It’s that time of year again. The time of year when I curse and gnash my teeth at the self-employment tax. Remember in the 90s when there was a lot of talk about granting the president a line-item veto? I think each taxpayer should have the ability to cross out one line of their tax return. My life would be even better than it is now if I could cross out that self-employment tax line. Hey line 57: I’m coming for you.
Until we can get rid of the hated line 57, the only thing to do is to make more money. I haven’t quite mastered that one yet, but through trial and error I think I can speculate as to some dos and don’ts that might help us on our way to those fabled lawyer riches.
Do… sell sell sell. Have to bring home the bacon. Young entrepreneurs are often told to always be fundraising. Well, lawyers need to always be selling. “Howdy, stranger. I do [this]. Keep me in mind.” You never know when the ground is going to fall out from under you. Just because you’re busy doesn’t mean you shouldn’t be telling people how great your practice is. Maybe your biggest client will go belly-up next week, but the person you met a couple of months ago will decide you’re the person to carry her company forward, and that company will take your (now former) client’s place. You never know. Like my girlfriend says, just because we’re in a loving relationship doesn’t mean she has to delete her Tinder app.
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Don’t… oversell. Don’t get so slammed you can’t get back to people timely and can’t get anything done and aren’t responsive. You could lose all your clients at once, or at least a chunk of them. And the ones you don’t lose might not want to pay the bill for your sucky service. Not going to make money that way.
Do… have people billing for you. Even if you have managed to have a nice high hourly rate, there is a natural ceiling there. Much better to have people under you billing time, so that when you’re on vacation or brushing your teeth or at a baseball game, someone is back in the office (or at least on their laptop) making you money.
Don’t… only rely on others to bill. The math doesn’t work until your firm is highly leveraged. If your rate is $500 and the associate is billing $300, sure, you’re clearing quite a bit off the associate, but you’re obviously not clearing $500. Gotta bill some hours yourself.
Do… keep overhead low. Some expenses you need, like administrative help, internet service, trusty printers, and beautiful Keurig machines. Some you might not, like know-it-all new grads, color copiers, and little bottles of mouthwash in the bathroom.
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Don’t… splurge. Or at least try to control your splurging. It’s so easy to say to yourself, I work so long and so hard. I deserve [insert wasteful spending item]. Resist.
Do… mix business and pleasure. Hey, doesn’t business suck up a huge chunk of your time? Date people in the office, talk about work, then write it off.
[Note: the above does not constitute tax, accounting, emotional, or other professional advice. Readers should consult their professional advisers prior to acting on the information set forth herein.]
Do… collect. This one is important! Have one person in the office known as “The Enforcer.” Preferably someone who looks like this guy. If there are no burly, bearded, blue-eyed guys around, make up someone and talk about the person in hushed tones. “Shhh… better pay up or I’m going to have to call… Janet” and then have people in the background scream.
Don’t… get sucked into a “volume practice.” You can kill yourself with work just trying to keep up with non-“volume” practices, so why would you have a volume practice that depends on seeing ten (10) different people a day? Much better to concentrate on two to three matters a day, from both a sanity standpoint and a collection standpoint.
Do… track financials. You don’t want to be waiting until you’re doing your taxes to try to figure out an entire year’s worth of financials. It helps to see your firm’s financial progress throughout the year, especially in planning for the future in areas like staffing and determining office space needs.
Don’t… give up. The older you are, the higher your rate, and the more you know what you’re doing. Happy days are just around the corner, provided we can get rid of the dreaded line 57.
TL/DR: Do good work (and maybe if you’re charming you can even get by with passable work), keep your employees busy and happy, collect all your fees from clients, and then keep doing it until you’re done. Really, anyone can do it.
And line 57 – screw you.
Gary J. Ross founded Jackson Ross PLLC in 2013 after several years in Biglaw and the federal government. Gary handles corporate and securities law matters for venture capital funds, startups, and other large and small businesses, as well as investors in each. You can reach Gary by email at [email protected].