When I consult with students and clients interested in going solo, I’m still so surprised by the fact those considering going into business for themselves truly don’t have a working knowledge about the economic health of this country.
While the economy should not deter them from starting their own practices, (quite the opposite), they still need to be educated on how the economy plays into the design of their business. Failure to consider the economic direction of this country and demographic trends prevents smart business planning when choosing both practice areas and physical location of one’s office.
First, it is irrelevant what conditions lead you to solo practice. Whether by design or lack of choice, a gift, even wrapped in the “big firm” rejection letter or pink slip, is still a gift.
However, in this time of economic uncertainties it will be a challenge to sustain oneself in business if you don’t understand how to make the right choices.
The smart solo needs to develop competency in more than one practice area and then develop strategies to maintain and grow those practice areas as the economy evolves and changes.
With every demographic trend and economic shift we have read countless stories of how large firms reevaluate their business plan. They follow the money (or lack thereof). They will merge, increase or decrease in size, and/or alter their focus. Well, the economy is seriously downshifting regardless what the TV talking heads are saying.
If you are considering opening your own practice what areas should you consider? Well, it is clear bankruptcy is HUGE. Why? This country is fueled on debt. Never before in our history have so many created a lifestyle built on the delusion of wealth called credit. Their party is definitely over. Did you think it was coincidence sweeping bankruptcy reform passed making it harder to discharge debt? Bankruptcy lawyers will be in demand for both individuals and corporations for years to come.
Another area – Foreclosure lawyers (and all the tangential areas associated with the threat of and actual loss of one’s home) will be needed in increasing numbers to represent not just those who took out ARMs to buy overpriced real estate but now those who were well qualified for a mortgage but have lost their jobs and can no longer meet their obligations. In addition, there are the mortgage lenders.
This month Deutsche Bank has announced nearly 48% of mortgages (25 million) will have negative equity (owing more on a mortgage than the value of the property). Of those, more than half (12.5 million) will have severe negative equity. This means they will owe mortgages more than 25% higher than the value of their home. (Harry S. Dent, Jr. October 14, 2009)
And with that pronouncement, I’d like to introduce you to one of my favorite economists, Harry S. Dent, Jr. He just recently created this video update for his clients and followers, my self included. What I want you to focus on in particular is his discussion of ‘principle #2″ (starting at 3:36). There are truly startling statistics in here regarding mortgages, foreclosures and the economy. It is a must watch. (‘principle #1′ discusses the market.)
Elder Law is very fertile ground even if there are some misconceptions about the statistics. Mull over this statistic. It is projected in twenty years Connecticut will have the same percentage of over fifty-fives as Florida. Is it just another coincidence that fifty-five plus communities are proliferating? And with that is another fast growing niche-field, HOAs (home owner associations.)
The point remains; cultivate practice areas that support demographic trends and the direction of the economy.
Then there are those practice areas which do well in any economy.
- Family Law; long-term economic hardship fractures fragile families.
- Criminal Law; criminal behavior will rise as the “have nots” take from the “haves.”
- Personal Injury; people will always suffer injuries and seek redress.
- Landlord/Tenant; when people lose their homes they have to live somewhere.
- Business Incorporations; those who are laid off tend to become entrepreneurs in order to feed their families.
- Wills, Trusts & Estate Planning; in good times or bad people protect what they have;
- Tax law; if people can’t pay for their homes, can they pay their taxes? And, of course,
- Debt Collection will be big.
This list is not exhaustive but you get the drift.
The huge difference, no matter the practice area, will be how much clients can afford to pay you in a down economy.
As a solo, your livelihood will turn on your flexibility. Your flexibility will turn on your overhead. If you haven’t economized and downsized, your operating costs will sink you.
By maintaining a high-tech home office or a virtual law office, you will be able to ride out a reduction in clients and fees, be able to offer payment terms, unbundled legal services, and write off unpaid receivables. If you practice exclusively in an area that will be or has been hit hardest by an economic downturn, you will need to diversify while you still have an opportunity to reeducate yourself and implement strategies to attract a different client base.
Please don’t confuse me with the grim reaper. Forewarned is forearmed. And it is definitely not too late. Too many people stick their head in the sand to avoid harsh realities. Do not marry a practice area (unless you are already ensconced and recognized for your niche and that niche will survive regardless of the economy).
Talented lawyers are trained to collect information, process information, and reformat that information to benefit a client. Apply this training to those areas of law that will enable you to keep your livelihood. Smart business people don’t fight the tide. They find a way to stay afloat and survive, while the truly savvy profit.