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Today Seth and Jay chat with the managing member of The Law Practice Exchange, Tom Lenfestey.

Tom is also a practicing North Carolina attorney and licensed CPA. Tom’s years in the legal world focused on transition and succession planning for other professions including creating, advising and implementing strategic business and estate plans for those clients. In doing so, he came to recognize the lack of knowledge, attention and options that were provided in the legal profession to attorneys for their own practices, specifically in the realm of succession planning and other transition or exit opportunities.

Tom is the author of the book Designing a Succession Plan for Your Law Practice and numerous other articles and resources about selling, buying and valuation of law firms.

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Transcript: Maximum Growth Live! with Tom Lenfestey

Speaker 1
welcome to the podcast edition of maximum growth live. The number one program for lawyers who want to grow their practices. Each week, our hosts Seth price and Jay Ruane tackled the fundamental questions about how to grow the profit and profitability of your law firm to watch the program live. Submit your questions and hear the latest episode tune in every Thursday at 3pm. Eastern on Facebook for our live show maximum growth live is a production of maximum lawyer media.

Jay Ruane
Hello, hello, welcome to another edition of maximum growth live. I’m wanting your host Jay Ruane CEO from flex your Social Media Marketing Agency for lawyers, as well as the managing partner of roofing attorneys, a civil rights and criminal defense firm here in the Constitution state of Connecticut. With me as always hanging out down in our nation’s capitol is my man Seth price. Seth is a founding partner of price Ben which are DC, Maryland, Virginia and South Carolina, as well as the creator in Grand Poobah and President No, no, you’re not the president. You’re What are you, the founder co founder, your blue shark blue shark, which sets the industry standard for high quality lawyer SEO and said that actually brings me to my first question of the day. Well, the first question is, how’s your week going?

John Fisher
We it’s going good. Like we’ve been talking. Exactly. Jay, I every time I speak to Jay, another another layer, the idea is peeled of something. But you know, look, I feel like we have a lot of balls in the air. A lot of good stuff we made some transitions have talked about where we’ve upgraded some management and really darn like, trying to leverage the systems. And every time again, you’re the king of systems, I feel like sometimes with the king of one offs, and every time we do a one off, it’s a disaster. So the goal is to do less one offs, more systems. I feel like I’m in that direction. So it’s been a good week.

Jay Ruane
Yeah, you know, it’s funny in our in our systems group, I’ve been posting some stuff about managing employees, how to check in with the weekly how to do an annual review is actually going to be posted during the show, I set it up as a scheduled post. But one of the things that’s that’s that’s crazy to me, is just how many systems need to function? Well, in order to have a really good functioning law office. I mean, there’s so many things going on simultaneously. Absolutely.

John Fisher
Let me ask you a question. So this literally just happened before we started recording. So you know, we had some updates in our intake for the PII department happens, we’re Oh, it’s always evolving. It’s a management changes. And I noticed some stuff cracking where stuff wasn’t being followed. So we’re doing a meeting. And there’s no, is there a system for this? You know, that the head of the team sent out an email to the team, we’re gonna do a meeting, it was 10 days from now. I’m like, why? Like, oh, yeah, so he’s getting a Maderna shot this and that. I’m like, Okay, what, why can’t we just set the meeting, pick the next possible date, which would be tomorrow, when most people are in, if one person’s out, you record it, and you do it. But if you waited for perfect attendance for meetings, it’s never gonna get as your team gets larger, it may never happen. And the idea not that you want to have a meeting without your constituents there. But the idea that as you get a team, and here we have a team of 14 people, like any given day, somebody’s gonna miss it for some god own reason, I what I would like to do is have a process where the video is sent out afterwards, we record the zoom, and there’s something that’s sent back that says, a test that they’ve seen it. That’s the piece that I think I’m struggling with, because we have systems, we do lawyer meetings on a every two week basis. And there’s certain stuff we’re trying to push certain processes and procedures that we’ve updated or change, wanting to let them know when a system changes. And the problem that I’m having is, what do you do when people aren’t there? And how do you ensure that they get the full effect of that Live Meeting watched as a recording.

Jay Ruane
So let me give you some input on this. Back in my younger days, I own a piece of a bar, there were 20 of us who own a piece of the bar. And we had a meeting every Monday night. And Monday night’s meeting was mandatory. And if you didn’t show up and pay the $1,000. And then this can’t happen in your firm, right? And the reason being was these meetings are important to move the business forward. And so there were zero excuses. Well, you’re on your honeymoon, fine. Pay the $1,000. You can miss the meeting. And you know what, it got people there. But that’s what we so that’s sort of an approach I take with the partners. If we’re just calling the partners meeting. There is no getting out of it. You know, that type of thing. But when it comes to your employees, we go with the quorum, you know that Robert’s Rules of Order. Do we have enough people here to have do we have 75 or

John Fisher
80%? It’s not the percentage. It’s the ID You have, you’re putting this stuff out there, you’re letting people know their new systems. Oh, I missed the meeting as if it’s gone in a vacuum. And that’s the piece, because it’s a negative incentive if you had the $1,000 there, but I have people that I need to get bought in usually personally most bought in as the person with some deadbeat excuse for not being there. And then the question is, how do you sort of do that checks and balances? The person is already, you know, the weak link, do you do have some sort of like, I wish there was. So there was sigh I, you know, so what?

Jay Ruane
So what we do in that situation is we record everything, we actually transcribe it, we’ll send them the notes, and the notes will be on a slide and you got to progress through all the slides. And at that point, they’ve gone. I mean, at that point, it’s, I mean, they could click, click, click, click, click furiously, to get to the end to just click that I accept. But there’s ways to track people’s, you know, filling out a form or

John Fisher
something, I need a slideshow for the transcription.

Jay Ruane
So what we do is we do a slideshow with a Google form a slideshow with a form, you know, what’s your input on this question, you know, throughout the process. So if you got 15 pages, you’re getting five responses. So they actually have to participate in this stuff. And it’s just necessary? I think, I find, and it does, it’s taken a lot of iterations to get to that point. But when you have a disparate workforce, when you have a distance workforce, even, you know, it just helps to make sure that everyone’s sort of on the same page. That way, the question I had for you was a digital marketing question. And it came up recently, somebody reached out to me and wanted my opinion or something, I think, probably only because they don’t know who you are, like, they don’t know you personally. And they felt they know me from a criminal lawyer group, and they want to do it. So here’s the thing they came through, they said, I love this idea of a 10 point client commitment. And I saw on another lawyer’s website, and I want to put it on my website. And it’s basically I want to use the exact same language, am I going to get penalized for having duplicate content from another person’s website on mine? And here was my response? Number one, I don’t think that’s the duplicate content that everyone talks about, because duplicate content from my understanding is, I have 15 pages on my website, every word is exactly the same. But maybe the name of the town is different, right? That’s my understanding of having, you know, you know, just gaming it with a bunch of pages. But this, this client commitment isn’t necessarily going to be something that somebody searches for, right? You know, and it’s on somebody in Atlanta and somebody in Philly, you know, the local searchers, it may be the difference maker that makes them call you because they read it, and they like it. But it’s not something that you need to rank for. So you don’t really worried about having some content that mirrors something on some other website? 1000s.

