Solo In Chicago…Grow Your Practice!

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Saw this in the Law Bulletin classifieds:

Divorce Practice for Sale

Great opportunity for young lawyer! Loop family law firm – 38 year client base, 350 files/yr., gross $1.2 million, 3-4 associates. Ready to retire will stay on as consultant. Serious inquiries only. Asking $1.4 million. Call XXX.

Anyone consider these options? I suspect we’ll be seeing more and more of these offers since Rule 1.17 got amended along with Baby Boomers retiring. Anyone have an opinion on the viability of buying a practice to build your practice?

In 2003 I was faced with a related dilemma. Right out of law school I took a job with a family friend who was planning his retirement and our expectation was that after a year or so we’d form an entity and agree to some buyout provisions. This was before 1.17 got amended so he could NOT flat-out sell his practice like he could now. So we both ran the numbers and had our respective accountants value the practice…we didn’t agree and thus I’m “Solo in Chicago” instead of in that partnership. He was asking far less than $1.4 million.

My general thinking is that unless it’s a practice with heavy repeating entity representation it’s not worth it to pay a premium for a law practice. What’s the value of all these files of people who got divorced once? That’s a one-time legal service. Conversely I think there is some decent value in say 50 suburban municipality clients. It’s not quite this black or white but I think this dichotomy should underlay one’s thinking. Contact me if you face this decision…I still have a lot of the “valuation modeling” that the accountants did.

EDITOR’S NOTE:

I get a lot of comments and requests related to this post so I thought I’d put the valuation stuff I have up. CLICK HERE.

The info. is obviously dated…my former partner-to-be is long since retired so I doubt he cares if this gets posted. My recollection is really the place to look are various accountants familiar with valuing businesses. And the trick was the big difference between valuing some entity where the owner’s person is irrelevant vs. a professional practice where the owner’s goodwill was very relevant. The law practice where the retiring individual’s personal goodwill matters a great deal shouldn’t be valued the same as a restaurant with the same numbers because the owner’s personal goodwill is far less relevant.