How do we move from thinking about retirement to creating a succession plan? 5 tips that put you on a path that works for you.
The statistics are disheartening. The ABA estimates that 400,000 lawyers in the United States are age 62 or older and that 63% of law firm partners 60 or older control at least a quarter of their firm revenue. Yet only 28% of law firms have a succession plan in place.
The bright side is younger lawyers, now more than ever, are declaring they don’t want to die with their wingtips on.
But how do we move from thinking about retirement to creating a succession plan? Keep in mind, it’s never too early to start planning. Creating a succession plan doesn’t mean you stop working today. Instead, it puts you in control of creating a path that works for you.
1. Identify Your Law Firm Succession Planning Options
Most people don’t give enough consideration to identifying their retirement options — and they don’t start considerations early enough. Some of the options:
- Go without a plan. The thinking being, “I’ll die at my desk (or become disabled) and someone else will close my office for me.” This option is the least desirable. While it may not affect the deceased lawyer, it is very hard on those left behind. Your remaining law partners, staff and family would be left to clean up a practice instead of focusing on their grief or making their own plans for moving forward. Also, there are various problems that may crop up later such as malpractice issues, bar complaints, client dissatisfaction — all issues that impact a lawyer’s legacy.
- Wind down the practice. This option requires the least planning, and most lawyers choose this by default. Many lawyers gradually wind down as their client base also begins to slow down. Your malpractice provider, state bar or succession expert can provide you with appropriate checklists to help you be on your way.
- Hire a successor. This suggestion is often met with resistance. “I can’t find young lawyers who want to work hard,” “This generation isn’t interested in a practice like mine,” or “My clients will never accept another lawyer.” Most of these are excuses that can be overcome with patience, a new mindset and a plan.
- Sell the practice. ABA Model Rule 1.17 allows for the sale of a law practice. While it may be true that not many lawyers sell their practice, it isn’t accurate that your practice has no value outside of yourself, or that there is no market (or buyer) for your practice. While value is different for each practice based on practice area and geographical location, there is value in your physical location, your law firm name and reputation, your web address and marketing efforts, your referral network, your staff who know your processes and your clients, and your clients and their work on your shelf. Take the time to talk with an expert in law firm succession planning and valuation before shutting the door on this idea.
- Move your practice to another firm and become “of counsel” for a wind-down period. This plan may involve a lump sum or payout over time, allowing you a scheduled wind-down and soft landing into retirement.
2. Get Your House and Succession Plan in Order
If you are considering hiring a successor, selling your firm or moving your practice to another firm, your practice needs to be in good shape. If you were selling your home, your realtor would recommend a fresh coat of paint and some curb appeal adjustments. If there is structural damage, that may move to the top of the list. Consider your law practice. Is your technology up to date? Can you quickly identify your current clients, case status and list of referral sources? Does your practice rely on outstanding staff members who would be willing to stay with the practice? If you are going to consider one of these options, don’t follow your natural instinct to slow your practice as you get closer to retirement. You may need to work at the same pace or harder for a year or two to get your financials where you want them to be for a great sale price. Or you may want to invest in improvements that will allow you to attract a successor or a buyer.
3. Create Your Retirement Advisory Team
Build a team of trusted advisors. As you begin to think about your future, you want to make sure you are ready financially and emotionally, as well as practice-ready. Having a team of confidants and consultants can help you through the process. This will include your accountant, tax advisor, financial planner, and a succession plan expert. It may also include friends who have retired, your doctor, clergy, a wellness expert, your spouse, partner or adult children. These are the people who have your best interest in mind, as well as the expertise to help you make the right decisions.
4. Develop a Plan for Life After Law
One barrier to retirement is fear of the unknown. Knowing what you are moving toward can help you move forward. Ask yourself: What is my role outside of being a lawyer? What are my hobbies and interests? Do I want to work part time or start a new career? How will I manage my health and wellness? Developing interests outside of the law in your 40s will help you prepare for retirement in your 60s. While it may be hard to balance work, family and friends, the investment you make now in having a life outside of law will pay off in retirement planning. Begin the process with an inventory of all the things you are (spouse, partner, parent, grandparent, parishioner, community member, mentor), and start a list of all the things you can be (volunteer, teacher, mentor, athlete, gardener, hobbyist, cook, baker, author, photographer, artist) — the potential list is endless.
5. Review Your Plan Periodically
Plans change. Perhaps your successor lands a better opportunity. Or a change in the practice accelerates your retirement time frame. Having a plan A and plan B, along with a disaster plan, helps ensure you are ready to approach life after law with enthusiasm.
Related Reading …
“Lawyer Retirement: Planning for Life After Law During a Pandemic” by Camille Stell
“Prepare Yourself for a Happy Retirement” by Ida Abbott
“Five Reasons Lawyers Avoid Retirement” by Camille Stell
“Saving for Retirement While Running Your Practice” by Ryan McPherson
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