Tuesday, January 29, 2013

Frodo v. the Fellowship or How I Learned to Stop Worrying and Love Going Solo

The last post on attorney salaries in Las Vegas turned up two very contrasting comments about hanging a shingle. We turn first to Anonymous #1, who we'll call Frodo:

Frodo said...

My own firm. A couple of hundred k. Happier and healthier. Vacation when I want. Work as hard as I want. Every dime I make, I "make." No passive aggressive overlords issuing arbitrary rules ever other day. No politics. I love being a lawyer.
January 28, 2013 at 9:28 AM
Later in the day, we got a different view point from Anonymous #2, the Fellowshipper:
The Fellowhipper said...
Since this is confidential...I tried going out on my own a few years ago when I got laid off. I gave it a try for a year. I barely made any money. Was working 12 hours a day trying to run the business and practice law at the same time. My wife was preggo, so I started looking for a job and found one. Making about $100K as a fifth-year. Mid-sized firm. Way better than all the work I was doing as a solo.
January 28, 2013 at 8:00 PM
Obviously, no two people are going to have the same exact experience with going out on their own, but which one of these descriptions of solo practice is more accurate? Are they both dead on or is the Fellowshipper just jealous of Frodo? It sounds like quite a few of our young lawyers out there are unhappy with their current situation--so what is holding you back from going out on your own (is it lack of experience, just being risk adverse, or something else)?
Or perhaps is there a need for the fellowship one experiences in the firm environment? The Fellowshipper seems very content now to be part of the team with more security. We'd like to hear all of your thoughts, but especially Frodo. What does it take to go out on your own?

21 comments:

  1. Balls. Plain and simple.

    My experience is very much like Frodo's. wouldn't change a thing about it. The other perk is that I can screen and take pro bono cases that I want, like and that need my help.

    ReplyDelete
  2. Frodo here: I knew I was going to leave probably 4 years before I did, so I socked away $$ for close to a year's worth of expenses. I took notes of how my firm was run. I basically interviewed the bookkeeper re. trust accounts and quickbooks; I kept copies of everything -- form letters, pleadings (generated and received) and inner office forms. I copied all of my contacts. never burned bridges -- even with my own firm. I am always professional and polite to to opposing counsel, and it is surprising how many, in turn, have referred me cases. In the same vein, I treat my staff with respect, and see better work from them than I ever saw at a big firm. I budget and stay within that budget. I keep my overhead low, but not too low-- if an expenditure is going to make me more efficient, or will generate revenue -- I get it. If it's just for show, I pass. Last, I really try to either go to the gym, or bike, or at least eat well -- to keep my energy up and my mood good. If anyone has questions how I set up my shop I will be glad to get into specifics.

    ReplyDelete
  3. I agree with both comments - you need balls and preparation. You can't expect to make a go at it without the leg work to know what it takes to run a firm. Have a loyal client base also helps when moving out on your own as well. I've been on my own for almost 9 years and very, very rarely look back.

    ReplyDelete
  4. Off-topic:

    I read with interest yesterday's brief discussion regarding the bankruptability of student loans. That guy might be on to something.

    Currently there is virtually no risk to lenders who make loans to college and grad students. The loans cannot be discharged in bankruptcy and when a borrower defaults, the federal government is there to ensure that the lending bank gets its its money back.

    But let's say lenders actually had to take some risk when lending money to JD candidates. Let's say, hypothetically, that student loans were bankruptable and the federal guaranty did not exist. That might actually make banks think twice before handing some marginally-qualified college grad $150k+ to spend three years at a third-tier law school.

    So what might the result be?

    Perhaps it would put an immediate end to the unfettered annual tuition increases we've seen every year for the past two decades. Law schools (and others) would lose the ability to arbitrarily raise tuition since less money would be available to borrowers, er, students.

    Perhaps we'd also see an end to the proliferation of garbage law schools - and maybe, just maybe a few of the garbage schools would have to shut their doors. And then, there would be fewer garbage JDs being handed out every year. Legal job markets would stabilize.

    As it stands, law schools have no incentive to discontinue the practice of expanding admissions. The easy-to-obtain loan money is out there and law schools are soaking it up and admitting anyone and everyone. This causes problems for many students, grads, and taxpayers; but it benefits lenders and academic institutions. Perhaps we should re-think how we lend money to students.

    ReplyDelete
  5. There are some practical considerations like health insurance. Ever bought an individual policy for your family?

    ReplyDelete
  6. I don't know who Frodo is, but I have immense respect for him/her. Thanks for sharing, and thanks for sounding like a decent/normal human being.

    What area(s) of law do you practice? I'm not asking in hopes of finding out who you are. I'm curious whether your practice lends itself more to solo work because you advertise (i.e. PI work, Chapter 7 BK, that kind of thing) or whether you just have a nice niche.

    ReplyDelete
  7. Frodo here:

    I do mostly P.I. work, some collections work for doctors I work with (usually for favors). I also do contract work for some out of state firms (including working for partners of the various subsequent incarnations of my prior firm).

    One thing I did learn early on, is, despite your panicked inclination to take anything that walks in the door, don't take it if you don't feel comfortable handling the job. You will end up either spinning your wheels for several years, diverting your attention from good cases, or you will commit malpractice.

    Frankly, I would not have been anonymous had I not talked about the $$.

