The future for small practitioners

This morning I held a breakfast meeting for small firms of solicitors to discuss the future under the Legal Services Act 2007, when the rules allowing Alternative Business Structures come into effect in 2011. We had an interesting discussion, and I may post another blog about some of what we discussed, but here I just want to mention the business model of running as a consultant rather than a law firm. This is what is happening in society generally, and is something too few solicitors consider when embarking on life outside large law firms.

It seems to be a clever way of operating as a solo nowadays to set up as a consultant rather than as a sole practice. There is a glut of lawyers, and the danger in setting up a solo practice is that you may find yourself trapped in a situation where you can't close down the firm (unless you're willing to pay 6 times your annual Professional Indemnity insurance by way of run off cover), and yet have to continue unless someone either buys the practice from you, or is willing to take over your liabilities.

Many solo firms lack the business and marketing skills required to create a truly successful business that someone will buy off them. The problem is that they set up their firms for the wrong reasons - redundancy, or for lifestyle reasons, and then find it doesn't provide the income they had hoped for.

If you don't set up your own law firm but instead offer your services on a case by case basis to other law firms (usually the larger ones) at far lower hourly rates than you would need to charge if you had your own law firm, you can still work from home, and get to use your expertise, but you stand to make a lot more money. You make more than you were making as a salaried employee, and much more than many solos make who set up their own firms.

You probably need to 'attach yourself' nominally to one of your client firms, who will put you down on their practising certificate renewal application form, but otherwise you are free to work for a number of different firms, and each assignment you undertake will be covered under the insurance of the client firm.

If you find a prospective client who wants your skills, but perfers to have you contract through a big brand law firm then you can refer the work to one of your bigger law firm clients, (collect a referral fee for this) and do the work at your normal rate. Similarly, if the client wants to pay lower fees you can refer the matter to a smaller client firm, again collect a referral fee, and do the work charging your normal rate. The client gets the same expert either way but gets to choose whether to use a large branded law firm or a smaller, cheaper one. You have none of the headaches about professional indemnity insurance. Your hourly rate is low enough to be affordable by either large law firms or smaller ones.

The wrong choice of business model underlies many of the problems solos face. Increasingly as it becomes more and more expensive to operate as a solicitor because of the regulatory overheads being piled up on law firms, why would anyone starting out want to burden themselves with a law firm? If you are a patent attorney, then it's easy enough for you to continue to practice. But for solicitors who don't want to or have nothing to offer if they drop their solicitor title, the solution is to set up as a consultant.

The time for running a lifeystyle law practice is coming to an end. Unless you've got a unique business proposition to offer clients don't set up your own law firm. The promise of lower fees and a more personal service, which you may or may not be able to deliver on, is increasingly not enough of a differentiating factor to win business for a solo practice.

Guest Post from Mark Anderson: Sole or SOLO

My good friend Susan Singleton is a sole practitioner specialising in IP/IT/competition law and a regular correspondent on the letters page of the Law Society Gazette. Her letter in this week’s Gazette comments on the joys of being a sole practitioner. One of the necessary qualities for sole practitioners that she identifies is being “emotionally robust”, which certainly applies to her.

Other qualities that I would identify are:

1. When you start in (sole) practice, it helps to have a steady client base that will stay with you when you go it alone.
2. You need to develop a “gene pool” of contacts who will recommend you or feed work to you to replace the clients who inevitably move on, retire, have no further need of your services, or find someone else whose services they prefer.
3. Linked to the previous point, you need to develop and maintain a reputation as someone who is good at what they do, and a credible alternative to using a larger firm. How you do this depends on your skill-set and temperament.
4. You definitely need to be someone who does not need the social interaction of a large office and can concentrate on work without external pressure.

There are different models of sole practice. Susan has chosen the extreme route of having no support, other than occasionally asking me to baby-sit her clients whilst she is on her holiday island off Panama. My route, as someone who worked at the same firm (Bristows) as Susan for 5 years, and set up my firm about 6 months after she set up hers, has been slightly different. Although still a sole practitioner, I employ six people.

What do readers think are the key qualities for successful sole practice?

