This week on Maximum Mom, your host Elise Buie is joined by Victoria Collier.
Victoria Collier, Founder and CEO of Quid Pro Quo: Victoria is a seasoned entrepreneur with over 20 years of experience in the legal industry. In addition to building and selling her own 7-figure law firm, she has been coaching lawyers since 2008 on how to add value to their law firms.
Take a listen!
- 08:15 Victoria Collier discusses how having children has influenced her entrepreneurial journey and the motivation it provides to show her children they can pursue their dreams
- 11:50 Introduction to Victoria Collier's business, Quid Pro Quo, which assists law firm owners in selling or buying law firms, focusing on finding a perfect match between buyers and sellers
- 18:51 The importance of being true to yourself and finding fulfillment in your work and personal life
- 19:56 The dangers of pursuing growth without considering personal values and alignment with clients
- 24:12 The importance of preserving the culture and legacy of a law firm when buying or selling, and the need for realistic expectations and a successful transition process
- 29:11 Discussion on the transition timeline when buying or selling a law firm, including the importance of respecting the seller's decisions and allowing them to stay as long as they want
- 30:50 Exploring the importance of going beyond surface-level conversations and understanding the fears and concerns that drive people's decisions
- 34:31 Steps involved in working with the speaker to evaluate and position a law firm for sale, including assessing the current state of the firm, determining the desired outcome, conducting a valuation, and creating a marketing package.
- 37:44 Discusses the rules of thumb for valuing law firms based on the services provided and the multiple of earnings before taxes and depreciation and amortization (EBITDA).
- 38:45 Explains the concept of sellers discretionary earnings and how it involves recasting personal expenses back into the net income of the law firm.
- 42:18 Emphasizes the significance of financial forecasting for law firms, including the ability to analyze trends, make strategic decisions, and understand the impact on the numbers.
📹 Watch the interview here.
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Transcripts: Avoiding Common Mistakes When Buying or Selling Law Firms with Victoria Collier
Speaker 1 (00:00:01) - Welcome to Maximum Mom with Elise Buey, where you'll hear from women who are navigating the same messy journey as you lawyering, entrepreneurship and mothering. What a trifecta. We're here to share tips, resources, wins, losses and encouragement for moms who are raising a family while building a law firm so you feel less alone in your journey toward a fulfilling career and being the best mom you can be.
Speaker 2 (00:00:29) - Welcome to the Maximum Mom podcast. And today I am so excited to have my friend and colleague Victoria Collier. Thanks, Victoria, for joining me today. Thanks, Elise. It's always a pleasure. Yeah, well, I'm so excited to talk to you. I feel like I have so many things I need to ask you about. I mean, there are just burning questions. I think that many of us would like to know the answer to. So I have just appointed myself as the person who's going to ask them all. Well, now you've set the bar up so.
Speaker 3 (00:01:01) - High, I'm not sure I can read that.
Speaker 2 (00:01:07) - Okay. First, I always like to just get over that. Tell us what your family looks like. You know, obviously, we're the maximum Mom podcast, so we talk to mostly moms. Of course, I deviate some, but so tell me, tell me what makes up your family? What do you all look like at home?
Speaker 3 (00:01:24) - Yeah. So at home, my parents sorry, my children. We don't need to go all the way back to my parents. But my children have two moms, so one of them was a prosecutor for 15 years before we had our children. And then she has been a stay at home mom since then and does part time work doing independent college counseling. And I, on the other hand, am a full time entrepreneur, juggling multiple businesses. And then we've got the the children that are 13 years old in eighth grade, a boy and a girl. Love and life at the moment. Yes.
Speaker 2 (00:02:02) - You are like hardcore in the thick of mommy Big. Big.
Speaker 2 (00:02:08) - Yes.
Speaker 3 (00:02:08) - Yes.
Speaker 2 (00:02:10) - Yeah, Well, you first You have to tell those of us. Some people might not know what you and your daughter did this summer. So, I mean, just give us a brief snippet of the adventure you all did. That involved flights, cars, animals.
Speaker 3 (00:02:25) - Right. So we so we live in Atlanta and we have a three and a half acre farm with goats and chickens. And it just so happens that the best goat ever is in the state of Oregon. So we flew first class out to Oregon and then rented a vehicle so that we could pick up. It was two goats, actually two goats from a farm out there. And then we traveled back in the car having to camp on the side of the road because you can't, you know, have goats and hotel. And so part of the adventure was that one place where we stopped to camp and, you know, not knowing how far we could drive and how the trip was going to go, we made no advance reservations anywhere.
Speaker 3 (00:03:11) - It's just kind of like, Hey, let's just stop somewhere. Well, one night there was tornadoes and and so we pitch a tent at this site that we find right at like, dusk. And we're, you know, pitching the tent and then the the park wardens or whatever you want to call them, come driving through and they see this goat and they're talking to my daughter and I'm like, Don't be talking to my daughter. And they're like, Nice goat. You can't have livestock at a national park in us. Like it's dark and there's a tornado coming and they're like, Just hide the goat. And so we did. So anyway, we saw Mount Rushmore. We went to Yellowstone, and it was I drove 100 miles an hour. It was an amazing trip.
