Do you want to sell out?

Since the financial crisis first hit, more lawyers than ever want to know how to sell their practice, how to value it (a requirement before selling) and then how to transition into life beyond the law.

Yes, not everyone is in panic mode, but for some the panic is there. This, in fact, may be a good time to sell. Those law firms that are well-run and free of debt will also be positioned to take advantage of many opportunities to be offered by purchasing other practices.

And when a law firm is wary or unsure of its current efficiency and effectiveness, a review or audit of the firm from a law practice management consultant may be a good prelude to either a sale or purchase.

When coaching lawyers on selling their practices, I typically start with several questions that, in my opinion, set the stage for all further deliberations:

• Why do you want to leave your practice?
• What do you want to do with your life once you leave practice?
• Do you want to retire, or start a new adventure?
• Can you achieve the same objective without selling your practice?

In discussing the value of his law practice as a prelude to selling, one client told me that his financial planner calculated a dollar amount that would assure his standard of living. This number became the purchase price of his practice. I suggested that the two were unrelated and that the value of the practice may be more or less than the lifestyle number his financial planner suggested.

This suggestion caused us to return to the reason he wanted to sell his practice and the time frame for achieving a sale. The more urgent the desire to sell, the lower will be the price; the less urgency, the greater will be the price.

Neither number has much to do with what it will take to reach and maintain a desired standard of living. Such a number may affect the decision to complete a transaction, but really has nothing to do with an objective valuation of the practice. A business is worth only what someone is willing to pay for it, and the value may be different at different times. But determining value and price are the prerequisites for a sale.

It is essential, however, to make certain that selling the practice is what you want to do. The American Bar Association in 1991 adopted Model Rule of Professional Conduct 1.17, which affirmed that an entire practice could be bought or sold. Since then, more than 40 states have followed with their own rules affirming the ethical viability of buying or selling a practice. Progress has been slow and reluctant.

For example, it was not until 2008 that the New Hampshire bar adopted its own version of Rule 1.17, which asserts that the selling lawyer cannot continue to practice law in the state of New Hampshire, in effect imposing a covenant not to compete.

Lawyers rushing to sell their practices should make certain it's what they want to do. They may not have a chance for a second act in the law.