A Guest Blog on Why be Solo

Hello Shireen,

You may remember that we met at the last Solo event in London.

My reasons for going 'Solo' are similar yours in that I was looking for flexibility in my working hours (for family reasons) but I also wanted to undertake good quality IP work without commuting to London (I am based in Oxford). (I have written briefly about my experience in an article published in the May issue of the LES Newsexchange.)

Although I was an Equity Partner at a couple of firms, now that I have experienced the freedom of working for myself I think it would be hard to relinquish it!

Having said that, I don't think the benefits of operating a Solo practice are just for the practitioner. I believe that clients can receive better value and support from sole practitioners than they might from larger firms because we can be more flexible in meeting client needs and more adaptable to changing circumstances.

I am a great fan of Solo and, like you, believe that we can all benefit from sharing with one another our knowledge and experiences of running Solo. With that in mind I would be interested to hear what accounts software Solo practitioners are using and whether they would recommend it.

Belinda
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Dr Belinda Isaac
Principal

Why are we sole practitioners?

At the recent INTA conference I met a few sole practitioners from other parts of the world, and had a chance to chat to some of the UK sole practitioner contingent that were present at the Meet the Bloggers session organised by Jeremy Phillips. Finding out why people are now in sole practice is really helpful as you can learn from their experience. So, anyone feeling generous, why not write a piece for us about your story? Where are you now, why are you there, and where are you heading?

In the meantime, I chanced upon Charon QC’s The Blawg here who has posted a podcast interview with a well known sole practitioner, Susan Singleton here The podcast is well worth listening to. Susan is firmly committed to sole practice. Certainly her name is very apt for sole practice.
The reason I myself set up alone was the lack of flexible working options when I wanted to return to work after more than 5 years out of the workplace. Having no family living nearby, and after a year or so of unsatisfactory childcare solutions when I worked part time at Reuters after the birth of my first daughter, I decided to just focus on raising my two daughters. Little did I know how difficult it would be to get back into a suitable job.

No employer was offering the flexibility that I needed for my child care responsibilities when I tried to return to work in 1996. Ideally I wanted to work till 3pm, leave to collect the children from school, and then carry on working later in the evening at home once my husband was back from work. But this was not an option. At the time my youngest daughter was still just 3. So, I ended up doing various consultancy jobs, and even worked for a while in a professional support role at Eversheds. Although the job was part time, it was hardly flexible, and I didn't want to be a support lawyer anyway. So, in the end afer a couple of years back in the work place, I gave it all up. It was simply too hard.

In the process I probably became totally unemployable as I no longer had the distinction of being ‘freshly out of an LLM degree course’ once I began to look around again in 2002.
Setting up my own firm seemed the way to use my legal skills while having enough flexibility to be around for my daughters who were by then 10 and 12. But I was completely clueless about what would be involved in running a law firm, and having my own firm has been a massive learning curve. For example, if only someone had warned me not to have a client account! I reckon I now spend more than £5,000 a year complying with the requirements of the Solicitors Client Account Rules.

Reading business books, such as Sahar Hashemi's 'Anyone can do it' have inspired and taught me a lot about running a business. Also important have been some key contacts I’ve made through networking, including through the Solo IP network. Sometimes when I have lacked the knowledge or skills to do a piece of work completely alone, rather than struggle over it, I have involved another specialist, and this has benefited both me, the expert, and the client. If nothing else this group has the potential to help others in the same way.
In the process of developing Azrights I have become employable judging by the one or two offers I have had to enter discussions about joining existing firms. I also suspect that now I would be able to work flexibily too, because firms would realise that working flexibly does not mean I work part time hours - far from it.

However, having now created Azrights, I have loads of ideas for developing the practice further, and am reluctant to give it all up, and give it all over to a larger firm. A large law firm would just restrict my freedom, introduce a layer of politics I am not suited to, and I suspect many of my ideas would be rejected out of hand by the other partners. So, I intend to stay solo for the foreseeable future – although it would be wonderful to meet like minded individuals to join forces with, as I definitely want to grow the practice.

I am hoping that some of the wonderful sole practitioners I met from other countries will be persuaded to join this group and contribute their stories.