Why Attorneys Often Fail as Businesspeople and Entrepreneurs

When he got back to Los Angeles, he was sat down and lectured by a few partners for being “irresponsible” and “unavailable.” He did not enjoy practicing law but he had a house, children, and a myriad of responsibilities that kept him busy. The only thing that made him happy was dreaming about starting his own business.

That dream was how he came to collect pinball machines and start his small side business selling them on eBay. He would spend the occasional weekend driving around California to buy the machines at various auctions. He would regularly come into my office and say things like “I just made $600!” or “I’ve got 25 bids on these flippers! Come check it out!”

I never saw him happier than when he was doing this. The rest of the day, he would sit in his office morosely writing briefs and so forth. He would have the machines shipped to the office and at times there were four or five of them stacked in his office. Partners would come in and talk to him without even saying anything about it. His secretary would spend at least a few hours a day helping him ship things out to his buyers.

“How much money are you making with this business?” I asked him one week. He proudly told me he figured he would make “at least” $10,000 over the course of the year doing this. The $10,000 he was making probably barely compensated for the time he was spending; however, that did not matter. He felt more alive and happy running his little side business than he felt when he was practicing law.

Many attorneys (like this attorney) dream of an escape from the accountability inherent in practicing law. This attorney never quit practicing law and has been a partner at another major law firm for a long time. As much as he might have liked to, he never left the practice of law. He had a family to support, and it is doubtful he could have done so at the same level if he were selling used pinball machines.

Many lawyers spend their days talking to and doing work for businesspeople. They see the money many businesspeople are making, take orders from them, and work long hours for them. Many lawyers believe that being a businessperson is more rewarding than being a lawyer. It is natural, of course, that many lawyers dream of this sort of freedom and escape.

One of the more persistent fantasies among attorneys is that they can go out in the world and start their own businesses. I am not talking about a law firm (which can be an excellent business for a lawyer): I am referring to any number of businesses outside the legal field. Lawyers love the idea of potentially starting their own businesses, or going to work in the business field instead of being lawyers. Their fantasy is that they will be able to make more (perhaps unlimited) money, have more freedom, not be tied to the billable hour, and not have to be lawyers anymore.

There are countless (and inspiring) stories of attorneys who made the jump from being attorneys to being entrepreneurs—but they are very rare. In almost all cases where I have seen them succeed, these attorneys had previous experience as entrepreneurs and made the jump to doing this very early in their careers, after just a few years of practicing law. Practicing law inculcates a style of thought and action that is not necessarily compatible with being an entrepreneur, and after many years of it, attorneys tend to be the exact wrong person to be in business.

This article contains two parts. First, I will examine the reasons why attorneys often make bad businesspeople and entrepreneurs. Second, I will discuss how you can assess if you might be the kind of attorney who is cut out for business.

 

1. Why Most Lawyers Make Terrible Businesspeople and Entrepreneurs

 

1. Entrepreneurs need to be incredibly optimistic, which is the opposite of lawyers risk averse nature

Entrepreneurs need to be masters in “possibility” and viewing a future for business, or an idea, that is far different from today. They need to be excited about an idea, get others excited about that idea, and see where things can go. They need to believe that not only will they not fail, but that the business will not fail. The entrepreneur may fail again and again and earn and lose multiple fortunes—but despite all this, the true businessperson will continue and keep going.

Being an entrepreneur is about uncertainty. Starting a business is uncertain, and all new businesses (unless you are buying a franchise) tend to contain a large amount of inherent risk. You never know what is going to happen with the business, and the reality is that most businesses fail.

In contrast, being a lawyer is about pointing out to your clients what could go wrong and making all the legal arguments against making a given business decision. Lawyers are trained to spot issues—to find things that can go wrong. Once someone starts law school and practicing law, this person will become an expert in finding everything that can go wrong with a situation. Entrepreneurs, however, need to find everything that can go right with a situation—and therefore most “real” attorneys are incredibly uncomfortable with entrepreneurship.

