationship that develops, as well as a good price."
      Jonas & Driscoll has positioned itself as the go-to, Johnny-on-the-spot shop for cases larger firms can't handle efficiently. "We don't serve the IBMs of the world," Jonas says. "We serve midsize business owners who don't want to pay $600 an hour to a partner who'll just toss it off to a second-year associate. And we serve those clients very aggressively. As a result, we have a big book of business."
      Indeed, such a strategy can result in very happy clients—and even impressed opponents. Robert C. Goodman, whose two-person firm in San Francisco specializes in environmental litigation, did such a good job litigating against a Fortune 50 company (and settling, on favorable terms) that its in-house lawyer later hired him to represent the company in another environmental lawsuit. "That company has continued to be a very important client for me," Goodman says. "In fact, over the years, a high percentage of my work has come from referrals from former opposing counsel, or former co-counsel in multiple-defendant lawsuits."
     
      Manage Work Flow
      One of the biggest challenges for small firms is managing what Kim E. Card, a partner with Chavez & Gertler, calls "the ebb and flow of legal work." That is, a larger firm can draw on other employees (be they attorneys or staff) when the caseload suddenly increases or a big trial is coming up. Smaller firms don't have the extra hands on board—and often can't afford to hire new people, since the heavy workload may be temporary. The solution often is using contractors. "When we're gearing up for trial, we'll hire paralegals to help get exhibits in order," Card says. "And we hire contract attorneys as we need them."
     
      Develop Anchor Clients
      Nevertheless, small law firms, like any small business, need to have large, steady bread-and-butter clients to keep the revenue coming in. Paikeday and his partners learned this the hard way when they set up Silicon Counsel in 2004. Initially they had a lot of small clients, but the finances were unstable. So the firm contacted some of the biggest companies in the Bay Area, trying to drum up more steady work. As a result, the firm has cultivated a few large clients—including PG&E and Blackhawk Network, a subsidiary of Safeway—as their anchors, while maintaining about 40 other, smaller clients.
     
      Balance Work and Life
      Although small firms do sometimes get swamped by work, they can also support their attorneys' personal lives. "We're a litigation shop," Renaker says bluntly. "As such, there are times when the workload is very heavy and times when it is a lot lighter. So we understand that people may not always be grinding out the hours."
      "Besides," she says, "three out of four of the shareholders in this firm have young kids. That necessarily creates a culture that values family life. It's a normal part of the life of this firm."
      Adds Kim Card, who works a 90 percent schedule at Chavez & Gertler by taking off every other Friday, "We're not supporting the huge infrastructure of a big firm. So everybody has a better work/life balance."
     
      Find your Niche
      Offering the same legal services that big firms do isn't always the best strategy. Instead, small firms may take on work that larger firms can't or don't want to do. Take Lewis, Feinberg, Renaker & Jackson, a ten-attorney plaintiffs firm specializing in employee benefits and employment work. "While we do work on large, class action suits, we also represent a lot of individual plaintiffs," Renaker says. "By its very nature, that attracts smaller firms."
      Shimokaji & Associates specializes in intellectual property litigation and transactional work—a practice area in which big firms do compete. But because the firm does high-quality work, on time, and for less money, he says, it's able to attract lots of clients.
      "One of the challenges for small firms is to attract interesting, complex work," says Robert Goodman, who appreciates both sophisticated cases and a "human scale" work environment. "Having a specialty is one way to do that."
     
      Market your Firm Resourcefully
      Small firms do have a harder time developing brand recognition than larger firms, because they don't have as many offices and employees out in the world. Nor do they have as much money to spend on advertising—or as much time to spend on rainmaking. But that doesn't mean that successful small firms avoid marketing altogether.
      "Small firms have to spend significant time on business development, all year round, no matter how much actual case work they have," Shimokaji says. But instead of buying lots of print advertising, his firm bolsters its reputation by being active in bar associations (for instance, Shimokaji is on the steering committee of the California Minority Counsel Program) and staying involved in industry groups the firm serves.
      Jonas and Driscoll teach seminars and write articles to get their names out. "I'm not a really social guy," Jonas admits. "And I don't golf or drink, which is how some attorneys get business. But you have to go out and meet people. You have to develop relationships with them, so they see what you're doing and respect you. If you sit in your office and wait for the phone to ring, you'll never make it."
     
      Learn to Run a Business
      Of course, being a good lawyer is no guarantee of success. Small-firm partners also must know how to run a business. "A law firm needs to deal with the same issues that other businesses do," says Charlene L. Usher, principal attorney of Pomona-based Usher Law Group, which represents employers in workers compensation and discrimination cases. "My primary advice for colleagues considering leaving large firms for small firms is that they should spend time learning how the business side works. How does the firm attract and retain clients? Or deal with human resources and accounting issues? Or address the lag time between invoicing clients and getting paid, while managing a payroll and other expenses?"
     
      Reject Bureaucracy, Embrace Freedom
      Lawyers at successful small firms tend to eschew bureaucracy and multiple levels of management. "I actually prefer less rather than more structure," Shimokaji says. "Bigger firms seem to have rigid ideas on how things should be done. I'd rather not work in that kind of authoritarian environment." Adds Jonas, "I've always had a strong personality. I don't need a partner sitting over me saying he might fire me if I don't do what he wants me to do. I like being in control of my own destiny."
     
      Susan E. Davis (sedwriter@yahoo.com) is a contributing writer for California Lawyer magazine. She lives in the Bay Area.
     
     
     
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Megan Kinneyn

Daily Journal Staff Writer

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