Starting Your Own Practice

The Independence Guide for Investment Advisors, Attorneys, CPAs and Other Professional Service Providers

Robert Fragasso

• Publisher: Wiley
• Year: 2020
• ISBN:
  9781119723035
• Edition: 2
• Topic: Betriebswirtschaft
• Subtopic: Unternehmertum

Provides expertinsight and advicefor professionalslooking to strike out on their own, fullyupdated to reflect current trends and issues?

Considering the overabundance of professional service providers toiling at monolith employers, you might want tostart thinking about business independence. Starting Your Own Practice: TheIndependence Guide for Investment Advisors, Attorneys, CPAs and Other Professional Service Providers offers you step-by-step guidance onthe entirety ofthe independence process, from your initial decision to break free, to managing your business, to your ultimate exit strategy.

In the 15 years sincehefirst wrote Starting Your Own Practice, authorRobert Fragassohas gainedinvaluable practical experiencecontinuing to leadhis own independent investment management and financial planning firm.Now in itsSecond Edition, this popular guideprovides more depth on management considerations, transition to business maturity, and eventual profitable business succession. The author has added a wealth of alternative ideas on how toleverage your skills and talents in your own business, licenseyourservices and infrastructure, plan for your retirement, and more. Sharing new insightsonmakingthe independence move quicker, easier, andless costly, this new edition:

• Provides straightforward information on both the financial benefits and risks of starting your own practice
• Helps you decide if you truly want to go into business for yourself
• Offers expert guidance on planning your move and structuring your marketing, managing, staffing, and general business operations
• Discussespracticalconsiderations such as leaving your current employer, converting existing clients, protecting your confidentiality, and financing your new business
• Provides new and revised content throughout, including additional in-depth commentary on management considerations and transition to business maturity

Starting Your Own Practice: The Independence Guide for Investment Advisors, Attorneys, CPAs and Other Professional Service Providers is indispensable for anyone providing skilled personal services.

CHAPTER ONE
IS IT YOUR TIME TO MOVE TO INDEPENDENCE?

Does your current work situation bother you? Does it get to you beyond the ordinary, day-to-day frustrations of working in business or in the professions? If it does, is that caused by the environment in which you work? Or is it the people upon whom you are depending for new business or for servicing your existing business? Is the revenue or cost sharing unfair? Are your ethics and values in conflict with your employer's?

Do you often ask yourself if you might be more comfortable in a business of your own?

If you are answering yes to any of this, and if your blood pressure is rising while thinking about it, you are a candidate for independence.

But, wait before taking action! Let's spend some time on your reasons for wanting business and professional independence. Those reasons will tell you a lot about your chance for success in your potential new venture. If you do this correctly, this should be your last venture because it will be yours. As the saying goes, be careful what you wish for as you may get it. So let's first dwell on you and your motivations.

Often the first thought concerning self-employment deals with money, but rarely do individuals go into business for themselves solely for more income. It is usually more complex than that. See if you can find your feelings in some of these scenarios.

The young attorney works hard to bring new business to the firm while the senior partners do not recognize him for those efforts with an appropriate sharing of the profits or with elevation to partner status. Is that about money, or is it about something more? A female CPA spends lots of time on the road representing the firm well in site audits. Meanwhile, her male peer back at the home office has been promoted to supervisor with a hefty raise in salary. Is this just about money? Finally, an investment advisor working for a financial services company is pressured to represent his organization's internally manufactured products to the exclusion of the independent investment products that are also, ostensibly, offered by his firm. He knows his company has good products, but not all of them are best for his clients. He feels limited in his ability to work ethically on behalf of his clients. That's definitely not about money.

Years ago during the Great Depression, Alfonso Fragasso managed the men's tailoring department for a major department store in Pittsburgh. He had dozens of people working for him and held a prestigious position for a person of his background. He was a master technician who could make a fine suit from a bolt of cloth and also a good manager who was liked and respected by his coworkers. Yet it was the Depression, and the department store's ownership brought in time and motion study people, then called “efficiency experts,” to find how to do more with less. Their recommendations if implemented would result, in Al's opinion, in diminished quality of goods produced. He also felt it just was not workable as the experts had never done any of the activities they were advocating. He chose to quit rather than oversee what he felt would result in lessened quality and an unworkable situation. It doesn't matter if Alfonso Fragasso was right. He felt he was and acted upon it. He spent the rest of his life owning and operating a specialty tailor shop, and he couldn't have been happier. He was well known in his community and respected for the quality of work that he did, and he did it his way.

