Every business needs to be prepared for the future. Law firms are no exception to the rule. A crucial part of planning for the future of your legal practice is putting a comprehensive business succession plan in place. Law firms without a well-crafted succession plan are vulnerable. At The Law Practice Exchange, LLC, we are committed to helping lawyers and law firms plan for practice transitions. In this article, you will find an overview of the importance of law firm succession planning.
What is Law Firm Succession Planning?
Investopedia defines business succession planning simply as a strategy that “ensures that businesses continue to run smoothly and without interruption after important people move on to new opportunities.” In other words, a succession plan for a law firm is a strategy designed to transition the legal practice—as a business—from one group of leaders, partners, and decision-makers to another. Exactly what a business succession plan for a law firm will entail always depends on the specific needs of the legal practice.
Why Succession Planning is Essential for Law Firms
Every law firm needs a comprehensive, customized business succession plan. Whether you are a partner at a mid-sized law firm or a solo practitioner, it is imperative that you have a plan in place that adequately protects your rights, interests, and your business. Some of the most notable benefits of law firm succession planning include the following:
- Provide Clarity of Purpose: What would happen if you or another key partner suddenly left your law firm? Would the firm still be able to continue operations? Would someone else be able to step in and fill the role? A law firm succession plan brings much-needed clarity to potentially uncertain situations. It can make things a lot easier.
- Reduce the Risk of Conflict: With law practice transitions, there is a serious risk of conflict. If everyone is not on the same page, the differing expectations have the potential to cause significant problems. A well-thought-out law firm succession plan reduces the risk of conflict in a practice transition.
- Smoothly Continuance of Operations: If a law firm partner or other key player left the practice, would a firm’s clients still be able to get top-quality legal services? A law firm succession plan helps to ensure that operations continue as smoothly as possible through any transitions.
- Ensure Financial Security & Protection: Law firm succession planning provides financial protection. It helps ensure that adequate funding is available to transition the practice to the next stage—regardless of unexpected circumstances.
Every law firm succession plan is different. Whether the ultimate goal is for the law firm to be sold to another party, ownership interests to be transferred to existing partners, or near partners are to be brought into the practice, a law firm succession plan can help make the transition as easy as possible on everyone involved in the process.
Three All-Too-Common Mistakes to Avoid With Law Firm Succession Planning
Succession planning is crucial. At the same time, a law firm succession plan will only be truly effective in protecting your financial interests and the future of your business if it is well-designed. In too many cases, law firm partners make avoidable errors in business succession planning. Here are three common law firm succession planning mistakes that you need to avoid:
- Waiting Too Long: With law firm succession planning, it is always best to be proactive instead of reactive. Waiting too long to get started on your business succession plan is a mistake. The right time to begin law firm succession planning is now—ideally, well before there is any immediate need.
- Poor Communication: Ultimately, successful law firm succession planning is about communication. Poor communication can undermine even the most well-considered succession plan. Make sure that everyone is on the same page.
- Failure to Update the Succession Plan: It is best to think of a law firm succession plan as a living document. A succession plan that is perfect for today may no longer be nearly as effective three years down the road. It is crucial that succession plans are kept up to date.
We are a Leader in Law Firm Succession Planning
At The Law Practice Exchange, LLC, we are a trusted national leader in the buying, selling, and transitioning of law firms. If you are preparing to purchase a law firm, we are here to offer support and guidance. Contact us today to set up an initial confidential consultation. We can help you meet your objectives. Our experienced law firm brokerage team works with clients nationwide.