Five Pitfalls To Avoid With A Law Firm Succession Plan

According to a recent American Bar Association report, over 65% of law firm partners will retire in the next eight years. Baby boomers, who have dominated law firm management for decades, are retiring, and millennials are taking their place. Is your firm ready for this change?

The legal sector is undergoing significant upheaval, and the greatest protection you can have is a robust succession plan.

Regardless of where you are in your legal career, law firm succession planning is critical to your company’s survival. According to a 2018 Thomson Reuters study, just 37% of legal firms had (or were developing) a detailed succession plan.

It isn’t always easy to imagine a circumstance in which your law firm exit plan would be required. The unexpected can, however, occur at any time. If something happens to you, a succession plan provides you peace of mind and assures that your clients and partners are in a great spot to succeed. You can ensure that your clients won’t be caught off guard regarding their legal needs by planning ahead of time.

However, law succession planning is often not an easy task, and many law firms make mistakes when developing one. When planning for succession at your law firm, don’t leave it to chance – the team here at The Law Practice Exchange are succession planning and law firm M&A experts and can help you make sure your firm is set up for success if or when an attorney exits the practice.

Common Pitfalls to Avoid When Developing a Law Firm Succession Planning

The following are some of the common mistakes we’ve seen law firms make when coming up with a succession plan:

Not Mentoring Upcoming Partners

If you employ young talent, but don’t coach them well to become partners, you’ll be in a predicament. You should be grooming younger partners toward management long before your older partners announce their retirement. 

Place them on panels to watch how they behave and respond in different scenarios. Make them a part of the firm’s management, client proposals, client relations, and vision. 

This aids junior partners in assuming leadership roles and aids other firm members in seeing them as leaders and feeling more at ease when their leadership status is established.

Not Giving Plenty of Time for Transition

Giving yourself enough time is probably the most crucial thing you could do to ensure a smooth leadership transition. Law firm succession planning should be a continual component of the company culture for large and mid-sized firms, where there may be numerous departing senior partners. 

Even in a small firm where just one lawyer is transferring, succession planning should begin at least five years ahead of time. It’s not a procedure that can be started when a senior partner wants to retire in a year. There’s always a need to hunt for lawyer “stars” to strengthen your roster and safeguard your firm’s long-term viability.

Not Valuing A Retiring Senior Partner’s Contribution to the Firm

Senior partners are encouraged to hang onto their rank for as long as feasible by the existing compensation system, which rewards attorneys for billable hours and origination for a legitimate reason. Seeing that your years of hard work have resulted in huge amounts of money for the firm fills you with pride, so it’s no surprise that when it comes to succession planning, the most common concern from senior partners is, “What about my compensation?” 

Compensation is a sensitive and frequently contentious discussion. However, one tried-and-true technique to make it go more seamlessly is to compensate older partners for their immense contribution and for their continued teaching of rising partners. There’s no use in creating a succession plan if your firm is not prepared to compensate transitioning senior partners for their contributions.

Not Involving Business Development Teams and Marketers

Whether working in-house or as consultants, legal marketers and business development experts play a critical role in attracting the best candidates. Law talents with leadership capabilities are in demand, so having a recruitment staff that can uncover them and sell them on your firm is priceless. 

Once these talents have been employed, they must be trained and coached to become rainmakers, another job for the business development team. Business development is a firm’s lifeline; if lawyers can’t generate business, everything crashes. That’s why your firm’s succession plan should include a vital company growth component and input from experts in the field.

Not Monitoring Your Law Firm’s Progress Enough

A succession plan’s schedule is self-evident: the senior partner will depart their role on a specific date. However, how you prepare for the change in the meanwhile is critical. To ensure that objectives are reached, essential team members should meet regularly. 

Stakeholders in your firm should meet every three months, as doing it less often raises the chances of the transfer failing. These panel discussions allow everyone to track their progress and enable top partners to receive public acclaim for their achievements. 

