Many of our Attorney Transitions Practice clients are interested in selling to their junior partners, or an existing law firm. An essential part of this process is understanding the value of their firm. This blog addresses four ways to improve the value of your law firm.
1. Efficient and Scalable Operational Workflow. An efficient, scalable workflow is crucial in determining value because a potential buyer will have the ability to combine operations and add client volume, while still maintaining historic (or even improved) profit margins. The same profit margin on higher revenue = more profit.
2. Demonstrate a Consistent Revenue Stream. Astute potential buyers will review many factors when investigating your revenues, but the ability to show a consistent stream of clients and revenues will almost always weigh in your favor. Whether via marketing efforts or referral sources, a repeatable flow of clients will reduce uncertainty and risk for a potential buyer.
3. Accurate and Presentable Financial Metrics. You should maintain and have the ability to present accurate historical financial data. This data should include an income statement (P&L) and balance sheet and may include other key performance indicators (KPIs). Being able to show financial trends will certainly increase the attractiveness of your firm.
4. Proper HR Documentation. Having a history of solid HR and employee documentation may improve your company’s value. Such documentation may include, but is not limited to, non-disclosure agreements, employee contracts, and adherence to progressive discipline policies. An HR department that is organized and consistent presents less potential future legal liability for a potential buyer.
For assistance with creating business systems, or with any other legal needs related to your business or estate planning, contact Fournier Legal Services at jfournier@jeflegal.com or 860.670.3535 now for a free consultation and planning session.