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FROM THE ALABAMA LAWYER: Hanging a Shingle (Some Practical Pointers)

By Andrew M. Skier

Congratulations! By making the decision to enter the world of solo or small firm practice, you have embarked on a career that will provide you moments of unspeakable personal and professional satisfaction, punctuated by periods of uncertainty, self-doubt, great frustration, and, yes, sheer terror. Not to worry–you are not the first person to choose this path. Help is available. Read on.

A solo practice offers benefits that many of our colleagues can only dream about. Ask any associate at a large firm how much schedule flexibility they have. Do lawyers who work for government agencies get to decide which cases they handle? How many of your colleagues get to select their office location and hours? When a big-firm associate brings in a large client or wins a significant case, how much of the fee do they have to turn over to their employer? As a solo practitioner, you will not have to worry about any of these things.

Instead, we solos have our own set of worries.

Solos often feel themselves getting bogged down in the administrative and office-management side of things.

We often lack the kind of peer support and camaraderie that our big-firm counterparts have.

Law school doesn’t train us in how to address the day-to-day operations of a small law practice. I say this not to knock the law schools. After all, it’s not their job to train lawyers in bookkeeping, marketing, setting fees, and the daily minutiae of a law practice. But every solo has to learn his own way to run his office, and that often comes from trial and error, with the emphasis on error. Every lawyer will develop his or her own best fit over time.

As a solo, you will regularly experience nagging doubts with worries such as: Will the phone ever ring again? Why does this judge seem to hate me? Did someone leave a negative review for me online? Can I pay my rent this month? Questions like these come to all of us. And if you are emotionally fragile or prone to panic in the face of worries like this, perhaps solo practice isn’t right for you.

Let’s look at some things you want to think about as you decide whether to enter the world of a sole practitioner.

Overhead and Hidden Expenses

If there is one piece of practical advice that every aspiring solo lawyer should hear, it is this: Keep your overhead as low as you can. Every dollar spent on overhead expenses is a dollar that you have to earn back. Do you want to work to pay your overhead, or do you want to enjoy the results of your labor? Solo practice is largely unpredictable, and you can expect both good and bad months. Knowing that there will be months when the money does not flow in, it is unwise to burden yourself with unnecessary recurring expenses.

What kind of expenses are necessary? Some are obvious. Rent, sure. Telephone? Absolutely. But there are hidden expenses that aren’t as obvious. Left unchecked, these can take over your monthly budget.

For example, I do not recommend practicing without some type of malpractice insurance. Unless you are planning on doing complex securities work (and, if this is the case, what on earth are you doing as a solo?), this insurance is affordable. And if you ever need it, you need it, and you will be glad you have it.

You also need some way to let potential clients know that you are there. Back in the stone age before online marketing, the Yellow Pages had a stranglehold on lawyer marketing. Every year each lawyer would sign a new contract for their ad in the phone book, and that was that. Today, marketing a practice is a much more complex series of decisions for a solo practitioner, and marketing costs can create an obligation that can quickly become overwhelming. You will receive pitches from all manner of marketing enterprises, some with pushy and aggressive sales representatives. Be very careful when listening to their promises.

Hiring office staff is expensive. When I was young and working without any staff, an older lawyer commented that once a lawyer hires support staff it is difficult, if not impossible, to do without them. Good advice, that. When I began, I was not aware that bringing in full-time employees is a far larger proposition than simply making payroll. Payroll is an extraordinarily complex beast and involves more bookkeeping than most solos are equipped to handle. That means that you will likely need to have a payroll service. Even if you do not offer your employees benefits like health insurance, you still must withhold and pay taxes and unemployment insurance for your employees quarterly, which can add up to shocking amounts of money. Be prepared for this before you take the plunge of hiring staff.

Taxes–the word alone fills many with dread. As a self-employed person, no employer will be withholding income from your paycheck, and you will be responsible for writing a check to Uncle Sam (and Aunt Kay) one or more times per year. Most solos pay taxes on a quarterly basis, and that helps to spread out the pain. All of this requires planning and discipline. Be prepared for this (I was not), and plan accordingly. Were you also aware that in many places you are required to pay taxes on the value of business equipment and furnishings used for an office? Neither was I. Now you are too.

