The reality is that it's likely going to take much longer than you think to get to where you want to be.
When I started my business, I made the mistake of spending a substantial amount of my startup capital on advertising. I thought, almost embarrassingly, that if I pumped enough money into sponsored listings with search engines and social media websites, clients would be flocking to me right away. That certainly was not the case. Because of that hasty decision-making and unreasonable expectation, I put myself and my business into a hole early on. It would have been much easier, and much less stressful, to start slow and start smart.
It’s easy to fall into a trap like I did, as we tend to tell ourselves something is bound to happen if we really want it. Silly, I know, but everyone can relate. It’s human nature to have faith in our beliefs even if that faith is unfounded. By putting some reason behind those beliefs we can give faith an objective ally.
In the beginning, there is really very little that you need to get started. Any new attorney can send out a nice letter to family and friends letting them all know what he or she is doing. In fact, I guarantee that, if it hasn’t happened already, your family and friends are going to be approaching you with plenty of legal issues they need advice about. Naturally, you’re not going to be able to help everyone because you simply don't have the expertise. But my point is this: There will be work that you will be able to do, and it will come to you with little or no effort. Of course, it’s probably not going to be enough to keep you up and running for the next few years, but it will hopefully show you that there are going to be people that need your help, and if you can keep reasonable expectations of how often those opportunities are going to arise, you are going to be ready to assist when they do.
That definitely does not mean that you shouldn't have lofty goals for what you want your business to become, but it does mean that you need to remember that it's going to take some time to reach those goals. In the short term, you need to look for small victories. Setting yourself up to meet realistic expectations is going to give you perspective and it's going to enable you to set realistic benchmarks for success. Hitting those will provide you with the motivation to keep pushing and give you optimism that you're on the right track. If you don't set reasonable expectations, you're never going to hit those benchmarks on time, and you may quickly convince yourself that you must be doing something wrong, or it's just not for you.
Set your expectations low and set yourself up for success.
Thinking that you're going to be pulling in $15,000 a month on a steady basis isn't realistic unless you are in an incredibly unique position in the market or geographically. I didn't pay myself a salary for six months as I built up a cash reserve and kept the lid on my spending. When I finally did pay myself, it was much less than my business plan or projections said it was going to be.
If you're expecting a $100,000 salary in your first year, don't bother taking the plunge into the world of solo practice. As has been said by practically any attorney who has done this before you, starting a firm isn't easy. And, a hefty paycheck certainly isn't going to come overnight. Reign in your expectations. Figure out the minimum you need to live and aim for that in the beginning. Your goal at the start is just to make it one more day. You're going to need time to feel out the market, establish yourself, and build your brand.
Understandably, it's hard to gauge where your firm will be in the future and when it will be there, so my advice is talk to other lawyers that have done it and ask them how long it was before they really truly were where they wanted to be. The answers might surprise you. They might give you a pessimistic view of whether you can actually succeed. But you know what? You can and you will, but only if you take it one day at a time and set reasonable expectations.
Oxford dictionary defines success as "the accomplishment of an aim or purpose." Often times we think of success in terms of achieving a particular level of wealth or outcome in a relationship or career. But look at the definition. Success is a finite concept. Once you find it, there's nowhere to go. You've hit the finish line. In business, how are you going to even begin to define what that finish line will be? Take a look at successful companies and you'll realize that they never hit the finish line—they aren't successful, but instead they are continually reaching for success while constantly redefining what success means to their businesses. You need to do the same thing.
Success by definition is a terminus. It's essential to the growth of your business that you don't ever feel satisfied. You should continually strive for success, but in doing so you need to always adjust your expectations and objectives in a way that is going to keep you moving forward. In business, there is no finish line.Michael F. Brennan is an attorney at The Virtual Attorney™ a virtual law office helping clients in Illinois, Wisconsin, and Minnesota with estate planning and small business legal needs. He can be reached at firstname.lastname@example.org with questions or comments, or check out his website at www.thevirtualattorney.com.
The following is an excerpt from "Solo Out of Law School--A How Can Guide to Starting a Law Firm as a New Attorney"
Solo out of Law School is a book for both law students thinking about a solo career and attorneys looking to open their own firms. It's about mindset, motivation, and viewing your solo career with perspective that allows you to see yourself and your work as something you can be proud of. It's not a "how to" guide to starting a law practice. It doesn't say anything about the tools you'll need or whether to open a brick and mortar office. Rather, it's a "how can" guide to developing the mental toughness and right mindset to succeed as a solo attorney. It's a collection of little lessons and simple reminders for when your choice to go solo in the first place come into doubt. Solo out of Law School is about finding the strength and motivation to keep pushing. By embracing the words on its pages, my hope is that you'll realize, no matter how much you doubt yourself or second-guess your actions, you are good enough to be successful as your own boss.
If you’re reading this book, then you are probably thinking about starting a law firm. Congratulations on even getting to this point of consideration! That alone is a huge step towards the metaphoric ledge from which you are thinking about inevitably leaping.
Tune out the Negative Speak
Let's get one thing out of the way right from the beginning: There is never a good time to start a law firm. Life has a funny way of creating all sorts of excuses that make it easy for us continually to put things off until the very inspiration we had to start something new—perhaps even revolutionary—fizzles away like a teapot losing steam.
It’s human nature to doubt ourselves, our skills, and our abilities to succeed. For you, that could be a fear of not being able to support your two young children, or maybe it's a worry that your friends will look at your decision to strike out on your own as an indication that you were not "good enough" to get one of those plush Big Law jobs.
Here’s what you need to remember: If everyone thought that going to law school, spending tens (if not hundreds) of thousands of dollars on education, and spending countless hours with your head buried in books and outlines just to say "no thanks" to becoming a big-shot lawyer sounded smart, they would be doing it. If everyone thought what you are about to consider doing was an excellent idea, then they would be doing it themselves.
