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October 20, 2008

Is Now The Perfect Time To Start Your Solo Practice?

The short answer:  Yes. I'm totally aware of the inner hysteria most people are feeling about our economy, needing to take a Valium before they open their 401k statement this month.  Watching your property taxes increase while your home value drops like an elevator with broken cables.  You've either been laid off or can't get your first job. I get it. Trust me, I do.

History tells us when economic times are their shakiest, it is the perfect climate to start a new business. (No, I'm not insane :-)  The following is information collected from disparate sources:

Did you know that 16 of the 30 companies which make up the Dow Jones Industrial Average were started during a recession or depression?  These little companies include Disney, McDonalds, Proctor and Gamble, Alcoa, General Electric and Johnson & Johnson.

Fast forward to 1973-75 when the U.S. was captained by an unpopular president, embroiled in the infamous Watergate scandal AND at the hind end of the Vietnam War, a highly controversial and expensive war which polarized the country.  Within two years gasoline prices had increased by more than 50%. Credit was very tight.  And, you guessed it, consumer confidence was at historic lows. (Does this sound painfully familiar?)

And in these terrible times a few entrepreneurs you may know figured 'what the heck.' Those tumultuous early 1970's saw the beginnings of Famous Amos Cookies, Supercuts, Chili's, Cablevision, Oakley and the start of a fairly well-know company (their products you might be using as you read this) called, that's right, Microsoft. (wonder where Bill Gates is expanding to right now?)

Other notable businesses launched during recessionary times: Costco, Applebees, J. Crew, Whole Foods and Intuit.

You're asking yourself, 'how is this possible?' Don't most businesses fail? With times so tough starting a new business seems the height of insanity.  Not really. It is during these times that entrepreneurs (and very smart business people) realize they have nothing to lose and everything to gain.  The world is crashing down around them anyway.  The very things which might have prevented those from starting a business before are no longer present - the opportunity cost is low. 

Yes, it's a little concept called 'opportunity costs.'  When times are good and you already have a safe job and many law firms are hiring, turning down a paying job with a paycheck means giving up the 'opportunity' of a good job and there is a quantifiable cost associated with turning down that job such as salary, health insurance, paid vacation and sick time, matching 401k.  You are giving up this known and quantifiable opportunity offered by another for the unknown adventure called solo practice, something for which you are totally responsible.

Now, a few select lawyers will always have these 'job' opportunities and if the jobs offered align with their professional goals they should grab it.  However, what if there are no good jobs being offered to you?  What if you are just finishing law school, passed the bar and no one is hiring?  You can stay home and watch reruns of 'The Practice' and 'Damages' or you can open your own solo practice.  There is little opportunity cost to do the latter as the alternative is sulking, fretting and eating lots of junk food or competing for a minimum wage position only to be told you are over educated for the cashier's position.

When bad times hit, the world as we know it changes. Economies experience severe upheaval and disruption.  The earth moves as it deconstructs and rapid change becomes the norm. For most, paralysis sets in. But those who shake off the paralysis, those who see opportunities where others only see misery, are the entrepreneurs. They search the rubble of 'what was' and look for opportunities to create 'what will be.'

What's happening in our legal world (and the rest of the world, too):

Competitors weaken. We are all reading about Big Law layoffs, partners jumping ship, small firms who became complacent and forgot the business components of running a law firm...well, they are freaking out.  Many of those lawyers you viewed as competition with tremendous overhead, fancy offices, excess staff are facing challenging times.  Maybe they are deciding its time to close up shop or downsize and outsource work.

Clients are seeking alternative and cheaper ways of getting legal work doneWhen the status quo is acceptable, clients are more likely than not to stay with their current lawyers even if there are more innovative and creative and better lawyers out there.  Complacency and disinterest in shopping around go hand in hand with good times. When money tightens, clients start shopping around.  Whether for cheaper legal services or more value for the dollars they spend, they still are shopping.  This lends validity to the statement, "in difficult times market, market, market."  There is a palpable shift in the flow of business and those with a great message pushed into the public arena WILL get new business.  It is not a time to tighten your belt on marketing.  Clients still have needs.  You better be promoting your solutions.