Speaker 2 (00:03:58) - Oh, my gosh. It was amazing. And I was so thrilled to be able to see you as you embarked on this journey just for a moment and to buy some of the goat soap that your daughter is making Now, I'm able to share that with people who come to my home for retreat.
Speaker 2 (00:04:12) - So it's kind of exciting because then they get to know and learn about your goat adventure, which I just I mean, you're like a mom after my own heart. I was that mom that was like, okay, we're going to go to camp now. And at the time we lived in Minnesota and camp was in Tennessee, and my kids were like, okay, do we have a map? I'm like, No, we're following the signs itself. I'm like, It is good. Like, we would just get on I-35 and I'm like, We'll just look for signs that mention Southern states, and that's where we're going. And we will get to Tennessee and it'll be all fine.
Speaker 3 (00:04:50) - Well, the amazing thing is being able to see friends, you know, while you're out of town and make those special trips and all that kind of stuff. And my daughter. So appreciate it and I appreciate it. You coming and making time to come see us and everything. So I love I love being able to have my own business, being able to take off time.
Speaker 3 (00:05:08) - I want to and go see the people I want to that I've worked hard with in the business world. Totally. Yeah.
Speaker 2 (00:05:15) - Well, and I just think it's amazing to to have your daughter come along and do something like that and to also listen to your daughter. I mean, sit there and talk to us about how she found the goats and how she, you know, figured this out. I mean, talk about a little entrepreneur in the making. I mean, like you just need the driver's license. She's got the rest all planned out. And which, again, reminds me so much of my oldest daughter, who I mean, I was just like, okay, you just do your life. Let me know when I'm supposed to be involved. Yeah, it's amazing.
Speaker 3 (00:05:52) - I'll just share this real quick. Is that, yes, she is a little entrepreneur, but because I am one, she'll tell you that she's not going to be one. Yes.
Speaker 2 (00:05:59) - So absolutely. Of course not. She's probably looking for like a steady job, steady pay, like a more steady thing.
Speaker 2 (00:06:08) - Yeah. I mean, we kind of joke in our family. I mean, we don't know if being an entrepreneur was a traumatic experience for the children or or a positive experience. I mean, you know, but that's just, I think, real life, too, you know, And I it's interesting. I mean, talking to you, you're a great person. I saw something recently on social media and somebody was talking about how, you know, they had this practice they'd been involved in. And I don't remember all the details, nor do I mean to like be specific and share the details. But, you know, they had had like a job, a W2 job for years and years, and they're like, Oh, I want to now go out and start my own firm so I can have flexibility and this and that. And it was like, Oh my. Like.
Speaker 3 (00:06:52) - What do we show have you been watching?
Speaker 2 (00:06:55) - I literally was like, I don't begin to know where to start to respond to this person.
Speaker 2 (00:07:01) - I was like, Well, if your flexibility includes 100 hour work weeks, you know, absolute. Stress over cash flow, like the actual learning that you have to do. You know, throw in 10,000 books you need to read because they didn't mention any of this in law school. If that is flexibility, girl, you go for it. You got this.
Speaker 3 (00:07:23) - That's right.
Speaker 2 (00:07:24) - I mean, it is a process of real process. Well, I really I mean, one thing I do want to talk to you about is and I think that I've heard you talk about this a lot of times, I think people think about entrepreneurship, you know, when they have young children because of the flexibility and stuff. And and I do think there is some real truth to the flexibility of, you know, being able to guide your life like, you know, what are you going to do? And are you going to show up for a school event or whatever? I mean, but I found my children's presence very much drove me in what I was doing because, like, I mean, I needed to pay some bills, like kids were looking at tuition in college and all the things.
Speaker 2 (00:08:10) - I mean, what about you? How has having your children impacted your entrepreneurial journey?
Speaker 3 (00:08:15) - Somewhat. Just like what you're saying is that, you know, you hear a lot of people say, I can't do that because I have kids. I do it because I have kids and it motivates me. And as you know, my entrepreneur journey hasn't been one business that has just gone forward. It's been multiple businesses in different industries. And I think more than anything, as I look through it, especially as they become teenagers and they're starting to think about who they are becoming, the biggest impact, I'd have to say, is that. Even more now is I don't want to hold back because I want to show them that they can do anything. They can't do everything. That's where, you know, teams and delegation come in. But but they can do anything and they don't have to stick with one thing they can change to. We are more than one job. We are more than one skill set. And I would have to say that that's been the biggest impact.
Speaker 3 (00:09:15) - Knowing that I have two little ones looking at everything I do every day.
