This was originally presented at the Ohio State Bar Association Annual Convention in Cleveland, Ohio in 2012 by Dustin A. Cole, President and Master Practice Advisor, Attorneys Master Class.
Presentation Agenda — Provide a context, options and tools to accomplish a successful sale or transition of your practice.
What are you selling?
- Practically – you are selling only three things: Inventory (current & future value)
- Infrastructure – the “operations”
What’s your practice worth?
It depends on only a few factors:
- What are you selling?
- Who is buying?
- Market & economic conditions
- How you want to sell it
What are You Selling?
Category of Practice Practices, or parts of practices, tend to fall into one of four categories:
Commodity firm – produces a product in which the buyer doesn’t perceive a significant value to the attorney, such as real estate closings, simple wills and uncontested divorces, traffic, etc. These firms are facing dramatically increased competition from non-attorneys, from thousands of new attorneys, and from technology, both software and the web. Traditionally operated commodity practices have little value. If very sophisticated, hightech, high leverage with high volume and extensive marketing, the value can be significant.
Brand name firm – driven by heavy advertising, with high consumer recognition.
Value firm – focusing on fewer matters doing more complex work. Strong reputations (goodwill) means business comes almost exclusively from referrals. This type of firm is one of the most viable and valuable, because it provides an important service not readily available from other sources. Clients usually expect to pay a bit more for that firm’s services. Difficult to transition since “goodwill” – reputation and trust in the personal expertise of the attorney – is the primary value.
“Nuclear event” firm – deals with extremely critical, high value “life or death” work. Highest value, even more dependent on “goodwill” value.
Valuing Your Inventory
What is most valuable?
- Ongoing business clients
- Will files
- Long-Term specialty “Work In Progress”(WIP)
Next most valuable:
- Comprehensive, current database of past clients and prospects
- Paper files of past work
- Commodity, brand name or value
Valuing Your Goodwill
- Visibility & participation
- Market area
- Legal community
- Client list
- Referral network
- Has little value in the Commodity area
- Is institutionalized and less personal in the Brand Name area
- Is essential and 90% of the value in Value and Nuclear Event areas