John Fisher
No, no, no, that is, you know, both both are issues, but no duplicate content does from another website. If you copy content, they’re going to index their content, not yours, right. But it said,

Jay Ruane
but it’s not something that I care if I’m not caring, if I render that, as

John Fisher
an SEO nerd, I don’t like it. My feeling is for two reasons. One is you shouldn’t be ripping somebody off, it’s one thing to emulate it, and take it and sort of make it your own. But without permission, I do think bad form A and B, and they’re going to see it because when they run their duplicate content check, you’re now the aihole who placed it. So I think it’s just wrong. Tip for the SEO, I just don’t think it’s the right thing to do. Second is make it your freakin own. Okay, go go. And go ahead and take it and don’t just copy it. Look, you take somebody else’s core values and you copy it verbatim even thought about it. Like make it your own. Is it okay, so yes, it is duplicate content? If it’s the same thing from another website? Is it the end of the world? If it’s 10 little points within it? No, it’s going to bring you down. It’s certainly not going to it’s not good for SEO, right? It’s not a good thing. It’s a bad thing. But is it really meaningful if it’s not, but if it’s on your homepage, you don’t want something that

Jay Ruane
was it was gonna be you know, buried in the footer, you know, that type of thing. They can reference there

John Fisher
in the footers div, but doesn’t sound that way. If you’re doing a free content course, you’re 10 talking points. It sounds like somebody’s gonna be front and center. So look, first, stay away from duplicate content, period. It’s not like it’s this penalty that’s going to wipe you off the face of the earth. It’s not a good practice. Second, I’m going to take you out of SEO for a minute. It’s just a dick move to rip somebody off without permission. If not worse, right? And third, the the whole point of this is that you internalize it you believe it not like oh, that’s a good idea. Me too, but rather, what is it and I’ll give you the for the final one, which is you damn well better embrace that, because one of the things that I always got when I first started I went to ethics lawyers and talked about you know, what should you should have on a site or not having a site and one of the things they said is never have something like you should always or you must get rid of definitive terms because because what happens? If you don’t do it? Now you’ve created liability. And you don’t want that. So, again, for all those reasons, you know, yes, it is duplicate content? No. Is it like the end of the world? But like, it’s not a good practice? Should you be ripping people off? No, like, emulate like, you know,

Jay Ruane
the language working?

John Fisher
You don’t and at the end of the day, don’t be in a hole.

Jay Ruane
Okay? So, okay, so that, that expands my understanding my understanding of what duplicate content was, was having multiple pages on your website with the exact same thing with an eye towards having a lot of pages on your website, rather than

John Fisher
what we’re talking about there is the actual, most people think of duplicate content, which is from another site into yours, on your own site is a whole nother thing. Because it’d be great just to cut and paste and put the name of a town and have the same content. That’s, that’s a no go as well. So it both are issues for different reasons. But neither are both.

Jay Ruane
That’s a really good point. So you know, we have a lot of listeners, and a lot of viewers out there who may, you know, be in, just pick a random city be in Philly, right. And they want to rank for Camden, and they want to rank for, you know, Bryn Mawr or Westchester that, you know, they’re looking for other towns around. So they might say, Okay, this content looks really good for Philly. Can I just copy that? And

John Fisher
we talked about that a lot. No, yeah, the answer is, and it sucks. Because is the law the same? In each of those vaccines? It’s the same, right? But get something localized, talk about the courts talk about the jurisdictions talk about anything localized, make it local, so that Google sees this as a unique answer for this area, it’s a bit of a game, I get it. And it gets worse, if you’re doing something like immigration where the laws could be seen nationally, you know, but you got gotta keep it original. You can’t just cut and paste and copy, you’ve got to, like Google’s trying to say, hey, what’s the best answer for this town. And in one sense, you could have this one beautifully written page, it’s got to be localized, or it’s not going to work the same.

Jay Ruane
So it’s not even just mixing of the paragraphs, it’s writing fresh content, it is no game

John Fisher
it don’t spin it like, right, that’s the right answer. If you do that, you’re gonna like that way, every time the algorithm updates, you’re not gonna get hit for a thin penalty, you’re gonna have good stuff. That’s why, you know, 99 times out of 100, when something updates, I’m like, I’m thankful because it’s getting rid of riffraff and putting our stuff further up.

Jay Ruane
You know, it’s funny I did that years ago, I had like, incredibly thin content. And what I did is I created a five page website, and created town names in each of the in like a sidebar menu. And when he would click on the town name, it would use PHP and spin up those five pages with the exact same content, but just swapping out the name of the town. It was so so it was really a five page website that could look like it was 1000 page website, it crushed it in Yahoo. For a period of time, you would Google me and I would own like the first. Yeah. And then And then Google never touched it. Google never indexed it. And I was like, you know, and it just got me. No, it sees outset, that’s, that’s just phenomenal news. And this is the kind of stuff this is why I like having these conversations. Because, you know, it’s, it’s a, it’s a lot of stuff that you need to know, as a law firm owner. And one of the things that we need to know about and start thinking about, I guess, is the Exit Planning plan, right, like some sort of strategy to get out of this. Because as I’m driving around, I’m thinking, When am I gonna get off this crazy tray? And that actually is somebody who we have today who can help us out with that. So why don’t you tell us a little bit about who our guest is, and what we

John Fisher
did this founder of the law practice exchange, I didn’t even know it existed till not that long ago. It’s it’s basically a marketplace for law firms. You know, it makes sense. You know, we see this stuff that’s happening in Arizona and Utah, and clearly a trend happening across the country. You know, it’s frustrating, because I see from the blue shark side, you know, you making 5000, the phone starts lighting up with people wanting to invest in buying all this stuff. And it’s pretty simple. You give them a bit of they give you a multiple you negotiate it, that’s how you sell an entity, law firms not nearly as simple. I think at the end of the day, what we’re going to see is it probably is it’s just not nearly as sexy, or as exciting, as you know, as a non legal because of all the different nonsense we deal with.

Jay Ruane
Well, I think there’s that and I think, you know, one of the things that’s unique about law that I don’t think impacts you or I, but it does impact a lot of people is that are a lot of lawyers, their self identity is wrapped up in their law firm, because they think of themselves as a lawyer, and that’s who they are. And it’s their firm that they’ve created and crafted. And I think part of the problem with it is that is is that tricky valuation because I’ll be honest with you, I had At a number of years ago, there was a lawyer who had all the chops but didn’t have the business skills. And I said, Hey, you know, why don’t you come in, I’ll pay you a great salary. And you could you could run my my litigation. And they were like, well, I’ll be giving up my firm. I want my name on the door. I want equity. And I said, but so tell me what kind of money you generated? Well, I have no idea because I get paid in cash every week, and whatever I get paid. I you know, I put a little aside for taxes in that state. That’s absolutely,

John Fisher
right. Absolutely. But point point is, we’ll take it and look. And that’s the difference. Like it’s when when the firm’s are sold properly. It’s not like this is a windfall of 20 years revenue. It sounds like, and I think that my general, just I’m curious to see what Thomas say, you get, like, one year’s revenue as a payout, if you’re lucky, maybe three years of profits, you know, something, it’s not, this isn’t the same, you know, seven to 10 times multiple data that you’ve seen with nonlegal. And part of it is, there’s all these things that are added to the mix that make us less desirous

Unknown Speaker
felt, right? Right.

Unknown Speaker
I feel a client’s etc. And I think

Jay Ruane
anything, you know, all of us are thinking, Well, you know, this law firm is so valuable over the last, you know, 30 years, I’ve made great money. But yeah, yeah, and you’ve spent great money, you know, there’s there’s a lot of dollars that run through our practices, but we don’t put 100% of them into our pocket. You know, we put a much, much lower, you know, 20 25% of that into our pocket. And that also includes the stuff that we do I mean, we’re not, you know, I know, I’m not out I know, you’re not out entirely, and it’s one of the things that has to be replaced. So why don’t we do this? Why don’t we take a quick break, we’ll hear from our sponsors. And then when we come back, let’s talk to Tom, let’s talk a little bit about this, I got a feeling that this is what could go long. Because this is something that we we we, you and I have a lot of interest in, but I think a lot of our viewers do. So folks, we’ll be right back with more maximum growth live.

Speaker 4
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Speaker 5
In this world today, if you want to grow your business, you want to grow your firm, you want to take on more cases and make a better impact. You have to have a digital blueprint that says typically, throughout the time that we’ve been working with blue shark digital, our law firm, the Atlanta divorce law group grew over 14 100%

Jay Ruane
Seth and his team have years of experience in this area.

Speaker 6
blue shark is truly a part of the firm. So I don’t consider blue shark any different than the employees in my office.

John Fisher
We’re thrilled to have Tom Lenfest, the the founder of the law practice exchange. Welcome, Tom.

Unknown Speaker
Thank you. Thanks for having me.

John Fisher
You know, you focus on an area that that I’ve sort of was wondering if there was somebody like you out there and we’d never really found found a person who was out there helping lawyers package their law firms up, get them sold, figure out, you know, some sort of marketplace because, you know, for most lawyers out there, they talk about selling their firm and Lord knows in the circles we travel Jay and I more people talk about selling their law firm than anything else. But the number of success stories seems very nominal compared to the number of people that plan on selling their law firm.

