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by Arthur G. Greene, Esq. & William E. Howell Sucession Planning Part I: Solos and First Generation Law Firms


If you are the founder of a solo practice or small law firm, chances are you think about the long term future of your firm on a regular basis, yet the day to day de- mands keep you from taking steps to ad- dress it in any proactive fashion. Develop- ing a plan is not as hard as you may imagine and the benefits from the effort spent are well worthwhile.


The goals of a succession plan should


be (i) to make sure your clients’ on-going needs are well taken care of, (ii) to provide you with the flexibility to enjoy some per- sonally rewarding retirement years, and (iii) to maximize the value you receive for the law practice you have built through years of hard work. It is only through a process of planning that begins well in advance of the time for the firm founder’s retirement that these goals can be achieved. First generation law firms are usually founded by lawyers who are both strong leaders and exceptional rainmakers. If the firm has grown over the years, the found- er’s focus in hiring additional lawyers has been for the purpose of servicing their cli- ents and performing legal work, without succession in mind. As a result, the sup- porting lawyers frequently do not develop the skills necessary to generate business on their own and successfully lead the firm. Without a successor-type lawyer in place, the retirement of the founder will challenge the very existence of the firm. In this respect, every solo practitioner


or small firm has a succession issue. Even those lawyers who say they love their work and have no plan to retire may be surprised to find that, over time, their feelings may change to, “I want to work when I want to work.” Sometimes, this feeling can creep in unexpectedly. By the time most lawyers reach their sixth and seventh decades of life they no longer want the demands of a full-time practice. In many cases, the future of their practice or their small law firm ends dismally, forced by immediate events, like illness, disability, or death. Lack of any fore- thought in retirement planning results in some lawyers winding down their practices and closing the doors, an unfortunate fina- le to what could have been a lasting legacy. Every founder of a solo practice or small firm needs to consider what they want for a retirement plan and whether the alterna- tives include transitioning the law practice to a hand-picked successor. Making the de- cision may seem daunting and implement-


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ing it may seem formidable. In many in- stances, this is the cause of inaction. But many who take the steps say they wish they had done it sooner. The first thing to recognize about succes- sion planning is that it is a process, not an event. If your firm has ever created a stra- tegic plan or long range plan, the approach and work involved are similar. The process should begin at least five to ten years be- fore the solo practitioner or founder of the firm intends to begin a transition. Identify- ing a successor and developing a step-by- step shift takes time. In most circumstanc- es, if you are in your mid-fifties, now is the time to set a plan in motion. Waiting un- til you reach sixty or seventy is waiting too long.


Elements of a Succession Plan


There are several aspects to a long range succession plan. They include:


• Generational Spread of Partners - Some aspects of succession planning are pretty simple. For example, as you grow your firm, make sure you hire from different generations. You would be surprised to learn how many small firms grow by adding lawyers from the same generation as the founder and end up with all the partners in the same age group.


• Leadership Requirements - Rarely do we see a successful firm without strong leadership,


which therefore


becomes a critical succession plan- ning issue. Some believe leaders are born, not developed. Others embrace the concept of leadership training. We won’t solve that debate, but the point to take away is that successful succes- sion involves identifying or develop- ing one or more effective leaders to succeed the founder.


• Management Responsibilities - Man- agement is unlike leadership and in- volves different skills. Every law firm needs individuals who are organized and have the ability to carry out pol- icies and effectively implement new plans. As firms grow, the majority of the management duties can be dele- gated to an office manager.


• Entrepreneurial Spirit - Lawyers who are founders of a small law firm have an entrepreneurial spirit. Without it,


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• Recruit a Successor - Solos and small firms with no apparent successor may consider engaging in a process to hand pick a successor. The successor can be an experienced younger law- yer that can be groomed to become the owner of the business. There would likely be a fast track to partner- ship and an exit strategy with an ap- propriate compensation arrangement for the retiring lawyer. This succession approach covers a five- to ten-year period.


• Merger - Solos and small firms can consider merging with another small law firm. This type of arrangement usually involves a two- or three-year period to execute. Often, the retir- ing lawyer is provided an Of Counsel arrangement with appropriate com- pensation and benefits. The duties of the Of Counsel may vary, but a crit-


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they would not have embarked on be- coming business owners. Unless you focus on this factor in your recruiting process, you are likely to make hiring decisions that surround you with law- yers who are not and never will be en- trepreneurial and therefore not the firm’s successors.


• Transitioning Clients - Clients are not commodities that can be easily trans- ferred from one lawyer to another. They are not like mortgages that can be transitioned from one lending insti- tution to another, with minimal notice to the consumer. The lawyer/client re- lationship is intensely personal. The successful transition of clients to suc- cessor lawyers takes more effort than most lawyers appreciate.


These elements need to be part of a


comprehensive plan that will include re- cruiting, training, career development, and sharing of clients. For some the effort may seem burdensome, but for those who can implement such a plan the financial rewards and lifestyle benefits will be well worth the effort.


Alternative Approaches


Most small firms are unprepared when the founder wants to retire. At that point, what are the possibilities? Fortunately, there are still a number of approaches to take. For example:


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