Cliff Ennico: Hi, and welcome to today's program. I am your host Cliff Ennico, and our program today is starting a solo practice, business, legal and ethical issues. A couple of words about me to begin with. First of all, my name is Cliff Ennico, and I've been an attorney now for 40 years. That's 40. I find it hard to believe it sometimes. For 25 of those years, I have been a solo practitioner, an extreme solo practitioner and working out of my spare bedroom, otherwise known as the home office in Fairfield, Connecticut. I've actually not left the home office in 25 years. My wife is very nice that way. You know, she puts food under the door. She checks to make sure I'm still breathing.
You know, it's nice that way. Obviously, I'm kidding about that, but seriously, I have been a solo practitioner now for a very long time and what I'm going to be sharing with you today is some of the real-world stuff that I've learned over the last two and a half decades of practicing solo. Let me tell you a bit about myself and my practice. I'm a small business attorney. I work primarily with small businesses, entrepreneurs, people starting tech startups, that kind of thing. I'm really an entrepreneurs' lawyer. My claim to fame back in the 1990s, I was the host of the very first shark tank type TV show on television. It was called money hunt and it ran on public television PBS from 1994 to 2003, not exactly the same as today's shark tank, but widely considered to be one of the precursors of the shark tank type reality shows for entrepreneurs. So that's my claim to fame. Over the last 40 years, I have probably worked with well over 30,000 startup businesses of all kinds.
So that is my practice in a nutshell. And it's relevant to you because when you're starting a solo practice is an entrepreneur. You are just like my clients in many ways. You know, one of the reasons I became a lawyer when I came out of college in 1975, I really didn't know what to do with myself. I was thinking about going to law school, but there were other things that attracted me. I was very big into broadcasting. I did a lot of radio in college and I was thinking about maybe going into that. And I spoke to a bunch of people about this career choice. And I'll never forget it, I did speak to a lawyer and I do not remember what his name was. And I regret that this was back in the summer of 1976, but he told me something, and he goes, Cliff, the thing about being a lawyer is if things just don't work out for you, you can always hang out your shingle and go on your own.
I mean, lawyers may not get rich. They may never be 1%, but they never starve. Even a small-town attorney in nowhere of upstate New York, maybe making a low six-figure salary doing what he or she does. So that was kind of impressive to me. I mean, with a degree in broadcast management, if I got laid off by a TV station, where was I going to go? You know, whereas with the law where you'll always have that fallback, that plan B. So it was one of the reasons why I became a lawyer, but you are an entrepreneur. You are starting a business from scratch, just like all of the last 30,000 clients that I've worked with over the last 40 years. The law is a profession, it is, and there are some very strict ethical rules involved here, which we're going to be talking about later on.
But it's also a business in many ways. And I mean, as I always tell people, lawyers always get hung up on ethical stuff especially when they have to market their practices. They think, oh, I can't do that. I can't do that. It's unprofessional. I always tell people it is impossible to commit an ethical violation if you don't have any clients if you don't have any clients, who's going to sue you, who is the plaintiff here? There is none. So I tell people by all means you must practice ethically. You must practice professionally, but you have to market your practice. You have to get out there. You have to build that book of business. Otherwise, the phone stops ringing after a while, and then you starve. It's not a good thing. You have to run your practice the same way that you run a business.
You know, again, being mindful of the rules of ethics, but making sure that you always have a flow of business, a pipeline of business to keep you going. Okay. And like any business, any startup business, if you don't plan, you don't succeed. Every startup business needs a business plan and a solo law practice is no different. If you don't where you're going, any road will take you there. The Cheshire cat in Alice in Wonderland says that. My personal favorite is Buckaroo Banzai the zen superhero from the 1980s. He always used to say, no matter where you go, there you are. Okay, that's it. Where do you want to be in 20 years? If you're starting a practice right now, where do you want to be? Do you just want to be making a living? Do you want to grow a practice? Have associates and partners and ultimately, cash-out by selling to somebody else or have another generation of lawyers take over.
This is the kind of business planning you have to do. And that's what today's program is going to be about. Now, one word before we begin, the program is going to be in two parts. In the first part of today's program, we're going to be talking about a bunch of things, but then there's going to be a second where we finish the program. So here's the outline. There are six big questions that you need to ask yourself when you're starting out in practice. What will I practice? What kind of a lawyer are you going to be? Are you going to do real estate? Are you going to do trust in estate? That's the first question you ask. Secondly, are you going to work out of a home office or a real office? Okay. Number three. How are you going to set up legally?
Are you going to form a corporation, a PC professional corporation or a PLLC, or is it okay to just remain a sole proprietor? We're going to spend a few minutes today talking about that. How will I manage my practice so I make money? Basically, how do you make sure that you always have money coming in the door? Number five, how much will I charge my clients, which is about billing and collecting receivables from clients. Sometimes they pay you on time and sometimes they don't and then last but not least number six. How will I get the word out? How do I market myself? What kind of marketing is appropriate for me? How am I going to let people know that I'm out there and what I do? In the next hour, we are going to be covering the first four of these six items.
And then on the second hour, we're going to be covering the last two, plus I'm going to throw in at least 20, 25 minutes about ethics, the ethical questions that you face, especially when marketing your practice because that's where most of the ethical questions come up for a solo attorney working out of your home office or your spare bedroom. So today we're going to be focusing on items one through four and in the second hour, we're going to focus on numbers five and six and an ethics component that will bring the program to a close. So let's get started. Okay, what will I practice? Okay, well, at first this sounds like an easy question, but you know, I've always done real estate. You know, I do real estate closings because I'm a real estate lawyer. You know, I do dirt stuff.
