Do your or your law firm have a succession plan? If you don’t you’re not alone. CNBC reports that a majority of financial advisors — more than two thirds – don’t have a succession plan for their own business – and that’s actually one of the tasks that they’re paid to handle for clients.
You might be wondering why you even need a succession plan. After all, if you’ve manage to squirrel away a few bucks each month for a little nest egg, then when you’re ready to retire, why not simply slow down your intake, refer out any active cases and shut your shingle down? And while certainly, that’s one approach, it doesn’t position you any better financially than if you spent years working for others.
The real value in running your own shop isn’t just in the flexibility and autonomy – although those are certainly important. Rather, just as with owning a house, owning a firm gives you an opportunity to build up equity so that when you decide to shut down, you can cash out.
But how? There are several approaches. One way is to ease your way out, by bringing associates on board to take over your cases, and devise an arrangement for them to keep you on as of counsel for a salary for several years. Or, you could simply sell the entire firm outright. When it comes to law firm sales, Ed Poll and Roy Ginsburg are two of the go-two guys in the area. In fact, Ed even operates a Law Firm Registry for lawyers seeking to list a firm for sale, or to find one to buy.
Even if you have a practice heavily dependent on personal relationships such that a sale might not work, you can still reap additional benefits of your years of hard work. For example, you could convert law firm IP – like due diligence checklists or small business forms into a product that you could license or sell for ongoing revenues after shutting down.
While law firm succession seems like an issue far down the line, it requires sufficient advance planning — not just months, but years — to maximize success. So if you’ve always practiced under your own name, you may want to consider switching to a trade name with less personal connection. A firm with solid systems in place and up to date technology – such as electronic records – is also likely to command more interest and value than one with a century’s worth of paper files to be digitized. In short, it’s worth taking the time today to consider the steps you need to maximize the value of your firm when you decide that you’re ready to hang up your shingle.