Speaker 7
Yeah, I mean, that’s part of the reason, you know, back a decade ago, I started the law practice exchange. You know, as an attorney, you know, CPA, I was working with a lot of other professional businesses, a lot of dentist, a lot of other CPAs you know, medical doctors insurance, everything else. And honestly, you know, Seth and Jay I think I got jealous on the fact that it seemed like other professions had figured out how to, you know, sell and retire you know, build value monetize that value and X And transitioning over. So that’s really what kicked off the, you know, the need the idea, and, you know, building it out into a service, so that lawyers can do that. And that’s what we’ve been focused on for these years is kind of building out how it can work successfully between a lawyer, you know, law firm seller, and a lawyer, law firm buyer.

John Fisher
You know, I noticed this, as, you know, blue shark, somebody said, Hey, there’s a lot of demand for marketing with dentists. And what I noticed was that most non Cosmetic Dentists essentially, you know, they go to, they go to dental school, they may have dental loans, and they go out and they see a practice, they may work in it for a year or two. And then they get a note and they buy the practice. Now they have the advantage of they can there can be non competes, you can sell your clients, you know, like there’s a whole bunch of things that lawyers have restricting them. But it’s a very clean way that somebody who’s three years at a technical school can, with modest step service, have a practice of their own something in the law firm oral Jay and I have been half the reason our show exists, is because people are trying to build this from the ground up. And there’s not a another option generally, for jumpstarting a firm. You know, so talk to me about, you know, obviously, that that’s the panacea is that you’d be able to package stuff up, how much do the legal ethics rules surrounding noncompetes and other issues, stymie the ability to, to sell a firm?

Speaker 7
Yeah, absolutely. I think the nicest part, if you look to ABA rule 1.17, which most states have adopted, not all, but, you know, expressly says you can sell a law firm, right, you can sell a law firm, and it’s one of the places that if it doesn’t require, essentially allows for the selling attorney to sign a non compete, right. So in most states, you know, on a national level, everybody says, attorneys, you know, you can’t sign noncompetes. But it actually, in order to prevent confusion, basically, you know, the states don’t want you to sell your firm to, you know, Joe, and then turn it and open up shop right down the street. And so clients are confused, right. So they actually say, Look, if you sell your firm, that is an area where we do not want you competing, right, ethically, you know, under that. So, non compete, I would say sale of a law firm or a law practice is the one area that you can have that for lawyers, but the ethics otherwise are still you know, not directly on point with how we really do the models, most of our sales are transition based sales, 1.17 kind of envisions a throw the keys to a buyer and walk out the door type of thing, which we just see as too much of loss of value, right? Those are death disability, you know, sudden departure type events. And so, you know, the ethics or restraint and some aspects, but it is one area where you know, ABA, most states have come out and said, Look, you can sell your law firm, there is a model to do it. And it is an area where we can make sure that the clients are transferred without confusion and without competition from the seller.

John Fisher
You know, in much of the non legal world sale businesses go with a sort of a multiple EBITA. How, what is the sort of how are you seeing law firm sold? Like what’s the, what type of multiple of what are you are you basically pricing law firms at?

Speaker 7
Yeah, um, so our multiples, we approached law firm valuation from four different methods typically, one of those, of course, is a revenues approach, looking at historical revenues. And then we talk about everything of you know, transferable value. So if you’re looking at revenues, really, we’re going to do an analysis to say, here’s what the firm has done. Right, but what is transferable to the next buyer, because, you know, what we find in certain situations, I mean, we may have a lawyer that does, you know, expert witness work, you know, highly lucrative revenue producing, but the buyer can’t do that work, because that’s going to be tied to that individual seller, right? Or there’s going to be historical clients that won’t transition or, you know, their aging out as well as the seller. You know, revenue loss could be a component, but typically on revenues, we’re looking anywhere from the low, which is a low of point five, up to a high of usually 1.1 On the revenue scale, right. And, you know, the larger the firm, the more structured ABA business model, you can really break those limits or push the higher ends of those. But that’s typically from a revenue side, which means if you’re doing a million dollars in revenue for the firm, and your multiple is a one, right, your firm value potentially could be that million dollars, right? That’s the vision of what hopefully the buyer will do on an annual basis going forward on the earning side or what we would call a net income approach that really means What you have benefited from on ownership of the firm over the last couple of years is that again, transferable to your buyer, right? And so on those aspects, if we’re looking at an adjusted, you know, owners cash flow or net income, we’re usually somewhere between a two to three and a half multiple. Right? And, you know, again, you’re talking about, okay, million dollar firm, maybe you make, you know, a half a million dollars, if you’re looking at that, you know, to multiple, your firm would be worth, you know, a million dollars, right, you know, two times

John Fisher
these things, these things should be coming together, there shouldn’t be a huge difference, depending on how you’re looking at it. For I flip this to j. And J. J is Mr. Systems. Do you find that law firms supplementing your question, Jay, but that we are, that are taking these systems and putting them in place? Does that make this more sellable, more likely that somebody could step in? To take it over? Versus the guy has been sitting there and doing stuff off the back of an envelope for 30 years?

Speaker 7
Absolutely. And, you know, Jay, to give you credit for your question, you know, as well, but it’s, you know, the aspect of focus on systems, you know, most traditional, especially small law firms, right, if you look at, you know, certain generation, the boomer generation that may be retiring, or looking at retirement strategies, not all of them were built on a business model, they are an extension of, you know, the attorney, right. And so, so much to your point, you know, you know, J and South is, it’s not systems that really wasn’t a business model. But those that have been built that way, are so much easier to transfer from one to the other, right? Because the systems can be transferred, the people that are trained on those systems, right, can be transferred, it’s much harder for us to show a buyer or prospect in the marketplace. This firms great, and let me tell you why. Because the attorney that selling it has all this information in their head, right? They do all these awesome things on a daily basis that produce these great clients and revenues, right? Or, we can show them, hey, here’s what they do on a marketing system and platform which generates these number of leads, right? Here’s the data, hey, they have checklists or software process for everything here. There is no team is trained on that, right, they outsource this, but they in house this. And so systems definitely help on a transfer or sale, it’s probably going to get you a better value. Overall, it’s going to get you better payment terms, right? So we can definitely sell, you know, the firm that is, you know, circled around that attorney, it’s just they’re, they’re going to be more focused on a performance based payout, the seller is going to take on more risk than maybe the seller who’s built a business that really runs without them in it, right. I mean, we’ve got some great firms that, you know, the owners make great money, and they haven’t stepped foot in their corporate offices for 10 years. Right. And they built a machine, right, that just, you know, happens to offer great legal services. And they’ve got trained, you know, experienced people and systems that can be seen by another law firm or a buyer of how they run those systems.

John Fisher
Before it throws the j are those firms where the principle is not essential they haven’t stepped inside the walls in years, is that easier to sell in the sense that you’re not, you clearly aren’t relying upon a person that there’s a team that you’re then would be theoretically acquiring that would be able to continue doing whatever they’re doing?

Speaker 7
Absolutely, it’s easier to sell that firm, right? I mean, as a generic statement, then a firm that everything is centered around the attorney or even involved in that, you know, I tell people, one of the things that got me started, you know, as I was helping clients and everything else was reading, you know, John Warrillow has Built to Sell book, right? I mean, we all know it, you know, or read it, but it’s the focus is basically, if the business is about you, right, it’s hard to sell it, you can go get a job somewhere, somebody will hire you. But if the business is fully, you know, you’re in every piece of it. So where you’ve removed yourself from that, and you’ve been able to, you know, still enjoy the benefits of ownership, then you’re really saying, you know, hey, somebody else I don’t need you to come in and I don’t need to spend the next couple years introducing you to referral sources, you know, training new on these systems like, that’s built right. So and we’ve seen that mostly with, you know, a firms and attorneys that are retiring, we see those with larger firms, right, a lot in the personal injury, you know, bankruptcy workers comp space otherwise, but they’ve they’ve invested over the last 20 years and you know, built some really nice business models that you know, they still are a strategic, maybe overseer of it, but they are definitely not daily operations.