I hear a lot of attorneys talking like that, and that's perfectly okay, but that may not be the right way to go for you. In the last 40 years, I've learned, there are four basic strategies for figuring out what type of law you're going to practice. Number one, stick with what you know, and don't venture outside the box. Number two, take on anything and everything that walks in the door and has a pulse. Number three, build a reputation for two or three highly desirable practice areas and let the market tell you what you should be. In other words, throw some bread on the water and see who bites and last but not least, specialize in a certain type of client and become a generalist for that client. In other words, instead of practicing a certain type of law, focus your practice on a certain type of client and do everything that that client needs it done.
That's kind of the model that I have followed in my practice, which we'll talk about. Okay. But let's take all four of them in stride. First of all, staying inside the box. Okay. That is a practice man. I'm a dirt lawyer. I'm a real estate lawyer. It's what I do. You know, it may be okay. I mean, there are advantages. Number one, your malpractice ensure will adore you. They love you because you're much less likely to commit malpractice when you're really focused on a particular area of practice. Number two, it's easier to describe what you do at cocktail parties and social occasions. I have a problem with that. Whenever I go to a cocktail party or a bar association meeting, where someone ask me, so Cliff, what do you do? I say, well, do you have an hour? You know, if you've all you do is one thing it's real easy.
I do real estate. I do trust estate. It's easy, it saves a lot of time on social occasions, you will also keep all of your hair well into old age. Yeah. Because you're not constantly struggling and trying to learn new things. Okay. Those are the advantages, but there are disadvantages to this as well. It may prevent you from growing unless your specialty is in great demand. We're going to talk about this later in the program. A lot of the things that real estate lawyers do for their clients these days are going to be automated eventually, they're going to be handled by technology and that may make you obsolete. I mean, my wife and I just sold a condo in St. Louis about a year and a half ago, and there were no attorneys involved on either side and that real estate closing, it was all handled via the two brokers and electronic exchange of forms.
No attorney made a dollar on that transaction. This is the way the world is growing and going in many areas of practice, I have negotiated with an AI, an artificial intelligence algorithm, and I lost. It wouldn't make any of the changes I requested. It was one of a very large commercial landlords that would not allow tenants attorneys to even talk to their attorneys until they had gone through the AI process. This is the way the world is changing. There are a lot of areas of the law that are going to be obsolete in the next 10, 15 years, maybe even sooner. And it may be difficult for you to stay in practice if you become too attached to an area of practice that's going out of fashion and you will also end up making a lot of other attorneys wealthy by referring out work that you are not comfortable with doing.
If you define your practice too narrowly, anything outside that, you're going to end up referring it to another attorney. So you're going to be making somebody like me rich, is that what you really want to do? Is that why you went to law school to help out other attorneys getting practice and only doing the things that you were 100% comfortable doing? It may also leave you vulnerable to sudden market changes. Economic swings, changes in the law. When I first started practicing in 1981, one of the big things that just about every state was doing was something called the industrial revenue bond. It was a way that small businesses could get financing and save a few pennies on the risk rate. Because back in the early 80s, interest rates were up around 12, 13%. Obviously, interest rates have settled down. In fact, over the last several years, they've been more like zero to 1%, for the last couple of years since the great recession of the early 2010s.
And also too, in 1986, Congress with one stroke of a pen deleted the provision that gave the tax exemption to the industrial revenue bond. So with one stroke of the pen, Congress eliminated a whole area of practice and put hundreds of wall street lawyers out of work. That kind of stuff can happen when your specialty or your focus is a little too narrow. But there's one other disadvantage. So when you're starting out, you may not have a box to stay into. If you're just out of law school and you couldn't find an apprenticeship, an associate position somewhere, you may have no choice but to stay into the box that you're familiar with, you may not have a box to fall into.
So these are the pros and cons of staying inside the box, but there are other strategies you can adopt. So let's talk about taking on everything that moves, everything that walks in. Yes, I can do that. Okay. First of all, it guarantees that you will have at least some business, which is good, and it may be the only practice alternative realistically when you're first starting out and you don't have any experience with particular specialties, you don't have the luxury of saying, well, I'm really a patent lawyer. You don't have that luxury. You may have to take everything that comes in the door, whatever it is. Now, but there are some serious disadvantages here and the biggest one is serious malpractice risk, no one, not even me can stay on top of all of the developments in five or six practice areas.
You simply cannot. I mean, you could take all the CLE courses in the world, you could devote three or four hours a day just to reading stuff and you still will not be up to date on everything. You know, one or two practice areas, you might be able to drill down deep, but more than that, you take some serious malpractice risks that you're going to make a mistake somewhere. Your malpractice insurer may not cover everything you want to do. When you fill out a malpractice insurance application, there's a section where you have to specify the percentage of your practice that each area accounts for what you do. If you just put 2% in each of the 50 boxes, your malpractice insurer is going to question that, they're not going to like that. They're going to think that you're spread too thin and that you are a serious malpractice risk.
Don't get me wrong. You may be able to get insurance, but it's going to cost you a very pretty penny indeed. Ideally, you should not be filling in more than five or six of those 50 boxes. Last but not least by spreading yourself too thin, you may have trouble developing a reputation for expertise in a certain field. There's an old saying, which is very, very true, that when you are everything to everybody, you end up being nothing to nobody. And that is the thing, or the other way of saying it is, when you're too well rounded, there's no point to you. Somebody actually told me that years ago when I was interviewing kids for college, I always liked to look for the well-rounded student. And one of my colleagues said that's not the way to go. You know, when a kid's too well-rounded he or she has trouble figuring out what to do with their lives.
I prefer the kid who's only good at one thing and that just eliminates all the anxiety. They know what they're going to do. They're going to be a cello player and that's it. So he said when you're too well-rounded, you end up having no point to you. It may be difficult to describe at a cocktail party succinctly what you do. So let's talk about strategy number three now, which is letting the market decide. Now, we're getting a little bit better, I think with this, because it is more likely with this approach that you will be at work on a regular basis. You're not doing anything that cannot be sold. There are certain areas of practice now that you just can't give away on a regular basis. If your goal in life is to represent hardcover book publishers, for example, you're going to have a tough time making a living, because that business is going the way of the dodo bird.