People are going to doubt you. People are going to critique your decision to open up your own shop, and they are going to let you know about it. To be honest, one of those doubters from time to time is going to be you.
A harsh reality? Yes. One that you can weather? Absolutely. Being in business for yourself means that you are going to need to have incredibly thick skin. You’re going to need to let things roll off your back, because at the end of the day, no one’s views matter except for yours. People are going to judge you regardless of what you do, so it's best to accept that and forget about it.
You are no doubt reading this book for a reason. Whether you're passionate about a growing niche area of law, you think that billing 2200 hours a year at a large firm sounds like the easiest way to drive yourself to an early grave, or you just can't find work anywhere else, you've no doubt had at least a passing thought that starting your own firm may be your best chance at happiness and prosperity. You may have ideas on how to make the law more accessible to clients or more responsive to industry needs. You probably want to do things cheaper, faster, or more efficient than the established law firms that are already out there.
If everyone shared that same belief, they would be doing it too.
If you can’t convince yourself that your reasons for wanting to start a law firm are valid, then you have set yourself up for failure before even getting started.
So, forget what other people think and stop worrying about what they may be saying. Most importantly, turn off that little voice in your head telling you that you can't do it and that you're going to fail. If you can't have confidence in yourself, you are destined to fail. You might as well realize that now because you are going to be your biggest cheerleader for the foreseeable future, so get on your good side now before things get tougher.
Think about why you want to start a law firm in the first place. Whether it's the freedom to work with the clients you want or the ability to make it to all of your daughter's soccer games, put that thought in the front of your mind and keep it there. Positive inspiration becomes your best friend when the road gets bumpy.
The Tax Cuts and Jobs Act, otherwise known as the tax reform bill includes some provisions which should prove beneficial to pass-through business owners. For those unfamiliar with the concept of pass-through businesses, they are the most common form of business ownership in the United States, particularly when it comes to small businesses. Pass-through entities include limited liability companies, partnerships, S corporations and sole proprietorships. The good news for small business owners with pass-through structured businesses is that beginning in 2019 (for tax year 2018) and running up through 2026, unless extended, they will be allowed to deduct 20% of all “qualified business income” But, the question then becomes, what exactly is qualified business income?
Qualified business income is defined as “the net amount of qualified items of income, gain, deduction, and loss with respect to any qualified trade or business of the taxpayer.” Less than helpful on its face, the definition turns on the meaning of a number if items, including what items are qualified. Well, put as simply as possible, qualified business income includes all business income except for a number of items, like reasonable S corporation shareholder compensation or guaranteed payments to stakeholders in an LLC, for example. But, overall, the new deduction has the potential to reduce small business taxes for pass-through entities by 20%.
Of course, this is the Internal Revenue Code, so there are a number of caveats, carveouts and specifics to ensure that abuse is curtailed and at least some semblance of fairness is written into the provision, or at least appears to be.
For example, there are phased-in caps on total income that qualify a business for the deduction and the deduction is simply unavailable for certain service trades and businesses unless they fall under certain income thresholds. Professionals in fields like law, accounting, and financial advising are not permitted to claim the deduction unless they fall under certain income benchmarks ($157,500 for single filers and $315,000 for joint filers), showing an obvious policy preference for favoring the manufacturing sector (one of those places we really only see a façade of fairness in the code).
The deduction is also limited to 50% of the W-2 wages paid by the business. So, with those caveats, it’s clear that the exact amount of the deduction is going to depend on the specific facts and circumstances of each business. For a great illustration of how the deduction for qualified business income would apply in various scenarios, I’d recommend reading Mike Piper’s detailed post on the qualified business income deduction over at Obvious Investor. Mike does a great job of using real life examples to show how the various nuances of the deduction may come into play for certain small businesses.
Regardless of the specifics, one thing is clear—the majority of small businesses operating as something other than a C corporation are going to see a benefit from this provision of the new tax law.
In the words of Benjamin Franklin, "an ounce of prevention is worth a pound of cure." Few places is that more evident than in the field of law, where taking proper measures to protect one's interests preeminently can ward off potentially messy situations down the road. Specifically, businesses that spend the time and resources to properly protect their interests before problems arise can limit their exposure to liabilities and lawsuits in the future. For that reason, it's important for every business owner to assess his or her exposure to legal risk from time to time and address any glaring holes in the business' risk mitigation practices.
When performing a legal audit of your business, ask yourself the following questions:
► Are you up to date on required filings, like your annual report, trademark and assumed business name renewals, business licenses and other registrations?
► Have you reviewed your operating agreement (if an LLC) or shareholder agreement and bylaws (if a corporation) within the last year to ensure they accurately reflect your business structure and operations?
► If you have employees have you assessed their status as exempt or non-exempt employees and determined your obligations to pay overtime?
► Have you appropriately classified your workers as employees or independent contractors?
► Do you have a written employment contract with each employer and a written consulting agreement with each independent contractor, and are they properly classified as employees or independents contractors?
► Have all employees signed non-disclosure or confidentiality agreements to protect your business’ sensitive information like client lists, business practices, marketing strategies, etc.?
► Do all directors/shareholders/partners regularly hold formal annual meetings?
► Are all business decisions recorded in writing?
► Have all transactions involving the business been properly documented?
► Is your business having difficulty collecting payment from your customers?
► Does to business have written contracts with all vendors and customers?
► Have you secured your trademarks?
► Have you reviewed your insurance in the past year with your agent to ensure sufficient coverage types and amounts?
If, after thinking about those questions you feel there are potential areas that may need to be addressed, drop us a line. Let's make sure we tackle things before they turn into expensive issues. You've worked hard to build your business, let us help protect it.