As the reality of the COVID-19 economy sets in, many legal employers are cutting back or cancelling new-attorney hiring. With fierce competition for the remaining jobs, many new lawyers aren’t likely to find an attractive position. By necessity, many of these new graduates will consider opening their own practices right out of law school.
Having recently started my own practice, I’m sharing five tips for today’s recent law graduates who are considering hanging a shingle and going solo.
#1: Try to hold off for at least a year
The issue with starting a legal practice right out of law school is that you don’t actually know how to be a lawyer yet. To be successful, you must be able deliver the legal services you promise to your clients. Right out of law school, therefore, your number-one priority should be developing your legal skills.
Make no mistake, starting a practice is starting a business. The reality of a new practice is that you will spend a significant amount of your time on non-legal work. For example, when I said started my practice, for many months, I was doing legal work for only 20 to 25% of my time. At that point, I had been a lawyer for almost seven years, so it didn’t really impact the development of my legal skills.
My advice is that you should put off going solo and try find a paying legal job for at least one year. Even the worst job legal job out there will teach you an incredible amount in that first year. With that experience under your belt, you’ll be much better positioned to start your own practice.
#2: Utilize a barbell approach
A serious risk for solo practitioners is getting stuck in fee purgatory. Billing around $75 per hour (which is roughly the going rate for contract-attorney work) for about 1,500 hours (that’s essentially full time for lawyers outside of Biglaw) sounds like a pretty good living. After all, that over $110,000 per year.
The problem is, however, that you also have expenses, including malpractice premiums, technology costs, and legal research tools. From my experience, it’s very easy to exceed $1,000 per month on expenses. Then, add in self-employment taxes and you’re well below $100,000 for a job with no security and no benefits.
That’s no good. And since you’re working full-time to bill those 1,500 hours, there’s no way out. You can’t grow revenue without taking a short-term pay cut. Instead, you must be cognizant of this dynamic and actively work to avoid it.
Enter the barbell approach. Rather than try to fill a full-time schedule with low-rate work, you’re only going to allow yourself to bill about 80 per month at those rates. With your remaining time, you’re going to market your practice like your life depends on it (because it does). The goal will be to replace as much of the low-rate work with full-retail-rate legal work. For most geographic areas, that rate will be between $200 and $300 per hour, or higher in metropolitan areas.
To be successful, you must limit yourself to billing only about 80 hours per month. If you try to add the high-rate work to the 80 hours of low-rate work, there won’t be enough time to effectively market yourself. Which means the high-rate work will dry up and you’ll be back to square one.
#3: Pick a single marketing tactic
It’s very easy, particularly if you’re tech savvy, to get excited and overly ambitious about all the different ways to market your practice. I made this mistake when I started out. I tried to take on a half dozen different marketing tactics at once. As a result, I couldn’t develop the necessary expertise or devote the necessary time and resources to make any of them effective. Once I pared it back, my marketing became much more effective.
There are dozens and dozens of ways to market your practice. Here’s a secret: they all work. But they only work with consistent effort. So, pick one marketing tactic and master it.
#4: Consider limited-scope engagements
As a young attorney, I took on a case that was way outside of my comfort zone. The resulting experience was probably the most stressful of my career. Thankfully, I survived and the matter concluded without any prejudice to my client.
Entering an appearance as the attorney of record for a client brings with it massive responsibility. For an attorney fresh out of law school, it’s incredibly easy to make a mistake that really hurts your client or lands you in disciplinary trouble.
Fortunately, many states have approved of limited-scope engagements whereby attorneys provide legal services that fall short of the traditional full-fledged representation (e.g., form-preparation assistance, demand-letter drafting, ghostwriting, preparation for hearing, etc.).
This kind of work carries a lower malpractice risk because of its limited nature. And it also allows attorneys to creatively increase profitability. For example, you could charge $50 for a form-preparation seminar with four to six participants or use a document assembly program to speed up the drafting of common forms.
#5: Beware of involuntary pro bono
There is no shortage of clients out there who will gladly allow you to do you legal work on their behalf but aren’t really interested in paying for it. It’s tempting to take a case when someone appears willing to pay $300/hr. But it’s a major risk.
Getting stuck on a case without getting paid could be devastating for a new practice. The judge might not let you out, and the client could hold a possible disciplinary complaint over your head.
To avoid this, figure out who is willing to pay for your services by charging for a paid consultation and requiring a retainer deposit. It’s a major red flag if someone isn’t willing to pay $100 to meet with a lawyer for an hour to discuss their case or to pay a $5,000 deposit on what will likely end up as a five-figure legal bill. Obviously, there will be exceptions but, as a new attorney, you’re not positioned to assume this kind of risk.
I’d also caution you to be careful with contingency-fee cases. Think hard about why someone would come to a first-year attorney for assistance with their supposedly great case.
If you decide to start your practice right out law school, good luck!