Best Practice: Law Firm Succession - Is There any Real Future Value in My Solo Practice?

Asked and Answered

By John W. Olmstead, MBA, Ph.D, CMC

Q. I am a 64-year-old solo practitioner in Arlington, Va. There are no other attorneys in the firm - I have one legal assistant. My practice is concentrated in estate planning and estate administration. I have just started giving thought to retirement and what to do with my practice. I want to provide continuity for my clients, security for my employee, and salvage any sweat equity from my practice if there is even such a thing? Personally, I question whether there is any potential for receiving any value from the practice - I think when you are done you are done. What are your thoughts?

A. It all depends upon the practice, not waiting too long, and finding the right WHO.  About a year ago I had this discussion with an owner of a practice and he held the position that when you are done - you are done. However, after we assisted him with a year-long hunt - he successfully sold his practice for a multiple of 1.0 times average of the last five years fee revenue with 85% paid at closing and the remainder paid out over three years.

Another sole owner recently sold a practice for $50,000 at closing and 20% of gross practice revenue for five years paid when fees collected.

So I believe if you don't wait too long and take the time to look for the right WHO - value from your sweat equity can be realized.

However, you are right. if you don't do your homework and start early - when you are done you are done.

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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.