Are You Ready to Fly Solo?

Published February 2, 2010

The highly publicized troubles of large corporate firms make the prospect of having their own firm seem more attractive to many young or newly unemployed lawyers. But nearly 90% of the 1.1 million U.S. lawyers are solos or in small firms, so the competition is intense. An old economics bromide holds that, “whenever there is change, there is opportunity.” Clearly, there is tremendous change currently, so there also is tremendous opportunity now to start a new business. However, you must understand the business and economic realities that are involved.

Solo lawyers need all the traits of an entrepreneur: motivation, acceptance of risk, resiliency, commitment, persistence. But they also need (and often do not have) adequate capital. It’s easiest to start a new solo practice for those legal specialties where capital requirements are less, where it’s easier to reach prospective clients who have more urgent immediate and personal needs and are less concerned about the team behind you. Practice areas that meet these parameters are where “the rubber meets the road,” areas such as personal injury, family law, bankruptcy, immigration, personal real estate and the like.

Don’t assume you’ll immediately make money from such clients. Even if you do work for them in your first few weeks, the national average is 120 days between when a law firm sends out an invoice and when it is paid. For that reason alone, having a financial reserve helps ease the angst of starting your practice. The ideal number would be a minimum of six months of living expenses, and preferably a year.

Managing money is your number one consideration for success in a new firm. Practice needs should always be met first, and personal needs should be the minimum expense necessary to maintain a standard of living. The one essential is that your new law firm should not be a bank for clients. When you bill clients, you are extending them credit. Lax collections mean you need more cash to stay in business while waiting for clients to pay. The new firm that stays on top of receivables will have the cash to survive and grow.

Needless to say, lawyers just out of law school—or just out of a megafirm—often have little practical feel for such issues, whether that includes training in effective client service and law practice management techniques, or basic knowledge about the operation of the firm as a business. Many such lawyers feel they have neither an efficient nor an effective way to learn how to build a better practice that better serves clients.

Categorized in:

Audience type: Sole Practitioners