Greetings from Virginia Beach y’all
In what you all know is a familiar refrain at this point, “I really meant to write this awhile ago” blah blah blah. This post has been tumbling around in the nether regions of my brain since just a day or two after posting my first-year finance figures last month, in part because the (occasionally vitriolic) responses I got started giving me flashbacks to posting my grades 1L year.
Then out of the blue I started getting tagged in a bunch of tweets mentioning the post:
— Trebuchet (@TrebuchetLegal) November 11, 2013
— Law School Toolbox (@LawSchoolTools) November 11, 2013
— Firm Manager (@LNFirmManager) November 13, 2013
— jaredcorreia (@jaredcorreia) November 13, 2013
— Mootus (@Mootus) November 14, 2013
Needless to say I was (1) flummoxed, (2) flattered, and (3) proud of what’s likely the closest we’ll ever get here at law:/dev/null to a viral post
And it also reminded me how long it’s been since I wrote the last entry
So now that I’m out of town visiting my grandparents for Thanksgiving, I’ve got some free time to respond to the handful of questions I got sent — that can be reprinted on a family-friendly blog like this one — in response to my first-year finance figures…
Like law students and their grades, people seem to be very protective of their financial info; I searched for this kind of stuff for weeks before getting started and never found anything useful. The most-common finance comment I found was along the lines of “You’ll lose money the first year, make less than what you’d make as a first-year associate your second year, and exceed what you’d make as a third-year associate in your third year.”4
I just don’t care that much And if it would provide any useful data to someone else thinking about going solo, all the better.
Q: How are you defining [the terminology at the bottom of the graphic]?
A: These may or may not line up with “normal” usage of the same terminology, but here’s how I came up with the numbers I did:
- Gross Revenue: Every single penny that ever crossed into the firm’s operating account, regardless of the reason for it (e.g. there’s no differentiation between someone paying me versus me merely being reimbursed for advancing expenses for a client). If you were to take the “Deposits” line from all my bank statements and add them up, this is the number you’d get.
- Gross Income: This is the total amount I earned in fees doing stuff for people. If you were to take the Gross Revenue category and subtract out all the entries where I was just getting reimbursed, this is the number you’d get.
- Net Income: This is the amount that actually went into my pocket for personal expenses. Take the Gross Income category, then take out everything I’ve spent on the business — office rent, the office phone line, office supplies, etc etc etc — and this is what you’d get. Meaning I spent a smidge over $30K in business-related items during the first year.
- Median Invoice: At the time I created that graphic, I’d sent out 142 invoices. This number was the median.5
- Average Invoice: The average of those same 142 invoices.6
- Worst Case: On a per-client basis, after factoring in all the case-specific expenses (filing fees, printing, mileage, and so on), this was the amount I lost on the worst single case.
- Best Case: Same as above, except the single best case instead (a business litigation case that, in light of the magnitude of the victory, I drastically undercharged ).
Q: There’s no way you survived an entire year on $1700. How did you eat?
A: True, I didn’t survive on the net income alone; remember that business meals are partially tax-deductible
If you factor out the business meals for the year (as well as a dozen-ish charitable contributions I impetuously made at the end of 2012 when things were going surprisingly well), the net income number would jump up a bit to $7,405.36 — a smidge over $615 a month. To cover the rest of my personal bills, initially I was using personal credit cards7 and since then have had to repeatedly hit up my grandparents for loans until things turn the corner.8
It’s a miracle the doors are still open at this point, so I just keep trying to get smarter about expenses and keep winning cases on the figuring that everything will build on itself. We’ll see.
Q: Have you done any advertising?
A: It depends on how one defines “advertising.” If you’re talking about taking a bunch of money, throwing it into a pile on the floor, then setting it ablaze, yes I’ve done some of that
After inviting all my Facebook friends to the TGD Law Facebook page, I started doing some modest Facebook advertising. I experimented with the Facebook sidebar ads before realizing they were a near-total waste of money, then switched over to the News Feed ads that got much better results. I still haven’t gotten a significant case from Facebook myself, but I’ve been messaged by a number of folks I had to refer out to other lawyers so hopefully social media engagement will lead to something.
