Article 3/6: Making Your Law Firm More Saleable Before Succession
Value and saleability are related, but they are not the same. A law firm may be profitable and still be difficult to sell if it relies too heavily on one principal, has weak systems, carries too much work in progress, or cannot demonstrate that clients will transition. Saleability is about transferability. It asks whether a buyer, incoming partner, or merger partner can step into the business and continue to earn the profits that justified the transaction.
The strongest starting point is a three-year history of high performance. Purchasers are more comfortable when they can see consistency in fees, profit, cash flow, staffing, and client behaviour. One exceptional year is helpful, but a pattern is more persuasive. That means improvement work should start years before the intended exit, not after the firm is already in the market.
Profitability improvement begins with leverage and staffing. Lawyers need clear performance expectations, and the firm must make sure work is being done at the right level. Senior lawyers and partners should not be doing tasks that can be handled by more junior people. Delegation is not just an efficiency tool; it is a succession tool. When clients are used to dealing with a team rather than only the principal, the practice becomes easier to transition.
Training and supervision are equally important. Junior lawyers should have regular contact with partners or senior staff who review file load, development, and performance. Career path planning should be documented, not left to informal conversations. A buyer will be more attracted to a firm that can show it has invested in people, because a strong team reduces dependence on the exiting owner.
Pricing is another major lever. Firms should understand whether their rates sit within the appropriate market range and should know the cost of production for each lawyer, practice group, and fixed-fee service. Fee earners need to be trained to discuss price confidently. Clients should not be surprised by invoices. A “no surprises” approach protects relationships, improves debtor recovery, and makes revenue more predictable.
Time utilisation must also be managed actively. It is not enough to hope that lawyers are busy. The firm should monitor recorded time, billable time, write-offs, and delegation patterns. If the business has enough work, then performance expectations should be enforced. If it does not have enough work, that is a growth and marketing issue that needs to be addressed well before succession.
Cash flow can materially affect both value and buyer confidence. Work in progress should be recorded properly, monitored regularly, and billed frequently. File inactivity should be visible. Many firms benefit from disciplined billing cycles, including regular billing days where client work pauses and invoices are brought up to date. Debtors should be managed by the responsible fee earner, especially once an invoice reaches 30 days. Payment options, including credit cards and payment plans, can help reduce friction.
Client management is at the heart of transferability. Firms should gather client feedback, conduct end-of-matter reviews, maintain detailed client databases, and rank clients by value, relationship strength, and risk. The more touchpoints clients have across the firm, the less vulnerable the practice is when a principal leaves. Trusted clients and referral sources may also be willing to support transition discussions when approached appropriately.
Technology and management systems complete the picture. A recognised practice management system, sound workflows, up-to-date hardware and software, accessible management reports, and a clear management structure all make a firm easier to understand and integrate. Buyers do not want mystery. They want evidence.
A saleable firm is one where profitability is not accidental, cash flow is controlled, clients are connected to the firm rather than only one person, and the business can be explained through reliable information. The earlier these disciplines are embedded, the stronger the owner’s position will be when succession begins.
Sam Coupland
Director, FMRC
E enquiries@fmrc.com.au