The beautiful thing about running your own law firm is that you can pay yourself whatever you want. Of course, you need the revenue to do so. But that said, once you cover your expenses, you can keep the rest for yourself. I have heard, and have seen reports, that solo attorneys and small law firm owners can keep up to 70% of their revenue. Similar stats show that partners at larger law firms make anywhere between 30 – 50% of their book of business as compensation. The math is simple, right? You make more money working for yourself. Not so fast. This is often a solo/small law firm myth.
Percentage v. Dollars
Obviously with all things being equal, the above calculation shows the solo makes more money than the law firm partner. My revenue is $1M at my firm, I pay myself 50% which is $500,000. My book at a law firm is $1M but my compensation is $350,000. What an easy choice.
Now, look at it this way. As a solo, your revenue is maxed out at $1M. You do not have any more bandwidth as a business owner and practicing lawyer. You do not want to hire anymore people. Your practice is limited to one or two practice areas. Therefore, you are constantly referring business to outside attorneys. What would your book of business look like if you could:
- Have more time for business development activities.
- Keep matters in-house through cross-selling.
- Have more bodies to service your clients.
Could you double your business with these things? If so, your compensation could jump to $700,000.
Staying in this example, you would be taking home more money. Also, with a $2M book, you will most likely be a partner at a larger law firm. And not just a partner in title – you would get an ownership interest. Depending on the law firm, an ownership interest can bring other financial perks. You may get a car allowance, equity bonus/distribution, marketing budget, professional development budget, and so forth. Previously, all these expenses came out of your pocket.
So, do not fall for this solo/small law firm myth. We can help you find the right firm that will allow you to increase your book of business. Plus, we can find the firm that will pay you more than what you make on your own. If this sounds appealing, let’s have a conversation.