They are stuck having to stay in their firm because of two main reasons:

1. They have built a firm they can’t sell because it still relies on them to operate.

And/or:


2. They can’t close it down because they can’t afford the personal indemnity insurance run-off cover.

Are you in this situation?

How infrequently this is spoken about or covered by industry leaders shocks me.

After many years of bearing the weight of keeping their firm running, many law firm owners today feel somewhat tired and wonder how they can best benefit from what they’ve built, such as the bank of wills they built up and their many client relationships.

Ideally, many want to transfer what they’ve built on to a family member, a colleague or a younger partner.

This transfer of wealth is happening across all business sectors today and at a grander scale than has ever been witnessed before because it’s from the mass generation of baby boomers to millennials and Gen-Z.

When you look at this macro movement in the legal space, it creates a turbulent situation for most law firm owners.

Why?

Most law firm owners and partners never learn how to delegate the work they’ve done for their clients for years to someone else, keep the clients loyal to their firm, and manage them to carry the workload instead effectively.

This means many have a younger partner or more, but they’ve never taken the time to teach them what they know, introduce them to their clients and support them to continue their work on their behalf.

There are many reasons why few law firm owners take the time to do this, such as believing that no one else can do what they do, that teaching someone else is too painful or simply out of fear of losing their clients.

And so, most law firms with one, two or three partners would fall apart if one could no longer work or if they leave.

Now, try selling your partnership and tell the buyer that when you leave, the firm won’t be able to operate without you.

Exactly.

No business person would touch such a situation with a barge pole.

So why not retire?

To do so, most law firm owners need around 3 to 3.5 times their current cost of yearly PI insurance, also known as run-off cover.

If your cover is £50,000, you'd need £150,000 to £175,000.

If it’s £100 per year, you'd need £300,000 to £350,000 to close your firm.

Most law firm owners don’t have that sort of money available, and even if they did, spending this to close their firm down would simply mean throwing away YEARS of damn hard work and money for nothing.

So, for most law firm owners, there’s no other option than to either work long, exhausting hours until the day they die or virtually give their firm away in a merger to another firm.

Or is there another solution?

Yes, there is.

Speak to brokers and ask them to find someone with an excellent management and business track record for growing law firms to invite them to buy a seat at your firm’s table.

If you stay committed to solving this, you will find that ideal possible new partner to bring into your firm.

You then need to negotiate your exit terms, likely over one to three years, and work with a new CEO or managing partner to either take the work off you or manage an existing team member or a new owner to delegate your work away to.

Doing this right will save your firm and everyone’s position while earning the exit money you deserve.

If you find someone financially positioned to invest in your firm and skilled in leadership and management, you can create a desirable deal. Still, you’ve got to find someone who understands how to grow law firms effectively.

There are people out there. Just start asking around because, as I’ve discovered, everything can be solved in conversation.