Jay Ruane
So I have a question for you, you know, I’m thinking, maybe it’s time to sort of take myself out of the out of the name of the firm, because I want to separate myself and be able to have a marketable entity or asset that I can sell down the line. Let’s Can we talk a little bit about, you know, when a person is starting to set up their law firm, there is this natural bias towards, you know, the ego, of naming. And after myself, we’re waiting attorneys Price Benowitz, because you are the firm at that point. But then, I’ve seen other people, and I’ve done it myself with some of my offshoots, who’ve decided to go straight branding, because they know that the brand is something that you can sell. And it’s a non person based law firm, you know, it’s advocates law firm, or something

John Fisher
along at the moment, that can actually help with Google search, given local spam work. So it’s ironic that right now, that there’s a double whammy that it’s looking forward to this answer.

Jay Ruane
Yeah. So where should we be? If we are thinking, you know, even 510 15 years down the line, we want to be able to sell? You know, should we be branding it? Or should we be rebranding as a generic name? Will that make it more marketable?

Speaker 7
I think the short answer is typically, yes. Right? You know, if you have a not generic name, but if you are really, you know, have picked a name that you build, you know, a brand around, right? And that’s why, you know, why do you buy a franchise versus starting your own, right? You’re buying that, you know, you’re buying that brand Jabara in a marketing, you know, somebody’s driving down the highway, and they see, you know, that fast food chain, you know, it, right, you can recognize that everything else versus, you know, mom and pops in a diner or anything else. But you know, I do think as much as you know, there’s an advantage to it. And there’s an ease of transition, like, when we talk about value of a law firm, we divided up into personal value that the attorney owner may have the firm value, right. And then we add to that the transition plan that is going to be needed by the seller to really take that personal value and transfer it over. And take those three components. And hopefully that equates to what your transferable value to a buyer would be, right? You take what the firm, you know, the website, the phone numbers, the systems, the train team, and you take your personal worth, which is you know, who you know, the brand, everything else that tied to you, if you move more of that to the firm, it becomes easier to transfer, less transition planning, just like building systems, and in our opinion would be, you know, better because you’re moving that from your head, over to the firm systems are anything else. And so, you know, I probably a little biased, but I would say if you can pick something that really works as a generic not tied to your name brand for your firm, then it’s going to help you, you know, later if you decide to exit transition anything else, you know, the old way of, you know, having firm names, which were, you know, eight partners long, right. And now all firms have gone to, you know, the big ones have all gone to shorten those to just two, right? And that used to be so and so and so, right? So they’ve tried to even take and say we need a brand, right? Like, we need a brand that isn’t tied to names. Plus, every time the partner would, you know, retire or die or change or leave, they’d have to change the firm name. So I definitely think there’s advantage now that said is there is some tremendous brands that had been built around personal names. And those personal names are nowhere involved in the daily legal delivery of services. So I wouldn’t, you know, again, persuade anybody to change that, especially if they have already built, you know, a brand or value around that. They just, you know, wouldn’t want to flip the switch and go the other way. But if you’re starting, I would say definitely look at something that’s not tied to you. And it

John Fisher
can flip both ways, right, Jay? Because in one sense, you could say it’s easier to sell it this way. But if it’s generic, it may be harder to brand it versus, you know, I was just talking to marketing client who had like a totally generic name. I’m like, I can’t imagine anybody ever stroking a check to that name. Meaning it was versus you know, if you Who are you getting, I know Ruane Ruane is going to take care of my matter. And that there’s that balance. But I have a little bit of a rant, which is I went through this process didn’t know that you even existed, and over the number of years said hey, we’re going to grow through acquisition. Both use the consultant did it myself. And the thing that I found it almost felt like the grind So what about Groucho Marx Woody Allen concept of who? Why would you want to be a member of a club to have you as a member was that the people that I really wanted to acquire? If they weren’t ready, the numbers were so crazy that you were like, that’s just not right. And the ones that were ready had run things into the ground so far, that, you know, there wasn’t as much left, they had sort of, you know, I’ll sell eventually, by the time they were ready to sell there were the systems were shot, the people were deadweight. And at best, you might get some cases, but you’d have all these transaction costs of sending that out. What are your thoughts on? Where do you find that sweet spot? Because it’s like, I got to tell you, it wasn’t intuitive going to market, there were plenty of people, I’ll give you this the story of a guy who, you know, had bought out his partner at a $500,000 valuation five years before, run the firm down. And when he finally said, Yeah, I’d be willing to sell it to you, I need a couple million in cash and, you know, a tail going into the future. And I’m like, it just stopped the insanity. So again, there’s a reason that you exist, and that there’s, you know, it would save somebody the time of all of these reverse tire kickers, where they were just like waiting to be able to give you a dream number that they would love to get. How do you? Where do you find that sweet spot?

Speaker 7
Yeah, I mean, we talked about one of our biggest needs is, you know, educating our sellers. But you know, having reasonable sellers, right, just like any other business, but especially, you know, what I learned about migrating from law into, you know, brokerage through the law practice exchanges, we have, I mean, you know, owners of law firms contact us every day interested in selling, then it becomes ours to basically filter through and say, okay, but can we really meet their expectations? Right? Do they understand what the market, you know, platform provides? And can we do that, because, you know, we work on a success fee. So if we can’t do that, right, we don’t want to work with the, you know, one that you had that just bought out their partner for 500 now wants, you know, a couple million dollars, right. Our goal is to make, you know, bring on sellers that we couldn’t really find buyers for have reasonable sellers, have reasonable moderators, the biggest thing that we’ve seen Seth is a challenge for especially small law firms is, you know, lawyers that own and run the practices that are looking at exit, a lot of times they look at their total comp that they are receiving, and they forget that so much of that that they are doing is tied to legal work, basically salary for the work that they’re doing, right,

John Fisher
the person, they’d have to leave someone’s gonna replace that

Speaker 7
work. Absolutely. Right. And so, you know, that’s just part of where I’d say, especially recently has been just a true education point for us of saying, Look, yes, you may have that million dollar revenue firm, and you may make $500,000. But you’re a 30 plus year attorney and expert in your field, what would you pay somebody to do all the legal work that you do, right? And then immediately, of course, it’s, you know, 200 300,000? Well, if that’s the true replacement cost, then your owner benefits from the firm is only 200,000. Right? And so now we’re talking about a multiple of, you know, 200,000 times two or three, right? Because that’s what you if, if you and your firm are looking at acquisition, you can play with those discretionary cash flow numbers, right after you’ve paid to have it replaced. And you can pay out of that. So you can make a payment of purchase price out of that you can invest in the firm and transition costs. But that is that is a challenge, right? Unreasonable sellers, you know, to make the deals work. And again, I think it’s because most attorneys look at the total that they bring out of the firm, they don’t really separate it out. And my best analogy is, you know, if a law firm is a factory, and you are one of those awesome machines in the factory, if you’re going to retire, we’re going to move you out, that factory is going to lose production, unless it replaces with another machine. Right. And it may take two machines, right? It may take two associate attorneys, you know, with that firm versus one expert that you’ve done everything right, everything else. But those are costs that buyers got to consume. Right. So we got to move those off the table. That is a that is a cost of doing business. It’s not a profit, right? It’s not a profit piece. So once we get that we’re pretty successful on making deals work and work successfully. I remember the

John Fisher
transaction costs just bringing the cases in so let’s say Jay wanted to acquire a firm and something that I’ve seen is that the value of the current cases you know, while there’s a definitely a tail if it’s a firm that’s coming in the amount of time j is going to need to take to take each file which may or may not be in a case management system may or may not be in his case management system clearly not in J’s is you know that How do you bake that in? Because that’s the No, I see people that like put the current value of the case almost at zero because of the amount of effort that it’s going to take to bring them into your current system.