An attorney may be able to enter an existing business, but then become incredibly uncomfortable with the constant change and risk entailed in keeping the business going. To stay successful, most businesses need to make constant changes (new products, new services, updating of ways of business) to stay successful over the long term.

I have seen more attorneys start businesses and fail than I can count. When attorneys fail in business, they often do not try again. They give up and become defeated. This is the complete opposite of entrepreneurs, who just try again (for example, I know of cases in which entrepreneurs had to start 25+ businesses before one succeeded). Several times a year, I speak with lawyers who have failed in business. They become extremely negative and blame all sorts of people for their failures—investors, managers, the markets, the customers. When an attorney fails, he or she is quick to find fault with a variety of actors and give up. Most entrepreneurs realize that failure is part of the mix of what they are involved with and just keep going.

See the following articles for more information:
 

• The Top Five Ways to Be Positive (When Everyone and Everything around You Is Bringing You Down)
• Seek Out Environments, Conditions, and People That Create Positive Beliefs in Yourself

Here are some quotes from Elon Musk after various failed launches:
 

 

 

 

 

2. Entrepreneurship is about ambiguity and not certainty

Entrepreneurship is about embracing ambiguity and knowing that not everything will go right and a lot can go wrong. Most entrepreneurs thrive on ambiguity and ignore it. They “take the plunge” without having any idea about what is going to happen. They come up with new (and often outrageous) ideas all the time and never know if these ideas will succeed or fail. An entrepreneur is just fine proceeding in the face of ambiguity.

Lawyers want to understand and know how things will turn out. Lawyers do not like ambiguity. I have watched attorneys in “pitch” meetings with entrepreneurs before, and it is often humorous. The lawyer will often look at the entrepreneur like the entrepreneur is insane and be visibly agitated by a thousand “what ifs” that the business idea might present. This ambiguity does not discourage the entrepreneur at all because the entrepreneur knows that the chips will fall where they may, and the entrepreneur will make changes as things move along.

Entrepreneurs tend to proceed in the face of ambiguity because they see something that may be untapped in the market. Attorneys take the prevention of ambiguity over gut and intuition, while entrepreneurs do the opposite.

See the following articles for more information:
 

• Plastic Surgery, Suzanne Somers, Certainty, Variety and Your Career
• Concentrate on the Process, Not the Results
• Your Strength Is Your Ability to Control Your Internal World

 

3. Many lawyers believe their credentials and intelligence entitle them to be successful, while entrepreneurs understand that business is about something completely different

Lawyers place a lot of importance on their credentials. They believe that having a law degree, having done well academically, and having worked with prestigious law firms gives them the credentials to be successful in anything they choose to do. I speak with attorneys all the time who think that their credentials will make them successful in the business world. Inside of a legal environment, this may be true: The attorney is being paid for the attorney’s specialized knowledge and ability to process and interpret information. But these “lawyer” abilities are different from what is required to succeed in the business world.

Business people succeed because they see ideas and possibilities, come up with ideas for products and services, organize and manage people to promote these products and services, and promote these products and services to the market. They also use feedback from the market to constantly change their products, services, and marketing. This is a completely different set of skills and knowledge than what it takes to be effective as a practicing attorney. The difference is like night and day.

After spending years practicing law, most attorneys have never developed the sorts of skills needed to succeed in business. Many entrepreneurs never went to college or finished high school, but have been developing the skills they need to success in business since they were adolescents. Attorneys who start businesses often get “eaten alive” because they have never developed the skills needed to be good at business.