Speaker 2 (00:09:19) - Oh, I mean, amen to that. It is I find it has been wild to watch how much your children do watch you good, bad and ugly. You know, and obviously and I'm know you, too, like me. I mean, I'm making mistakes over here all the time. You know what I mean? Like on the Daily. I mean, on the hourly, you know, I'm flinging off some mistake something and they are watching all the things. And it's interesting because when mine, when I got to that empty nester syndrome or period, I literally thought, oh, I'm on the back end of all this. Little did I realize these young adult people are watching like a hawk because now they're really like, okay, you know, what am I going to do with my life? What is. So any thought that, you know, once they go off to school, you can like, you know, kick your heels up and they're not watching? Let me assure you, that ain't the case.
Speaker 3 (00:10:20) - There's Well, just like you're still watching them like a hawk, like mothers do. Yeah. They're, you know, which is good. You know, it should be that way.
Speaker 2 (00:10:30) - Yeah, it is. It's an interesting journey, though. And I have found actually said to my husband the other day that I think owning a business has been the biggest impetus for personal development by far of anything I've ever done. And that alone is worth the entrepreneurial journey.
Speaker 3 (00:10:50) - Right. And, you know, I think and that comes down to like you hear the term coaching all the time. And I meet lawyers that have gone ten, 20, 30 years without any coaches at all. And I think where they missed the boat often and even just listening to podcasts and things like that is that coaching isn't often about the business, it's about your growth and how you uplevel you so that then the business does what you want it to do with results. And so you're right. I mean, to me it's all personal development.
Speaker 3 (00:11:25) - I just happen to have a business on the side that's coming along and supporting that, Right?
Speaker 2 (00:11:29) - So exactly. I think that's exactly right. Well, let's talk a little bit about your current business that you're running that's related to law firms. I know you are involved in different business adventures now, but you have one business that is related to law firm positioning, law firm sales. How would you how would you describe that overall?
Speaker 3 (00:11:50) - The business is called quid pro quo, which means equal exchange of value. And so the crux of what we do is we help law firm owners sell or buy law firms, and we're looking for a perfect match between buyers and sellers, which does bring equal value to both sides.
Speaker 2 (00:12:07) - Awesome. And what what type of things? I mean, what are you looking at and what is your own experience in this? Because you do bring a unique skill set to this area having sold and I think bought your own.
Speaker 3 (00:12:22) - In the process of. Yes.
Speaker 2 (00:12:24) - So tell us a little bit about that and what your experience brings to the table in this.
Speaker 3 (00:12:30) - So I started my own law firm in 2002, so I built a law firm from scratch right out of law school. I had that for 18 years and then sold it. And before I sold it, I was doing estate planning, which is really exit planning for personal life. And so it wasn't a big change to go to exit planning for business. And so I got credentials in that and then credentials and valuations so that I could determine what the value of a business would be, specifically law firms. And so I sold my business and I had been coaching lawyers for years and years in the Estate planning, Veterans Benefits World. And many of my students, if you will, were older than I was. And so they had heard that I had sold my law firm. They're contacting me to find out how do I do that? Because historically you didn't you just closed your doors. You just handed your open files to your buddy down the street. And so my very first client was an estate planning firm right in my backyard where she had called me to see if I wanted to buy her firm.
Speaker 3 (00:13:35) - And I said, Well, that would be lovely, except I'm under a conflict of interest because I just sold mine. And, you know, there's ethics rules that you have to abide by. And so we were able to sell her firm all cash up front with a short term exit. And that was what started it all. And so now, yes, I am in the process of buying a law firm as well. And even when I owned my own law firm, I went through the process of trying to buy another one. So I had some experience in that. It just didn't complete at that time. And so we do help other law firms by law firms as well. And I would say at least though, that the thread through all of it is that my background has some psychology in it and communication and mediation, and that is all very helpful with. This type of relationships because emotions run high on both sides.
Speaker 2 (00:14:28) - Oh, yeah. Big time. Big time. Well, tell us a little bit about I mean, why did you decide to sell your law firm? Like, you know, I know a lot of people, they want to know, like if you're running a successful law firm, why would you leave? Why wouldn't you just continue to run it, you know, earn the money off of it, have somebody else do the day to day.
Speaker 3 (00:14:48) - I'll share a little differently today than I ever have in the past. And which is all still true. Everything is true. Just you get more layers of the onion as you talk about it. But ultimately, I had considered exiting my practice a few times before I did, and something always kept me there. And then I was looking to hire someone as a professional legal administrator to really get my office shaped up in a way that I could not do because I'm the visionary I cannot implement and systems. I believe in them. I cannot create them. And so when I was interviewing this, these people, one of them, the personality test, the guy said, hey, she's going to want to take over your business. And I'm like, That was the first time. I'm like, Really? When it you know, he said it was like, was a bad thing. So that really gave me some hope of spark of hope with some stuff that I had pushed to the end. And then I was on stage giving a about to give a presentation and this woman was heckling me and I was like, I don't need this.
