Lawyer wanting to set up HR/Employment Law consultancy

[EchoAlpha]

Apologies in advance - I know there have been a historic post (or 3!) on a similar topic.

I'm an employment lawyer and really keen to set up an HR/Employment Law consultancy. I've been thinking about this for a while now. Prepping for baby no.2 and don't think I want to go back to work (for various reasons). It's quite a big decision for me, as I'm the breadwinner and have worked really hard to get to where I am now.

It would be great to hear from people who have successfully set up their own consultancies/sole-practice firms. Also open to hearing from those who thought about doing this and then backed out.

Thanks in advance!

Who do you envisage providing consultancy for? Employers or employees?

My primary clients would be businesses rather than individuals —particularly those with lean HR teams or limited in-house legal capability. The offering would include workforce change and redundancies, investigations, compliance and manager training, and sensitive employee relations matters.

I would also work by referral from employers, where they want to exit an employee and need them to get independent advice on settlement agreements. So employee-focused services would be available but not the main. I’ve had so many people ask if I could negotiate their settlement agreement and it’s hurt me to have to say no - very quick money!

There’s a great deal of competition in this field tbh.

You will need to put major effort and resources into finding clients, you will probably need the skills to do that just as much or even more than HR/Law
I know a few people who offer similar and they have to constantly look for clients and promote themselves, there is a LOT of competition

Thanks for your comment (and the comment above). I fully appreciate your point but am not sure that’s a reason to not bother venturing into it. There’s competition in a lot of things. I know I’m not doing something new. I guess my hope is there’s work to go around.

I met someone recently who solely focuses on settlement agreements (and has done for 20+ years) and encouraged me to do it alone. Despite there being so many people providing the service, they easily clear 5 figures per month.

My biggest fear is just sticking as an employee and not trying something on my own. Also I’m quite young so am hoping that that can be part of a USP (lol).

Happy to hear I’m completely delusional.

You aren't delusional but there should be no "hoping" anything, you should do proper market research and analysis
I used to be an SME Mentor and so many people failed because they were highly skilled in their area but had no idea how to run a business and in many cases didn't really want to either.
You should give it a go as long as you have some money behind you and can afford not to be profitable immediately
Work out exactly what your T/O needs to be to pay yourself the wage you need after all expenses etc and make sure you put around 25% away for corporation tax and the same on what you pay yourself for your own personal tax. I have sen tax bills sink many businesses

Having worked in a small org we used an online company and the market is saturated with them
I don’t think you being young is any sort of USP for a business to use your services
I know quite a few consultants in this field and it is a crowded market

I would join a firm as a self employed consultant and see if you can drum up enough work to justify going out on your own in the future. Somewhere like Setfords is good to have a try with and there are plenty of others.

You being young isn't really a USP tbh, OP. Most employers will be looking for experience and expertise, so emphasising your youth would probably be counter-productive. The employer doesn't need young and dynamic in this area, they just want a safe pair of hands that will help them to protect their business.

As an employer, I pay for outsourced HR services, and as others have said, it's a pretty crowded market. That isn't necessarily a reason not to do it, but you do need to go in with your eyes wide open.

Do you know any businesses which need your services? I found that I needed 2 or 3 existing clients (similar field but not law) who I could rely on for around 50 days of work each year, then I picked up more through word of mouth.

You might get one or two who are willing to buy you in on price, but it really is essential to have existing links, especially as it sounds as though you need a decent income.

How are you planning to juggle childcare? I paid for a nursery place for 4 days pw. I couldn't have pretended to offer a professional service if a baby was in tow.

I did it 20 years ago and am doing it again now.

20 years ago I was in my early 30s with a toddler. I had supportive mentors and friends who came through for me. That got me started and I had 12 very happy years.

It’s different this time. I have a business partner. I have loads more competition. Technology has moved on. I have repute in my field. I have self-belief (like men do). We’ve had a good first year and will re-enter the regulated sector this year.

I think, OP, that I respectfully disagree with HoppingGreen. I don’t think that kind of planning is critical. It’s critical for getting loans but that’s not what you need. No disputing its value, it’s just not critical. The indispensible thing is self-belief.

i’m assuming that as a lawyer you are conservative enough not to make basic tax mistakes.

what I think is

Thanks so much all. Really appreciate your input and will give it all further thought. Welcome any other thoughts and more than happy to chat via PM!

Happy New Year!

I run an employment law firm.

As others have said, the market is saturated. Both with employment lawyers and HR consultants.

You being young is absolutely not a benefit I'm afraid. You cannot underestimate how difficult it is to be completely on your own with no colleagues to chat to when you are not sure about a point. It's also very difficult to keep yourself updated with employment law because it changes so frequently. You need to set aside an afternoon every week for updating. Another half day(ish) for admin.

