Selling Your Law Practice: Insights from Tom Lenfestey on Building a Saleable Business

Tom Lenfestey:
So it takes you a little while to figure it out, really find the groove as part of that, which is part of why communities like you've built and everything else are so awesome. To help, hopefully prevent some of those learning challenges that I went through.

Ali Katz:
The millions of dollars of mistakes that we make when we try to go it alone.

Tom Lenfestey:
Yeah. Yeah. I mean, it's really like the path is yours, right? But avoiding a lot of the same mistakes that others have made, like, why wouldn't you find guidance and whatnot to do that?

Ali Katz:
Hello, and welcome to the NewLaw podcast, where we guide entrepreneurial lawyers to build law practices into businesses they love. I'm Ali Katz. Today you're going to hear me talking with Tom Lenfestey, the founder of the Law Practice Exchange, LLC, as well as a practicing North Carolina attorney who successfully sold his own law firm and then, now helping lawyers from 200,000 a year all the way up to $50 million a year of revenue to sell their businesses. And so this is going to be a great episode on what does it take to build a saleable business that has true value? And so you're going to want to listen for that, because you're building something that isn't just for right now. It's for life, but it's also for legacy. So listen in, and I'll see you on the other side.

Ali Katz:
Hey, Tom. Great to see you. So glad that you're here today.

Tom Lenfestey:
Yeah, great to be here. Thanks for having me, Ali.

Ali Katz:
Well, I would love to start just by hearing your back back back story, on the path to becoming a lawyer, what had you decide to go to law school and where did you attend?

Tom Lenfestey:
Yeah, absolutely. So I actually entered undergrad in college. Of course, you always have everything figured out right, as you enter college, but I think everybody believed that I argued enough that I should either be a lawyer or in politics. And so for undergrad, I started out as a political science major. And, you know, with the plan and the path and the interests in doing law, not really doing politics. But then through undergrad, I also started to diversify a little bit more, be pulled over into finance, and actually ended up graduating with an accounting degree, but then, you know, still going on to law school as part of it. So I was one of those weird, like, passing up, you know, really good job opportunities to go to law school. My first week of law school, I remember an orientation. Like, we know a lot of you are here because you can't get a job with your degree. And I was like, I think I'm in the wrong place. But no, it was, you know, it was really a passion. I was always interested in law. I'm not sure I really fully understood. I didn't have, you know, the mock trial experience or the family friend experience. It was, you know, based on what information I had. I had that interest and I had that pursuit.

Tom Lenfestey:
But I've always come from more of the finance, the accounting, you know, the business background as my approach to it. But that's really it. I mean, you know, that undergrad kind of took me through, did a master's in accounting, and then went on to law school from there, and then went into practicing law.

Ali Katz:
You even got a master's of accounting before law school.

Tom Lenfestey:
I did. Glutton for punishment, as I tell everybody as an attorney and as a CPA. But that was part of it is, you know, back then, especially the CPA opportunities were plentiful. They still are today. But that was something that I passed up to go to law school and kind of continue forward.

Ali Katz:
And was that because you always had your sights set on being an entrepreneurial lawyer? Like, was that what you were thinking about? Or, I'm just trying to get a sense of, like, what were you thinking about at that time? Okay, I'm gonna go to law school and be what?

Tom Lenfestey:
Yeah, I think, you know, at that time, again, the information you have at that time, it seems like a good plan, but, you know, if you had all the facts and all the information. I think I went into law school thinking, you know, I'll be a tax lawyer. Right? I'll be a tax attorney. Like, what a great combo of this CPA license with this, like, that's what I'll be. And, you know, getting into law school, taking tax classes, some, which I did, you know, great on, some, which I did so-so on. But overall, you get into that mindset of, is this really what I want to be? And then, you know, as you go forward in practice, you kind of figure out what, you know, what it really means. And I think that's where in practice, I was probably drawn a little bit more to working with entrepreneurs, like business owners and otherwise, because my practice in those early years was estate planning and small business, corporate planning, otherwise and that's really where I was like, hey, I kind of like this. I like the energy. Right? And, you know, as part of that started to, you know, draw me to be my own entrepreneur.