Speaker 3 (00:15:53) - You know, I just don't need this. But ultimately what was happening and this is the new information, what was happening behind the scenes was my plan was definitely getting my business in shape, and it was definitely going in a great business direction. But personality wise, we were very different and I knew that the two of us could not lead the firm with me as visionary and her as PLA. And I knew that she wanted her own firm and all that, coupled with my daughter getting horses and us getting a farm. And didn't it just feel better to be on the farm? And it did. And I thought, You know what? There's only one letter difference in farm and firm. I'm just going to go to the farm and sell the farm. And it got harder and harder to come back, right? And then it was beautiful timing because the pandemic hit. And so then we could just spend all of our time out there. And it's been I just could see all the possibilities with my kids out there and working from there.
Speaker 3 (00:16:52) - And there was no decision after that.
Speaker 2 (00:16:55) - Good for you. Yeah, Well, I think it's I think it is really interesting. And I think as law firm owners, there's so much shoulds in our head about what we should be doing. And I think many of us ended up in law school based on a should, you know, like a lot of times I think people, they get out of high school, they go to college, they go to graduate school. And and they haven't really stopped to think like, what do I want to do? Like, what am I trying to do? So I love that you were able to step back a little and really think about it. And and I mean, personally, I'm with you. Farm and firm. They're just so similar. Like barely a difference, right?
Speaker 3 (00:17:37) - That's right.
Speaker 2 (00:17:38) - I mean, you're wrangling horses in one place and you're wrangling people in another. Like it's all the same.
Speaker 3 (00:17:44) - Yeah. You know, I mean, it took a lot of mental work to get there because it's not even just the shoulds, but it's with everyone watching you, with me having had a presence in the legal community forever with I mean, I remember one lawyer telling me one time something about I'm not going to get his words quite right, but basically you bounce around from here to there with different interests.
Speaker 3 (00:18:09) - And the way he said it, it was I did not take it as a compliment. I took it kind of like she can't ever figure it out. She can't complete anything. And that's not at all how he meant it, because I did ask him about that. But he says, No, you're inspiring because because you can do these things and you don't limit yourself based on, you know, what you people think you should do. Yeah, but it does it. That doesn't mean that it's not inside and has to be dealt with because it does. You see yourself as a failure, I guess is the bottom way to say it is. You know, I'm not still practicing after 30 years. I must be a failure. Why? Why can't I just keep enjoying this? Right.
Speaker 2 (00:18:51) - Yeah. But I think it is so just insightful to realize that sometimes you're waking up in the morning. I mean, and if it's morning after morning and you're not, like, fired up to go to the firm and you'd rather be at the farm, like, I mean, good on you do, you know, for being able to make that decision and stand strong in what you believe in? I think it's really powerful.
Speaker 2 (00:19:14) - I mean, it's the ultimate anti people pleasing.
Speaker 3 (00:19:18) - Right? And then you have your family to answer to. And why is mommy not to? Taking clients anymore.
Speaker 2 (00:19:25) - So, yeah, because she's wrangling horses and dealing with goat adventures, right?
Speaker 3 (00:19:30) - That's right. You know, it certainly changed the dinnertime conversation because my kids literally because we've always talked money, we've always talked business. And so it was not uncommon for me to sit down at the dinner table and have one of my children ask me, So, Mommy, how much money did you make today? And so for two years, I didn't have to hear that.
Speaker 2 (00:19:49) - Right, Exactly. Instead, you could talk about how much poop did you shovel?
Speaker 3 (00:19:53) - That's right. How many plants did I plant?
Speaker 2 (00:19:56) - Yes, indeed. Well, one of the other things you bring up, I think, is about coaches. And I think there is a real plethora of people that just talk about grow, grow, grow, grow, grow. And it is one of the things I personally really struggle with because I think we don't.
Speaker 2 (00:20:16) - We don't fully explain what grow, grow, grow, grow, grow can look like. And I think all growth is not equal. I mean, you know, there is growth that is very solid, like people's numbers are and their ratios are excellent. The business is healthy and that is good and there is growth that gets very quickly out of control and people's numbers go a little crazy. And and there's just all kinds of things that can happen. So I think that it's important to really hearken back to what is aligned with the client, you know, and when coaches are coaching people, I mean, how have you dealt with that? No doubt you have come across that grow, grow, grow mentality just as I have.
Speaker 3 (00:21:05) - Absolutely. In fact, I think on my website it says stop growing and start going because, you know, growth for growth sake is empty. And we have to have a purpose because otherwise it's unhealthy, which causes the stress, which causes you to see post on Facebook that say, you know, I hate managing people.
Speaker 3 (00:21:25) - No, you just don't know how to grow properly. You know, But the growth in your business has to keep up with or I should say your personal growth has to precede your business growth and your business growth cannot go first or exceed you. Otherwise you're always going to be miserable and stressed. But yeah, I see it. And I think that programs that are just, again, just growth for growth sake leave people maybe with more income. Gross Not necessarily net, but. Gross But not fulfilled in the ways that they want to be fulfilled. So I would say that when we talk about growth like you intimated, and that is figure out what that means for you. First, don't let your coach define what that is. You define what that is.
Speaker 2 (00:22:12) - Yeah. And I think that is such an important takeaway because I think that it it absolutely breaks my heart to see how many stressed, sad, miserable business owners there are and that are literally just, I mean, sinking in, just ickiness.
