Skip to content

Time for going it alone?

Law office management
|Written By Kevin Marron

It may fly in the face of conventional wisdom, but for James Scott there is no better time to launch a solo property law practice than in the depth of a recession and real estate slump.

It’s a belief that Scott, a Hamilton, Ont., lawyer, is now putting to the test for a second time. He first hung up his shingle in 1989 and built up a thriving practice during the recession of the early 1990s, winding it up in 2005 in order to go into semi-retirement. But late last year, as real estate and financial markets began to tumble, he decided it was time to start up again. “There’s less competition. A lot of people will exit the market thinking there’s no business. That was my experience in 1989 and I believe it will be the same now,” says Scott, who believes there will be enough action in house sales this summer, albeit at lower prices, for him to be in a position to add at least one other lawyer to his practice later this year.

Only time will tell whether Scott’s business plan will pan out. But the question of whether or not it makes sense to open a solo practice in a recession is one that many lawyers are pondering at a time when law firms are struggling to find enough work to keep partners and associates busy.

Of course, much depends on your area of practice. If you specialize in labour and employment or collections, there can be no better time to open or expand a practice, while there is always less work for business lawyers in a slow economy. And although people still need litigators to resolve disputes, clients are seeking to cut costs by settling early, according to Dan Pinnington, director of PracticePRO, a risk management program run by Ontario insurer LawPRO.

A family law practice might thrive in a recession, but you may not want to bet your house on it. Initially, couples may try to stay together as money is tight. But family problems and tensions are also amplified as money gets even tighter. As a result, says Pinnington, “There may be more work there. But whether or not there are clients who will pay is the question.”

The risk for those starting up a solo practice in today’s economy is that they will be tempted to “dabble” in areas of law where they do not have expertise, says Pinnington, who notes that dabblers are more likely to make mistakes or oversights resulting in claims against lawyers’ indemnity insurance. “When times are tough and there’s less work coming in the door, there’s a temptation to work on just about anything.”

Criminal law should be recession-proof, since clients will usually come up with the money they hope will keep them out of jail and there’s legal aid for those who can’t pay. That’s certainly the experience of Bo Arfai, who launched a solo practice in Toronto last summer.

One thing Arfai didn’t expect, however, was that he wouldn’t be able to get a bank loan. The bottom was just beginning to fall out of the credit market when he went looking for a line of credit at his local branch. Certainly, like any young lawyer, he had a healthy amount of student debt, but he had been articling with a Bay Street firm and understood that, until now, banks had almost routinely advanced credit to a promising lawyer or a doctor to launch a new practice.

Scott discovered the same thing. It’s a key difference between this recession and that of 20 years ago, he says. “Then it was easy for a sole practitioner to get a loan. Now you have to self-finance.”

Arfai used his credit card to finance his new practice, although he did not feel comfortable about doing so. He worked from home and kept his costs to a minimum, spending just over $10,000 in start-up costs, according to a bare-bones budget that he posted in his blog Solo in Ontario (soloinontario.blogspot.com), along with other tips for new sole practitioners, such as how to develop a logo on the cheap and how to look smart while saving money on dry cleaning bills.

The recession forces you to be frugal and innovative — and that’s a good thing because you’ll benefit from having a more cost-effective practice when the economy picks up, says Michael Carabash, a Toronto business lawyer and lobbyist, who also opened a sole practice after articling last summer. He relies on technology to run and market his practice, using free applications where possible. He finds many of his clients through DynamicLawyers.com, a web site he launched last November to provide a forum where prospective clients can describe legal matters they need help with and get quotes from lawyers interested in taking on the work.

“You don’t have to have a posh office and a huge staff. You can walk around with a BlackBerry and a laptop and that’s your entire practice. And you can earn a good income, even in today’s economy,” says Carabash.

Nevertheless, Arfai — like many, if not most, sole practitioners — would rather have a physical presence for meeting clients. So, as soon as his finances allowed, he went looking for an office. That was in February of this year and, by then, the recession was having a huge impact on the rental property market in Toronto. He had 20 or more excellent possibilities to choose from, many at reduced rents with favourable leasing arrangements, and settled on space in a downtown Toronto law chambers suite, with a full-time receptionist, a “dirt cheap” phone line, and photocopying at two cents per page.

Savings on the cost of photocopying and phone lines may seem like petty things for a lawyer to have to think about, let alone get excited about, as Arfai clearly does. But those who feel that way may want to think again about whether to launch a solo practice, particularly in today’s tight economy. You must have a strong desire to be a business owner and possess an entrepreneurial spirit, says David Bilinsky, practice management adviser and staff lawyer for the Law Society of British Columbia.

“If they are looking to start their own practice as they don’t see any other alternative, I would take a step back and encourage them to really think about whether dealing with all the minutia of running a legal business is for them,” says Bilinsky.

If you do enjoy the business side of running a law practice, however, it certainly makes sense to launch a solo practice today, Bilinsky adds. “Part of the joy of being a solo is having the ability to adjust your sails and be agile in response to the market.”

Freelance journalist and business writer Kevin Marron can be reached at kevin@kevinmarron.com


SPECIAL REPORTS



Save

PROFESSIONAL DEVELOPMENT