You may not anticipate the need for and cost of various licenses required. Besides the annual non-voluntary contribution to the Alabama State Bar, you will likely be required to buy a local business license. In most jurisdictions, the cost of a license is based on gross receipts. This can add hundreds of dollars to your annual outlay and, like many others, is an expense that can catch a new solo by surprise.

If you expect to offer clients the option to pay via credit card (a must if you want to be competitive today), you will be amazed how quickly the seemingly minimal transaction fees stack up. Who knew the seemingly tiny 3.5 percent of each credit card transaction would actually turn out to be a lot of money? No one who ever signed up for their first credit card merchant account, that’s who! In addition, your bank may charge maintenance and other fees for holding your money. Both of these kinds of fees are negotiable, but not entirely avoidable. Be prepared and budget for them.

Many solos use the strategy of pooling resources with other solos and sharing expenses such as rent, utilities, reception, and the like. Office sharing can be a great idea, and it can lead to significant savings. It has the added benefit of building in a group of lawyers with whom to discuss cases, ask for advice, and generally share ideas. But you have to be very selective with whom you enter into an office-sharing arrangement. You never really know someone until you go into business with them, and many long-term friendships have been damaged irreparably by lack of business compatibility or because of a business disagreement. Don’t let this happen to you.

The Art of Setting Fees

I can vividly remember the first few times I sat across my desk from a potential client. I had built a rapport with them. I understood their situation. I offered them a solution. Things were going swimmingly. Then the time came to talk about legal fees. This terrified me.

Having spent the first three years of my legal career as a government lawyer, I felt utterly unprepared for this part of our conversation. And I was.

Here are several things to think about.

Flat fee or hourly rate: There’s no question that from the lawyer’s perspective it’s just easier to charge flat fees. On a flat-fee matter, you don’t have to keep a detailed time record, though you should in case someone complains that your fee was excessive. And you don’t have that awkward conversation with you asking the client to replenish a depleted retainer.

Not all cases, however, are predictable enough to employ a flat-fee scheme. Domestic relations cases immediately come to mind.

In the long run, if you charge a flat fee in all of your cases, you may wind up working harder for less money.

While flat fees are great for cases that can be handled relatively quickly and have little chance for unforeseen complexities to arise (if there is any such thing), they don’t work well for all of them. If there is a chance that a case could be more complex than you believe, or if it appears during the meeting that the client will demand a lot of your time, then an hourly rate billed against a retainer is probably the better option.

So how much should I charge? I wish I could give a definitive answer to this excellent question. Fees are based on multiple factors, including the prevailing fee levels in your community, the lawyer’s level of experience in the area of law related to the case, the legal specialty involved, the complexity of the client’s legal issue, and, last but not least, the client’s ability to pay.

Unfortunately for the novice, this is another area of solo practice where the concept of trial and error comes into play. As a general rule, don’t undercharge for your services. Stop, go back, and read that last sentence again. You almost certainly will undercharge in some cases (I still do it sometimes after 26 years), but the trick is to minimize this. After all, if you are going to bring in the same amount of money, isn’t it better to have fewer clients to whom you can devote more of your attention?

(Almost) always charge a consultation fee, and make it applicable to a flat fee: Unless you are in the business of bringing in large plaintiff’s cases or other types of contingency fee matters, you are going to want to charge potential clients for your time doing initial consultations on nearly every other type of case.

Even a nominal amount such as $50 or $100 has a four-fold benefit:

First, a consultation fee sets the precedent that your time is valuable and should be respected.

Second, it is likely that you will give at least some advice to a potential client during a consultation, and even that advice can result in that client’s filing a complaint against you even if they do not hire you.

Third, paying a consultation fee makes the client more likely to choose you over other lawyers as they have already paid you a “first installment” on your fee.