Ali Katz:
Yeah. So I love that you thought, maybe I'll be a tax attorney. I never in a million years thought that. And then I was at Georgetown, and I was taking tax classes with Marty Ginsburg, and I was really good at it. And he even gave me, like, this special commendation. Then I became a tax attorney at Munger, Tolles & Olson and spent many, you know, many months in the question of, like, what am I doing, how did I become a tax attorney? But ultimately, we both found our way to estate planning. And it sounds like you knew right away that it was estate planning for entrepreneurs, that you liked working with the business owners and you, and that's who you were working with right from the beginning. Is that, is that accurate?

Tom Lenfestey:
It is. I mean, as much as, you know, we were always there to help the husband and wife couple or anything else, but the entrepreneurs, the business owners who had the planning need, but also had different contingencies, different aspects that really were there from a creative planning strategy to help with. But also, it was so cool to latch onto some of those entrepreneurs and their energy, watch them, of course, make mistakes as much as they did the right things, but also just to be there to help them as a legal advisor, as a financial advisor on that side from the tax and CPA. But I just, I really found, like, if you're sitting in those consults, like, I'd walk out of those, you'd have more energy. Right? And I think that's a big thing as you maybe don't realize it at that point, but it starts to set in and you start to look into your law career and, you know, what's going to make you excited going forward.

Ali Katz:
And did you start your own firm right out of law school, or did you work for somebody else first?

Tom Lenfestey:
Yeah, I worked for a 30 plus attorney, you know, out of Raleigh, mid size law firm, out of Raleigh, North Carolina. So I actually, you know, started out as one of, it was a mostly litigation firm, and I was one of the few transactional attorneys in the firm. So, yeah, I started out with having a lot of other peers, you know, the billable hour quotas and everything else, which was great. Some of those practice groups I was amazed by, and again, starting to see that entrepreneurial, like, you know, wheel turning, watching these big mega practice areas that had software that had really been processed and structured. They're representing big Fortune 500 companies, but they had really done a lot to invest in systems in some aspect. And it's like, wow, that's really neat to see that. And again, those came about over like 10-15 years. Multiple attorneys kind of helping do it, but it's like, how do you take those and maybe on a lower scale, you know, try to help our clients or develop those in the practice.

Tom Lenfestey:
So I worked with that firm. I actually made partner in that firm, and then I, you know, like a lot of others. And part of my story, too, was the question of where do I go from here? Is equity partner something that I want? Is equity partner something that's available? And there was a lot of questions on that going from non equity to equity partner. And so that's kind of what I did. What a lot of others do is spun out and took my practice and really joined a practice of peers that did real estate and commercial and residential and that piece. And then that's really where, you know, the full estate planning, the true entrepreneurship of, like, oh, man, now it's on me.

Ali Katz:
Now you're on your own. Yeah. Just put some time frames. How long were you at the 30 person firm out of law school, the whole time, like, from the time you started until the time you left there?

Tom Lenfestey:
Yep. I clerked with them for a summer and then half of the 3L year, but I was with them as a associate and a non equity partner for about six years. So it was about six years before I broke out and then kind of went on my own.

Ali Katz:
Got it. And when you left there, did they try to. So I'll just tell you my story first. So I'm not just asking yours, but when I left. I was only there three years at the firm that I was at, and the partner that I was working with told me that if I tried to go out on my own because I came back from my second maternity leave, well, my second child, first maternity leave there, and I said, I can't. I can't stay. I need to go out and start my own firm.

Ali Katz:
And he said, no, you can't. Not that I can't, but that I would be making a big mistake, that I needed to stay a few more years, and I really had to kind of fight with him about it, and I ended up leaving. I'm curious, did you have that same experience? Were they okay with you going, how'd that go?

Tom Lenfestey:
They were not, well, I would say most, again, bigger firm. Most were very supportive. Most of the, you know, a lot of the equity partners had come from other firms. Right? And joined or anything else through their associate years or otherwise. There were a few that, of course, were not supportive. Like I tell everybody, somewhat like breaking up in a good dating relationship where you're like, it's not you, it's me, and it doesn't matter as much. Right?