See the following articles for more information:
 

• The Two Most Important Ingredients of Success
• Plan for Success-Not Failure
• Your Ability to Be Free Will Determine Your Success
• Success Requires Ignoring Group Norms
• A Success Turnaround Formula That Works
• Your Success Is a Product of the Procedures You Follow
• Never Stop Improving
• How You Handle Chaos Will Determine Your Success or Failure

 

4. Most attorneys have never had to “struggle” for money. This type of mindset is extremely useful in successful entrepreneurship

Most entrepreneurs and businesspeople have had significant struggles related to money in their pasts. Whether it is difficulty making payroll, not having enough marketing dollars, or simply having had one failed business after another, the majority of entrepreneurs have struggled for money at some point in their careers. This struggle breeds a level of hunger and scrappiness that creates something unique in the entrepreneur. The entrepreneur becomes careful about how he or she spends money, is always looking for deals, and is always seeking to find more value more cheaply. Entrepreneurs are hungry to grow their own businesses, or to start new ones, because they do not want to fail financially; they have tasted what it is like to not have money and they do not like it. The failure that most entrepreneurs have experienced makes them hungry to never fail again.

Lawyers, though, come from a different background. Most lawyers have been in positions where they used their minds almost exclusively since they were in college. Lawyers are paid comfortable salaries to sit behind desks and do the sort of work lawyers do. They are supported by secretaries, paralegals, and others. They are given comfortable offices, receive health insurance, and easily qualify for mortgages to live in nice neighborhoods.

The entrepreneur is a different animal. Many entrepreneurs do not pay themselves because they need to pay their employees first. They may need to layoff employees when their business slows, only to rapidly scale up again when the business gets busy. An entrepreneur may spend years living frugally to get a business off the ground, and when a business does start, the entrepreneur may be extra motivated to succeed because he or she has experienced failure in the past and wants to prevent it from happening again.

Lawyers often lack the “hunger” that entrepreneurs and businesspeople have because they have never failed. When they “get in the ring” in business against other entrepreneurs, this lack of hunger results in them being much less effective than their counterparts. Because they are not as hungry, they do not put as much thought into things like how hard they need to work, how they will manage things, how they will keep costs down, how they will be aggressive at marketing, how they will continuously improve and innovate, and similar matters that are important in helping ensure that a business succeeds.
 

5. Lawyers tend to be poor marketers compared to entrepreneurs and businesspeople

While it is not true across the board, many attorneys are notoriously poor marketers. In fact, lawyers are so against marketing that it used to be illegal for lawyers to advertise. Many of the largest law firms view marketing as somewhat undignified: The message is that their reputations and the quality of their work should be all the marketing they need.

While marketing may be considered undignified in some quarters where attorneys practice law, this is not necessarily the kind of thinking that is needed to get businesses off the ground and sustain them. To succeed, businesses need to get their name out there and be seen all the time. Businesses need to take risks to get the attention of the public. Whether it is in-person meetings, advertising, publicity stunts, or other ways, the most effective entrepreneurs are often marketing all the time. In fact, I have seen many entrepreneurs at conferences state that being good at business is more about being good at marketing than about the quality of the service or product! While I disagree with this, in almost every case a well-branded product or service will sell better than its generic equivalent.

When lawyers deal with marketing-related issues, they are often afraid of looking dumb, making mistakes, or being offensive in the smallest possible way to their marketing audiences. Lawyers tend to allow their egos to get involved in marketing. This ends up holding back the growth of the product or service they are marketing. Lawyers are often used to getting referrals and business coming to them—and depend on this. In the business world, the best marketers get the most business. Whether it is Steve Jobs, Richard Branson or Donald Trump, a great proportion of the most successful businesspeople out there are the best marketers.

See the following articles for more information:
 

• Making Rain: Ingredients for Success
• The One Close Call and the Moving Parade
• The Two Most Important Ingredients of Success
•  Success Requires Ignoring Group Norms
• Two Things the Most Successful 5% of Attorneys Do That the Rest Do Not

 

6. Lawyers tend to be poor at customer service compared to entrepreneurs and businesspeople

Lawyers are paid to give answers, understand legal issues, and take sides for a client in most legal environments. They are not paid or expected to understand the variety of points of view of their customers and clients and make sure that every customer is as happy as possible. While servicing their clients may require a certain amount of customer service-related skills, the business environment is one where something is almost always going wrong and where customer service needs to be a constant priority.