Everything is going digital in the publishing industry. By letting the market decide it's more likely you'll get work on a regular basis. There probably will be less competition, meaning you can charge more for your services. You may also get referrals from other lawyers who are staying in their boxes. You know, if you're comfortable getting outside your comfort zone once in a while, that gives you a natural advantage over the attorney who's staying inside his or her box and not moving outside of it. Those kinds of people will refer you to business because they're not comfortable doing the stuff that you do. I have to say, I get quite a few referrals from other attorneys because they're just not dealing with things like E-commerce and technology and a lot of the other stuff that I deal with. You can also develop a reputation for cutting edge legal work before other lawyers do.
This is how solo practitioners get rich. If you can figure out a new area of the law that's burgeoning right now and if you can get ahead of the crowd and position yourself as the go-to attorney for X, that is the way that you may be able to build a very successful practice indeed. I mean, if I were starting my practice all over again today, I would be really reading everything I possibly can about blockchain and digital currencies, not cryptocurrencies, but digital currencies that are backed by government fiat. I would want to know everything there is to know about that because that is going to be the wave of the future. We are not going to be using nickels, dimes, and quarters, in 10 years, all of our payment streams are going to be digital. And I would want to know everything I would want to know about that.
That's going to be a major area of technological development and the lawyers who get in ahead of the curve there are going to do very well indeed. Data security would be another area that I would consider, but there are disadvantages to this approach as well. It can be a very stressful way to make a living because you're constantly in learning mode. Let's face it, when you take on a new area of technology, there isn't a whole lot written about it. The law isn't developed, you're going to have to make some educated guesses as to where the law is going to go and be right about it. You know, that's one of the things about my practice that can be a little bit stressful. There's no case law on many of the questions that my clients are asking me. There also may be a very good reason why local attorneys avoid certain specialties even if they're in demand.
You know, there may be just a good reason. Maybe the market is saturated. You know, there's too many attorneys out there that are doing it, or maybe it's just the wrong part of the country. If you're doing oil and gas law in upstate New York, for example, where they eliminated fracking by law, you're going to do much better as an oil and gas attorney being down in Texas, Oklahoma, Arkansas, or those kinds of places. Lastly, if you are developing more than one specialty, there may not be synergy between them. So if you're doing trust and estates and E-commerce, I kind of want to know a little bit more about you. Why do you think that works? I mean, there's no way that the one practice supports the other. If you're going to develop more than one specialty, it's a good idea that there'd be some synergy between them where the business from the one kind of supports the other specialty.
If you're going to just follow this path and let the market decide and let the market tell you what you should be. Here are the rules. You got to look for a practice area that is in demand and that is cutting edge or otherwise hasn't saturated the market that can generate a decent profit margin, not all practice areas are profitable. Sometimes you can just barely make a living. If you're doing heavy tort litigation, for example, your costs might well be greater than what you actually end up getting as a percentage of the settlement and that you can easily market to without great expense. You shouldn't have to spend a ton of money marketing. Your market should be organized enough that by taking out a few strategic ads, writing a few articles, we're going to talk about marketing a little bit later and how you build your business plan.
But you want to be able to market to them easily. Those are the rules in terms of picking out the specialties areas that you're going to follow and the ones that you're not going to follow. Last, but not least, let's talk about this strategy, which is the one that I've more or less followed in my practice, which is specializing in target clients. Instead of specializing in the area of law, focus on a specific client and become a generalist for that particular group. It allows you to be more of a generalist. This is the only way that you can be a generalist in the practice of law. The practice of law over the last 15, 20 years has become very specialized. And it's harder and harder to be a generalist, but this is one way where you can, it's easier to stay on top of developments in multiple practice areas because you don't have to know everything about them.
When Obamacare first came out, the affordable care act in 2008, 2009, I didn't have to memorize all 600 pages of the affordable care act. There was only one question that my small business clients about, which is how do I calculate the 50 full-time equivalent employees to know if I have to provide my employees with healthcare coverage, the employer mandate under Obamacare. That's the one thing I had to know very well, but I didn't have to know anything about gold plated insurance programs, which was a whole section of the Obamacare statute because none of my clients offers those kinds of benefits to their clients. So gain, all I had to know about Obamacare was what my clients needed to know. So that made the CLE process a lot easier on me. If the client community is organized, it's easier to generate referral business too when you work this way.
So if you're focusing on commercial real estate developers, well, there are organizations of commercial real estate developers. There are societies that they belong to. It makes your marketing a lot easier. You go where they are and it just makes it a lot easier on you without just crafting bread on the waters and hoping that some of the fish bite, but there are disadvantages in this. If there are not enough target clients in your area, you may have to relocate to engage to them or engage in a multi-jurisdictional practice. So if you are planning to pursue blockchain and digital currency type people if you're in Oklahoma, you may have to move to one of the coasts. You may have to be based in San Francisco or New York, where most of that action is and where most of the startup activity is in that area.
You may also be vulnerable to market technology and economic swings that disproportionately impact your clients. You know, there are a lot of business models that are going out of business these days. And if you're representing shopping mall developers or book publishers, you have a very limited shelf life on what it is you're doing. Those industries are being transformed by technology and by other things, demographic changes and sustains in society. You have to be aware of where you stand. You do not want to be like the Rolling Stones. You don't want to be in a business where you're making ceiling wax and in finding new ways to make ceiling wax. It's an old Rolling Stones song called 19th Nervous Breakdown from 1965. Okay. If you're going to specialize in target clients, the best way to succeed is to identify a client that's common in your area and provide a wide range of services for that client with one or two exceptions.
