Lawyers (or business people) - economics of hanging your own shingle?

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SeattleLaw
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Lawyers (or business people) - economics of hanging your own shingle?

Post by SeattleLaw »

I am looking to get some input from lawyers (or any professionals) who decided to go out on their own, and specifically what it took financially. I'm particularly interested in those who have started "virtual" law offices.

How much did you have set aside in savings? Are there any specific challenges you faced? Do you ever regret the decision?

It's hard to imagine leaving a big salary, free benefits, and a guaranteed stream of clients to start your own business from the ground up. But, sometimes the money just isn't worth it :sharebeer

One thing unique about my area of law is that it is very advertising-heavy. Traditional firms spend tons of money on traditional media (TV, billboards, radio) while the newer firms focus more on SEO, online ads, and social media. That is something to consider in the equation of "how to get clients" for me.
bh1
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Re: Lawyers (or business people) - economics of hanging your own shingle?

Post by bh1 »

Not a lawyer, but I did make an attempt at being an independent professional. It is 100% about marketing yourself, and you must have a strategy for doing that. Personally, I hated doing marketing and didn't stick with the solo gig for long. At one point I spoke to someone else doing similar work and discovered that I was marketing to the wrong people.
Random Poster
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Re: Lawyers (or business people) - economics of hanging your own shingle?

Post by Random Poster »

Your State Bar might have resources to help you figure out how to start up a practice, or at least provide guidance in respect thereof.

The Texas Bar does, or did, have a law office toolkit or something to that effect, put out by the Texas Young Lawyers Association. I think I took a CLE along the same lines put on by the California Bar many years ago.

Anyway, something to consider.
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JPM
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Re: Lawyers (or business people) - economics of hanging your own shingle?

Post by JPM »

Most young attorneys I know are stuck in their salaried or non equity partner jobs due to the difficulty of starting from scratch. Some cases, the employer lets them take some cases with them to help them get started. Others have a prosperous spouse who carries the household while the attorney gets going. In a couple of cases, prosperous parents supported the household for a few years while the atty built up a self-sustaining practice. Access to capital gives needed staying power. Independent practice pays off over time in money and satisfaction, but getting started requires supportive capitalization or intense frugality. Or in some cases both. PI takes probably five years. Good marketing strategy for wills and estates maybe 3 around here. Not easy but possible. You can take on evictions, contractor disputes, small claims, and such to get started and develop a clientele.
chassis
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Re: Lawyers (or business people) - economics of hanging your own shingle?

Post by chassis »

SeattleLaw wrote: Thu Apr 13, 2023 9:25 pm I am looking to get some input from lawyers (or any professionals) who decided to go out on their own, and specifically what it took financially. I'm particularly interested in those who have started "virtual" law offices.

How much did you have set aside in savings? Are there any specific challenges you faced? Do you ever regret the decision?

It's hard to imagine leaving a big salary, free benefits, and a guaranteed stream of clients to start your own business from the ground up. But, sometimes the money just isn't worth it :sharebeer

One thing unique about my area of law is that it is very advertising-heavy. Traditional firms spend tons of money on traditional media (TV, billboards, radio) while the newer firms focus more on SEO, online ads, and social media. That is something to consider in the equation of "how to get clients" for me.
“Virtual” means online, correct? I wouldn’t conduct an online business because it’s commodity service and you are competing with anyone with a laptop who could possibly offer similar skills. I have run my own business catering to the C-suite with word of mouth networking/marketing. I recommend this - offer high value services to the people with the deepest pockets.
Outer Marker
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Re: Lawyers (or business people) - economics of hanging your own shingle?

Post by Outer Marker »

SeattleLaw wrote: Thu Apr 13, 2023 9:25 pm It's hard to imagine leaving a big salary, free benefits, and a guaranteed stream of clients to start your own business from the ground up. But, sometimes the money just isn't worth it :sharebeer
What about it isn't worth it? It sounds like you'd be doing the same kind of work, but having to hustle your own clients vs. having those chores handled by the firm. Sounds like you're doing PI work. Would switching sides and going in-house for an insurance company be an option?
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AnnetteLouisan
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Re: Lawyers (or business people) - economics of hanging your own shingle?

