Whether anticipating retirement, making a career change, or just looking to leave private practice, law firm owners must decide how they want to transition. The most common approach is to close the firm altogether. Another route is taking on a partner for a transfer of firm ownership. Some may prefer to train an associate to one day assume management of the practice. One possibility gaining traction is merging the outgoing lawyer’s firm with another.
For some owners, simply closing up shop after spending 20, 30, or 50-plus years building and shaping a practice may feel unsatisfying. So it’s understandable that selling the firm might seem like an attractive solution. For many attorneys, though, navigating such a transaction can be overly complicated, a major expense, and generally unreasonable. The feasibility of a practice’s sale depends on factors like the area of law, office location, clients, and firm reputation in the community.
Any transition requires careful thought and planning. As you begin this process, review your options by asking yourself these three key questions:
# 1: What is your goal?
The first question to ask yourself is what is your long-term, big-picture goal? If you don’t have a goal, create one. Start with the ultimate objective in mind. Then you can research your alternatives and the steps to achieve them. Evaluate those possibilities carefully and candidly. If you find that one option is not viable, pivot your plan to align with your intended outcome.
For example, if you feel your firm serves a need in the community, you may decide your goal is to continue this legacy. You will likely want to hire an associate, then, who can learn and adapt to how your firm contributes to an underserved population. If your goal is to enhance legal services offered to your clients, merging your firm may be a practical solution.
Alternatively, if your aim is to leave practice with a lump sum, selling might initially look like the ideal exit strategy. If you are a solo practitioner, however, you have likely cultivated your firm to better serve your location, work style, client base, and area of law, so not just anyone can assume your role. In addition, a large component of a sale is estimating the value of your firm’s assets. Tangible and intangible assets make a practice more appealing to buyers, but many firms, unfortunately, may not own an office building or enjoy a steady volume of repeat clients.
No matter what path you choose, consider your options through the lens of what you want for your next chapter.
# 2: What is your timeline?
Once you decide on your goal, you should also determine a reasonable timeline and milestones to reach along the way. Having a target date will help you structure your plan and make it easier to accomplish. Ideally, your timeline should provide enough lead-in to allow for planning and research before you begin the actual transition process. You should also have an idea of when you want to reach each milestone of your goal. Planning with a date in mind will also help you determine your best options and set realistic expectations for your firm.
If you are hoping to sell your practice, it is important to be realistic with your time frame. The entire process may take several years depending on your firm’s value, advertising, and potential purchasers. Also, most law firm buyers don’t have ready access to quick financing.
If your plan is to hire a partner or associate, you will probably need a longer window of time to accommodate the more gradual transition. As with any new staff, you will have to train the incoming attorney on your clientele, firm operations, and office systems. Inexperienced associates must also master the learning curve for that area of law. Your ability to mentor and develop a younger lawyer into a strong managing partner will benefit your clients and staff in the long run.
# 3: What is your next step?
In addition to your overall goal and your timeline, you should know where to look for your next step. Research your available resources—blogs, checklists, and books—to find the detailed steps involved in different transitions out of practice. Use these resources to build your exit plan.
With any transition, remember to research any legal or ethical restrictions applicable to your situation. You will need to incorporate those considerations into your plan, such as how to advertise a sale of your practice to comply with ethics rules.
For a starting point on many of these resources, check out the PLF practice aids below or reach out to a practice management attorney.
Writing the next chapter in life requires exploration, time, and planning. To set yourself up for a successful transition out of private practice, map your goals, estimate your timeline, and research the logistics. With these key questions in mind, you can begin evaluating your options for your transition with realistic expectations and a positive mindset.