The Secret to Transitioning from Lawyer to Entrepreneur

I did the direct client service thing for many years. I liked it, too.

For the most part I felt like I added value to the world, but sometimes the clients drove me bat-shit crazy. They would do or say things that made me want to jump in front of a bus.

There are a substantial number of lawyers, however, who don’t experience sudden suicidal urges like mine when working with clients. They love caring for people in the community, solving problems, and feeling pride in a job well done. They love their work, no doubt.

We’re all different. We have different experiences and perspectives. We each derive satisfaction from different elements of the practice (and business) of law.

After many years serving clients while managing a business, I realized that serving wasn’t how I derived satisfaction.

I’d had enough of the lack of clarity that comes from splitting my time between two functions. I knew my time was more valuable when I spent it making the business run more efficiently and effectively. I was certain the business would be better off if I built it up, rather than getting bogged down by the daily minutiae.

I had reached my limit. I wanted to work exclusively on the business, not in it. It was time for me to make a switch.

That’s when I stopped serving on the front lines, taking calls, appearing in court, handling consultations, etc. I moved to the back office and led the team from behind the scenes.

Nevertheless, I was still sucked into daily tasks. I had emails to answer, client calls to return, and endless questions from my team to resolve. I was still spending considerable time in the business, long after I decided to switch to working on the business. As sure as I was that this plan was right for me, I struggled with the transition.

I fantasized about a time – far off in the future – when I would have the freedom, space, and energy to fully shift my focus from in to on. I could see that version of my business off on the horizon, but as I ran toward it, it seemed to move further away.

My time working on instead of in the law firm has inspired most of the insights I’ve shared here over the years. I’ve been involved in every element of my practice. I went from working in someone else’s firm as an associate to working all by myself in a makeshift office fashioned from a former hallway.

For a while, I served my clients without assistance. Over time, I grew the business to nearly fifty team members. I found it necessary (and inviting!) to spend my time working on instead of in. In fact, I found working on much more pleasurable than directly serving clients.

Make the switch from in to on

There’s no reason to wait to make the switch from working in your business to working on your business. If the decision is right for you, it should happen quickly.

Today I’m going to talk about whether making the switch is sensible for you. As someone who made that switch myself (possible prematurely), I have special insight into how the transition plays out. (Hint: It’s not all rainbows and sunshine.)

So when is the right time to stop serving clients and focus on your business’s growth and success? Is it now? Sometime in the future?

It depends.

Don’t you hate when the answer is “It depends”? Don’t worry, I’m going to answer the question, but it really does depend on a number of considerations. Let’s go through each one to figure out if now is the right time for you to make the switch.

1. Do you enjoy client service?

Some lawyers want to get busy working on instead of in the practice because they hate dealing with clients. They assume, mistakenly, that working on the business will insulate them from the day-to-day client interaction that prevents their happiness and satisfaction.

Working on the business doesn't separate you from clients. In fact, it increases your involvement in the messy stuff. Upset clients always want to talk to the boss.

Unhappy clients file grievances, too, which get managed by the boss. Then they file malpractice actions. The people working on the business deal with those too.

Sometimes the desire to switch from in to on is just a symptom of the need to get out of the legal profession entirely. Let’s face it: Being a lawyer isn’t for everyone. It's not always mentally stimulating, enjoyable or satisfying. Lawyer books on “alternative careers” are perennial bestsellers.

Did you know there is work you can do other than practicing law?

You can quit. Yes, you'll still owe your student loans. Yes, you’ll have wasted three years of education. And all those years gaining experience? Wasted, too.

But maybe you’ll be happy.

You need to seriously consider whether you’re looking to move away from client interaction because you hate being a lawyer. Working on a law firm doesn’t turn it into Disney World. It’s still a law firm. It’s still a business that requires serving many unhappy, upset, and irrational people in unfortunate situations.

But you don’t have to do any of it. You can always walk away.

Decide for yourself whether your desire to switch roles stems from a need to deliver better service to your clients, or if it’s driven by a need to avoid clients altogether. Switching roles without the right motivation is just a stalling tactic to keep yourself employed while you find your true passion.

