Starting A Law Firm Is Not An Easy Solution For Unemployment

Many people should not hang out a shingle just because there are fewer job openings right now.

The ongoing COVID-19 pandemic has had a massive impact on the legal industry. As detailed at length on this website and others, many law firms and in-house departments have been forced to furlough or terminate employees due to economic issues caused by the pandemic. The amount of job losses within the legal profession may even rival the losses experienced during the Great Recession. Since the job market is competitive right now, and the ongoing pandemic does not appear like it will subside anytime soon, many jobless lawyers may be contemplating starting their own law firms as a solution for unemployment. Indeed, numerous people have been asking me recently about hanging out a shingle, since I myself took this step about a year and a half ago. However, starting a law firm is not an easy solution for unemployment, and many individuals should not hang out a shingle just because there are fewer job openings in the present environment.

One of the main reasons why people should not rush into starting a law firm if they find themselves out of work is because opening your own practice takes substantial planning and saving. It takes a long time to make money after starting a law firm, and people need to save and think about how they will pay for all of the expenses associated with starting their own practice. I personally planned on starting a law firm nearly a year before I gave my notice to my employer so that I could think about all of the practicalities associated with launching my own shop. I also took that time to save up money that I could rely upon when starting a law firm. It takes a substantial nest egg to secure the malpractice insurance, office space, technology, and other resources needed to launch a successful law firm, and it may be difficult to save this sum if you start a law firm shortly after losing your job.

Another reason why it rarely makes sense to consider starting a law firm as a solution to unemployment is because it takes time to build a law practice. Indeed, it took me months to build my book of business, begin effective advertising, and see cash flow increase from invoicing. Luckily, I was fully committed to my practice, and I wanted to start a law firm not because I did not have other options but because I wanted the lifestyle of being my own boss.

If you start a law firm because there are few other employment opportunities, you might not have the commitment and drive needed to weather the storm in order to build a successful practice. Indeed, I have friends who started their own law firms, but their practices failed because they were not totally committed to running their own shop. Other friends of mine failed to launch successful firms because they just did not give their practices enough time to grow and develop. It is extremely difficult to start a law firm, and if you do it out of necessity, you might have a lower chance at being successful.

Another reason why starting a law firm is not a good solution for unemployment is because launching a firm could actually hurt your future prospects of landing a job at an established firm or in-house department. Many employers like to see applicants who have experience working at respected shops with which they are familiar. However, if a manager sees that a candidate opened his or her own shop, it might reflect poorly on the candidate and seem like they had no other option but to run their own firm. In addition, working for certain types of clients could make it difficult for you to abandon your practice for other gigs. For instance, if you make an appearance in court on behalf of a client, it might be difficult to leave the client hanging, unless you have another lawyer lined up who could continue the case or you can bring the case to a new firm. As such, operating your own law firm could limit your options should you wish to make a career change.

Furthermore, right now is likely one of the most difficult climates to open a law firm in recent memory. The demand for legal work has dried up in many practice areas, and competition for legal services is very high. In addition, lawyers looking to make new connections cannot do in-person pitches, attend networking events, or pursue many of the other strategies lawyers use to develop new business. Even if you wanted to begin your own law firm for years, it might make sense to hold off on your plans until the economy improves.

It is difficult to predict the future, but there are some signs that the job market will improve relatively soon. Some firms are retracting their earlier pay cuts, and I have anecdotally heard of hiring picking up in some sectors of the legal industry. In addition, I do not want to imply that starting a law firm is always a bad choice, since I have truly enjoyed my experience running my own law firm, and you can make a good living with your own practice. However, I launched my firm over a year before the pandemic hit, and the economic climate is different now than it was then.

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All told, unemployment is tough, and it can be frustrating to search for jobs in a down economy with little to show for the effort. Although starting a law firm can be an enriching experience, the decision to open a shop should not be made lightly, and starting a law firm should not be viewed as an easy solution for unemployment.


Jordan Rothman is a partner of The Rothman Law Firm, a full-service New York and New Jersey law firm. He is also the founder of Student Debt Diaries, a website discussing how he paid off his student loans. You can reach Jordan through email at jordan@rothmanlawyer.com.

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