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Flying solo: the rise of the sole practitioner

Flying solo: the rise of the sole practitioner

Sole practice presents some unique challenges and opportunities for a growing number of lawyers looking for a sea change, writes Zoe Lyon.Sole practitioners could perhaps be described as the…

Sole practice presents some unique challenges and opportunities for a growing number of lawyers looking for a sea change, writes Zoe Lyon.

Sole practitioners could perhaps be described as the law's quiet achievers - a sizeable chunk of the profession that keeps away from the legal limelight.

Yet, for a variety of reasons, sole practice is becoming an increasingly appealing career choice, and a growing number of lawyers are turning their backs on larger firms to set up shop on their own.

Figures from the Law Society of NSW show that in NSW sole practitioners make up a considerable portion of the profession, and this portion is growing. In 1998 sole practitioner firms numbered around 2400, representing approximately 65 per cent of all private sector law firms in NSW.

However, by October 2008 the number of sole practitioner firms had grown markedly to 3766, representing 85 per cent of all NSW firms.

The lure of sole practice

Sam Coupland - a director at legal consultancy FMRC, which runs a specialised program for sole practitioners - says that the lawyers choosing to pursue a career in sole practice fall into two broard categories: "the entrepreneurs" and "the lifestylers".

The entrepreneurs, he says, form a smaller group and have a genuine desire to steer their own ship their own way. "They're naturally entrepreneurial, they genuinely want to be in business, they usually come with a pretty good client base and they'll make a really good go of it," he says.

However, he says a much larger percentage of those choosing to enter sole practice do so for lifestyle reasons, believing that it's easier to achieve a work/life balance in sole practice than it is in larger firms.

Margaret Hole, the sole partner of Sydney firm WM Walker Taylor Edwards & Smith (WTE&S), agrees that lifestyle factors are a big drawcard of sole practice. She believes this has become even more important in recent years as time and billing pressures on lawyers in larger firms have increased.

"The drive into the business world was inevitable ... the drive towards the maximisation of the dollar. And if you've got [multiple] partners of course it follows that you have to pull your weight. But you lose your ability to manage your lifestyle in a large practice, and I think some people have moved to sole practice or smaller practices so they could have a life," she says.

“There’s a smaller group [of lawyers] who are essentially forced into sole practice … because the door is closed on partnership and that’s probably the way it’s going to stay”

Paul Armarego, the sole principal of Canberra-based firm Strategic Legal Services and Consulting and a former Clayton Utz partner, agrees, saying the increasingly competitive, and profit-driven culture of large law firms, just doesn't appeal to all lawyers.

"The main reason for [moving to sole practice] is your freedom and independence to do things, subject only to the economic needs of being able to keep open, and of course, your duties to the client and the court. But you have a huge amount of flexibility in determining things like what kind of work you take on, and you don't need to feed a billing pyramid," he says.

"One of the changes that's been happening in big law firms over the past 10 to 12 years is that when you used to have a really big year you'd say: 'That was a great year, but next year we'll revert to smaller incomes again.' But what they do now is re-benchmark every good year, so they're continuing to increase their salaries. Now that's an environment which suits some people, but it ends up being pretty cutthroat ... and when you're a sole practitioner you don't have to deal with that."

Playing a forced hand

The move to sole practice is not always a matter of choice. As Armarego explains, there are two main reasons people go down the sole practice road: "The first is because you want to, and the second is because you have to."

For a start, he says, with limited opportunities for partnership, sole practice might prove to be the only viable career choice for lawyers who don't want to continue indefinitely as an employee solicitor.

FMRC's Coupland says this is particularly the case in small-to-medium sized firms where opportunities for partnership are few and far between.

"The fact is that smaller partnerships are limiting equity far more than larger firms. It's much harder to do - if you're a two-partner firm and you admit someone else into the partnership that's another snout in the trough - [the equity] is diluted a lot," he says. "So there's a smaller group [of lawyers] who are essentially forced into sole practice ... because the door is closed on partnership and that's probably the way it's going to stay."

WTE&S' Hole agrees, adding that in her experience, many young lawyers are perhaps unrealistically optimistic about the prospects of making partnership. "The numbers are stacked against them, but everyone is optimistic - and they should be - that they're going to be the one who gets through the barrier. But the numbers are such, it's like picking a horse," she says.

It's not just those younger lawyers with soured partnership ambitions who are being forced down the sole practice route. According to Terence Stern, a sole practitionerspecialising in professional and medical negligence based in Sydney's Bondi Junction, there are also a significant number of older partners the larger firms consider to be "past their use-by-date" now joining the sole practitioner ranks.

