Sweat Equity Is B.S.

How can I put this? I have learned it the hard way myself. The notion of sweat equity is unreasonable, it represents folly, it is a farce, it is a crazy concept, and it is just plain crap.

Law firms, by and large, do not have equity in any sense that a lawyer can realize.

It is a concept which means that the attorneys are trying to build a law firm should not pay themselves a salary while they are trying to build the law firm. In other words, the attorney should work for nothing.

You hear this a lot from newly minted attorneys that go out on their own. They speak of it in terms of paying for their education. That is a silly statement as well. They have already paid for their education many times over.

I tremble when I hear these statements.

When I speak of a salary, it might not be a fixed amount, but it does represent money that needs to be taken out of the firm to properly and respectfully feed and care for the family.

I do not know of any law firm that has failed because the attorney paid himself a reasonable amount of money. The failure of a law firm, as the failure to pay the lawyer money, often represents much more serious financial problems that indicate the law firm is not working out well.

Sure new law firms often lack enough quality clients or cases, but this is cured by our ingenuity. When you as a lawyer need cases and money, you will get out and find cases and money. If you do not get out and find it, you are asking for failure.

The bigger problem is a problem of too much overhead and debt. It still astounds me sometimes that new lawyers and new firms, without cases or clients, will go out and incur debts and liabilities. They will not think first how to make a living for themselves. It is counterproductive. It is harmful. It is a recipe for failure.

I do not know why this happens.  Maybe it is because we lawyers are just overly legalistic and into fictional organizations. But, I see most new solo attorneys go out and spend money to incorporate, which also increases the ongoing cost of doing business.

I see newbies lease space, bring on a legal assistant, hard wire phones, pay for professionally designed websites, conjure up advertising needs, buy new computers, buy a new car, join a bunch of unnecessary organizations for their needs, and generally guarantee they will not be earning in a salary or money for themselves.

Lawyers need to structure and build a practice reasonably to pay themselves and not to cover expenses.

The sweat equity rational only tends to mask the problems of a new law firm.

Just ask yourself where your law firm would be without you? The answer is nowhere. Would you work to keep someone else's law firm going without being paid? I doubt it, and you should not do so with your own firm.

The rewards of the practice of law should be yours.

Comments

[Vivian Rodriguez]

I couldn't agree more! I think the follies you write about stem, in large part, from two facts: (1) lawyers don't get taught the basics of running a business in law school, and (2) once we get out, we buy into a lot of the hype of what used to be "big law."

"When you as a lawyer need cases and money, you will get out and find cases and money." Exactly! And while it may be a trickle in the beginning, keeping to it will make it grow...