Speaker 7
Yeah, I think, you know, one of the approaches that I didn’t mention that we take as usually an asset approach, right, like, if you’re looking at current case inventory, whether it’s, excuse me, whether it’s, you know, criminal defense, whether it’s personal injury workers comp, you know, those that have potential buildup, you know, there’s good to that, bring it in the cases, but there is cost to that, right, there’s cost to complete those cases. But there’s also like bringing them over on your system, usually, we like to figure in and work with our buyers on what is the transition cost, the transaction cost to onboard this firm and carry it over? Right. And if you have a firm, that’s all paper files, right, and it’s gonna take you and your team, you know, 50,000 $100,000, then we just, we need to discuss that and make that part of the deal that that would be a reduction of price, because that’s what it takes to move a historical, you know, very heavy personal value firm, to a, you know, process driven, you know, more modern firm. So, yeah, definitely, we see that we see a lot of hard files, too, you know, we see sellers that say, look, I’ve got offsite storage, I need a buyer to pay for that, because I’ve got 20 years of files. And I said, you know, our basic education point is, buyers don’t want to pay for file storage, right? They’ll pay for the contacts. But you know, you may be able to work with a buyer on a cost to have things scanned, entered into a CRM system, but they’re not going to take over your three year lease on a on a file storage so that they can just have, you know, mountains of paper as well.

Jay Ruane
So I have a question for you. And it’s starting to happen at West, you know, Arizona, Utah, and outside money. You know, law is probably one of the last industries where there is no outside money in the United States really, up until the last couple of months. But I you know, as things stand, it seems to go west to east, and where do you see this outside money as playing a role in the acquisition of law firms? Where do you see the future?

Speaker 7
Yeah, I mean, again, I can tell you that when I started the law practice exchange in 2013, there was a belief that it would happen. I don’t think that I thought it would happen even this quick. Right, really, but yeah, not in 2013 to, you know, kind of, you know, less than a decade later, see, you know, equity, you know, and kind of state laws change. And it’s not just Utah and Arizona, but it’s the, you know, 15 other states that are, you know, considering this move, right, and either publicly or super secret committee, right, you know, that there is, you know, those discussions, and once the dominoes fall, unless there’s a catastrophic push back in Utah or Arizona, you know, states will change, and we’ll go to what is, you know, a lot of foreign models, everything else, as well that you could have private money, nonprofessional money into law firms. And, you know, I tell people, a lot of things just, you know, part of the reason of creating the law practice exchange, I don’t know that I have novel ideas, but I like to be a student and of other industries or professions. And if you look at how, you know, outside non licensed, non professional money has changed, you know, dentistry, you know, medical, right, you know, even CPA firms can be, you know, owned by non licensees, those different things. It’s been a balance, right, certain firms are still going to be owned 100% by the professional, and others are going to change over. Right. I think overall, it can be a good thing for the profession, right? Some people may not want to hear that. But I do think that there can be money that goes to providing better services to clients across the board, whether those are underserved markets or their current serve markets, you can help create a better platform where lawyers that have to self fund or borrow just don’t have the capital to implement a lot of the ideas and things that they would like to do to provide that better service. Right. But you get an you know, an equity investor that can cough up 5 million bucks. And that’s not something the lawyer has to do. You can do a lot with that in a law firm, right? To provide great service, you know, not just make money for yourself, but you know, help others. The other thing I see too is I’m sure if you guys again, focused on systems focused on people within those systems. You know, non attorneys are becoming so important in certain firms, that having them have a profit incentive, or equity incentive, you know, in those opportunities, I think is is needed because As I do think the non attorney managers, the non attorney marketing roles are becoming so such a key part that this, you know, non sharing of legal revenue, you know, change over will help attract the best, you know, to law firms, right, not just, you know, those that will work for a base salary plus a discretionary bonus. All right. So I see it changing, I can tell you that, you know, Europe, the buying and selling of law firms is pretty much a marketplace that has been around for years. And as is very active, right? Most foreign jurisdictions are more active than the US. So I think from the buying sell inside, it will change right now, if you want to buy a firm, you have to self finance that you have to ask the seller to, you know, seller finance or do terms with them, or you have to go get a bank loan. Right. At a certain point. Is that happening?

John Fisher
Are you seeing are you seeing bank loans for law firms?

Speaker 7
Yeah, we’ve got, we’ve got great lenders, right? Similar to lenders, again, that’ll lend for other Goodwill’s structured companies like dentists, doctors, CPAs, you know, we usually don’t have any issue finding financing for you know, deals that again, good firms, the right terms, you know, reasonability otherwise, but again, that’s the buyer or the firm taking on that risk, right? Anytime you could take somebody in, and it’d be an equity partner, and they’re going to essentially put up that capital, you know, to improve your systems, but then go out and acquire other firms to bring onto your systems. Right. So Jay, you know, you have an equity partner, and then you’re able to go out and acquire, yes, you got a lot of paper files, you got cost to do that. But you don’t have to sell finance that and Bootstrap everything, you know, you’ve got you know, deeper pockets to help you do that, and hire the right team to do that. And overall, you know, if you’re proud of what service model and how your firm does things, then hopefully we’re changing the profession for the better, right? We’re using that outside capital, we’re still the ones directing as lawyers how those services are delivered. But it’s not our pockets necessarily, that we have to always pull into to fund those. It’s, you know, outside and kind of share in that, you know, opportunity.

Jay Ruane
So I got one, let me ask this question. There’s really sort of two ways to sort of sell your law firm, right? One is to go and find somebody who’s not connected to your firm. And the other is to sell to your employees and sort of let them come in is, in your experience, is one more successful than the other? Is, is one easier than the other is one more difficult because the owner who wants to sell than his employees never really let the employee know how much money was out there. And now the employees are like, Well, shit, why do I want to buy your thing? I’ve been doing all the work for 2030 years, like when you get into some interpersonal dynamics, when you sell internally? I’m just curious, where do you find the problems on both sides? The internal sale and the external sale?

Speaker 7
Yeah, absolutely. So when we started, you know, we would separate if somebody came to us and said, I want to sell to my associates or sell to an associate, you know, we would take them down a one path, right? The problem that we ran into is that one path would kind of grind on, right, we’d run into, you know, baggage history, right? They would tell us, Oh, I love, you know, this attorney has worked with me forever. They don’t like to work that hard, right? They don’t stay past five o’clock on a Friday, right? You know, these different things, all of that history and baggage from employer employee would come up during the deal. And then a lot of times, and again, through no fault of the next generation, they don’t want to be a buyer. They don’t want to be an owner, right, they don’t want to have the sole risk, or they don’t want to pay for it, they feel they’ve earned it right to a certain degree, or at least earned a discount. So you know, that’s where we and I always started as I wanted to build the marketplace for buying and selling, right like that’s really the law practice exchanges goal is to be the marketplace where everybody can come to get the resource, but essentially do that. Because, you know, if we can bring outsiders to even that small law firm, one owner, one associate, the associate may be promoted into a junior partner situation, maybe the geographical manager, but this other firm is going to take over the financial risks, the operations, everything else from outside. And timeline is so important to attorneys when they go to sell. Most of them are looking at retirement or exit for the next thing in their life. And when you spend months discussing and negotiating with your associate non Equity Partners, whatever the case is, and that doesn’t lead anywhere, man, you’ve eaten up a lot of your timeline, right. And so what our approach is, you know, with clients now is, if you’re interested in selling, we go through the same process, we value your firm We prepare it for presentation to any buyers in a marketing items, everything else, gather and bundle all that together plus the sale structure on payment terms, whatever else, if you want to present or you want us to present to internal candidates, fine. Those are, you know, one or some of our buyers, but we also are going to mark it, because that allows us to make sure we’re making the most of our timeline. And if things slow down or stalled one, one path, we have the other path already moving, right. And what we found is it is a challenge to sell to internal candidates, right? A lot of them don’t want it or there’s just you know, financial mix, I don’t want to share my profit and loss statements, because they don’t know what I’ve been making. So all of that is kind of just holds you back from really being fully invested. When we bring a law firm or a attorney from the marketplace. You know, I tell everybody, it’s like you meet them. And it’s a first date, everybody’s on best behavior, right? You know, everybody’s nice, everything else, you don’t have those years of, you know, kind of baggage or anything else to do that. So it’s more of an initial culture and an easier sometimes to make a match.

John Fisher
But up to that point is when you’re selling internally, do you have an issue where and Jay, I think sort of alluded to this where there’s the person buying thinks there should be some goodwill that they were buying in as in like the old idea, like you’re working towards partnership, that there should be a discount provided because they put their sweat equity in, and there wouldn’t be a handoff very often there wasn’t a person like yourself involved. So now there’s an additional expense, potentially. But you know, what about that? Is there usually a discount? So as you’re sharing, you’re preparing either way, which I love. Because you could say to somebody, look, the market values at this, do you usually see in the end, some sort of a discount for people who have been there for a period of time?

