Lawyer Dumpster Dives for Lunch

July 7, 2010 11:51 AM

Family Business Filter: How do I negotiate a salary that reflects my value? How does a firm base salary from hourly billing rate?

I just graduated from law school and am joining my dad in his solo practice. We're in a small Midwest market.

He's offering me $25,000 with the likelihood of managing when he retires in "a few" years. I know I can barely live off that salary in this area, but because I tend to be self-effacing I figured it's worth it if I can manage a law firm sooner than later. But conversations with people I trust, plus my own intuition, have led me to think that I'm being undervalued. I say "intuition" instead of "research" because the market is small enough that any feelers I put out about other employment would almost certainly get back to him, and postings don't usually mention salaries. I do know of one friend employed locally in legal academia who is being paid a salary of $40,000 plus benefits (did I mention I get no benefits?).

My first question is, how to I determine what is reasonable? I know I should go by market average, but like I said I can't exactly look for other jobs. I did figure that he's billing me now at $50/hour. If he continues that (and it will probably go up), then I'll bring $96,000 to the firm if I work full-time for a year. Do you know what a reasonable percentage of their billing hour is paid to new attorneys?

So my next question is, how should I approach this? Because he's my dad, I'm afraid it will turn into a conversation where I'm asking him to give me an allowance or match my cost of living (I would like to move into a nicer place, by which I mean rent around $600-50 instead of a $450 basement). He knows about my financial struggles through school and knows how much debt I have. I would very much like to keep the conversation to my value to the firm as a new attorney instead of my value to him as a daughter. How did you manage this if you work with family?

posted by anonymous to work & money (15 answers total)

This is a bad situation. You should do everything in your power to at least get a formal job offer from an unrelated firm. Then you will be able to back up asking for a reasonable salary if you decide to work for him. However, based on his initial offer, he does not respect you as an employee and you have no reason to believe this will change in the future.

I say "intuition" instead of "research" because the market is small enough that any feelers I put out about other employment would almost certainly get back to him, and postings don't usually mention salaries.

This is positively creepy. If your dad would really be upset about you looking for work at a "competing" firm, maybe you need to move to a bigger town.
posted by 2bucksplus at 12:07 PM on July 7, 2010

Is that $25,000 just to get you on your feet, and then you'll be paid for the business you bring in minus overhead?

Because otherwise that's ridiculous.
posted by Oktober at 12:08 PM on July 7, 2010

You don't have any bargaining leverage without another job offer in hand. If you are worth $40K to another firm then he knows the market value. If he chooses to ignore it that is his decision. And then you get to make a decision. Given that I made $23.5K in my first job with a bachelors degree in 1989, $25K for a law school graduate in 2010 seems way low to me, even with the glut of lawyers in the US these days.
posted by COD at 12:13 PM on July 7, 2010

Is there some reason you can't discuss this openly with your dad? This is business, after all. You're (potentially) going into business with your dad, so treat it like business. If you can't discuss such things openly, you shouldn't be doing it at all.
posted by jon1270 at 12:14 PM on July 7, 2010 [1 favorite]

$25K is ridiculous if you'll actually be bringing in that $96K. Keep in mind, though, that it may take you a while to ramp up to billing full time. So that $25K may be a "starter" salary.

That being said, there are alternatives to just asking for a raise. For instance, you could ask for a profit sharing setup. It's not a bad idea in your case anyway, given that the expectation is that you'll eventually take over the practice. It also gives you the opportunity to propose the idea as less of "I need more money, give me an allowance" and more of "If you want me to take over this practice, give me the incentive to continue making it successful." Ask for a % of profits for the first year -- maybe start with something in the 30% of base salary range -- but also propose that the percentage increase every year as you gain experience and (ideally) bring in new business.
posted by devinemissk at 12:24 PM on July 7, 2010

How small of a market are we talking? Depending on his practice and if he was planning on hiring someone anyway or whether he's only taking you on BECAUSE youre his daughter, he might not be able to offer you more than that. Is there really enough work to bill you out 40hrs*52wks? He may be taking a big cut off his own salary to jumpstart your career. 25k plus some % of new business you can bring in isn't all that bad...if you can bring in new business. If the market is so small/bad that your Dad's firm is just scraping by already, you need to at least look at other options if at all possible.

The more important point is, if you're going to be working with him just the two of you, you need to be able to talk about important professional things like the firm's financials and where the kills come from (and a million other things) or it just wont work.
posted by T.D. Strange at 12:31 PM on July 7, 2010

I've worked at big firms and smaller firms, and I think the key information here is "solo practice in small Midwest market." That is the single factor that will impact salary more than anything else.

That being said, in the smallest firms where the salary was way below market and the benefits were minimal, the carrot was offering associates a cut of any new business they brought in. In that firm, any new client brought in by an associate, the associate got 33% of the billings from that client. Although I do think that finding a competing offer is the best way to gauge your value, I understand that 'small market' may make that impossible to do discreetly. But a proposal that creates and incentive for you to bring in new business ought to be something your Dad should entertain, as it benefits the firm as well.

