It’s hard to remember that I don’t need to worry about revenue.
It’s hard to remember that I don’t need to worry about angry clients.
It’s hard to remember that I don’t need to worry about negative Google reviews.
It’s hard to remember that I don’t need to worry about associates making mistakes.
It’s hard to remember that I don’t need to worry about losing a key employee.
Why don’t I need to worry about those things?
On October 31, I sold my law firm
I haven’t fully adjusted to the new reality of my life. I still worry, but the feeling is generalized now – I can’t pinpoint any specific cause.
Maybe it’s like the phantom pain someone experiences after losing a limb. It hurts even though it’s gone. This adjustment will take me a while.
Now that I’m on the outside, I have a renewed respect for law firm leaders. They keep people employed, provide security when they might not have it themselves, and carry the worry so others (employees and clients) can move forward with their lives.
Now that I’m out from under the responsibility, I see how challenging it is to carry the load. I was the frog in the boiling pot. The heat snuck up on me.
Selling a law firm is weird
After 27 years of law firm ownership, I can’t remember life before carrying that load.
I feel the relief now, but it came slowly as the sense of obligation seeped out of me, little by little.
Selling a law firm is weird. It’s like walking out the front door without pants. Something is missing.
Which is probably why not every lawyer wants to sell their practice. Most like having something to do. Fortunately I have Rosen Institute to keep me busy.
I don’t know that I would have sold the business, at age 56, without something exciting to do with my time. I’m so passionate about Rosen Institute that it was easy to make the switch.
But selling a business isn’t easy. It’s challenging from an emotional and a financial perspective.
Selling a business on decent terms is only possible if you can demonstrate a track record of success. The business needs a steady stream of revenue. It must be profitable.
When I started the law firm, I didn’t realize I was building a business to sell.
In retrospect, I see why it had market value. I have a better understanding of what it takes to create value for the buyer.
You can do it too
Even though I’m excited about being on the other side of law firm ownership, I don’t encourage every lawyer to build a practice with the intent to sell.
There are lots of options when it comes to creating a practice, and each of them brings different pleasures, rewards, stresses, and burdens. There are as many approaches as there are lawyers.
You should do it your way (not that you needed me to tell you that).
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But some lawyers want to sell their practices.
A sale is part of their master plan. It’s why they keep their clients happy and maintain the firm’s reputation. They work to maximize the firm’s value because a sale is part of their financial security.
Since I’ve taken this path, I’ll pass along some of my insights. I’m sure I’ll learn other lessons as I gain distance and perspective, but here’s what I’ve learned so far.
These are some of the key principles to build a practice ready for sale.
1. Visualize your business
It all starts with a vision of where you’ll go.
Sadly, I didn’t have that clarity of vision when I started out, all those years ago.
I knew only that I wanted freedom from my former employer. They wanted me to do things I didn’t want to do. After three years, I had an out-of-body-moment, and saw myself resigning.
I wandered aimlessly, building the business in a haphazard fashion, until I began to clarify my vision. Then, without any additional work or effort (I was already working hard, but now I had direction), I moved faster down the path.
The vision drove me and my team forward at a pace I hadn’t imagined. We moved quickly once we knew where we were going.
2. Tell your client’s story
Empathy is incredibly powerful.
Clients want a lawyer who understands them. Having a clear vision gave me clarity about which clients I sought.
Then, by turning my marketing message into a vivid description of how they were feeling, we rocketed forward. They felt understood and trusted us to solve their problems.
We listened to them for years. We heard what they said and incorporated their language – and their feelings – into our marketing.
The moment our clients encountered our messaging, they felt that we understood them – that we knew what it was like to stand in their shoes. That understanding built trust.
Our message became entirely about repeating the story of our ideal client back to them. We talked endlessly about what it feels like to experience their problem. Our prospects felt understood and that translated into retainers.
3. Tell your story
Over the years, I’ve been more than willing to tell my story. It wasn’t an accident that I became a lawyer. I am the son and grandson of lawyers. It’s in my genes.
But I also had experiences that drove me forward. I told prospective clients those stories too.
They weren’t always the stories of achievements. I told them of my struggles as well.
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People with problems need to know why we do what we do.
They need to understand we’re human. They want to know what we love, what we hate, why we care, and what it means to us.
