When starting out, solo practitioners have to find clients. The traditional way, through networking and advertising, will get mixed results. So some think outside the box and try to find new ways to get people’s attention. Some attorneys have fantasized about setting up a hybrid business combining law and something else.
Law practice can successfully complement other work because of overlap. It is not unusual to see attorney/CPAs practicing in the areas of tax, business, and finance. I have also seen estate planning attorneys double as financial planners. And I have seen too many real estate lawyers work as sales agents or brokers on the side.
But once in a while, someone proposes a business that tries to combine law practice with something that seems totally unrelated, such as clothing sales or a bakery (I know some attorneys who have actually proposed these). These ideas sound crazy and in most cases go no further than that. But a brave few have ran with it. And some are seriously considering it in light of the terrible job market.
While I don’t want to wish ill on someone who is legitimately trying to make a living and taking a risk, I think most legal hybrid business plans are not viable. Not to mention sounding silly. Click onwards to find out why…
The premise behind these legal fusion businesses — usually involving retail sales — is that the retail aspect of the business will bring in lots of people. Some of them may need legal assistance and do not know a lawyer they can call. Right. I think few people going to a mall shopping for jeans or a purse have an immediate need of a lawyer. If they did, they would have found someone the old-fashioned way — the internet.
Not only that, there are some issues that need to be addressed even before this venture gets started.
The first is the cost in terms of money and time. If you are going to run a law firm/boutique bakery, you will have to know how to run both businesses. You will also need startup funds for overhead. Thankfully, law practice requires minimal overhead (at least initially). But running a bakery will require you to immediately buy or lease lots of equipment, hire employees, and lease a prime location. Also, you will have to spend a lot of time keeping up with the latest news and trends for both businesses. Not only will you have to keep up with new case law and legislation, you will also need to know the latest flavors and experiment with new ingredients for the new eclair or red velvet cupcake. And you may need to set up separate limited liability entities for each of your businesses. If you are unfortunate enough to get a malpractice judgment, you don’t want your new creditor to take your ovens and kitchen equipment.
The second issue is professional ethics. While I won’t get into substantive matters, I think most state professional ethics codes were passed not contemplating that lawyers would one day set up law firms/fried-chicken restaurants. If you have a lot of customers in your store and one just happens to need legal advice as opposed to the three-piece extra-crispy with biscuits and cole slaw, will you have a separate space that doesn’t resemble a broom closet where the two of you can talk privately? If not, then you may have attorney-client privilege problems.
Also, you may be unattractive to certain clients and to other attorneys who give out referrals. As a general rule, I try to refer potential clients to specialists over generalists. And I would have serious reservations about referring potential clients to a lawyer/auto mechanic unless I know the owner very well or the client also needs to get his car’s oil changed. Also, I’ve heard anecdotally that most clients want someone who practices law 100% of the time. Otherwise it gives the impression that a lawyer is not successful and needs a side job to make ends meet.
Finally, you have to consider the possibility that it will one day be easier to focus on one business and let the other one go or seriously downsize it. Some businesses are just so incompatible that it is impossible to make them work together. Eventually, you will find that one of the businesses is making more money or the other one is continually generating losses with no hope of recovery. Or you may enjoy selling or curating art more than drafting and reviewing the sale contracts. Or you just don’t have time to run both at the same time.
It is only fair to point out that it is possible to run a hybrid business. If you do it right, you will have two successful businesses instead of one. But even then, at some point, it will be financially and legally prudent to separate both business into their own entities. You can run one business and hire someone else to manage the other business.
I think the fundamental question to ask is, “Why am I setting up a hybrid legal entity?” Is it because you see a genuine money-making opportunity after doing the proper research? Or are you doing it because you cannot find a job and want to take a serious risk just to see what happens? The latter is likely to lead to failure, especially if you are new.
Shannon Achimalbe was a former solo practitioner for five years before deciding to sell out and get back on the corporate ladder. Shannon can be reached at email@example.com.