Law Practice Management Asked and Answered Blog

« May 2013 | Main | July 2013 »

June 2013

Jun 22, 2013


Law Firm Succession – Where and How Should I Start

Question:

I am the sole owner of a 8 attorney practice in Houston. I am 55 years old and am beginning to think about retirement. The other attorneys are associates in the firm. What do I need to be thinking about in order that I can transition out of my practice and have money for retirement. While I have put some money in a 401k, I am not yet financially secure enough to retire.

Response:

You are not alone. As the baby boom generation ages – more and more attorneys are asking this question. Unless you have an appropriate Exit Planning Strategy and put in place a sound Exit Plan, it is doubtful that you will be able to cash in on the full value of the goodwill that you have created. To exit successfully you need:

You will need to consider whether you should consider merger, sale of the practice to an outside buyer, or sale of the firm to the other lawyers in the firm. You need to find ways to institutionize the firm so that in additional to professional goodwill (your personal reputation and goodwill) you develop practice goodwill (goodwill of the firm that will remain after you have left the firm). Develop your lawyers and create a desire and motivation for them to want to be owners/partners in the firm. Develop your staff and practice systems. Diversify and stabilize your client base.

If you decide to sell to attorneys in the firm – begin the process early so that most of the buy-in is completed before your actually leave the firm. The longer the planning horizon – the easier they buy-in burden will be for others.

Click here for our blog on succession

Click here for out articles on various management topics

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

Jun 11, 2013


Law Firm Buyout Arrangements in a Contingency Fee Practice

Question:

I am a partner in a four partner law firm in Cleveland, Ohio. Our firm does class action contingency fee cases and all of our fees are contingency fee. We do keep time of our time expended on these cases even though we don't bill by time. One of our partners has announced that he will be withdrawing from the firm. We each have 25% ownership interests. How do we value the firm and determine his buy-out. Our partnership agreement does not address this nor do we have any precedent. Do you have any suggestions?

Response:

The real value component is the value of your unsettled cases and it will be difficult – if not impossible – to determine the value of these cases until they are concluded in the future. Some firms payout the capital account and the value of the hard assets upon departure or over a relatively short payout period and they have a future payout formula for the cases in progress as the cases are concluded.

Click here for our blog on partnership matters

Click here for our blog on financial management

Click here for articles on other topics

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

 

Jun 04, 2013


Problem Law Partners

Question:

Our firm has been discussing how to handle one of our partners. We are are 12 attorney firm in Houston. One of our partners who is one of our highest fee producers and best business getter's simply won't follow firm policy or play by the rules. He won't turn in time-sheets in a timely manner, he is argumentative with others in the office, and not a team player. He is "me first" while the rest of the partners in the firm are mostly "firm first". We are trying to build a team based practice and this one partner is holding up our progress. Do you have any thoughts or suggestions on how we should handle this?

Response:

Dealing with "maverick partners" is always a challenge. Of course they seem to always be the heavy hitters and this makes it that much more difficult as often there are major clients and large sums of money at stake – at least in the short term. This can also be major issues and large sums of money at stake in the long term if you don't deal with the maverick partner as well. In addition you won't be able to achieve the vision and goals the firm is trying to achieve.

Many firms have had to deal with the problem of a maverick "huge business generator" who just wouldn’t cooperate with firm policies and caused conflict and tension in the firm.  It is an unplesant task – but in the end – worth the investment. In the end he or she either conforms or leaves the firm. We have been advised by our clients that even though they may have struggled in the short term as the result of the loss of a major fee producer – in the long run the firm was better off and should have done it earlier.

Click here for our blog on partnership matters

Click here for articles on other topics

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

 

    Subscribe to our Blog