Speaker 7
Most owners of firms, most sellers want to provide that discount, right? I mean, they’ll go and say, Look, if if this happens, I’m happy to discount it, you know, to this or provide more favorable terms or something of that? And yes, to your points up, most buyers expect it right. If they’ve been there for years, and helped build the value. They’re really a key part. They’re not just, you know, part of the pyramid, so to speak, but they are, you know, more level, they have their own clients that have their own practice mix, than absolutely, they’re gonna come and say, well, great, that’s the value of the firm that you’ve own. But if I left tomorrow, right?

John Fisher
Why leave and what are you selling? Gotcha, right, right. It’s more than that. It’s really more of a succession planning, rather than a sale, you still a sale, but it’s a different calculus than here’s my widget that I’m selling to a third party, and I’m going to get terms for.

Speaker 7
Correct right. Now, again, if they’ve been an associate for a few years, they’re just, you know, great opportunities, but they really don’t have their own book, you know, if they left, then a lot of times, there isn’t a discount, right? You know, you you could be replaced without loss. And so, you know, there would be no discount applied, but usually, it’s just a gratuitous, you know, employer employee, hey, I’m happy to discount the purchase price by five 10%. Because they’d been with me for this long, right? Or because if they left, they would take these originations and clients with them and everything else, right. So we definitely go through that which again, is a reason why if we can find a good strategic marketplace buyer, sometimes you’ll get better, you know, price, but also better payment terms, right? They can use, you know, seller, you know, outside bank financing, so you get more down payment at closing, you know, those different things.

John Fisher
So what are the things I mean, this is I know, we’re starting to go along, but I want to, you know, we talked on some of these terms, but Jay is sitting here, he say, hey, in the next 10 years, I want to sell, what’s the checklist that you want to come up with, in order to prepare yourself so that you would be in the best shape? When you’re ready?

Speaker 7
Yeah, absolutely. Well, I don’t think Jay needs to hear this. But my first recommendation would be to start delegating everything you can, to, you know, people, within your firm your team, or to systems if you don’t have maybe a team maybe or a solo otherwise, or, you know, to the people and systems within so, you know, because your goal is to lessen the need for your knowledge, your expertise, your relationships, the personal value that you have j right, you don’t want that to be such a deciding factor for a buyer. Right. The other part is, you know, again, prove yourself on the financials and the data that supports them. Right. So strong revenues, strong earnings, built on systems, everything else, and the data to track to say look, you know, these are, you know, the leads that we get in from these different marketing sources, these different funnels, you know, this is our conversion rate. You know, this is our intake, this is how we do things. That’s all going to help prepare Right, you know, for that event?

John Fisher
Do you mean profitability? Yeah, when I saw on your site, there was a lot about, you know, what the revenue was at. And sometimes it mentioned how much somebody was taking home, which can be dicey, especially for a smaller firm where the firm is running a ton of stuff through the firm, but is where’s profitability on the list compared to gross revenue?

Speaker 7
Yeah, absolutely. So we use both when we look at, you know, value for our firm profitability, we really use, you know, south as a, I’ll call it a stress test, right, we’ll do our, you know, return on investment, you know, cash flow projection. So if you value a firm at a million dollars, but the earnings on the firm is, you know, 200,000. And just because it runs on, you know, heavy costs, or otherwise, then that deal probably doesn’t work, right, for a million dollars, the price is too high, you know, for that firm, because a buyer, maybe like yourself, won’t see the advantage. And so, you know, we use earnings from a multiple factor for valuation pricing, but we also use it to test, you know, our cash flow projections, you know, going forward, you know, post deal, right post sale type of terms from that aspect. So, you know, again, earnings are the benefits of ownership, basically, the profits that you receive, not necessarily what you pay yourself for the legal work you do.

John Fisher
Gotcha. And then one of the things you mentioned, which brought me back to sort of my my journey through this area with sort of non rational buyers, which I love, which is, if a bank would lend on it, you got to think that the terms are sort of standardized. And my dad, who was not, he was a lawyer, but did deals for non law firms buying and selling small family businesses over the years, I always you came away with just sitting down at the dinner table, that if you didn’t get your money upfront, there was a good chance you weren’t getting the rest of it. And so as like a truism, but it seems like that very often people are talking past each other, just sort of like a lawyer that charges gets a downpayment and knows they’re not getting the rest of it from sort of a client on the edge, that when a deal is structured, right, and that is a win win. That makes sense. If somebody is if it’s a gouge, and you’re waiting for future payments, it will eventually end and litigation of some sort, is that I assume as part of your role is to bring some sort of a marketplace to this, where it’s not just some guy saying what he throwing this multimillion dollar dream out. But saying, This is what it can support it, if it supports it, in theory, and the firm buying is a rational player, they should be able to, you know, monetize that in such a way that payments will be made versus if something is so lopsided. You get in, you dust off these paper files, and all of a sudden, you’re upside down, much less likely, you’re gonna get paid anything beyond the initial upfront payments.

Speaker 7
Yeah, absolutely. Our goal in building the marketplace is to do deals that work for you know, the seller, but also going forward for the buyers. I mean, we want our buyers to be not just one time buyers, but multiple, right. You know, if you’re gonna buy a firm, we want you to come back and through our model through our help, you know, do another one. And so again, that goes back to seller education, making sure that we can do that, on payment terms, we always talk about, you know, a mutual sharing of risk, the market definitely operates with most firms based on performance structure, or what a lot of people call earnout. Right? You know, it’s, Hey, you’ll get a percentage of revenues over time CPA firms operate very similar, right, you know, earnout, structure everything else, because it goes back to, you know, do those relationships, will those clients stay, right? Especially if you’ve got more personal value tied to you, and you’re going to help introduce at Rotary Club at the Chamber of Commerce, right, and go through that effort thing. So earnouts there, what we try to get most deals to is a sharing of risk model. If a buyer is willing to go and use cash they have or use, you know, outside financing for a downpayment, you know, even if it’s a 5050 deal, if you go and you value a firm at a million dollars, and you’re willing, as a buyer to go out and, you know, contribute cash and borrow half million, hopefully, right? You’ve thought through it, you’re not going to lose a half million dollars of value. Right? You know, from that aspect. The other half million may be variable seller financing, or an urn out component where the seller now is very invested in making sure that that post sale transition plan you know, is successful, right takes you to rotary takes you to the Chamber of Commerce has, you know, lunch when we were having lunch as you know, normal human beings and everything else. But those different things, and we’re okay with that. Right? As part of it, and we talk a lot in due diligence on our deals about creating that transition plan, so that a seller and a buyer are comfortable prior to closing on how that’s going to work, you know, because we want our sellers to be very comfortable that look, I’m not just selling this for 500,000 when it’s really worth a million and I’ll never see that They want to feel very good that hey, look, I know this firm has built good operations has good people is going to be great stewards for my clients, my referral sources, there’s a great plan to do that. And it is going to be successful. And then as I tell everybody, again, we’re success. Fee motivated is the way we get our fees. And we typically earn with our clients. So we’re very motivated on this side as well to make sure you’re choosing the right buyer, that it is going to be successful. Right. So anyway, but yes, we can work with terms and structure. But we want to make the deals work for everybody.

Jay Ruane
I have a I have a quick question. It may not be that quick, wouldn’t when I ask it. Have you seen practice groups splinter off? And so just a practice group of affirm? Or is it basically an all or nothing situation?

Speaker 7
So we’ve definitely seen practice groups Different. Different states vary, and can you sell just one practice area versus, you know, the whole firm itself, like I think California revised their, you know, their version of 1.17, to basically say, it’s an all or nothing, right? You can’t just sell it now that said is, you know, practice groups are bought and sold all the time, to the outside world, you see it, as you know, this, this attorney has left to go join this firm, right. And they’re joining love counsel, whatever else, you know, behind the scenes, whether we’re part of that or not, there’s been some kind of financial transaction, which says, come join us, we’ll pay you right this for, you know, legal work, but we’ll also pay you over time for the clients and the goodwill value that you bring. But to that, if you’re a firm that’s doing multiple, and you just want to get rid of an area, you can do it, it’s a little bit more challenging, depending on state ethical rules. And typically, you would kind of dance into a co Counsel of counsel, and then you know, full transfer, so we can work the financials to make it work. But it just takes maybe a kind of a incremental steps to get it over there.

