How Much Do Lawyers Make?

The ABA Journal teamed up with  William D. Henderson of the Center on the Global Legal Profession at Indiana University's Maurer School of Law, to study and report on the wages for lawyers throughout the United States. I think this is an admirable response to a lot of uproar regarding "the lying law schools," but I believe, as some of the comments suggest that this still isn't reporting the true nature of the legal profession. The biggest flaw of the study: "Equity partners and solo practitioners are not included in the survey." Oops.

I think this flaw over-exaggerates the numbers. Sure, I guess if my goal is BigLaw, government, or in-house, these figures should bring some comfort. However, if you're a solo practitioner or equity partner (why isn't BigLaw complaining?) you're screwed. The fact is, there's still a larger portion of the legal profession that is unrepresented in the study. As one commenter states, "The ABA bothers to show this because they want the media to pick it up - they want a counter to all the bad press law schools have been getting, and this gets the fuzzy idea, 'Oh hey, lawyers DO make a lot of money' out there in the world again. It’s an attempt to keep the bubble growing and obfuscate the truth - that law school is a bad investment for almost all students who take out taxpayer backed loans to attend."

Some of the surprising information for me gleaned from the study:  Reno, NV and El Paso, TX, have "unusually" high salaries for relatively small metro markets. Perhaps, if you desire to become an attorney, you should relocate to Huntsville, AL, where lawyers earn $125,000, and the market is small 440 (is that a typo?). Also, isn't the "hot spot" graphic nice? I guess there won't be a rush of lawyer to Montana, North Dakota, or Northern Maine.

From Law Student to Lawyer to Partner

I'm all in favor of starting your own law firm right out of school. I did, and I think I've been fairly successful. I think with enough diligence, you can too.

Now, Law.com, has this post about starting your own firm right out of school. I think this is one of the more well-written articles, and gives some genuinely brilliant advice.

SPU Stuff

I'm a student at Solo Practice University. I think it's well worth the tuition, especially if you're a solo or small firm practitioner.

In recent weeks, SPU took some harsh criticism from some (unmentioned) bloggers. Their criticism about the idea is that the information really is a waste of money because the solo is dying. That's not true, and unfortunately for all law graduates, the harsh reality is that SPU gives you the practical skills, if not some small insights, into uncharted territories. I'm learning Social Security from Johnathan Ginsberg, and bankruptcy from Jay Fleischman. These are just two of the many classes you can take to improve your practice.

One of the other courses I'm in is taught by James Chartrand. The course deals with marketing and other information. James' most recent post gives some great pointers into designing a better website homepage. The keys: Be Brief; Be Even Briefer; Be Commanding.

Of course, these aren't new principles or even groundbreaking ideas, they're simple. With the additional information James' post provides though, you're able to evaluate your website and tweak it. It's these kinds of simple principles in every class that set SPU apart, and make it worth your tuition.

If you're interested in joining, let me know.

Case Loads

A law student, and prospective solo practitioner, recently asked me a great question about handling cases. The question was, "how many cases do you think you can handle at any one time as a solo with no staff before you can't handle it?"

I'd never really considered the question, because I've never had that problem. Like any good attorney, my answer was as vague as possible. I simply said that "it depends on various factor, but probably no more than 100."

We continued discussing the various factors, problems, and scenarios. I've though more about the question and some of the intricacies, and continue to believe that 100 is the magic number.

Here's my thoughts, and I'd like yours:

First, many cases are not so intense as to require a significant amount of time. Sure, you'll have heavy periods, but like anything, you're going to have a significant number of slow periods. If you're good at time management, and you improve your organizational skills, you'll likely be able to handle this many cases alone.

Second, if you're focusing on one or two practice areas, chances are, you'll see a lot of the same issues. Therefore, it's easy to convert/modify pleadings, letters, etc., from another case to your current one. This will save some time and other hassles.

There are some drawbacks too with handling everything yourself.

As chief and worker, you're responsible for everything that happens in the law office. You're responsible for the letters that go out, and answering the telephone, sometimes at the same time. Every task you have to perform takes time, and takes away from the tasks on other cases. You must be able to do everything quickly and efficiently.

Having a large number of cases also results in a large amount of excess work. In order to settle each claim, you have to work the file. This extra work can add extra stress and longer work days. I've spent several late nights/early mornings worrying about the cases and the tasks that need to get done.

It's really easy to think that you can handle everything alone without support and staff. The truth is, most of the things you can do alone. However, like any business, if you want to grow and serve your clients best, you need to add support staff.

