With many law firms around the country shedding attorneys, some practitioners are opting to start their own firms, either by choice or out of necessity.
But in order to do that, especially during a recession, a solo practitioner needs to combine business savvy with legal ambition.
“You have to ask yourself, ‘How much money do I need to live?’ not ‘What are my expenses?'” said New York attorney Jeffrey L. Solomon. “Then figure out how to get that out of your practice.”
Although Solomon went solo several years ago after being let go by a large boutique firm, he started his current business law practice only six months ago.
He said he initially endured the “traps and mistakes” of hanging out a shingle, but ultimately developed a business strategy that fit his practice.
The same is true for Madison, Wis., solo Jeffrey W. Nichols.
He started his solo practice in criminal defense and family law almost a decade ago without much of a business model, but said there is a difference between starting out and keeping it going.
In the last several years, Nichols has had a handful of clients on the family law side who have gone into bankruptcy and been unable to pay him.
“That’s thousands of dollars lost in fees because of that,” he said.
Keeping track of cash flow is crucial in a down economy, said Solomon, who offered business planning tips during a program at the American Bar Association annual meeting in Chicago earlier this month.
“Even now, I don’t leave the office until I bill a certain amount of dollars a day,” he said.
But for recent law school graduates like Heather Grace, who expects to start a solo practice in her hometown of West Branch, Mich., developing a business plan and executing one are two different things.
She said her 10-year career plan is to get established as a lawyer, run for prosecutor and eventually become a county judge.
However, the May 2009 graduate of Thomas M. Cooley Law School said she is still developing her business plan.
“The big challenge I’m going to find is financing,” she said. “Because banks are so hesitant to give loans now to new businesses and there’s a glut in the market of experienced attorneys that have gotten laid off.”
Management consultant Ken Philip, who also spoke at the ABA program, agreed.
The partner at Philip + Company, Inc. primarily advises larger firms, but he suggested that anyone planning to start his or her own law firm now better have a sound business plan.
“Maybe the second worst business in the world to try and get a new loan for is professional practice, because that’s a big risk and lenders don’t take it,” he said.
For those attorneys who do succeed in getting financing, Philip said it is imperative for them to have certain business measures in place before the first client comes through the door.
Monthly forecasts detailing income, expenses and overhead are relatively easy ways to determine cash flow for a firm, Philip said.
“Write it down and get a financial projection attached to understand what it’s going to cost from a cash basis,” he said. “Then ask, ‘Can I really do it?'”
Nichols said given that the majority of his practice is criminal defense, he does not necessarily see the value in reviewing cash flow charts each month.
For him, it’s simply a matter of smart budgeting.
“My business is really feast or famine,” he said. “I might make good money for a month or two and the next two months make nothing.”
Grace said at this point she has developed her own Web site and once in practice, she plans to take a personal approach toward clients and also get active in the community.
She said she realizes that breaking into a saturated market as an inexperienced solo practitioner won’t be easy and will depend on her ability to sell herself to clients.
“My skill set isn’t going to be the most attractive feature because of a lack of experience, so I want people to hire me because they think I’m a good, honest person,” she said.
Editor’s note: This article first appeared in the Wisconsin Law Journal, which is also owned by Dolan Media Co.