Taking The Fear Out of The ‘R’ Word

Dear Lawyers, It’s Time to Take The Fear Out of The ‘R’ Word.

There are so many reasons that some attorneys approaching retirement decide to postpone any decision. Instead, focus on their clients, internal responsibilities, and other relationships. The most common sense most attorneys seem to be a lack of clarity about what the future will hold after owning your law practice

The goal of retirement is not to stop but to enjoy life after law. Let’s take a closer look at some common fears of retirement. And look at a strategy you can employ to get over these mental hurdles to retirement.

First, let’s be honest about four fears that most attorneys face as they consider their transition. The scary ideas that run through many potential retirees’ heads include:

If I don’t work, I’ll have no choice but to become a “mall walker.”

Really? You get to choose what you do after leaving your law firm (and as you scale down before your final departure date). You don’t have to walk the mall, join a retirement community, or do any other thing you fear you might not like (recognizing that these activities would make some quite happy). That may involve still practicing as of Counsel for quite some time, mentoring young lawyers, sailing the Caribbean, traveling across the country, or all of the above. You made a plan for your law practice and made it happen, so now it is time to do the same for the next stage in life. 

If I don’t practice law anymore, I don’t know how to introduce myself to others.

It’s true that at some point, you may not be a current member of your firm, but you can remain a member of your state bar and stay involved in the profession in so many ways. 

If I don’t work, I will lose my mind.

It’s possible that if you don’t use it, your sharpness may decline. However, there are many great ways to keep your mind engaged outside of employment. Set new goals which you have to learn and plan to achieve.

That plan to sail the Caribbean won’t happen without going to sailing school to learn all those knots, navigation, and preparation you need for that adventure. 

I need the money.

To get an idea of what you’ll need in retirement, you need to have a good conversation with a financial planner. Depending on how many years you have until retirement, this can give you an idea of what you should contribute to your nest egg and what your expenses will need to live comfortably.

One possibility might be continuing to work as an of Counsel for some time, doing other consulting in the legal world so you can maintain a steady revenue stream. However, it will likely be smaller than the one you earned when you were at your firm.

So, how do you counter these fears about retirement? The best option is to prepare a list of the possibilities for your retirement. Take the following steps to put this list together.

Open a document or take out a piece of paper.

Consider this your first moment of brainstorming for retirement, so it doesn’t have to be perfect. You will update it many times over several years. Perhaps, so you want it to be fluid, accessible, and not easily lost or misplaced.

Begin a list of all of the things you might do after retirement.

You do not have to be sure you will tackle an item before placing it on your list. It may be a travel destination, a consulting company idea, teaching a class, mentoring an attorney, giving back somehow,  etc.  

Add to your list.

Update the list over time. As it gets longer and more filled in, consider reorganizing it and structuring your possibilities by the nature of the activity. 

Share with others.

Start telling everyone about your target goals and possibilities. Not only will this provide you with feedback on your list, but it also can encourage you and make the commitment even more real once you have told someone else.  

Try them out.

Before you fully retire, start trying some of those hot items on your list. Take some extra time and try a shorter version of that big trip or start taking some classes for your planning activity. 

Keep it up and keep adding. 

Once you complete something, add another item and keep the cycle going. If you want something with even more challenge, go ahead and shoot for the stars. You are an attorney; you will figure out how to make it happen. 

Look forward, not backward.

As your plans start to move you towards retirement, don’t approach with fear of the unknown. Instead, get ready and make a plan to achieve all those things you dreamed about and start your list and action items to make your next stage in life even more fulfilling than the previous. 

How to Break ‘THE’ Big News

How to Break ‘THE’ Big News About the changes in  Your Law Practice? 

If you are considering selling or another exit from your law practice keeping it quiet is the key. Typically, no good will come from too many people knowing about you looking to exit. However, there will come the point when the deal is closed, and everyone in the office is sensing a change in your attitude (maybe it’s the smile, Hawaiian shirt, and golf shoes). 

Once that time has arrived, make sure you follow these steps in announcing the practice transition.

Insiders First.

Always start by sharing the news with your attorneys and other employees first. Start with the attorneys and critical individuals and then together share the information with the others. This leads to a group announcement that builds trust and provides the ‘buy-in’ factor.