Speaker 3 (00:22:33) - And and I don't mean to laugh at that, but ickiness is a nice word. Yeah.
Speaker 2 (00:22:36) - I mean, it's really bad though, like, and I'll read things and I'll be in mastermind groups and listen to somebody and I'm just I'm really, I have this huge, just empathetic heart for these people who are going through this just growth, growth, growth, growth, growth. And they are so torn up about what their lives are looking like. And I'm like, guys, we are in an amazing profession. We have such amazing opportunities. We ideally are going to be joyful and content and like and I don't mean content in the sense of you don't want to do other things and you don't have other goals, but just like day to day kind of content in your skin, you know.
Speaker 3 (00:23:19) - I think what sometimes traps people there and why they're so miserable is they don't see that they have other options or that they perhaps created this and they can create it. And so, you know, we all have that choice, right? It's just which difficult choice do we want to make, stay or leave in this situation? So but it's all painful until you get through it, whichever direction you decide to go.
Speaker 2 (00:23:47) - What are some things that you would say like as you've watched the sale and purchase of different law firms? I mean, what are some of the mistakes you've seen? No doubt you had to have seen some people purchase firms that it was like, whoa, that was not a great move. Or, you know, like, what are some of the, you know, just top three things you would say people need to think about?
Speaker 3 (00:24:12) - Well, I would say the biggest heartbreak that I have seen is when a person buys a firm and it's a great firm and then they don't continue the firm in the way that it had become so great. And they either start changing lots of things or they just continue to operate in their own way without taking all the greatness that the firm was. And then that diminishes the culture and the income and the referrals and production, everything. And so I've seen that happen twice now. And it is heartbreaking to the seller who still there to witness that for a period of time.
Speaker 3 (00:24:57) - And there's nothing they can do because, I mean, the new person's not listening. If they were listening, they would have done it differently to begin with. So I would say, number one, if you're going to buy a firm, figure out why you're buying this firm, why this firm? If it's just the income stream, then I would say don't buy the firm. There are so many other ways to make an income stream, but if you want to continue somebodies business and the legacy they've started and the culture, then actually immerse yourself in what they have built and become part of that and then blend over time, but don't do it immediately. That has been the most damaging I've seen. So that's number one. Number two would be a seller who is not vested anymore. And then they are just I wouldn't say. Interfering, but they're interfering through lack of ability to. Have a successful transition. And so even though we might have the perfect buyer, the seller's already blanked out, and that's not helpful to anybody.
Speaker 3 (00:26:06) - So that's why getting started in the process, before you're burned out, before you're ready to just throw it away is number two. And then that kind of piggybacks into number three. And that is there are a lot of sellers that are just like ready just to walk away tomorrow. So they list their property, their property, their law firm, and then they have this expectation that within 3 to 6 months it's going to be sold and somebody else is going to have it. And, you know, it generally takes a little longer than that. Due diligence takes that long. And so to have an unrealistic expectation, just because you're burned out doesn't mean the buyers are just going to come swarming towards you, even though there's a lot more education out there, even though there's people like me out there finding buyers, it still takes time. And so having reasonable expectations is helpful.
Speaker 2 (00:26:53) - That's a really good point. I love that and I love the thought of how you you have to be doing this and doing this positioning well in advance of your burnout period.
Speaker 2 (00:27:04) - Like. Right. Well, talk to us a little bit about I mean, in people who haven't really looked into this might not know when you talk about a seller maybe staying involved in the business, post-sale, what is that called? What what is that looking like? Because it does seem like there's different ways people can structure these sales.
Speaker 3 (00:27:25) - Well, when someone stays afterwards. Historically, what that means to the outside world is that you have done an earnout, which means that you have not paid all up front for the business. And the business has to achieve certain levels of revenue for the seller to continue to get more revenue. And so the seller has an incentive to stay and make the business successful. That's historically what people think of, but that's not really what I'm talking about. I 100% against earnout. I don't think that they actually benefit either side of a transaction ever. But what I am talking about is like a relay race. You know, there's a baton that has to be passed and there has to be two hands on that baton at some point.
Speaker 3 (00:28:13) - You can't just throw it to the next person, not without bobbling it and it falling to the ground and you losing your position. So it's when you've got those two hands on that baton. The thing is, how long is that baton? How long are we going to stay together? Buyers often will want a seller to stay too long, a year or two years or three years or four years or five years. And a seller, They may even some of them will want to stay longer, like a year or two. And from experience, I can share this unless you're doing a merger, which is very different than an acquisition, when you're doing an acquisition, it's like a light switch goes off after the papers have been signed, the mentality completely changes the buyers. The buyer are making decisions, and this isn't the best decision for the firm right now that you've been making all this time. I'm going to come and make it the sellers. Like, Hey, I'm still here, I'm still a valuable person and you're just not listening to me.