So for example, the approach that I use, if you go to my website at Cliffennico.com, it says a wall street lawyer for your small or growing business. That's my tagline. I do just about everything for small business clients except litigation and patent and trademark work, everything else, even copyrights, I'll do a basic copyright registration on form TX, but everything else, I will do for my clients, I just don't specialize in clients who don't know what they're doing and have no money. I got to tell you something, this is a grossly underserved demographic, everywhere you go in the United States, there are plenty of people who don't know what they're doing and have no money. The problem is, of course, if you take on these people, you are going to have an extremely stressful practice and you will not make a living. These are the people that don't pay their bills on time because they don't know what they're doing.
They tell you the stuff that's wrong. It is a very stressful way of making a living. One of your goals as a solo practitioner is to try to keep these people to a minimum. Okay? So here are some examples of some client-centric strategies. You can focus on a type of business, software companies, internet early-stage tech analogy companies, specific industry construction industry, there are a lot of lawyers I know who specialize in the construction industry where they do everything within that underserved, ethnic or religious groups. There are many groups in this country that are grossly underrepresented by attorneys, Hispanics, Muslims, certain immigrant communities. If you have a relationship to a certain immigrant community, and there is a strong immigrant community locally, focus on that. So for example, if you were in Brooklyn or Queens right now, I would definitely learn a little bit of Arabic because they're getting Brooklyn and Queens right now and New York City are getting a huge influx of Muslims from the middle east.
And these people have trouble finding attorneys because their English isn't so great or whatever and hire a couple of assistants who are of that culture who speak Arabic and play to that. Don't be afraid to do that because there's a huge need. Immigrant groups are much better than others in paying their bills on time by the way. They tend to be very grateful for what people do for them and they pay accordingly. You have less trouble with them than you do sometimes with the people whose ancestors came over on the Mayflower. Okay. Economic status, if you're doing estate planning, are you doing high net worth individuals or are you doing working-class wills? I mean, you can make money either way, but you kind of got to have to know your image. Your brand image depends on the client that you target and last but not least clients that themselves specialize in target clients.
So for example, residential investors are people who are buying and selling and building and fixing up old houses and refurbishing them versus commercial real estate investors who are building office buildings and malls and that kind of stuff. Those are two very different types of practice, even though both of them qualify as real estate law. Let's talk for a minute about taking on clients in other states. This is something that will happen to you at some point, you take on a client, the client accounts for 20, 30% of your revenue, and then they move to California or to some other state, Florida, wherever, Texas. What do you do here? What are the rules? Well, the rules are evolving. The model rule 5.5 says that a lawyer shall not practice law in a jurisdiction in violation of the regulation of the legal profession in that jurisdiction, what that it means is you cannot practice in another jurisdiction if what you are doing constitutes the unauthorized practice of law in that the state that requires you to be licensed there.
Now, that sounds pretty bad, but when you look a little closer at it, this gives you a lot more flexibility than you might think. The definition of what constitutes the practice of law varies widely from state to state very widely. There are some states, for example, in which doing a real estate closing requires you to have a law license. There are many states though that do not require that. Forming businesses, drafting contracts, accountants do it all the time for their clients and they sometimes do a better job than we do because they get the tax stuff better than we do. The one thing that is constant, every state says that in order to represent another person in court, you must be an attorney licensed in the state.
That's the one thing that is universal. But once you get past that, the rules are very different. So if you're thinking about practicing in another state, the first thing you want to do is you want to check out their definition of unauthorized practice and make sure that you stay clear of those specific activities that state considers the practice of law. The second thing you have to think about though, is malpractice liability. If you do practice in another state, whether or not the rules of that state allow you to do so, you will be held to the same standard for malpractice liability as an attorney admitted to practice in the other jurisdiction. So if your client moves to California, I would take some CLE courses on California law to make sure that you can comply with your rule 1.1 duty of competence. That is the second thing.
So the two rules, when you're practicing in other states, number one, check out the state's definition of unauthorized practice, make sure that you are allowed to do whatever it is you want to do in that state, and second, making a commitment to learning something about the laws of those states, the peculiar rules, every state has gotchas in their shoot books for out-of-state lawyers to trip up on, find out where those are, so that you can practice and still sleep at night and not worrying about being sued for malpractice. So those are the rules regarding your practice mix and what type of law you should practice. Now, I know I spent a lot of time on that, but it really is the most important thing, you will be year-to-year making changes in your mix.
Every year, once a year, I usually do it around the holidays, I sit down with a fine VSOP Brandy or other liquor of choice and I say to myself, is my mix right? Am I doing the right things? Am I spending too much time on things that are not bringing in money? Am I spending too much time on things that are becoming out of fashion that people don't need attorneys for anymore because there's software that does it? I spend some time, usually on the holidays to do that. You know, take a couple of days off, a long weekend or whatever, go skiing, camping, whatever you like to do, and just focus on how's the mix, is the mix still viable? And if not, what do I have to do to make this mix more viable so I can get more money in the house here?
How do I do that? All right. Let's talk about home office versus real office now. That's the next topic we have to talk about. Well, for certain types of practice, a real office is unavoidable. I hate to say it but if you're being sued by someone and you're worried about losing your life savings, you don't want to go to somebody's house and watch them playing with this Frisbee with this golden retriever on his front lawn, you don't want that. You want to go to a real law office, somebody that looks serious, trust in the states is another one of those areas. When you go to an office to do your will, you want to go to a lawyer who looks like they've been around for a thousand years, you don't want to see a fresh face 23-year-old doing your will ill because that person, frankly, doesn't have the life experience that a more senior attorney does.
I mean, forgive me. There are some studies that back me up on this, they've done surveys of client satisfaction or whatever and these are the things that people look for. There are some types of practice where you just can't get away for a home office, but for most areas of practice, you can. But there may be some other reasons why you may not be able to work from home. Your local zoning range may not let you. Your nosy neighbors may not let you. Your spouse or significant other may not let you, or you're not disciplined enough to work from home, which is a big issue for a lot of people. Working from home is not for sissy's. You got to be very disciplined here to avoid distractions. Here's the big question, though, whenever you're thinking about working out of a home office versus a real office, should you see clients and customers in your home office? This is the big question.
