Senior Attorney Match Podcast

Guest Appearance during Ep. 28 of the Ask the Law Firm Seller Show: Tim McKey, CPA, CEO of Vista Consulting Team: 3 Tips for Strategic Planning to Sell a Plaintiff Contingency Law Firm

During Ep. 28 of the Ask the Law Firm Seller Show, Tim McKey, CPA, CEO of Vista Consulting Team, joins to address 3 Tips for Strategic Planning to Sell a Plaintiff Contingency Law Firm

 

McKey initially explains that Vista Consulting Team provides strategic consulting to Plaintiff contingency law firms, assisting clients with systemizing their businesses per Vista’s tagline: The business resource for Plaintiff law firms.

 

McKey then shares the following 3 tips for strategic planning to sell a Plaintiff contingency law firm:

 

Tip No. 1: As McKey says, “The best thing you can do to prepare your firm to be sellable is to be profitable.”

 

Underlying that tip relates to law firms knowing their numbers.

 

Examples of numbers to know include: (a) Gross revenues vs. Net Revenues; (b) The EBITDA for your firm; (c) Average fee per case; (d) Case acquisition costs; (e) Number of open cases, together with estimated values of those cases; and (f) Average time on desk to resolve cases, including differentiating between pre-lit. and litigation matters.

 

Tip No. 2: Know the value of your firm per 1 or more recognized methodologies of valuation.

 

Tip No. 3: Have efficient, effective, and documented operations within your firm, including (a) A methodology for internal reports that hold teams at a firm accountable; and (b) A means to make sure that a firm does not need its founder/rainmaker for the firm to operate.

 

McKey and Poock also discuss their thoughts about what buyers want/need when purchasing Plaintiff contingency practices, including strategic purchasers who seek to purchase more than one law firm, usually, in anticipation of a future roll-up type transaction.

Mini-Podcast: Recap for Why the Rewards Outweigh the Risks for Growth by Acquisition

As a recap for why the rewards outweigh the risks for growth by acquisition, Senior Attorney Match’s Jeremy E. Poock, Esq. summarizes the following 6 rewards that growth by acquisition offers to Growing Law Firms:

(1) Instant client growth by succeeding to a well-established Book of Business filled with clients & referral sources.

 

(2) Adding knowledgeable & experienced lawyers and para-staff.

 

(3) Low risk earnout payments as consideration to the owner(s) of a selling law firm (percentage of revenues paid during a fixed period of time).

 

(4) Opportunities to convert decades of Subject Matter Knowledge to digital content for Multi-Channel Digital Marketing.

 

(5) Succeed to a legacy phone number(s).

 

(6) Benefit from established websites & additional digital value (egs. SEO rankings, 5-Star Google Reviews, 3 Pack results & more).

 

Poock also summarizes the following 3 risks:

 

(1) Potentially overpaying a Seller if the clients from a selling law firm’s Book of Business do not retain the acquiring firm.

 

(2) Not having enough lawyers & para-staff to provide legal services to the clients of a selling law firm

 

(3) The costs of adding overhead associated with growth by acquisition (egs. salaries, benefits, additional rent, etc.)

 

In conclusion, Poock states, “The rewards absolutely outweigh the risks when it comes to growth by acquisition for Growing Law Firms.”

The Clock Has Begun Ticking on Law Firm Sales 1.0

In Episode 63 of the State of the Market for Law Firm Sales in 11 Minutes, Senior Attorney Match’s Jeremy E. Poock, Esq. addresses the following:

The Clock Has Begun Ticking on Law Firm Sales 1.0

 

As Poock explains, the clock has begun ticking on Law Firm Sales 1.0 because of the ongoing impact of Digital Disruption upon business development for lawyers in today’s post-2020, 3.0 Digital Era for the legal industry.

 

Unlike the pre-Google, 1.0 Word-of-Mouth Era in which Senior Attorneys built their Books of Business as Rainmaker Attorneys, today’s and tomorrow’s clients by-pass Rainmaker Attorneys and search Google, as well as additional digital platforms (egs. LinkedIn, Facebook, Instagram, and more), to search for lawyers and law firms to hire.

