There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don’t know. But there are also unknown unknowns. There are things we don’t know we don’t know. – Don Rumsfeld
When you start a law firm for the first time, one of the hardest things to get a handle on in the planning phase of your firm is your monthly expenses. What’s this going to cost? How much do I have to make in order to bring money home?
When you start your law firm there are going to be a lot of expenses that fall squarely into the “things we know that we know” bucket. You are going to know a lot of your expenses. For example, you’re going to know your rent is $______ or your phone service is $_______. These are easy numbers to know.
Then there is “there are things that we know we don’t know” bucket. You don’t know how much paper you are going to use in a month. You don’t know how many times the shredding service is going to come. There are many of these kinds of expenses. But most of them are of the small variety assuming you are a solo or small firm.
The last category is the killer. It is the unexpected bill. These are bills that take you from having a great month to breaking even – the “unknown unknowns”.
In this post, I’ll share with you some unknown unknowns of the early part of my practice. Plan for these four expenses:
1. Deposit For Electricity
Both times, I’ve opened accounts for electricity, my provider has required me to pay a 6 week estimate of usage as a deposit. A deposit that is refunable after a year of on time payments. Last week, I cut a check for $600 for my deposit.
2. Commercial Eletricity Can Be Spendy
It is hard to make any blanket statement about electrical rates. But I’ve paid significantly more for commercial rates than I have for residential rates in the same area. Check with your supplier before opening. See what the difference is in price per kwh. It can add up. The first commercial electricity bill that I received was shocking.
3. Malpractice Premium Jump
When you first hang your shingle, malpractice premiums are relatively low. They are a claims made policy and the world of possible claims is small. Between years 1 and 2 of my practice my premium jumped 35%. I had planned for a 5 to 10% jump. Speak with your broker about this. Plan for it throughout the year. It is much easier to save a little every month than get hit with a large bill all at once.
4. Sponsorship Expenses
Local businesses sponsor all sorts of things and you will too. When you start you’ll be out and about. Meeting all sorts of folks. You need to do this. It is vital to the success of your business.
But maybe even before your first fee comes in, you’ll get asked to sponsor something. It will be some worthy cause put forth by some worthy contact. You’ll feel bad not doing it.
My advice on this is to pick one cause and focus your sponsorship on that cause. At McKeen Law Firm, our biggest sponsorships are to “The Race To Fill The Pantry” and “Achilles CT“. For every other cause, I basically buy the small ad in the program.
There’s no right answer but have some plan to deal with this pressure. When you are starting out $250 here and $500 there really adds up.
Ryan McKeen is A Connecticut Attorney. He can be reached at (860) 471-8333