The solo practitioner as entrepreneur
To leave the safety of the pack to go out on one’s own is risky, but there are rewards.
By training, and perhaps personality, lawyers are risk-averse. Our job is to mitigate and manage risk. Conversely, risk defines the entrepreneurial endeavour; without it the reward would be undermined. Is it possible to reconcile the two? The answer is the sole proprietorship.
Two years ago, I left a safe and comfortable position as a partner in a national law firm to start my own firm. I had been practising for 18 years, and it was something that I thought about often. I had spent my career at national firms and had no idea how trust accounting worked or the difference between a general ledger and a trust ledger. But I knew I wanted more control over my practice, my overhead and, my schedule. I wanted to take on mandates on my own terms.
What stopped me each time I thought about going out on my own was fear. I was afraid of how I would attract clients, how I would produce a reliable recurring revenue stream, how I would obtain office space, how I would run a trust account and how I would hire and retain staff. Moreover, overhead was a nebulous concept. It was a baseline of the firm’s expenses, but I had no understanding of how expenses were allocated. Put simply, I was afraid of the business side of the law.
Large firms deleverage and offset risk by having multiple practice areas and multiple partners. When M&A or banking work is in a in a slump in a firm, the insolvency or litigation groups often are busy, which stabilizes revenue within the firm. Cross-selling is also a key benefit of the large firms, as in-bound referral work can help technical lawyers who lack business development acumen. Decision-making is also shared, with more minds at the table focused on achieving short and long term strategy goals. Costs and expenses are de-risked through the sharing of overhead. And a handful of national firms offer the ultimate safeguard: a pension. For better or worse, the sole proprietor bares all the risk on her own. She has to weather a downturn in her practice by reducing her expenses or exploring new practice areas. She has to decide on her own whether she should allocate resources to marketing or to improving the firm’s system.
In-house counsel, who often leave private practice in the hopes of being involved in enterprise, have prescribed positions within their organizations. These positions also offer a reprieve from grueling billable hours and daunting business development mandates. But they rarely involve taking risk or making business decisions. Though there are some very challenging, interesting and lucrative in-house positions, the lawyers that occupy them, are not often stakeholders in the enterprise.
The sole proprietorship is suitable for a practitioner who wants to operate a business on her own terms, without the benefit (or hindrance) of a collective partnership. Although it promotes growth through shared overhead, partnership may also hinder growth through client conflict and office politics. There are accounts of lawyers rallying hard to bring in clients only to be advised by their partners that the new clients are not welcome due to conflict or a perceived conflict, or of stories of clients being turned away because of the unlikelihood of their work generating enough revenue for the firm.
To leave the safety of the pack to go out on one’s own is risky, but there are rewards. Many rewards. They include the freedom to devise alternative fee arrangements, to be an innovator in offering clients a different way to pay for legal services, to target clients whose vision, values or market presence align with one’s own, and to create value on one’s own terms. The sole practitioner has the autonomy to produce a business model that defies industry convention, test the model in the market and make adjustments, as necessary, quickly.
When I launched my practice two years ago, I was acutely aware of what was required to create a competitive practice in a mid-market city such as Vancouver, appreciating market sensitivity surrounding fees and the size and volume of transactional work prevalent in the city. I implemented a business model that had some inherent risk, but if executed properly, would prove to be a successful enterprise. In doing this, I transitioned from being a lawyer to running a business. The sole proprietorship provided the platform for me to become an entrepreneur.
