For the past few decades, biglaw had a good thing going: a seemingly sustainable pyramid scheme. Large firms hired top talent and fed their appetites and egos with top salaries and assurances that these new associates constituted the cream of the legal caste system. Then, the firms turned around and billed the heck out of their young subordinates, racking up huge PPPs with a sense of arrogance and entitlement that blinded them to the possibility that this highly leveraged model could ever fail. Too bad biglaw never took the time to observe or learn from us savvy solos.
See, because we solos don’t have an army of associates against which to leverage our hours, we learn very quickly to leverage ourselves. What that means is rather than rely on costly, highly paid labor to amplify our billable time (not hours, time – which is my second point), we solos use technology and outsourcing to extract more value out out each hour of work we perform. With a virtual assistant (and I have an excellent one), I can hunker down and focus on client work that demands my unique expertise, while my assistant can keep my trade association (another revenue maker) up and running or ensure that I’m constantly submitting proposals for work from new clients (yes, I know RFPs aren’t ideal, but that’s how certain aspects of the energy biz work). As a result, even while I’m working on one project, I’m generating or at least stirring up the potential for revenue from others, so I’m super-charging the value of my time. Just as partners do with associates, only that comes at a much higher cost.
But we solos don’t just implement principles of leverage. Those who are most successful also diversify (which is also another way to leverage our time, as I discuss below). While I’m sure that biglaw will insisting that “hey, we diversify also. Look at all these practice areas we offer – employment law, probate, corporate securities, etc….,” that’s not what I mean by diversity. Instead, I’m referring to the concept of diversity as applied in the investment context — as a means to spread risk around. An investment portfolio that holds stock in 50 different high tech companies may seem diverse because of the number of different holdings – but most of us realize that it’s not, because the portfolio places all bets on one industry. By contrast, a portfolio with just 5 investments but all in different instruments of varying risk (i.e., stock, mutual funds, bonds, gold or real estate holdings) may seem more limited in terms of holdings, but is actually more diverse because of the different character of each investment.
Like the high tech stock portfolio, biglaw’s so-called diversity is illusory. What’s the point of offering 50 different practice areas if they’re all premised on the billable hour? When the economy tanks as it has now, clients reach a point where they can’t afford any of the firm’s offerings. In short, multiple practice areas don’t provide much of a hedge against a poor economy because when the economy hits rock bottom, all of those services are priced way out of most clients’ range.
By contrast, smart solos diversify – for real – both in fees charged and products and services offered. As to fees, most solos offer a variety, from billable hour to flat fees to phased fees (flat fees for different phases of a protracted process) to value based billing or reduced fees with success bonuses and of course, the good old contingency fee. Different fee structures mean that clients can always find some service in their price range, which insulates us in a downturn. Few solos I know (myself included) who offer these varied billing structures have even had to cut rates much, if at all even in the midst of this economic turmoil.
Fees, however comprise only one component of diversification. Solos are also diversifying the products they offer, many times through leveraging existing expertise. For example, many family law or estate lawyers provide full service to clients, but also offer unbundled service to clients who can’t afford or don’t want more. Unbundled services diversify a practice and guard it against economic downturn, but it’s also a form of leverage: because lawyers already have deep familiarity with certain practice areas, it doesn’t take much effort to squeeze more value out of that knowledge by providing it in an unbundled package. Tollbridge agreements which provide a small service on an ongoing basis are another way for lawyers to diversify their revenue stream.
Diversification can also take the form of different side businesses. In my own case, in addition to my law practice, I generate a small amount of revenue from this blog (which I hope to increase over the next few months) as well as from work with a trade association that I formed. Some lawyers offer for-fee seminars on their practice area, coach other lawyers, help them market law practices or build legal reseach and writing outsourcing services. Some even go so far as to develop software products or other technology that enable lawyers to run practices efficiently. Some solos ghostwrite for other companies or even operate businesses totally unrelated to law practice (such as party planning or leasing companies) that bring in money without detracting from the practice of law.
So to my fellow solos, I say, “leverage thyselves!” I’d say the same to biglaw, but I know that despite my inclusion as an ABA Top 100 Blawg (had to throw that in somewhere, but it’s the last you’ll hear of it), that there’s no one at biglaw listening to a solo like me.