Valuing a Law Practice - The Importance of Synergy Value

In this episode, Mark S. Gottlieb, CPA/ABV/CFF, ASA, CVA, CBA, MST of MSG Accountants, Consultants & Business Valuators (www.msgcpa.com) discusses valuing law firms.

In response to the “What is My Law Practice Worth” question, Gottlieb explains that valuing a law practice depends on the size of a practice, namely, a sole proprietorship, a medium-sized firm, or a large law firm.

For small law practices, Gottlieb explains that valuation depends upon the following question: “What is the amount of cash flow available to the owner both before and after officer’s compensation, and what is the risk associated with earning that revenue stream?”

In the context of succession planning for lawyers, Poock points out that Growing Law Firms pay for the value of a Senior Attorney’s practice via fee sharing derived from a Senior Attorney’s clients and referral sources, payable over a defined period of time.

Gottlieb defines that value as: “Synergy Value.”

As Gottlieb states: “Growth is now primarily coming from acquisition, not from organic growth.”