And the good news is, there's a very easy answer to this question. No. If you are working out of the home, my advice to all of you is never ever see clients in the helm. Why am I saying that? Well, because it makes you more invisible to your neighbors and community, and that invites legal hassles. We'll talk about zoning rules in a second, but the only way you ever get in trouble with zoning when you work out of a home while in office is if your neighbors rat you out and turn you in. And if you're conducting your business in such an obvious way, that is changing the character of the neighborhood, that's when the baseball bats are going to come out and you're going to hear from the local zoning board saying, will you please come in for a meeting?
Okay. As long as you stay invisible, you will not have a problem with that. Okay. There's also an increased risk of slip and fall and dog bite type liability if you raise Rottweilers as a hobby and they're running around the house while your clients come over, there's only a matter of time before one of these dogs decides he doesn't like one of your clients and that's it. Not all clients and customers are nice people. Household items may go missing. You work in your office all day and all of a sudden, some of your wife's favorite antiques have disappeared or your spouses. That's not going to be a very pleasant conversation to have. Your spouse or significant other probably will not want people traipsing through your home. Also, let's be honest about it. Let's do some soul searching here. Do you really want your clients and customers to see how you live or know where you live?
If you're doing criminal defense work for serial killers, do you really want your clientele to know where you are? I personally don't, but maybe you feel differently, that's up to you, but I wouldn't take the chance. The key to success, if you're working out of the home, is invisibility. That is the key to success. People cannot see or know that you work out of the home. So how did you achieve this? Don't use your home address for business purposes. Find your local UPS store and rent a private mailbox. This is like a PO box, except that you don't get just a box, it's not just a PO box 123, it's an actual street address. It's 123 main in street, suite number four, five or six. So it looks like you have a real office there.
Get that mailbox, use that and have all your mail go there as well. It gets you out of the house at least twice a day. I personally get a lot of registered and certified mail in my practice. If I had to stay home and wait for the mailman every day to sign for all that crap, I'd be a prisoner of my home. This way they will sign things for you. They have copy machines. They'll do bulk copying. They'll do shredding for you. If you travel, if you go to Europe for two weeks, they'll forward your mail to you, or they'll send you an email every day, telling you what you have so that you can stay on top of things. It's just for the 10, 15, 20 bucks a month that they want it is well worth it. Get a UPS store, don't use your home address as your business address, rent a conference room space from a local firm.
I have a relationship with two local firms and if I have to have an in-person closing where everybody's got to get together in a room and sign 50 documents like for an SBA loan, they will let me rent their conference room by the hour. One of them even just gives me the space for nothing because I refer a lot of business for them. Make relationships like that with local firms that have the resources you need so that you can do a barter deal with them. See clients in their offices wherever possible or in a neutral location. In my first practice law, I was known as the diner lawyer of Fairfield County, Connecticut, because I always met my clients in a diner. Diners are wonderful by the way, they got any kind of food that you'd ever want to eat and they can deal with any kind of food allergy or special situation. If it's not on the menu, they'll even make it for you.
And if you go during the day and as long as you keep the coffee or the soda replenished every in a while, they leave you alone, they don't bug you. You can spend two or three hours there as long as they're not busy. As long as you're not taking business away from them, they'll leave you alone whereas a lot of other restaurants will boot you out after a while. That's a little tip from an expert. And avoid noises, especially late at night, lots of cars in your driveway. Don't put a sign up in your front yard that says, Cliff Ennico attorney at law, just use common sense here.
You know, if the local kids can't play basketball on the street, because they're too busy dodging UPS trucks that are going to your home office, sooner or later, your neighbors are going to rat you out and you will have a problem with your local zoning board or your local authorities. Now, I do know that in most localities in the United States now there are special rules governing home offices. And many of them are just a summary of what I've just described. Most of them are just common sense, but just be invisible, as long as you're invisible. Because keep in mind, a lot of your neighbors have home offices as well and they don't want you ratting them out either. So those are the rules on whether or not you should work from a home office. Now, let's talk about your legal entity, your legal entity structure.
Should you be an LLC? Should you be a PC? Well, this is really up to you. But the one thing here you have to know about is that there is a statute in every state. On the slide here, I've given you the New York statutes, but every state has them. That basically says that an attorney at law cannot limit liability for his or her own malpractice by forming a PC or a professional corporation or a professional LLC. Okay. They cannot avoid liability for their own malpractice. The PC or LLC will not shield them. Now, if it's just you and you don't have associates or partners, why do you even need a PC or an LLC? I do not. I am a sole proprietor in my practice. I do have an EIN federal tax ID number.
I don't use my social security number ever, because I have to send out a lot of 1090s at the end of the year and I don't want anybody knowing my social security number, but otherwise, I'm okay being a sole proprietor, I would rather spend the money on a drop-dead policy of malpractice insurance rather than spend money on starting and maintaining a PC or LLC that frankly isn't giving me the protection against liability that it would other types of entrepreneurs. If you're doing it, you do it for optical reasons. So for example, if you're using a trade name like Cliff's LLC service, LLC sounds a little bit better to the marketplace than just Cliff Ennico attorney at law, but there's really no reason to do it.
Now, the one thing is, if you do bring on a partner at some point, then the first thing you should do is to form a PC or an LLC because you don't really care so much about being liable for your own malpractice because your insurance policy will cover you, but you want to make darn sure that you are insulated from liability for what the other person does. When you are in partnership with someone it's like the three Musketeers, all for one and one for all.
