Looking for Law Firm Growth? Consider Buying a Law Practice.

Purchasing an existing law firm may be ideal if you are looking to grow your existing practice or law firm, or if you are an in-house or a lateral looking for immediate stability in revenues along with the flexibility and independence that comes with firm ownership.

The upward climb from starting from scratch to sustainability may be too great or too financially risky.

Where attorneys once locked the front door when they were ready to retire, today they are instead looking to sell or transition their practices to maintain the value that has been built and demonstrated by the ringing phones, systems, clients, firm reputation and overall practice knowledge base.

Check out our current listings here: https://thelawpracticeexchange.com/listings-sale/

THE BUYING PROCESS

1. Self-Assessment. Is now the right time to take on the work and responsibility associated with buying a firm? Is there anything in your personal life or your current firm’s structure that could benefit from additional time instead? As a buyer, what would be a good fit for you or your practice in terms of practice area(s), size, location, culture, etc.?

2. Get Help. While you are an experienced attorney, this isn’t something you go through every day. It is a unique process and the right advisers can ensure the transition is successful. Assemble your advisory team and connect with a qualified law practice broker (I know a good one) who understands the unique nature of law practice transitions as compared to other business transitions.

3. Consider Opportunities. The law practice marketplace is mostly hidden due to confidentiality concerns. Most transactions go unnoticed. To discover firms for sale, contact a law practice broker, complete a confidentially agreement, and get preliminary information on potential firms. The broker will coordinate initial conversations with seller(s) to discuss how transition may work, your questions, and to get an overall initial comfort level.

4. Get Engaged. If you and the current owner believe it’s a good fit, you’ll need to agree on the value of the law firm, the structure of the transaction, transition plan, and other important deal terms while conducting due diligence.

5. Closing & After. A fixed date will be chosen for the ownership to change and the purchase and ancillary agreements to be executed along with the financial exchange. At this point you should also feel confident about the post-closing plans for a successful transition plan with the transferring attorney.

THE STEPS

1. What’s the Key To Your Success? It’s a well-prepared transition plan for the buyer and seller. You both will need to agree on the goals of the transition such as the time which will be required of the seller, and the benchmarks of a successful plan. Your goal in practice acquisition is for the selling attorney to remain or become part of the buyer’s practice post-closing.

2. How To Value? The value of a law practice is typically calculated based on historical cash flows, adjusting for factors personal to the seller or that practice as well as deal terms that impact value (shorter transition timeline, etc.). The sale price, and practice cash flows should be reviewed during the due diligence period to ensure the selling price is justified and the payments are sustainable with your projected future cash flows.

A law practice broker or CPA who is knowledgeable in the buying and selling of law firms can be vital in assessing the key value-drivers of a law practice along with the expected post-transition retention. Net income may be a great line item to use in determining the purchase price, but cash flows post-closing are a more accurate way to ascertain the firm’s value. As well, consideration of tangible asset value, accounts receivable and post-closing seller compensation should all be considered and calculated.

3. How Does Payment Structure Work?  A typical payment structure is for you as the buyer to finance or pay a certain amount at closing and for seller to finance some or structure the remaining portion as a percentage of revenues earned out over time. This allows buyer and seller to share the risk, focus on making the transition plan a success. For younger attorneys, an abundance of cash on hand is not typically the norm, so considering all financing options with lenders and payment structures is key. For more established firms or attorneys cash may be more readily available, but some form of a seller earn-out is typically still desirable.

IS IT THE RIGHT CHOICE FOR YOU OR YOUR FIRM?

Success and growth are not guaranteed if you purchase an existing practice.  Careful planning, due diligence, and self-evaluation should be performed before you buy a law practice. It is a unique process and having the right advisors can help ensure the transition is smooth and successful.

Attorney/CPA at NC Planning and Accredited Business Intermediary at The Law Practice Exchange, LLC

Tom Lenfestey, Attorney, CPA, ABI with The Law Practice Exchange LLC. Tom Lenfestey is the managing member of The Law Practice Exchange LLC as well as a North Carolina attorney and CPA. The Law Practice Exchange aims to curb the lack of knowledge in the profession by educating and advising attorneys on the number of different options available in the legal marketplace for succession of a law practice and also serving as a confidential adviser to seek and provide connections for those right opportunities between an existing attorney and a growth-focused attorney or firm. Contact The Law Practice Exchange at (919) 789-1931 or info@TheLawPracticeExchange.com for a confidential conversation.