Jay Ruane
You know, it’s interesting to me, we talked about building systems, we talked about doing, you know, every lawyer that I talked to, you know, just wants it to work, you know, they want to sort of have this magic wand, where they can hire staff that can do things, and they don’t necessarily want to do the work to build systems. And it sounds like a lot of lawyers want to sell their firm, but they don’t necessarily want to do the work that it takes you to be able to just sell the firm type of thing. So I think that one of the takeaways I got from this was, you got to put in the work early on in the process to make it easier on the back end, it’s fair to say,

Speaker 7
Absolutely, I mean, even when we start our process, you know, our our attorneys who say I want to sell, I’m ready, let’s go, what do you need? And we say, Okay, we need in three, five years of tax returns when a p&l is we need, you know, employee cheese, do you really need all this stuff? Right? I mean, it’s the, you know, this is gonna take some time, you know, those different things? Yes. Right. You know, we’ll make that process more efficient. But to your point, Jay, yeah, put in the time and efforts, right. If you are looking to sell your firm and 510 years, then start putting in the steps and efforts now through, you know, help through your guy’s community. And otherwise, you know, to implement that because your firm will be hopefully a higher value, easier to sell, find a more attractive, good fit buyer, and kind of move through those things. But it does take the effort and the time commitment to do so what what

Jay Ruane
what, what are we talking about? timewise? From the decision of yes, I want to sell my law firm, you know, is it normally 18 months, 24 months? Nine months? Like, what’s a jet? I mean, I know you can’t get specific, but what should somebody be budgeting in their head for? You know, I decided today that I’m going to list something with a law practice exchange, what should I be looking for, in this time commitment, before I can say, I’m out?

Speaker 7
Now, we tell everybody, if you’re looking at, you know, exiting the profession, or getting to a point where you really are not practicing law, get to us at least three to five years ahead of that point, right. So if like retirement, on bail the post, you’re right, it includes that window. So I’m sitting here today saying, you know, in five years, I want to be done practicing law, then that’s the time to really start you know, planning for sale and exit. And a walk through that if you come to us today and sign up with us, you know, it’ll take us you know, 3060 90 days because again, we got to get financials, everything else to get you into market to prepare pricing structure, marketing materials strategy to do that. And then, you know, we we sign up for basically a 12 month kind of window, because it takes a while, right? I mean, if you’re an attorney located in this certain community, of a certain practice area, you know, our biggest thing Our geographic location and practice area match, right? We can have somebody that says, Oh, I’m looking in this geographic area, but not this practice, you know, area, right. And so we keep moving on. So as this market builds, you know, our biggest asset, probably, you know, aside from our process, and knowledge is our database, right? So we continue to build those buyers who are interested in everything else to make those match. But that could take a year, right to find the right buyer to negotiate that deal. Hopefully close on that deal could take longer could take shorter. But now we’re, you know, a year into this, and then we tell everybody on the seller side plan on at least six to 18 months of post sale transition, right, which means, hey, you’ve sold your firm, maybe you sit down as a partner by name, or you’ve joined and kind of, you know, as part of the sale, you’re of counsel now, with a firm, you know, that first six months, 12 months, you may be working pretty hard to transition stuff over. And then after that point, yeah, you’re needed for rotary club, you’re needed for this key client or this key referral source lunch, right. So you’re very much part time, but you’re still working, you’re still doing that, right. And openly, most of the problem that we see, you know, of the generation of sellers, you know, of the boomers otherwise is they don’t really want to stop practicing law. They just know they need to have a plan for ownership transition. And to them, we essentially say selling your firm does not mean you have to stop practicing law. Right? So I would imagine that if you’ve looked and talked to some of those potential sellers, if they said, Well, I’ll sell the firm at good reasonable terms. And then I’d like to stay on and be an attorney with your firm, right, going forward under a compensation model. Most of the time, he’d say, great, you know, wonderful, picks up a good personal brand, has somebody to do some of that legal work. But they then for the rest,

John Fisher
you found the rational sellers, I have not, that’s why you’re, you’re you were going to put your information, your contact information in the comments. My final question, as we as we get out of here is what are the economics? What should somebody expect? You know, how do you guys work? Is there is there an upfront fee for putting the package together? Is it’s great to hear that you do your percentages along the way? Is it a set amount? Or is depend on the deal? How do you work?

Speaker 7
Yeah, typically, we just charge to, you know, what we think fairly small amount, depending on the firm upfront to do the valuation, right, and just the initial market prep, really, we do that? Because we want to go into that and say, here’s the price, here’s what we think we can get for you on terms price, everything else. What do you think? And if the seller says it’s way too low, then that’s where we stop. Right? We’ve been competently

John Fisher
valuation run ballpark. Hi, hello, what’s what’s up? Right? Yeah.

Speaker 7
Depending on ours, you know, on a low side, three to four, right, on a high side, you know, 10, right. And we’re doing these as you know, pricing, market analysis, you know, type of things, depending on the ownership structure, you know, size of the firm. But, you know, typically, they’re not really

John Fisher
counting, did you bring an accounting firm to run the numbers? Or how do you do that all in house,

Speaker 7
we do it all in house. So we have in, in myself, of course, being a CPA, we have other CPAs on staff, to basically build out all our own models, as you can imagine, there’s just not a lot out there about, you know, market pricing of firms, right, and then the payment structures, you know, our data, and then really, you know, on success fee, the typical, the standard is 10% of a success fee, you know, varies of the firm’s larger, it’ll scale down usually from there. But, you know, for our goal is, you know, that 10%, you know, standard brokerage, you know, for business type model. And again, our goal is we are in with you. So if you get 20%, down, and 80% is paid over time, but you really liked the buyer, the firm, you feel there’s a great fit, a great stewardship of what you’ve built, then we’ll ride that with you. And we’ll help throughout that process to make sure that you guys have talked about what’s the transition plan, right is there you know, set dates for how you’re going to introduce to key clients referral sources, make the right announcements, bring resources to that.

John Fisher
Well, thank you so much, Tom, this is this has been illuminating.

Jay Ruane
Yeah, it really has, you know, this is something that we talk about a lot. But I don’t think people really know the steps that are necessary. And getting to talk to somebody like you is really helpful to sort of frame it out in our minds. Now, I want to see what I can do to get out of there.

John Fisher
JJ is already like delegated 20 different things. And he’s he’ll have the firm on your website within a week.

Jay Ruane
Yeah, absolutely. All right.

Speaker 7
Well, I appreciate it, guys. Anything during the future? Let me know.

Jay Ruane
Alright. Thanks so much. Thank you so much, Tom. And folks, we’ll be right back with more maximum growth live. All right.

John Fisher
Thanks, Tom. I got I got a joke.

Becca Eberhart
Hey, it’s Becca here. I’m sure you’ve heard And then Tyson mentioned the guild on the podcast. And in the Facebook group, the guild is this perfect mix of a community group coaching and a mastermind. Guild members get so many benefits, including weekly live events and discounts to all maximum lawyer events, head over to maximum lawyer.com forward slash the guild to check out all the benefits and watch a few testimonials from current members. So head to maximum lawyer.com and click on the guild page to join us. Now, let’s get back to the episode.

Jay Ruane
Well, I’ll say I mean this, this gave me a lot to think about, especially that last part about the timeline. If I want to exit in five years, and be totally out, I need to start thinking now. And as I think, you know, when do I want to get out that at least gives me a roadmap to where I think I want to be and, and knowing someone like Tom is out there, I think is going to be helpful, because I have now a resource I can go to start putting things in place. What were your takeaways?