You can add staff in a number of ways. For instance, you can hire an intern (check IRS restrictions/labor laws on this) to help draft documents and work with you. This is a great opportunity for the intern, and can add some extra value to your business.

You may also hire a "virtual assistant" who can draft routine correspondence and help reduce or eliminate some of the mundane tasks that take extra time. Remember, every minute you can save yourself from having to draft a letter to someone on the case, is a minute you can devote to other paying tasks.

There are a variety of things you can do without incurring a large amount of overhead or extra monthly costs. The important this is to be creative.

The Basics of Getting Paid - Part 3; Open Accounts

Note: I started this post, but never published it to finish off the series.

The reality of any business is that you're going to have work to get paid, especially if you're billing by the hour. This is especially true if you're practicing the traditional method of billing by the hour (there's another reason flat fee pricing is so great).

The key to avoiding delinquent accounts is to bill effectively. Like your telephone sales pitch, your billing statements should succinctly and eloquently describe the services. Nobody likes to pay for a 10 minute phone call, unless the phone call had value. Clients will resent you, and will consciously avoid paying bills they feel are valueless.

One the lessons I learned early is that "drafted motion for summary judgment" doesn't nearly have the panache as, "Researched case law regarding [legal issue], using [list resources consulted]. Discovered these cases: [list cases]. Drafted argument section of motion for summary judgment based on [case name or legal theory]."

Although clients don't understand any of the legal jargon, they do understand that you did a significant amount of work. Remember, the easier you can make it on them, and the more you can justify your costs, the more likely you'll be to get paid.

The Basics of Getting Paid - Part 2; But Nobody's Hiring Me

Face it right now, especially if you're a newbie/soon to be newbie, you're not going to get Michael Jackson (I know, he's dead), Mike Tyson, or the latest A-list Hollywood star divorce. You're not even going to get the B, C, or F-list divorces. Unless you know the person, they're going to go with [Insert Local Family, Criminal, or etc. Law Super-Attorney's Name Here]. The people you're going to serve are just like you: middle-class Americans, trying to make a decent living, and are now having problems.

Sometimes though, you'll find that even these decent middle-class Americans aren't hiring you, despite the fact you've quote 100 fees today. You might get discouraged, or you might start to think your fees are too high, and consider changing your rates. Unless you're charging $250 per hour, don't think about it! More especially, don't change your fees or cave to your doubts.

The worst thing you can do is start to believe you've mispriced your rates. The truth is, you're just like the other 90% of attorneys in this world who aren't getting the clients. Remember, clients have a variety of reasons for not hiring, and most likely, price isn't one of them. Good pricing makes the potential client truly evaluate their situation (check out my post here for a frank firm to client discussion about fees).

When you're not getting hired, it's time to reevaluate your sales pitch. What are you doing/saying? Quick, you have 60 seconds to sell your divorce/family law/bankruptcy/etc. services, what will you the caller? Have you even thought about your telephone pitch?

There's a great blog post by Jay Fleischman, titled, What if the Client Set the Legal Fee? The post is a candid look at fees and services. Mr. Fleischman, makes the point that "[v]alue must be built from the very first moment you begin to market your bankruptcy practice (or, for that matter, any legal niche). You need to stand in the client’s shoes and determine what it’s worth to them to get out of debt, and exactly what you can do to build up that value to a point where it matches or (ideally) exceeds the price tag associated with your services." I wholeheartedly agree.

I looked at the reasoning behind my "failures" and found that I didn't think I was giving the client enough information about what I would be doing to help them. When speaking with potential bankruptcy clients, I found I simply told them, "I'll help you file bankruptcy under chapter 7." No wonder I wasn't turning phone calls into clients. What exactly does that mean? And why does that justify my fees? Heck, anyone can file pro se and save themselves hundreds.

So, after this brief evaluation, I revised my pitch:

I'll help you file chapter 7 bankruptcy. This will involve meeting with you in person and talking on the phone at least 3 time to discuss your paperwork and financial information. I'll also be filing out the bankruptcy petition and compiling the financial data you've given me. This usually takes 1 day, or about 8 hours. When the petition is filed, we'll continue to talk, and I'll probably call you 2 or 3 more times to discuss simple issues that arise. We'll meet for the 341 meeting, which is a simple hearing before the bankruptcy discharge. All these services will be part of your [Insert fee amount here] fee. Of course, you're free to call or email at anytime with questions. When would you like to meet?

After discussing these things, I'm able to answer any questions and resolve any concerns with the client, before recommitting to the engagement meeting. The script, or something similar, takes about 60 seconds to recite, and has a powerful effect on people's actions.

