published on 1/23/06
Few lawyers actually believe that their practices represent something of value they can sell or otherwise transition to another lawyer. They don't believe they have goodwill that can be transferred and are unwilling to share the current value of their attorney-client relationship, even with others in their own firm. Yet lawyers are not immortal, and at some point they must confront the issue of moving on. Here are thoughts on three different scenarios.
Plan for Succession
Most lawyers at most law firms live in a system in which they "eat what they kill" and therefore don't want to share information on clients or prospects with the next-generation lawyer who might "steal" business before the first attorney is ready to step away from active practice. A law firm can create a huge competitive advantage for itself by proactively encouraging succession of clients from older to younger lawyers. One way is to offer a buyout or capital payout in exchange for sharing clients with younger lawyers. Senior lawyers would remain engaged in the firm, continuing to bring in new business, but without the fear of financial loss from losing a book of business. The firm and clients benefit from a planned transition.
Institutionalize Marketing
When rainmakers hit 65, they slow down, and their referral sources retire. Meanwhile, the next generation of partners has been accustomed to inheriting business and has no marketing skills. This is usually when I get a call, and I emphasize that clients belong to the firm, not to a partner. I recommend that firms service top 20 clients with teams - not just a single rainmaker - and cross-sell between teams according to a strategic plan. Train lawyers to go after target businesses according to a personal marketing plan, and give bonuses to those who get results. Hire associates with business development skills, and don't make them partners unless they have a book of business. Require management committee members to be rainmakers. Steps like these institutionalize the process of marketing so that the firm doesn't face sudden disaster when rainmaker partners retire.
Selling a Practice
Selling a law practice, or portions of the practice, to another qualified attorney or attorneys no longer violates the code of professional ethics in most states. Even so, you shouldn't do it until you're serious about getting out. Remember that 99 percent of potential business buyers invariably get cold feet and back out before closing. Anticipate this and deal logically, reasonably and unemotionally with it. I recommend that sellers retain a professional business consultant or broker who is involved in selling law practices and knows how to find the few potential buyers with the proper means and motivation. Even after culling out unqualified potential buyers, only about 50 percent of serious prospects eventually buy a law practice. Once you do have a buyer, realize that you can't have a change of heart and decide to resume practice. This would violate both contract law and the rules of professional conduct. Your intent in selling should be to retire from the practice of law.