If one gets sued, they all get sued. So you want to make sure, especially if your partner is doing something completely different from you, where you can't really evaluate the quality of what they're doing. If you ever bring on a partner at some point, the first thing to do is to form a PC or a PLLC. But other than that, if it's just you, I don't really see the need, unless there's an optical need for you to have a particular name in the marketplace and it would make you look bigger than what you are it, but for most solo practices, that will not be the case. So let's talk now about how do you make money? Okay. Up to now, we've just been talking about the preliminaries of how do you get started. But now you're in operation. How do you manage your solo practice? How do you do it? Okay.
Like I said, at the very beginning, every entrepreneur in whatever field needs a business plan and that's true. That's just true if you're starting a tech company, a media company, eCommerce, that's the same for a startup solo law practice. Now, included. I did give you a handout with this program in which I believe the Quimbee people will include in the materials. It was something that a friend of mine and I developed a bunch of years ago, it's a nice little checklist of all the things you need to have in your business plan. I mean, I could easily do a whole hour program on the business plan for a solo law practice, but we don't have a lot of time today. This is an overview program so I've given it to you in a handout here. Make sure you download it, it's a PDF file. It's only about two or three pages long, but it will give you sort of a nice checklist for different types of practice of the various things that you need to do.
How so? How do you make money when you have a solo practice? There's a very big difference here between big business and small business. Big business is all about earnings and profits. What are the recorded profits at the end of the quarter at the end of the year, the earnings before income taxes, the EBIT, the EBITDA, small business is not about that? Small businesses about cash. Do I enough to go out to eat? Am I making enough money that I can afford to take my spouse out to dinner at a restaurant once a week, without having to worry about whether or not I can pay my bills next month?
What we call ODI, owners discretionary income, how much is left over after paying all the expenses? That's what small businesses are all about. And a solo law practice is a small business. Know your fixed and variable costs cold. This is important. When you're starting a practice, you need to do a spreadsheet, use an Excel spreadsheet and make a list of everything you have to spend just to keep alive, to keep the doors open and find out how much things cost. Talk to people, find out how much is it going to cost you in filing fees, in court fees, whatever. The things that you have to spend money on to service your clients. Find out what these things are and budget for them, put them in, know your costs close cold because this is the stuff that your clients have to be paying for.
If you are not generating enough revenue from your clients to cover your basic operating expenses each month, that is a path to disaster. Sooner or later, you will absolutely fail. So make sure that you know what your costs are. Keep overhead to an absolute minimum. That is the key if you can work out of a home office, do so, if you can do without hiring someone, if you don't mind making copies yourself and doing some of the clerical work if you don't need that kind of secretarial support then do it without a secretary or an admin person, keep your overhead to an absolute minimum. That is the key to success in just about any small solo business that I'm aware of. But for lawyers especially, don't spend money needlessly. Then once you know your costs, then what you do is you project revenue on a monthly basis.
And this is really very simple. So let's say, for example, your monthly expenses are $1,000 a month. And let's say that all you do is wills, you do people's wills. And let's say that you typically charge $300 for a will. Now, I'm making this up. These are not realistic numbers and I know it but okay. With $1,000 in costs, you have to do at least four wills a month to cover your basic expenses and make a little money. This is simple math. This is grade school arithmetic. The math does not get any more complicated than this when you run a solo practice, you do not need to know calculus to run a solo practice, which is good because the biggest reason that people become lawyers after all go to law school is math anxiety. Lawyers are the people who had 800, 200 SATs, engineers are the people who had 200, 800 SATs, and everybody else is somewhere in the middle.
Okay. I'm only kidding about that. All right. How much ODI do you need? I mean, if you're the kind of person that has to make at least half a million dollars a year to feel comfortable about life, well, that's going to dictate a certain practice model. You know, if all you need is to just cover your expenses and make $50,000 a year, that's a different practice model. You're free to do more things that way. Your practice mixed to some extent will be dictated by how much ODI you need in your practice. Don't forget about taxes by the way, as a solo practitioner, you are an independent contractor. You cannot live on 100% of what you may ache after federal and state income taxes. You are only going to be able to live on about 65 to 70% of what you make.
Make sure you escrow for taxes. This is very important. The biggest and dumbest thing that people do when they start a small business is they spend everything they make and then when it comes time to pay taxes, they don't have enough money in the checking account to pay the taxes with because they blew it all at the racetrack or something like that, or at the casinos, make sure that you escrow at least 20 to 30% of your income for taxes, your accountant will help you greatly here depending on your personal tax situation. They'll do the calculation and figure out what you have to do, and then consider getting a line of credit. This doesn't need to be more than a couple of credit lines. American Express is good for this. They have credit lines that will give you up to like 25, 30, $40,000.
Again, this is emergency money. You only use this money when you absolutely have to. You do not need to take out a loan. If you have a lot of equity in your house, you might be able to do a home equity line of credit what they call a HELOC, H-E-L-O-C, home equity line of credit, but a simple credit card with at least a $20,000 balance should be enough to help you get through the tough times when they happen. Like when COVID hit for the first time last year, a lot of lawyers were hitting up their accounts for their credit lines for the first time ever although it didn't last long. My practice actually did great last year. Last year was one of my best years with COVID-19, which is bizarre. I mean, totally counterintuitive.
Okay. Marketing. The thing you have to know about marketing is you absolutely must do it. Okay. Marketing is the key to small business success in any small business. And I can tell you this, as someone who has worked with over 30,000 people who started businesses of their own in their career, let me tell you this is absolutely true. All of my successful clients to a man, woman and child, are good at marketing themselves, their business of what they do, the ones who aren't good are the ones that crash and burn in six months to a year. Marketing is essential to the success of any business and a solo law practice is no different from any other. So here are the five things that you need to do to market your practice. Okay. First of all, you have to give some thought to your firm name, your firm address, your business cards, your stationary, what the world sees when they meet you in person, you have to give some thought to that.
