Thanks to all the readers who emailed me about Part I of Flying Solo. If you missed it, you can read it here. I received many questions about money and going solo. I’ll attempt to address that in this post.
6. The Money Issue
Before Jeff and I quit our firm jobs to fly solo, we sat down and looked at every single expense on our bank and credit card statements. We cut all the fat, got rid of unnecessary subscriptions, canceled cable TV, found cheaper car insurance, etc. We also saved as much money as possible before leaping into solo practice.
Each of us invested approximately $10,000 into the practice. Most of this money was for a buffer to keep us afloat before we became profitable — not for capital. We invested in a laptop, printer/scanner, bankruptcy software, and limited stationary. We also spent several thousand dollars on branding: logo, website, and business cards. Fortunately, we were profitable within months of starting our practice.
We decided early on that neither one of us was interested in reporting to an office every day, so we use a co-working space. We can use an app, liquidspace, to book space as needed. I highly recommend this option rather than investing in brick and mortar. We probably pay less than 10% in rent using the co-working space vs. what it would cost us to have our own space. Our practice is also almost completely paperless.
Crunching the Numbers
There are (at least) two numbers you should calculate:
- Your monthly minimum income. This is the absolute minimum you’ll need to earn in order to stay afloat. You’ll need to calculate your personal expenses as well as your business expenses. For example, if your monthly living expenses are $3,000 and your business expenses are $1,000, you’ll need to earn $4,000 + taxes = [minimum gross income].
- Your ideal income. How much money would you ideally like to earn? In order to calculate this, you’ll need to first figure out your hourly rate. Let’s assume you’d like to earn gross revenue of $200,000 per year and your hourly rate is $350. Add to that your overhead cost (for us, it’s around 35%). This means that you’d have to generate approximately $300,000/year [$300,000 – 35% overhead $105,000 = $195,000 net]. That’s 857 hours per year or 17 hours per week, assuming 50 work weeks per year.
You’re probably thinking, really? Just 17 hours! Yes, but it’s not just 17 hours. That’s 17 billable hours that you can collect. I assure you, it’s much harder than it sounds.
When you’re solo, you don’t have the support that you get when you’re at a firm. Law firms are designed so that you can bill 40+ hours per week. As a solo, I find that 20 hours of billable work per week is about the maximum amount I can bill.
I need time to not only work in the business, but also on the business. I need time to send out invoices, review P&L, go to the bank, take colleagues out to lunch, attend networking events, and do all the other non-billable stuff.
7. Take Time Off
This is probably the biggest lesson I’ve learned in running my own practice. Taking time off, especially in the beginning, seems like an impossible task. I felt as though if I took any time off, if I wasn’t available, the business would fail. My partner and I worked around the clock for the first two years. I didn’t know it at the time, but I was showing all the signs of burnout: insomnia, chronic fatigue, impaired concentration, anxiety, and depression.
Look, if you’re going to be your own boss, be the best boss possible. Give yourself scheduled time off. This can be unplugging from work email after a certain hour, not working on weekends, or taking three-day weekends. In order to be a good attorney, you must keep yourself healthy — physically, emotionally, and psychologically. You can’t do that if you’re working 24/7.
8. Don’t Follow the Herd
Lawyers love to follow other lawyers. Don’t start a Twitter account just because everyone else is doing it or because you should. The question isn’t “Should your law practice have a Twitter account?” but rather, “How does Twitter fit into my overall business goal?” Ask yourself: who are my ideal clients and is Twitter the best use of my time to attract those clients?
There is no shortage of different ways to market and grow your business. There is a limitation on your time.
Get clear about who your ideal clients are. Budget a certain number of hours each week for marketing. Make a list of all the possible marketing strategies, then sort by A) your favorite activities and B) likelihood of success, and stick to your plan. Don’t follow the herd.
9. Think Like an Entrepreneur
My fellow ATL columnist Keith Lee wrote Stop Saying Lawyers Need To Become Entrepreneurs. The point of the article was that “most lawyers have always been entrepreneurs.” I agree that in order to succeed as a solo practitioner, you must not only be a good lawyer, but also a good business owner. There are many skills necessary to be a successful entrepreneur, but here are few that I found to be particularly important.
Fail Fast, Fail Often
I learned this idea from John Krumboltz, the author of the book Fail Fast, Fail Often(affiliate link). As the title suggests, we will all fail at some point in our practice. However, often, it’s through failures that we learn. The key is to fail, learn from your mistakes, improve, and fail again.
Do Income Producing Activities — First Thing In The Morning
Start your day by doing whatever you can bill for. (Not Facebook, Twitter, or even your Inbox.) Yes, you can bill for emails, but it’s too easy to get sucked into the Inbox vortex.
Get Comfortable With Talking About Money
I’ve found that one of the most uncomfortable conversations I have with clients is money. Saying “your bankruptcy is going to cost thousands of dollars” to someone going broke is hard. Write out a fee schedule and stick to it. Avoid clients who tries to negotiate your fees. (See Advice #3.)
10. Follow Your Curiosity
The best part of having your own practice is the flexibility. Take advantage of it. Go to different conferences outside of your practice area, start a hobby, take a class, do the things you’re naturally interested in — what you’re curious about.
Over the years, I started doing non law practice related projects that has led to other income streams. I’ve always enjoyed writing, so I wrote two books, including The Anxious Lawyer (affiliate link) as well as columns over at The Huffington Post and Lawyerist. I also started teaching mindfulness at law firms, including an online course. I teach at a local law school, USF Law.
Could my husband and I earn more money by working at a law firm? Probably. Do we miss the firm life? Never. For us, it’s not all about the money. Sure, a certain amount of money is necessary, however, after meeting our basic needs, what’s more important is having a practice that’s sustainable, profitable, gives us a sense of purpose, and fit our lifestyle.
One final thing I’ll mention is having (or not having) kids. It’s something you’ll obviously want to consider before taking the leap. There is no leave when you have your own practice, so you have to plan for it. For a detailed conversation, check out my Resilient Lawyer podcast.
If you have specific topics you’d like to see covered for future posts in terms of solo practice, work-life balance, self-care, or related topics, please drop me an email ([email protected]).
This article previously appeared on Above the Law.