IF YOU own a small law firm, inevitably there will come a time when you want to sell your business and retire – preferably with enough funds to enjoy your retirement. That’s why it’s crucial for you to start building the value of your firm as soon as possible. However, when it comes to selling your practice, buyers do not value your firm based on the skills you’ve improved over the years, how great a lawyer you are or how much your clients love and trust you.
The value comes from how well-organised your practice is. For example, if a potential purchaser is looking for funding, based on your WIP perhaps, the funder will want to know that your records are up to date, clear and precise. A firm with modern, efficient systems will be worth more than one using old, outdated and inefficient processes.
Ask yourself this: if you had to sell now, would your firm be up to scratch? Consider three well-known companies – Facebook, LinkedIn and Twitter. None of these companies has made a significant profit, yet they are worth billions. Why is that? What do they have to justify the value? The answer is: names. These companies have built a substantial list of names, or clients, or users, whichever you prefer. If your firm has been around for a while you also have lists of names: your present clients, your former clients, the various stakeholders in your firm, your referrers and that magic box, the contents of your Safe Custody register.
So in your area of expertise, in your geographic location, you also have a list of names: this is what the value of your firm will be measured on. However, if a potential buyer cannot find this value easily and trust that the data is true, your years of hard work will not pay off in the long run. Your firm needs to be better organised. It’s never too late. Take time now to implement efficient systems – your future self will thank you for it.
LEAP is a legal practice management software solution for small law firms. For more information visit leap.com.au