Are you a lawyer considering retirement, or do you know someone who needs to start thinking about their retirement? If so, read on…
It seems counter-productive to be thinking of an exit strategy when building a business; but that’s precisely what experts say you should do. This was particularly relevant during the .com era when companies were often crafted and shaped for the very purpose of being bought out.
We don’t think like that in law because a law practice is far more personal. Our business is tied to our ability to build trusting relationships, which are harder to transfer simply armed with a purchaser’s agreement. And few lawyers go to law school to create a firm only to sell it once it gets successful. We’re usually in this for the long haul.
But at some point – whether you are of counsel, a partner or the owner of your firm, you will stop practising either because you decide to (i.e. you retire) or the decision has been made for you (by the firm, or by your health). If that moment is the first time you think about your exist strategy, it’s already too late. Too many decisions will be made without your input about the last stage of your career, your financial future, and who will take on your clients. And that’s no way to end an illustrious legal career.
The remedy is to take your exit strategy into your own hands, well before that exit actually occurs. Here’s how:
- Spend some time seriously planning what you want your life to look like in retirement. What will you do to fill your time? What could you do that you’ve always wanted to? How much money will you need?
- Next, work backwards and determine how you need to prepare for this stage of your life. Do you need to save up some money? Do you need to start a hobby? Do you need to learn a language, buy a new computer, learn a new skill before you commence on that next life stage? Plan it out so that you work toward retirement, rather than having it forced on you at the last minute, with no tools or idea how to live it.
- Determine an approximate retirement date. It’s impossible to really plan unless we have a time line in mind. The exact date can always change, but try to figure out an approximate schedule.
- Take a long, hard look at your practice and determine what you would like done with it. Will other lawyers in your firm inherit your clients? Do you intend to try to sell your practice?
- If other lawyers will inherit your clients, create a work-back schedule and plan for how you will introduce your lawyers to those clients. Figure out how long the client will need to get comfortable with that lawyer, and create a gradual plan for making that happen. Keep in mind that this transition might take a year or more.
- If you plan on trying to sell your practice, meet with an advisor to determine what the practice is worth. There may be ways – with time on your side – to make adjustments so that your practice is more sellable, and potentially more valuable. Ensure you have a game plan in place, with the time to implement any strategies needed to prepare for an eventual sale.
You’ll notice that this list began with time spent planning retirement life before addressing work life. That’s because in my experience, it’s impossible for lawyers to seriously consider retirement unless they know what they are going to. By determining what the “to” looks like and taking the time to make it very appealing, the lawyer can then fully commit to taking the steps needed to deal with the work side of their life.
You’ll also have noted that the planning for retirement and succession starts considerably before the actual retirement occurrence. Six months is insufficient. You need 1-3 years of prior planning and action items for an effective retirement plan and work transfer process. Think about it: you may have built trust and loyalty with your referral network and top clients over a 30-year period. Do you really think that a few quick introductions to a junior over your last six months at work will effectively transfer that relationship? It will not. If you truly care about your client base, then ensure they have an ample amount of time to get to know and trust whomever you’ve appointed as your successor.
I appreciate that one of the greatest challenges to this graduated, fully-facilitated client relationship transfer process is the typical law firm compensation system. Law firms should look closely at how they manage compensation for lawyers on the retirement path. If firms only value work done, where’s the incentive for a retiring lawyer to work on a smooth, prolonged transfer? In a perfect world, as soon as a lawyer has a draft retirement and succession strategy in place, the firm would put that lawyer on a different compensation system that reflects billings, but also recognizes work transfers throughout that 1-3-year period. Reward – or at least don’t penalize – the behaviour you want to see.
From my view of the marketplace, most lawyers are not leaving the practice of law because they are being forced to. They are leaving because they are tired, they are intelligent and have many other interests and skills they want to explore, and their family are encouraging them to embrace a non-working lifestyle. Most of the lawyers I know at this stage have more than earned the opportunity to step into a wonderful retirement. But lawyers hate change and too often, their work has defined them. For this reason, I encourage my clients to see retirement as a process with a very blurred line at the end of their work life where they might have one foot in each camp for a period of time. This gives everyone time to get used to the shift.
This doesn’t have to be painful. The chances are that retirement will be much better, smoother and rewarding if you take the time to be in control of the process, well in advance.
Heather Gray-Grant is a business strategist, marketing expert and executive coach for law firms and lawyers. She can be reached at firstname.lastname@example.org