 

That Digital Disruption to business development in the legal industry has also caused the clock to start ticking upon Law Firm Sales 1.0, in which selling law firms benefit from fee sharing derived from the performance of their Books of Business, for the following reason:

 

If a selling law firm’s Book of Business diminishes as a result of Digital Disruption in today’s 3.0 Digital Era for the legal industry, the value of their earnouts via Law Firm Sales 1.0 will diminish as well.

 

Poock also explains that the clock has begun ticking upon Law Firm Sales 1.0 because Growing Law Firms may soon prefer acquiring new clients via Multi-Channel Digital Marketing, rather than paying referral fees in consideration of the Books of Business of Senior Attorney-led firms.

 

As Poock states, “[W]e're starting to see . . . in the marketplace that Growing Law Firms may very well not need to acquire Senior Attorney firms because their customer acquisition cost, that is, their new client acquisition costs could be less expensive and more efficient via their Multi-Channel Digital Marketing.”

 

And, as Poock has shared in previous podcasts, for those Senior Attorney-led firms that will not adopt Multi-Channel Digital Marketing to replenish their Books of Business, the best time to sell is now, while Growing Law Firm purchasers continue to want and need their: (1) Book of Business; (2) Experienced workforce; and (3) Subject Matter Knowledge to convert into digital to attract the attention of today’s and tomorrow’s potential clients who search online for lawyers and law firms to hire.

Q.1 from Ep. 27 of the Ask the Law Firm Seller Show: What is Senior Attorney Match’s Design Phase?

During Ep. 27 of the Ask the Law Firm Seller Show, Jeremy E. Poock, Esq. addresses the following question:

What is Senior Attorney Match’s Design Phase?

 

As Poock explains, Senior Attorney Match’s Design Phase involves 4 steps, the cumulative goal of which involves assisting selling law firms determine what they have, who wants what they have, determining their best option(s) for sale, and addressing payment terms to expect from a purchaser.

The 4 steps of the Design Phase include the following:

Step 1: Step 1 of the Design Phase focuses on determining the value of what a Senior Attorney-led firm has, including analyzing the following 5 components of value: (a) The Selling Law firm’s Book of Business, including its clients and referral sources; (b) Client volume by practice area; (c) Revenues by practice area; (d) Bios, skill sets, and experience of key employee lawyers and para-staff; and (e) Digital Value

Step 2: Analyze who wants and needs what a selling law firm offers. As Poock explains, there are 2 purchaser options, of which Growing Law Firms present typical purchasers, and internal successors represent infrequent purchasers.

Poock points out that Growing Law Firms want and need the following 3 resources that Senior Attorney-led law firms offer: (a) New clients, i.e., instant client growth; (b) An experienced workforce, consisting of lawyers and para-staff; and (c) Treasure chests of Subject Matter Knowledge to convert to digital content to attract the attention of today’s and tomorrow’s clients who search online for lawyers and law firms to retain.

By contrast, internal successors infrequently purchase their boss’ law firm because internal successors typically want and need the following per their roles as key employee lawyers: A Reliable, Predictable, and Safe Job.

Step 3: Determine a preferred sale option. During this step, Senior Attorney Match explores the following 4 sale options Senior Attorney sellers to consider: (a) Join/Seller to a Growing Law Firm (preferred); (b) Structure and internal sale (potential); (c) Maintain the Status Quo (Risky); or (d) Become a referring attorney per a given state’s version of Rule 1.5 of the Professional Rules of Conduct (alternative to a sale and maintaining the Status Quo).

Step 4: Address Law Firm Sale Payment Options. During this step, Senior Attorney Match explains the following 3 payment options available to a selling law firm: (a) Law Firm Sales 1.0, which primarily consists of earnout terms, payable as negotiated fee sharing upon collections attributable to a selling law firm’s Book of Business during a negotiated period time: (b) Law Firm Sales 2.0, which includes a fixed payment attributable to a selling law firm’s digital and brand value, plus an earnout; or (c) Additional payment options, including : (i) A fixed price; (ii) A Buy-Sell Agreement with internal successors or a third party law firm; or (iii) A tiered purchase approach, typically negotiated with an internal successor.

Guest Appearance during Ep. 27 of the Ask the Law Firm Seller Show: Greg Maxwell, Esq., CFP of Amicus Settlement Planners

Guest Appearance during Ep. 27 of the Ask the Law Firm Seller Show: Greg Maxwell, Esq., CFP of Amicus Settlement Planners: What tax savings value do structured settlements provide to sellers and buyers of Contingency Fee law firms?

