Want to Buy a Law Firm? Read This First
By: Tanya Farmer
Whether you are venturing out on your own and plan to start your own law firm, or your current firm is expanding, you may be thinking it is time to buy a law firm. Buying a law firm is a bold move and one of the biggest decisions you will make in your career, so it is important to first consider a few important factors. Below are some things to keep in mind when it is time to start searching for a law firm for sale.
The Right Time to Buy
Of course, you want to take market conditions into consideration when planning to buy a law firm. However, you also have to consider whether now is actually the right time for you to buy. It takes a certain amount of confidence and business savviness to run a successful law firm, so you need to understand your strengths, and weaknesses, in order to set yourself up for success. You also have to consider if you or your team can handle the additional workload, responsibility, and risk that will come with the increased revenue.
Perform Your Due Diligence
Valuing a law firm is not easy, but when done correctly, can provide a great roadmap of the benefits buying the firm will have. To determine how much a legal practice for sale is worth before purchasing, you should review the following to start:
- Financial statements for the past three (3) years, including tax returns, profit & loss statements, and balance sheets
- Billable hours, and rates, by employee
- Salary history of at least three (3) years for any employees that will be retained
- Compensation and employment agreements
- Lease agreements
These are just a few of the important documents you should have in order to properly value a business. An experienced professional can help collect and analyze due diligence materials to ensure that you aren’t missing any other important documents that can help with the evaluation.
The Firm’s Culture
There are many different cultures among law firms. Some have high employee turnover while others have mostly tenured employees. Some firms prioritize repeat clients, while others concentrate more on marketing for the future. You may already know the practice and the partners, but if you do not, you should get a feel for the firm’s culture throughout the entire purchasing process. This will help you determine whether the culture is a good fit for you, if you will need to make changes, and if it is worth it to make those changes.
A Plan for the Transition
Early on in the due diligence process, you and the attorney from the law firm for sale should create a documented plan for the transition. This should include certain timelines and transition goals that will keep both sides on track throughout the process. This will help streamline the sale and avoid any potential problems.
Speak to a Business Broker
As an attorney, you know a lot about the law, and you may even have a basic understanding of how to buy a law firm. However, you still should not do it alone. At Private Practice Transitions, our Washington-based business brokerage can help ensure the entire transition goes smoothly, and that you end up with the law firm that is right for you. If you are considering purchasing a law firm, call us today at (253) 509-9224 or contact us online to learn more about how we can help.