When we tell our story, we build connection, rapport, and trust. When we explain how our personal story brought us to the place where we solve our clients’ problems, our prospects know it’s safe to hand their worries to us.
4. Create a storytelling/marketing machine
A law firm without an underlying marketing machine won’t appeal to a prospective buyer. In fact, the reputation is the primary driver of the firm’s value.
The phone needs to ring frequently for the buyer to see a reason to turn their cash into ownership. A great team, efficient processes, and excellent financial systems won’t matter if new business doesn’t come through the door.
The marketing machine tells the client’s story and the firm’s story. It builds trust, reminds people you exist, and spreads your story. The marketing machine must attract prospects, inspire them to call, and convert them into clients.
The marketing machine must reach its targets with a resonating, emotional message. It needs to build trust and confidence. The right message grows more powerful with each passing year and takes on a life of its own as it spreads.
Your law firm’s reputation – those stories – are the true source of your business’s value.
5. Build a team
The business has no value without a core team of players.
You can get away with a certain amount of employee turnover and still offer something appealing to a buyer. But the key people must stick around. They are the institutional knowledge the buyer relies on to keep things going.
Lots of us spend huge amounts of energy on hiring. We “hire slowly,” invest in psychological testing, and select carefully. Then we expect our new hires to perform without us.
That’s unreasonable. Management is essential.
You can build a team with “B” players. But with management, “B” players can become “A” players.
Most of us spend way too much time hiring and way too little time managing our team. When we supervise, providing feedback, coaching, and training, we take mediocre hires and turn them into great staff.
6. Establish systems
Your buyer doesn’t want to own a business that will require their intervention to accomplish the simplest tasks. Systems persuade a buyer that it’s easier and less expensive to buy a functioning business rather than creating one from scratch.
Thus, your systems need to be comprehensive. You need reference materials that describe, in a step-by-step manner, the operation of every significant process in the business.
The systems can’t, however, hide in a binder or an online wiki. That doesn’t matter to your buyer.
Your systems need to live. Your team needs to use them. They need to evolve as they drive the business.
Dormant systems are useless. Your entire culture needs to rely on your systems to get work out the door.
7. Know your numbers
A business grows due to management. You do more of what works and less of what doesn’t. It’s not exactly rocket science.
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It is, however, impossible to make data-based decisions without the numbers. A monthly profit and loss statement and balance sheet won’t cut it. You need more.
A dashboard that shows trends is essential. Driving the business without a dashboard is like driving a car without a GPS. You’ll get somewhere, but you won’t know your destination until you arrive.
That’s not good for you and not useful to your prospective buyer.
Buyers base the price of the business on the numbers.
And while the numbers matter, the presentation of the numbers matters even more. Solid numbers presented in a useful manner inspire confidence. The price goes up when the buyer can see the trends and appreciate that the numbers are moving in the right direction.
8. Streamline with technology
Buying software is easy for most businesses, but not law firms.
Law firms are more challenging because we represent a fairly small market. Developers hesitate to invest in our specific vertical, so legal-specific products probably won’t meet your needs. You won’t find an easy, off-the-shelf solution.
You’ll have to connect one tool to another, then incorporate something else. You’ll have to make existing technology meet your needs, or choose to build a customized system from scratch.
Making the software work for your practice is a struggle. That’s a big part of what your buyer buys. They appreciate the value you added by picking the software, connecting the pieces, training the team, and meeting client needs.
9. Identify an internal buyer
Many businesses are sold to strangers. Law firms, when they’re sold at the highest value, are nearly always sold to employees.
You need an internal buyer who has become a friend. You need to head down that path now because developing your buyer will take a very long time.
You need to bring your buyer in, teach her, talk to her, encourage her, support her, and grow her into a business owner. She needs to become a great lawyer, but also a great business owner. That’s not an easy journey.
She needs to be successful in her own right and you need to give her the space to succeed. She needs to be known in the community and she needs to earn a very good living, so she can afford to buy your business.
If your model is to hire cheap associates, throw work at them, and hope for the best, you may end up with a profitable business that you’ll own for a long time.
But you won’t grow a premium business you can sell, because you won’t find an interested buyer at your price. In this world, you need to grow your own buyer. That requires patience, care, and attention.
