Selling a PRE-Owned Law Practice

Published December 4, 2012

Pre-owned Cars

In recent years the makers of luxury vehicles like Cadillac and Mercedes have developed a marketing strategy to diminish the long-held stigma against used cars. They instead call their vehicles “pre-owned,” implying that all the kinks have been worked out and that the purchaser will receive real value with almost as much prestige.

Profits = Revenues – Expenses

Lawyers looking to sell their practices can similarly maximize the value they realize from them by borrowing this concept to create a PRE-owned law practice. In this instance PRE stands for the value creation dynamic of any business enterprise: Profits equal Revenues minus Expenses, in other words, P = R – E. This dynamic applies throughout the life of a legal practice, but is especially important in maximizing practice value when the time comes to sell. A profitable practice is more valuable, and the simple fact is that lawyers who enjoy the practice of law generally have a more profitable practice.

The Secret to a Successful Practice

Are you selling your practice because you’re unhappy and burned out? Or do you still love the law and enjoy helping people? The latter attitude is the true secret to a successful practice. Older lawyers who continue to apply the client service lessons presumably learned throughout their careers ought not to see the profitability of their practices in jeopardy. This avoids the danger too often faced by aging lawyers or lawyers committed to closing their practices, who may emotionally leave their clients long before they close their doors. In such instances clients become dissatisfied, profitability decreases, and the value of the firm is diminished.

Good Will and Reputation

A profitable practice shows that a lawyer is focused and passionate about the practice of law, and that they are still effective at client service. The simple truth is that such lawyers are having fun, and they are earning good money even as they are maximizing both revenues and client service. This is essential for a successful practice sale, for a practice in which a lawyer is still emotionally invested is one with a higher amount of goodwill: the client base and client loyalty that the selling lawyer has created over the life of the practice. Profitable firms with satisfied clients have maximum goodwill that can be realized in a practice sale.

The PRE-owned practice is one where the P = R – E equation is positive, assuring the seller and the purchaser of maximized value. The goodwill, the reputation of the firm, continues beyond the lawyer who built it. And that lawyer has the satisfaction of a life in the law well lived.

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Audience type: Administrators, Associates, Large Law Firms, Small Law Firms, Sole Practitioners