There is an unspoken word threading through all of these examples and with all of the other examples that we may add to our list. That word is control. You do not have to control the company for which you work to feel in control. But if you feel that you are not in control of your outcomes, then you begin to focus on all of the ills that you perceive in your surroundings. If you are bringing in new business to your company but not being compensated or promoted for your efforts, you feel cheated and lacking in control over your destiny. If you see others being promoted for seemingly non-achievement-related reasons, you feel that your career path cannot be influenced by your efforts. You are not in control of those outcomes. If you cannot service your clients ethically and cannot engage in a corporate dialog to rectify it, then you also have no control over your outcomes.

So what initially seems to be about money is really about controlling your desired outcomes and guiding your own destiny. The true candidate for owning her own business says that she wishes to control her own outcomes and destiny—and will earn the income she deserves as a result! Thus, business ownership is all about deciding which outcomes are desired, how those outcomes are obtained, who helps you do that, and in what time frame—all with freedom of ethical action.

THE FINANCIAL BENEFITS

The bonus is that you also control the income you receive for doing it your way—and you build and own the equity in your business. Consider the role that business ownership plays in creating wealth. Drs. Thomas Stanley and William Danko examined the accumulation of wealth in their landmark 1996 book The Millionaire Next Store. They determined that four out of five US millionaires were still working. Of those still working, two-thirds were self-employed, and that 80% of those were first-generation affluent and had not received a sizable inheritance. Those folks had six and one-half times the wealth of those not in that category. So there is ample evidence supporting the hypothesis that business ownership is a principal road to wealth and independence. Stanley and Danko state that, while self-employed people represent less than 20% of the nation's workers, they account for more than 80% of the personal wealth. Average annual income of a business owner was $247,000 and the median was $131,000 as of their 1996 writing. And 13% of business owners made $500,000 or more. Stanley and Danko pegged the average net worth of the successful business owner at $3.7 million with 6% of them at over $10 million.

You will have lots of company as a business owner. Don't think of small business as a diminishing relic of past generations. Rather, it is a growing trend. The US Small Business Administration (SBA) published a study in December 2004 using Department of Labor data and covering the period of 1979 through 2003. Self-employed individuals (not incorporated) represented 9.8% of the labor force in 2003 vs. 9.3% of a much smaller labor force in 1979. Their numbers increased by 11.5 million, or 6%, in the period between 2000 and 2003. This increase was reflected across both genders and most races. While 9.8% of the population was unincorporated self-employed, 6.8% of women and 12.4% of men are. Further, 10.4% of Asian Americans, 5.2% of African Americans, 7.0% of Latino Americans, and 9.9% of immigrants are self-employed. Interestingly, while 12.4% of men are self-employed, 13.7% of male military veterans are self-employed, perhaps representing a higher incidence of marketable skills.

The point of all of these statistics is to present self-employed independence as a viable and growing avenue for marketing skills and for gaining control over one's outcomes and destiny. That opportunity is not seemingly diminished by gender, race, country of origin, or economic background. A study of incorporated businesses that are controlled by the founder and providing personal services such as legal, accounting, investment management, architectural, and consulting may reflect similar demographics. Anecdotal evidence would indicate so. Stanley and Danko's research compiled in The Millionaire Next Store presents self-employment as a primary road to wealth. The above data indicates the opportunity is available to all, regardless of background or current circumstance.

By contrast, you can also become wealthy working for others. You can rise in your field and be paid large sums of money to perform the services that you do well. The US Department of Labor, Bureau of Labor Statistics publishes a National Compensation Survey listing average earnings for various occupations. In the year 2018, the mean corporate non-owner manager made $121,560 up from $71,840 in 1996, an architect made $148,970 up from $62,320 in 1996, and a financial manager accountant made $146,330 vs. $48,700 in 1996. Marketing and sales managers had a mean income of $143,000, and computer and IT managers earned $148,970.