Post by AnnetteLouisan »

For me, having seen the life of a solo practitioner, the concern would be the percentage of time spent on business management tasks like managing the lease, getting letterhead and buying office supplies, managing payroll, hiring and managing staff, complying with OSHA and related regulations, addressing corporate governance, franchise tax, business accounting, getting clients, joining client development business associations, etc. it’s a ton of work over and above legal practice. And that eats into one’s billables. Plus it’s hard to keep up with a larger firm in terms of resources and expertise.
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SailorManDan
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Re: Lawyers (or business people) - economics of hanging your own shingle?

Post by SailorManDan »

Started a medical business awhile back so a little different but starting any business from scrap is essentially the same and a lot of work put in to a proper Business Plan will yield the decision whether to jump or not - especially if you are able to convince a third party (as in NOT family) to lend capital. This first step will put a tremendous amount of pressure on you to convince a non-biased party whether your idea is solid or not especially a bank as they have certain "requirements" when loaning money. Also, selling a service is completely different than selling a product where your target market will need to be convinced to place their trust in YOU to provide value for their hard-earned dollars. A good Business Plan will include every answer to the question: how NOT to fail.

Another, possibly easier answer to your question, is to ask people in your profession (suggest not in your physical area) how they made it. You'd be surprised at how successful business owners love to talk about their experiences when starting out. Good luck.
hachiko
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Re: Lawyers (or business people) - economics of hanging your own shingle?

Post by hachiko »

It would help a bit to know your area of expertise. Hanging up a shingle to practice real estate law is going to be a lot different than hanging up a shingle to become a litigator. Real estate transactions are common enough you could probably make a decent amount just getting friends to use your services. For litigators, my guess is that is not the case.

It would also help to know where you are in your career. As a 3rd year attorney you're not going to have the same connections and ease of getting business just through referrals as an attorney who has worked for 20 years doing time in several law firms, at a megacorp or two, and in government. The economics are probably much different for those two groups, in large part due to the fact that a 3rd year attorney is probably going to have to spend way more time and money on bus-dev than the person who is getting a text every day from someone needing legal work, without having to advertise at all.

The people I know who have hung up their own shingle (I don't know anyone who has done it singularly alone, but I know many who start a firm with one or two others) seem to be pretty successful. My sense is that they don't work less than they did at their firms though, if that's your goal.
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chassis
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Re: Lawyers (or business people) - economics of hanging your own shingle?

Post by chassis »

A rule of thumb I generally agree with from personal experience is that for each billable hour you wish to have, one hour needs to be spent on promotion (sales, marketing) of the business.

The rule of thumb suggests a solo practitioner is therefore 50% billable. This is broadly and directionally correct.

This rule of thumb helps to set billing rates and annual income targets/expectations.
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uaeebs86
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Re: Lawyers (or business people) - economics of hanging your own shingle?

Post by uaeebs86 »

I have a close friend who just switched from having his own business for something like 20 years (specializing in bankruptcy) to managing an office of attorneys. He's the happiest he's been in years.

He had issues with SEO for his business (he said Google screwed up something and he disappeared). The grind of being at home constantly with less contact with the real world during Covid really wore him down as well.
"Things work out best for those who make the best of the way things work out." ― John Wooden
drewlaws
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Re: Lawyers (or business people) - economics of hanging your own shingle?

Post by drewlaws »

I’m not an attorney but hung out a consulting shingle and it was the best financial decision I’ve ever made. Working for someone else is not without its own risk. You can be let go any time for any number of reasons beyond your control. When you’re on your own, at least you have more control of your own destiny.

My experience will be different than yours. My start up costs were minimal, like $5k. I get my business from referrals, not advertising. I assume you’re a PI lawyer? Here are some of the things that helped me start and minimize my risk:

Had a year worth of expenses saved to give myself a fair runway to try.
Was well established in my industry.
Kept my prior employer as my first client at a similar compensation level.
Very low overhead expenses.
Felt confident I could go back in house if things didn’t work out.
Had a good network of vendors I trust.
Hired a contract bookkeeper early so I could focus on my work and not learning quickbooks, invoicing and banking. This was a great decision since I’m invoicing frequently when I am busy working 60-80 hour weeks doing the actual job.
Work your tail off and provide the best service you possibly can. I did that by working for people I believed in and not overcommitting myself early in the journey by taking everything that walked in the door.

I’ve been blessed and *knock on wood* things continue to go well. It was nerve racking, even though I was confident I did everything I could to set myself up for success.
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