I believe when you've carefully explained what value they're getting, this helps resolve a client's anxiety about paying your fee, and trusting your service.

Unlike a tangible product, judging the quality and value of services is difficult. Clients will not hire you for the task if they don't feel you can accomplish the job and get them the "justice" they deserve.

The Basics of Getting Paid - Part 1; How Much Should I Charge?

One of the biggest problems with being on your own is the ability to generate revenue. This is difficult regardless of your career field, but more especially in costly service fields, like law. With the challenge of new generating revenue, also comes the task of collecting the money before or after services are completed. I'm going to make a series (is 2 considered a series?) of blog posts dealing with the dirty issue of making money, because, face it, this business (or any) is about making money.

This first post will deal with some of the challenges you'll face in selling your services, and setting prices for your services. The second post will deal with collection matters, including the issue of whether you sue your client. If you have questions along the way, or would like me to talk specifics, please let me know.

How much should I charge?

The question that drives fear into every new solo's heart is, "how much do you charge?" This is especially true for recent graduates who hang their shingle. I remember when my first client confronted me with the question, and how my heart sank when I had to respond.

Sure, I'd talked to others about their fees and hourly rate, but without much else, I knew little about the market for new attorneys. Some friends I knew who worked at big firms boasted about being billed out at $250 per hour, that seemed extravagant to me though, especially when I knew most of these associates had little or no practical legal skills.

As I talked, many people offered the practical advice that I should bill $100 per hour, based on the number of decades in practice. For instance, since I had practiced law less than 1 decade, my hourly rate should be $100.

Finally, I settled on a slightly higher hourly rate that I felt confident could benefit me in two ways. First, the slightly higher rate would discourage "bargain seekers" from hiring me. In my experience, client seeking bargains can never (yes, I said never) appreciate the value of your services. Moreover, the bargain seeker will consistently challenge your decisions/suggestions, and most likely will make unreasonable demands to resolve the case. You will soon regret the lower hourly rate. You will find that a client who accepts your higher rate will become your ideal client. Believe this fact too, there's plenty of other attorneys who will take these clients, don't despair.

Second, a higher rate would allow me to adjust, my fees for the "pro bono" client, while still making enough to keep the doors open. Trust me when I tell you that you'll have plenty of opportunities to give away your services. Whether you offer discounts to friends/family/good clients, through genuine pro bono services, or to your "charity" clients (mine are kids), the opportunity to help someone will be there. What's more, these clients will appreciate your "discounts" much more than the others will.

What about flat fees?

I love flat-fees (or one fee for all services). They're the heart of my practice, and are especially valuable to clients.

The problem with the flat-fee billing method is that it's extremely difficult to "value price" your services, and account for specific, and often time consuming, nuances in cases. I found early on that it's a good idea to "bill" for everything you're doing on the flat fee case (I use QuickBooks Pro to tally time, mileage, and case expenses). This helps to give you a general idea of how "difficult" a case is, and provides a good reference point for future cases.

For instance, for a "simple" or uncontested divorce I charge $1,000. I arrived at the amount because I learned early that $500 and & $750 did not adequately compensate me for the amount of time I spent dealing with issues in the case. When I finished my first "simple" divorce (which I took for $500), I ended up making $5.75 per hour. Not even minimum wage!!

Granted, because this was my first divorce case, I cost myself more time by not knowing particular shortcuts. Moreover, because I "bill" for everything (time, postage, mileage, telephone calls, hourly casework), I increased my rates.

The important thing I learned though was that I needed to have more money to make the cases worth the time, effort and costs. Remember, you're in a business, despite the idealistic mantra your professors gave you. If you're not making money, you're not going to survive.

You ask, I answer

I don't consider myself an expert by any means. However, occasionally I get a variety of emails regarding my decision to go solo. Most of these I'll answer with a simple statement that, "I'm just some guy who got a lucky break, and am now doing what I love."

 

Most of the people asking questions are 3rd year law students who have some considerations to make. One of the most frequent concerns that questioners have is regarding financing. The question invariably goes, "how do you get money?" This is a legitimate concern, and if I knew the answer, I'd hopefully be selling my secrets somewhere else.

