(l-r) Alma Asay, Paul Saputo and Rosemarie Barnett (Courtesy photos)
Alma Asay was counting her nickels in 2014. She pulled the spare change out of her pockets and put it on the table.
“I wanted to see how much money I’d have to pay for food that week,” said Asay, a former litigation associate at Gibson, Dunn & Crutcher.
She’d left a successful practice in New York two years earlier where she was earning about $250,000 a year plus bonuses, she said, and she wasn’t yet making ends meet with her fledgling litigation software company.
“I would get a pizza and live off of that for three days,” said Asay, 34. “I started gathering all the change around my apartment versus going to the ATM since cash was running so low.”
Like so many Big Law associates, Asay dreamed of leaving large firm practice and becoming her own boss. And like some of them, she did, creating Allegory Law in 2012.
But it was financially difficult—very difficult—at times, said Asay and others like her who have taken the leap to start their own endeavors. They say the autonomy and job satisfaction of running their own shops are invaluable. But they warn, with 20/20 hindsight, that the sacrifices can be profound, at least for a while. They also say that lawyers who aim to leave Big Law should be brutally honest with themselves about what they’re willing to give up.
“You need to have that hard look,” said Asay, who graduated from New York University School of Law in 2005. “While you’re still working in a law firm, you have to get down to the nitty gritty of what things will cost.”
Asay’s decision to depart Big Law reflects the high rate of associate attrition nationwide. The attrition rate for 2015 was 20 percent, up by 2 percentage points from 2014, according to the NALP Foundation, which reports that 71 percent of all associates who left their jobs in 2015 had been working at their firms for five or fewer years. Law firms with more than 500 lawyers reported a range of 12 percent to 25 percent attrition. (The 2015 attrition rate is equal to total associate departures from Jan. 1, 2015, to Dec. 31, 2015, divided by total associates employed as of Jan. 1, 2015.)
Meanwhile, the average student loan debt is more than $125,000 for private law schools, according to the American Bar Association.
For lawyers who don’t have the financial support of a spouse or partner or family money to rely on, the transition out of Big Law can mean lean times for an extended period, said Fred Rooney, a Fulbright specialist who in 2007 launched the first legal incubator—programs that help lawyers develop their own practices—at City University of New York. Today, there are 62 legal incubators in the U.S. and four internationally.
“In most instances, whether it’s law or any other type of profession, you can assume that for the first couple of years you’ll operate at a loss,” Rooney said. “For a significant amount of time, [lawyers] will struggle as they create a new client base and learn not only how to bill but how to collect.”
Asay, who is single and without children, was about $170,000 in debt after law school, a figure that included undergraduate loans. She was still carrying about $100,000 of that when she left Gibson Dunn in 2012.
Now making about $100,000 a year, Asay said she wished she’d taken advantage of plentiful credit offers when she was earning Big Law money. She recalled tossing out credit card promotions that would clog her mailbox when she was an associate. Those offers stopped when she left.
“When I wanted credit, I couldn’t get it,” she said.
Asay, who racked up about $30,000 in credit card loans to help get her business going, doesn’t advocate amassing debt, but she does recommend securing credit lines while working in Big Law for those who expect to leave.
“It doesn’t mean you have to get the loan or pay interest on the money,” she said. “But you need to be able to show that you have credit.”
Paul Saputo, a 2012 graduate of Duke Law School, said he had about $120,000 in student loan debt and roughly $30,000 in savings when he left Vinson & Elkins’ Houston office in 2014. He was driving a Porsche as a young associate. Today, his work car is a Kia, and he runs Saputo Law Firm in Dallas, which focuses on criminal defense.
Saputo, 29, said he “loved” the people he worked with at Vinson & Elkins, but said he was miserable as a Big Law associate. His departure from the firm was the result of a mutual decision, he said.
“There was one moment when I realized that I had to make a life change,” he said. “I realized I would rather be making minimum wage being a waiter or doing construction work than doing what I was doing.” He was making $165,000 a year, plus bonuses.
Saputo said he had options to go to other big firms. It was 2014, and firms in Texas, amid an energy boom and a push by national firms into the market, were “hiring like crazy,” he said. He also had some in-house options.
“I just didn’t want to do it,” he said.
Having whittled his student loan debt to about $100,000 while at Vinson & Elkins, Saputo first tried his hand representing clients in the fashion industry when he left. He quickly learned that such a specific focus wasn’t sustainable.
As he tried to gain traction as a solo, he realized he’d taken for granted the support system provided by Vinson & Elkins. It hadn’t hit home how online legal research, copiers, work phone lines and internet access were so readily available for “free” at the firm.
“Every aspect of law practice management is taken care of for you,” Saputo said.
As a few criminal and civil cases trickled in through past acquaintances, he had to get creative about using freebies. He relied on free online legal research. Starbucks, with its free Wi-Fi, was a substitute office at times. For a while, he rented 400 square feet of office space that provided free internet access.