Those are all marketing tools, your involvement in organizations and community activities, your personal interaction with potential clients and referral sources, your elevator pitch, you meet somebody at a cocktail party who was a potential client. Okay, Cliff, what do you do for a living? How do you answer that in a way that makes him or her want to know more about you? That is key. I could give a whole course and how to do an elevator pitch for a solo law practice. Your public speaking strategy, get out there, let people see you. People do not hire a lawyer. People hire you. They have to see you. They have to see that you have a brain in your head and that you're intelligent. That you're funny and that you're easy to deal with that.
That you're not going to be looking down your glasses at them like they're stupid because the IRS is auditing them or something like that. People are afraid to speak to attorneys because they're afraid to admit that they screwed up their lives. Let's face it, people do not call their lawyers when they are having a nice day. That is a fundamental rule of our profession. If someone's calling a lawyer, the wolf has broken down the door and is eating up their body. And they're very nervous about that, they're ashamed to admit that they did something that they shouldn't have done. Anything you can do to alleviate that fear makes you a much more successful lawyer. You know, a key part of my marketing strategy is just that I go out of my way to make myself very approachable to people.
People are not intimidated by Cliff Ennico and that's a good thing in my practice. I get a lot of business that other attorneys don't, who are too starchy and who are too judgemental. You know, people don't like attorneys, they're afraid of attorneys. Do anything you can to alleviate that fear and that will take care of a lot of your marketing for you. Now, there are specific rules about marketing. We're going to be talking about those in part two of this program, but just be aware that they all live in rules 7.1 and 7.5 of the model rules of professional conduct in any state, not just New York. Sit down, read them and make sure you understand them and read them closely. Don't just skim them because when you skim them, it makes it look as if it looks as if there's a lot of things you can't do that you really can do.
Read it closely and you'll see, there's a lot of loopholes in those rules. And we'll talk about those in part two. Okay. Every solo practice needs at least five things to be successful. You need to have at least one client. I have to say that you got to be joking. As I said, a law practice that has no clients. Well, the good news is you'll never be sued for malpractice. The bad news is you'll be living in a diaper under the Brooklyn bridge. You need a virtual library. The rule on law books. A law book without forms and checklists is worthless. A law book that is just a treatise with every case that's ever been decided in a certain area. Well, if you're a litigator and you're doing research, maybe that is useful to you, but frankly, you can get those at the nearest bar association library.
You don't need to own them. What you need are tools and resources. If someone comes in your door and says, Hey Cliff, I need you to do an X contract, a frugal frames contract for me, you want to know exactly where you can lay your hands on forms of frugal frames contracts so that you know what you're doing, and you can avoid malpractice. These websites here are the websites of the three largest law book publishers in the United States. Bookmark them, take a look at their catalog, sign up for email notifications of new publications. Again, most of these are things you will never need, but you want to know that they're out there. You want to know that if a client is getting into a data security issue and needs to have a disaster recovery plan drawn up, that you can lay and it as a key client for you that you want to keep, you don't want to pass them off to another attorney. You want to make sure that you can lay your hands on some disaster recovery plan forms within 60 minutes.
There's also a very good website, there's several good websites with legal forms, but most of them are too basic. They're like Bloomberg forums. I happen to like this one, US legal forums.com. Also, the SEC's Edgar database is a great place, especially for corporate forms. Whenever a corporation does an SEC filing, all of the exhibits have to be filed with SEC Edgar, so that Edgar database is a huge database of potential forms and it's free. You can access it without having to pay any kind of membership or subscription fee. Thirdly, the best malpractice insurance you can afford, I could do a whole course on malpractice insurance. And maybe I will someday if Quimbee lets me, but get the best malpractice insurance, don't just do a hundred thousand.
What you want is at least what we call one and two, 1 million per recurrence, 2 million overall, at least. That's the minimum amount you should be carrying. A dedicated computer with multiple backdrops, go to eBay, go to Amazon and spend 50 bucks on an external hard drive. Most of us know enough that we have a place on our computers where all our forms exist. We also may have subscribed to a monthly cloud-based service where every day, everything we do gets swept up into the cloud and it exists in a duplicate form there, those are all good things to do, but they're all vulnerable to hacking, get an external hard drive, and once a week or every other day, plug it into your computer, back up all your documents onto the external hard drive and disconnect it.
Always have your file folder in at least one physical place that's not connected to your PC or your laptop in case something happens. There was a good ABA opinion that came out last year on the virtual practice of law, print it out and read it. It's a wonderful summary of all the things you need to do in order to be able to comply with your rule 0.1 duty of competence regarding technology. Last but not least, you need a network of other attorneys that you can bounce questions off of, it's okay to be a solo practitioner, but if you are a loner by nature, it's going to be hard for you to succeed. You should have at least a network of a few attorneys, friends that are close enough that you can just call them up and just whenever you get yourself into a thorny ethical situation, or you're getting into a situation where you really think you're getting in over your head, but you're not sure, it's really nice to be able to pick up the phone.
I actually have such a network that are five or six attorneys, they're all here in the New York's city metropolitan area. And we have a deal where if we ever get a call from one of our networks, we will find the time to answer that call the same day. And I will do it for them as well. You know, the idea is, I mean, we don't refer business to each other. I mean, I've only gotten maybe one or two referrals from these people. I don't do it for that reason. These are just people that I can call who think enough of me that they'll take 15, 20 minutes out of a busy day to help set me straight on something that I'm not sure about. You know, do make that part of your community.
This is why you join bar associations, by the way, it's not likely that you will ever get business from a bar association. Lawyers are notoriously poor referring as to other attorneys, but you definitely will find network people here that can be part of your personal network and can help, can help back you up if things get weird. Okay. So now let's talk about how do you grow your practice? I mean, if you want to grow your practice. Okay, obviously, you can hire an associate. The basic rule that applied when I was in law school, by the way, it's still the case today. This is one thing that has not changed in 40 years and the thing is if you hire an associate, that associate should be generating enough billable hours to cover three times the associate base salary. So if you hire an associate and you pay them $50,000 a year pre-tax, that associate should be generating $150,000 of billable income every year or else that associate is not justifying their existence.