"I think it's pretty well known that for practitioners who have reached the senior levels in a big firm, by the time they've reached their 50s and 60s [they] are regarded as dispensable ... and I don't think that was the case 10, 15 or 20 years ago - that's quite a change. And they go in a steady stream into sole practice," he says.

Preparing for the journey

Whatever the reason for embarking on a career as a sole practitioner, there's a degree of practical and mental preparation that is first required. Armarego's advice for those just hanging up their shingle is to keep overheads as low as possible until there's a steady cash flow rolling in.

"There's no doubt that at first - for me it was probably for about the first year - you just don't have an even cash flow, and you've got no way of evening it out. You're not getting a lot of money in, which means it's hard to take on things like premises and staff, but once you can do those things it comes together really well," he says. "I have to admit those first 12 months are a bit scary and they're enormously challenging - but they're a lot of fun."

Hole adds that having a client base ready to go from the beginning is also essential. "You don't want to go out on your own and be sitting there twiddling your thumbs waiting for work to come through the door - because it doesn't work that way," she says.

“You have a huge amount of flexibility in determining things like what kind of work you take on, and you don’t need to feed a billing pyramid”

"You've got to have something that you're going to [take on]. It might be that your family's got a business that they can channel work from that they've been giving to someone else, but you've got to have that backing behind you."

According to FMRC's Coupland, prospective sole practitioners should also be very clear from the outset about the nature of the work the firm will take on. He says that through running the firm's sole practitioner program, he's encountered a number of lawyers new to sole practice who have fallen into the trap of taking on any matter than comes through the door.

"They might not necessarily be good at it, it might not be profitable, and they may not enjoy it, but they think, 'I've got to get some fees in'. And those files can bog you down," he says.

He recounts the story of one sole practitioner who had taken on a large number of legal aid family law matters - matters well beyond his area of expertise. "He'd never done it, he wanted to be doing other work, and these matters were just killing him," he recalls. "At the program he sat next to a family lawyer in the same region and by lunchtime he'd passed off four files to her. She was delighted and he was thrilled."

Coupland says the key for sole practitioners is to stick to their areas of expertise and structure their firm accordingly.

"It's not like there's any one particular area of law that is the most profitable - it all has to do with how appropriately you're structured to do that type of law," he says. "So success for a sole practitioner ... is about getting in and doing the work that they enjoy - first they've got to enjoy it and then they've got to be good at it. If they can tick those boxes, and if they're structured appropriately and they price themselves appropriately, then profitability will follow."

The long road ahead

An ongoing challenge for sole practitioners can be professional loneliness, and not having the backup of the physical resources, or the experience of other lawyers, available in larger law firms.

As Hole explains: "You can become isolated and you don't have the benefit of dashing down the hall and speaking to another lawyer." As a result, Hole says, it's important for sole practitioners to proactively develop and maintain a network of professional contacts with expertise in different fields who can be called on for assistance.

"That means that, if you have doubts, you've got a circle of people you can talk to on the phone to get some sort of back up or confirmation of what you need."

Stern, who has been in sole practice since 1974, adds that the resource challenge that sole practitioners have long faced has been broken down in recent years by the proliferation of online legal research services. "They have been amazing in narrowing the playing field to a significant extent. And a sole practitioner who really strives to be excellent now has to opportunity to compete in many areas," he says.

Armarego agrees, saying that the change in the volume of online resources available to sole practitioners has been considerable even over the last five to ten years. "It's one of the reasons why I think sole practice is becoming more viable for people," he says. "Admittedly it's not cheap ... but you can get access to every bit of legal information you're reasonable likely to require at your fingertips. The reality is that your ability to produce high quality work, particularly in technical, legal, detailed areas ... is made much easier by these things."

Finally, sole practitioners will also generally have to be content with a lower - and less consistent - income than their counterparts in larger firms, but, as Hole explains, it's a trade-off. "The spinoff is being able to organise your life

and being able to pick and choose the work you do, to a certain extent."

For Armarego, at least, it's been a trade well worth making.

"I'm not trying to make super profits - I'm trying to do financially reasonably okay - but I don't need to, nor do I want to, make the kind of money that a full equity partner at Clayton Utz would be making in Sydney," he says.

"Overall ... I'm just so much happier and more relaxed."

Related article: Here to Help -- Programs and services available for sole practitioners

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