'You Ask...I Answer' - How Does One Start a Solo Practice in the Midst of Seeming Economic Crisis?
(Not the cheeriest post but it needs to be said..and it's long.)
Question: I'm a 1L who's interested in going solo when I graduate or shortly after. Something that's been on my mind recently is how the approaching recession and/or limitations on credit will affect those of us who are starting from scratch.I came across this article in the L.A. Times (see below), which confirms for me that other people are at least thinking this might be a problem.
It seems reasonable to assume that, given the subprime mortgage mess, the credit market will tighten as lenders become more risk-adverse, whether or not we have an accompanying recession. I wonder if you can bring some experience to bear on how solo practitioners can deal with tight credit markets in terms of preparing to open a practice, building a business plan, and maybe even choosing a practice area. They've been tight before, so that information has to be out there.
Just throwing it out there. Thanks again for all your time and effort in providing so many people this valuable blog!
(Here is the L.A. Times Article in snippets but you should read the whole article....)
No one wants to utter the word "depression." But the truth of the matter is that the American economy may be entering a state of free fall. Every day brings more bad news about the sub-prime mortgage debacle, about home foreclosures, construction industry slowdowns, a credit drought for consumers and businesses, oil price shocks and the open-ended devaluation of the dollar. Where is it all leading?
What makes Wall Street's latest crisis so portentous, however, is the way it is interacting with, and infecting, healthier parts of the economy. When the dot-com bubble burst, many innocents were hurt, not just denizens of the Street. Still, its effect turned out to be limited. Now, because of the sub-prime mortgage meltdown, Main Street is under the gun.
It is not only a matter of mass foreclosures. It is not merely a question of collapsing home prices. It is not simply the shutting down of large portions of the construction industry (which is inspiring some of the doom-and-gloom prognostications). It is not just the born-again skittishness of financial institutions that have, all of a sudden, gotten religion, rediscovered the word "prudence" and won't lend to anybody. It is all of this, taken together, that points ominously to a general collapse of the credit structure that has shored up consumer capitalism for decades.
The equity built up during the long housing boom has been the main fallback position for ordinary people financing their big-ticket-item expenses, from college educations to consumer durables, from trading up in the housing market to vacationing abroad. Much of that equity has suddenly vanished, and more of it soon will. Also drying up fast are the lifelines of credit that allow all sorts of small and medium-size businesses to function and hire people. Whole communities, industries and regional economies are in jeopardy.
**********************All of that might be considered enough, but there's more. Oil, of course. Here the connection to Iraq is clear; but, arguably, the wild escalation of petroleum prices might have happened anyway. Certainly the energy price explosion exacerbates the general economic crisis, in part by raising the costs of production all across the economy and so abetting the forces of economic contraction. In the same way, each increase in the price of oil further contributes to what most now agree is a nearly insupportable level in the U.S. balance-of-payments deficit. That, in turn, is contributing to the steady withering away of the value of the dollar.
Finally, it is vital to recall that this tsunami of bad business is about to wash over an already very sick economy. While the old regime, the Reagan-Bush counterrevolution, has lived off the heady vapors of the FIRE sector, it has left in its wake a deindustrialized nation, full of super-exploited immigrants and millions of families whose earnings have suffered steady erosion. Two wage-earners, working longer hours, are now needed to (barely) sustain a standard of living once earned by one. And that doesn't count the melting away of health insurance, pensions and other forms of protection against the vicissitudes of the free market or natural calamities.
This perfect storm will be upon us just as the election season heats up.......
- Debt Collection
In any economy you will always have:
- Personal injury
However, in difficult economic times you will find an increase in criminal activity. Money is the number one reason for divorce so in an economy where money stresses will be great it's sad but fair to say there could be an increase in dissolutions. This could also give rise to an increase in mediation, arbitration, collaborative divorce, etc.
When you consider we live in a rapidly aging society this creates opportunity in Wills, Trusts and Estates, Elder Law and all practice areas catering to the over 55 crowd. An aging demographic and delays in starting families give rise to opportunities in adoption and surrogacy law.
As more people get laid off from jobs and become entrepreneurs and Home Office Warriors one can be an independent General Counsel to numerous small businesses doing everything from small business incorporations to helping them take their businesses global.
What about rising emmigration?
How does credit-tightening impact ones ability to open a law practice? Whether the economy is flourishing or not, you should be taking home at minimum $.70 of every dollar. That's right. How? Technology, low-cost highly effective marketing, home or virtual office and outsourced help as needed. My friend, Chuck Newton has brilliantly described the Third Wave of Lawyering in his signature piece. So, if done correctly, credit is not an issue because your expenses will be minimal.
Remember, I am a realistic optimist. Tell me the truth and I will find a way to make it work. Forewarned is forearmed...and profitable.
One other point I would like to make. People will advise you to 'follow' your passion. If your passion intersects with the demographic and economic realities in which you are trying to grow your practice, go for it. However, if you want to earn the right to follow your passion which may be different then the economic realities, start by practicing profitability and using good business sense. Use your profits as seed money to grow the practice areas you are passionate about. Going solo doesn't mean you don't pay dues. But you are paying dues to yourself and this can be very gratifying.