I recently spoke at two CLE presentations for lawyers. The first presentation was Succession Planning for Law Firms. The second was Marketing, Recruiting & Business Development – Advancing Your Career. At both programs, I discussed solo attorney and small law firm issues in great detail. The topics of interest to solos/small law firm owners were:
- The importance of succession planning
- Succession planning v. exit planning
- Free agency for solo attorneys and small law firm owners
Basically, the messages were to use succession planning and related issues to position your law firm to achieve success. In other words, to ensure that your years of hard work (time, money and emotional energy) pay off – either at your current firm or by being an attractive merger target for a larger firm.
In my discussions with solo attorneys, most want to know that their clients and team members will be taken care of after they are finished practicing law. However, many of these same people do not have a formal succession plan. So, I stress the importance of creating a succession plan. The main reasons are as follows:
- Business Continuity – leave a legacy after you retire.
- Crisis Planning – hope for the best but plan for the worse. What happens if you become ill or injured?
- Leadership Planning – simply handing the keys over to an inexperienced person may not be the best for your firm and clients.
- Firm Growth – can new blood and new leadership jump start stagnant growth?
- Recruiting Opportunities – you can attract excellent talent with leadership opportunities.
- Client Service & Loyalty – clients need a level of comfort knowing that you will not be able to meet their needs forever, but that there is someone that can easily step in when that time comes.
Succession Plan v. Exit Plan
There is a difference between a succession plan and an exit plan. The succession plan assumes that you want your current firm to live and thrive after your departure. The exit plan can mean two things – you close your firm, or you merge with another firm. For a succession plan to be successful, you must find the right person or people to take over for you. This can be a daunting challenge. Why? Because you need to groom an existing employee, or you need to hire one. Plus, this is a process that takes several years.
Therefore, if you do not have the patience or time, an exit plan may be for you. For purposes of this blog, I will not address closing the law firm at length. Rather, I simply point out that there are ethical requirements and considerations. So, know your local rules before locking your doors.
There are common reasons why a solo may want to enter the free agent market by being acquired by a larger firm. As previously mentioned, the first is succession planning. Again, you do not have somebody to take over your practice. What will happen to your clients and staff? The second reason is that you miss just being a lawyer. You are tired of administrative headaches, wasting time, ordering supplies, employee drama, and so forth. And the third reason is stagnant growth. You must refer too much business out, have too much work and not enough support, and cannot adequately service clients.
Because of these reasons, free agency makes the most sense for you. Good news! Larger firms are in a war for talent, and they have too much legal work and not enough lawyers. As a result, larger firms want to find smaller firms and solos to:
- Fill a void in a particular area of law or industry
- Add to an existing team or office
- Enter a new geographic market by opening a local office
Because of the current market conditions, you can find a firm that will negotiate to meet your wants and needs. For example, you can aggressively negotiate compensation. But it does not end there. You can also negotiate things like remote work, billing rates, and the way you practice law. There are law firms out there that will try to accommodate all your reasonable requests.
I must add a few comments about what larger law firms are looking for in small firms. Besides having the right practice areas, industry niche, experience, and geography, your book of business is still very important. If your small law firm is made up of rainmakers who are each bringing in $1 Million or more in revenue, we could easily find you a merger partner. If the revenue is significantly less, it might take a little longer. Therefore, if the goal is to be acquired one day, start growing revenue today. Of course, in this seller’s market, I would not foreclose any opportunity or make any assumptions. We should discuss your situation and goals. There may be the perfect partner waiting to hear from you. Let’s schedule a call!