Starting your own business and the long jump

In the long jump, the second to last step is referred to as the “penultimate step.” The penultimate step is when the jumper briefly dips down before exploding into the jump. As you already know, it’s impossible to jump with your legs kept straight. As with all things, before you go up, you have to dip down…just a tad. The penultimate step is the most important step in the jump and it’s the most important step before you can truly break free and start your own business/law practice.

Scale down, then scale up

When I talk with fellow attorneys that are close to squeezing the trigger and starting their own practice, I think of the importance of the penultimate step. As in the long jump, we all need to be willing to scale our lifestyles down in preparation for the big “jump.” I’m reminded of the quote, “Success can never be negotiated. Identify the price and pay it.” Well part of the price lies in your willingness to ramp things down for a bit. If someone is accustomed to making over $10K a month, and they’re married to that $10K a month lifestyle, their choices are completely limited in what they can do in the marketplace. With law, building a profitable practice takes time and it’s hard to make a painless transition from the securities of a law firm into the chaos of a competitive market. If you’re not willing to scale things down, it’s the equivalent of trying to negotiate down the price of success. It’s not going to happen. Leadership requires vision and part of vision is developing the courage to make the tough short term decisions for long term success. The penultimate step leads to a temporary slow down right before the explosion. I challenge you to make the tough decisions in 2010.

If I don’t speak with you between now and Christmas, Merry Christmas to you all. I love and respect all of you.

The following statement was jointly prepared between both parties.

“On or about November 20, 2009, Plaintiff Laurel Cook filed, on behalf of herself and those similarly situated, a Complaint and Demand for Jury Trial in the San Diego Superior Court against efusjon, Inc. and several individual defendants. Plaintiff alleged that the efusjon Energy Club was an illegal pyramid scheme. Defendants vigorously defended the action and continue to deny that the efusjon business is an illegal pyramid scheme or violated any law. The Parties engaged in a confidential mediation and through this process were able to settle their dispute under mutually agreeable terms. Defendants’ agreement to settle this matter is in no way an admission of liability.”

The specifics of the settlement are confidential.

Smaller businesses (ahem, law practices) have many advantages over larger ones.  As the saying goes, “Small is the New Big.”  In 1937, Ronald Coase, a Nobel Prize winner, illustrated one of the fundamental purposes behind large organizations: business can be expensive and sometimes it’s best if costs are spread out throughout a large enterprise.  Due to operating costs, all businesses, large and small, have an inherent “Coasean floor” where a certain endeavor is not worth the organization’s time.  But if costs are driven low enough, the Coasean Theorem states that small operations can theoretically overtake big ones.  With fewer barriers to enter, such as zero marketing costs and super-low technology costs, the small can act big and provide equivalent services at much lower price points.

To be clear, the mega law firms are not going the way of the dinosaur.  There will always be the mega law firms with enough resources to support the needs of various institutional clients.  I do not see a sole practitioner getting complex security work from Merrill Lynch.  However, it’s no secret that there’s a deflationary force in the legal industry where clients are demanding more competitive rates.  If the Coasean Floor of the larger law firms prohibits them from making adjustments due to legacy costs, inflated salaries and costly infrastructure, the work will flow to professionals with leaner operations.  If you’ve got a laptop and an internet connection, it’s possible to open up shop.  It can be as simple or as complex as you want.

I did two interviews last week and I want to provide them in one spot for your convenience.  Recently, I was on the ACES Radio Live program with industry leaders, Troy Dooly and Jim Gillhouse.  Troy and Jim are extremely influential leaders in the industry and it was an honor to be a part of their program.  We had a great discussion about the legal ramifications facing distributors in the network marketing industry.  Click here to listen to that program.  We’ve received some good feedback from the audience, such as this statement from a listener:  ”I have listened two times! Most amazing informational recording. Thank you Kevin for coming on the show. Thank you Jim and Troy for asking the right questions! WOW and I agree Michael ‘holy cow Batman’.”

I was also a guest on Len Clement’s program as well.  Click here for that program.

It was a busy week, but it’s an honor to speak with industry leaders about the state of the network marketing world.

In this new age of transparency and openness, it’s near-impossible to bottle up information and sell it. Today, information begs to be free. This is especially true in the realm of digital information. Last month, Bob Dickie from the Aide-de-Camp blog sent me the Wall Street Journal article about a strange monopoly over a particular realm of information: the law.

The article states,

But with the possible exception of the ever-leaky CIA, no aspect of government remains more locked down than the secretive, hierarchical judicial branch. Digital records of court filings, briefs and transcripts sit behind paywalls like Lexis and Westlaw. Legal codes and judicial documents aren’t copyrighted, but governments often cut exclusive distribution deals, rendering other access methods a bit legally questionable…

In law school, I recall a lesson in Criminal Law where we were taught that “ignorance of the law is no excuse.” It was explained that there’s a presumption that everyone knows the law and purposely chooses to follow or break it. By itself, the presumption is obviously a huge stretch, but it’s also understandable.  Otherwise, could you imagine all the “I didn’t know” excuses?  But when we lock access to the law behind expensive pay-walls, doesn’t it fly in the face of this presumption of knowledge? On the one hand, we want to hold everyone to a standard of sophistication and understanding. On the other hand, we bury the laws behind expensive websites that are only accessible by law firms.

Hence, the monopoly over legal information. As lawyers, we make a living exploiting the ignorance of our clients. It’s true. They have a need, they have no idea how to solve it, we have access to the information to help them, and we earn a living by connecting the dots. There’s nothing wrong with this model. It’s been around a long time. In defense of this model, I’d argue we have a unique skill set to understand the issues and leverage the information to the client’s full advantage. And with skills, comes marketable value. Again, there’s nothing wrong with this.

But this model is on the wrong side of history… As an example, if you used to make a living setting up corporations and LLCs, you’ve probably moved on thanks to Legal Zoom. Who’s next? The problem with information is that it can easily devolve into a commodity.

So what’s the solution?  Be an expert, own a niche, and stay one step ahead of the commodity curve.  The legal profession needs to get out of the 20th century, embrace openness, and seek to empower average citizens with as much information as possible. Entrepreneurs are already trying to make this happen. Lawyers can share documents at JD Supra, law students can share case summaries at Advanced Advocates, lawyers can cheaply search for cases over at fastcase.com. Furthermore, the American Bar Association needs to end the requirement to be certified in each state separately to practice there. If I practice law in a state for 3 years, I’m more qualified to work in a different state than some law student that just crammed for the Bar exam. If you can practice in one state, guess what, you can practice in all states. Open up the doors of competition. Entrepreneurs will slowly pick this industry apart. Either accept openness, or be destroyed by it.