The sooner you gain this self-awareness, the less time and energy you’ll waste before you can find real happiness.

2. Do you believe others are like you?

Most of us are driven. We're motivated, inspired, and love learning. We wake up in the morning, excited by the challenges we'll face each day. We're the type who make task lists. We have a plan for where we’re going.

But that isn’t true for everyone. Unfortunately, most of us have a hard time accepting that other people see the world differently and have different agendas. We spend hours asking ourselves “why did he do that?” as we watch the behavior of others. They do it differently because they have different interests, ideas, plans, and priorities. They are not us.

You'll be miserable working on the business if you believe that others think the way you think. You'll add to your frustration if you hunt for employees who think and function like you. They're few and far between, and you'll be regularly disappointed.

Most people need direction, management, and frequent communication, guidance, and feedback. Most people are not self-starters who see the big picture. You'll be frustrated if you believe that others ought to think like you, act like you act, and hold your beliefs.

People are people and they all come with issues. If you think clients are challenging, just wait until you're dealing with associates all day long. They have personal issues, work issues, and workplace issues. The problems never stop. There will be conflict, emotion and complexity. Working on the business often means working on your team.

Working on the business includes managing people who are experiencing tough times. That sounds just like delivering legal services to clients, doesn’t it? Much of working on the business includes the same issues as working in the business. It’s not always different and it’s not always better.

3. Will the change make you more money?

The firm will likely grow as you move from working in the business to working on the business. Simply throwing a resource (you) at a problem will have an impact. Freeing up your time and devoting it to the right things will cause growth to happen, which is good.

But growth doesn’t necessarily improve your bottom line. It’s possible to be bigger and be less profitable.

It's likely, especially at first, that you'll grow the top line, increase the bottom line and still take home less money. That's because you'll be paying someone to do the work you previously handled. Your income was (most likely) attributable to your client service efforts. Paying someone else to do that work will come straight out of your pocket.

You’ll make more money eventually as you continue to develop your marketing, refine your management, improve your technology, and employ financial management strategies. It won’t happen immediately as each of these improvements takes time to impact the business. Each step will take attention, energy, and experimentation.

4. Do you have the skills and interest?

There’s little point working on your business if you don’t have the strength or interest.

Most lawyers get excited about handling cases and advocating for clients. Running a business just isn't on their radar. They operate the business because it’s required in order to achieve their real goal of serving clients.

Many lawyers don’t have much vision for their business. If they wanted to run a business, they’d have gone to business school, right? They don’t want to set goals, assemble a team, create a culture, manage cash, or implement a marketing strategy.

If you don’t have the passion to run and grow a business, you won’t develop it. Pushing yourself to do something unpleasant isn’t unsustainable.

Some of us, however, love running a business. In fact, many successful business leaders are educated in the law. Quite a few examples come to mind: Peter Thiel (Palantir), Summer Redstone (Viacom), and Samuel Robson Walton (Walmart). These smart lawyers quickly realize that their skill set is better employed in industries where there's more transferable value creation and larger markets.

If running a law firm is your choice, don't expect to be good at it automatically. Most people become stronger business owners in two ways.

  1. They learn by making big, painful, expensive mistakes
  2. They aggressively seek out educational opportunities.

You'll need to devote time, money and energy to building your skills. Most lawyers that make the transition are decent at marketing. Unfortunately, they lack skills in management, technology, and finance. Making a business work requires a comprehensive understanding of all the issues.

5. Can the business support management?

Many lawyers decide to step out of the client service role far too early. They do it long before the firm has any traction. They get distracted by a few good months of revenue and decide that they're Warren Buffett. Sadly, when they lose an associate or have a bad month they're back in the courtroom.

Many small businesses can't afford a management layer. They're just too small and the need for management isn't significant enough to justify the cost. For instance, a three-employee firm generating one million dollars in revenue doesn't require a full-time manager. There's just not that much managing to do.

