Mastering Money (Part 1): Leveraging Independent Contractors
Starting and growing a solo law practice is an exciting venture, but mastering the financial side is crucial for long-term success. As a legal entrepreneur, there are numerous ways to maximize earnings and streamline savings. In this article, we will focus on one of my favorite key strategies: leveraging independent contractors as support staff.
Leverage Help
It's a known fact, but as a business owner, your hours are limited. Working not just “in” but “on” your business means you can't bill for every hour to a client case. To keep your client files progressing and maintain momentum on cases, you need a team. While some prefer being "true solos" to avoid the complexities of payroll and office space, there's a solution: independent contractors.
Also known as virtual assistants, freelancers, or 1099 workers, these professionals set their own schedules and rates. You hire them as needed for projects or hourly work, without the obligations associated with traditional hourly or salaried employees.
Types of Situations for Independent Contractors
At our firm, I leverage independent contractors in various capacities:
Bookkeeper: Manages law firm bookkeeping.
Legal Assistant: Handles administrative tasks with flexibility.
Paralegal: Shared with other lawyers for case support.
Free lance Attorney: Assists in writing briefs or demand letters.
These roles are distinct from what I refer to as “vendors” like court reporters or process servers, though they also receive a 1099 from our firm.
The Benefits of Working with Independent Contractors
Consistency: Independent contractors rarely quit as freelancing is their business, reducing the need for frequent training.
Time Tracking: They track their time, making it easy to bill or have them log hours into case management systems.
Cost Savings: In lean periods, you can refrain from assigning tasks, saving on expenses.
Profitability: Billing their time at a higher rate than you pay them contributes to your firm's profitability.
Simplified Payments: No payroll processing; payment is made directly through platforms like Venmo or PayPal.
Networking: Independent contractors often make referrals, expanding your network.
Freedom: You work whenever or wherever you want and they do, too.
The Cons of Hiring Independent Contractors Compared to Full-Time Employees
Workload Challenges: Unexpected spikes in client work may find contractors too busy, although this is rare.
Scheduling: Contractors set their own schedules, requiring more lead time for project completion.
Firm Cultural Buy-In: They may not share the same firm culture or values as what you can teach a traditional fulltime employee because they are working with other firms or professionals.
Remote Work: Administrative tasks like mailing or handling deliveries may fall on you.
Higher Hourly Rates: Independent contractors may charge higher hourly rates than traditional employees.
Leveraging Independent Contractors for Flat Fee Clients
The biggest bang for your buck on flat fee cases is to delegate as much of the non-attorney work as you can to ICs. Here is an example of a flat fee estate planning client file, but it can apply to almost any flat fee legal work:
Price for Basic Estate Plan: $1200
You Work: 3 hours on the case doing what only you can do (meetings with clients, drafting customized language).
You hire an IC Legal Assistant that spends a total of 1.5 hours on the file at $30/hour.
You hire an IC Paralegal that spends a total of 1 hour on the file at $40/hour.
Total out of pocket = $85.
Your profit: $1,115. Divide that by the 3 hours of work you did, your billable hour on that case was $371/hour.
If you worked the full 5.5 hours instead of delegating the work to an IC, your hourly billable rate goes down to $218/hour!
By outsourcing some tasks to independent contractors, your effective hourly rate on the case skyrockets!
It’s a no brainer.
Where to Find Independent Contractor Support
Finding the right IC is not easy. It takes trial and error. You can begin by joining your local bar association Solo/Small Section and email list serv, where you can connect with attorneys who may be willing to subcontract services or refer someone to you. Platforms like UpWork and LawClerk.com are also excellent resources. Consider law schools for potential candidates and, as a last resort, explore mainstream job platforms like Indeed.com or LinkedIn.