The theory is that they have to make enough to cover their base salary, their overhead, and then a profit. And that's what the three times associate salary comes about and more if possible. If you don't think you have enough work to get to those kind of numbers, then don't hire the associate, do it yourself. That's how you make that decision. You can certainly outsource. There are outsourcing firms out there now that will help you find a temporary lawyer. So let's say, for example, you are on vacation and discover a holy cow, judge so-and-so changed his mind and they're scheduling a hearing on a motion this Friday. You can call these places and get a temp attorney to go cover that for you. Obviously, you're going to have to spend some time on the phone educating them on the case and whatever, but there are services out there you may want to take advantage of them and some are better than others.
In fact, if you're just starting out, you might want to volunteer for outsourced opportunities. Be that person who goes to court on two days notice and argues the motion or does whatever, or just basically shows up and tries to get a postponement. That's basically what they do. You know, take advantage of that. That might be a good way to get to know other attorneys that can refer you to work on a more regular basis. Consider creating a virtual law firm. The New York city bar association came out with an opinion last year, which you can just look up online. That basically says that lawyers may enter into a business relationship with other law firms and share referral fees even though the other law room is owned by non-lawyers. Keep in mind though that this is not the rule in every state.
Many states do not allow non-lawyer owners of a law practice or partnering with non-lawyers, which is a big deal. So let's say an accountant calls you and says, Hey Cliff, I got this great idea. I'm getting all these clients from the UK that want to do business here in the US, but they need a lawyer too. Let's you and I to team up, we'll do a website. We'll create a blended fee for these people where every, this one-stop shopping. These UK companies can find all their legal and accounting services in one place. Okay. You know that is barred by the ethics rules in most states and you should be aware of that. I think it's rule 7.4 or maybe it might be 5.6 that prohibit lawyers from entering into partnerships with non-lawyers so be careful. If you're partnering with a non-lawyer and sharing the fees with them, if the client is paying both of you individually, and you're just referring business back and forth to each other, that may be okay.
But if you're sharing the fees and splitting them, that might be prohibited by your state ethics rules. Make sure you look at that. Also, watch out for rule 8.4g. This is a rule that is being expanded in virtually all states. It basically says that if you start hiring people, you cannot discriminate in hiring. You also cannot engage in any kind of personal or sexual harassment. So be careful about that. If it's just you, it doesn't matter, but the minute you start adding people, you have to start thinking of yourself as an employer and all the federal and state employment rules and regulations come into play. Okay. Last but not least, what about your exit strategy? Now, one of the first things I said at the beginning of this hour is you when you first start practice, you have to think, where do you want to be in 20 years?
What is your exit strategy? What happens to your clients and your pending matters if you die? What happens if you just go on vacation to the Himalayas and you fall off Mount Everest? What happens to that? You have to have a plan for that. In most states, you are required to designate a successor or attorney who can step in and take over your files in the case that you die or become disabled. You catch COVID or whatever it is, make sure you have a succession plan in place so that you can continue performing your ethical duties even if you're incapacitated, that's number one. Number two, selling your law practice. You have to look at rule 1.17 of the model rules as they are in your state. Every state has a specific set of conditions on this. So for example, there are some states that allow you to sell your book of business and take back a percentage of the gross production.
But there are states that prohibit that. You have to look at your state rules and find out because the law varies a lot from state to state. A lot of states consider that impermissible fee sharing. You can only sell your practice if you get a lump sum payment up front with maybe a two or three-year promissory note with interest at five or 6%, some states will only allow you to do that. Obviously, the better approach is to get some kind of a share of the gross production going forward, what we call royalty payments. So try and see if your state will permit that because that's probably the better way for you to get your retirement income rather than just a flat sales fee. You also must give notice to your clients and advise them of their right to seek other counsel.
You're not allowed to buy and sell people. You can't do that. There's a constitutional amendment that prohibits that, okay, you cannot do that. All you can do is sell the files and give notice to your clients and basically give them a right to opt-out if they so choose. Obviously, your goal here is to avoid as much a trade as possible, and if people were really fed up with you as an attorney, they really didn't like you. This is when you're going to find out for the first time that's the case is when you go to sell your practice. Lastly, plan on buying a tail malpractice policy. Now, you should be aware that most malpractice insurers, if you are a customer for a particular period of years, it's usually five or six years, they will offer you the chance to get a tail policy for free, so take advantage of that if they offer you that.
A tail policy means that if you are ever sued ever in the rest of your life, because of something you did before the policy date or did not do, that policy covers you. It's a great thing to get, but keep in mind that once you sign that policy, you cannot practice law afterwards. And if you do, you are operating without insurance. And if anybody sues you, your home and all your personal assets will be at risk. You can write books, you can participate in bar associate activities. You maybe can even teach, but you cannot represent clients or do things for clients once you sign a tail malpractice policy, there're some movements of foot in some of the bar associations to change those rules, to make them more friendly to older attorneys that maybe want to mentor younger attorneys or whatever and not charge them for it right now the tail malpractice policies that I have seen prohibit kinds of an arrangement.
If you sign a tail policy and mentor a junior attorney and that junior attorney does something wrong, you could get caught up in that malpractice case and the tail policy would not cover you for that. So we are at the end of part one of our two-point program on starting a solo practice. In part two, we will continue. We will talk about some of the rules about client handling. We're going to talk about billing and collection practices. And then we're going to conclude by talking about the ethical rules, specifically, the ethical rules that apply to marketing the solo practice, because that's where a lot of your ethical compliance conundrums are going to come about. You will find that it's very hard to get into ethical trouble just serving your clients on a regular basis. But when you start marketing yourself, you get into ethical gray areas. And we're going to talk about those in the second half of this program, but for now, this is the end of part one. I'm Cliff Ennico. Thanks for listening.