I meet a lot of lawyers who have a plan for giving up client service in order to devote themselves full-time to marketing. That’s a great idea if you have the capital, but most firms don’t. If you can afford to slash your income to pursue more clients, do it. But if you can’t sustain the business, you need to run your numbers carefully and bootstrap one step at a time.

Truthfully, this is a resource allocation question. Firms with under a million dollars in revenue aren’t ready for a full-time marketer (or a full-time anything that doesn’t play a direct service role) unless the owner has outside resources paying his/her living expenses.

6. Does the business generate return on investment?

Some lawyers expect the business to generate a return on their investment. They figure, logically, that they own a business which took years to create. They believe it has a significant value and they expect that value to translate into some sort of income.

They assume that the business generates a profit beyond the reasonable value of their work. That profit should cover some, if not all, of the short-term cost of their move from in to on. Unfortunately, many law firms aren't sufficiently established to generate much profit.

You should think of your business as an investment. Again, it's useful to have a realistic sense of the asset you own and how it compares to other assets. Understanding our assets enables us to make smart financial decisions and gives us a sense of how to develop our vision for a path forward.

Some lawyers imagine a future in which they replace their role in the business with a professional team which handles all of the work while they cash checks on a beach in Turkey (beautiful beaches there, by the way).

Let’s do some math to determine if the numbers will support a beach lifestyle.

If you had ten million dollars invested in mutual funds, you'd reasonably expect a return on your investment. That return would come in the form of dividends or growth of the principle.

If you own a law firm worth ten million dollars, you'd expect the same kind of return. If you can't get the same (or better) return on your business, it would be logical to sell it and invest the proceeds.

When I talk with other lawyers about the health and growth of their business, this is the part of the conversation that becomes awkward. I explain the return they should expect from the business. They state their thoughts about the value of the business. Then I do the math.

Invariably, the return (after factoring in a replacement for their labor within the firm) isn't comparable to what they'd make in the stock market. I suggest selling the business and buying mutual funds. That leads to more discussion of the valuation, liquidity challenges, and the limited number of prospective buyers.

That's when they start connecting the dots and discover that the return on investment is the best place to start when calculating the business’s value. The assessment of their situation is revealing, sometimes distressing, but undoubtedly realistic.

I'm not suggesting that law firms are impossible to sell or that they lack significant value. I am, however, telling you to be realistic. I've found Built to Sell very helpful in wrapping my brain around the possibilities and developing an action plan.

Understanding the value of the underlying asset is particularly helpful in refining your mindset as you contemplate moving from in to on. It's a perspective most of us lack as a result of the holes in our training. You need to think of the business as an asset, and you need to understand how the financial numbers work now and how you might choose to impact value.

So what's the answer?

Should you make the shift from working in the business to on the business?

Yeah… It depends.

There's quite a bit to consider and it only makes sense once you've established a solid foundation. It's essential that the switch is something you're equipped to handle and that it’s something you want to do. You also need to be prepared for the short-term financial impact of losing your labor on the front lines.

If you’ve decided that moving from in to on makes sense for you and your business, then it’s time to make the switch. That begs the next question: How do you do that? How do you extract yourself from in so you can spend your days working on?

1. Think differently

Play a game with me. Suspend disbelief and step into a world unaffected by things like the ethical rules of nonlawyer ownership of law firms. Do the following:

  • Pretend you don’t have a law license.
  • Accept that you own a law firm.
  • Accept that the law firm is an essential source of your income.

What do you do today? What’s your next step? How do you get that call returned? How do you get that e-mail answered? How do you answer employee questions and accomplish your daily tasks? How do you attract clients? How do you handle consultations? Who does the legal work?

What if you weren’t able (because in this scenario you don’t have a law license) to serve your clients? Who would do it? How would it be managed and supervised? How would the clients be treated? How would the firm practice law?

Answering these questions shifts your brain from in to on mode. They start the ball rolling as you think about what needs to happen to shift your role.

2. Start doing the on stuff.

You’re ready to focus on the business’s growth. You want to bump up the bottom line. You’d like to take home a little more money, do a little less work, and have less client-related stress. You've got a realistic understanding of how this will play out and you're committed.