John Fisher
No look at a lot of it’s sort of it is common sense. We, you know, I think it is what we’ve spent a lot of time on this podcast talking about which is running your law firm like a business and the more you run it like a business the more sellable it is. Now, it’s you know, this is somebody who sold several dozen, you know, firms, this is, it is still not an easy thing to do. But But what I but I also see having gone through the process without a Tom, but with somebody else with a person who is trying to make these introductions, is that there are so many lawyers that sort of, they say one thing, and we’re all guilty of this, but they do another you know how many times you said I’m gonna get out of going to court more often, you know, and then it doesn’t happen for whatever reason, some parts because you like it some because you think it’s business development, some because the guy you need going there as instruct whatever it is, it is easier said than done to set yourself up for it. And I think that that is that that is the key. You know, what Jay Ruane can do without Jay Wayne is what sellable. And until you get to the point, the systems are great, everything else is great. But if you’re still the if you’re indispensable, that it’s not a business to job, I was talking David Breton about this when he’s like, you know, I’m gonna just take care of this issue. I’m like, stop it, you know, I had to stop myself doing it. Now. I, the president of blue shark is like, No, unless it can be done by excellent staff who knows what they’re doing, then you’ve just bought yourself a job that is not a business. And I’m always sort of, and I think that it’s not different here, it’s never going to be, it’s always better if you do it yourself. But until you get to the point, you have the ability to put the systems in place. But until you make the hires and put talent in place, it doesn’t really allow you that ability to make the exit. And we’d be curious, I’d love to follow up with Tom, of the successful sales. You know, one thing is obviously expectations, we heard that loud and clear today, right? If you think you’re getting seven times earnings, that’s not happening in the law firm, put that aside, but of the people that did that were sellable. How many of them had made themselves non essential, because without it, you know, it’s one thing if you’re doing the work, because then they can put another practitioner to do the work. But the people that have everything tangled through them as Grand Central Station, probably less likely to have sold in the people that did do and follow the things we talked about today, probably much more. So.

Jay Ruane
You know. And that that begs an interesting question, too, is what is the value of somebody who is somewhat of a visionary, because a person who buys a practice, you know, that practice may be humming along, but it may not necessarily grow? You know, I think one of the things that I bring to the table is, I constantly have ideas. I’m trying something now that i It’s so fluid, I mean, we’re talking six months before I think I’ll be able to even share information because I want to run a B tests and, and do a bunch of things. But you know, it’s I just had a crazy idea one night.

John Fisher
But you’re still you’re still in the position, you’re not selling anything. So the question is, when Jay Ruane is tired, or we may get older, seems like most people seem to get older and more tired. When you get to the point where it’s not there. The question is, can you hand it off and that’s why when I look at like the dental practice, you know, there’s a methodology you run your piece, but you’re on your feet all day, you know, at x age and the over under maybe 65 at some number, maybe 62 You’re going to sell it you’re going to get a couple years of revenue from it you bank money before that’s how it’s done. And that you you sort of like it’s it’s tried and true lawyers have just basically run themselves to the ground and same reason we have the different you know, mental health issues and alcoholism and all these things. There isn’t a there’s not a schedule to get off the treadmill. The people that go into this go into it because they’re so focused and determined. It’s sometimes I think hard to jump off that that treadmill and get yourself to the point where like, Okay, what is next? When do I had to Boca?

Jay Ruane
You know, it’s funny, I was at a dinner Last week for a lawyer turning 60. And I was the youngest lawyer in the room, obviously, I’m only 48. And, and there were in the room with me 12 lawyers over 75, who still practice and have no plans on walking away from it. And

John Fisher
85 still practicing in New York Council. But that’s why the big firms with succession for the Mega firms, they have mandatory retirement, you know, and they’ll for a mega Rainmaker, they may get like a five year extension, but like, or even a two year extension, but generally, it’s up and out. And they know the worst gotta go somewhere, they assume more often than not, it’ll stay at their firm, but they don’t want the people to stay there forever. That there’s for a bunch of reasons. But you know, the, the question for us is, is it a lead? Is this a larger discussion for future episode? Is the law firm a lifestyle? You know, mechanism of earning for you? Or are you building something to unload? Most people treat it as a lifestyle, most of the people in our audience who have their own shops, they run a lot of personal stuff through their firm they do they, they make it into something that’s part of their being in their DNA. And so what we will be talking about today is a whole different mindset. And usually what happens is, and my guess is, and he alluded to this, a lot of people come on, it’s too late.

Jay Ruane
Yeah, yeah. You know, we acquire, it was interesting about the whole lifestyle thing, because I didn’t get to bring it up in the interview. But I remember talking to Lee Rosen A while back, who had been traveling for years, while his firm was sort of just functioning without him. And when he sold it, he said, You know, I didn’t really budgeting for the fact that I wouldn’t have the frequent flyer miles anymore. That, you know, because he was living in hotels, and getting upgrades and all those things. And that disappeared when he didn’t have a law firm churning those American Express or chase sapphire miles for him. And that was something that he had never even thought about as part of his lifestyle that was necessary. And so I just thought it was something that that was interesting that, you know, a lot of people that, you know, they’ll run their cell phone, cell phone through the office and their car payments or your company cars. And when you don’t have the firm anymore, you don’t have those as as expenses. So it’s something that you have to think about, you know, if there’s so many variables to getting out, but I don’t I definitely don’t want to be that person who has a heart attack at their desk. You know, and

John Fisher
I’ll tell you, I wouldn’t I don’t wish that upon you. But if I had to give it over under who’s still working after AD, I have a distinct feeling might be Jay ruin. Hell no. Hell no. This is a movie. Money on it back and forth about bagel and lox at the bagel tree.

Jay Ruane
I was gonna say I want a Bitcoin. Let’s buy a Bitcoin now. And if I’m still working at 80 I’ll give you my bitcoin. But I know you said you don’t want to gamble that much. I’ve been with the I did with your Vegas. I was just talking to some friends about how we were at Lagasse stadium for your 50th and I got there at seven o’clock in the morning and stayed there till eight o’clock at night watching football and gambling all day. And you must have come in and out of there like a dozen times because you couldn’t sit still watch the Giants

John Fisher
it was this was the thing about Lagasse which is it’s such a fun spot. But it is like when you’re there with your friends from your entire your entire life shows up in Vegas. It’s everybody wants to go in their own direction. But that was a great trip. 52 this October after MDMP.

Jay Ruane
Wow. Geez, people are looking for trips. So is that it? You’re making the announcement now at the seventh birthday party is in Las Vegas. We can’t go back to the gosee stadium. COVID Knocked it out. It’s gone forever, which is a shame, which is a shame. I’m sure they will. Okay, folks. So we’ve gotten long. We’ve gotten really long this week. But I think you got something good out of it. Of course, you can always catch us every week, every Thursday live here at 3pm Eastern 12pm Pacific on our Facebook page, as well as all the other Facebook groups that we’re syndicated to, if you don’t want to watch us live, if you want to take us on the go. Our show is always syndicated through the maximum lawyer podcast. Or you can download maximum growth live wherever you get your podcasts, if you want to get other information about the duplicate content issue we talked about at the top of the show sets on his blue shark page. And on his own pages, has the SEO insider where he really interviews and talks all about topics just like that with some of the movers and shakers in SEO. And it’s amazing to me, you know somebody who’s sort of bounced around the fringes of that industry over the last 20 years to see the names of people that you’re getting on that show. I mean, we’re talking people who you know, I followed on Twitter, I’ve seen speak at seminars and you’ve got these Conversations are just phenomenal from from just a knowledge base. And there’s really no agenda there, which is phenomenal. So I highly recommend that you check it out. Of course, folks, be sure to sign up for maximum law con. That’s coming up this October. I know Seth, you’ll be presenting, I know I’m going to be presenting, that’s going to be a phenomenal show. And of course, if you want to talk more about the role of systems in your practice, be sure to join our Systemising your law firm for growth Facebook group, we’re happy to have you every week I post different systems this week, and this month, we’re doing a lot of stuff about how to manage employee. So that’s it all for you folks today. A lot of good stuff here. Please make sure you watch this again, you know, I’m gonna go back like I do most weeks and, and take an audit of everything that I need to work on. But there’s some great stuff set any parting words for everybody?

John Fisher
Have a great week. Great weekend, and we’ll see you next week.

Jay Ruane
Awesome, folks. Thank you so much. This has been another edition of maximum growth live with Seth price and Jay Ruane. We will see you next Thursday here on another edition of maximum growth live. Bye for now.

Speaker 1
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