In this week’s edition of “Things I Wish I Knew,” Joleena Louis contemplates managing financial goals in your first year of solo law practice.
When I embarked upon my first year of solo law practice, I found it very challenging to set any kind of financial goals. I wasn’t a “rainmaker” in my previous job and I was starting the practice with no clients.
In terms of finances, I really didn’t know what to expect (other than that comfortable twice-monthly paycheck would be ending).
I spoke to other solos about this. Nearly everyone told me that the first year would be the most difficult. That most businesses are not profitable in the first year.
Based on this minimal advice, I set a financial goal for myself (which was sort of like picking a number from thin air).
My practice turned a profit in its first year.
As it turned out, after my first year of practice I greatly exceeded my goals (and expectations). And while that first year was profitable on a P&L basis, I certainly don’t deserve any awards for this.
You see, my goal was pretty simple: bring in enough revenue to meet my minimum monthly business expenses.
As many of you know, monthly expenses for a small solo law practice are pretty negligible. My biggest splurge was the workstation I rented in my shared office space. Even that, I took advantage of a special package my landlord offers to new solo practices, and even that was basically paid for early on with a couple of referrals I received from suitemates.
Because I had no idea what to expect, I set my financial goals very low. Looking back, it would have been very difficult to not to meet those goals.
When I reviewed my financial numbers for 2014 and made plans for 2015, I wondered whether my practice would have been more profitable if I had set more challenging financial goals at the outset? Of course the other side of that coin is when a goal is so unrealistic that it becomes paralyzing (especially during those first few months when I was struggling to figure out the whole marketing thing).
I don’t have the answer to that question, but after a year of solo practice, I have some ideas about how I would have approached financial goals when I started out:
1. Be more aggressive about getting financial numbers from other attorneys in my practice area.
My fear of failure contributed to me not aiming higher. That fear was a direct result of a lack of knowledge about what to expect.
I had no idea what a realistic goal would even be, so I ended up with an arbitrary one and no real financial strategy.
Looking back, I would have had more detailed conversations with the solos I spoke with. I would have asked them poignant questions about their current finances and the numbers they produced their first year. I was nervous to ask those questions (it’s not polite to talk about money, right?), but when it comes to business, I find that entrepreneurial lawyers are more transparent about their finances than you might think,
I know that if someone came to me before they started their solo practice and asked me about the numbers I did my first year in of solo law practice, I’d be happy to share it with them. I would also let them know the different ways I could have improved on that number.
2. Stick to short term goals, and adjust annual goal halfway through the year.
Even by getting some concrete information from other lawyers about what they did their first year, it’s entirely conceivable that you will greatly exceed (or lag behind) other attorneys numbers. In this regard, I would have set an annual goal based off the information that I learned from the other attorneys, and I would have broken that down into monthly and quarterly goals.
I would have tried my hardest to meet those short term goals, but would have given myself the flexibility to adjust my annual goal once I have a better grasp of how I would obtain clients, how quickly I was retaining new clients, and how many new clients/billable hours I needed to reach my goals.
About halfway through the year, I could have adjusted my annual goal based on actual data, making it both realistic and challenging.
3. Adjust short-term goals for seasonality.
Many law practices have seasonality, and my matrimonial practice is no exception (the holiday season is typically the slowest time for business in my area of practice, and January is the busiest). This makes setting monthly goals much more difficult than simply dividing your annual revenue goal by 12.
Of course, I learned this lesson the hard way: by being blindsided by it.
If I had to do it over, I would have adjusted my monthly goals to account for the seasonality of my practice. This would have enabled me to better plan my time so I could have been set up to do more marketing during the known slow months, and plan for less during the busy months.
4. Have a better understanding of a marketing pipeline.
During my first year of practice, as long as revenue was coming in to pay for expenses, I didn’t worry. But taking such a sophomoric approach to finances caused stress throughout the year. Not only should I have been looking at revenue and expenses, but I needed to be paying much more careful attention to my marketing pipeline.
It was great when revenue was rolling in and that made me feel really confident during those months. But in reality, my pipeline of new cases was getting thin. That resulted in a few lean (and panicky) months that could’ve been avoided, or at least anticipated, had I been paying closer attention to my pipeline.
Even armed with a lot of information, projecting revenues for your first year as a solo will still be a bit of a guessing game. But you will still be able to get close, and if you give yourself the leeway to adjust your goals during the year, you will get closer to achieving your full potential.
I’m grateful that my first year ended up being a profitable one, but I’m glad that it’s behind me.
How did you set goals your first year of solo practice? Leave a comment below and let us hear your thoughts.
Joleena Louis is a matrimonial and family law attorney at Joleena Louis Law, a ﬁrm she founded after leaving a boutique matrimonial ﬁrm in Brooklyn. Joleena is a client in Law Firm Suites’ start-up program in Downtown, New York. Her weekly blog series Things I Wish I Knew… explores her thought process and experiences in her transition from small law ﬁrm employee to successful solo practice entrepreneur.