Big Law cuts back. They make the huge mistake of reducing their marketing budget and even services especially to their smaller or less valuable clients.  These smaller clients may be a perfect fit for you.

Client Disloyalty Can Benefit You. As your competition reduces services and clients look for more creative and cost-effective ways to save their scarce resources and get their legal service needs met, it means they are less likely to remain loyal to even their long term legal service providers if there is a better alternative which improves their own bottom line.  You need to recognize this and be their innovative, cost-effective solution.

That means opportunities for you when you open your solo practice. Specifically, what you can do:

Be the other white meat. Target those clients who are using more expensive, traditional legal service providers and show them there is an alternative to what they currently know.  Show them in lean times fixed fees are superior to billable hours.

Market aggressively.  As the ties that bind clients to their lawyers unravel, your competitors' clients are more willing to try a new legal services provider. However, they won't find you unless they are receiving your message loud and clear. And if you are not shouting it out, I guarantee you some other lawyer(s) will be.

Innovate. Be the low cost and/or high value solution to your competition's clients and they will be receptive to listening to your message.

Present yourself as an 'outsource' to Big Law.  Big Law is laying off left and right. You can be the less expensive alternative to the associate who is being axed because you can be used 'as needed' without the carrying costs of a traditional employee. And the sooner you start leading the pack, the harder it will be for others to catch up.

Very few clients will make a change unless they are forced to.  The economic times we are in will rock many a client's world.  Be entrepreneurial, innovative, aggressively seek out business while still maintaining your ethics.  When the dust settles, those who realized this was a time of great opportunity will be profitable.  Now is not the time to fade away and lick your wounds.  Now is the time to gather yourself up by your professional bootstraps and say, "It's time to take charge."

I

(And in case you didn't see, check out our recent faculty announcements at Solo Practice University.

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Comments

Carolyn Elefant

You forgot to add "have kids" on the list of things to do (along with watching reruns and pigging out) if you can't find a job. That's what one (now former) friend who was moving up the ladder in her own profession, suggested to me to do when my firm gave me my walking papers and I couldn't find a job - she said I might as well just give up on my career and start a family. Good thing that I did not take her advice, because now I have both.

Andy Miller

This is so encouraging to read! As a solo who just hung his shingle a few weeks ago, I don't need to tell anyone how nerve wracking this is. But you are right Susan, it was only once I was laid off did I finally understand that the MOST security I could have was in forging my own path. I am in charge of making it or not; not someone else and that is one of the most empowering parts of going out on my own.

Stephanie Kimbro

Very motivational article. I think trust between clients and the legal profession is also a big issue right now. Clients are wary of large companies, and displays of wealth by larger firms and their associates can be a turn off. Solos can use this to their benefit. Solos often have the opportunity to provide more personalized customer service to clients, not just run a factory or send the clients to the paralegals.

In this economic climate, I've seen that the public are eager for more affordable and convenient methods of working with an attorney, but they also want to be able to trust us. Be innovative and market aggressively (as in my case with a virtual law office), but keep the interactions with your clients personal and stay humble. That might just pull clients over to your side and create customer loyalty.

Susan Cartier Liebel

@Carolyn - I'm always stunned by other people's advice..like your former friends. At least she gave your the kick you needed to become the success you are!

@Andy - yes, empowerment is priceless. Civilized living has made us almost incapable of survival when needed. Nice to see our 'survival' genes getting a chance to exercise in these challenging times.

@Stephanie - trust is huge. Big displays of wealth do not encourage trust right now. Humility, understanding, compassion and creativity in offering services will go much further in the long run.

Wes

Shaky economic times can also create a great opportunity to potentially expand your areas of practice. Your clients will likely be dealing with issues that generally didn't arise during more comfortable economic circumstances. Be aware that clients may be dealing with new kinds of legal issues and be ready to satisfy those needs, because unlike Big Law, the solo has the flexibility to take advantage.

