Last month, I wrote Part I of this two-part series, about a succession planning presentation at our LegalShield Provider conference by Roy Ginsburg, a legal strategic advisor. Part II will move from the why of retirement into the planning for leaving the law, including some tips on divesting your firm.
“The time to put on a new roof is when the sun is shining.” —John Kennedy
As we discussed last time, those who are ready to retire have usually created financial stability and an identity above and beyond work. Once the decision is made, then a whole new list of action items is required. First, however, a few decisions are needed in terms of your succession planning:
- Are you closing your practice?
- Are you retiring and leaving the firm to other partners?
- Will you entertain a buy-out by an internal successor or a buy-in from an outsider?
- Will you sell to a competitor or merge your firm with another?
If this seems like a daunting list, that is okay, as there are professionals to help you, and also this is a long-term strategy as outlined below. Business brokers and consultants can help you advertise your firm and you can also use your own network to look for a potential buyer.
As we explored last time, there is certainly less stress when you are retired, but what if you still wish to work with clients? You can consider stepping down as a partner to alleviate a management headache and still serve your clients. However, that might not be a good fit if there is a shift in firm culture. Or perhaps you may not wish to relinquish control over and work for someone else again at the end of your career.
“The best way to predict your future is to create it.” —Abraham Lincoln
The value of a law firm is the clients and the revenue stream. As you plan to either sell or retire, it’s important to review the plan for client transition to ensure that there is minimum disruption within the firm and amongst your clients. This should include the use of customer relationship management (CRM) and practice management systems to gather the information on clients’ billing history, future legal needs, and the relationship over the years.
A multi-phase and multi-year succession approach was discussed as follows:
Phase One (Years 1-3): Think of this as probation for you and your successor as responsibilities shift and you spend time training. There is still time to back out if you change your mind in this phase. Your goal is to test that you have picked the correct person to take your place.
Phase Two (Years 4-6): At this point, you are starting to scale back and will work less and start to receive payments as your clients that are transitioned to your successor.
Phase Three (Years 7-9): This is the tipping point where you will start to receive significant payments for your share of the clients as you are exiting. The marketplace will generally define a fair price for those payments.
The above deal is your compensation and you should structure your payout over time, but the sooner this process is mapped out and initiated, the better. Please note that the years are just estimates and certainly the process can be shorter or longer. Remember, each deal is different.
A bit more information on lawyer and coach, Roy Ginsburg: Roy has spent more than 30 years practicing law in both private practice and as in-house counsel, and currently runs a successful part-time solo practice. You can reach Roy here for more information on succession planning and other topics to help your practice succeed.
About the Author
Lori Owens is the senior director of provider services at LegalShield, which develops and markets pre-paid legal service plans through a network of independent provider attorneys across the U.S. and Canada. Contact her at firstname.lastname@example.org.