What do you do to make the transition happen? Where do you start?

It’s simple, really. You just do it. You start working on the business and stop using yourself as the default person to work in the business.

When the phone rings, don’t answer. When email arrives, don’t respond. When the client freaks out, don’t talk him off the ledge. When the deadline approaches, don’t jump in and finish the work. When the fee is due, don’t collect.

3. Have someone else do client service work

In practice, delegating is simple: Transfer all of your client work to someone else.

“But, but, but,” you say. “I could have done it. It would have been done right. It would have been quick and efficient.”

Yeah, that’s true.

But then you’d be working in the business instead of on the business. If you're going to focus on the business, then focus on the business. Let your team focus on the day-to-day client management.

4. Accept a messy transition

Of course, the transition will be stressful and frustrating. You’ll even make less money for a while. There’s no way to make more money until you start adding more value. If you’re good at working on the business, you’ll make more eventually.

Knowing that the transition from in to on will actually cost money should put pressure on you to start adding value quickly so revenue increases. You need to see quick financial results.

5. Allocate your time and money carefully

There will be a moment after you make the transition that you’ll have little to do. Once you’re out of the client service role and your marketing machine begins to accelerate, you’ll find yourself with moments of calm.

When that happens, don’t let your foot off the gas pedal. Don’t be tempted to take a break from working on your business. Most importantly, don’t jump back into your old client service role. You are in a financially vulnerable period. Press forward into the unknown. Move quickly.

You'll likely add value fastest by applying more energy and resources to marketing. Balance this by making it possible for your staff to cope with the work increase through better management and technology. Building clear financial dashboards will help you identify and address issues before they arise and create problems. This balance requires vigilance. Change is difficult.

Devoting a big percentage of your day to marketing may feel awkward. Marketing often involves taking chances, risking failure, and feeling vulnerable. You picked a path into an uncomfortable arena. Don't back away when the expected discomfort manifests.

Move forward. Keep going.

6. Resist the pull to return to working in your business

The transition is difficult and it takes time. You can’t flip a switch and suddenly appear in your new role. There are forces that will suck you back to your old role.

Most lawyers don't survive the switch. They let the tide pull them back into client service. You have to really want to make the move stick for it to become permanent. You need drive to transition because life resists change. If you've ever tried to lose weight, start exercising, or quit a bad habit, then you know what I mean.

Making change stick is incredibly hard. It's easy to slip back into our former role. You'll make justifications like “Good help is hard to find,” “Only I can do this,” or “The client prefers my work.” (The no-one-else-can-do-it-but-me mentality is quite a disease.)

It's easy to blame an event. An associate will leave and you’ll rationalize returning to your old role. A client will demand your service and you’ll rationalize. Someone will have a crisis (health, financial, legal, whatever) and you’ll rationalize.

It’s easy to talk yourself right back into working in your business. Resist.

Now it's time to decide

If you actually want to work on the business instead of in the business, then do it. It really is that simple. But simple doesn't mean easy.

At this point you have a better feel for what it means to shift from in to on. This shift is not a way to make a hard job easy. It’s not a way to avoid clients. It's not a way to skip messy human interaction. It's a tough job that's different than serving clients directly, but still difficult and stressful.

Your understanding gives you options. You only have a few:

  1. Keep doing the work and serving the clients. Working on the business full-time isn't for everyone. It’s okay to accept that it isn’t for you.
  2. Recognize that delivering legal services simply doesn’t make you happy and look for alternative work.
  3. Use your newfound perspective to hire someone to focus on the business so you can keep serving clients.
  4. Make a transition from in to on. Embrace learning something new and building the value of your asset.
  5. Throw yourself in front of the nearest moving bus.

Options are a good thing. Choices give us a way up and a way out. They give us control, which makes us feel better.

I hope my experience illuminates the path for you. I hope you've gained a perspective that helps you decide whether you'd rather be working in or on and helps you find the path to get where you want to go.

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