Do Solicitors’ Practices have a value?

on 2 August, 2010 Email this Email this - Print this Print this

In the second of four articles, CoreLegal founder member Ray Fox (from the Bottom Line Consultancy) provides more insights into his specialist work as acting as a broker selling Law Firms.

A few years ago, I was approached by a well known major City Law Firm.  They had a Client who was married to a Solicitor who she was divorcing.  She wanted to know what the Practice was worth in order to negotiate a realistic settlement…

I was asked to value her husbands’ Practice which I duly did.  Since then, the phone has been ringing continually asking me to value Practices.  I don’t know of anyone else who values Practices but I’ve now done about 285.

We all know that running a small business is a piece of cake – you only have to work half days!!  You just have to decide which 12 hours and which 7 days!!

We all know that running a small Law Firm is the route to phenomenal wealth.  Didn’t we all read in The Gazette recently that the average Partner of a Law Firm earns about £120,000 p.a.  Strange, then, the number of Firms I have worked with where the Partners are taking home £25,000 or £30,000 p.a.

We all know that Clients don’t complain or shop around when they spend £3,000 or £4,000 for an estate agent to sell their house but ask them to spend £500 to do the conveyancing and they shop around for a competitive quote to save £5!!

We all know that Principals of small Law Firms never have hassle with the OSS, the SRA, Professional Indemnity Insurers, The Law Society, with red tape or bureaucracy, complaining clients, disloyal staff, competition from specialist niche law Firms, bucket shop conveyancers, will writers, personal injury claims farmers, etc, etc.

And then the final insult – a predatory local Firm want to take over your practice for free, because – as they always say – there’s no goodwill attached to the value of a Law Firm.  HA! HA!

Remember what Benjamin Franklin said – there are two things guaranteed in life – Death + Taxes.  When you’re the Partner or Sole Principal of a small Law Firm, there’s something else that’s guaranteed – you’re going to want to dispose of the equity in your Practice.  So what’s your Law Firm worth?  Obviously, it depends on the Firm.

Over the years, I’ve valued small High Street Practices, large High Street Practices, legally aided Practices, Immigration Practices, Personal Injury/RTA Practices, Multi-site Practices, Conveyancing Practices, Criminal Practices, Commercial Practices, highly profitable Practices, failing Practices, Practices in the centres of major cities as well as Practices in the remotest parts of the West Welsh coast.

What your Practice is worth will depend on a manifold of factors.  The type of work you do, whether your work is generated by passing trade, the internet, repeat business, recommendation, adverts in the local press and directories, how long your Firm has been established, the local competition, the numbers of wills in your safe, etc. etc.

The over-riding consideration is that your Firm does have a goodwill value and don’t let anybody, ever, tell you the opposite.  I’ve sold too many Firms where significant sums of money have changed hands to know that there are real Firms out there prepared to pay real money to buy a Practice.

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Topics: Selling law firms
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