Tom Lenfestey:
And so for the most part, very supportive. Some, I think, were disappointed, and I'll take that as a compliment, hopefully, that they were sad to lose me. Right. But at the end of the day, when the interesting part of my story was, one of the real questions was nobody had been making equity partners, so there really was no defined succession plan or path to partnership in the firm. And when I went to discuss, like, I'm departing, that's when that came up. Right. Like, oh, we want to talk to you. Like, you are, like, really right here, and we want you to stay.

Tom Lenfestey:
And. And I said, you know, I appreciate it, but at this point, kind of like, to yours, my wheels were in motion. My plan, I had been planning for a while. And so you just. And you don't want to get more hurt feelings by somebody feeling like they're really offering more to keep you and you're just not willing to do that. So I knew it was time to go. And overall, mostly supportive, but, yeah, similar. They're like, don't leave yet. We've got one more thing. And you're like, appreciate.

Ali Katz:
Yeah, no, I gotta go. But it's actually a really good lesson for law firm owners to have a succession plan, because I talk with a lot of law firm owners who have associates coming in, and I talk with a lot of associates who are thinking about what's next for them, and they can either see themselves taking over the firm or leaving to start their own firm. And so if you're a law firm owner that has associates, you got to know that that's happening. And we'll talk about that a little bit today, Tom, because I think you'll have a lot to say about that with the Law Practice Exchange. But if you have a firm and you have associates, you have to know they're thinking about what's next, and you can either provide a clear succession plan opportunity, or they're going to be thinking about leaving.

Tom Lenfestey:
Absolutely. One of the things, Ali, that we've talked about a lot over the years is, you know, because when we started talking about succession planning for small law firms, a lot of it was like, no, I've tried that. I've hired associates, and they've come and gone. Well, have you communicated with those associates that this is something like, you want them to be the future owner? And most of the time, it's just a failure to communicate, to really have that discussion. And we've really talked about the concept of, look, if you're a small law firm, solo owner, solo practitioner, you hire that associate, but you're hiring them with the intent for them to be your successor, then you're not hiring an associate, you're hiring your buyer. And that's a different discussion, different questions that you want to ask potentially that person you're looking to bring on board. It just changes the messaging a little bit. But yes, waiting too long.

Tom Lenfestey:
This is a small pond in the law firm, you know, space. And so sometimes we'll get calls from the associate of like, oh, it's never going to happen at this firm. I want to look to leave and buy another firm. And we'll get a call from the owner that says, I have an associate, but I know they're not going to be interested in taking over this firm. Right. And you're like, oh, if you guys could just, I think you should really talk to them first. Right? To really do that. Yeah.

Ali Katz:
Yes. Yes. Well, that's great. Let's get into the next stage, then. So you left, you started your own firm, that firm. How long did you have your own firm? I mean, it's still kind of your firm, but you have also succeeded and transitioned it to the next stage. But how long were you active in building your firm?

Tom Lenfestey:
Yeah, past then, if we want to look at that, was probably around 2010. It was really for the next, I'd say six to eight years of building that firm and then focusing on transitioning out of that firm as I moved on to my entrepreneurial, next endeavor outside of practicing law. And so part of that was growing that firm, growing the client base, growing the team, growing the systems that really hopefully would do that. But that's overall, I mean, it took a lot even there. And I was surprised in that step because there's a lot of feeling like, oh, well, I know how to run a practice. When you're housed in a big 30 attorney firm and you've got full accounting department and you can gripe about a lot of those things and those systems of like, man, this takes forever. This software doesn't work. But then when you go and do it on your own, you're like, oh, I made the wrong choice on software.

Tom Lenfestey:
Right? Like, that was my decision. My bad. I made the wrong choice on this. Or, you know, I've made the wrong choice for an accountant, or I've done this. Right. So it takes you a little while to figure it out, really find the groove as part of that, which is part of why communities like you've built and everything else are so awesome. To help, hopefully prevent some of those learning challenges that I went through.

Ali Katz:
The millions of dollars of mistakes that we make when we try to go it alone.

