R is for... ?
You are a principal whose thoughts are turning to retirement, but what are your options? All of them involve forward planning to achieve a smooth landing
I’ve turned 59. Incredible. Surely it’s only a few years since I started as a solicitor? And still a supreme athlete and the office eye-candy. Yes? No? … no. Reality check – my kids are up and away, working and living in different continents. In my day (oh no, I sound like an old man already), travel meant Lesmahagow, Falkirk. Nowadays it’s Abu Dhabi and Toronto.
I shouldn’t kid myself. Wherever I turn, friends, family, colleagues all have as the main topic of discussion the R word. Contemporaries have already retired, on public service pensions, some sadly invalided out, some delighted to cash in and get the next Easyjet flight to Palma. Lady Lafferty and I are more or less the same age. We need to plan our future – she’s a teacher in a state school; I am a self-employed solicitor. And getting on – in both senses.
Personally I have no wish to retire any time soon. Lots of lawyers moan about stressful legal practice, ungrateful clients, awkward Law Society regulation, unrelenting workload. But they’re wrong. You either run your practice or let it run you – see umpteen Word of Gold articles in this slot. I consider myself lucky to have an interesting and well-paid job, with no one shooing me out of the door just because I am nearing an age.
So far so good. But the day will come, and I need to be ready. Retirement should not be a leap off a cliff, but a shallow glide at a gentle angle from full-on work to the day you leave. From way back, look ahead – no one lives for ever. Build up whatever wealth you can – pensions, property, savings. One retired solicitor I know throughout his practice years took every third fee payment and after tax put it into a savings account. Sometimes it was a legal aid cheque for £36, sometimes it was a private fee of £3,600 – over the period it became his fully inflated liferaft to paddle into comfortable retirement.
But whether you have a strategic plan or suddenly realise the runway is coming to an end, it’s essential to know the options. And by “you” I mean a sole practitioner, or the plural you (youse in Glaswegian) as a small firm, though it is a similar set of challenges for a partner retiring from a continuing firm.
Prepare for landing
First, there is buy out – if your firm is worth someone buying it. There is a market for acquisition, but rarely does that involve one payment. More likely it will be an earn-out, where the buying firm pays the agreed price in instalments over a period of years. This is good for the purchaser, but for the outgoing proprietor it is giving up what you hold without getting all the money, and risking the new people’s ability to survive and thrive sufficiently to pay you and still make a profit. Indeed you may be locked into working as a consultant – paid or otherwise – for a period of time, watching as your life’s work is dismantled, eroded – or even vastly improved. Best to get yourself a good solicitor to advise, and protect you with a tight agreement and preferably some securities.
The second route is buy in: promotion from within. This presupposes you have been successful and farsighted enough to hire and/or grow some decent qualified staff that are (a) competent and (b) at least as entrepreneurial as you. The trends are that young lawyers are less orientated to a career in one firm, but more likely to move for money. That makes it part of your ongoing duty (from way back on the glide path) to create a profitable and attractive firm. That in turn is to do with all sorts of good management/business principles that lawyers should practise, but often don’t.
Third is the “bye-bye” option: you close the door and give the clients’ account back, maybe offloading the wills. That reads like failure or defeat, but needn’t be. Your circumstances may be such that it is impractical or unrealistic to seek a sale, and you frankly may have made enough money from years of practice that the hassle, actually, of getting taken over is not worth your while. Sadly, you may instead be at the other end of the commercial scale, and have nothing to sell that anyone wants to buy.
The point is this. I am no guru of business management or expert practice manager. What I have learned in 30+ years of running (and latterly, grace à Dieu, co-running with my excellent partner John Roberts) my/our practice, is that all aspects of firm management and ownership are worth doing properly. Being a decent lawyer is one thing, but managing the start, middle and (for the purposes of today’s lecture) end of a practice are complex skills and tasks, worth learning and applying. In other words retirement is not something that happens to other people. The end will arrive either from the cliff-edge fall or as smoothly as that Easyjet landing at Palma airport. Your choice, ultimately.
Austin Lafferty is founder and senior partner of Austin Lafferty Ltd, Glasgow, Hamilton and East Kilbride.
Stephen Gold hopes to return shortly