Solo firms can fail for any number of reasons. The good news is if you can identify and responsibly address the risks, you can help ensure the long-term viability of your practice. The following are of particular concern.
- Falling victim to a cybercrime – In looking into our cyber claims over the past 14 years, solo firms are anything but “off the radar” of cyber criminals; and if a cybercrime event happens to be a ransomware attack or a wire fraud scam, the consequences can be devastating. Suffice it to say that over the years I have worked with solo attorneys who were never able to financially recover.
To mitigate this risk, prioritize keeping all hardware and software applications current in terms of system updates and critical security patches. Use two factor authentication whenever available on any device or with any application. Never authorize any transfer of funds without first verifying the authenticity of any transfer request by way of an out-of-band communication.[i] And finally, purchase a cyber liability insurance policy.
- Mismanaging the business – Yes, the practice of law is a profession; but in order to be able to practice long-term, you must also be able to build and maintain a successful business. Despite what some would like to believe, good clients don’t start lining up at the door just bec ause the shingle has been hung, nor will they be tripping over each other as they race to pay their bills on time.
To mitigate this risk, you may need to develop a few new skills or hire someone to help you because all successful solo attorneys have at least a basic proficiency in business management, marketing, and accounting. Understand that long-term success is built on staying on budget; knowing what your profit margin is; knowing when and how to hire the right people; selecting the right technology and knowing how to get the most out of it; putting sufficient time and energy into marketing; and knowing how to reach and meet the legal needs of your target market. Yes, this does take time and effort; but the effort is worth it. Here’ why. Mismanagement of the firm was the reason several major U.S. law firms failed this past decade. If mismanagement can take down a major law firm, it certainly can and will do the same in the solo firm space.
- Ignoring one’s duties under the Rules of Professional Conduct – Sometimes money drives ethics. That’s just a reality, particularly when it comes to conflict resolution. In addition, trust account missteps are far more common than they should be, and few fully appreciate that lack of intent, shoddy record keeping practices, and/or restitution aren’t going to be successful defenses to a misappropriation or conversion of client funds complaint. Trust me, a fast track to having your practice come to a screeching halt is playing fast and loose with these Rules. Even ignorance about what your duties are under the Rules can be problematic because ignorance is no defense.
This risk is an easy one to mitigate. Read the Rules, take them to heart, and reach out for advice if you’re ever unclear about what a rule requires. Most importantly, make sure you fully understand and abide by the rules pertaining to your trust account because trust account missteps remain one of the top reasons attorneys are disciplined.
[i] Out-of-band communication – a method of challenge and response to the requestor of a transfer, payment, or delivery of money using a communication method that is separate and distinct from the communication method the requestor originally used. Its purpose is to authenticate the accuracy of the information initially received.
Since 1998, Mark Bassingthwaighte, Esq. has been a Risk Manager with ALPS, the nation’s largest direct writer of professional liability insurance for lawyers. In his tenure with the company, Mr. Bassingthwaighte has conducted over 1200 law firm risk management assessment visits, presented numerous continuing legal education seminars throughout the United States, and written extensively on risk management, ethics, and technology. Mr. Bassingthwaighte is 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 Responsibility’s Conference Planning Committee. He received his J.D. from Drake University Law School.