How To Value a Law Firm

You have worked hard and built your law firm into something that you are immensely proud of and that you value a lot. When it comes time to sell your firm, however, it is not the value you place on it that matters. You need to determine how valuable potential buyers will find your firm because that is what you will ultimately receive for it. While you may think it is going to be difficult to ignore your own emotions when evaluating your law firm, there are a few factors you can use to help you step back and really see how much your firm is worth. Let’s dive into how to value a law firm.

Concrete Factors to Consider When Evaluating Your Law Firm

When asking yourself, “What is my law firm worth?” there are some concrete factors to consider. These factors include actual dollar figures that can help determine how many assets and liabilities your law firm has, how much it pays in overhead, such as in property taxes and payroll, and more. Using these figures is a good place to start when determining how much your law firm is worth because they are definitely stats and numbers potential buyers will want to see. To determine the value of these factors, you will need to use several different documents including: 

• Financial statements
• Tax returns
• Titles to assets
• Banking records
• Debt agreements
• Lease agreements
• Insurance policies
• Payroll

You already know that there is more that goes into law firm valuation than just these factors, but they are certainly a great place to start. 

OTHER FACTORS IN LAW FIRM VALUATION

When selling your law firm, buyers are not only going to look at the firm’s financial documents, they will also look at other factors of value. These will include:

• Client lists: Although there is no guarantee that your clients will stay on with the new buyer, there’s a very good chance they will. A substantial client list also tells the buyer that they are purchasing a reputable law firm, which adds to its value.
• Staffing: Much of the time, your staff will stay on with the buyer, particularly if you are retiring or getting out of the industry. When you have sufficient staff and they are knowledgeable, friendly, and helpful, that also increases the value of your firm.
• Reason for the sale: Certain reasons for the sale, such as retiring or relocation, will not decrease your firm’s value. However, if buyers feel as though you just need out, particularly if that need is urgent, they may wonder why that is and it could hurt your ultimate sale price.

Finding a Buyer

Of course, knowing how to evaluate a law firm is only part of the battle of selling. You also need to find a buyer willing to purchase it for the amount you would like.  

Fortunately, there are many ways to find the right buyer. Many attorneys simply rely on word of mouth. The legal community is often a small one even in the biggest cities, and by telling a few people within it that you want to sell, word often gets around. 

If you do not receive a lot of interest when relying on word of mouth, you can also post an announcement in your local and state bar newsletters. Lawyers often read these regularly and so, if someone is thinking of purchasing an existing firm, it may help you with your sale.

Lastly, you can also always go online to find your perfect buyer. Post an announcement on your own website or blog or even post about the sale on websites such as Craigslist. This will tell thousands of people about the sale with just one ad.

Get Help from a Washington Professional Business Broker

If you are thinking about selling your law firm and need help evaluating it or finding a buyer, our professional business brokers in Washington can help. At Private Practice Transactions, we can help with every aspect of the sale and ensure that it goes as smoothly as possible. Call us today at (253) 509-9224 to learn how we can assist with your sale.