3 Strategies for a Profitable Law Firm Sale
Every law firm owner has the option to sell their firm regardless of the size, area of practice, or location of their business but it requires proper planning, valuation, and guidance to be profitable. In this article you will learn three tried and true strategies for maximizing the profitability of your law firm sale.
Strategy #1: Valuation
To get started with your law firm for sale, you need to accurately determine its true market value. This goes beyond mere profitability. Valuation considers a variety of elements and conditions to calculate the firm’s actual worth in the marketplace.
The value of a law firm hinges on multiple factors such as size, location, the area of practice, number of practicing lawyers/legal professionals within the firm, historical financial performance including revenue growth, and net income margins among other key value drivers.
The value of a law firm isn’t just in the tangible assets and financials either. The intellectual property and goodwill of your firm accumulated over time is considered.
Long-standing client relationships built on trust and success, the future earning potential of those existing clients, as well as the referral sources that are in place all have true market value. These factors impact future cash flow for the business and can make the firm more attractive to buyers as well as increase the valuation.
Many successful attorneys have sold their firms by properly assessing these key areas of their business and you can, too. An accurate evaluation will not only attract serious buyers but also ensure fair pricing during negotiations.
Strategy #2: Access to Buyers
You’ve worked hard building up an enviable track record at your law firm over years – perhaps even decades. Now it’s about making sure the right people know it’s available for purchase. A law firm broker can be a great asset in finding the right buyer for your firm, especially if they have a well-connected network of buyers and sellers accessible to them.
A good business broker will have a solid reputation in the industry, be recognized as a leader in the field, have a network of ancillary professionals that can help buyers and sellers facilitate a sale (such as lenders), and a depth of experience not only connecting buyers to sellers but moving deals forward to get them successfully concluded.
They help make sure your firm lands in capable hands and gets the attention it deserves throughout the entire sales process. To attract high-quality prospects, they will position your practice as more than just another opportunity. They will highlight what makes it unique and profitable and be able to justify the valuation they have calculated for it.
A broker will also be able to effectively market your law firm listing. The digital space offers vast opportunities to reach buyers and your broker should have a solid digital marketing plan in place to increase visibility and attract potential buyers. By using platforms like LinkedIn or legal-specific marketplaces, your broker can get your listing in front of other business brokers and buyers looking for a law firm to purchase.
Strategy #3: Getting the Deal Done
When it’s time to sell your law firm, negotiation is key. Just like coming to a settlement in a complex legal matter, knowing how to broker a deal can make all the difference in whether or not the deal gets done.
It’s about understanding both sides – you as the law firm seller and them as the law firm buyer. Deals can and should be structured in such a way that both sides are satisfied with the outcome.
You may find yourself negotiating with different types of buyers – each with their unique expectations and concerns. One type could be fellow lawyers who see potential in owning a turnkey operation where they can slide right into leadership without missing a beat. Others may be expanding into multiple markets and be less concerned with processes and systems and more concerned about geographic location.
Your first step should be getting clear on what you want from this sale. Do you want to maximize the profit from your life’s work or do you need assurance that your legacy will be maintained? Then you will need to understand the different individual buyers who express an interest in buying your firm and what key drivers are motivating them to enter the marketplace at this time.
Having a great match between buyer and seller is incredibly important. Once you know there is a good fit, it becomes more important to focus on the process that pushes a deal forward from initial interest to signing closing documents. This is where engaging an experienced partner becomes critically important.
Transacting the sale of your legal firm is not a simple task. But with preparation, clear goals, open communication, and the support of key players, you can ensure a smooth transition that benefits all parties involved.
You wouldn’t sell your home without the help of a competent real estate agent. Don’t sell your business without the support of someone who knows how to get deals done.
Selling a law firm is more than just transferring ownership; it’s about continuing an established legacy. You’ve learned the importance of accurately valuing your law firm for sale, gaining access to qualified buyers, and engaging with a partner that knows how to get deals done. These three strategies can make all the difference to your profitability and carrying out a succession plan that you’ve always envisioned for your future.
Schedule a consult today to learn more about valuations and selling your firm.