Regular meetings keep individuals responsible, as succession planning is about altering people’s behavior, which can be a challenge.

Contact Our Law Firm Succession Planning Team

Planning for the succession of your law firm can be a daunting undertaking that requires a significant amount of time. Setting aside time to organize your firm’s succession plan might be challenging, from ensuring you’re following your state’s requirements to drafting the proper documentation and choosing what to do after retirement.

If you’re having trouble keeping up with your succession planning checklist, start small and continue expanding your strategy. Succession plans are systematic, and failing to have one puts you, your business, and your clients at peril. Because you can never know when a catastrophe may occur, the best policy is to be prepared.

The Law Practice Exchange has the experience and the expertise to help with succession planning for your law firm, whether that’s bringing in a junior attorney and training them to manage the firm, or whether it’s exploring options to sell your law firm in the future. Call us today or fill out our online intake form to take the next step in securing your future.

How To Sell Your Law Firm: An Overview

When you have worked at your law practice for many years, weariness often starts to creep in and manifest itself in many ways. For some attorneys, this is a sign that it may be time to consider selling their firm. While most professionals begin exploring succession avenues at some stage of their career, many lawyers don’t realize that selling their firm is an option.

Whether you’re a solo or a larger firm, it’s worth researching your firm’s value if you’re considering moving to another venture or starting to plan for retirement or succession.

Should You Sell Your Law Firm?

If you’re considering selling your law firm, odds are it is worth more than you think. Many lawyers don’t totally appreciate the value of what they’ve created throughout their professional lives. A lot of time, work, and money go into building a law practice, and that all combines to give your firm a transferable value of its own.

Even if you’ve built your practice on your own name and reputation, you should realize that your practice will carry value for someone else, even long after you’ve retired or moved on to something else. In addition to tangible assets such as your office and technology, you likely have a solid track record and goodwill in the community that another firm or lawyer may be willing to pay for.

Key Elements You Need To Consider As You Prepare To Sell Your Practice

A key consideration is the law governing the sale of practice within your state. California was the first state to develop and implement rules governing the sale of law practice back in 1989. Today, the American Bar Association (ABA) Model Rules of Professional Conduct Rule 1.17 (enacted in 1990) guides the sale of a law practice. 

This has been absorbed into the state laws in most of the jurisdictions in the United States. Part b of the rule establishes that the practice or practice area must be sold in its entirety. Regarding its pricing, one of two prices is attached; either a fixed price calculable from an analysis of the firm’s past performance or an earn-out (based on future revenue).

The sale of the practice essentially translates to the selling lawyer losing practice rights in the firm. Nevertheless, the law remains rather vague on the window of time leading to when you, as the seller, need to cease practicing. Likewise, no such requirement prompts such a transition to be immediate. 

As a matter of good faith between parties to a contract, the selling lawyer must give notice of sale via certified email to all its clients. This letter can be used as the announcement of merger, joinder with a firm or other positive announcements as well. 

When a lawyer comes to buy a practice from you, they are looking to grow their revenue by adding your clients to their client base. Even though the property, office furniture, and technology are of some value, they do not offer the financial security equivalent to regular client traffic and the network that the firm has been able to build over its lifetime. This is why it is very important to gain clients’ consent, agree on the proper message with the buyer and develop the right transition plan before making a sale – the value of the firm strongly depends on them.

How A Law Firm Valuation Works

The valuation of a law firm typically takes three forms; asset, market, or income valuation. Asset valuation is done on the tangible assets of the company. Most law firm assets owned depreciate over time so the values are low. So, the calculation for the cost valuation is done by deducting the depreciation accumulated from the original price of the items. This figure is known as the book value. Asset value can also include case inventory, receivables, billings in progress and other assets in law firms which can drive the value up.

A market valuation is conducted to arrive at a fair market value. In essence, this is the estimated value of the firm based on its comparison to peers in the industry. The ideal scenario would be to find a firm of similar profile and financial standing to compare with and ultimately settle on a figure, similar to a real estate comparison. 