 

During Ep. 27 of the Ask the Law Firm Seller Show, Greg Maxwell, Esq., CFP of Amicus Settlement Planners joins to address the following question:

 

What tax savings value do structured settlements provide to sellers and buyers of Contingency Fee law firms?

 

Maxwell initially explains that Amicus Settlement Planners primarily works with contingency fee practices, assisting with settlement planning from the standpoint of spreading out recoveries in contingency fee matters to reduce the “tax bite” that plaintiffs may otherwise incur.

Maxwell and Senior Attorney Match’s Jeremy E. Poock, Esq. then discuss the benefits that structured settlements offer to contingency fee plaintiff attorneys, including a role for structured settlements in the sales of contingency fee law firms.

As Poock and Maxwell discuss, structured settlements can play a role in the following scenarios:

(a) Deferring taxes upon a portion of upfront money paid by a purchaser to the seller of a contingency fee law firm; and

(b) Deferring portions of annual earnout payments for sales structured as earnouts once a selling contingency fee attorney receives annual earnout payments that satisfy a selling attorney’s annual income needs.

Maxwell explains the benefits of a structured installment sale when sellers of contingency fee law firms receive significant upfront payments in consideration of their law firms.

In those sales, Maxwell explains that a buyer can direct a portion of purchase proceeds to a company such as MetLife or Independent Life, which can establish a future series of payments for a seller, such as payments over the course of 3, 5, or 10 years, or the remainder of a Seller’s lifetime.

 

As Maxwell states, “So, the point of that is to really get them down into the tax bracket that they want to be in so that they don't have a huge spike in taxes the year they sell their firm. . . This gives them the opportunity to spread out that recovery . . . and keep themselves in a tax bracket that's more comfortable for them.”

 

Maxwell’s appearance also includes addressing the following hypothetical:

• Assume that the 67 year old owner of a Personal Injury Law firm that generates $2M in annual legal fees sells to a growing PI firm in consideration of 1/3 fee sharing for 5 years upon cases attributable to the Seller’s Book of Business.

 

• Assume that the Seller’s Book of Business continues to generate $2M/yr. during the 5 year earnout period, which would result in annual fee sharing with the Seller in the amount of $667k/yr.

 

• Assume that the Selling attorney only needs to earn $350k/yr. because of revenue from other sources of income.

 

• How could a structured settlement arrangement “capture” the additional $317k in annual earnout revenue, including deferring taxes for the Seller?

 

As Maxwell explains, the Seller may treat the additional $317k as deferred compensation, where similar to an annuity, that $317k could benefit from deferred tax treatment until the Seller receives all or a portion of that amount from a plan administrator in the future.

Bonus Addition to Why the Rewards Outweigh the Risks for Growth by Acquisition with Attorney Bishoy Habib of Tampa, FL Based Levacy Legal

During the Bonus Addition to Ep. 61 of the State of the Market for Law Firm Sales in 11 Minutes, Senior Attorney Match’s Jeremy E. Poock, Esq. welcomes Attorney Bishoy Habib of Tampa, FL based Levacy Legal to discuss:

Why does growth by acquisition fit into the growth model for Levacy legal?

 

As Bishoy explains, an established Senior Attorney-led firm that has a Book of Business, a staff in place, and has subject matter knowledge and expertise, “adds a ton of value [on] day one.”

 

Bishoy also explains the value of Senior Attorney sellers and their key employee lawyers continuing to practice following a law firm acquisition.

 

As Bishoy states, “The goal when we acquire . . . is never to let anybody go . . . We want to keep what's going on in tact and make it more efficient, make it better, and bring it into [a] new era . . . .”

Why the Rewards Outweigh the Risks for Growth by Acquisition

In Ep. 61 of the State of the Market for Law Firm Sales in 11 Minutes, Senior Attorney Match’s Jeremy E. Poock, Esq. addresses the following:

Why the Rewards Outweigh the Risks for Growth by Acquisition

 

As Poock explains, “When it comes to Growing Law Firms that are considering growth by acquisition, it's really six rewards that we're going to talk about versus three risks.

 

The 6 rewards are as follows:

 

(1) Instant client growth by succeeding to a well-established Book of Business filled with clients & referral sources.

 

(2) Adding knowledgeable & experienced lawyers and para-staff.

