Thursday, June 5, 2008

Should a solo lawyer pay herself a salary?

Solo lawyers must pay themselves salaries.

First- your business exists to serve your life. Your practice is a part of your life, but you also need to take enough money and free time out of it to have the big-picture life you want. Do not be satisfied with leftovers. Figure out what your target income is, then put yourself on salary. Be realistic.
You might have to start yourself at entry level. Choose a target for the near term and plan to increase it until you're where you want to be. At every increment, that target salary should be a stretch but not impossible.

Second, it's a fact that if you have an explicit goal, you are far more likely to achieve it. One of the biggest celebrations I've had is when a client was finally able to pay his salary monthly from cash flow for a whole year. If you give yourself a salary, it's a number to plan for, to keep top of mind, to help you make decisions. Maybe you're more likely to collect your receivables if you know you need to meet your payroll. Maybe you'll get your invoices out sooner. Maybe you'll spend a bit of time in your CEO role to think about how you're managing and growing your practice.

You'll be more successful if you know what you need to take out of the business to support the life you want and you're striving to meet it every month. Promise!

The bottom line is:  the time & money you want in your life drives how much money you need to make over what timeline which drives your monthly salary requirements and is also going to drive LOTS of other things, from the kind of work you do and the type of clients you target to the level of staff or other leverage you need to consider, even how much pro bono work your practice can support. You must shoot for what you want in order to have a chance of getting it.

If you're not paying yourself a salary yet, we're going into 3rd quarter. What will your salary be for the second half of the year?

Note to sticklers: I'm sure there are likely more reasons to pay a salary, from a tax or legal entity perspective- I'm not addressing those. I'm sure the how to solo books have more erudite and well-written responses.  Check them out if you still need convincing! I think I beat the horse dead, but maybe not!