Acquiring a Law Firm May Be Smarter Than Starting From Scratch

Purchasing an existing law firm may be ideal if you are looking to grow your existing practice or law firm or if you are an in-house or a lateral looking for immediate stability in revenues along with the flexibility and independence that comes with firm ownership.

The upward climb from starting from scratch to sustainability may be too great or too financially risky.

Where attorneys once locked the front door when they were ready to retire, today they are instead looking to sell or transition their practices to maintain the value that has been built and demonstrated by the ringing phones, systems, clients, firm reputation and overall practice knowledge base.

THE PROCESS

1. Self-Assessment. Is now the right time to take on the work and responsibility associated with buying a firm? Is there anything in your personal life or your current firm’s structure that could benefit from additional time instead? As a buyer, what would be a good fit for you or your practice in terms of practice area(s), size, location, culture, etc.?

2. Get Help. While you are an experienced attorney, this isn’t something you go through every day. It is a unique process and the right advisers can ensure the transition is successful. Assemble your advisory team and connect with a qualified law practice broker (I know a good one) who understands the unique nature of law practice transitions as compared to other business transitions.

3. Consider Opportunities. The law practice marketplace is mostly hidden due to confidentiality concerns. Most transactions go unnoticed. To discover firms for sale, contact a law practice broker, complete a confidentially agreement, and get preliminary information on potential firms. The broker will coordinate initial conversations with seller(s) to discuss how transition may work, your questions, and to get an overall initial comfort level.

4. Get Engaged. If you and the current owner believe it’s a good fit, you’ll need to agree on the value of the law firm, the structure of the transaction, transition plan, and other important deal terms while conducting due diligence.

5. Closing & After. A fixed date will be chosen for the ownership to change and the purchase and ancillary agreements to be executed along with the financial exchange.

At this point you should also feel confident about the post-closing plans for a successful transition plan with the transferring attorney.

THE STEPS

1. What’s the Key To Your Success? It’s a well-prepared transition plan for the buyer and seller. You both will need to agree on the goals of the transition such as the time which will be required of the seller, and the benchmarks of a successful plan. Your goal in practice acquisition is for the selling attorney to remain or become part of the buyer’s practice post-closing.

2. How To Value? The value of a law practice is typically calculated based on historical cash flows, adjusting for factors personal to the seller or that practice as well as deal terms that impact value (shorter transition timeline, etc.). The sale price, and practice cash flows should be reviewed during the due diligence period to ensure the selling price is justified and the payments are sustainable with your projected future cash flows.

A law practice broker or CPA who is knowledgeable in the buying and selling of law firms can be vital in assessing the key value-drivers of a law practice along with the expected post-transition retention. Net income may be a great line item to use in determining the purchase price, but cash flows post-closing are a more accurate way to ascertain the firm’s value. As well, consideration of tangible asset value, accounts receivable and post-closing seller compensation should all be considered and calculated.

3. How Does Payment Structure Work? A typical payment structure is for you as the buyer to finance or pay a certain amount at closing and for seller to finance some or structure the remaining portion as a percentage of revenues earned out over time. This allows buyer and seller to share the risk, focus on making the transition plan a success. For younger attorneys, an abundance of cash on hand is not typically the norm, so considering all financing options with lenders and payment structures is key. For more established firms or attorneys cash may be more readily available, but some form of a seller earn-out is typically still desirable.

IS IT THE RIGHT CHOICE FOR YOU?

Success and growth are not guaranteed if you purchase an existing practice. Careful planning, due diligence, and self-evaluation should be performed before you buy a law practice. It is a unique process and having the right advisers can help ensure the transition is smooth and successful.

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 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. © 2015 The Law Practice Exchange, LLC. Reproduction in whole or in part is strictly prohibited.

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.

Rewards and Risks of Buying a Law Practice

Buying a law practice isn’t something that is commonly discussed, but if you haven’t considered the financial and professional opportunities that may come with purchasing a law practice it may be time to do so. Attorneys have been buying law practices, whether internal transfer (partner to associate) or external (firm acquisitions and mergers) for years, but the marketplace is continuing to build with more sellers looking to exit their practices for value and more attorneys considering the buying of a practice as a way to grow and solidify revenues in a constantly more demanding legal marketplace.

