Taking Your Law Firm Valuation to the Next Level with Gordon Van Wechel

business valuation valuation Jan 06, 2022

Knowing your business inside and out contributes to its performance. But what if you're unaware of the factors that drive business value and affect business valuation? You'll only ever be scratching the surface of what your law firm can really do.

In this episode, Gordon Van Wechel joins us to discuss how you can prepare your law firm for ultimate value. With his extensive knowledge and experience, he shares the factors that will help increase your business' valuation and enhance your presence. These, in turn, will allow your firm to gain more clients, become more appealing to business acquirers, and increase your value.

Do you want to find out how to unlock the fullest value potential of your firm? If you're looking to increase your business valuation, then this episode is for you.

Here are three reasons why you should listen to this episode:

What are the factors that drive your business’ value?
How can marketing and focusing on value drivers positively impact business valuation?
What are the effects of unlocking your business valuation?

Resources On Valuation

Digital Jumpstart
Visit the Alchemy Consulting Group website!
Start value building with Alchemy today.
Get your Value Builder Score to improve your business valuation, discover your company’s assets, and spot your company’s silent killers!
The Alchemy Consulting Group website
Core 5® Marketing for Professional Practices
Total Market Takeover for Roofing Contractors by Gordon Van Wechel

Episode Highlights

Gordon’s Journey

After grad school, Gordon took a job at a large national corporation. He got fired after two years because he couldn’t keep his mouth shut.
Since then, he’s built and sold three successful companies.
The Alchemy Consulting Group was formed in 2003 to make business strategies available to local companies.

How to Unlock Your Business’ Value Potential

Create a website that communicates your value proposition.

Claim your Google business page and optimize it by publishing content regularly.
Find citation and directory sites for search engine optimization.

Drive traffic value to your website through enhancing your online reputation, doing banner ads and retargeting, and paying for Facebook and Google ads.

Implementing Paid Ads

96% of the time, visitors to a website don’t take action at that time.
What’s important is that people who click on the ad get their questions answered.
If somebody clicks on an ad and bounces quickly, they didn't find the answer to their question, negatively affecting that website's quality score.

Getting Started on Marketing

Figure out the most basic, least expensive thing you need to get an online presence.
Most business owners overlook the importance of online reputation.
Online reputation is one of the top three components in Google's algorithm for website search result rankings.
Garnering reviews helps your website place high on search results and is cost-efficient.

Business Valuation: Increasing Your Firm’s Value

Moshe: “... when we’re building our law firm, if we’re not thinking about this end game from the get-go, we’re essentially on a runway. But we’re taxiing instead of speeding up to take off.”

Business owners tend to focus on what they’ve done to build the firm, not on its value.

Business acquirers don't look at past performances but rather the future potential and value of a business for valuation. Companies may have hidden traits that increase their business valuation.

Gordon: “Businesses look very similar on the surface. But oftentimes, there’s hidden value in a business, in a practice that the owner may not even know about.”

Some things might impede your business’ value at the time of sale. There's no opportunity to practice selling a business, so analyzing value drivers and implementing them is crucial to valuation.

Gordon: “When the time comes to sell, we take it to market. And if we haven’t analyzed these other factors, then we can very easily be leaving money on the table.”

Considerations in Business Valuation

Using the Value Builder Score, they found eight value drivers that enhance a business’ valuation in the eyes of a business acquirer.

Distribute authority in the firm.
Don't put more than 15% dependency on any single supplier, client, or employee.
Create a recurring revenue throughout the year.

Prioritizing the Value Drivers

The Value Builder Score gives you a score out of 100 for each value driver.

The average value score is between 50-55, so they would analyze the low value drivers first since they would move the needle the fastest.

Double your business valuation by working on the value drivers.

Gordon: “So you can literally double the value of your company by working on these value drivers. And again, that’s not something that happens instantly; that happens over time.”

Paying Out Your Firm

In most cases, earnout happens where a person has to stay involved with a company to some extent for a certain period.
The final payout percentage depends on what happens in the firm during that time.

As a seller, you should focus on business valuation and minimize or eliminate the amount of value earnout.

Typically, there's a cap to what the seller can earn out but no floor, so it's better to avoid earnout as much as possible.

Gordon: “... the people [selling their business] who come in have all of these great ideas that aren’t successful, and the owner winds up coming back in to try to take over and protect the earnout amount that they’re still waiting on…”

The Effects of Focusing on Key Metrics

People on the team become more involved in the business, taking on more leadership roles and ensuring effective operational systems.
Client service also increases, and the net promoter score is essential.

Gordon: “But the higher you can get that net promoter score above that range, the better the value of your firm is in the terms of an acquirer because what that tells them is that there’s loyalty there…”

Focusing on that helps implement better onboarding and transaction processes.

Working on value builders gives you a vision of your current situation and where you could be in the future.

Gordon’s Goals and Advice for Clients

Focus on your expertise and outsource other tasks.

Solo practitioners generally aren't great candidates for the Value Builder process unless they aim to expand. On the other hand, an owner with senior partners and some associates are logical places to start the Value Builder program.

Gordon: "Focus on what you really do well, focus on the highest value, highest return on investment of your time, and outsource other things. That will help you have a better quality of life and enhance the value of your business."

About Valuation Expert Gordon

Gordon Van Wechel is the Founder & CEO of the Alchemy Consulting Group. With 25 years of experience in the industry, he brings revolutionary ideas combined with enthusiasm and passion to encourage, inspire, and support his staff and clients. He helps clients develop creative marketing strategies and transition out of their businesses.

If you want to know more about Gordon, you may visit his website or send him an email at [email protected].

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