However, it is rare to find another firm along these lines to compare to since business operations vary, affecting the overall value of individual firms. This is one of the reasons it’s important to hire a M&A firm experienced in your vertical like our team here at The Law Practice Exchange – our experience helping lawyers buy and sell firms gives us data that is peerless in the industry. 

The third method of valuation is cash flow valuation which looks at revenues or income of the firm. A cash flow valuation example would be if you take your gross income (averaged over the past 3 to 5 years) and use a multiplier to come up with a value. The appropriate multiplier is often determined by a number of different variables, including:

  1. The client base – do you have one big client that’s 50% of your revenue, or a good distribution of client income across many clients?
  2. The stability of the revenue of the practice – is it growing, shrinking or staying the same?
  3. How long has the practice been in business?

How Can You Get Prospective Buyers For Your Firm?

Marketing a law firm for sale is an arduous process, mainly because of the difficulty to package your product well enough to attract the best buyers. While some lawyers choose to advertise on their own, the best choice is to find a broker to guide you through the transaction as they will often already be connected with potential qualified buyers. 

An experienced law firm broker like The Law Practice Exchange can help find and vet qualified buyers for the firm, and in many cases can get a higher valuation for your practice than if you had elected to go it alone or work with a general business broker.

What Paperwork Do You Need to Sell Your Law Firm?

You’ll first need to appraise and package the structure of your legal practice when selling it. You’ll also need any legal documentation pertaining to the sale of a business in your jurisdiction. While the specific paperwork you’ll need may depend on your circumstance and location, you’ll almost certainly require the following:

  • An offer-to-purchase agreement 
  • Cash flow statements
  • A note of seller financing (if offered)
  • Past and current financial statements (about 2 to 3 years)
  • A statement of the seller’s discretionary income

Some Tips To Keep In Mind During The Transition

While you may be burned out and ready to sell your practice or retire, it’s critical to keep some things in mind throughout the process to make sure everything goes smoothly.

First, is that you must continue conducting business normally during the process. This means servicing clients, supporting your team, and continuing to grow revenue if possible. This continuity will help put your buyer’s mind at ease, and anything unexpected during the sales process could either derail the sale or lower your valuation.

Second is that there is almost always a period (can be as long as several years) where you will be required to stay at the firm to help with the transition. This period is often tied to compensation in some form or fashion (an earnout).

Make Your Plan

While the specifics of your strategy may vary depending on your circumstance and the ethical regulations in your location, you should consider the following:

  • A timeline for transitions:  How long do you plan on staying following the sale? Plan the stages in detail and estimate the time it will take to transfer ownership to the buyer.
  • Transfer of essential information:  You should have a strategy to appropriately pass on crucial knowledge about your law firm. This could include passwords, account details, insurance information, and vendor contacts.
  • Training: Will you have to train the new owner or employees? Factor all this into your strategy to ensure a smooth changeover.

Contact The Law Firm M&A Experts

Having a deliberate transition strategy when selling a law practice is just as important as having a business plan when beginning one. A transition strategy guarantees that everyone involved, including you, your clients, and your buyer have a smooth and seamless transition.

The successful sale of a law firm requires experience and preparation. From valuation and preparation to finding your buyer and executing the sale, you will need expertise on your side. The Law Firm Exchange has the experience and expertise to help you navigate the complexities of selling your law firm. Contact us today for a free confidential consultation and find out your options!

Have You Saved Enough To Exit Your Law Practice?

Have You Saved Enough To Exit Your Law Practice?

Most attorneys made their law practices their largest source of income for them 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 if 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 on 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?

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 Selling Your Law Practice? Should You Consider an Internal Sale First?

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.

Eight Key Considerations in a Law Practice Transition Agreement

Eight Key Considerations in a Law Practice Sale Agreement.

While many different considerations are leading up, during, and after the sale process, here are a few to which you should pay particular attention.