Speaker 3 (00:29:11) - You don't respect me. And so, you know, and then the sellers like I have other things I'm interested in. Why am I still here? And so my thing is we want to find out why do we want this transition Now, there are times when the buyer doesn't want to come in and be the lawyer like me. I'm buying a law firm right now. I'm never going to step in and be that lawyer. And so one of the sellers, because it was a partnership, one of the sellers is out immediately. The other seller wants to stay a year, two years, three years. And I know his generation, he doesn't want to go home and I'm okay with that. But because I'm not going to be there on the day to day, I'm still going to operate that firm as if he still owns it. I'm going to respect his decisions. I'm providing support from a leadership standpoint. I will be doing the hiring and and involve him as one of the key individuals. But I'm the one that makes those decisions.
Speaker 3 (00:30:04) - But he still gets to stay and do the things he loves, like meeting with the clients and going to the golf course now and doing some networking. And so I'm going to let him stay as long as he wants to, as long as he's in a role that supports the best interest of the firm, which is networking and all that. But like when my buyer bought my firm, she wanted me to stay two years because she felt insecure in a legal practice area within what we did. And I can get that. But you know, there's close for that and you can call me for that. I don't have to be here every day, you know? So that's what we need to define is why do you want this transition to be long? Where is the gap of knowledge or confidence? And let's see where we can fill that without the person being there.
Speaker 2 (00:30:50) - I love that. Yeah, I think that's so great. It goes, though, to your psychology point. I mean, you got to dig under and figure out what what are the fears, what are the concerns? What is driving people's, you know, decisions? Because I think a lot of times if we stay at that surface level, we're not getting we don't really understand what's going on.
Speaker 2 (00:31:12) - You know, And.
Speaker 3 (00:31:13) - Yes, people like to stay at that surface level.
Speaker 2 (00:31:16) - Oh, my gosh, totally. I was actually having a text conversation with a friend of mine just yesterday, and she was commenting about how she feels like everybody just stays at this shallow level of the universe. And she's like, I can barely do it anymore. Like, it's just so and I'm like, I agree. But I think it takes a certain level of vulnerability, a certain level of I mean, self confidence in your vulnerability, which is kind of a weird kind of mix and then just authenticity, willing to just admit like, yeah, I don't know this or I'm terrified of this or whatever.
Speaker 3 (00:31:57) - Yeah, it does, it does. And through that, being vulnerable enough to say, I don't know that I have all the questions to ask, I don't know where my gaps are or or how this relationship is going to go. And so then they gloss over with, I would say, bravado versus confidence, and then it doesn't go as well as it could go.
Speaker 3 (00:32:21) - So but but I see that everywhere in least as you do you. In our daily lives. We have to be willing to be vulnerable.
Speaker 2 (00:32:28) - Oh, yeah.
Speaker 3 (00:32:29) - So and we can't bring that to the office if we haven't practiced it outside of the office, you know? So, yeah, I was teaching one of my newest employees. He's a sales guy, and he was learning, you know, why you make follow up phone calls and all this kind of stuff. And he kept giving me answers, very surface like textbook answers. I said, That's great. Now stop telling me what you think I want to hear. Tell me what I actually want to hear. Go a level deeper. And it's like he didn't know how. So I'm training him on how to go deeper, right?
Speaker 2 (00:33:02) - Well, I think that's so critical in the work we do, especially when you think about working with law firm owners, working with, in my case, family law people, estate planning people. I mean, you're dealing with people's lives.
Speaker 2 (00:33:16) - I mean, like it's hardcore people stuff. Like there's probably there's emotions, there's feelings there. Spears And if we're not willing to dig in, I mean, we are not doing anybody a service because we are just looking at them like a little bot and we are, you know, solving just some surface level issue that might not even touch what the real issues are.
Speaker 3 (00:33:41) - Right? I learned a tool years ago that essentially you ask the same question until you get there, and that is And why is that important to you and why is that important to you? And while the asker feels like, you know, it feels ridiculous to do it, but the person who's actually answering, if they're into it, they don't even realize you're asking the same question over and over because they're finally getting into the emotion of why this is important. Now, when.
Speaker 2 (00:34:07) - People come to you and they want to work with you, let's say it's an owner and they're seeing themselves, you know, maybe I don't know, their kid is almost in college and they're thinking, yeah, I could see getting out of this in a few years.
Speaker 2 (00:34:21) - What are the kind of steps they're going to be taking? I would think. I mean, you're going to have to help evaluate a business or I mean, what does it look like to come work with you?
Speaker 3 (00:34:31) - Sure. So first of all, we got to get a just a baseline as to what is your firm? Who is your firm? What does it look like? Who do you have working for you? What kind of clients do you have? What kind of referral sources, what kind of systems and processes, all that kind of stuff. It's just basically holding a mirror up and reflecting Who are you today? And then it's where do you want to be or what do you think you need in order to live the life that you're trying to get to and seeing, Are we already there? So all we got to do is get this listed or are there things we need to do to position it to get you the value you need so you can take that next step? And so if we are already there because that's the easier path is we still need the valuation because you're going to list it for a price and then you have to justify that price.