 

(3) Low risk earnout payments as consideration to the owner(s) of a selling law firm (percentage of revenues paid during a fixed period of time).

 

(4) Opportunities to convert decades of Subject Matter Knowledge to digital content for Multi-Channel Digital Marketing.

 

(5) Succeed to a legacy phone number(s).

 

(6) Benefit from established websites & additional digital value (egs. SEO rankings, 5-Star Google Reviews, 3 Pack results & more).

 

The 3 risks are as follows:

 

(1) Potentially overpaying a Seller if the clients from a selling law firm’s Book of Business do not retain the acquiring firm.

 

(2) Not having enough lawyers & para-staff to provide legal services to the clients of a selling law firm

 

(3) The costs of adding overhead associated with growth by acquisition (egs. salaries, benefits, additional rent, etc.)

 

Poock addresses those risks as follows:

 

• By often structuring law firm sales as earnouts, purchasers minimize their risk by aligning the consideration paid in a law firm acquisition with collections derived from a selling law firm’s Book of Business during a negotiated period of time.

 

• Key employee lawyers and para-staff at a Senior Attorney-led Firm present great opportunities for new hires for acquiring law firms because of the key employees’ experience, plus their trusted relationships with the clients of a selling law firm.

 

• In terms of adding overhead costs, Growing Law Firms recognize that any increase in overhead attributable acquiring a Senior Attorney-led firm will become offset by adding hundreds of thousands of dollars, and sometimes, millions of dollars, in new revenues.

 

In conclusion, Poock states, “The rewards absolutely outweigh the risks when it comes to growth by acquisition for Growing Law Firms.”

The Impact of Digital Rainmaking upon Law Firm Sales

In Ep. 62 of the State of the Market for Law Firm Sales in 11 Minutes, Senior Attorney Match’s Jeremy E. Poock, Esq. addresses the following:

The Impact of Digital Rainmaking upon Law Firm Sales

 

As Poock explains, society’s digital pivot in 2020 has revolutionized rainmaking in the legal industry as follows:

 

Unlike the pre-Google, pre-2020 Era during which Rainmaker Attorneys developed clients in-person and via Word-of-Mouth referrals, today’s 3.0 Digital Era for the legal industry involves Digital Rainmakers whose law firms attract the online attention of prospective clients who search Google and multiple digital platforms (egs. LinkedIn, Facebook, Instagram, and more) for lawyers and law firms to hire.

 

Based upon the rise of Digital Rainmakers and the vanishing Word-of-Mouth Rainmakers, Poock shares the following 2 observations:

 

Observation No. 1: Those Senior Attorneys who do not commit to Multi-Channel Digital Marketing will not replenish their all-important Books of Business with new clients as often as during the pre-2020, pre-Google Era.

 

As a result, the value of their law firms will continue to decrease because of the correlation in Law Firm Sales 1.0 between a purchaser fee sharing upon revenues attributable to a selling law firm’s Book of Business and the number of clients that comprise that Book of Business, i.e., as the Book of Business of a selling law firm’s Book of Business decreases, so will the value of the firm itself.

 

Observation No. 2: As Growing Law Firms continue adopting Multi-Channel Digital Marketing to attract the attention of today’s and tomorrow’s clients who search online when considering hiring a lawyer or law firm, their practices will continue becoming more valuable because of the following 2 assets that Digital Rainmaker law firms continue developing:

 

(1) Digital Value

 

(2) Brand Equity

 

As Poock states, “[I]n Law Firm Sales 2.0, we are going to see higher multiples . . .because the sellers are selling not only the Book of Business, but also that Digital Value and Brand Equity . . . .”

 

For those Senior Attorneys who will not become Digital Rainmakers, Poock shares the following points:

 

• If you already attract less clients than pre-2020, now is the best time to consider selling your law firm because Law Firm Sales 1.0 involves deriving value via an earnout based upon collections attributable to a selling law firm’s Book of Business.

 

• So far, the digital disruption in the legal industry has primarily disrupted rainmaking, i.e., business development.

 

Even though Senior Attorney-led firms may not develop as many new clients during today’s 3.0 Digital Era, Growing Law Firms continue to need the following 3 resources that Senior Attorney-led firms offer: (a) Instant client growth; (b) Experienced lawyers and para-staff; and (c) Subject Matter Knowledge to convert to digital content.