If you can earn $100,000 to $150,000 employed by others and not risk your own capital or lose sleep over making payroll, why have your own business? You may also build equity in someone else's business through stock options and other forms of equity incentives offered to you to help your employer build the business. If your primary intent is to earn more income, you can do so with far less risk staying where you are right now and working even harder to progress more quickly within the organization. Be the best architect you can be, and inevitably your employer or its competitors will recognize that and pay you appropriately. If you become the most productive salesperson possible in your chosen field, your employer will have no choice but to pay you commensurately or lose you to its archrival.

Then why go into business for yourself? Well, if you want to see your idea for a product or a service become a reality and you want that idea to be implemented in just the right way, your most fulfilling opportunity may be with your own business. If you want to build equity and wealth directly proportional to your efforts and not wait for someone to eventually recognize your efforts, you must be in business for yourself. If you want to prove yourself, there is no better arena. If you wish to surround yourself with people and a culture of your making, start your own business. You will not have the luxury of uniquely specializing your law practice if you work for a large firm. When employed by others, you will spend years, decades, or your entire career trying the cases and accepting the clients that your firm dictates to you. As a realtor, you will show the houses and place the mortgages exactly as your supervisor dictates. Your financial services firm employer will tell just how important the selling from product inventory is to the firm's profits. As a CPA your firm will dictate your travel schedule and whether you will be able to take a vacation day to see your daughter's championship-winning skating performance. As a commercial realtor you will clearly understand which corporations you may approach and which are off limits as house accounts. But, as a business owner, you will decide how, when, and with whom your business is conducted. And your earnings will reflect your work, energy, creativity, and your vision.

Thus in making this decision, there are two questions that you must answer for yourself:

1. What do you want to do each day?
2. And with whom do you wish to do it?

Sound simplistic? On the contrary, those questions are both profound and defining. Consider that if you only want to work on highly technical things and not be responsible for gaining new business, you are not a candidate for entrepreneurship. No matter how proficient your skills, people will not beat a path to your door. There actually have been better mousetraps invented, but you likely haven't seen them as everything needs promoting, selling, and managing. If selling your service to potential clients or customers repulses you, you should not go into business for yourself. Representing your services to potential clients and customers will be required every day and year of your business career. You may not pound doors to tell your story, but you must present it professionally in your daily activities. If that is not what you want to do, then you must leave it to others at your current or new employment.

Some years ago, a friend was leaving government service as a prosecuting attorney. He was well known and well respected. We had lunch, and we spoke of how new business would come to him. It would not come to him simply on the basis of his exemplary government service record. How many people know of that after all? And how would they know where to find him if they did? He would need to make new business acquisition a part of his daily activities or he would not prosper. So will you.

So you must first answer the questions of what you want to do each day and with whom before diving into this adventure. This exercise, if performed honestly and fully, may tell you to change your place of employment rather than indicate that you should start your own business. The simple efficiency of this process, using only those two questions, will filter out the background noise provided by family, friends, and the emotional tugs of past associations as well as concerns over adequate capitalization. While those are substantial considerations that must be properly administered, they are not central to the core decision. Only your uniquely individual answers to those two pivotal questions will guide you to your self-actualization and career happiness. It will be worth the time spent.

If you determine that you should not be in business for yourself but still feel unfulfilled in your current situation, you can obtain help via available career counseling services. Seek out psychologists with extensive career counseling experience. Their work with you will help guide you to the right situation. There is a word of caution here. Psychological testing is a commodity; by that I mean any psychologist can administer those tests. The key is to locate the professional who can interpret the results in a meaningful manner tied to your goals. At our company we had used various testing facilities for employment evaluations with mixed results. Then a very talented person named Joe Kerin brought to us a profiling tool that he used when running North American operations for a major corporation that measurably improved revenues and profits by placing the correct personality types in various key positions. The quality of our personnel analytics and decisions jumped. We now had a partner who took the time to listen and understand, and that's what you must seek. Find a professional who wishes to first listen to your career goals and then account for them in the work he or she is performing for you.

Keep on reading if the two-...