Fourth, a consultation fee has a screening effect. If a client is unwilling to pay anything to come talk to you, either their matter isn’t that important or they are going to be a difficult client down the road. Let them be a difficult client for someone else who didn’t have the foresight to charge a consultation fee.

This is controversial, but I don’t bargain on my fees. Occasionally a client will try to negotiate a lower hourly rate or flat fee. When confronted with this, I firmly say that my fees are what they are and that I do not negotiate. My belief is that waffling on fees sends a bad message to the client that (a) you are a weak negotiator and can be pushed around, (b) you don’t value your own time, or (c) you lack confidence in your own abilities. If the client says, “Well, I spoke with lawyer X and they quoted me less,” my response is, “Then you should go hire lawyer X.” They almost never do, and if they do, they (as well as lawyer X) probably did you a favor in the long run.

Finally, never, ever guarantee a particular result. There are thousands of variables present in each and every case, and your potential client likely didn’t make you aware of all of them. This doesn’t necessarily mean they are being deceptive. They are not in a position to know the nuances of the law. Also, they may be subconsciously downplaying the weaknesses in their situation. Promising a particular result is asking for trouble from a disillusioned client to worse, a client who complains about you to the Alabama State Bar. I have said hundreds of times to clients, “There are no guarantees in this business, and if a lawyer makes you a guarantee, don’t walk but run out of that lawyer’s office.”

Marketing Your Practice to Potential Clients

Shortly after hanging your shingle, you will likely be inundated by sales pitches from companies wishing to help you to market your law practice.

The relatively simple (but expensive) days of the annual visit from the Yellow Pages representative to sign up for another year of advertising are long over. In today’s reality, hardly a day goes by without multiple unsolicited emails promising “website hosting!” “search engine optimization!” or “be on the first page of Google results!” arriving in our inboxes. First and most obviously, it’s likely not a good idea to do business with anyone whose own marketing plan consists of spamming you via email. Further, even legitimate legal marketing companies sometimes utilize high-pressure sales tactics that prey upon the insecurities you will likely feel in operating a solo practice.

Here are some questions to ask to help you make good marketing decisions:

(1) Is the company reputable, and do they have a track record of helping lawyers? Pretty much anyone can purchase a web domain, obtain a high-speed Internet connection, and begin marketing themselves to lawyers nationwide.

With a little bit of research, it’s not hard to determine whether a marketing service has a good track record. Ask for a list of references. Visit the websites of those references, and reach out to one or two who have similar practices. Find out whether they would recommend them. If a company refuses to provide a list of references, they are likely hiding something.

(2) Is a sales representative pressuring you to make a quick decision? Generally, when a sales person asks for a quick decision, they don’t want you to take the time to really think things over. Take your time in deciding. A decision to go with that company creates an obligation to the company. There’s nothing wrong with taking some time to think about this important decision and comparison shop. If a sales representative discourages this process, or says things like, “Well, I have three other lawyers in your town about to sign up with me,” view them with additional skepticism.

(3) What are the goals of the marketing plan, and how will these goals be quantified? One of my pet peeves is when a marketing sales person says that an advertising plan will pay for itself. An advertising campaign paying for itself is not what anyone needs. After all, if all the plan does is pay for itself, you will be working for the marketing company, not yourself. What you will actually need is for any marketing plan to pay for itself multiple times over. A reputable company will be able to set specific goals for their marketing plan, and it will be able to provide hard data over time in order to allow you to analyze whether those goals are being met.

(4) What kind of commitment is the marketing company requiring? Early in my career I made the mistake of signing an extended contract with a very well-known online legal marketing company. Without going into too much detail about how stupid I was, over the course of my contract I paid this company over $10,000 and in return only was able to attribute one new client to their marketing efforts. Every month I got more and more angry with the company and also with myself for falling for a sales pitch and signing such a lengthy contract. This led to my personal rule that I will not sign an extended contract. After all, if a marketing plan isn’t showing results after 90 days, when will it? If a marketing sales rep balks at a short-term trial contract, this shows a lack of confidence in their own product and should be a data point in making your marketing decision.