Speaker 3 (00:35:20) - So we do a valuation and then we do a marketing package, if you will. And so if you're working with us to help you sell it, we actually then have a team of professionals who are very proactive and reach out to prospective buyers or sellers, depending on which side we're on. And we phone call, we email, we do direct mail, things like that. And so that's why our process sometimes is faster, although we can't guarantee any speed whatsoever. But faster than just listing your business on a site like this, buy, sell if you have to position it and if you want or need it to be worth more, then we actually look at in what areas of your firm would be most beneficial to increase the value. Like you wouldn't go in and rehab a living room, you would rehab the bathrooms in the kitchen. Right. And so we look at the firm for the bathrooms and kitchen areas to rehab. And then we also have to consider what timing, because some people may be like, well, there's this gap here, but I can't wait five years.
Speaker 3 (00:36:19) - I have to do this like by a year from now. Okay, then let's fast track that. There was actually one firm that I've spoken with most recently and they said, well, within the in the next three years, we want to be able to sell it for 3 million. And I said, Well, then I can do the valuation for now to see where your gap is. I know where your income is right now, but I'm not the right person to get you to the three in such an accelerated pace. There are other organizations out there that could probably help you with that. You come back after you're done. So because I can coach people and I do coach people, especially estate planning firms, but also other types of firms as well. When we are looking at systematic structured growth or just specific areas of the firm that need to be positioned well. But I'm not the right kind of coach. If you need to accelerate your income in a short period of time.
Speaker 2 (00:37:13) - Now, if somebody is trying to sell their firm, let's say like this person for $3 million, is there a certain ratios you're looking at where you're like, okay, your income needs to be $6 Million to sell it for 3 million? Or I mean, I have no idea.
Speaker 2 (00:37:28) - This is not something I've looked into. So I'm curious and I know a lot of people are curious because people are always I mean, you just see people all the time and you just get tagged in a million things when people are talking about selling their firm.
Speaker 3 (00:37:44) - Certainly this weekend was a nice weekend. So so I would say that there's certainly rules of thumb. There's, you know, targets you'll hear three times EBITDA, which is earnings before taxes and depreciation and amortization. So I would say, first of all, the type of firm, the services you provide. Are going to have an effect on that. So there's some services that are going to have a higher multiple than other services. For example, I'd say estate planning, trademark business law, those are going to have higher multiples than, for example, P.I. or maybe even family law that are heavy litigation, one time transactions. But you're looking at in general terms, one time. Gross Or about 2.8 times net. But the net is the weird one because net can be manipulated so easily with how much you put into your IRA or how much you, you know, flow through for a tax purpose, but not necessarily a business purpose.
Speaker 3 (00:38:45) - Purpose. So now when when we are doing our valuations, we rely heavily on what's called sellers discretionary earnings. And that's basically doing a recast of all that personal stuff back in and making it net.
Speaker 2 (00:38:59) - That makes good sense. Yeah. Is that and that's kind of like I think what a lot of people refer to as total owner benefit. Are those kind of the same thing, correct?
Speaker 3 (00:39:08) - It is. It is the same thing. However, one of the things that people don't think about, and that is the salary of the owner who's leaving. And sometimes people take W-2 salary, sometimes people don't, and they just pull from the net. And sometimes when they do take from the salary, they're paying themselves either $30,000 a year or they're paying themselves $250,000 a year. And so that is an owner benefit for sure. But we also have to look at, well, what would it cost to replace you with somebody and not just as a lawyer, but you're also the CEO and you're also this and that, that and the other.
Speaker 3 (00:39:46) - So we do a lot of figuring to to make that real for a buyer's perspective.
Speaker 2 (00:39:53) - Yeah, that makes really good sense to me. Well, I've thought that when people do those tiny salaries as a lawyer, like if they're the CEO, I'm always thinking that is going to be interesting. If ever somebody has to come in and replace you. Because I mean, finding a CEO for $30,000 a year might not be your best hire.
Speaker 3 (00:40:14) - Good luck with that. But doesn't it make your profit look so much higher right now?
Speaker 2 (00:40:17) - Right. Exactly. I find I have to tell you, this is an area of law firm ownership that I find so fascinating is understanding the numbers. Like, I mean, like 2AT, and I am kind of a freak. I mean, my my bookkeeper and CFO team will tell you, like, I literally play these mind games. I'm like, okay, if we're 2% off on our forecast, like, where did we go wrong? And, you know, like, I want to be like dead on and really understand our numbers.
Speaker 2 (00:40:49) - And then I hear other lawyers and they're like, Yeah, I haven't seen my pal since January. And I'm like, Oh my gosh, I would be like a hair on fire, like cat on the ceiling kind of person.
Speaker 3 (00:41:03) - Last week I talked to someone who doesn't even have panels. I'm like, What? What, what? I'm not understanding. Like, just send me your taxes, then just send me your taxes. How do you operate this way?
