Month: March 2022

Have You Saved Enough To Exit Your Law Practice?

Most attorneys made their law practices their largest source of income for themselves and their families. The dependency on that income may become less over the years, but there is always the question of what things would look like if the law practice salary, profits, and benefits ceased upon retirement.

For attorneys who find themselves asking the question of whether they still need the practice, there are a few ways to reduce this dependency and ensure your long-term financial security.

• The first step is to get a clear picture of your total personal financial situation. What do spending and savings look like post-law firm ownership? Is there a gap in needs with what you have saved?
• Get help from your financial advisor or retirement planner to make sure there is a gap that you can fill with income or from the sale of your law practice.
• Look at life after given your spending, giving, and other financial expenditures to determine how many are provided by the business and which you will be responsible for personally. It may make sense to stay with the new practice owner or firm for longer after closing to receive health insurance or other benefits for of-counsel work.
• Remember that your law firm can provide financial benefit to you even after your ownership or retirement through a sale, merger, or other sale-type transaction, but you need to take the steps early to plan to do so. We can help!

Overall, this analysis can be done fairly quickly with the right help and should be done regardless of your desire to sell or exit in the immediate future. Knowing your number and any gap in funding your goals will help you have confidence in preparing the timeline for transition and those financial goals needed for the value of the practice upon sale or otherwise.

What Does ‘Selling’ A Law Practice Really Mean?

Different ideas come to the minds of attorneys when they hear ‘selling a law practice’. Some think of just the sale of their fixed assets to an up-and-coming attorney or new firm in town and shutting down their actual law practice. Others think maybe they could sell the phone number and that may have some value.

In today’s marketplace selling a law practice takes many forms which are from the basic and lowest value to the more strategic with a higher value to both seller and buyer. Typical sale transactions take various structures, but are usually one of the following:

• Outright Sale. An outright sale of assets (including your personal and firm brands) to another attorney or law firm as a buyer to continue your firm under their ownership.
• Merger/Joinder. A merger or joinder by your firm or you with another firm to continue your firm’s services and provide a financial incentive for allowing them to be your firm’s successor as you slow down.
• Affiliation With Succession. An Of Counsel or other affiliation with a law firm where you personally join the successor firm to continue your practice with the support of their resources until you decide you want to retire.

Each of these are done with your financial and overall succession goals in mind to allow you to transfer what you have built for value, but allow us to work with a buyer or successor to take different structures depending on your goals, the practice transition needs and the potential buyer or successor who may be interested. 

Selling a law firm or selling a law practice can take on several shapes and forms, but the key to remember is it involves your transition and that takes time. If you are pondering “should I sell my law practice?” then contact us today to discuss your options and which structure may work best for you.

Thinking of Exiting Your Law Practice? Should You Consider an Internal Sale First?

If you are one of the law practice owners who is looking at setting plans for retiring from your law firm or selling your law practice you have more options than you think for exiting for value. Over the last several years the external purchaser marketplace has continued to gain popularity, but many times owners of law firms should look to the internal candidates, but should do so while also exploring the marketplace at the same time in case the internal path doesn’t work out.

There are several things to consider in deciding between an internal and external sale for succession and exit from ownership of your law practice:

1. Financial Considerations – Your practice may be positioned and strong enough to seek some outside prospective buyers who are willing to pay a higher price than internal candidates, but this is not always the case. For many practices, the internal associate or junior partner candidate understands the practice, the people, the clients and is more comfortable taking an additional financial risk in a purchase. Additionally, they are ensuring their compensation so many are more motivated than an external.
2. Practice Considerations – Each option will impact your team, your clients, and the community you serve differently. An external option may be more knowledgeable, stronger financially, or have more experience, but may not understand ‘how things work’ in the practice or community. As well, some employees may resist change and rather see a known person take control than the uncertainty that comes with an external.
3. Personal Considerations – Paint the picture in your head of what a perfect exit and transition looks like for you. Do the financial needs outweigh the practice aspects or do you like the idea of being able to have a tested successor who you have worked with for years before making the decision. These personal goals and objectives are the key drivers in making sure you see the exit as a success after the implementation.
4. Timeline Considerations – Sometimes timeline is not just about you or your path to retirement. The timeline that may be important is for your internal successor. Where are they in their career timeline? How long have they been with your firm?

Overall, the key is that you can’t be sure whether an internal sale or succession will work. It may look like it would or that it should and you may even have had conversations about it which seem promising, but don’t put all your eggs in one basket. Instead, make movement on your plans and keep the internal and the outside/marketplace options open to find success for you and your firm.