Buying a law practice is probably one of the biggest decisions an attorney may make in his or his career. As a result, it is important to make sure the right information is gathered and the proper advisors are consulted before taking that leap.

If you are moving in that direction of buying a law practice consider these rewards and risks as part of your evaluation:

-Common Rewards 

-Financial Freedom
-Flexible Schedule
-Sense of Accomplishment
-Proven Practice Model
-Acquire Trained Employees
-Predictable Revenues
-Geographic Expansion
-Improved Systems and Process

-Common Risks 

-Financial Commitment
-Failed Client Transition Plan
-Management and Legal Time Capacity for Increased Workload

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 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. © 2015 The Law Practice Exchange, LLC. Reproduction in whole or in part is strictly prohibited.

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.

ARE YOU PREPARED FOR THE FUTURE?

As attorneys, we are called on from time to time to advise and advocate for clients’ needs while also anticipating items they may not be thinking about on the road ahead in life or business. Many attorneys will also advise those same clients, businesses and individuals on contingency and succession planning they should consider if certain events should happen. Solid advice and the implementation handled by that attorney and other advisors on behalf of the client can work perfectly. The client gets to walk away knowing they have a great contingency plan in place and things will be alright upon disability, death, retirement and many of the other curve balls life could throw their way.

How about your plan? Have you been through the same level of planning with your team of advisors that you recommend to your clients? Have you spent the time, money and effort on your own personal contingency plan? Make sure you aren’t projecting “Do as I say, not as I do” as it applies to the succession plan for your law practice and for you personally.

Follow these next steps to get prepared for your future:

  1. Stop Procrastinating! – No seriously, stop putting it off! Set aside some time to get out of the office and start considering the ‘what-ifs’ for you as a person and how those situations will impact your practice.
  2. Schedule Those Meetings – Not with your clients, you are the client now. Reach out to your financial advisor, your own trusted attorney, your CPA and a law practice consultant or broker (like us!) to start the discussion. No idea who to start with? Anyone. Make a list. The key is to start and the pieces will begin to fall into place.
  3. Document Everything– You are an attorney after all!…So make sure you are taking notes and preparing a war chest of information, goals, ideas, disaster planning info and all those other items you or someone else would need to complete your succession plan.  It could be helpful to create an organized list of where all your important documents are stored as well.
  4. Get Informed – Talk to your advisors. Open up about what your goals are and what your personal and financial needs are so that you can lay out a plan that truly works for you.
  5. Address the Contingencies – Have you heard of a Will? Do you have one? How about one for your law practice? It’s called an assumption, buy-sell or partnership succession agreement. Some form of agreement should be in place so that your practice, your clients, your family and most of all your professional legacy is not lost by just a winding down and shuttering of the client matters.

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 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. © 2015 The Law Practice Exchange, LLC. Reproduction in whole or in part is strictly prohibited.

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.

Excuses Attorneys Use to Avoid Exit Planning

Like every person and business owner, you will one day exit your law practice. That day doesn’t have to be today, but whether voluntarily through transition and retirement or involuntarily through disability, death or other unplanned event the day will come. When it does, you will want to make sure you have planned to achieve certain professional and personal goals.

Believe it or not, most attorneys and law firms have done absolutely nothing to plan and set out a process for making sure succession can occur from one attorney or one firm to another. Here are some excuses attorneys use to justify the delay or failing to put a transition plan in place:

Excuse Number One: My law practice doesn’t have any value without me in it. Yes, this may very well be true, but typically there is little to no value in practices where the attorney has passed away or had a sudden event not allowing them to be in the practice. In the succession of a law practice it takes time and transition steps which help preserve and transfer the value of your firm to the next successor.

Excuse Number Two: I’ll just keep working and earn out my value. You can definitely continue to work in the practice for so long as desired, but life throws curve balls at you and if that day comes when you can’t, but your needs dictate otherwise then the problem arises. Instead, focus on transferring ownership under a succession plan or sale and if you want to keep working then do so for so long as desired. Having a transition plan does not mean you will stop practicing law. As well, exiting at a higher value instead of in wind-down phase will always yield the best financial results for you.

