If you are currently in practice and thinking about starting your own practice, this blog post tells you what you can expect from your soon-to-be-former employer and how to get your first clients.
Starting your own practice: Not as easy as it may seem
I’ve been privy to two situations where a director of a firm has left to set up their own firm. In both situations the person leaving the firm was naive and just expected to be handed a book of business from their former firm. They both left without thinking through how to actually win their own clients. As a result both individuals failed to get their firm off the ground and had to go back to paid employment within 12 months of setting out on their own. It serves as a cautionary tale to anyone who is thinking about starting up their own practice! The easiest way to start up your own practice is to be given a book of business and told to get on with it. However, this rarely happens. I’ll explain why now.
What you can expect from your former firm if you decide to start your own practice
Remember the contract of employment you signed with your firm when you started? Within this contract is almost certainly a non-solicit clause. This clause will prevent you from ‘soliciting’ work from current clients of the firm for a defined period of time. In other words, you (normally) have no legal right to take any of the clients with you to your new firm. If in the process of starting your practice you have been viewed to have actively courted existing clients of firm you could be sued. If you have made proactive contact with clients of your firm, e.g. by phone or email, this could fall foul of your non-solicit clause.
When you have a strong relationship with a client of your former firm everyone knows that there is a strong likelihood that this client may want to go with you. It’s often in no-one’s interest to prevent the client from following you to your own practice. However, don’t expect that you can just ‘take’ this client with you, with no financial consequences. There is a strong likelihood that your former practice may make you pay a large % of their 1st year’s fees direct to them. I.e. they will expect you to buy any clients that you want to take with you. If you are starting up an accountancy practice your former firm will know if a client goes to you because they will be asked to send the client’s records to you.
You may find that if you are thinking of starting your own practice your firm may put you on paid gardening leave for a period of time. Until your gardening leave is over you wouldn’t be able to formally start your own practice. But what you can do in this situation is actively network and build up your pipeline of new clients for when you are allowed to start your own firm.
Before starting your own practice consider how you will win your first clients
I’ve seen too many people rush their exit from a firm to set up their own practice and then really struggle to win any clients. In my opinion you ideally need to plan your exist 12-18 months before you leave. This gives you time to build up your personal cash reserves as well as build your own network of well-placed introducers. Before you leave you ideally want in place:
- a pipeline of likely work
- a network of introducers who will send you work regardless of who you work for
- a business plan, including a marketing plan which you are confident you can implement successfully
- personal cash reserves to tide you over until your practice income is enough to survive on
Starting your own practice is never easy. With careful planning you too can enjoy the rewards and freedom which come with running your own practice.