The Economics of Solo/Small Firm Lawyering - A Survey
Reader of Build A Solo Practice, Attorney Emily Finger of Minnesota e-mailed me this very interesting information regarding the economics of solo/small firm lawyering. Over 300 solo/small firm lawyers participated in the 2007 Solo & Small Firm Economic Survey conducted by Minnesota Lawyers Mutual for the state of Minnesota. (Full 24 page survey here.)
You may say, "I'm in New York (or California or Kansas) so how does this relate to me? It's fair to respond, " it does" when you read some of the more interesting revelations:
Of the 340 attorneys who responded, they either worked full or part-time but exclusively in private practice. This can have a tremendous impact on the statistics. The majority of respondents, 51.4%, described themselves as a solo practitioner, with another 39.8% indicating they work in a firm of 2 - 5 attorneys. This means of all respondents, 91.2% are in firms of less than 5 attorneys. Whether this is indicative only of those who chose to respond or a statistical representation of the division of lawyers in private practice in Minnesota is unknown. But, regardless, the number is impressive.
Almost half of those who responded practice in what is traditionally known as general practice areas, family, estate planning, probate and real estate (total 42.6%).
With hourly billing between $150-199 per hour solo/small firms who responded are grossing up to $150,000 per year. 28.1% reported under $50,000; 30.3% reported $50,000 - $100,000; 23.3% reported they earned between $100,000 - $150,000. There is a caveat here, though. 17.8% of lawyers reported working less than 32 hours per week. (This is interesting because the majority are part-time by choice due to family considerations and/or other business interests.) It would be a reasonable assumption to believe those who considered themselves part time are the majority of the 28.1% earning under $50,000 although this is not necessarily true.
Among the solos who responded, more than half claim their overhead expense goes to paying for non-lawyer personel (28.5%), rent, phone and utilities (28.2%). Those who had gross sales between $100,000 and $199,000 said their total expenditures, excluding wages and salaries was $25,000. It makes a strong argument for outsourcing to either technology or per diem remote or virtual assistance in order to earn more money working smarter rather than harder.
I find this study enlightening because it shows gross sales with an hourly billing range. If you are in a state which commands higher hourly billing rates your gross sales will be higher. If you bill a significant number of hours per week your gross sales will be higher. If you are solo and high tech, commanding higher hourly rates and/or value billing and can reduce your non-lawyer wages, technology knowing no demographic or very little variation state-to-state, your income will be significantly higher without working harder, just smarter.
As with any study there is margin for error but it does cast an interesting light on the earnings of the solo/small firm lawyer, something you can also read about here. If you wish to see a copy of the summary in PDF, please send me an e-mail. ( I was unable to provide a link to the summary PDF on this post.)
Also, on Thursday we will be featuring Attoroney Emily Finger on "Going Solo; Confessions and Inspirations."