For 30 years I practised as a sole practitioner in North Shields in north east England, my partners having long since retired. When I reached my late 50s, my thoughts turned to my retirement.
I had been a solicitor for nearly 40 years and felt that was enough in any job! I also had a bout of ill health, which tends to focus the mind.
So, what could I do next? I could close the business. While it is not particularly difficult to do from a regulatory perspective, there are three important things to watch out for:
- stiff penalty clauses in business leases if you don't own the premises (although, fortunately, in my case, I did)
- the question of professional indemnity insurance run-off cover
- what happens to long-serving and loyal members of staff?
What happens to the staff?
The last point was a deal-breaker for me. I had worked with some staff members for 30 years. My secretary came to work for me straight from school, aged 15. I practice in an area of fairly significant social deprivation, so to make people redundant could have very damaging effects on their lives. It is a huge moral issue, and it was this that drove me more than any of the other financial considerations on the table to sell, rather than close. I decided my best course of action was to merge with one of the bigger firms in town.
I didn't really set myself a deadline to sell – I was busy running the practice at the same time. Perhaps in hindsight I was rather dilatory.
Going, going, gone
I began by sounding out local practices and speaking to other solicitors in the area and at conferences about my plans. I had to be delicate – gossip can spread fast in a small town, and I didn't want to give the impression that the business was in trouble. I also spoke to a firm in Leeds which specialises in law firm mergers and acquisitions, generally firms much larger than my own. They were very useful in terms of pastoral support and explaining what to watch out for when selling.
Though I investigated about half a dozen firms, I only had in-depth conversations with two, and I decided on the one that offered the best package for my staff who wanted to transfer over.
From index cards to IT
To make my business attractive for sale, I realised I had to bring things into the 20th century! We still worked on ledgers, with index cards in the 'strong room'. That was the way it had always been. When someone asked me how many wills I had on file, I would reply: '3,000 … I think.'
I hired someone to create databases of my wills and deeds, which took about 10 months. These databases were a crucial selling point for my business. Clearing out the office was an eye-opening experience: we came upon a stash of wills, one of which was for someone who had been killed in the second world war!
The sale was straightforward, insofar as I knew the senior partner in the firm I was selling to fairly well. It wasn't about points-scoring – I knew I had a very sellable asset and it was really a case of agreeing how much I wanted for it. I was very keen that my employees who were transferring over would be looked after, so I agreed to take a consultancy role in the firm, to keep an eye on things and ensure they were bedding in.
The whole process took about a year to complete. Needless to say, selling your legal practice is 10 times more complicated than selling anything else that you might care to mention!
Sole practitioners, small firms, and illness
In retrospect, I probably would have done it earlier. I have subsequently had another bout of ill health, and I have seen the disaster that can befall sole practitioners of a certain age when illness strikes.
The hardest part of everything was, psychologically, giving up my practice. It was my life – I lived and breathed it, I woke up at 3am thinking about it, I rarely went on holiday. As a sole practitioner or partner in a small firm, you can enjoy quite a high status in the local community, especially if you have been practising for a while – people come to rely on you. You build relationships with clients, and they become friends. It's rather like being a respected doctor. I think losing all that would have been a bit of a shock, and I would have become bored playing golf three days a week!
If you're thinking of selling or closing your firm, get to it sooner rather than later. The truth is that it is becoming much more difficult for smaller firms to exist. In my opinion, I think the authorities would be happy for each town to have no more than three law firms at most.
According to the Law Society, the profile of most provincial solicitors is a white man in his early 60s and poorly provisioned as to pension. In these smaller firms, you tend to find that the variation in the ages of partners is not wide – there may be someone in their 60s, someone else is 62, then 55 – there's notably no one in their 30s or even 40s. This can cause lots of problems: how do they extract capital without destabilising the firm?
Whereas in the past firms would be sold to younger solicitors who would pay a capital sum for goodwill, this is now unusual. If firms do not have the finance, they will be unlikely to be able to deal with the issues involved in closing down the business, which can lead to solicitors continuing to practice in circumstances where the partners are mentally worn out, are not compliant with current practising requirements and generally unable to cope with current business norms.
One thing that the Law Society could do is offer more pastoral care for sole practitioners or partners in small firms in the same situation that I was. It would be much more helpful to speak to a dedicated person over the phone who has handled lots of similar cases, rather than being directed to a website or practice note.
Views expressed in our blogs are those of the authors and do not necessarily reflect those of the Law Society.
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