X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
For the past three years, Hyattsville, Md., solo attorney Karren Pope-Onwukwe has kept the small notebook in which she drafted the business plan for her practice. On the page before it, she quoted German writer Johann von Goethe: “Boldness has genius, power, and magic in it.” By most standards, it was a bold move for the divorced mother to start her own practice. She was just two years out of law school with loans to pay off and without a large book of clients. She was not leaving a high-paying firm and didn’t have a spouse supporting her financially. But 50-year-old Pope-Onwukwe wanted to start her own elder law practice so she could help people and have more time to spend with her 14-year-old son. And in spite of the financial risk and obstacles she faced, Pope-Onwukwe, like many other D.C.-area attorneys, did it without going broke, something those who advise these would-be business owners say is the norm rather than the exception. Pope-Onwukwe used her own money, credit cards and the generosity of friends and family to start her business, but ultimately hard work, she says, is how she paid for it. “You finance it through blood, sweat and tears,” she says. “The biggest investment is your time and effort.” But the need for money can’t be ignored. Based on informal surveys of solo and small-firm practitioners, Reid Trautz, director of the D.C. Bar Lawyer Practice Assistance Program, has come up with some average first-year costs for starting a practice. On the low end, a solo will spend at least $20,000 in the first year when working out of a home office. A small firm of two partners will spend about $100,000 in the first year. EXPLORING THE OPTIONS Lawyers starting their own solo or small practices have different financing options. Some spend money saved from a big-firm salary, and others max out credit cards and lines of credit. Many cut corners to make the expenses — for office space, computers, telephones, stationery and malpractice insurance, among other things — less painful. Pope-Onwukwe left the office of the general counsel of the Washington Suburban Sanitary Commission to start her own practice two years after her graduation from Georgetown University Law Center, but when she first drafted her business plan in January of 2000, she couldn’t afford to leave a paying job with benefits. Instead, she took an unpaid leave of absence (so she could keep her health insurance) and two part-time jobs. Pope-Onwukwe built her elder law practice while working her two, more flexible jobs, one drafting documents for a fellow Prince George’s County attorney and another teaching introductory law courses at the University of Maryland University College. By August 2000, she was confident her practice would survive and officially hung out her shingle. To make it to this point, Pope-Onwukwe relied on a close circle of family and friends. Her mother got her a credit card, her brother bought her a computer, and a friend supplied much-needed office supplies. Her first clients were friends and family. When she missed a payment on her house, even the mortgage company was sympathetic, she says. “When you tell people what you’re doing, they support you,” she says. Pope-Onwukwe had to weigh expenses against each other to save as much money as possible. She decided to save on perhaps the biggest expense facing a startup practice, office space, by setting up a home office. Trautz says choosing a financial plan of action depends largely on the size of the firm. Trautz tells solo lawyers with no client base to minimize expenses and work at home, “building your client base without spending too much money.” Small firms, however, should have an office presence. “You have to spend a little money to make a little money,” he says. Solo lawyer Carolyn Elefant recommends that starting solos and small firms control costs as much as possible. Elefant, who spent about $2,000 to open her solo regulatory law practice in 1993, says fancy office space and expensive stationery aren’t worth the money. Rather than buy all new equipment, Elefant advises, solo and small-practice newcomers should use the computers, telephones and other office supplies they already have. Stationery can be designed on a personal computer and printed on a laser printer to save money. “Most of the people already have what they need to start their practices bare-bones,” she says. Elefant, who runs a Web site devoted to solo practitioners, strongly recommends that startups operate from a home or virtual office. “Don’t invest in or commit to long-term leases,” she says. Instead, she tells solos and small firms that need an office presence to look into office-front arrangements, which will provide, on a monthly basis, office and conference space, an answering service and a mailing address. Although Elefant believes a full-time office usually isn’t worth the money, others say that having an office presence is essential to building a professional practice. Mary Ellen Flynn, chair of the Maryland State Bar Association’s Solo and Small Firm Section, says one of the most important investments is office space. Flynn and Elliott Andalman left partnerships at a Takoma Park, Md., firm in 1998 to start their own practice. They invested in office space in downtown Silver Spring, Md., technology and furniture so their practice would look professional in spite of its age. “You want to do it right,” Flynn says. Instead of cutting costs on real estate, Flynn suggests avoiding unnecessary luxuries such as expensive furniture and advertising contracts. She says those new to the business of law often take out expensive ads that won’t get them as many new clients as old-fashioned word of mouth. “The best kind of marketing is the true work of meeting people,” Flynn says. “My best source of referrals is from other lawyers.” But in order to lease office space, lawyers have to fork out the money to cover expensive D.C. metropolitan area rent, which can run from $1,000 to more than $3,000 per month, without revenue from clients coming in right away to offset the cost. Trautz of the D.C. Bar says a group of partners trying to start a small firm should have enough money to cover their expenses by pooling their personal savings — the approach taken by Flynn and Andalman. But a solo, especially one with a family to support and law school loans to pay back, may have to take out a line of credit. Traditional loans, however, are more difficult to get because banks see a small, startup law firm as a risk, he says. BANKING BUSINESS While large firms borrow from banks regularly, Jeff Grossman, senior credit officer for Citigroup’s Law Firm Group, says his bank usually doesn’t lend to a startup with fewer than 10 attorneys without an established clientele. “We’re not actively pursuing startups,” he says. “Most of the very small ones we look at tend to have very successful attorneys.” Solos and small firms usually borrow from smaller, regional banks and rely on lines of credit and their own savings, Grossman says. Trautz says a healthy savings account is a prerequisite to starting a practice and is indispensable in tiding it over until revenue from clients comes in, which can take up to six months. Ranji Garrett worked for about a year at a large D.C. firm, saving half of his hefty salary before he started his Rockville, Md., solo practice. The unmarried 31-year-old civil litigation attorney tried not to spend much money when he started his practice in May 2002. He bought law books, took continuing legal education courses, and shared office space in Rockville. Garrett was able to live off his savings until revenue from clients started coming in. A year later, he has about 30 active files and a healthy practice. “I haven’t had any problems paying the rent,” Garrett says. But to pay the bills, Garrett and other solos and small-firm lawyers have to make sure their clients pay them. Flynn, who collects on unpaid bills for other law firms, tells her clients to send out bills monthly and invest in legal billing software, which costs about $300. “Don’t be defensive about your bills,” she says. “You work hard and earn that money.” Flynn says that taking extra time to keep detailed records of how time is spent is worth taking fewer clients. Keeping track of time will also help the inexperienced charge correct rates. Those who advise lawyers starting their own practices agree it’s very possible to cover the initial expenses to grow a financially successful practice. Trautz says most big-firm lawyers who ask his advice are surprised to find out how profitable a small or solo practice can be once it’s up and running. A high percentage of what these lawyers bill goes to the firm, and they may be able to make more money on their own, he says. Flynn says a little talent and a lot of hard work can go a long way. “If you set yourself up right and work hard, I think anyone can be a success,” she says. Pope-Onwukwe, who says she started “on a wing and a prayer,” now has more than 100 paying clients. “I’m probably not the wealthiest person in the world,” she says. But “it’s comfortable. I enjoy what I do.”

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

For questions call 1-877-256-2472 or contact us at [email protected]

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.