Most entrepreneurs start businesses with the goal of eventually selling them, a concept explored in books like Built to Sell by John Warrillow. However, the idea of creating a law firm designed to sell has historically been less common—until recently.
Traditionally, owners of small to midsize law practices viewed their firms as cash-generating ventures to either pass on to another generation for a modest buy-in or shut down upon retirement. But this mindset is evolving.
Building a Law Firm Designed to Sell
Lawyers are increasingly recognizing that their firms are not just practices—they’re businesses. And businesses have intrinsic value, making them potential assets for sale. To realize that potential, planning for a sale must begin early.
At first, the idea of building a firm to sell might feel premature, especially if retirement seems distant. But consider this: the law firm a buyer would find attractive is likely the same one you’d love to own—a well-run, profitable firm that operates efficiently without constant owner oversight.
What Attracts Buyers to a Law Firm?
A law firm that is both profitable and requires minimal input from its owner becomes a desirable acquisition. When the time comes to sell, such a business commands top dollar. Isn’t that exactly the kind of firm you aspire to run?
Preparing a Law Firm for Sale Takes Time
Building a sellable firm isn’t an overnight process. Buyers typically require at least three years of profitable tax returns. Achieving this level of profitability often takes two to three years of focused effort, followed by another three years to fine-tune operations for peak efficiency. Altogether, preparing your firm for sale can take five to six years.
Once the firm is ready, the process of marketing it, finding a buyer, conducting due diligence, and finalizing the sale adds even more time. This timeline underscores the importance of starting early. Waiting until your 64th birthday and hoping to retire in a year is likely unrealistic.
A Proactive Timeline for Building to Sell
Compare this scenario to that of a 35-year-old attorney planning for a future sale. By age 38, they’ve achieved profitability, allowing them to begin saving for retirement. Over the next decade, they focus on growing the firm’s revenue, even if it means sacrificing some profit margins.
At 48, with major expenses like college tuition on the horizon, they prioritize high profits over aggressive growth, turning the firm into a steady cash generator. Fast-forward another 10 years, and they’re in an excellent position to sell—or continue running a profitable, low-maintenance firm while enjoying life.
This forward-thinking attorney is perfectly positioned to retire or maintain flexibility in their career, all because they planned early and built their firm to sell.
Planning to Exit on Top
The notion that law firms are valuable, sellable businesses is gaining traction. My upcoming book, Exit on Top, challenges traditional perspectives and offers a roadmap for building profitable, self-sustaining law firms with future saleability in mind. Look for it in March!
