The greatest challenge in planning an exit strategy from your law practice is that most lawyers don’t think about working today to make their practice more valuable tomorrow.
They put off thinking through how to make the practice valuable to a buyer. I have looked at this from many different viewpoints, including selling my practice, looking to buy another practice, negotiating to have lateral partners merge, and examining what is the “real” street value of a practice versus the appraised value.
There are three key things to consider working on today that will increase the value of your practice tomorrow.
- Your case management system. There is tremendous value in an updated, thought out, and organized case management system. If you can email all of your clients to announce a merger, a marketing program, a workshop, or a law change, then you are on the right path. If you are thinking, “That is a really neat idea, but I would never do that,” then you may be on the wrong path to making your practice valuable.
- Your team. How dependent is the law firm on you? In my experience, the more dependent the firm is on your presence, the less valuable your firm will be to a buyer. The more your team can move work out the door without your intimate involvement, then the more valuable the firm will be.
- Your marketing. Do you have an annual marketing calendar? How many great referral sources do you have that you can transfer to a buyer? 100? 10? Or just 2? The more you can help a buyer transfer those referral relationships the more valuable your practice will be.
Potential buyers will be looking to answer three questions in assessing your firm’s value:
Can I run it efficiently? (case management)
Can I get work out the door profitably? (a good team)
What are my marketing resources and can they drive work in the door? (marketing calendar and referrals)
In my experience, lawyers should be working on these key issues with daily improvements to make their practices more valuable when they exit.