5 Tips for a Successful Succession Plan

The statistics are disheartening. The ABA estimates that 400,000 lawyers in the United States are age 62 and older, and that 63% of law firm partners, age 60 or older, control at least a quarter of their law firm revenue. Yet only 28% of law firms have a succession plan in place.

The good news is now more than ever, younger lawyers are declaring they don’t want to die with their wingtips on.

How do we move from thinking about retirement to creating a succession plan?

It’s Never too Early

1. Keep in mind, it’s never too early to start planning. Creating a succession plan doesn’t mean you stop working today. Instead, it puts you in control of creating a path that works for you.

Identify Your Options

2. Identify your retirement options. This is something most people don’t give enough consideration and they don’t start early enough. 

• No plan. “I’ll die at my desk” (or become disabled) and someone else will close my office for me. This option is the least desirable. While it may not impact the deceased lawyer, it is very hard on those left behind. Your remaining law partners, staff and family are left to clean up a practice instead of focusing on their grief or making their next plans for moving forward. This option may include problems that crop up later such as malpractice issues, bar complaints, client dissatisfaction – all issues that impact a lawyer’s legacy.
• Winding down your practice. This option requires the least planning, and most lawyers choose this by default. Many lawyers gradually wind down as their client base also begins to slow down. With a free checklist from your malpractice provider, State Bar or succession expert, you can check the boxes and be on your way.
• Hire a successor. This suggestion is often met with resistance. “I can’t find young lawyers who want to work hard”, “this generation isn’t interested in a practice like mine”, “my clients will never accept another lawyer”. Most of these are excuses that can be overcome with patience, a new mindset, and a plan.
• Sell your practice. Many lawyers assume this option is not ethical, not practical, their law practice has no value outside of themselves, or there is no buyer. ABA Ethics Rule 1.17 allows for the sale of a law practice. While it may be true that not many lawyers sell their practice, it isn’t accurate that your practice has no value and there is no market for selling your practice. While value is different for every practice based on practice area and geographical location, there is value in your physical location, your law firm name and reputation, your web address and marketing efforts, your referral network, your staff who know your processes and your clients, and your clients and their work on your shelf. Take the time to talk to talk with an expert in law firm succession and valuation before shutting the door on this idea.
• Move your practice to another firm and become “of counsel” for a wind-down period. This plan may involve a lump sum or payout over time, allowing you a scheduled wind-down and soft landing into retirement.

Get Your House in Order

3. If you are considering hiring a successor, selling your firm, or moving your practice to another firm, your practice needs to be in good shape. If you were selling your home, your realtor would recommend a fresh coat of paint and some curb appeal. If there is structural damage, that may move to the top of the list. Consider your law practice. Is your technology up to date? Can you quickly identify your current clients, case status and list of referral sources? Does your practice rely on outstanding staff members who would be willing to stay with the practice? If you are going to consider one of these options, don’t follow your natural instinct to slow your practice as you get closer to retirement. You may need to work at the same pace or harder for a year or two to get your financials where you want them to be for a great sale price. Or you may want to invest in improvements that will allow you to attract a successor or a buyer.

Create Your Retirement Advisory Team

4. Build a team of trusted advisors. As you begin to think about your future, you want to make sure you are ready financially, emotionally, as well as practice ready. Build a team of confidants and consultants who can help you through the process. This will include your accountant, tax advisor, financial planner, and succession expert. It may also include friends who have retired, clergy, doctor, wellness expert, your spouse, partner or adult children. These are the people who have your best interest in mind, as well as the expertise to help you make the right decisions.

Life After Law

5. Develop a plan for Life after Law. One barrier to retirement is fear of the unknown.  Knowing what you are moving toward can help you move forward. Ask yourself, what is my role outside of being a lawyer? What are my hobbies and interests? Do I want to work part-time or start a new career? How will I manage my health and wellness? Developing interests outside of law in your 40’s will help you prepare for retirement in your 60’s. While it may be hard to balance work, family, and friends, the investment you make now in having a life outside of law will pay off in retirement planning. Begin the process with an inventory of all the things you are (spouse, partner, parent, grandparent, parishioner, community member, mentor) and start a list of all the things you can be (volunteer, teacher, mentor, athlete, gardener, hobbyist, cook, baker, author, photographer, artist – the list is endless). 

Review Your Plan Periodically

Plans change. Perhaps your successor lands a better opportunity. Or a change in the practice of law accelerates your retirement time frame. Having a Plan A and B, along with a disaster plan will make sure you are ready to approach Life after Law with enthusiasm.

Camille Stell is the President of Lawyers Mutual Consulting & Services and the co-author of Designing A Succession Plan for Your Law Practice: A Step-by-Step Guide for Preparing and Packaging Your Firm for Maximum Value. Continue this conversation by contacting Camille at camille@lawyersmutualconsulting.com or 800.662.8843.