To be good at customer service, a business needs to like its customers, understand their points of view, and care about them. Lawyers tend to be more focused on legal issues than on people or customers. Lawyers are used to being right and discounting the points of view of those who are not on their side.

See the following articles for more information:
 

• The Only Way To Be Happy Practicing Law
• You Need Relationships Before Transactions
• Top 9 Ways For An Attorney to Generate a Ton of Business  
• Your Ability to Be Free Will Determine Your Success

 

7. Lawyers tend to be poor managers

Most attorneys are not the best managers. While business schools teach the importance of collaboration and managing others, this sort of training is not done in law schools. As a consequence, most law firms are led by attorneys who do not have any significant training managing others.

Associates and partners inside of law firms tend to have very high levels of dissatisfaction practicing law. Attorneys tend to be graded with compensation: The attorneys who bill the most hours and have the most business make the most money. Attorneys who manage others the most effectively often are not the highest paid. Lawyers do not measure how well they do their jobs based on management surveys but on factors like hours billed or books of business. This is different from the culture of professional managers and what is promoted inside of many companies.

Many law firms believe (rightly or wrongly) that they are paying a lot of money for their attorneys. Many partners and senior associates inside of law firms do a poor job of managing those beneath them, and this causes many departures. Many attorneys speak of “feeling abused” and never knowing their status (good or bad) within their law firms and not feeling valued. In contrast, most companies try and foster a culture of making everyone feel valued on their team. Law firms tend to not involve most of their attorneys in the business side of their firms because they believe that the job of the majority of their attorneys is to be “worker bees.”

When lawyers get into the business world, they often bring their law firm training with them. They are secretive with their staff about finances, they believe they can manage by paying high salaries, they may expect their orders to be blindly followed and not questioned, and they are not interested in reaching an accord with staff before mandating that tasks get done.

See the following articles for more information:
 

• Effective Teamwork Strategies for Law Firms
• 21 Reasons Why Being a Large Law Firm Partner is More Difficult Than Being an Associate
• The Insecurity of Superiors  
• The Importance of Law Firm Mentoring Programs
• Symptoms of a Dysfunctional Law Firm that Make Associates and Partners Flee  

 

8. Lawyers are not exposed to the business side of most law firms and never learn much about it

In law firms, most lawyers are never exposed to the business side of the firm. They never learn much about the law firm’s revenues, expenses, management challenges, or hiring, marketing, and expansion plans. Instead, lawyers tend to work alone at their desks most of the time and subsist on rumor and innuendo for this sort of information. Most law firms keep their attorneys, staff, and even many of their partners under a “cloak of secrecy,” where they are exposed to very little information whatsoever and have almost no opportunity to learn anything about business.

When I am speaking with senior associates, they often brag to me that they have been on “a few” client pitches with partners and that “things are looking up” because this alone means the firm must be grooming them for partnership. In the business world, these sorts of activities occur with astonishing regularity among members of the staff.

The point is that being inside of a law firm teaches attorneys hardly anything about business compared with being in the business world. With little exposure to what a business is, the attorney is not well suited to starting a business or working in one. Businesses pick up on this as well. Every year, I work with at least a few attorneys who are graduating from business school and have gone to business school after practicing for a few years. Despite going to prestigious business schools, many of these attorneys find that they are unable to get jobs with the sorts of prestigious companies that their classmates are. Without business experience—and still thinking like lawyers— companies are turned off by them.