    ReplyDelete
  8. Errr, I do collections work "AS" favors -- eech... that sounded bad

    ReplyDelete
  9. Thanks for clearing that up. When you said "for favors" I was wondering what the word "doctors" was a euphemism for.

    ReplyDelete
  10. I second the comment thanking Frodo for sounding like a normal human being. Others who have commented in other threads about striking out on their own often sound like pompous blowhards who can't discuss the subject without trashing the spineless "suckers" who work for others. Wishing you continued success Frodo-sounds like you planned well.

    ReplyDelete
  11. The premium for individual health is more expensive -- ours was about 30% more expensive, and you have to pay for it all yourself. However, you can pay for it with pre-tax money (i.e., your firm pays) so that acts as a 20-30% discount

    ReplyDelete
  12. Since this is anonymous, Frodo, what kind of capital contribution did you make to start your new practice?

    ReplyDelete
  13. Frodo here: I had about 90k put away. That was for home and business expenses. While the initial cash outlay wasn't huge --maybe $15,000 (for computers, reasonably priced furniture, decent web page and logo design) there were longer term obligations including a 3 year building lease and a 4 year copier lease -- all personally guaranteed because I didn't have any business credit.

    At six months I felt a bit of panic as my operating account was dwindling -- because, of course in addition to the firm obligations, I had to pay myself to cover home expenses. (I remember wondering where I was going to store the copier for 3 more years if I had to close shop).

    However at the end of the first year, I about broke even -- meaning my personal and business obligations were current. Although my operating account did not have a lot of leeway.

    In addition to your home expenses (which maybe covered by your significant other), and depending on your work (cash up front versus contingency) I think you need a year's worth of firm expenses put away.

    ReplyDelete
  14. Another question for Frodo or a couple of questions I suppose. When you were first starting out on your own what were your expenses for a "typical" PI case? From your perspective would you recommend starting at a "bare bones" point and working up or at a point where you were already comfortable financially? Are the areas you currently practice in areas you had worked in while at your previous firm, or where they areas you thought had the most potential as a solo? Thanks.

    ReplyDelete
  15. For a rear end mva with soft tissue, it'll cost maybe $50 to $100 for records, police report, copies and mail. Add a couple of thousand for a premises case for a decent expert report so your claim will be taken seriously. I took over a case that went to trial my first year, which I was into for $20-$25k for experts and doctors reports and testimony. If you have a good case and you don't want to mortgage your house, associate in a sugar daddy. In this day of efile and efax, if you have the will power, you can work from home and do a virtual office to keep initial expenses down.

    I wouldn't get anything done so I needed an office space. With regard to startup capital, I know a lot of attorneys who got a line of credit and hung a shingle. I just didn't have it in me so I saved up. Also I know attorneys who've had that line of credit called in at a bad time.

    I started in insurance defense and some collections but did p.i. For the last 5 years bf I opened shop. I enjoy p.i. So that was my plan when I opened shop. Plus I sucked at keeping track of my time. I wish I did criminal Because I refer out a ton of cases. Those are good for Startups Because unlike p.i. They pay cash up front.

    Before you open shop learn Quickbooks or hire a book keeper, and get e&o.

    ReplyDelete
  16. Not Frodo but have similar insights and suggestions. If you want to keep your capital outlay down upon deciding to hang a shingle, find either (a) an executive suite (that has the copier, receptionist, conference room table, etc.) built in and who will offer shorter term deals than the typical 3-5 year commitment to a commercial lease or (b) a friendly firm who already has all of the infrastructure and is willing to give short term lease/subleases to you. The latter option can sometimes also give you fall back options for feeder work to keep your head above water.

    Frankly office space is still dirt cheap in this town. Used desks can pretty much be found for the cost of renting a truck to go get them. I started my firm (admittedly no longer a solo shop) with $20,000 loaned to the firm. The balance never went below $7000and was repaid within 3 months. I took some immediate flat fee and LRIS pay-for-service cases just to get the income stream flowing and never looked back.

    Is hanging a shingle a panacea for all problems and meant for everyone? No. Are solos harder-working? Not necessarily yes or no. As far as the question of greater time off after hanging out the shingle, I gained much greater freedom to leave work early when I wanted but sacrificed some short-term ability to leave work early when I wanted.

    ReplyDelete
  17. I too opened my own solo shop. I did it about four years ago after three years at about a four-lawyer firm.

    I broke even the first year, made about $50K the second year and made about $100K each of the past two years. I think I'm still heading up, but the problem is that unless I can afford an associate attorney, I see it being difficult for me to ever make more than about $150K in a year. My goal for this year is $150K.

    ReplyDelete
  18. @5:50,

    When you say "you made," do you mean that you netted $150k, or that you paid yourself $150k out of the profits of the firm?

    ReplyDelete
  19. I'm "hoping to make" $150K this year, meaning netting after expenses. I netted $100K last year and the year before.

    ReplyDelete
  20. Went out on my own about ten years ago. Took a while, but now making $120,000 to $160,000 a year. First few years were really tough.

    Would I do it again if I could go back in time? Not sure. Running an office sucks.

    ReplyDelete
  21. Couldn't find a job out of law school in 2009, so tried going solo. Was okay, not horrible. But after two years of that, got a job elsewhere. Happy with that decision. Making more at the job I took.

    ReplyDelete