Speaker 2 (00:41:15) - Oh, my gosh. Oh, there's no way. I'm like, I am getting hives when it's like the sixth day of the month and I don't have my PNL because my people are like, We can get it on the ninth. And my last person always had it on the fifth. And I'm like, okay, I'm trying to go for your ninth thing. Like I'm, I'm trying to, you know, be there. But by the seventh, I'm always like, So do you have it a little like.
Speaker 3 (00:41:40) - It's like a button.
Speaker 3 (00:41:41) - And QuickBooks just brought it to me.
Speaker 2 (00:41:43) - I'm just like, I'm so pathetic.
Speaker 3 (00:41:47) - I'm with you, though. I always in my law firm, I always got it on the sixth. And if it wasn't there on the sixth, man, I was like, calling pound and desks.
Speaker 2 (00:41:54) - Yeah, well, I think it matters. And I to me, it's a almost like a safety blanket kind of thing. Like a security blanket. I mean, I know exactly what's going on, so if something is going awry, I'm going to know it quickly. And I mean, and I'm going to even have other things more than monthly where I'm going to know if things are going awry. Do you know, so that levers can be pulled?
Speaker 3 (00:42:18) - Well, you want to see the trends. Absolutely it's not. And that's the thing, though, is even those that have the panels, those that look at their panels, often they are just looking to see how did we do? They are not looking at it at a strategic way to see what is the trend and where's the forecast going.
Speaker 3 (00:42:36) - And so their businesses could be so much different if they were forecasting versus just historical. How do I do? Did I check the box? Do I get to pat myself on the back today or not?
Speaker 2 (00:42:46) - Oh, my gosh. I love my forecast to tool. We run a 13 month, you know rolling forecast and I mean it is by far my biggest self competition you know but I find the forecast. Casting tool to be powerful in allowing you to look at things strategically and make those strategic decisions. Because, I mean, you've got everything in front of you, every little thing. And I mean, you can pull levers all around and see what is happening, you know, what it will do to numbers and how it will impact things. And I think it allows you to look at trends right there in your face. Do you know what I mean?
Speaker 3 (00:43:28) - Like I do. I do. And but what we hear all the time is from lawyers. I'm not good at numbers. I don't like numbers.
Speaker 3 (00:43:35) - Also can't tell you the number of people who have told me that, that when we then focused on the numbers and they actually started producing results, they liked, they loved being in their numbers. And so what I really take from that is what you don't like is the results you're getting. And that's why you don't like numbers. That's why you don't like to get in there. Because if they produce differently, you would love it.
Speaker 2 (00:43:55) - Well, and I think I think a lot of us lawyers joke about going to law school because we didn't have to do math. I mean, I was definitely one of those weird lawyers. I thought I was going to be a biomedical engineer. So I was all about math. Like I was totally into math. I kind of got the end of my calculus brain, though, and I was like, Whoa, I don't think I can do any more of this calculus stuff. Like, I am tapping out. But our math is all simple, you know what I mean? Multiplication, adding a little, dividing some percentages, like, you know, it's basic.
Speaker 2 (00:44:27) - I feel like you get through sixth grade in seventh grade and we're good with our math like.
Speaker 3 (00:44:33) - Nothing that a basic calculator can't do or map.
Speaker 2 (00:44:36) - Exactly. Exactly. And so yeah, I tend to think it might be a little bit of an excuse because we got that. We definitely have seventh grade math, I think. Yeah. So. Well, I really appreciate your time today. It just I can't tell you how much I appreciate it. And I know there are so many people out there that are either thinking of buying firms, thinking of selling firms. I mean, it's a point of conversation practically in every setting I attend. And so I just am really happy we were able to bring you on and talk about quid pro quo and what you're doing and how you're doing it.
Speaker 3 (00:45:14) - Thank you. I'm glad I was able to answer all your questions for all your people.
Speaker 2 (00:45:18) - Yes, indeed. Well, and I hope you now have your kids. They have gone back to school right in.
Speaker 3 (00:45:24) - They started last Thursday.
Speaker 3 (00:45:25) - So, yes, this is the first full week starting today.
Speaker 2 (00:45:28) - So you're like living it up this week, huh?
Speaker 3 (00:45:30) - That's right. Just free as a bird.
Speaker 2 (00:45:35) - Okay. Well, enjoy and enjoy the rest of your week. Now, do tell our listeners and we'll add it in the notes. Where can people reach you? What is the best way for somebody to reach you?
Speaker 3 (00:45:45) - Well, the best way to become aware of our community is through our private Facebook group called The Art of Buying and Selling a law firm or law firms and otherwise. Our website is quid pro quo law.com.
Speaker 2 (00:45:58) - Okay, perfect. Well, great. Well thanks again and enjoy the rest of your week and take care of those goats in that tractor and all the things.
Speaker 3 (00:46:07) - All the things. Thank you so much, Elise.
Speaker 1 (00:46:10) - Thanks for listening to the Maximum Mom podcast, a production of Maximum Lawyer Media. Be sure to subscribe to the show so you never miss an episode. See you next time.