If you are looking to sell your law firm in the coming years, then you will be interested in the trends in buyer demand for small firms and particularly what small law firms are easiest to sell.
What small law firms are easiest to sell? – Areas of Law
Recently I interviewed Melbourne based Trevor Willoughby who is a practice broker who has specialised in selling small law firms for over 16 years.
The question I put to Trevor was, “What small law firms are easiest to sell?”
Trevor approached the question from the point of view of what areas of law were attractive or unattractive to buyers. Trevor indicated to me that there were some trends that he had seen develop with small law firm sales. He made these observations:
1) Not many buyers were looking for criminal practices;
2) Family law practices that specialised in issues involving children were difficult to sell;
3) Practices that derived a significant proportion of their revenue from legal aid regardless of work type, were also increasingly difficult to sell.
Maybe Trevor’s observations of the market for small legal practices equate to what you intuitively may have thought.
What small law firms are easiest to sell? – Geographic Location
One trend that I have personally heard about in recent years that has had an effect on demand for small law firms in certain geographic areas, is the tendency of the larger firms to increase their leverage by culling partners. In addition to that, as times have been tougher for the big end of town, increasingly senior lawyers have been retrenched to maintain firm profits.
Many of these senior people are in no financial shape to retire and many still have large mortgages and dependent children.
As their chances of securing work at another big firm are slim, some are increasingly looking to acquire a quality small firm to maintain their lifestyle.
In these cases they are often looking to buy in a location that is close to where they live.
For example, in Sydney a senior lawyer or big firm partner may well live in the Eastern Suburbs, which is an affluent area of the city. It is no surprise that this is one of the areas that I have been told is increasingly in demand as retrenched senior lawyers or culled partners look for other opportunities.
I think that it is a reasonable assumption to think that in other markets where big firms are shedding senior lawyers that this trend may well apply there as well.
Making your firm easier to sell – Areas of Law
If you practice in areas of law that are less attractive to buyers and you are close to retirement, it is unlikely that you are looking for a total change of direction to your law firm, but if you are, then go for it.
You may be looking instead, to make some less radical changes that will never the less make your firm a more attractive proposition at sale time.
Here are two suggestions.
- Diversify your areas of law
For example, if your family law practice does a lot of work with matters involving children, develop a strategy to increase the amount of property related family law work that you do.
If your practice does significant legal aid work, set some limits on it to free you and your team up to take on more fee paying work. Clients have said to me that legal aid work can really take over your practice, so if you want that to change, you need to limit your intake of legal aid matters.
- Look for a buyer in-house
While not many buyers may be looking at these areas, if you have an employed lawyer who is already working in these areas and enjoys it, then they could be worth grooming to take over your practice. You don’t necessarily need a hundred buyers for your practice, one will do.
If you would like increase the sale price of your legal practice to help build your retirement funds and be better paid for your lifetime’s work in building your practice, I encourage you to read our report “Retirement Planning for Principals of Small Legal Practices”.
A recent reader stated:
“I found it very interesting with a few points to implement” Lower North Shore – Sydney practitioner
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