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Articles
Several months ago I testified before the California State Bar Ethics Commission, urging that the provisions allowing the sale of a law practice be maintained and expanded. Even though selling a law practice is no longer against most ethics codes, many state bar associations - and many lawyers - still haven't warmed to the idea.
From the business side, this is hard to understand. After investing years of hard work and financial resources in growing the practice and building goodwill, why would a lawyer forego the opportunity to reap the benefits of that years-long investment? Rather than closing a practice when it's time to retire, the most beneficial choice for all involved is to sell it to another qualified lawyer (or lawyers). The buying and selling lawyers benefit, but the clients also benefit when they are smoothly transitioned to receive competent representation from a qualified buyer. This is, in fact, just one of three major ethical considerations that support selling a practice.
Selling helps the client. Aging lawyers, or lawyers committed to closing their practices, emotionally leave their clients long before they close their doors. This often results in less effective representation long before the actual closing. Lawyers able to sell and transfer their practice to other lawyers will want to grow it and tend to continue active and effective representation until the sale because a vibrant client base can bring a higher selling price. Clients may choose to take their files and go elsewhere; but, on balance, selling a practice is in the client's best interest.
Selling gives solo practitioners more protection. Large law firm lawyers "sell" their practices now. They simply call the process something else, like "retirement," or becoming "special counsel," or taking "emeritus status." The result is the same - another lawyer in the firm takes over the client list. Solo practitioners can only receive the same advantage when they sell a practice outright; ethical rules to the contrary, particularly those that prohibit realization of "goodwill," put solos at an unfair disadvantage to big firm lawyers.
Selling part of a practice creates greater efficiencies. ABA Rule 1.17 allows the sale of an area of practice. This rule should be adopted by states uniformly, because it allows lawyers to focus on areas of practice in ways that benefit them and their clients. For example, if a lawyer maintains both a probate and an estate administration practice, he or she should be permitted to sell one or the other in order to focus energies and client attentions in one area. This relieves the lawyer from the burden of continuing a practice at "full speed" (which may no longer be physically possible), or from trying to slow down in order to keep the full practice going (which may result in a lesser degree of service, to the detriment of the client), or from losing the value of his/her asset (the law practice).
Lawyers should be treated like any other business professionals. There's no reason to let spurious ethical qualms deter lawyers from harvesting the fruit of their labors.
I long thought that many lawyers who may want to sell their practices shy away from it because they're afraid its improper, or that the whole process will be too difficult and expensive. To dispel that fear, I've written my latest book, Selling Your Law Practice: The Profitable Exit Strategy. I make no apologies for the fact that the purpose of the book is to help lawyers get maximum return for selling their practices when it's time to retire, relocate or simply walk away.
Selling a practice requires effective preparation, but that preparation is neither difficult to understand nor implement - if you approach it properly, right from the start. The first question to answer is whether the ethical rules of your jurisdiction allow you to sell. Part of Selling Your Law Practice is devoted to a state-by-state assessment of the rules; many lawyers are surprised to find that even large states like Alabama, Connecticut and Texas still prohibit a sale. The book gives you the detail to be sure you're on firm ground if you do want to sell.
Beyond ethics, Selling Your Practice is a step-by-step exploration of "The Business of Law"® as it applies to the entire sale process. You can learn how to:
You'll also get on a CD the sample contracts, forms, and financial worksheets from the book in Word and Excel so you can reproduce and modify them for your personal circumstances.
An important audience for Selling Your Practice is small and solo firms. I was pleased that attorney Al Nye (well known through his blog), who reviews many books aimed at this audience, told the readers of American Lawyer Media's Small Firm Business that Selling Your Practice is an "essential guide [that] will guide you in every aspect of selling your practice for top dollar."
There are plenty of safeguards already built into the system to protect clients in the event of a sale. The time is here to protect the interest of the lawyer as well. That's what I've aimed to do with Selling Your Practice: The Profitable Exit Strategy.
Consumer Reports recently published a study that listed the top ten cars. None of them were made by companies traditionally thought of as "American automakers," the companies that built and for decades dominated the largest automotive market in the world.
I remember when Nissan (then Datsun) and the other Japanese companies first entered our market, they asked us as drivers what kind of car we wanted. We told them. And they listened. And they began to include the features we wanted. American car companies, on the other hand, got fat and sassy. The Justice Department was considering charging General Motors with monopolistic practices because it had a 52% share of the market. The American car makers no longer listened to its public, no longer made cars with quality, and no longer cared about their legacy and long term reputation. The Japanese did.
How does this apply to law firms? The answer, I believe, is simple: You must provide a quality product/service to your clients. They must understand what you do and how you do it. They get this understanding only because of the way in which you AND your staff conduct yourselves. You should be a team that creates quality service and work product for the benefit of our clients. I love the phrase, "No man is an island unto himself." And that is particularly true in delivering legal services to appreciative clients who pay their bills on time and refer their colleagues to you for more services.
Put another way, without clients there is no reason to be a lawyer. Why do so many lawyers have complaints registered against them by their very own clients? Why is it that clients (otherwise known as customers) are not put on a pedestal, are not revered for providing our livelihood, and are not cherished for giving us an interesting and challenging way to spend our time?
Bob Ambrogi, a leading journalist on legal affairs, cites a BTI study about Corporate America's dissatisfaction with their present counsel. I glean from Bob's comments that the two biggest reasons for this dissatisfaction are unhappiness with law firms' service performance (not the same as legal advice), and failure to keep pace with clients' changing needs. Such law firms generally fail to communicate with their clients to learn what clients want, how they want to receive it, and where the clients' growth will be in the next one to five years so the law firm can be prepared to have the right skills in place when the clients needs change.
What do you really do as a lawyer? You don't practice law, you serve clients. General Motors, once the largest corporation in the world, lost sight of the fact that its real purpose was serving customers, not making cars. Before too long we may read about GM's bankruptcy.
Regular readers of the LawBiz® blog may have gotten the same chuckle I did out of a photo I recently posted under the title of "Employee of the Month." It showed what ostensibly was a Microsoft support person in India, sitting on the dusty ground with his laptop, a Microsoft technical manual - and a prominently displayed photo of Bill Gates, the man many of us love to hate. After laughing, however, a thought occurred to me. Here was a person who will never meet Gates or see the Microsoft campus, but he apparently had a strong emotional belief in the man and the company that provided his livelihood.
Do you have photos of the people responsible for your livelihood - your clients - displayed in your office? Do you use their products or services, and tout the benefits to others? Have you ever called a client just to say "thank you"? If not, reread the previous story . . . and think again.
Share these ideas with others at work and in your personal life. Being a mentor and helping others is one of the most rewarding things you will ever do. They may get their own subscription by sending an email to edpoll@lawbiz.com.
© 2024 Edward Poll & Associates, Inc. All rights reserved.
