Succession planning: five key steps
In association with Wesleyan: five steps legal firms should take to achieve successful succession planning
Legal practices face a constant battle to retain and develop talent. Research by ALM Legal Intelligence (ALI) in 2017 revealed that over a third of UK legal practices did not have a succession plan. ALI’s research discovered that 52% of law firms lost on average at least a quarter of a retiring partner’s book of business when they left the business.
These are the five steps a legal firm should take in putting a succession plan in place:
1. Create a long-term succession plan
If your strategy is well executed, you will be in a stronger position to enjoy a good retirement whilst ensuring your legal practice is left in safe hands. Ask yourself three questions:
- How much money will you need to retire on?
- What levels of investment are needed to ensure your practice is attractive to potential buyers?
- How are you going to identify and nurture potential future leaders and aspiring partners?
2. Review your retirement options frequently
Busy lawyers rarely have time to review their retirement plans. According to 2016 research by Wesleyan, lawyers are confused by pensions – more than half of those surveyed did not understand the key features, and almost three-quarters were unsure of how much to save each month. In-firm seminars are a service offered by Wesleyan Financial Consultants, who are trained to understand the specifics of lawyers’ pay, benefits and career paths. Advice is offered on a no-obligation basis.
3. Identify future leaders
To identify potential future leaders, consider the specific attributes you will need prospective partners to possess. Communicate to them that they are regarded as the long-term future of the firm and explain what the buy-in process involves. This will enable them to focus on honing their skillsets to stand out from others and make them less likely to leave and seek other opportunities.
4. Seek support from finance providers
New equity partners are required to assume greater financial risk and make capital contributions based on the equity interest they hold, which may present cash flow concerns. Bespoke equity purchase loans from specialist finance providers allow individuals access to funding of up to £250,000, over terms of up to 15 years, providing new partners with a more manageable means of buying into a practice.
Flexible alternative finance solutions can also reduce the considerable burden of partners’ tax liabilities by enabling them to spread the cost of their bills over six or 12 regular monthly instalments.
5. Invest in technology
Legal practices that keep pace with technology are more likely to attract the next generation of business-savvy partners who are looking to embrace new innovations to boost revenues and increase productivity. Modern technology assists law firms to offer enhanced service levels to clients through faster response times to queries and requests for critical case information. It can also safeguard employee retention levels.
Specialist financial providers offer tailored solutions for new equity partners and retiring partners who are selling their share in a practice, to guide them through the process to ensure it progresses smoothly.
The Law Society of Scotland has appointed Wesleyan, the specialist financial services provider for lawyers, as its expert partner providing commercial and personal financial advice to sole practitioner solicitors and high street law firms.
For further information, please visit www.wesleyan.co.uk/lawyercommercial
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