Plan today, retire comfortably tomorrow.
You can’t pass the torch when no one’s waiting for it. Though you may not want to step away from practicing law, you’ll need to hand over your clients and responsibilities at some point. Succession planning helps you find the right replacement, maintain the monetary worth of your firm, and organize a smooth transition for your clients and employees.
Create your own succession plan with these five essential steps.
1. Draft a Transition Timeline
Your succession plan should begin at least five years before you plan to retire.1 Let everyone at your firm know when you start searching for your replacement. Keeping your staff involved in the process helps you prevent one of the main pitfalls of poor succession planning: losing talented and dedicated employees.1
In the meantime, you have cases to work, files to review, and clients to consult. But you need to block off time for succession planning. Otherwise, this important and intricate process won’t get the attention it deserves.
Even if you handle bookkeeping duties, consult an accounting professional to create realistic monthly averages for your firm’s expenses and revenue. This collaboration combines your transition timeline with a plan to create more profit, because you’ll need extra earnings to bring on an external hire or promote a successor from within.
2. Create Your Ideal Candidate
Today, 62% of active lawyers are age 45 or above, and 4% of active lawyers are below the age of 30.2 Before you sift through this broad spectrum of talent, create a profile for your ideal candidate. This profile should include personality traits, legal experience, overall skills, and certifications.3
As you search for your replacement, don’t let an impressive resumé lure you into a quick decision. Qualifications alone won’t let you know if a potential successor will get along with the firm’s clients and employees. Interview every serious candidate, whether it’s in person, over the phone, or through Skype. This allows you to discover possible character issues or personality conflicts.
3. Make an Enticing Offer
After you’ve narrowed the field down to one choice, make a strong offer. Today, it’s common to award successors 10% ownership of the firm at no cost.3
Include a written agreement that gives a higher percentage of ownership to the successor over time. Use this contract to clearly call out revenue goals and intervals for performance reviews. Make sure to incorporate your transition timeline, because your new partner will eventually start buying in to ownership.
4. Inform Your Clients
You don’t want your clients to be unfamiliar with your successor, and likewise, you don’t want your successor to know nothing about your clients.
As time allows, set up in-person meetings or conference calls where you and your successor speak directly to clients and discuss their unique needs. This puts your replacement at ease and lets your customers know who to contact if they have questions.
5. Slowly Transfer Responsibility
A succession plan works like a very long tryout. If everything goes as planned, your successor gains more trust and earns more of your responsibilities.
Right before you retire, your succession plan ideally ends with a complete buyout of your ownership stake. This boost in income should help you retire in comfort, and with your newfound free time, you’ll finally be able to take a long vacation.
This article is for general information purposes only.
1Olmstead, John W. “Law Firm Succession/Exit Strategies.” Olmstead & Associates. 26 August 2016.
2Gaille, Brandon. “30 Mind-Boggling Lawyer Demographics.” Brandon Gaille. 24 August 2016.
3Cole, Dustin A. “Pass It On: Secrets to Succession and Transition Planning.” GPSolo. 24 August 2016.