 

As Poock states, “Even if your Book of Business is not replenishing as much as yester-year . . . you present an experienced workforce, and you have Subject Matter Knowledge that Growing Law Firms want and need because they need to convert your Subject Matter Knowledge into digital content to attract today's and tomorrow's clients who are looking to Digital Rainmakers that will catch their attention when they're looking to hire lawyers and law firms to meet their legal needs.”

Q.2 from Ep. 26 of the Ask the Law Firm Seller Show: Why do Growing Law Firms want to purchase Senior Attorney-led Law Firms?

During Ep. 26 of the Ask the Law Firm Seller Show, Jeremy E. Poock, Esq. addresses the following question:

Why do Growing Law Firms want to purchase Senior Attorney-led Law Firms?

Poock answers this question by explaining the following 4 upgrades that Senior Attorney-led Law Firms present to Growing Law Firms:

 

Upgrade 1: Instant upgrade to a Growing Law Firm’s Book of Business by acquiring the Book of Business that a Senior Attorney-led firm has developed over the course of a career.

 

Upgrade 2: Upgrade to a Growing Law Firm’s workforce by welcoming experienced and talented key employee lawyers and para-staff as part of growth by acquisition.

 

Upgrade 3: An upgrade to subject matter knowledge depth in multiple practice areas that Senior Attorneys and their key employee lawyers bring to a Growing Law Firm.

 

As Poock explains, “[B]y bringing in Senior Attorney lawyers and the lawyers that practice at their firms, they have often decades of subject matter knowledge that is going to make your [growing] practice more valuable by offering even more talent to your current clients and prospective clients.”

 

Upgrade 4: A Digital Value Upgrade, which includes the following (i) Adding bios of Senior Attorneys and additional lawyers to a Growing Law Firm’s website; (ii) Adding pre-existing 5-Star Google Reviews and requesting new 5-Star Google Reviews from satisfied clients among a Senior Attorney-led Firm’s Book of Business; and (iii) Convert Subject Matter Knowledge into digital content for a Growing Law Firm to post to multiple channels of social media (egs. LinkedIn, Facebook, and Instagram), plus e-newsletters, podcasts, YouTube videos, and more to attract the digital attention of prospective clients in today’s 3.0 Digital Era for the legal industry. 

Q.1 from Ep. 26 of the Ask the Law Firm Seller Show: How long does it take to sell a law firm?

During Ep. 26 of the Ask the Law Firm Seller Show, Jeremy E. Poock, Esq. addresses the following question:

How long does it take to sell a law firm?

Poock answers this question by explaining the following 3 stages involved with selling a law firm:

 

Stage 1: Preparing to sell a law firm

 

Poock points out that during the 12-24 months prior to selling a law firm, the owner(s) of a selling law firm should organize the following:

 

• The law firm’s client list, including addresses, e-mail addresses, and cell phone numbers.

 

• Update the firm’s website, including updating content, removing stale content, and refreshing bios & pics.

 

Ideally, updating a website should include adding 5-Star Google Reviews from satisfied clients because potential buyers and clients want to review 5-Star Google reviews, similar to how consumers expect to review 5-Star Google reviews prior purchasing any product or service in today’s digital era.

 

• Update social media profiles, and particularly, LinkedIn bios & pics.

 

• Review all contracts that are not terminable at will (egs. commercial lease, software licenses, malpractice insurance, copy machine lease, etc.).

 

Stage 2: The 6 Meetings Needed to Sell a Law Firm

 

The 6 meetings needed to sell a law firm are as follows:

 

• Meet & Greet
• Due Diligence
• Negotiate a Letter of Intent
• Sign the Letter of Intent
• Negotiate a definitive Agreement
• Sign the Agreement

 

Poock explains that the process from Meet & Greet to Signing the Agreement can involve circa 3-9 months, and sometimes, longer.

 

Stage 3: The 4 Steps to Achieve Success after Selling a Law Firm

 

The 4 steps to achieve success after selling a law firm are as follows:

 

• Listening Tour
• Adapt
• Adopt
• Grow Together

 

Toward the end of answering Question 1, Poock offers the following:

 

[I]n terms of how do we know that the deal is successful? We started . . . with a meet and greet and went through due diligence and . . . signed an agreement. We know that we have success . . . when our clients will say, “I should have done this earlier.”