War Chest for a New Solo Practice?
In a previous post, How Much Does It Cost to Start a New Solo Firm?, Ruth Carter, Carolyn Elefant, Stephanie Kimbro, Debbie Foster, Donna Seyle & Greg Siskind told us how much they think it would cost a new lawyer to start up a solo practice today … from scratch. Manhattan litigator John H. Snyder recently left large-firm practice to do just that—and he fields plenty of questions from peers on this particular topic. So we were particularly interested in what he advises …
Core Start-up Costs from the Litigation Practice Perspective
If a lawyer wants to open a firm on a shoestring, it can be done. I am a litigator, so I am more familiar with the expenses associated with opening a litigation shop. Here, briefly, are the “core” expenses.
- Malpractice Insurance: $1,100 per year (depending on practice focus).
- Westlaw: $3,600 per year.
- QuickBooks: $500 per year (make sure you get your bookkeeping right).
- Google Apps per email domain: $50 per year.
- Computer, Printer, Scanner: $2,500-$3,500.
- Office: Nothing if you work from home; you don’t want to overspend on an office until you have positive cash flow.
- Cell phone with data plan: $1,200 per year.
- Business cards: $400 (don’t skimp here).
- Business development budget: Depends on the nature of your practice.
Multiply by Six
That being said, while you are building a practice, you still have to eat, and you have to maintain your sanity. In calculating what you need for a start-up “war chest,” I usually recommend having enough money to cover your monthly living expenses (including health insurance, which is a killer), plus your business expenses, for six months. That way, you know from the outset that you can devote six full months to building a practice, with the baseline assumption that you will earn nothing during that time. Then every dime you do earn during the first six months is gravy.
From my perspective, the most important calculation in considering starting a firm is your monthly living cost plus business overhead. Multiply that by six.
This points to a bit of life advice for younger lawyers, especially those who have reasonably high-paying jobs at firms, but who are contemplating starting their own firm one day: Keep your “life” overhead low. Don’t lease a Mercedes. Don’t buy a huge house that you can barely afford. Don’t marry someone who expects you to do these things. Avoid golden handcuffs!
John Snyder is the founder of John H. Snyder PLLC, a boutique litigation firm in Midtown Manhattan that focuses on complex closely-held company disputes and outside general counsel services for emerging companies. John has deep experience in the private equity and commercial real estate industries, and is a graduate of Harvard Law School and Brown University. John lives in Times Square with his wife, Julie Fei-Fan Balzer.
More on Attorney at Work
- How Much Does It Cost to Start a New Solo Firm? by Merrilyn Astin Tarlton
- Risky Business: Start-up Advice from Women Lawyers by Joan Feldman
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- First Figure Out Your Billing Strategy by John H. Snyder
- Enterprising Lawyer: Stephanie Kimbro
- Enterprising Lawyer: Greg Siskind
- Enterprising Lawyer: Steve Harhai
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- The Perfect Virtual Law Office Address by Ruth Carter