1.Valuation.  It is common to highly value our work. This is particularly true for business owners, and lawyers are no different. As such, we may be prone to overvaluing the business. Unrealistic or unsupported sales prices can hamper or outright quash a deal. So it is typically a good idea to bring in a valuation professional to accurately value the practice.  

2.Increasing Purchase Price. It is beneficial in preparing for sale to review some of the key factors of valuing a practice as they pertain to your own. These include historical financial performance and growth, reasonable expectations of future revenue, likelihood, and extent of repeat clients, geographic location of the practice, saturation of practice areas in the local and regional marketplace, and others. Focusing on strengths and weaknesses may point to where you can do more to improve the value of your practice leading up to the sale. 

3.Consider Taxes and Net Number. If there is a certain purchase price you need to hit for retirement or any other next stage in your life, knowing what you need to do to get the value of your practice to that price, and then making sure the purchase price and structure support that goal is imperative. Also, consider the personal benefits you are receiving as an employee of the practice (health insurance, vehicle, CLE, etc.) as well as those liabilities that you would have to satisfy at closing and how those impact your number.

4.Transition Timeline. Knowing what is needed and if you can provide the time and effort to transition the clients and their associated goodwill to any purchaser is vital to any transaction being successful. Each practice is unique and specifics should be worked out not only on the total time but how the day-to-day roles will work and the financials post-closing.

5.Insurance Considerations. Due to the nature of legal malpractice insurance coverage, maintaining proper coverage through and beyond the sale of your practice is vital. Coverage details will likely be a key point in the sale transaction deal, with the seller’s responsibility likely taking the form of “tail” coverage, which provides a certain period of extension of coverage for claims made during the original life of the policy.

6.Ethical Considerations. As an attorney, you are subject to a myriad of legal and ethical duties on an ongoing basis. That doesn’t change just because you sell your practice. ABA 1.17 of the Rules of Professional Conduct provides some guidance depending on structure of your sale and several other ethical responsibilities apply depending on the transaction (i.e. merger v. sale).

7.Post-Closing Items. Give strong consideration and planning to how things will work after the sale is closed. Items such as non-compete, access to files, firm name use, how selling attorney will be involved, fees, and billing structures are just a few key areas that should be discussed and included.

8.Make Sure You Are Ready.  Selling your practice can be very draining: mentally, emotionally, physically, and financially. It is important, therefore, to make sure you are ready, on all of these levels. Take the time to talk it through with your loved ones. What are their expectations? What are yours? Are they reasonable? Does it matter? Make sure you are fully prepared for these and other transition consequences.

5 Ways You Can Exit Your Law Practice

5 Ways You Can Sell Your Law Practice.

So you’ve decided to plan for exit and sale of your law practice? Congratulations! Great first step. Now what? Now, you must go forward and choose the best exit strategy for you and your practice.

Consider these options noted below as a starting place.

Then get your key advisors, do some goal setting and choose the best path for you.

  1. Selling to an internal candidate. Even if you don’t have someone within the firm at present the idea of hiring or recruiting your successor should always be considered. Internal sales tend to be smoother and can be on a more controlled timeline for your plans and client needs.
  1. Transferring to a trusted attorney or firm. You may know some good attorneys or firms out there that would be interested. If you are worried about confidentiality, then consider hiring a law practice broker to maintain confidentiality and guide the parties through the process.
  1. Selling to a marketplace buyer. The number of buyers looking for quality law firms in all sorts of practice areas and locations continues to grow. This is a great option to maintain confidentiality and bring in a successor for value when internal options don’t exist.
  1. Partnership, join a firm, or merge. You have built a good practice. You are a good attorney. Most firms would be happy to have you join them in a partnership, merger, or lateral move structure. Financials and your ultimate exit plan should be agreed upon, but this is a great option when others don’t fit.
  1. Do nothing. It will happen. One day you will no longer be running your practice. The question is what that even will look like if you have not taken action and seen it through. Did you get the financial needs required upon exit? Are your clients going to be taken care of? Employees?