I also started trying direct mail back in May, which was breaking even initially but has now hit a point where I’m likely to cancel it. The direct mail side of the legal industry is very cost-competitive — some lawyers in the Raleigh-Durham area are handling things like traffic tickets for as little as $25 a case — and I’m simply not willing to be a bargain basement lawyer charging dirt-cheap rates in the hopes of getting 20-30 cases a day.
And then a few months ago I started experimenting with ads in the monthly brochure of a well-trafficked local business. The most I’ve gotten out of that one so far has been a single tweet from someone who happened to see it and thought it was interesting — and who already knew me from NCCU Law.
All told I’ve spent $4,260.90 on advertising over the year, and in terms of concrete results have only made back $1,379.96 of that amount. Needless to say there will be changes made in 2014.
Q: What’s the most important thing you’ve learned financially from Year 1 that you’d give as advice to a new solo?
A: Track everything.
When I first started out, I took a number of cases in far-flung areas like Greensboro and Smithfield just because I needed the money. While those cases were certainly more lucrative than me sitting at the office making nothing at all, after I factored in case-specific costs (office supplies, mileage, and so on) I realized they weren’t nearly as lucrative as I thought.
And tracking everything also taught me how profoundly expensive even local cases can be if you don’t get paid in full and up-front. As an example, the “Worst Case” from the graphic was a simple criminal defense issue in Wake County (adjacent to my home territory in Durham), but required so many trips back and forth to Raleigh trying to get the guy the best possible result that I burned a ton of gas in the process… and never got paid a dime
Q: If you could start over, what 3 things would you do differently?
A: That’s easy –
- Invest in my website: I didn’t even put a page up at tgdlaw.com until last Thanksgiving — and now it’s almost a full Thanksgiving later and there’s still nothing there but the firm bio and a contact page. There’s no telling how many potential clients I’ve missed because I don’t show up on most Google searches and have no meaningful info there when people type in the URL from my business card.
- Get paid up front: When I read Jay Foonberg’s How to Start & Build a Law Practice, I was underwhelmed. It had plenty of good info but it simply didn’t match the hype,9 and several times felt painfully anachronistic (especially the tech stuff). But he’s 110% right on the money — pun intended — when it comes to what he calls Foonberg’s Rule: get paid in cash, and get it up front. I “played nice” with a number of clients, including some who were classmates and old friends, and got burned on more than a couple occasions. Rack up a few of those and you start freaking out over how to pay bills in addition to being annoyed that folks decide not to pay for a service you provided. It’s better for everyone involved if you go ahead and get paid in advance and then just work hard to deliver a quality result.
- Charge more: A couple weeks before I got my bar results, I saw a blog entry that recommended lawyers “work for full price or for free, but never for cheap.” Being (relatively) young and naïve, I completely disregarded that concept entirely — I started out charging just $75 an hour, did flat rate appearances for what ended up being even less, and even got a $420,000+ judgment wiped out for a nonprofit I only charged $2,500.10 After all, my whole premise underlying NC SPICE was that legal supply and demand were just mismatched because of pricing, and enabling new lawyers to keep their overhead low would in turn enable them to charge lower rates and lead to a flurry of business. But the problem with “working for cheap” is that you have to bring in a ton of clients to make ends meet, even at low overhead. And then you either end up with either (a) dissatisfied clients you can’t keep adequately up-to-date, or (b) working yourself like crazy trying to keep all the plates spinning. It seems counterintuitive, but you’ll be a better and happier lawyer — providing better service to a now-happier client — if you charge a healthy sum and provide a corresponding level of service.
So that’s my $.02 follow-up on the money stuff I hope all of you get to have an amazing Thanksgiving with family / friends / loved ones!
From the Mailbag archives:
- TDot’s Mailbag v10.0: First-Year Finance Figures Follow-up Edition (11/27/13) [this entry] –
- What are you doing?
- How are you defining your terminology?
- How did you survive financially?
- Have you done any advertising?
- What’s the most important lesson you’ve learned?
- What 3 things would you do differently?