See the following articles for more information:
 

• The Top Two Different Ways Law Firm Partners are Compensated
• What Law Firm Titles Mean: Of Counsel, Non-Equity Partner, Equity Partner Explained
• Two-Tier or Not Two-Tier: The Equity Partnership Dichotomy
• Law Firm Economics and Your Career

 

9. Lawyers are often followers, and this goes against one of the more important characteristics of all entrepreneurs—finding something no one is doing and exploiting this need

Many attorneys go into the practice of law and stay practicing law because it appears to be a safe profession. An attorney can get a job with any number of hundreds of large law firms if he or she has gone to a good law school and done well there. The attorney will come out and make the same as other members of his or her class and hopefully advance if he or she plays by the rules. Inside of law firms and most legal environments, there are not great rewards for extremely independent thinking. Most legal environments tend to be quite conformist and attract a certain type of person who tends, overall, to be quite conservative and unwilling to rock the boat. Most legal environments will rapidly expel people who are too different. While there is a high degree of tolerance for diversity, there is not much leeway when it comes to divergent thought processes and the work ethic required of attorneys. Lawyers work for clients, and as servants to clients, they are expected to act in certain ways.

I go to conferences now and then where people who have started very successful businesses talk about how they did it. In almost every case, the person who starts a business does so because he or she sees something in the world that is not being done correctly, or which can be done better. These people reach a state in which their overriding interest in changing something is so strong that they are willing to risk everything (and look different) to do that thing. The entrepreneur needs to stick out and look different to succeed. Many entrepreneurs need to risk ridicule, failure, looking different, and upsetting the status quo to get things done. This sort of mindset is something that attorneys are not always comfortable with.

See the following articles for more information:
 

• The Two Most Important Ingredients of Success
• Plan for Success-Not Failure
• Your Ability to Be Free Will Determine Your Success
• Success Requires Ignoring Group Norms

 

2. How Attorneys Can Know If They Should Start a Business

There are many attorneys who should start businesses. Just because the training of law school and a law firm does not support most attorneys being entrepreneurs does not mean this is not something an attorney should do.

For one thing, certain people within the legal profession are already behaving like entrepreneurs. Being a partner in a law firm and starting and running your own law firm are very entrepreneurial and business like endeavors.
 

• Partners with business in law firms are running businesses. They are working for businesses (the law firms), but running businesses all the same. A partner is expected to bring in business, maintain that business, grow that business, and manage that business. In exchange for 50 to 80% of the money the partner brings in for the firm, the law firm provides an office, a brand, office support (secretaries, computers, phones, associates) and other types of support. If the partner does not like the partner’s arrangement with his or her firm (the quality of support) and (most importantly) how much the partner has to pay for the support (the real reason most partners leave), the partner will switch firms and take his or her business and clients elsewhere.
  
  Partners with business enjoy what they do much more than associates, in-house counsel, and partners without business. They are in control of their destinies, do not need to take abuse from anyone, and can shop their business to the firm they choose. I see partners with business practicing into their 80s or later. All of the criticisms of the legal profession are still present for partners with large books of business, but I will tell you that once a partner gets a decent-sized book of the partner seems much, much happier—and committed—to the practice of law than attorneys without this.

See the following articles for more information:
 

• Your Legal Career as a Small Business
• The Industrialization of the Law Firm
• How the “Invisible Hand” Operates in Law Firm Employment Decisions

 

• You can always start your own law firm. That is also a business. I have been amazed at the levels of success that attorneys can achieve doing this. I know of many attorneys making millions of dollars a year doing this. If you like practicing law, are comfortable with marketing and getting yourself out there, have thick skin and are not afraid to fail, starting a law firm can be an incredible decision. While you may have to share the wealth with new partners who join you in the process, it is not uncommon for even a small law firm to have millions of dollars in profits per year.
  
  In many ways, having your own law firm is the ideal business: You are only selling your mind. You may need to do so out of an office, you may need a secretary and a few computers—but your cost of producing your service is close to zero. Also, there is a huge barrier to entry in the legal profession: compete with you, someone needs to go to law school, get a law degree, get experience in your field, and build out the same list of contacts as you.
  