To slash personal expenses, he moved into a smaller apartment, learned to cook, started doing his own laundry and shining his own shoes. When things got extremely tight, he borrowed $1,200 from his parents.
“Basically, I did not spend money,” he said.
Now, he makes about $65,000 a year, which is enough to live comfortably in a two-bedroom apartment in Dallas, he said. His student loan payments run about $1,000 per month. He spends far less money eating out, he said, and much less on drinking after work.
Making full use of tax deductions has helped Saputo immensely, he said.
“The biggest advantage is the amount of stuff I get to write off,” he said. The Kia is a company car, Saputo said, adding, “Every fun event I do is related to business.”
The good news for lawyers wanting to leave Big Law is that they often underestimate how much they’ll be able to deduct when they start their own businesses, said Rooney, the incubator developer who is also an adjunct professor at Texas A&M University School of Law.
The bad news, he said, is that lawyers underestimate how long it will take before they start making money once they open their own shops, and they overestimate what they’ll be able to charge once they leave.
“You need to understand your real value in terms of your skill and the law,” Rooney said. “Think what your hourly rate would be. Ask yourself if you can legitimately charge $500 an hour.”
Lawyers with expertise in specialized areas such as patent law or tax law can charge more than general practitioners or criminal defense attorneys.
Rosemarie Barnett knew that the rate she was billing as an associate at Skadden, Arps, Slate, Meagher & Flom would be nowhere near what she could charge once she went solo. Barnett, 50, had been handling complex torts and insurance coverage matters at Skadden when she opened her own litigation practice in 2013. Her annual salary at Skadden was $285,000 plus bonuses when she decided to say goodbye. She had relatively little savings—about $30,000—because she’d spent much of it repairing her home on Long Island that was severely damaged by Hurricane Sandy, she said.
“I couldn’t hack it anymore,” said Barnett, referring to large-firm practice. “I couldn’t deal with it in terms of taking care of family and rebuilding my house.”
Barnett, who had worked at O’Melveny & Myers and Rivkin Radler before joining Skadden, said she rented a “horrible hole-in-the-wall” office and kept her expenses extremely low. A divorced mother of three, she said her family made some drastic cutbacks. Among them, she could no longer subsidize tuition payments for her college-age son, who had to “take out loans like everybody else,” Barnett said.
At one point, lenders were about to foreclose on her home and repossess her car. “I was down to my last $5,000,” she said. “It was a terrible time. It was very difficult.”
But two things happened that helped her turn the corner. First, a long-running personal injury case in which she was the plaintiff involving a botched sinus surgical procedure settled for an amount in the “low six-figures,” Barnett said. She used half of it to dig out of debt.
Second, the networking she’d been doing started to pay off. At big firms, Barnett said she was a “backroom lawyer,” a “bit of a recluse,” who did more of the mundane work and didn’t interact with clients or other lawyers.
Once she went solo, she started taking former colleagues to lunch, asking them for introductions to other attorneys. She talked up areas of the law they weren’t familiar with, including family law and immigration law. Barnett said she positioned herself as the attorney who would take on small matters that big firms would not touch.
“I really hustled,” she said. “I lost 30 pounds just from not sitting around in my office like I did before.”
Once she started bringing in $10,000 per month in “raw revenue,” Barnett said she could breathe a little easier.
Rooney, who recommends that lawyers contemplating departing from Big Law should be saving about 30 percent of their income, encourages them to also pay more on their loan debt than minimally required. He notes, however, that loan repayments can be adjusted to income, although those adjustments extend the life of the note.
In Asay’s case, the interest rate on her loans was high—about 7 percent—after she graduated from law school, so she paid off about one year’s worth of law school with savings. But when interest rates dropped after the recession to about 2 percent, she slowed down on paying off the debt.
David Wang paid off much of his debt while he was practicing as an associate at Jackson Lewis in the San Francisco Bay Area. He started at Jackson Lewis two years after he graduated from Santa Clara University School of Law in 2008. He left the firm in 2015 with about $30,000 in student loan debt to launch Wang Legal Group. About nine months before he struck out on his own, he started saving heavily, he said.
“I wanted a bit of a war chest to sustain me,” said Wang, who declined to identify his salary at Jackson Lewis or the amount he had in savings when he left.
Even with those savings, the first year was a challenge, said Wang, 39, who’s married and has a toddler.
“I can’t tell you how many times I’ve eaten leftovers for lunch,” he said. “I won’t tell you how many bean and cheese burritos I’ve eaten.”
But being strategic with the kinds of cases he’s taken—he handles mostly employment law matters for plaintiffs and defendants—on both contingency and on an hourly basis has diversified his income sources and helped avoid shortfalls, Wang said.
And the feeling of “freedom” of being his own boss, he said, has been worth the sacrifice.
“I really like being in the driver’s seat,” he said. “I have problems with authority, I think.”
Contact Leigh Jones at firstname.lastname@example.org. On Twitter: @LeighJones711.