Best Practice: Proper timing for the sale of your law practice
Asked and Answered
By John W. Olmstead, MBA, Ph.D, CMC
Q. I am a sole owner of a 4 attorney law firm located in Washington, D.C. Our practice concentrates on estate planning and administration. We have 6 support staff members. I just turned 60 the first of the month and am beginning to think about what I will eventually do with the practice. None of the associate attorneys are interested in partnership or in purchasing the practice - they just want jobs - they are not interested in owning a law practice. When is the best time for me to sell my practice?
A. You really have to give some thought to your timeline - how long do you want to work? Do you plan on pursuing another career? Have you put enough money away so you can simply retire without concern about the need to generate additional income?
If you need revenue for an additional 10 years and if you enjoy what you are doing - then it will not be in your interest to sell the practice too early. Let's say you could sell your practice for one million dollars - this might equate to two years of earnings. If you worked another 10 years - you could have earned five million dollars.
To a large extent owning a law firm is in essence a job where you work for a living where you have provided employment for yourself. It might be hard to find a job that pays as well as your firm. So if you need revenue for another 10 years and your enjoy your work - you should probably plan on working another 10 years. Build you timetable to sell your practice around your future work timeline. Things change - you may find that your associates change their mind or down the road you may end up with new hires that will have an interest in partnership.
Start with planning out how long you want or need to work and go from there.
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John W. Olmstead, MBA, Ph.D, CMC,(www.olmsteadassoc.com) is a past chair and member of the ISBA Standing Committee on Law Office Management and Economics. For more information on law office management please direct questions to the ISBA listserver, which John and other committee members review, or view archived copies of The Bottom Line Newsletters. Contact John at jolmstead@olmsteadassoc.com.