  I always tell attorneys who are considering starting businesses to consider this path first. Since they spent years getting their credentials to practice law and considerable time in a law firm or other legal environment learning to practice law, this has always seemed the most obvious business for them to enter. The legal field is a huge one, and this is the reason there are so many law firms doing this.

If you do not like practicing law and detest it, then going into business is often a very good idea. If you are spending the majority of time thinking you would prefer to do something besides practice law, then you probably should consider it. Quitting the practice of law is like ending a bad relationship. If you know you are not going to marry the person or you realize that being with them is not right for you at all, then you should get out. You have to know that it is not going to work out for you. In most instances, if you truly detest the practice of law, it is not going to make much of a difference if you go in-house, change practice areas, or change firms. It has to be something about the work that you detest and that you believe limits you. You need to believe that you will never like it—the same way you may feel right now about a food you know you will never like. This is the best way to know if you should never practice law.

There are tons of opportunities in business. Most businesses do not even require you to have a college degree. Moreover, you can make a ton of money in many businesses. I have seen people make small fortunes running businesses like washing windows or even running a restaurant. One guy I know of makes millions of dollars running a few restaurants. There are countless businesses you can run that will make you successful if you put your heart and mind to it. When I was practicing law, one of my clients was suing a guy who had made over $100,000,000 in less than a year importing a single toy from China. There are a variety of amazing opportunities in the business world that you can take advantage of if the business interests you.

The attorneys I have seen do the best with business were all consumed with business ideas when they were practicing law. They always dreamed about different sorts of businesses and would share these ideas with others. They felt naturally drawn to businesses and dreamed about starting or growing businesses. They felt energized when they spoke about business, and they felt defeated and uninspired when they spoke about practicing law.
 

• If you are naturally drawn to business and more interested in this than practicing law, this is probably something you should be doing.
• If you look around and see an opportunity where others see obstacles, then you probably should consider going into business.
• If you are optimistic about all the opportunities out there and see more opportunities as a businessperson than as an attorney, you should probably be a businessperson.
• If you are more interested in making things happen than in working for those who are making things happen, then you should probably be a businessperson or entrepreneur.

I was an asphalt contractor before going to law school. When I was a contractor, I used to refuse to leave my house unless I was going to make thousands of dollars that day (and this was over 25 years ago). I was making a lot of money and having fun, but there was an academic side of me that gravitated towards the law instead of the work I was doing. When I told the people I ran around with in the business that I was going to law school they thought I was crazy: “Why would you go to law school when you can just hire attorneys if you need to?” Their idea was that attorneys service people who are out there doing things. Their mindset was that lawyers work for businesspeople and businesspeople do not go to work as attorneys.

I never understood the distinction until years later when I started practicing law—that lawyers solve the problems of others, and people who have problems hire attorneys. Attorneys are energized by helping others solve their legal problems. Most businesspeople are energized by coming up with new products, services, and ways of doing things that help people in different ways. Attorneys help businesspeople with the problems they face along the way. This is the fundamental difference, and you are either one or the other. Before you ever leave the practice of law or stay practicing if you are unhappy, you better know what side you are on.
 
Despite the fact that most attorneys do not make good businesspeople, most attorneys are very smart and could quickly figure out how to be good at business if they had the chance—and if they started earlier rather than later. I know several attorneys currently practicing law whom I believe could be good working in businesses outside of the law but never will be.

One of the curses of the legal profession is that attorneys make too much money too early. These attorneys quickly get homes, families, and start relying on the income being an attorney gives them. They then lack the savings needed to start a business and become risk averse. They end up in lives that are not as happy as they would like them to be. If you are interested in business, the time to start is often much, much sooner rather than later—with the unfortunate understanding that once you leave the legal world, you will have a very difficult time returning if you fail in business.

See the following articles for more information:
 

• Book Review: What Can You Do With a Law Degree? A Lawyer's Guide to Career Alternatives Inside, Outside and Around the Law.
• The Practice of Law: To Stay or Go
• Considering an Alternative Career