Making succession a success: a guide for lawyers
Building a successful law firm takes time and effort. Over a number of years, you will grow a client base, hire staff, and perhaps expand into several offices. Yet all of this can be jeopardised if you don’t put in place the right plans to cover what happens if one of the partners suddenly leaves the company through illness, retirement or death.
With this in mind, here are a few things that lawyers should consider as they think about their plans for the future.
Start early, think long-term
When it comes to succession planning, starting as early as possible is key – at Wesleyan, we’d recommend managing partners start to consider their succession plan as early as 10 years before they plan to step back.
This will afford them plenty of time to consider all of the options available and to thoroughly develop their own strategy.
When it comes to their firm, partners should take the time to review their practice’s operations to determine where investment might be required to create an environment that’s attractive to external buyers, outside talent, or possible successors within the business.
It’s also advisable that they think about how they’ll identify future leaders or partners, either from within their own business, or outside of it.
Consider personal requirements
From a personal perspective, lawyers will also need to consider whether their personal financial situation supports their professional roadmap.
A partner looking to retire, for example, might set a time when they’d like to step back. But they’ll need to ensure they have a retirement plan that can make this a reality.
This will involve considering factors such as how much income they’ll need to live on during their retirement – a figure that, from our own survey of lawyers , was estimated to be an average of £48,458 a year.
This income could come from a number of places – such as hard-earned pension savings or through the sale of assets like property. Meanwhile, choosing to release equity by selling a partnership share can also deliver a lump sum of capital, but can also carry tax implications that will need to be factored into any income projections.
Crucially, lawyers should regularly review their succession strategy to ensure that it remains closely aligned with their personal circumstances or those of their business.
Develop the next generation
In some cases, departing partners may wish to bring in a replacement from outside their firm to fill their position. But in others, they may prefer to source a successor from within their business.
Choosing and developing successors from within a firm can offer its own benefits. Giving associates or senior associates the chance to take on future leadership positions can be a motivator for their own development, while helping to retain talent within the firm by providing them with a clear path for progression.
When looking to identify possible successors, lawyers should first consider the skills and attributes they require a potential successor to have. Explaining these to team members who show potential can then enable them to focus their own development upon reaching the standard required.
Earmarking individuals for succession early can also give a future leader time to build up the funds they’ll need for things like capital contributions, if they’re looking to become an equity partner in the business.
It may be beneficial to explain some of the various support options available to non-equity partner successors to help them navigate the financial costs involved. Bespoke equity purchase loans, for example, can help spread the cost of buying into a practice over a fixed time-frame.
Stay ahead of the game
Finally, partners planning for succession should consider how their business is investing in technology.
Technology – including cutting-edge systems such as automation and artificial intelligence – can help to improve service quality by increasing lawyers’ speed in meeting client requests, and reducing the amount of time spent manually conducting essential administration. Ultimately, this can help boost productivity and support a partner’s ability to increase their fee levels.
By putting tech high on a list of investments when building a succession plan, partners can position their firm as attractive to new talent from outside their business and help to support its retention within.
Put your plans in place
Planning for succession can come with its hurdles, but there is support available to help lawyers put an effective strategy in place. Planning early, thinking long-term, and ensuring that the right investments in your people and business are in place will help a partner put themselves in the best position for success.
At Wesleyan Financial Services, we understand the needs of lawyers – and law firms – when it comes to their finances as they consider succession. Those looking for additional information should click here.
Wesleyan Financial Services Ltd (Registered in England and Wales No. 1651212) is authorised and regulated by the Financial Conduct Authority. Its Financial Services register number is 134753 and its VAT number is 487282114. The business can be contacted on 0345 351 2352.