The Cost of Selling a Law Practice
The cost of selling a law practice has never been more affordable. The internet has changed the marketplace for selling a law practice pursuant to ethical Rule 1.17. Universal access to the web has fundamentally changed the way retiring attorneys offer a law practice for sale. Law practices for sale used to be the exclusive purview of business brokers who had a book of business and relied on business connections to match sellers with buyers – for a 10% commission. Not anymore.
Lowering the Cost of a Law Practice for Sale By Owner
The internet has introduced a whole new way of selling a law practice. Online classified advertising forums have popped up for retiring lawyers selling a law practice – much like the for-sale-by-owner market. Retiring lawyers can offer a law practice for sale in a matter of minutes and reach an audience accessible by every licensed lawyer in the United States sans broker. The online advertising forums have increased the frequency of seller and buyer contact. Prospective buyers can peruse the inventory of available law firms in a matter of minutes and without the hassle of engaging a business broker or paying a buyer’s broker fee.
How Much Does a Law Firm Business Broker Cost?
Business brokers are not cheap. Circumventing the cost of a business broker puts more money in the retiring lawyer’s pocket. Brokers often charge 10% of the law practice sale price with a minimum commission fee of $10,000 to $20,000. So, a retiring lawyer selling a $479,000 law practice would lose $47,900 to the broker. GONE! Ten percent of a 30-year + practice lost in a single transaction.
Online classified advertising forums are the answer to unreasonable commissions. Retiring lawyers selling a law firm can list a law practice for sale for as little as $49 per month. A savings of $47,875. Lawyers can list their law firm for sale in about 20 minutes. It’s a snap with online instructional videos to make the process as easy as 1-2-3.
Confidential Law Firm Information
Online law practice listings provide substantive information to prospective buyers. But the retiring attorney has control over how much information to provide. Designated fields can provide relevant information or be marked “confidential” and only disclosed privately to qualified buyers.
Designated fields can identify the following information (or marked “confidential”):
- city and state where the practice is located;
- substantive practice areas (primary, secondary, and tertiary);
- geographical practice area (where clients come from);
- description of the law practice;
- number of clients in the client base;
- total gross revenue in three each of the three most recent calendar years;
- average gross revenue per client during the last 12 months;
- accounts receivable balance;
- law firm legal structure (P.C., LLC, LLP, etc.);
- number of lawyers in the law firm with ownership interest;
- number of lawyers in the law firm with NO ownership interest;
- seller’s willingness to train buyer to learn substantive area of law; and
- a narrative explaining why a buyer should be interested in purchasing seller’s legal practice.
Selling a Law Practice Anonymously
A lawyer selling a law practice online remains anonymous until the seller decides to reveal his/her identify. Prospective buyers can email the retiring lawyer via the classified ad forum’s email portal. The prospect’s email is sent directly to the retiring lawyer without the seller’s contact information being revealed. Then, the retiring lawyer can decide whether to commence negotiations, or not. The power to remain anonymous is under the selling lawyer’s control.
Simple, easy, affordable.
Law practices for sale are governed by ABA Rule 1.17 or the ethical rules of the state in which the practice is located. Every lawyer selling a law practice should become familiar with ABA Rule 1.17. The text of the rule can be reviewed by visiting the ABA website. Attorney Robert Schaller urges lawyers selling a law practice to review other law practices for sale to get a clear idea of the market availability, firm valuation pricing, and information disclosures. A good start is reviewing the law practices for sale at www.LawPracticeSale.com.