While I don't think there's a "magic pill" to calm the financial worries, I think there's a couple different things to ease your worries:

1. Don't be afraid to work from home.  While I'm not a fan of this option for new lawyers, I think it's a viable necessity if you're going to save money. It's harder to make a profit if you're always running a deficit each month.
2. Minimize your overhead. You're going to be tempted to buy flashing products, services, etc., that you think are cool. The problem with a lot of these products is that you're not getting any value without having a lot of expenses. My "minimal" materials are: laptop, cell phone, laser printer/scanner/fax, word processing software, practice management software and Adobe Acrobat Professional. There's others who will argue for more or less (online fax service), but you can get by with these items. Also, using free services like Google Docs can limit your overall expenses. Finally, get a Google Voice number to give you flexibility.
3. Get out and Meet People. There's nothing better than hearing, "I got your number from . . ." The more people you're working with and meeting, the more you're going to improve your financial situation.
   
4. Work Hard. It's your financial future. If you're screwing around and procrastinating, you're not going to survive. PERIOD. Solo practice requires that you make work when you're working. I've seen a couple of attorneys fail because they weren't willing to work.
5. Hard Work Breeds Success. You should absolutely worry less knowing you're in charge. You are going to make yourself successful if you work hard and have a trustworthy disposition.
6. Don't Be Afraid to Seek a Loan. Sometimes the money just doesn't come fast enough. Use some downtime to develop a well-planned business proposal and seek some outside funds. I've already felt this was a last option because of the risk. If you're not making money now, it's hard to add one more expense. However, occasionally by adding some cash inflow you can develop leads and other sources. Don't go overboard!! I'd strongly recommend that you don't get a loan greater than $10,000.
7. Make Yourself a "Specialist" in a Cash-heavy Practice-area. When I entered the business, I quickly became an "expert" in child custody and other family law areas. These practices often paid cash (something that always needed), and I always got an up-front payment. My thought was that I could afford to throw time away, but if I couldn't keep the doors open, the amount of good I was doing wasn't worth squat. Luckily, I priced well, and was able to get the jobs done without much lost time. One other good thing was that I could get an estimate of the value of my services. If I could determine or estimate a time frame, that would make future pricing easier and more profitable.
   

 I love working for myself. Each day I'm excited to go into the office an accomplish everything. I'm still concerned daily about the financial situation, but it's a great motivating factor to work hard and give excellent service.

 

If you're looking at making the plunge, make some careful examinations, then don't ever look back (almost).

Six Months of Productivity

Next week there's going to be a new flock of Oklahoma attorneys. In celebration of that event, I've decided to show you my balance sheet beginning from October 1, 2008 to today. You'll see I haven't made great money, but I've been able to pay the mortgage, a car payment, utilities, and feed my 2 kids. If you'd like some advice on how I've done it, check out this post.

ABSOLUTE LEGAL SERVICES, LLC - PROFIT & LOSS SHEET (Oct 1, 2008 - April 8, 2009)

Ordinary Income/Expense
Income
Hourly Fees 2,986.28
Legal Fee Income 17,898.87
Uncategorized Income 196.01

Total Income 21,063.16

Cost of Goods Sold
Subcontracted Legal Services 107.66
Total COGS 107.66

Gross Profit 20,955.50

Expense
Advertising -19.87
Automobile Expense 133.75
Bank Fees 254.40
Business License & Permits 100.00
Computer & Internet Expense 717.00
CLE 40.00
Dues & Subscriptions 50.00
Insurance
Professional Liability 275.95
Meals & Entertainment 146.20
Office Supplies 399.42
Postage & Delivery 119.28
Printing & Reproduction 15.00
Reconciliation Discrepancies 1,786.41 *Note: be more detailed on CC tracking
Rent 0.00 *Note: I save a lot b/c of my arrangement
Repairs & Maintenance 32.17
Research Services 240.00
Telephone Expenses 582.67
Travel Expense -29.70
Utilities 247.40

Total Expense 5,090.08

Net Ordinary Income 15,865.42

Other Income/Expense 84.95

Net Other Income -84.95

Net Income 15,780.47

Here's a few notes on the list. It's a little skewed because I just had (April 6) a significant contingent settlement that netted a large portion of the amount. I've noticed that a few of the numbers (ie "utilities") were misplaced and now are in their correct category (telephone). Also, you'll note that there's no student loan payments, poverty has it's advantages (said with jest and a smile). Those have to be considered in your solo decision.

For 6 months, I'm particularly satisfied. If I closed the practice today, I'd average about $2,600 as a monthly paycheck. Right now, that's only $31,000 per year. Sure, I could make a lot more working for someone else (maybe), but I'd have to sacrifice some things to do it.

The greatest thing I've seen is that you can do it, but you have to be smart. If you let yourself get carried away (I have on some things), you're going to burn.