Susan Cartier Liebel

@Wes, You bring up a very good point - versatility.

That's a whole other set of blog posts which you can find in the category Demographic and Economic Trends where I and others have discussed what practice areas thrive in challenging economic times and how solos must remain nimble and open to the opportunities.

It is also why I am fervently against specialization certification for practice areas such as real estate, bankruptcy, family law, trust and estates, personal injury, small business incorporation and other 'regular joe' practice areas...precisely because it would be a death knell to have solos 'specializing' with all the attendant costs and requirement of a percentage of your practice being devoted to one area...how do you switch gears in times like these without destroying your business?

Joe

Susan, this article couldn't have come at a better time. I started a firm right out of law school with a classmate right out of law school (couldn't find a job) but that didn't work out too well. We had no idea what we were doing, and we eventually both found jobs, and walked away. Fast forward 5 years later, and I'm revisiting this again. I still have a secure job, but am extremely unhappy, mainly due to where the company is headed, and the compensation does not match my responsibilities or stress level.

In any event, after not eating for about a week and losing 10 lbs (and as a laywer, running through exactly 1 million career alternatives and scenarios in my head) I decided, maybe I need to look into this again. After some google searches, I was led to another blog and then to this one, thank goodness. I've not been this excited in years. I have to say, this blog is what pushed me over the edge and confident that this is something I can do, and build upon my previous venture, learning from what I did wrong.

Since I am still employed, I have not put my full name yet, but will very soon! I am working on my brand and blog and website as we speak, and due to some good friends, will not have to spend much at all. I just wanted to say thank you to Susan, and all commenters for giving me the tools and confidence to do this.

Wes

I had an inspirational thought earlier today about the uncertainties presented by our seemingly tumultuous economy. The upheaval we're experiencing is a manifestation of a fundamental process, namely that the rules forming the structure of incentives within our economy are changing. It stands to reason, then, that in order to transition successfully into the newly minted economic paradigm (however and to whatever extent that it shifts) I actually need to redefine myself appropriately. No matter how insulated from the maelstrom I may feel at the moment, I must be aware that the rules are changing--it's basically the only thing that I can be sure of during times of transition. Any current feeling of protection is necessarily uncertain because of the changes occurring. Allowing myself to indulge in the illusion of security doesn't seem the most logical choice.

This thought propels me forward in seeking out new ideas and practices--the rules are changing and I must be changing also in order to keep up. That's what scares away the paralysis for me. Innovating is the only logical choice once you've become certain the rules of the game are changing.

Steve Imparl

Thanks for the thoughtful article about entering solo practice. I like your approach: seeing opportunity despite the gloom-and-doom mentality that is becoming more pervasive. As I consider the situation, I conclude that there are still plenty of opportunities out there; we may need to look a little harder and dig a little deeper to find them, but they are there.

Anita Campbella

Susan, this is such an inspiring article. Thank you for this.

I could not agree more that down economies are good times to start businesses. I started my own business in the midst of the Dotcom
Bust and a week before 9/11.

A lot of companies were struggling and big competitors were focused on downsizing and managing costs. And the slower times in the first 6 months were a blessing in disguise, because they gave me time to work on the foundation of my business, with fewer distractions. I worked on content, technology, etc. with fewer distractions about dealing with lots of customer demands.

I know it sounds crazy to say I was better off with just a few customers those first 6 months, but as a one-woman band, I needed that ramp up time to figure out what I was doing. I was better able to deal with bigger customer demands later on because I had that foundation in place.

Anita

Elizabeth

Another fantastic post Susan. My husband and I really feel that while it might be tough now (let me tell you, it is!) when this economic downturn gets better, we will be there, and be READY TO GO full steam ahead. Very motivational!

JP Ren

Great post!

I'm not an attorney, but I am curious as to what will happen with legal fees once more solo practitioners enter the market. One advantage I see of going solo is that your overhead costs will be very low, as compared to BigLaw. Question here is, if you are a solo attorney, how should you price your services so that 1) you don't leave any money on the table, and 2) you can effectively market your services without the scale of BigLaw.

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