Taxes and Fees When Selling a Law Firm

What You Need to Know About Taxes and Fees When Selling A Law Practice.

Not every lawyer lives in the world of business sales and transitions and even fewer have ever had the opportunity to advise and work on a law practice sale. The unique blend of law practice transaction specifics with the ever-changing landscape of structure options, how the government taxes proceeds and associated fees with a sale create potentials for some unknown and unwanted surprises. 

You don’t need to be a tax or law practice expert, but it does help to put a CPA on your team early. Beyond that,  having an early idea of how things may work always helps in laying out structure and paths to achieve.

Consider these quick items on structure and taxation before going too far in your plans:

  • Transaction Structure Options. From stock purchase to asset purchase to mergers and beyond there are many potential purchase structures to consider. Each of those has its impact on taxes and your financials. 
  • Taxation on Sale Proceeds. Depending on the structure of your law practice entity and the structure of the purchase your tax hit can often be anywhere from 20% to 50% or more of the sale proceeds. Making sure you understand how the net amount would be calculated under certain structures and terms to negotiate to lessen that tax hit to the lower range is key.
  • Fees. Yes, you are an attorney but expect to pay other advisors such as practice brokers/consultants, accountants, and even an attorney to help you through the process. Knowing and calculating these as part of your expected after taxes and fees benefit is key.

Knowledge of deal terms and having an idea of where key points of the deal may impact your net number is key to get your transition plans moving without surprises later. Look for the right people to add to your team, as it is near impossible to go it alone and plan for the best outcome while minimizing those surprises and hits to the bottom line. 

Succession Planning For A Law Firm

Law Practice Succession Planning – Set Your Goals and Take The First Step.

The reality is that every lawyer at some point in time needs a plan for when he or she steps away from the legal field and the options for buying or selling a law practice should be considered. Thanks to life’s multitude of unexpected events, that time may be sooner than you think. And when you throw in the current state of evolution of the legal profession, it becomes more and more apparent just how important it is for each practicing professional to understand the challenges and opportunities that accompany this type of transition.

From big-firm shakeups to increasing client competition among small firms, lawyers today must contend with unprecedented financial, cultural, and marketplace changes and, as a result, each attorney must be open to transition strategies with a longer reach than those employed in the past.

These broader and more modern strategies include realizing the value of a law practice through a sale or acquisition. If those options are being considered in your exit or growth planning, then know your personal and practice goals and get ready to take that first step.

Set Your Objectives

The most important question: “What are my exit or transition objectives?” In looking to sell, transition, merge, groom the associate or even in buying a practice for growth, there are right reasons and there are wrong reasons. Any attorney must first reflect on his or her practice and determine if it is ready for such a transition or acquisition. Is now the right time, or is it better to put the plan in place for a transition or acquisition down the line?

Openly, you must first establish your objectives, weigh the costs and potential benefits, and then strive to determine the best path for your sale or purchase that has given those goals. And while personal aims may differ, in preparing a transition plan, it can be helpful to consider the following goals and rewards of practice transition planning:

– Better Prepare Practices for Change – Promote Lawyer Focus on Client Value

– Preserve Client and Practice Goodwill – Provide Alternative Growth Options

– Provide Exit Strategies – Continuous Service to Client

– Promote Mentorship – Increase or Expedite Retirement Options

Where to Start?