Excuse Number Three: I have tried that before. A number of attorneys we have spoke with have started, stopped, started again and then things fizzled. Or they have hired an associate with the thought of a successor and associate(s) have left. Openly, if you have tried it without success it is probably because the client demands, the legal work and life in general have taken precedent over the planning. Its okay. It is understandable. For most of our clients our true goal is to push through those time constraints and keep the process moving to get to implementation. Having an outside advisor for accountability and knowledge helps greatly in this area.

Excuse Number Four: I don’t want to stop being a lawyer. You don’t have to and no one wants you to, even your successor or buyer. All law firm ownership exits should be based on transitioning over time. Even when that is complete most successors would be delighted to keep you involved and associated with the firm, but you have gained the flexibility to do so when desired and without fear of the unknown. You shouldn’t be done and with the right transition and exit plan you never have to be.

Want to Sell Your Law Practice? Waiting Too Long Can Be Costly.

Recently, I had a meeting with an attorney who had a great litigation practice. Over the last 30 plus years, he had worked hard, done the right things and built a great practice with strong client revenues. However, the attorney had received some news based regarding his health that had him working quickly to consider the sale of his law practice as he was going to be out for some time due to medical treatments. The attorney was hoping he could find a buyer so he could cash out of his practice, but he needed one fast.

The problem I discussed with him that day was that the value of his practice will greatly diminish if we remove his willingness or ability to provide transition time to a buyer, as well as just simple help and assistance in dealing with clients, information and process items post-closing. What could have been a significant number a couple of years ago would probably be far less when considering today’s current situation.

So, we laid out the options for this attorney:

– Keep the practice throughout his medical care
– Prepare for his absence with the plan to return thereafter
– Consider selling now with a drastic decrease in sales price.

Not great choices for an already tough situation.

This situation isn’t an isolated one. Many attorneys contact us when it is too late or they haven’t taken the steps necessary to plan for their exit when they needed to do so. If you are considering selling your law practice soon, it is not only important to continue to do good work for your clients, but it is just as important to make sure you take the right steps to prepare for your exit and to start that process today.

Financial Questions You Need To Answer Before Leaving Your Law Practice

 

Financial Questions You Need To Answer Before Leaving Your Law Practice

You have spent your entire career building a great law practice. It’s now time for you to start thinking about the next stage in your career. What do things look like after the practice of law? Before you take the leap and decide whether it is really the right time to transition away from your practice you need to make sure it’s the right decision for you, personally and financially.

Here are 7 things you should consider before deciding to take steps to sell or transition out of your law practice:  

  1. How much is your practice really worth? – The real answer is how much will you be left with after you sell it considering taxes, debt payoffs and any other terms of the deal. Consider the costs of the transaction and look to make sure you know how the net amount will hit your personal bank account. Bringing in a practice broker to provide a value is the first step, but making sure other advisors, particularly your CPA look at your situation and give you an estimate of final results.
  2. What are your personal expenses? – Do you really know how much you spend each year? Do you have a personal budget? Charge everything on credit cards for the next 3 months and see how all the expenses stack up and where the money is going. Can you sustain these cash outflows after your transition?
  3. How much is the practice providing? – This is a big question. One of the most forgotten business ownership benefits is having control over what expenses that business or your practice may pay that would be personal expenses if not for your practice. Health insurance, vehicles, travel, etc. are all things that sometimes are paid for by the practice, but post-transition would be your sole responsibility. Add them up and consider how they fit into your personal budget.
  4. How much have you saved outside of your practice? – If you are solely dependent on your practice cash flows or the value from selling your practice you may have a rude awakening upon exit. Make sure you are working with quality advisors on saving and diversifying outside of your law practice investment. Know your personal number and where those funds are going to come from to live the way you desire.
  5. How much risk am I willing to take? – Most law practices are not sold for 100% cash at closing. Instead, they’re sold for a percentage of cash and the rest as a seller earn out or seller financing note. There is risk involved in these deals. Make sure you have a choice of buyers and terms so you can minimize the risk by making sure you have chosen the right buyer as a transition partner.
  6. Do you have a true financial plan? – A napkin with your projected expenses scribbled on it doesn’t count. You need to go through a comprehensive financial planning exercise. The total you may get from the sale of your practice will be added to your outside investments and then all those personal expenses will be considered (as well as some you didn’t consider) to make sure you feel comfortable in the next stage in your life.

