When is the right time to Start your own Practice?
Starting a practice is an extremely sensitive topic for many lawyers and is certainly not for everyone. There are many factors to consider: practicing law vs operating a business, managing a payroll vs receiving a payroll, taking on personal liability over and above what professional insurance will cover etc. Taking the jump to starting your own practice comes with many of these different types of responsibilities and much has been written on it apart from this article. This includes how to network, acquire your first clients, how to hire and manage employees, how to raise start-up capital etc. But this is not the purpose of my writing this article. Instead, the purpose of this article is to tackle the question when is the right time to start a practice? Obviously, the right time depends on your particular circumstances and goals. However, a general analysis should be conducted internally on the subject of risk: the best way to answer the question of when is the right time to start a practice is to substitute a different question – what is your risk tolerance? Based on the answer to this question, the right time to start your own practice may be “never” or “immediately” or somewhere in between. Let me explain.
Many people, especially lawyers, mistake risk for probability of adverse consequences. As an example: lawyers may state that a client’s case or strategy is “risky” and will apportion a certain percentage of success or failure based on the information and available case law (ie “there is an 80% risk you lose your case with this information based on the law”). But this has nothing to do with risk – this is simply a prediction of an adverse consequence and it is a prediction based on a person’s discomfort. For example, there might be an 80% chance of losing a case, but if a client is comfortable with having to pay the costs of this loss for some other reason, and is willing to bet on the other 20% chance of success, then there is very little risk over all in proceeding – it is a win-win or low risk for the client even if the lawyer is uncomfortable with the risk. Similarly, in investing, there is the adage of “higher the risk the higher reward” – certain investments will pay out higher but they are risky; this also is a fallacy. A person who invests in something that pays a higher return and is seen as “riskier” by investment advisors may be less risky depending on the goals of that person, experience and control in that particular investment, and general comfort level in making the investment.
Risk instead should be defined as a level of comfort should the negative prediction actually come to light. Can you handle the stress of losing your case after taking that action in litigation? Can you move on from losing your money on that particular investment? Is your relationship support system strong enough or are you internally strong enough at this point in your career and life to help you move forward from the consequence of your actions? If yes, the action is not risky at all; if not, it is too risky. As you can see, the analysis of risk is a very personal and philosophical question.
What does any of this have to do with starting a practice? Starting a practice involves understanding this definition of risk. There is a discomfort around many issues including the potential of losing your license, liability to clients or suppliers, reputation in the legal industry, and liability to employees or creditors. Until you are ready to feel the discomfort of uncertainty and handle the corresponding consequences in the event of potential failure, you are not ready to start a practice.
Note that being ready to face uncertainty and feel discomfort is different than feeling ready from an intellectual or experiential point of view, which is a common misconception but plays a small role. Many people may want to gain more experience, contacts, and knowledge which is acquired later on in their career before starting and that works just as well – but this is independent from facing a level of discomfort. This is why many people are career employees and never switch to starting their own practice regardless of knowledge or experience. Instead, there is an inverse relationship here between risk/comfort and responsibility and level of experience. This is because waiting too long to start a practice increases the level of discomfort for failure because it is likely that by the time you have earned the knowledge and experience you feel was required before starting, you have also acquired the very things you would feel extremely uncomfortable losing in an uncertain venture (house, marriage, financial assets, etc). So, while there is a slightly higher chance of success due to what you have gained in your career by this time in terms of contacts and experience, there is also a higher feeling of discomfort – the risk is too great.
Ironically then, by this logic, the best time to start a practice is immediately before taking on the above responsibilities you are afraid to lose even though you have the least experience, knowledge and contacts because with less to lose, failure (while more likely if defining risk in terms of probability) will be less uncomfortable overall, so your overall risk is lower (under my definition). Obviously, all of this is counterintuitive.
How will you know when you are “ready” to start your own practice? You will know when you are “ready” if after performing your internal analysis of risk, building your support system in case of failure, you then act with complete intention – without hedging and working part-time somewhere else; but taking the jump and spending 100% of your energies to achieving your goal of operating your practice regardless of consequences. You may also realize that, like many other things, the fear of what you predict may happen were worse than what actually occurs. Failure, then, is not an option but even if it is, when you and the people who depend on you are ready to feel the uncertainty and discomfort – the move will be low risk.
This article was originally published by Law360 Canada, part of LexisNexis Canada Inc.