“The stock answer is that [law] firms are not worth anything..”
Online Law Firm Sales Broker Website
I was recently surfing the internet to see what articles are out there on law firm valuations and selling solicitors’ firms. I also looked at discussions on succession and retirement to see what kind of advice was being given by valuers of law firms to partners and owners.
Duff Advice
One of our sellers who recently successfully sold her practice in South Wales got in touch to say that she knew of so many law firms and partners of law firms who were contemplating giving their firms away or disposing of them or closing down without actually achieving any premium because this was the advice that they were being given.
I’ve also taken a couple of calls in the last few weeks from partners of law firms who have said that they have been advised that their practice was not worth anything when they come to retire and they should give it away.
When I had a look on online, I could see that there are a couple of business advisors out there who start from the premise that law firms are not worth anything at all and go from there. They use the justification that run off cover renders the value of law firms virtually worthless.
Interestingly I think I recognised the name of one of the advisers who had written one of the articles – if it is the one and same person then the adviser has a very good reason for writing articles saying that law firms are worthless as he is involved in the purchase of law firms!
Are Law Firms Worth Nothing?
No, not at all. Total nonsense.
The seller I mentioned above got in touch again because she was very grateful for our assurances that her practice did have a value. She sold it at around the level predicted by us less than 3 months after listing it.
Our website is updated daily with law firms for sale. So the list you can see on our site is fully accurate. Some of the brokers online seem to not have updated their sites or lists for a long time, with some dating back 10 years or more.
I am always happy to have a conversation with partners and owners of law firms to give them a rundown of the sorts of values we are seeing for sales right at this moment in time rather than experiences dating back to 2012, which is where I think some of the incorrect advice is coming from regarding firms not having a value.
Law Firms Attract a Premium
At the moment, law firms attract a premium. And recently I have not seen very many at all where a firm has not managed to achieve a cash sale following the disposal of a practice. I have written articles in the last few months saying that the usual rule of thumb is to take your last year’s turnover, halve it and this is likely to be the value of the practice. This rule of thumb is incredibly rough, but also fairly accurate for a good proportion of firms at the moment. Will it stay like this? Unlikely…
Retirement plus Issues
The only arrangements we see where no premium is going to form part of the deal is where partners are retiring from a partnership and the buyer takes over the practice in return for the partners taking their WIP, plus continuing for a while as consultants. There is usually a time limit on this kind of deal (ie quick sale sought due to illness etc.) and there may well be certain issues affecting an outright sale.
The vast majority of law firms don’t get into this particular type of scenario – when it comes to a sale usually one or both partners will want to stay around. So if you are reading online that your law firm is worthless and you should give it away, have a look at who has written the article…
I should add that we get no benefit at all from selling firms at a particular price – we charge buyers fixed fees (and sellers no fees). It does not follow that every law firm will achieve a cash sale, but start from the point that your efforts have been worth something and you have created a business that contains value…
For a confidential discussion about your firm and a rough valuation, please give me (Jonathan Fagan) a ring on 01824780937. You can also use our law firm valuation services, with prices starting at just £650 plus VAT. Details here.
In case it assists – here is a link to our online guide to selling a law firm.