- TDot’s Mailbag v9.0: “So why did you go solo?” Edition (01/18/13) –
- Why did you become a solo practitioner?
- What was your “Plan B” job-wise?
- What helped you the most 3L year in preparing for post-grad life?
- If you had to do 3L year over again, what would you differently?
- TDot’s Mailbag v8.0: Post-Bar Exam Edition (08/11/12) –
- What materials did you use for bar prep?
- Are you bailing on law:/dev/null for Twitter?
- What are your plans for law:/dev/null post-graduation?
- Where do things stand with NC SPICE?
- How does it feel being done with everything?
- What’s your secret to not being stressed about the bar exam?
- Do you have any bar exam study materials?
- TDot’s Mailbag v7.0: Legal Eagle Grading Edition (06/22/11) –
- You made Dean’s List… but grades don’t matter?
- Why is NCCU Law’s curve so low?
- What is the rationale for NCCU Law’s dismissal policy?
- How does the dismissal policy work?
- What are NCCU Law’s GPA cutoffs for Dean’s List and academic honors?
- Do you get notified if you made Dean’s List?
- TDot’s Mailbag v6.0: 1L Questions Edition (08/23/10) –
- Do we really need to study 60 hours a week?
- My study partners study all day; am I missing something?
- How time-consuming is being an SBA Representative?
- Should I use “canned” briefs or create my own?
- Is law school really just a big head game?
- What’s the biggest difference between 1L year and 2L year?
- What made you pursue law after having done computer science?
- TDot’s Mailbag v5.0: What Law School’s Really Like (04/14/10) –
- Bar Exam?
- The Work?
- What would you do differently?
- TDot’s Mailbag v4.0 (01/21/10) –
- What really made you dislike BigLaw?
- Why were 2 of the top 4 teams in the K-S competition from T4s?
- What happened to Tweet-sized Tuesdays and the Friday Drive-by?
- How did your CivPro I final exam turn out?
- TDot’s Mailbag v3.0 (10/04/09) –
- What’s your email address?
- Do you really send/receive thousands of text messages in a month?
- How are you adjusting to a historically black university?
- Are you really a Republican?
- TDot’s Mailbag v2.0 (09/07/09) –
- Did you have a bunch of study materials for the LSAT?
- How well did you do on the LSAT?
- How did you do in your election for 1L SBA Rep?
- Who is in the Gang of Eight?
- TDot’s Mailbag v1.0 (08/20/09) –
- What does law:/dev/null mean?
- Did your entry about That Guy really happen?
- Did you really count the lights from your apartment to school?
- Starting with the last mail entry, I’ve given up on trying to anonymize all the names by just eliminating the names entirely. So now if you send me something, don’t worry about you potentially being listed as the person who sent the question [↩]
- Totally unrelated: I really have an adverse reaction to two exclamation points. I’m fine with one (!), or three (!!!), or an exorbitant number not worth counting (!!!!!!), but two just strikes me as… off. Unless it’s l33t-ized as in “!!1”. [↩]
- Mostly unrelated: last winter several of you asked if I’d have the cajones to post my final law school transcript, since the one in that earlier entry was only through 2L year. Well here you go. [↩]
- I’d need more than two hands to count the number of times I ran across that comment too. You’d think people just copy/pasted it without offering their own perspective… [↩]
- I know lawyers aren’t renowned for the mathematical talents, so in case you’re not familiar with medians basically I sorted the invoices by dollar amount, and then took the amount from the middle invoice. [↩]
- Adding up the dollar amounts of all the invoices, then dividing that sum by 142. [↩]
- A horribly bad idea in retrospect. I know it’s commonplace and the only option a lot of entrepreneurs have, but avoid wrapping your personal life into your business as much as possible. [↩]
- There are few things in life more emasculating than being a man in his early-30s with two degrees asking your retired non-degree-holding grandparents both in their mid-70s for a slice of their Social Security checks [↩]
- Some attorneys commented that they slept with the book next to their bed, so they could read it over and over across the years. I question the sanity of those attorneys. [↩]
- Let me tell you, they appreciated the return they got on that investment! [↩]