Working for 35 to 40 years and then deciding (virtually overnight at times) that the moment has come to walk away is extremely common amongst owners of law firms. Quite a few people work away day after day, week after week, month after month and don’t actually have a long term plan for their lives, career, business or their future.
This article is a guide to thinking about retiring and what factors you will need to take into consideration at the outset.
Factors to think about when considering retirement plans
There are a whole host of different things that you need to have a think about when it comes to planning for retirement. I will break these down into different sectors, but the first one of these is your firm in its current form.
Its all about me
If you have a practice where you are undertaking the vast majority of the fee earning with a little bit of help from support staff possibly, but not really from any other fee earners, or the vast majority of your turnover is from your own work and not from the fee earners in your business, then you need to be having a think about what exactly is likely to happen to your business as and when you retire.
If you are the only fee earner undertaking the work, then chances are if you retire, the practice will not be able to continue in its current form. Not only this, it’s not going to have a lot of value because once you’ve retired there will be nobody left to bring in any income. A buyer would need to find their own fee earners in order to complete the work, and they would be dependent on clients continuing to come to the practice rather than go elsewhere because you are no longer on site.
One of the first aspects of planning for retirement that we come up with is to look closely at the structure of your firm to make sure that issues like this are not going to affect your chances of realising a return from the sale of your business, or to maximise the return that you are going to get.
Working as a consultant
Quite a few lawyers have the idea that when they get to a certain age they no longer want to do any work at all, and instead have plans to retire to a holiday home somewhere quite exotic (or not so exotic!) and not to do any work at all of any shape or form. What a lovely thought – or is it?
Our experience is that quite a sizeable percentage of retired lawyers last for about three months and then register with us as locums. Partly because they still want to keep their hand in and do a little bit of work as they get older, partly because they want to retain the knowledge they have and also because they want to work to keep from getting bored.
If you think this is likely to be you then when thinking about the sort of deal that you want to get out of a potential buyer, you need to think about whether or not you are willing to stay as a consultant, and if you want to carry on doing some work within a practice once it has sold, merged or been acquired by a third party. This is an important consideration to have right at the start, because it will affect the saleability of your business, and also your prospects for achieving a reasonable return for your business.
Get valued and consider deal structures
We regularly tell people that when they come to sell their business they don’t necessarily need to tell anybody what price they want on the business at the start, because you quite often find that the figure you require is very different to the actual figure that a buyer is prepared to pay, sometimes considerably more than you were looking for and sometimes considerably less.
However when it comes to looking at retirement and retirement planning, it can be very useful to have an idea yourself as to what the practice is likely to be worth to a buyer, what type of deal is going to suit you and also what type of deal is likely to be offered to you and how to improve on this. You can use our services – we offer valuation reports that include examples of structured deals and suggestions as to the sort of deal you should be looking for – click here for details.
Deciding what’s important to you
Quite a lot of people get to retirement or retirement planning and don’t really think about what it is they want to get out of a retirement disposal. Do they want their employees’ jobs to be secured, do they want the name of the business to carry on, do they want their clients to be looked after by someone they can trust? Or are they simply looking for a decent sale to a third party prepared to pay a reasonable price?
This must be thought about really carefully, because quite often buyers fall into a couple of categories – you have the buyers who are local and perhaps just want to take over your business but not actually pay a premium or a sufficient amount of premium to make it feel like a sale but more of a disposal, and you also get the buyers who are looking to pay a premium but may well change absolutely everything about the firm, from the name to the staff, to the identity of the practice or indeed the way they work with the clients or for the clients. Think about this carefully because this will make a difference to the likely deal that occurs.
Retirement – most common
Retirement is the most cited reason that sellers list their firms for sale with us, but quite a few of the enquiries we get are from people looking to retire who have not yet made plans for the future or thought things through carefully. We recommend thinking about your plans as early as possible so that you can plan for your future and enjoy a successful and happy retirement, having realised some value or your required value from the disposal of your law firm.
For details of our law firm sale and advisory services please visit www.jonathanfagan.co.uk