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Solo In Chicago

...empowering the Second City's entrepreneurial legal community

Wednesday, June 20, 2007

Buying a law practice...

Saw this in the Law Bulletin classifieds:

Divorce Practice for Sale

Great opportunity for young lawyer! Loop family law firm - 38 year client base, 350 files/yr., gross $1.2 million, 3-4 associates. Ready to retire will stay on as consultant. Serious inquiries only. Asking $1.4 million. Call XXX.

Anyone consider these options? I suspect we'll be seeing more and more of these offers since Rule 1.17 got amended along with Baby Boomers retiring. Anyone have an opinion on the viability of buying a practice to build your practice?

In 2003 I was faced with a related dilemma. Right out of law school I took a job with a family friend who was planning his retirement and our expectation was that after a year or so we'd form an entity and agree to some buyout provisions. This was before 1.17 got amended so he could NOT flat-out sell his practice like he could now. So we both ran the numbers and had our respective accountants value the practice...we didn't agree and thus I'm "Solo in Chicago" instead of in that partnership. He was asking far less than $1.4 million.

My general thinking is that unless it's a practice with heavy repeating entity representation it's not worth it to pay a premium for a law practice. What's the value of all these files of people who got divorced once? That's a one-time legal service. Conversely I think there is some decent value in say 50 suburban municipality clients. It's not quite this black or white but I think this dichotomy should underlay one's thinking. Contact me if you face this decision...I still have a lot of the "valuation modeling" that the accountants did.


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