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 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. © 2015 The Law Practice Exchange, LLC. Reproduction in whole or in part is strictly prohibited.

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.

The Time To Sell Is Now!

Are You Hoping to Sell Your Law Practice? The Time To Sell Is Now!

It is estimated that over 50% of law practice owners are from the Baby Boomer generation. Of these practice owners, one is turning 65 every 57 seconds and that trend will continue for the next 17 years.  Consider this growing number of potential attorneys looking to exit their law practices along with the understanding that almost 90% of practice owners do not have a documented exit strategy, the future for buying opportunities begins to look better and better for those growth-focused law firms and attorneys.

However, if you are one of the Baby Boomers considering exiting your practice and selling it for value, the time to do so is now. It’s not too late and you can start the process by working on your transition plan that encompasses the following:

  1. Determine Your Personal Goals – Get Yourself Prepared First
  2. Calculate How Much You Will Need
  3. Take Steps to Maximize the Value of Your Practice
  4. Understand Your Exit Options
  5. Minimize Mistakes That Can Cost By Getting Advisors to Help
  6. Put the Plan in Action…It Will Take Time
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 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. © 2015 The Law Practice Exchange, LLC. Reproduction in whole or in part is strictly prohibited.

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.

Don’t Have a Succession Plan? Consider Selling.

Why Selling Your Law Practice May Be The Key To A Successful Succession PlanAn attorney unexpectedly passed away at an early age. What’s next? What happens to his or her law practice? Now that the income from being an attorney is gone, are there funds for the attorney’s family to support them? What frantic moves will the surviving spouse have to make to ensure someone can take over the practice?This is a real-life example. Most people don’t consider anything happening to them until later in life when all is winding down and things are going just as they should. Life doesn’t play the game that way. It will throw things at you that weren’t part of your plan and could mean disaster for you and your family if you haven’t taken contingencies into account as part of disaster and succession planning for you and your law practice.

If the practice owner dies, becomes disabled, or becomes incapacitated, has the next generation of attorneys in the firm been groomed and can they take over? No other attorneys in the firm- now what? Would the law practice survive if the next generation at the firm isn’t ready or in existence? The answer is typically no. However, if this next generation of owners isn’t an option for you then now may be the time to consider selling your law practice.

‘Selling’ takes all different forms and there are various structure options for you to consider and determine which works best for you. However, if you don’t have a backup plan available to you and one of those ‘what-if’ events happens tomorrow, now is the time to consider your best options in such event and how they can help maximize value and minimize disruption to your practice.
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 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. © 2015 The Law Practice Exchange, LLC. Reproduction in whole or in part is strictly prohibited.

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.

What Our Clients Say !

“The transition was smooth, the clients were glad to know their new advocate was enthusiastic and ready to help them and the practice never skipped a beat.”

Erik B.- Buyer

2019-01-02T01:16:03+00:00

Erik B.- Buyer

“The transition was smooth, the clients were glad to know their new advocate was enthusiastic and ready to help them and the practice never skipped a beat.”
“Amanda and Tom introduced me to a buyer I would have never met otherwise.  Throughout the process, they were available, helpful, and experienced in keeping us on track toward closing.  The entire process went better than expected, and I have Amanda and Tom to thank for that.”

-Bankruptcy Firm Seller LPE#541

2019-01-02T01:27:54+00:00

-Bankruptcy Firm Seller LPE#541

“Amanda and Tom introduced me to a buyer I would have never met otherwise.  Throughout the process, they were available, helpful, and experienced in keeping us on track toward closing.  The entire process went better than expected, and I have Amanda and Tom to thank for that.”
“Thank you again for all of your help. I didn’t think it was possible to get money for our practice and you proved me wrong.”

-Residential Real Estate Seller LPE#522

2019-01-02T01:25:47+00:00

-Residential Real Estate Seller LPE#522

“Thank you again for all of your help. I didn’t think it was possible to get money for our practice and you proved me wrong.”
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