At last week’s World Economic Forum Annual Meeting in Davos, world leaders shared predictions for 2023 including the rise of entrepreneurship resulting from unprecedented economic disruptions that have created the perfect conditions for new businesses to be born and built, particularly those with a purpose-driven bent. We sat down with Scale Founding Partner, Adam Forest, to talk about how this rise of entrepreneurship is showing up in the practice of law.
Q1: The latest data shows that more attorneys are leaving traditional firms to “hang out a shingle” and build their own practice. What do you think are the drivers of this trend?
A: Two main drivers. First, technology has enabled entrepreneurship and caused disaggregation across many industries. We’re now seeing that play out in the legal field. In the same way that Uber made it easy for drivers to work for themselves, business software like Quickbooks, Clio, and Google Workspace have made it easy to start your own law firm.
Second, the pandemic and the ensuing “great redefinition” of success has made it culturally acceptable for lawyers to leave a traditional practice. We used to believe we needed brick and mortar to have a fulfilling, prestigious practice, but that’s not the case any more. Our clients are happy with Zoom, which opens up a world of possibilities and begs some very important questions … such as, “Why do I work here? Do I like working here? Is there an alternative?”
Q2: You left a GC position at a growing fintech company to go back to private practice. Many in-house counsel view that as a challenging or risky career move. Has technology or distributed firms changed that equation?
A: The transition from in-house role to private practice is a challenging transition because, as an in-house lawyer, you can’t have a book of business: you have one client and you are dedicated to that client. For most attorneys making that transition, they truly start from scratch. That’s a big leap.
But the thing most in-house attorneys don’t realize is this: from a skills perspective, and even more importantly from a network perspective, they’re starting well ahead of the pack. In-house lawyers understand the pressures of business and how to right-size risk better than outside counsel. Full stop. And senior in-house lawyers–unlike most lawyers in private practice–have been able to show their quality in front of business leaders who are capable of hiring them. In other words, they have a ready network of clients who know and trust them the day they start their practice.
Previously, in-house counsel faced a binary choice between hanging their own shingle or joining a large firm with a salary. To some degree, that’s a Hobson’s choice. Going out on your own is lonely. Joining a firm means giving up the majority of the value you create. Tech-enabled, distributed firms provide a middle path that is much more attractive for in-house counsel in particular, because you get the infrastructure and network of a big firm without the expensive trappings.
I started Scale in part because I suspected it would be easier to build my practice in a community of other lawyers like me, both from a community and brand perspective. And our data has proven that suspicion to be true: 50% of our work at the firm is shared, meaning that our lawyers are a lot busier than they would have been had they gone out on their own.
Q3: What do you think 2023 has in store for all of us in the legal profession? Are there opportunities that attorneys need to think about as they plan for the year ahead?
A: I’m not convinced ChatGPT will put lawyers out of a job this year. More relevant for 2023 is the economy. Most economists and business leaders are still predicting a recession of some kind and we’re already seeing many businesses reducing staff. It’s hard to imagine that big firms will be able to continue to increase rates at the same pace as the last few years. Clients will be looking for value. In many ways that favors agile, tech-enabled firms, large or small.
Scale is very well positioned there, (1) because our platform is efficient and allows us to have competitive rates; and (2) because so many of our attorneys have in-house experience at a time when in-house departments are being squeezed and are unable to hire to meet needs.
In part because of those factors, and in part because of the cultural shifts in the profession, I think 2023 will be credited as the year distributed firms really got their toehold. There are already two in the AmLaw 200, but a good deal more are coming, and we’re beginning to see the first signs of brand differentiation. It’s a good bet distributed firms will increase market share in 2023.
Q4: What are the key traits that define a successful lawyer entrepreneur (“lawpreneur”)?
A: Not one-size-fits-all, but in general I’d say:
- Experience (roughly 8+ years of practice)
- Network (of clients and colleagues)
- A tech-forward orientation (understanding of modern business tech or a willingness to learn)
- A moderate appetite for risk
- A strong desire to build something of lasting value
Let me stay on that last point for a moment, because I think it’s key. There are some people who want certainty, and some people who want potential. I think I’ve been successful as an entrepreneur because I’m one of the latter. I’m happier making less than I might have otherwise if I know the potential to make more is there. I never liked a system where the reward for hundreds of hours more work was a meager bonus. I’ll give up a good deal of certainty for potentiality. Entrepreneurs are motivated by the possible: and I think you need a bit of that behind you to make it.
Q5: What advice do you have for lawyers who have these traits and want to take the next step?
A: The hardest way to win business is as “the law office of yourself”. So team up. Lawyers make great teammates. We have asymmetric skill sets, and clients have needs greater than what any one of us can do. Working in the same firm or informal network with folks you know and trust is key to success.
Firms do this well, but that doesn’t mean you have to be part of one to leverage your network. Think about who your tribe is.
And, remember that the best business development is just good work. If you’ve done it in the past, clients will find you … Your likelihood of success as a lawpreneur is proportional to the amount of visible good work you’ve done in the past. One of the issues with big firms is that they often keep good lawyers hidden away. If you’ve had a chance to show your stuff in front of clients, and you know what you’re doing, they will find you again in the future.
I would also say that most lawyers I’ve met – and I’ve interviewed many many hundreds at this point – are prone to overestimate the cost of failure. But the reality is that the cost of failure isn’t that high for most lawyers. Most can go back to a big firm, find an in-house job, or some other steady paycheck in the legal world. Destitution is rarely in the cards. So I’d say, find your community, and invest in yourself. The payoff is worth the risk.
