So what’s my law practice worth?
How’s this for an answer: “Whatever someone is willing to pay”?
Not clear enough? Then go through this little exercise:
Imagine it is a Friday afternoon. After years of hard work, you’re ready to ride off into the retirement sunset. When Monday morning comes, will existing clients or prospective clients still contact you and agree to work with your successor?
If your answer is “no,” your practice is probably worth little to nothing. If your answer is “yes,” you’ll need to ask two more questions.
Will I get referral fees if I sell?
No. But thinking about future predictable revenue in the context of referral fees is a concept that lawyers can wrap their heads around to appraise a firm.
So what valuation method does Roy use to determine the right number?
Roy values practices by taking a percentage of predictable revenue over a timeframe. But the number you get under this method is usually not what a seller will ultimately receive.
For most deals, Roy’s valuation methodology is an excellent starting point for negotiations. It is rarely the ending point.
What other factors can affect valuation?
For starters, other market realities frequently impact what a practice is worth.
If you’d like more information on other market realities, as well as a more comprehensive discussion of Roy’s valuation method, consider reading Roy’s eBook, Exit Strategies for Lawyers. It’s only about 30 pages long, but it will tell you everything you’ve ever wanted to know about how to value a law practice and a lot more!
Roy Ginsburg, attorney coach and law firm succession consultant, can provide you with the valuation insight you need to prepare your practice for sale. Call him today at (612) 812-4500 or contact him by email.