  1. Look Around. Regardless of whether you are looking to sell your practice or acquire another’s, the first step in any transition is to look at your practice and determine if it is in good order and capable of sustaining a transition. Focusing on how one will perceive your practice’s value or considering the potential of doubling your client matters overnight is great motivation to help you tackle those lingering items you have wanted to address for years. 
  2. Put Your Team Together. Next, continue your education on getting ready to sell or buy by seeking assistance. This includes putting together your transition advisors, which typically include your CPA, financial advisor, insurance advisor, valuation expert and law practice broker. Yes, a law practice broker. This type of advisor focuses on the buying and selling of law practices, bringing guided expertise to navigate and exploit the marketplace even when you can’t see the for-sale signs. Confidentiality is key, so contacting and engaging someone to act on your behalf, but properly, helps make sure the transition is successful for all involved.
  3. Set Specific Goals. Once you have your team in place it is time to start developing your strategy for selling, buying, merging, or other transition. Set and review your goals and define your desired transaction terms; and, then your practice broker will confidentially seek out and search potentials as well as sort through the non-opportunities. 

When to Start?

Now. Time has a way of working against us, especially in the legal profession where time is our typical exchange for compensation. Don’t be the lawyer who forgets to focus on his legal contingency plans when advising clients of the need of their own. Take the time today to jot down some of your objectives for a potential transition, whether selling or buying, and some tasks to do tomorrow to see what options are out there for you. Seek a resource to help you with your best next step.

A Law practice has transferable value and that value can provide options to an attorney looking to exit his or her practice or to gain the goodwill of another. Knowing your options and the likely financial outcome can greatly impact your professional and personal finances and can also provide tremendous opportunities for those firms or lawyers looking to see continued client service through a transition. Recognize that these options exist and begin exploring which may be best for you today. 

The Benefits of Using a Broker in Selling a Law Practice

The Benefits of Using a Broker in Selling a Law Practice

Regarding the sale of a law practice, it is reasonable to say that there is a distinct lack of communication,  opportunities, and knowledge in the professional marketplace. While you may know that you want to buy or sell a practice, you may not know where or how to start. Speaking with a law practice broker may provide you with the right tools to accomplish this goal and overcome knowledge deficiencies.

What is a law practice broker? The goal and purpose of the law practice broker are to help organize, prepare, value, promote, negotiate and package a deal for the sale of the practice. What does this entail? Generally speaking, a broker will use his or her skills, expertise, connections, and other tools to promote and develop your knowledge, awareness of market opportunities, and overall ability to get the deal done. More specifically, this includes:

  • Listing the practice, finding the right practice to buy, and otherwise exploring the marketplace;
  • Connecting you with key advisors;
  • Developing marketing and listing strategies;
  • Assisting in practice valuation and valuation improvement strategies;
  • Assisting with preserving and transferring goodwill;
  • Negotiating, and facilitating the negotiation of, key deal terms and otherwise bringing the parties to the table;
  • Reviewing and discussing exit strategies and opportunities;
  • Providing alternative growth options;
  • Ensuring confidentiality in the sale process;
  • Expediting the process and keeping it moving;
  • Allowing you to focus on your business;
  • Assisting in practice transition;
  • Facilitating closing and accomplishing checklist items; and
  • Developing an overall plan for transferring the practice.

The broker is motivated and incentivized to help you make the sale, so you may question the motives of or need for the broker. But the simple truth is that the broker can often be the difference between closing the deal and it falling through. Buyers and sellers often have substantially differing opinions on what constitutes a “fair” deal. From price amount, structure, and allocation, to limitations and qualifications of representations and warranties, to post-closing transition requirements, there are many opportunities for discord among the parties. And while it is typically the job of the attorney to hammer out these terms and prepare and revise the purchase agreements, it is the broker that often can get past the recalcitrance and get the parties talking.

The benefits of having the right law practice broker to guide and assist you through the purchase and sale process often more than justify the commission. How do I find a buyer? Is the seller asking too high a price? Does the buyer have the right qualifications? Is the market share and growth outlook of the seller the right fit for your practice goals? These are complicated questions that often take a qualified and experienced broker to help you fully understand. And while you may feel comfortable or qualified to or sell a practice based on your experience as an attorney, you can still benefit from speaking with a broker.

As you begin considering purchasing or selling a practice, take the time to speak to a law practice broker. Whether you move forward with his or her services, you will almost certainly benefit and learn from the experience.