5 Things to Consider Before Buying a Law Practice
If you have been considering the benefits of buying a law practice in order to expand or grow your client base, be sure to ask yourself the following questions at the beginning of the process before going too far. Buying a law practice could be one of the biggest decisions an attorney makes in his or her career. As a result, it is crucial to prepare and make sure this potential purchase is right for you.
- IS NOW THE RIGHT TIME TO BUY? The first step should always be conducting an assessment of yourself and your firm when determining if you are ready to buy. A certain amount of confidence is needed in your strengths and the ability that you and your team can handle the transition and increased workload that will accompany the increased revenue stream. If you, the lawyer, and your law practice are ready, give some considerations to the personal aspects as well. Is this time right for you to take on more work, responsibility and risk? Or are there things in your personal life that should require such time?
- IS THE PRICE RIGHT? All law practices have value, but determining the exact amount of value is the real challenge. An analysis should be completed on the sale price and practice cash flows should be reviewed during the due diligence period to ensure the selling price is justified. Make sure someone who is knowledgeable in this area is providing this opinion and taking into account the key value-drivers of law practices.
- WILL THE SELLING FIRM’S CULTURE BE A GOOD FIT? If you don’t already know the attorney or practice, you will have the opportunity to get a glimpse of the firm’s culture throughout the due diligence period. Are there tenured employees or is there constant changeover? How much of the firm’s focus is on marketing for the future and getting clients as repeat customers? These and many other factors can help determine if it will be a good fit for you and your practice.
- IS THERE A DOCUMENTED TRANSITION PLAN? Whether the purchase you are considering is an internal transaction between attorneys of the same firm or an outside purchase, a documented and well thought out transition plan should be agreed on and a timeline should be specified. What transition goals should the exiting attorney focus on in the first few weeks? Next two years? Ultimately, you will want to know that you and the selling attorney agree on the goals of the transition, the time which will be required and the benchmarks of a successful plan as it is implemented.
- DO YOU HAVE ALL THE ANSWERS? You don’t. We promise you. Even though you are an attorney, this isn’t something you personally go through everyday. It is a process and having the right advisors from step one can ensure the transition is successful and missteps are avoided. Assemble your advisory team and connect with a qualified Law Practice Broker, your CPA and your Financial Advisor to help guide you through the process. Make sure these questions are asked and answered!
The information and advice provided in this publication is general guidance and is not necessarily specific to your individual situation, objectives or other needs. Make sure you seek a qualified expert opinion before proceeding with your transition objectives.