If you are considering exiting your law practice in the next few years make sure to plan ahead and avoid these costly mistakes.
1. Failing to Consider All Your Options – Should you sell your practice internally? Have you considered an external sale? Is your Associate or junior partner ready to pay?
2. Not Getting Help – We are lawyers and we of course can do everything, but sometimes getting help from those who are experts is the right thing to do. Consider having an initial meeting with your financial advisor, CPA and of course, your practice broker to walk through best options for you.
3. Being Too Reactive – If you wait till the market feels right or the practice is exactly at the right number you may miss the best opportunities to transition. Just like you can’t time the stock market picking the exact right time to exit is not always achievable.
4. Not Understanding The Timeline – Selling a law practice is about transition and preparing, finding and implementing the best exit option takes time even before that transition begins. The more time you give the process the better the value and the outcome.
5. Failing to Consider Your Financial Needs – Don’t forget that your personal financial or retirement plan are dependent on the cash flow or exit value from your law practice. Make sure you have a clear understanding of what amounts you need for your personal plan post-exit.
6. Not Knowing Your Value – What is your practice worth now? Make sure you have done your own due diligence and have a complete understanding of a realistic and defendable value for your practice.
7. Getting Distracted – We are emergency responders for our clients and some days there are just too many client fires to handle to allow you to also continue the plan for your exit. See (2) above and consider getting someone in place to make sure the planning continues when you aren’t able to.
8. Not Considering the Taxes, Taxes, Taxes – Review any exit options or potential deals with your CPA and make sure taxes are calculated and determined to predict your true net number.
9. Making it Too Complicated – Exiting your law practice does not have to be complicated. Don’t get overwhelmed with the tasks ahead. If you have chosen an experienced team they will walk you through the steps and get you to the finish line.
10. Forgetting What Is Next – If you are successful in exiting your practice make sure you have a plan for post-transition. This profession has been your life for many years and now it is onto the next stage. Have a personal plan and be ready to implement.