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Law Firm Succession Planning: Key questions develop a strategy

August 8, 2018

sucession-planning-hopper-don.jpgIf a senior attorney is part of a small- to medium-sized law firm, it may be apparent who should be the successor to taking over management of that firm. There will likely be another partner or associate who has been mentored and is ready to assume greater responsibilities in the firm. But, the firm and its management will need to develop a transition plan to make this happen.

If an option or successor is not obvious, the senior attorney or law firm will need to formulate a strategic search plan to identify a successor. Such a plan would involve answering several key questions.

What are your goals for your retirement and succession plan, and how do you plan to achieve them? Do you have any timetable in mind? It can be difficult for some of us to sit down and think about retirement and how we will plan our exit from our practice. But just as in estate planning, we need to face these issues. Certainly, we should discuss these things with our significant other. If we are in a law firm, we should have regular and periodic conversations about our retirement plans with our partners and associates. Developing a timetable that involves our partners is essential to developing a successful exit plan. If health issues are not involved, a period of one to two years is common.

What are the important values in your law practice? Why do you practice law? What’s important to you? This is especially important if you choose options such as mentoring a junior attorney, selling your practice to another attorney or law firm, or merging your law practice with another attorney or law firm. Understanding this yourself is important because we want to pass on our practices to people with compatible values and practice cultures. Possible values include how we treat and communicate with our clients, how we treat and develop our staff, how we respect our fellow attorneys and how we maintain high ethical standards.

What succession options make sense in your situation? Transitioning to an “of counsel” role? Merger with another law practice? Sale to another lawyer or law firm? Mentoring a junior attorney? Winding down? These options were discussed in the last article. Sometimes, there will be a clear option. However, I’ve found that for some attorneys, many options need to be considered. Oftentimes, the circumstances of the senior attorney, type of law practice and size of the community where the attorney practices may dictate or eliminate some options. The option or options you choose or are feasible for you will shape your succession plan.

What is the ideal profile of the person or firm to take over the practice? Age? Experience? Practice specialty? I had a conversation with a senior attorney who had an estate planning, probate and real estate practice in a county seat community. I asked him these questions. He quickly responded, “I don’t want a new attorney. I want an experienced attorney who is around 45 years of age who can relate well with my older clientele and people in my community.” Identifying characteristics like these will make the succession plan more successful in the end.

What do you have to offer that person or practice? Referral network? A will vault? Proprietary systems or software? Having a recurring client base, will vault and proprietary systems or software would be very attractive to another attorney or law firm. We can’t sell our clients, but we can aid in the transition of our practice by introducing and recommending the acquiring attorney or law firm to our clients. It’s all about relationships and transitioning those relationships with our clients’ cooperation and consent.

In 25 words or less, what is your “seller’s pitch” to the successor? Essentially, this a statement of your answers to these questions, coupled with a statement of how the seller envisions the successor helping to accomplish your succession goals.

Once the above questions are answered and your desires are articulated, the next step in the process of developing your succession plan is to identify the possible successors, whether an attorney or law firm. Who would be compatible with your values and be able to carry on your legal legacy? Because you have practiced law for many years, you may have identified possible successors. You also may want to talk with trusted colleagues about your list and others who they think would be good candidates. You may need to enlist help from legal and professional search firms.

Once the possible successors are identified, you will need to sit down with them and talk about your plan. Sitting down with your possible successors will take courage, but is essential to accomplish your retirement goals and implement your succession plan. You will need to preface these conversations with the attorneys or law firms by saying that what you will be discussing is highly confidential. You should share your “sales pitch” and the reasons you think they will help you accomplish your goals. You will need to gauge their response and interest in being a possible successor. This may lead to more conversations together over the next few weeks or months.

If both you and your possible successor are serious about pursuing this further, you should consider providing the prospective successor with a letter of intent or confidentiality agreement. This will provide for the protection of confidential financial and client information. This will also allow for due diligence to proceed. The letter of intent and other essential legal documents in the implementation of a succession plan will be addressed in more detail in a future article.•

Don Hopper is founder of Hopper Legal Consulting Services and a partner at Harrison & Moberly LLP. His focus is serving solo and small law firms in developing law practice succession plans that will continue their legal legacies in their Indiana communities. Opinions expressed are those of the author.

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