Your practising certificate and SRA fees will be expensive and your professional indemnity insurance will also be expensive particularly if you are quite young without decades of experience. You also need public liability insurance, you need to pay the ICO and you will have bank charges for multiple accounts since you'll need to run a client account and an office account. You will need proper time recording software and proper accounting software. Your accountancy fees will be higher than you expect too due to the client account. You will need a proper IT system with good security and all of the usual subscriptions - word, excel, adobe, docusign. You will need a subscription to PLc/lexisnexis. You will need insurance cover for if you're off sick and the SRA requires you to have a non related lawyer friend signed up and committed who can step in immediately and run your firm if you are suddenly hit by a bus. When you decide to stop working (whether because you want a change or you want to retire), you still have to carry the Professional indemnity insurance for six years of run off so you are paying a fortune and earning nothing..

You'll need to clear £25k+ pa before you make a penny. My old city firm sends me a lot of work but I'm now in my early 50s and all of my contacts are retiring. When people move you tend to lose the client since the new HR director will have their own favourite lawyer so you'll need to spend a lot of time keeping in touch with contacts and going to networking events etc.

I’ve worked in HR (employee relations) for 30 years. I would say that there’s a lot of difference between legal advice and HR consulting. HR consulting is about business strategy and management, coming in to do a project (usually restructuring) and you need experience of communications, supporting people through difficult changes, persuading leaders and managers to have difficult conversations and make hard decisions. You have to show that there’s value and provide commercial business justification for your work, not just “it protects you from being taken to tribunal”. If you have experience of this that is more of a USP than your age. It will be hard, don’t underestimate the competition in this area and friends who are self employed in this area spend more time networking and obtaining work than on the actual work they procure.

The other thing to bear in mind is that if you are planning on bringing in c£10k a month you may well struggle to get professional indemnity insurance at all. Insurers don't like small firms with relatively low levels of annual income since they are regarded as more risky. They also don't like project based work since you are then reliant on fewer clients for your overall income and they like steady year to year income rather than a spiky profile. I had a year where I knew I would be earning less that year since I was unavoidably away for a period and it made my premium shoot up.

Thank you, this is very helpful!

You really don't think planning is critical?
Believe me it is, so many people think you only need BP to raise finance and while that IS the case for a detailed plan but you do need to know your market, profit margins etc.
A Business Plan isn't something to show other people its a working document to keep you on track - how can you tell if you are succeeding if you have no idea what you are trying to achieve?
And believe me, even Professionals can make basic tax mistakes
I worked as an SME Mentor and so many businesses failed due to lack of planning and simple avoidable errors.
Hopefully OP won't fall into those traps and there is no reason to assume she will but I was just sharing my experiences professionally and as someone running a Consultaancy myself

Thank you, this is really helpful.

OP I agree this is a very crowded market. You would need to think carefully about what you would need to charge to get the income you need.

If you were planning on working FT, I would work on the basis that at best you would have 3.5 days available to do chargeable work, with the rest taken up with keeping up to date (big in this field), admin, billing, chasing payments and business development. Even if you can get enough work will that work financially? Lawyers often badly underestimate the time involved in the non chargeable work.

Can you explain why being young is a USP? Remember it will just be you. There weren’t be colleagues to bounce a silly question off or senior lawyers to go to with a tricky situation. You are going to need to convince your clients that you have seen & done it all before, something which is harder to prove with only a few years PQE.
I would suggest that this is a particularly risky time to make the move both due to the leaps which AI is making which will reduce the amount of work companies are outsourcing and the new law being introduced. There is always a difference between getting up to spend on the black letter of the law and discussing the actual implementation of it with colleagues, seeing what clever wording other firms are coming up with, seeing how risks are actually being managed.
Finally, do bear in mind that you are working entirely on the basis at the moment that you will have a smooth birth and a healthy baby. Whilst that is most probably what will happen, in the rare situation that it isn’t the case, whether it is a short term hiccup or a longer term complication, it may be easier to come to terms with and manage that as an existing employee with a supportive employer, a sick leave policy etc, especially when you are the breadwinner.

Ah yes I forgot the chasing bills time. It takes a ridiculous amount of time. People don’t prioritise paying £300 plus vat for a settlement agreement. Individuals simply don’t think they have to pay half the time. Obviously you can’t charge up front for employees unless you keep the money on client account.

I’m thinking about this too, although I’m looking at a long lead in to retirement as my kids are older. I do respondent work now however fancied the SA claimant work but I’m qualified in Scotland where you have to set up as a firm as an individual rather than a freelance solicitor as I believe the SRA allow, so I think the regulatory burden may end up being too much. I’m also concerned about the BD side. It’d be good money for not much work compared to what I do. Ow if I could make it work but I really need to try and work out if it’s feasible

IANAL, but imo you've got three major events/changes happening soon/now:

1. Workers' Rights bill, once it gets through
2. EHRC guidance, once it's published
3. AI and how it is hollowing out the need for firms to employ staff

I have a friend in recruitment and he's finding that firms are hiring fewer and fewer people. Which would also have a kickback on the need for your services.

Would it not make more sense for you to stay where you are while these changes happen/bed in, rather than to leave and risk your income, esp with two children where you're the breadwinner?

Or at the least, choose an area to become an expert in.

Love your name!