Six Steps to Prepare Your Practice for Sale
So you’re ready to sell your law practice. That’s great! Selling your law practice can be an excellent way to realize the value built up over years of practice and to generate income as you transition into the next phase of your career or life. But where do you start? Listed below are a few steps to review and help you prepare for the transition and sale process.
1.Set a Time frame. When do you want to sell? Knowing this (flexible) date in mind, and factoring in a post-transition assistance period, is important in readying the practice for sale and maximizing sale value.
2.Self-Education. Spend some time researching the process, the applicable laws and rules (including NCRPC 1.17), and the practical concerns of putting practice for sale on the marketplace.
3.Get Your Team in Place. You can’t go it alone, although it may be tempting: as a lawyer, you may have helped sell many businesses, but that does not mean you are necessarily qualified to best conduct the sale of your own. Having the right people to help you through the process will not only make it easier but can also have a dramatic effect on the bottom line. Additionally, you are trying to run a practice, so your time and focus are limited. Find yourself a law practice broker and CPA, and consider consulting or retaining a financial advisor, an insurance advisor, and a valuation expert.
4.Value your Practice. It is a good idea to have a verifiable idea of your practice’s value before placing it for sale. And while we are all likely to place a high premium on the work that we do, a potential buyer may see things differently. Consult with your practice valuation expert on current value and ways to increase value.
5.Analyze and Initiate Steps to Make Your Practice More Valuable. Get your practice in the best shape possible. Client management, practice areas, intended timeframe for sale, billing and realization rates and procedures, and employee management and transition are some of the factors that go into valuing a practice. There may be ways to improve efficiency and results in any or all of these areas. If you give yourself enough time, these improvements may make the practice more appealing to potential buyers and may lead to increased sale price and take-home profits.
6.Develop Your Strategy. Consider the type of intended buyer, your financial needs for retirement or next phase (consult your financial planner and CPA), necessary sale price to provide for those needs, tax strategies, internal communication, and transition needs, and other desired terms of sale. Prepare your strategy. It may and likely will change, but don’t adlib the sale process.
Selling your practice does not happen overnight. It takes months of prep as well as months, if not years, of post-transition assistance. You have to start somewhere, however. Just as you may advise a client preparing to sell his or her business, start by getting your house in order. These steps should help.