Realistically, however, not every lawyer has a buyer on the payroll. There are alternatives. My favorite resource is The Law Practice Exchange. Speak to Tom Lenfestey and mention my name. He’s the guru on valuation and tactics for getting the deal done.
10. Replace yourself
You are replaceable. We are all replaceable.
Replace yourself sooner rather than later if you intend to sell your business.
It’s critical to replace the leadership component you provide. The business can’t thrive after you’re gone, if you were the only leadership.
Don’t expect it to go smoothly at first. You may replace yourself more than once. Look for people who can do the marketing, the sales, the operations, and provide the vision.
You need someone who will keep and communicate the vision because that’s what you bring to the table. You won’t truly replace yourself until you find someone with those capabilities.
Your replacement may be the buyer, but it might be an employee. The buyer may not take on that leadership role. It’s critical, however, that you get someone into that role as you extract yourself from the day-to-day operation.
Then, once you replace yourself, get out of the way. Leave them alone to do their thing.
Sure, provide advice and guidance, but let go. Stepping into a leadership role is challenging enough without the old leader standing in the corner being critical.
Your business gains its most significant value when it runs without you. Let that happen, so the buyer acquires a business that will generate a consistent profit.
For me, creating distance involved working from home, selecting management who worked remotely, and then leaving the country. You might choose a less extreme approach, but I needed to create mental and physical distance.
11. End on a high note
The idea of exiting a practice is appealing when things are down. When we’re struggling financially or overwhelmed by angry clients, we fantasize about getting out. But that’s the worst time to sell a business.
You need to sell when you hit a peak.
Wait for smooth sailing during a period of high revenue. Look for the perfect moment when everything is rolling along well.
That’s when you need to sell your business, but it’s also the moment when you most want to keep it. Resist the temptation to hang on, because that’s when the value is as high as it’s going to get.
What do I do now?
I’m excited about what’s next because it involves you.
I have renewed excitement about helping lawyers.
I’ve always loved my work at Rosen Institute, and now I’m free to give it my full attention. I’m energized by this chance to follow my passion.
This new phase is invigorating, but it also gives me opportunity to reflect. Looking back over the 27 years since I formed the law firm helps me see the arc of the story.
I created the law firm out of nothing back in 1990. Things started with a bang because I brought clients from my old firm. I hired my first employee, then more employees. I rented a small office space, then bigger and bigger spaces.
During that time I got married. We bought a house, had baby number one, bought a bigger house, and had baby number two. Then I had a heart attack and quintuple bypass surgery.
I tried a lot of cases. The business hummed along. Sometimes things went well. Sometimes they went poorly. It’s been a rollercoaster.
One kid is all grown up and living in Bangkok. The other is in college. My wife and I managed to stay married, which feels like an achievement when you work in an industry of failing marriages.
When the first kid moved out at age 18, we sold the house (actually, we accidentally sold it a month before he moved out).
Over the next few years, we downsized and downsized again and again until we finally shipped off the last big item (the second kid).
At that point, we had reduced ourselves to nothing more than the contents of our carry-on bags. It made us wonder why we had spent the past several decades accumulating stuff.
We’ve been on the road for nearly three years now. Running the law firm remotely went well, but business problems are no less worrisome when you’re 10,000 miles away. My law firm stress squeezed right into my carry-on bag.
I spoke to my law firm buyer a few months ago. I knew she wanted to close the deal, but I wasn’t anxious to take action.
Then at some point in Egypt, it became clear: I could have the law firm or I could have the value of the law firm in cash. The cash looked appealing. I’m not entirely sure why, but suddenly I was ready.
It didn’t take long to finish the deal. It had actually been years in the making. It was easy because we trusted one another.
From the day the discussion got serious to the day we signed the papers was a period of only a few weeks. We understood each other so well, many words weren’t necessary.
Wow. I’m still struggling to fully appreciate that the deal is really done. I still want to check the number of prospective client calls, the status of prospective clients, and the daily revenue. It isn’t easy to let go.
But time passes and the pressure releases. I’m getting there
Now, more than a month later, I’m settling into this new reality. My time is consumed with Rosen Institute members. I love those folks. They are inspired, motivated, energized, and many are seeing huge growth. Working with them is incredibly exciting.
It’s hard to remember that I don’t have to worry about the law firm anymore. But my connection to that worry, through my members, helps me help them.
Still, sometimes it’s hard not to worry.