When selling your law firm, what are the important points to consider? Have you thought about all avenues available when the time comes?
In this explorative article, we talk to a well-established law practice owner in Essex. He has been an owner for over 45 years and has recently gone through this process.
Please give us a bit of background on yourself and your law firm.
I set up my business from scratch in 1975 as a general high street practice covering about 12 different areas of law. The practice changed in many respects over the ensuing 45 years before sale in 2020. By that time, we were a two partner practice with a staff of four specialising in residential and commercial conveyancing, LPAs, wills and probate.
What are the biggest changes you have seen in the legal industry over the years since you started your career?
The decimation of the residential conveyancing market by legislation in 1986, leading to a critical reduction in conveyancing fee income and the birth of huge conveyancing law factories. And the introduction of the computer and internet in the years just before and following 2000.
What is the one thing you wish knew before starting your own business?
Nothing really. When I founded the practice in 1975 at age 29, I was already fully versed in the structure and management of a small law practice.
What makes your practice different from other law firms?
Quite a lot really. As standards in the quality of service (particularly in the residential conveyancing sector) have dropped, we have concentrated upon keeping the business small and tightly run, on top of regulation and changes generated by the advancement of IT but with an “old school” presentation at the practice which is appreciated by middle-aged/older clients and, in turn, appeals also to the younger element of their family/friends whom they recommend.
What prompted you to sell your practice?
My age. Much is said today about older people extending their careers beyond retirement age. I worked full time until age 75 when (having loved it) I quite suddenly felt that I did not want to do it anymore. My younger partner and I had agreed that when this time was reached then we would dispose of the practice.
What are the benefits of selling your legal practice?
When approaching the matter of disposal/closure of a law practice, there is one big driving factor (the payment of professional indemnity insurance cover at the rate of roughly three times your final premium).
- Hire young lawyers to ensure your retirement and succession with the business continuing (this is practically impossible with a small firm as young lawyers do not wish to take the risk in this small arena).
- Amalgamate or “bolt on” to another local practice (this often does not succeed because they would prefer not to take the risk and know that they can wait for your firm to die before picking up part of your clientele).
- Sale. This is by far the best option and the route I took.
- Closure and pay the massive professional indemnity insurance run-off premium. Then watch your practice dissipate and vanish to other local firms.
What important areas should you consider when selling your law firm?
Ensure that your regulatory and claims history is in good order. Realise that the capital sale value of your practice is going to be very small. You must rely upon a well-constructed sale contract to ensure that all financial benefits are gained from the sale.