Setting Client Boundaries

As a young lawyer, I remember an older solo lawyer (now a judge) giving me his advice on how to handle clients who demand too much of a lawyer’s time: “When they pay your fee,” he told me with a sly grin, “they aren’t buying you, they’re just renting you.” Like much of the advice from more experienced lawyers, with the perspective of time this turned out to be extraordinarily valuable advice.

If you got into law, at least in part, because you want to help people (and I certainly hope this is the case), then you should have no issue with a client truly in need reaching out during an emergency situation. This suggestion is not about that rare case. There are and always will be certain clients who simply do not respect evenings, weekends, and other times when a lawyer is away from work, and who persistently abuse the good nature of their frazzled and overworked lawyer.

The initial consultation is your first chance to let a potential client know that you have time boundaries. I like to lay out my office hours and say that for non-emergency communications we expect the client to contact us during working hours. This is followed by a detailed explanation of what constitutes an emergency (“the police are knocking at my door with a warrant”) and what does not (“I forgot when my court date is”). If a client later tries to takes advantage of your time, they can be gently reminded of this conversation.

I do know lawyers who charge a premium for excessive non-emergency after-hours communications with clients, but since I have been making this statement early on in the representation process, it has become much less of a problem for me.

Of course, many solos are now basically running their office’s communications via cell phone and no longer use land lines. While this is a smart decision when limiting overhead (see above), when all of your clients have your cell phone number, it makes it a bit more difficult to avoid the occasional inconvenience and makes the setting of time boundaries even more important.

Take Time for Yourself

Being a lawyer is a great job and can make for a fantastically satisfying and rewarding career. It’s as easy as it is unwise to let your lawyer-self completely take over your personal life. Burnout and dissatisfaction with professional life are endemic in all types of law practice, solo or not. If you want to eventually become one of us old(er) lawyers giving advice to the next generations, it’s important to have a work-life balance. At the end of your career, no one will be giving out awards for who worked the most hours or who spent the most time in front of a glowing computer screen staring at documents. In order to have a healthy work life, it is important to have a good personal life, and vice versa.

I was recently in an extended trial against a lawyer with whom I am also friendly. I noticed that he was wearing himself down while trying the case. He rarely ate lunch, he was not exercising, and his stress level was off the charts. Around the fourth or fifth day of trial, I went to him as a friend and expressed my concern. I told him that his body didn’t quit needing nourishment just because he was in trial, and that he needed to take better care or he would not make it through the remaining weeks of trial. He did slow down a bit, and I like to think that I helped him in a little way to manage the stresses that all lawyers occasionally feel. My friend fell into a trap that many of us do, without even realizing it.

In the same way, whatever it is you like to do in your free time, take the time to do it. Anybody who has been practicing a significant length of time can probably name lawyers who did not take this advice and ended up with substance abuse issues (lawyers have some of the highest numbers of any profession), failing relationships, professional frustration, and general malaise. Many of these lawyers ended up leaving the practice of law or, far worse, driving themselves to premature deaths.

I find that the occasional weekend trip out of town helps me to refresh and recharge and, equally importantly, to keep the practice of law in perspective. Getting out and away from work is healthy for both body and mind.

Don’t downplay the importance of exercise as part of your daily routine. The mind is supported by the rest of the body and requires oxygen, vitamins, and sunshine to function properly. Deprive your body of these basics, and you will feel your mind start to go along with your general health. It goes without saying that this spells doom for the up and coming lawyer.

I sincerely hope that some of these thoughts are helpful if you are currently running a solo practice or if you are thinking about doing so. If, 30 years ago, someone had sat me down and told me that my legal career would have taken the path it did, I would have been incredulous. With the benefit of hindsight, the experiences I have had, the relationships I have made, and the satisfaction of knowing that what I have today I built, myself, from the ground up, have made my career as a solo lawyer a satisfying one. I wish the same for you.