Defending Those Who Defend Us All: Retired Marine JAG Officer Phillip Stackhouse Fights for Service Members and Contractors... Law Firm Profitability and Client Satisfaction: Using a Pricing Pro to Achieve Both: Law firm leaders understandably see lucrative client work as an important key to overall... Millennials in Big Law Resistance is Futile: Not since the Baby Boomers has a generation had such a profound impact on our culture,... Law Firm Hospitality: Picture this: A law school graduate walks into the law firm’s lobby. She’s a little... How to Create a Law Firm Content Marketing Strategy that Gets Results: A comprehensive strategy, which incorporates written content, guest-posting, visual... Are Your Practice Groups Working? 5 Reasons Why Law Firm Practice Management Structures Don’t Work: I recently got a call from a firm that wanted to talk about changing theirpractice... What Clients Love (and Hate) about Email Communication from Lawyers: Clients are increasingly asked to do more with less. Theyhave greater responsibilities,... 9 GROWTH STRATEGIES AND TACTICS from Industry Insiders: Prior to 2008, the legal market was experiencing a 4-6% annual growth in demand. Today,... Community News – February 2019: Wingert Grebing Brubaker & Juskie LLP is proud to announce Ian R. Friedman has been... Renee Galente Stackhouse, Stackhouse APC, San Diego: As Renee Stackhouse (nee Galente) enters her second decade of legal success in San Diego,...
Executive Presentations-468x60-1

Are You Suffering From Solo / Small Firm Imposter Syndrome?

Until recently, practicing law in the private realm pretty much came down to two pathways: joining a Big Law firm, or becoming a solo practitioner/starting a small boutique law firm. Most attorneys who opt for the solo practitioner route do so because they want more control over their career. They want to determine how much they work, keep more of the money they collect, and have greater say as to which clients they serve.

While the solo/small firm life sounds like a better alternative to Big Law, there’s a downside that’s not often talked about in attorney profiles and at networking events. It’s what I call “imposter syndrome”—many solo/small firm attorneys are not making very much money and are constantly juggling practicing law with running a firm.

A recent survey by the Thomson Reuters Solo and Small Law Firm group found some interesting statics from 301 attorneys practicing in firms of less than 30 attorneys. Among solos, about two-thirds have annual revenues less than $200,000, with 28% less than $100,000. Only three percent of solos have revenues of $600,000 to $1 million. In firms of 11 to 29 lawyers, about one-third have revenue of $1 million to $5 million, about one-third have revenue more than $5 million, and about one-third do not say.

Evaluating a “best case scenario,” each partner at an 11-person firm with revenue of $5,000,000 makes approximately $454,545. Not a bad number except when you realize that is revenue to the firm, and not earnings per partner. After subtracting overhead costs, which even for a very lean firm may account for 20% of revenue, each of those attorneys is paying $90,909 dollars in overhead for a net revenue of $363,636. Less efficient firms’ overheads range from a third to half of revenue meaning that if the firm is not efficiently run, each of those partners could be taking home only half of their revenue or $227,272.

Many small firm attorneys are taking home half of their revenue because their overhead on office rent, equipment, personnel, and other expenses is high. Smaller firms who want to behave like larger firms and have nice offices and all the bells and whistles must devote a higher percentage of revenue to overhead since there are fewer attorneys to share the costs. A friend of mine who founded a seven-person firm recently admitted that he starts to get angry if he isn’t taking home “at least 50 percent of his collectibles.” Many attorneys are working harder, not smarter, than they should.

While a solo may have better luck in controlling overhead costs, after all, it’s just them; and they often don’t factor in their “lost hours costs.” Solos spend the least amount of their daily time practicing law: only 55% of each day. Compare that to 69% of a day for lawyers at firms of 11 to 29 attorneys. Solos must spend more time managing the firm’s operations and participating in business development to keep their solo engine moving forward. That leaves them less time to bill and generate revenue.

One way attorneys can work smarter is by investing more toward technology to streamline business expenses and duties. Unfortunately, many solos and small firms do not have the money, or inclination, to invest in technology that can help them work smarter. The other answer is to reduce overhead costs. Getting rid of unnecessary expenses like office space, and practicing virtually, can greatly reduce overhead.

A business like Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media company, produces no shows. They operate in a virtual space. Such examples show that successful businesses of the 21st century no longer need to operate in a traditional manner.

In the case of law firms, many attorneys no longer need a regular office space where clients come to acquire their services. The Internet and cloud-based software makes it possible to conduct business virtually and provide more efficiency and choices. As a transactional attorney, 95% of the clients who engage me do not meet with me prior to hiring me. I do not meet in person with 85% of the clients I advise; we communicate by email, telephone, text or video. Frankly, my clients are often too busy and prefer not to waste time meeting.

The future of business is changing, and solo practitioners/ small firms would be served well by taking a virtual approach and harnessing the power of technology to make their lives easier, more productive, and much more profitable. The virtual law firm model pays its attorneys more because there is less overhead. This is especially appealing to women who seek the opportunity to earn as much—if not more than— the standard 89% of their male attorney counterpart’s salary. Minority and male attorneys who are seeking better income opportunities also benefit.

If you’ve chosen the solo practitioner or small firm route to practice law, ask yourself if you are working smarter, not harder. If you are not, stop being an imposter and start looking for a new business model. You’ve worked too hard to be trapped in imposter syndrome. The virtual road may be the solution to help you achieve freedom and flexibility while earning what you are truly worth.

Cynthia Morgan-Reed

Cynthia Morgan-Reed is the CEO of Vanst Law, LLP., a modern law firm that operates virtually and pays attorneys 70% of what they collect. She practices in land use, real estate and lobbying transactional work.

More Posts

Digg This
Reddit This
Stumble Now!
Buzz This
Vote on DZone
Share on Facebook
Bookmark this on Delicious
Kick It on
Shout it
Share on LinkedIn
Bookmark this on Technorati
Post on Twitter
Google Buzz (aka. Google Reader)    Send article as PDF   

Filed Under: Featured StoriesPersonal Development

About the Author: Cynthia Morgan-Reed is the CEO of Vanst Law, LLP., a modern law firm that operates virtually and pays attorneys 70% of what they collect. She practices in land use, real estate and lobbying transactional work.

RSSComments (0)

Trackback URL

Leave a Reply

  • Polls