Timeline Communicated.

Make sure to outline a transition plan and timeline anticipated. Always provide regular updates.

Employees Can’ List.

Once you bring the employees into the mix, please provide them with these three items.

  1. Make sure they know what they can share. Give the employees messages and FAQs on how to respond to clients or others.
  2. Identify a role you would like each of them to play in the transition.
  3. Offer a platform and method for them to ask questions and share feedback.

Breaking the big news is just the beginning.

Make sure any communications with employees or others focus on the future and not the past. Selling your law firm is not the end but the beginning of more opportunities. 

Share with Clients and Referral Sources.

Follow a similar pattern in sharing this news with referral sources and clients. Start with a message from you as the leader that is followed by more personal communication from the referral source or client’s point person within the firm. This will help reinforce the message and convey consistency and confidence.

Personalize Communication.

Phone calls are better than a mailing or email, especially with key contacts or clients. Even better, take them to lunch to address any concerns. 

Focus on Client Service and Employee Care.

Make sure the clients and employees know you have chosen your new practice partner after careful due diligence to make sure they are taken care of and that this new opportunity brings numerous benefits to employees and clients know the benefits, write them down and communicate them.

You Aren’t Going Anywhere.

Your employees and your clients like you – Congratulations! Reassure them that you aren’t leaving and this is just part of an extended plan. You’ll still be there when they call tomorrow and you will make sure to take the time and effort to have someone always there for them, whether it is to provide employment or to help with a legal issue.

Handling Client Transition When Selling

Practically speaking, handling client transition when selling includes and means selling and transferring your clients. There are several things to do and considerations to take into account. 

Here is a list of things to remember and consider when handling client transition when selling a law practice.

  1. Client notice 
  2. Written notice regarding the proposed sale
  3. Conflicts of Interest rules must be adhered
  4. An announcement in a local newspaper 
  5. Contact information 
  6. Follow all requirements 
  7. Introduce the purchasing attorney to the clients
  8. Find common ground

Client notice.

Rule 1.17 in most states mandates client notice as a condition precedent to selling.

A written notice regarding the proposed sale.

All clients should have a copy of a written statement regarding the proposed deal, the client’s rights regarding ongoing counsel and possession of records, and other details. 

Conflicts of Interest

Conflicts of Interest rules must be adhered to following the law. 

Notice in a local newspaper. 

The seller should send a letter or email to your entire current client database and all former clients to keep everyone updated on the upcoming changes. 

Contact information. 

The seller should provide clients with contact information for both parties involved just in case they need assistance.

Follow all requirements. 

Follow all requirements regarding retaining and transferring client records, giving the clients notice of the right to retrieve their records.

Introduce the purchasing attorney to the clients.

It can be an excellent policy to introduce the purchasing attorney to the clients (though practical difficulties will likely prevent introduction to all). It will demonstrate your care for them and encourage them to stay.

Find common ground

Find common ground and work together to achieve a mutually beneficial transition. Both parties will have an incentive to protect the practice’s goodwill – reputation, referral base, etc. 



Four (4) Law Practice Deal Roadblocks to Avoid

During a law practice deal, there are four deal roadblocks to avoid.

1. Financials –If you are a practice owner and don’t have financials that are in good form and up-to-date with the ability to generate reports for accounts receivables, employee costs, historical comparisons of profits and losses, then the time is now to get things in order. Get those items answered first before you acquire a practice.

2. Where the work comes from –A practice owner’s most significant deliverable to a potential buyer is to explain what works for marketing, where clients come from as a result of the firm’s marketing or brand awareness, and the mix of revenues from specific revenues clients or practice areas. If you haven’t been tracking this, it’s time to put some software to accomplish it.

3. Ethics and licensing –If you don’t understand how a law practice acquisition works under ethics rules or other business structures and proceed forward without that knowledge, several bad things can happen, including killing the deal. Licensing for new or out-of-state attorneys takes time, so make sure to reach out and connect with the right knowledgeable resources who can make those items become understood.

4. Transition plan –Sometimes the biggest hurdle in making a deal work, but it is imperative to get it done right. We work with clients to discuss their practices. By doing so, we make sure the buyer and seller can work through transition details that make sense, work for both parties, and preserve the value and lessen disruptions.