You might also collect some information about the cost of you buying your own health insurance vs. what a small business plan would cost the firm, and make sure your Dad understands the consequences of not giving you any benefits. The difference in numbers might be an eye-opener for him.
posted by ambrosia at 12:38 PM on July 7, 2010

I . . . make more money than that in a desk job that only requires a Bachelor's in an area with a very low cost of living. Just saying.
posted by PhoBWanKenobi at 12:41 PM on July 7, 2010

I think a lot of us will weigh in and tell you to go with your gut here. But if your gut needs a little prodding, ask yourself if you have any idea what state the books of this practice you'd be inheriting are like! I'd be suspicious of any small business offering such a paltry salary to a new JD or MBA, and want to know why they couldn't afford to pay something at least approaching market rate. Is the firm in debt? Having serious problems with cash flow? There could be all kinds of issues under the surface which your dad isn't sharing when painting a rosy picture of the law firm you could soon be managing.

Even if that's not the case, you need to have a professional conversation with a counter-offer grounded in reality and/or look elsewhere. Or split the difference - take him up on this as a temporary solution, but be clear that at that salary, you're only going to work a 40 (or 30, or 20...) hour work week. Use your free time to job-hunt aggressively, and don't feel guilty about moving on.

Finally, I assume you've checked out Glassdoor, Payscale, and some of the other web tools to let you compare salaries with people of similar backgrounds & geographies? These sites have their flaws, but they're a good first stop for a gut check on what you're worth.
posted by deludingmyself at 12:41 PM on July 7, 2010

$25K is ridiculous if you'll actually be bringing in that $96K.

Actually, it's extremely common that employee lawyers working at law firms are paid 25-33% of the revenue they generate. This has been a common metric for at least the last several decades. At larger firms, you might be towards the low end of the spectrum, for many reasons but the significant overhead is a big one. At smaller firms, or solo practitioners taking on one person, it's very common for total compensation to be 33%-50% of business that you yourself originate, and/or other salary or other compensation based on the hours you bill.

If he is really billing you out at $50/hour, $25k may be about right. $50/hr seems quite low for any lawyer's actual rate for anything that could be called a "market". Was that prior to admission? It would seem an appropriate rate for a rural lawyer in an impoverished area.

Also, your $96k number assumes 1920 billed and collected hours, which I think would be almost unheard of in your situation. It assumes 9-5 billing for 50 weeks minus holidays and 100% collections. Is he instantly going to double or more the amount of work (when measured on an hourly basis) being performed by the firm?
posted by iknowizbirfmark at 12:46 PM on July 7, 2010

He's offering me $25,000 with the likelihood of managing when he retires in "a few" years. I know I can barely live off that salary in this area, but because I tend to be self-effacing I figured it's worth it if I can manage a law firm sooner than later.

Is it really realistic for you to be managing a law firm "in a few years"?

First, does he have an actual timeline for retiring? If so, do you think he'll stick to it? Is he the sort that's likely to be satisfied by a retirement lifestyle or would his retirement continue to involve significant day-to-day involvement in the company? Because it sure sounds like the type of situation where ten years could pass with him "retiring soon".

Second, is he the sole attorney at this law firm? Now I'm not a lawyer and only have a cursory knowledge of law firms. But if this law firm has other attorneys besides your father, especially attorneys with significant experience, I can't imagine they'd be excited to have your father retire and you step in to managing the firm, bypassing them. Why wouldn't they jump ship or fight your promotion?
posted by 6550 at 1:07 PM on July 7, 2010

Geez, I completely missed the solo practice bit. *facepalm*
posted by 6550 at 1:12 PM on July 7, 2010

My mom made about $20,000 her first year as an attorney (2007,) solo practice, picking up guardian ad litem, contract drafting, and public defense work in four rural counties plus one mid-sized city. I would be shocked if you were bringing in anything close to $100k in billable hours. You need to know all about the firm's finances for all kinds of reasons; either ask for that or resign yourself to job hunting.
posted by SMPA at 3:22 PM on July 7, 2010

How small an area are you in?

Call your local PD or DA office and see if you can find out what the starting salaries are there -- in my area that was a mid range for smaller firm salaries as well.

This may also be a great opportunity to get something out of your law school's career services -- even if it's out of state, they should have some idea of the starting salaries in various locales and specialties.

And, as anecdata, as the first and only associate in the small practice where I worked before my partner went back to being solo, I got 10% of the collections on the clients I brought in, and a bonus once I billed my salary and individual overhead.
posted by freshwater at 9:16 PM on July 7, 2010

think of yourself as a associate or partner and not a grunt worker, approach joining his firm in terms of business development and not just a worker, he is after all running a business.
posted by inlimbow at 1:46 PM on July 20, 2010