The issue of succession for small firms and solo practitioners has received a significant amount of attention of late in Canada. The attention stems from a demographic reality that sees the majority of lawyers in many provinces in the country in excess of 50 years old and a general recognition that a substantial amount of these lawyers have not adequately planned for succession. Concerns regarding succession are especially poignant for small firms and solo practitioners who often suffer from a lack of resources to address succession issues but who are the most at risk for negative consequences due to an unexpected illness or other triggering circumstance. I have recently had the opportunity to work on a number of projects with small firms and solo practitioners in British Columbia that has revealed that a lack of succession planning is indeed a very real concern for the legal profession.
As succession planning is a hot topic these days, there are myriad resources available and a variety of approaches that can be followed that range from extensive planning activities to simple checklists. My intention in this post is not to outline complicated discussions and processes but instead to outline 3 very basic steps that can be taken to begin the process of identifying and addressing succession issues that face the small firm and solo practitioner.
The first step that any lawyer can take in regards to succession is to simply set aside some dedicated time to think about succession issues. This can be as basic as booking an hour appointment with yourself or your partners to ask the following questions:
- When do I plan to retire?
- What is my exit strategy?
- What steps need to be taken to ensure my exit strategy is viable?
Although these questions seem very basic and lawyers may have notionally considered them in the past, it is alarming how many individuals nearing retirement age have not addressed these issues in any organized manner. The final question is especially important, as unrealistic expectations may exist regarding the saleability of your practice or the desirability of your geographic region to young lawyers. These expectations can only be tested through identification, discussion and research.
Following evaluation, a basic plan should be committed to paper. The plan does not have to be extensive but can include the answers to the above questions and should establish some simple steps to be taken and a commitment to when the steps will be completed by. One common approach to planning calls for steps that are SMART or Simple, Measurable, Attainable, Relevant and Time Specific. In order to assist I have identified below what I feel to be the five most common succession strategies and one possible first corresponding basic step that can be taken:
- Sell your practice – Contact a Certified Business Valuator (CBV) that has experience with professional service businesses. You can locate a CBV through their website at https://cicbv.ca/
- Wind down your practice – Contact the Law Society to obtain information on the process for winding down a practice. Many Law Societies have checklists and other resources available. It is also a good idea to ensure that you have a designated winding up caretaker.
- Join larger firm – Make a list of suitable firms in your area and commence the process of dialogue with the appropriate contact.
- Transition to junior lawyer – Contact the career officer from the universities in your region to gather information about recruitment of a junior lawyer.
3. Take Simple Steps
At this point you will have a basic idea of your succession plan and an outline of steps that can be taken. The goal now is to follow through and execute on your basic steps according to the timeline established.
While the three steps above appear simple to the point of the ridiculous, it is surprising how many lawyers have not taken even these basic steps. Recent data from the Law Society of BC for instance indicates that only 12% of solo practitioners over the age of 50 have designated a winding up caretaker. Similarly, through personal experience I can report that a shockingly high percentage of small firms I have worked with have not addressed the most foundational question of all with their partners “When do you plan to retire”.
Through the application of the three basic steps outline above hopefully more small firms and solo practitioners can begin the process of planning for succession.