You Can Take It [Biglaw Practice] With You
Many large firm lawyers think that if they hang a shingle. they’ll have to throw away their biglaw specialities, like securities regulation or merger practice and trade it in for more general practice fare, like family law or criminal practice. But at least one solo attorney, Walter James, of the newly created Environmental Crimes Blog shows us that it doesn’t have to be this way, with a post about how some of the best environmental work (traditionally regarded as the domain of biglaw) is being handled by solos and small firms.
The benefits of going with a small firm? Lots of expertise for a lower price.
So if you’re toiling at a large firm, dreaming of the solo life, think of ways that you can take your $400/hour expertise (of which you may see 25 percent, if that much) and transplant it at your own law firm.
. . . And very often by transplanting their expertise to a smaller firm lawyers with big firm expertise & big firm clients, can offer lower fees for the same work, and pocket more profit at the end of the day.
If handled the right way, I’ve known many lawyers who were able to make the transition and still maintain a great relationship with their former big firms. The measure of “great” being that cases are still referred back & forth and occasionally they even cooperate as co-counsel or in an outside counsel capacity.
Point being, you don’t have to choose either, or. Sometimes you can have it all!
Respectfully,
RJON ROBINS
http://www.HowToMakeItRain.com
Helping Lawyers In Small Firms Make ALOT More Money!
Keeping it Special(ized)
Over the last 24 months
Serious question: Are you saying a $400/hour large-firm lawyer starting her own practice, after all that experience, would be *lucky* to get $100/hour? I was under the impression that even in rural markets a lawyer could get $150, perhaps $125 MINIMUM.
Please tell me that, using Foonberg’s fixed-fee pricing for most small to medium matters ($1500, $3000, perhaps $7000 engagements), I can hope to realize an actual $150 an hour or so, or better.
Thanks for any reply. I’d like to see a post on this topic. I always enjoy your blog and especially when you discuss “real world problems” such as pricing, law office management type stuff.
IN response to the last commentor, what I meant is that if you are billing $400 an hour at biglaw (which many midlevel associates do), a large chunk goes to overhead. Assume 2000 hour billing at $400 an hour – $800,000. I know that salaries have gone up, but i’m pretty sure that a 4-5 year associate doesn’t make $800k, more on the order of $200k, maybe $250k with bonuses.
If you start a practice, the 4-5 year can charge $300 an hour, and billing even 1000 hours will recover $300,000. Now obviously, a hunk of that goes to overhead but even if your overhead/marketing is $100k (which is enormous for most solos), you still have $200k – and that’s at 1000 hours. I realize that starting out, it may be hard to find 1000 hours of billable work a year, but you can work towards that.
Now I will admit that when you get to the partnership level, the analysis changes because at a large firm, part of your income is profit that you make off associates. In small practice, there’s a limit to what you can earn as a pure solo, unless you take on an associate. But many solos I know do eventually build to a point where they hire a well paid associate whom they can bill for 1800 hours and turn him/her into a profit center.
A few random facts & figures to help make the comparison. . .
Most large law firms manage their revenues by The Rule Of Three (not me who coined the term):
1/3 to whoever did the work
1/3 to overhead
1/3 to the partners to fight over like rabid dogs at year-end (some editorialization included)
In most small law firms – other than contingency firms and those enlightened enough to offer flat fees the split is more like 50/50 both for revenue & time.
So if you’re working 2,000 hours in a big firm billing $300/hour that probably translates into like $500,000 collected by the firm after your admin time, write-downs & write-offs. Unless you’re a partner who gets to fight over the partnership pot, you’re probably making around $160,000.
If you stick to the same billing rate ($300) then to make that same $160,000 on your own you’re going to have to work more than 2,000 hours because in addition to performing legal service, you also have to run the business & make it rain. Which is why so many solos want to learn how to discover the benefits of value-based billing & developing niches where they can be very efficient and profit from their paralegals too.
For example let’s say you pay your paralegal $50,000 and bill him/her out for 1,000 hours @ $100/hour, that’s an extra $30-50,000 in your pocket at the end of the year.
Bottom line is that making the switch from a big law firm isn’t just about making more money. It’s also about having a life, being in control of your own destiny, choice of clients & work you want to spend your time on and many other factors. And if you do it right, you CAN make alot more money too!
Respectfully,
RJON ROBINS
http://www.HowToMakeItRain.com
“Helping Lawyers In Small Firms Make ALOT More Money!”
“You Can Take It [Biglaw Practice] With You.”
Bravo. From well-respected D.C. lawyer and blogger Carolyn Elefant at My Shingle, it’s right here….
Right. Got it. I understand all that (overhead, admin. time that’s not billable, etc.). I thought you were referring to the “gross” hourly rate quoted to the client. I understand a lawyer is lucky to “profit” $100 an hour for all “hours worked” (hours worked including nonbillable time, running the office, CLE, keeping up with the books, etc.) ($200k a year would be a great year). You are not disagreeing that the legal services purchaser can be made to pay $150/hour even to a solo–and yes, the solo will be doing well to “profit” (pocket) 2/3 of that, and said solo will be lucky to have 1,000 to 1,200 collectible hours–making said solo’s gross (pre expense, pre tax) income $150,000 to perhaps $180,000.
YES I would say that any solo who is grossing less than $180,000 has room for realistic improvement.
Anon., I may be reading too much into your last comment, but I am a little concerned about the sentence you wrote “could be made to pay $150/hour.” Probably you were just writing casually & most likely I’m just reading too far into your choice of words, but let me just encourage you to try & get into the habit of thinking in terms of the amount of value you can deliver, not the amount that clients can be “made” to pay. The latter way of thinking usually leads to big a/r problems & doesn’t make for a fun law practice.
Clients can’t be “made” to pay anything. All we can do is implement good management techniques & learn how to use our trust accounts like the profit-protecting management tools they are designed to be. But at the end of the day, the client won’t pay your bill for $150/hour or $15/hour if you don’t demonstrate that they got value.
Like I said, I’m not trying to give you a hard time for what is probably just a different choice of words. Delivering value is a subject that’s important to me so I get kinda touchy.
BTW – I’m almost done with a program with the working title “A Simple System For Managing Your Trust Account That Won’t Make You Feel Like A Schmuck” that may help you address some of your concerns about how to collect $180K & avoid a/r problems. It’s not quite done yet but if a few (and I do mean a few) people are interested in a sneak-peek, I’ll let you download it for free as a beta test if you’ll agree to give me some constructive feedback. Just shoot me an e-mail.
RJON ROBINS
http://www.HowToMakeItRain.com
Helping Lawyers In Small Firms Make ALOT More Money!
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