How Do You Exit Your Law Practice?
While building my law practice, I have struggled with two competing thoughts: how to continue to grow my firm and how to eventually exit it. In grappling with these seemingly divergent ideas, I have come to realize two important things: (1) not enough of us are thinking about these issues, and (2) the two ideas, growth and exit, are mirror images of each other, and lessons from one can inform the other. Alarmed by our collective failing to give these issues enough consideration, I want to share what I have learned to encourage you to confront these issues in your own practice.
Before jumping further into the discussion, though, while I love practicing law, you should know that my goal in doing this planning is to build the value of my firm so that on exit, I can realize that value. Several years ago, I had a business mid-life crisis. I had been working in my solo practice for about twenty years, after big firm life. I realized then that if I got hit by a bus, no one would pay my family a dollar for all of the work that I had done. From that day on, I have striven to build a law firm and grow its value.
This idea was made possible with the evolution of ethical rules regarding the sale of a law firm. “Standards governing the sale of law practices are of comparatively recent origin. Before . . . 1996 . . . a lawyer in New York could not sell a law practice. See EC 4-6 (as in effect prior to 1996); N.Y. State 707 (1998). The theory, still reflected in Comment [1] to Rule 1.17, was that ‘[c]lients are not commodities that can be purchased and sold at will.’” NYSBA Ethics Committee Opinion 1168 (5/13/2019).
New York Rule of Professional Conduct 1.17(a) now provides: “A lawyer retiring from a private practice of law . . . may sell a law practice, including goodwill, to one or more lawyers or law firms, who may purchase the practice . . .”
Even though, as practitioners, we are now on equal footing with other business owners looking to exit, I know that many local practitioners do not take advantage of that opportunity. I have seen many colleagues simply choose to retire and close up their office. While that may be your expectation for your own exit, I am hoping that by sharing what I have learned in my own efforts, you will give more forethought to your own plans.
The options that I have explored include law firm purchases, mergers, lateral moves, and hiring and internal succession. In future articles, I will share what I have learned about each one of these choices. While none of these options is perfect, it behooves each one of us to make deliberate choices about both our present practices and our law firm exit.
