Law Practice Management Asked and Answered Blog

Category: Law firm succession

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Sep 14, 2011

Law Firm Succession: Opportunities for Solos and Small Firms to Join Other Small Firms Looking for Talent to Implement Their Succession Strategies

Question:

I am a solo practitioner located in the Chicago suburbs. I have one staff member. I am 53 and have been practicing law for over 25 years. I try to limit my practice to estate planning and estate administration. However, I do have to take on other general practice type matters to stay busy. Practicing law by myself is beginning to take its toll on me – it gets lonely practicing alone, coverage and backup for clients is difficult, and I have the full burden of the worry 24/7. What do I do with the practice when I get older and reach retirement age? I have not taken a vacation in years. I have been thinking about the pros and cons of joining another firm? What are your thoughts?

Response:

One option would be to grow your practice internally. You could add a younger associate attorney. However, it sounds like you currently don't have the business that would support the position. Then you would have to train the mentor the assoicate and pray that once they become productive – two or three years down the road that they stay with you and don't leave for greener pastures.

Another option would be to bring in a more senior lateral attorney with experience and a book of business.

A third option would be to look around for another solo or small firm that is looking for someone to carry the firm into the next generation as a part of their succession strategy.

According to a 1995 American Bar Foundation Lawyer Statistical Report the number of bar admissions has been consistently around 30,000 each year since 1977. Further, the number of lawyers by age reached 30,000 for lawyers under 50. Those lawyers in 1995 who were in their late 40s will be reaching retirement age between 2010 and 2015. Law firms have a larger population of lawyers in their 50s and 60s that will be approaching retirement and must develop strategies for transitioning their legal and leadership skills as well as their client relationships and market presence.

Sixty-five percent of law firms’ equity partners are in their late 50s or early 60s. Over the next 10 years there are going to be a lot of successions.

There are a lot of firms looking for someone just like you.

I am currently working with several firms in the ChicagoLand area that have asked us to help then find someone just like you. So there is a lot of opportunity to join a firm that is looking for a succession strategy that will carry the firm into the next generation.

The big questions is always the "who" more than the "what". So put together a plan and start looking around and see if you can find a compatible firm.

Click here for our blog on succession topics https://www.olmsteadassoc.com/blog/category/successionexit-strategies/

Click here for articles on other topics

John W. Olmstead, MBA, Ph.D, CMC

 

Apr 06, 2011

Law Firm Succession – Transitioning and Grooming the Next Generation

Question:

I have a general practice firm in Southern Missouri. I am the sole owner and I am 64 years old. There are three associates in the firm and four staff members. I have recently been giving some thought to my future, what to do with the practice, and how to salvage any sweat equity or value from the practice when I am ready to retire. The problem is that I love my work and really want to work forever. Suggestions?

Response:

Succession and exit questions are a hot topic in law firms of all sizes today. I find that in small firms it is not unusual for partners and owners to want to work as long as they can. In fact, in approximately 75%-80% of the firms that I am working with this is the case. Many attorneys enjoy their work and obtain great fulfillment from the work that they do.

The key is to start early and develop a transition strategy and plan. In your situation since you, health permitting, want to practice as long as you can, a sale of your practice is not really your best option. I would think that you need to focus on grooming your associates and gradually, over a phased basis, transitioning interests to them. Get a feel for the value of the practice, put together a firm financial profile and a quality proposal, dress up your financials, and sit down with you associates and discuss your ideas and plans with them. Determine their state of readiness. If they are not interested – keep your succession plans in mind when hiring others and screen for new hires that have an interest in owning a law firm.

As you look toward grooming the next generation keep in mind that you must find ways to get your associates invested in ownership both financially and emotionally. They need to believe that they are part of the firm and that down the road that it is in their best interest to someday own your firm rather than start their own. This will mean gradually giving up some control. You can't have it both ways.

Click here for our blog on succession/exit strategies

Click here for articles on other topics

John W. Olmstead, MBA, Ph.D, CMC

Apr 08, 2008

Succession: Obtaining Maximum Value for Your Practice

Question: I am the sole owner of a 12 attorney practice. I am 55 years old and am beginning to think about retirement. The other attorneys are associates in the firm. What do I need to be thinking about in order that I can transition out of my practice and have money for retirement. While I have put some money in a 401k, I am not yet financially secure enough to retire.

Response:

You are not alone. As the baby boom generation ages – more and more attorneys are asking this question. Unless you have an appropriate Exit Planning Strategy and put in place a sound Exit Plan, it is doubtful that you will be able to cash in on the full value of the goodwill that you have created. To exit successfully you need:

You will need to consider whether you should consider merger, sale of the practice to an outside buyer, or sale of the firm to the other lawyers in the firm. You need to find ways to institutionize the firm so that in additional to professional goodwill (your personal reputation and goodwill) you develop practice goodwill (goodwill of the firm that will remain after you have left the firm). Develop your lawyers and create a desire and motivation for them to want to be owners/partners in the firm. Develop your staff and practice systems. Diversify and stabilize your client base.

If you decide to sell to attorneys in the firm – begin the process early so that most of the buy-in is completed before your actually leave the firm. The longer the planning horizon – the easier they buy-in burden will be for others

John W. Olmstead, MBA, Ph.D, CMC

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