How to Determine Your Firm’s Value and Sell at a Fair Price with Victoria Collier

buyers exit plan investors law firm value selling a law firm selling your business Mar 17, 2023

Whether you’re just starting a law firm or have many years of building one up, most of us never think about selling the firm we’ve built. If you’ve never thought about it before, now is the best time to start. Remember: putting this off can be tricky. When you’re desperate to sell, you’ll accept any price, devaluing the effort and years you’ve put into the firm.

The solution? Plan with the end in mind, even if you think you’ll never sell your business.

In this episode, Victoria Collier joins us to share her insights on the value of having an exit plan. It’s not just about selling — it’s about creating a valuable law firm. Victoria also shares the ins and outs typical of a law firm purchase or sale.

We never know when we’ll need to sell our law firm, and whether or not it happens, planning for it is important.

If you want to build a more valuable law firm and learn about exit strategies, then this episode is for you.

Here are three reasons why you should listen to this episode

Learn how law firms are typically valued and sold.
Understand how to build your law firm’s value.
Discover the difference between being a lawyer, a business owner, and an investor.

Resources

Want to implement what you’ve learnt in this episode? Download the Action Guide, a workbook designed to help you process and implement the knowledge gained from this interview.
Learn more about the Profit with Law Elite Coaching Program here.
Connect with Victoria: Facebook
Quid Pro Quo Law
Smart Lawyers Position to Transition podcast
Art of Buying and Selling Law Firms Facebook group
Clockwork: Design Your Business to Run Itself by Mike Michalowicz

Episode Highlights

[02:23] Introducing Victoria

Victoria moved out of her parent’s house at age 17. She ended up in the Air Force and became a paralegal, which led her to become a lawyer.
Before joining the military, Victoria worked as a caregiver in a nursing home.
She worked in the niche of veterans benefits because of her experiences.
It was during a presentation on Veterans’ Day that she realized she needed to move on from this line of work.
Victoria eventually sold the firm in 2020.

Victoria: “If you’re not happy, you need to go. Don’t make yourself miserable or anybody else miserable . . . That was my first indication that maybe things aren’t quite as good as I think they are.”

[27:28] Lessons Learned on Leveraging Tech

Victoria said she’d be less arrogant if she knew what she knew now.
While running her law firm, she didn’t want to work with a software company. She thought she could recreate everything herself.
10 years later, she’s now working with that company.

Victoria: “I would have used technology much sooner [rather] than trying to recreate everything myself out of arrogance. So that’s the number one thing I would have done . . . invest in systems that make things go more efficient so that we are more profitable.”

[30:09] How a Law Firm Gets Sold

Law firm owners who are looking to sell their firms usually have no other options and have become desperate.
Buyers typically offer 20% of your ongoing revenue based on 2 to 3 years of data.
With the help of coaches, more law firms are now becoming profitable. Lawyers are willing to buy firms at a better deal.
Historically, transitioning owners take 1 to 2 years.
Victoria observes that when a firm is built beyond the owner’s name, the transition can be as short as 3 to 9 months.

[35:35] How are Law Firms Valued?

Business valuations are based on earnings before taxes and depreciation.

Victoria: “We want to know: What is that net? . . . What’s the take-home? Because a buyer wants to know what they’re going to be able to put in their pocket, not just what they’re putting into the firm itself.”

As a service-based business, law firms are also valued based on their predictable income, leadership, and team structure.
The risk of loss is also a factor in terms of team structure.
Policies and procedures for mitigation bring more value to the firm.
Another test for value is whether the firm can work autonomously.

Moshe: “This idea or concept of having a four-week vacation . . . is that you’re not taking a four-week vacation because you’re taking a vacation from the business. It’s giving the business an opportunity to have a vacation from you.”

[41:00] Think Like a Business Owner, Not a Lawyer

Remember, a law firm is still a business. It needs to function like one.
The law firm owner doesn’t even need to be a lawyer. They simply need lawyers in order to function.
When a lawyer starts a firm, they are stepping into two different roles — an owner and an attorney.
A law firm that can function on its own can be a passive asset.
Learn to see the value of a law firm, whether you’re buying or selling one.

Victoria: “We need to know what the value is. We need to know what systems they have and what team they have in place, whether we’re on the buying end or the selling end.”

The Investors’ Perspective

Remember, investors will always look at the risk and reward.
When you’re building a business with the end goal of selling, remember to decrease risks.

Victoria: “We should look at shared risk . . . If you’re a buyer that doesn’t want any risk, then you shouldn’t be in the business of buying any kind of business, much less a law firm.”

Victoria’s Tips on Selling a Law Firm

Be emotionally ready to sell the law firm.

Victoria: “You may feel done. You may be like, ‘I cannot do this anymore,’ and yet, do everything possible to sabotage the sale, unintentionally, unconsciously. Because you don’t know what’s next for you. You don’t have an identity outside the law firm.”

When your name is tied to the business, your attachment to it will be higher.
Most buyers will care about the name tied to the firm and the complexities around changing it.
You never know when your last day at the firm will be. But you can put systems in place while you still can.

About Victoria

Victoria Collier is the founder of Quid Pro Quo, LLC, a company dedicated to help lawyers build a valuable law firm and help them sell it. The company is also actively representing clients in sale and purchase of law firms.

Before Quid Pro Quo, Victoria built a seven-figure estate planning elder law firm right out of law school and sold the firm after 18 years. She’s a certified Exit Planning Advisor, certified in business valuations, and a co-owner of an eight-figure business helping veterans.

Want to know more about Victoria's work? Check out Quid Pro Quo and the Smart Lawyers Position to Transition podcast. You can also join the Art of Buying and Selling Law Firms Facebook group.

Connect with Victoria on Facebook.

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