Tom Lenfestey:
Yeah, yeah. I mean, it's really like the path is yours, right. Avoiding a lot of the same mistakes that others have made. Like, why wouldn't you find guidance and whatnot to do that? And really, even back then, I think one of my biggest mistakes is not really seeking out another practice mentor, like somebody outside, but in the either estate planning or planning community to just have some of that guidance and otherwise. But, yeah, absolutely. So another six to eight years of building.

Ali Katz:
So you built for six to eight years, and then did you sell or how did you transition out? I know that you are still on the website, but it's not your thing anymore.

Tom Lenfestey:
That's right. So I fortunately was able to bring, like through succession, have two equity partners move up, and they did, you know, buy me out from that standpoint. I still hold a certain equity stake in it, but they are the equity partners. They run the day-to-day. And that's taken some time, too. So even though that happened around that time frame of '18,'19, something like that, then it's really what we always talk about, it's the transition. I had a lot of personal goodwill and referrals that I needed to transition over time. There's practice management knowledge, other things that need to do that.

Tom Lenfestey:
That's really been a gradual decrease that needs to happen even when that transaction is done. So the total timeline for succession is always, a little bit more, it's not full time, but it's always a little bit more extended than some people.

Ali Katz:
Yeah, if you want it to go well, I sold my practice in 2008, but I had no idea who to sell to, how to sell, how to transition. And as a result, I think really what should have been a $500,000 windfall to me ended up being $250,000 of debt. When the person I sold it to handed it back to me and said, where's all the clients? And I looked at the whole thing and I was like, oh, well, you fired the marketing team and stopped running the marketing, so you don't have any more clients coming in consistently. And he didn't have the business acumen or wherewithal or anything. And I didn't provide the guidance because I didn't even know that was necessary. And so what I'm hearing you say here is that in the growth path, and we see a few different growth paths, just, I'll just lay these out. The way that we look at it for our Personal Family Lawyer firms is that the growth path is either going to be to really stay a solo. When you decide to exit, which will probably be when you die, you'll have a succession plan.

Ali Katz:
Ideally, we require it now as part of our assessment. We require you to have a successor lawyer that will take your files in the event you become incapacitated or when you die. That's one path, not the most optimal path, in my opinion. The second path would be the path where you really do what you did, Tom, which is to have the firm continue running, but transition the majority stake, or even maybe a minority stake if you can work it out that way, and you continue to receive cash flow without having to be involved in the day to day. And then the third path would be a complete and outright sale. Do you see other paths besides just walking away from all of it and letting other people clean up the mess?

Tom Lenfestey:
Yeah, you know, we see, again, lots of different structures, ways to do it, but it's really about transitioning based on the type of practice, the size of the practice, the nature of those client relationships. You know, Ali, one of the things that we see a lot that we're, you know, great on is just the co counsel out. Right? It's just co counsel. And just over time, you're kind of transitioning your client base, your referral. For some of the small practices that makes a lot of sense, right? Finding somebody, another practitioner that you trust and really to do that. But from the market side, we're also seeing a lot of estate planning firms getting bigger and rolling up other estate planning firms in different geographic markets. So I think it continues to evolve, but I think those three that you outlined are the key ones, for sure.

Ali Katz:
Yeah, I think we're going to see quite a lot more of it in the coming years as the estate planning firms begin to really go head to head with the financial advisors, which is the big thing that I'm seeing now, and that we're really at the forefront of addressing. And I think we're going to end up starting to see private equity start to roll up firms once the laws pass where non lawyers can own firms. And it's happened. I think you've probably seen it with your firm in the dental industry, because I saw that your firm was serving dentists, and I know that's been a big thing in the dental industry. So you sold the practice, but you still own a stake in it. And it sounds like through that process you saw there was a need to help lawyers sell their practices. So tell us about the birth of the Law Practice Exchange.

