A law firm is a complex business. Whether you are buying a law firm or selling a law firm, it is crucial that you have a well-developed strategy to protect your rights, your financial interests, and the future operations of the practice. Transitioning leadership within a law firm can be challenging. With a proactive approach, you can take the right steps to facilitate a smooth and successful transition of a law firm’s leadership and/or ownership.
You may have questions about the best way to accomplish a transfer of leadership for a law firm. In this article, our seasoned legal team at The Law Practice Exchange will discuss what to consider when transitioning leadership in a law firm, and we include a detailed checklist for doing just that.
Know Your Purpose and Objectives
As a starting point, it is crucial that you have a clear view of your purpose and your objectives—both on a personal level and on a professional level. Many people run into problems when transitioning to a law firm because they see the ultimate goal. Here are some key things that should be considered:
- Do you know why you want to buy, sell, and/or transition the leadership of a law firm?
- Are you confident that all key players—inside and outside the firm—are on the same page?
Develop a Comprehensive Plan for the Practice
A well-thought-out plan for the practice can provide clarity and direction during the leadership transition. In many ways, you could think of this type of strategy as an “estate plan” for the law firm. Among other things, a plan for the future of the practice may need to address the following:
- A complete list of all current (and recent) clients of the firm
- A detailed account of the case file/legal strategy for all ongoing matters
- A clear chart that clarifies the current and future organizational and management structure of the law firm
- A complete account of the financial position—income, assets, liabilities, etc.—of the legal practice
Create a Strategy for Client Transfer/Transition
One of the most complicated and most important aspects of a leadership transition in a law firm is the client transfer process. You need to figure out which, if any, clients will transition to new legal representation. How exactly this works depends on many different factors. Key steps include:
- Create a profile for each client
- Develop a more comprehensive client map
- Create a client service checklist
- Ensure that administrative matters (billing, etc.) are handled
- Develop a plan for communication changes with clients
- Create a comprehensive accountability plan for the transition
Ensure a Business Succession Plan is in Place
Every law firm should have a business succession plan. The University of Washington (UW) defines a business succession plan as “the process of identifying the critical positions within your organization and developing action plans for individuals to assume those positions.” The plan should be updated during and after the transition of leadership. Important considerations include
- Safeguarding client information and client assets
- Ensuring compliance with record-keeping requirements
- Closing out trust accounts and client accounts (if applicable)
- Developing a new plan for the future leadership of the law firm
Provide the Knowledge and Tools to Empower New Leaders
Taking on the responsibility of running a law firm is never easy. A lawyer who assumes the position of leadership must be empowered with the right knowledge, resources, and tools. This is an area where two law firms run into problems during a transition. Among other things, this part of the process may involve:
- Proving all relevant financial information about the practice in appropriate context
- Ensuring that technology services and digital accounts are properly transferred
- Preparing staff and other key players for the transition of new leadership
- Promptly notify all vendors and suppliers of ownership/leadership changes
Pay Careful Attention to Insurance Coverage
Insurance is a vital part of owning and operating a successful legal practice. It cannot be overlooked. It is imperative that all parties involved in a law firm’s leadership transition review insurance coverage before transitioning leadership to avoid any potential legal issues.
- TAIL coverage
- Malpractice coverage
- Business life insurance coverage (if applicable)
The Law Practice Exchange are Leaders in Law Firm Brokerage and Exit Strategies
At The Law Practice Exchange, LLC, we are proud to be the leading law firm brokerage. If you have any questions about exit strategies or the transition of the leadership of a law firm, we are here to help. Contact us today to set up a fully confidential initial consultation. Our team helps clients with the buying, selling, valuing, and transitioning of law firms nationwide.