The Law Practice Exchange aims to curb the lack of knowledge in the profession on law practice transitions by educating and advising attorneys on the number of different options available in the legal marketplace and also serving as a confidential broker and advisor to provide connections for those right opportunities between an exiting attorney and a growth-focused attorney or firm.

3 Questions to Ask Employees

The 3 Questions to Ask Employees During a Law Practice Ownership Transition.

The foundation of a good transition plan is open communication. Start by meeting with each of the employees and asking them these three questions during the transition.

1. What worked in the former practice, and what should we make sure we continue?

2. What were some of the obstacles to performance in the old structure to change them?

3. What was missing, not being done before, that we should address and focus on adding?

We work with clients to discuss those 3 questions to ask employees during the ownership transition. Also, it is important to know their practices to make sure the buyer and seller can work through transition details that make sense, work for both parties, and actually work to preserve the value and lessen disruptions.

Use the responses received to drive those subsequent changes. Notice that the questions focus on the practice structure and not the previous attorney. You are looking to take something working and improve on it with the team that helped get it to the level of success you just purchased. It would be best if you had them to help you get to the next level as well, so be mindful and move forward with change involving each of them as possible. Get the team to embrace them as their ideas for improvement.

Tom Lenfestey is the Managing Member of The Law Practice Exchange, LLC, and a practicing North Carolina attorney. The Law Practice Exchange aims to curb the lack of knowledge in the professional law practice transitions by educating and advising attorneys on the number of different options available in the legal marketplace and also serving as a confidential broker and advisor to seek and provide connections for those right opportunities between an exiting attorney and a growth-focused attorney or firm. Find out more at www.TheLawPracticeExchange.com. © 2015The Law Practice Exchange, LLC. Reproduction in whole or in part is strictly prohibited.

Your Law Practice Has Value Upon Exit

Every Law Practice Has A Quantifiable And Marketable Value. Like any other business, each law practice has a different and marketable value of its own. You have built and managed a proven business model. So, you have come to the understanding that your law practice has value, but next in line is the real question: How much? This number is the one that can make you feel good, feel proud, and maybe even a little boastful or on the other hand.  This number may make you reconsider what you are trying to build within your practice, but having an exit option for your retirement is ultimately deciding whether to sell or buy.

Valuing Your Practice: What’s Your Magic Number? Several methods can be used to determine a law practice’s value. Each technique may be right depending on the needs or purpose of the valuation.

Rule of Thumb Methods. The basic premise of these varying methods is to look at past cash flows to estimate future value. They are based on the belief that what has happened in the past should continue in the future.

Revenues. Therefore, practice with average annual revenues of $500,000 may sell for anywhere from $250,000 to $600,000. It is not an alarming number if you previously hadn’t considered your practice had value. 

Multiple of Net Income. Law practices will typically sell for a multiple of between 2 to 3 times net earnings. Using our example from above, if that same firm has a net income of $200,000, the value may be anywhere between $400,00 to $600,000.


Market Comparison. In a marketplace of buying and selling law practices where most negotiations and real deals are confidential. While confidentiality adds a layer of difficulty to the overall public valuation process, those with knowledge of the marketplace and what real numbers law practices are transferring can be phenomenal resources.

Key-Value Drivers. Some factors can create a significant swing in value. Some of them will help increase the weight, but some will also lower it like Financial Performance, Growth Potential, Brand Identity, Practice Area, Geographic Location, etc. 

Adjustments. There will always be adjustments that need to be made, and those from the critical value drivers noted. These adjustments are typically ones that have made a financial impact on the practice. That said, every valuation should include some adjustments. 


The ‘It Depends’ Disclaimer.

Hey, we are attorneys and thus understand that variables can change the rules and the result. You and your practice are unique, and those specific aspects can throw any of the methods above out the window or vary them quite a bit. However, if you genuinely want to know the value of what you have built, start with the above as a first step. Then, go through the valuation process with an expert who is fit to meet your valuation needs. 

How to determine your law firm value is a crucial step to any sale or exit planning you may be considering. The above are ways to estimate, but always consider getting an accurate valuation from a law firm broker, valuation consultant, or similar.