Tom Lenfestey:
Yeah, you know, my short story is I tell everybody I formed the Law Practice Exchange out of jealousy. I was sitting in a seat out helping these dentists, helping these CPAs, helping these investment advisors, right? That you just kind of cited. And I was sitting in a legal seat of being their advisor, and these dentists or CPAs would come in and be like, look, I've been practicing this long. I built this practice, million dollar practice. I found a broker, they found me a buyer. I'm getting this much cash and I'm going to retire. And I need your help kind of doing this updating estate planning transaction. And I'm like, that is really cool. Like, how are lawyers doing this? And who's doing this for lawyers? And that's really 2011, 2012 was when this, you know, went into motion. And that's when I really said, really, nobody was. I mean, there was consultants, definitely good consultants out there talking about it.

Tom Lenfestey:
But as far as building a marketplace to help lawyers do this, there wasn't. And so, you know, I kind of joke about jealousy, but at that time I was building, you know, my team, my practice was growing. And so, and I had come from a firm where the equity partner succession had not been clear.

Tom Lenfestey:
And seeing these dentists, accountants, investment advisors, it's like, man, it's needed. And others have figured out how to do it. We just need somebody to really take charge and do it for law firms right, which similar but different. And that's really what started that charge with the first few years doing a lot of education, a lot of talks, some consulting, and then the last few, of course, it's been picking up from there, but that's really where it came from.

Ali Katz:
Yeah. And so it's a lot of years later now, from the beginning, how many law firm sale transactions are you working on each year about?

Ali Katz:
Would you love direct support to help you grow your law practice into a business you love? Go to newlaw.co/show and sign up for a call with one of our trusted law business advisors. Each of our advisors has been trained directly by me over the past five years plus to help you chart your path from wherever you are now to where you want to go as efficiently and effectively as possible. You're ready to grow. We are here to help.

Tom Lenfestey:
Yeah. So our overall, like right now, I think in our market, if you go to Law Practice Exchange, I think we have 25 active listings, we'll probably have another five to ten that are private listings, like non marketed. And the size of those firms are going to range from firms doing $200,000, like a solo attorney just looking for their retirement succession, up to one of the firms we're dealing with in the private say, you know, $50 million in revenue, two owner a firm, doing all the right things, Ali, like we, you know, you'd be so excited.

Tom Lenfestey:
We get so excited to see creativity and really great implementation by, you know, lawyer entrepreneurs. Um, but yeah. And our goal is to help. Right? The focus really for us now is the marketplace is just helping lawyers see that there's opportunities, build business value and then, you know, even if price isn't your main goal for succession planning as an owner, but it's just to make sure the firm continues. Wonderful, but feel good about that. You've built value and as a, you know, young attorney or a new firm looking to grow, like picking up value in different markets, different geographies, different client base, everything else is a pretty cool thing because I don't think that's something that lawyers historically really had focused on their practice. It had been income pool, it hadn't been building value. Right. Like business value.

Ali Katz:
Yeah. I don't even know that people will know what that exactly means. Building value. What does that mean to you?

Tom Lenfestey:
Yeah, to me it really is, you know, it's more than just what you're getting on a monthly basis out of the firm from income or anything else. And I know lawyers, right. We've dealt with them for the last decade and helped. I mean, that is what they think. Like, this is what the firm is worth to me, like the money that I get on a monthly or an annual basis. But at the end of the day, they really don't think, look, the investments I'm making, whether it's with like a community and coaching group like yours, Ali, of building a better business, it's not only benefiting me, but it's increasing my business's value.

Tom Lenfestey:
And that's a pretty cool thing because it doesn't, it probably means you're going to make more money now, right? I mean, openly, but it also means you're building something that's better and stronger for potentially the next generation because they're going to come in and be your successor, be your buyer, and you're going to leave that legacy to them. And so the stuff that as entrepreneurs, business owners, you grind through on a daily, it's one thing if you're like, well, I need that money, but it's another thing if you're like, look, I'm doing things because I'm trying to do them different, I'm trying to do it better.

Tom Lenfestey:
And if in 5-10 years or 2 years I'm ready to exit and that has value, to me, that's pretty cool because now, it's not just about I've got to keep doing this for my paycheck or for those profit distributions. It's, I'm doing this and putting in the extra work and investment into the law firm business because it's going to mean more later when it has an exit value and a price to me. We have, you know, over the last several years, we've had 30 year old attorneys, you know, sell their firm because they're going to start a software company. Right? And. But they needed the money from the sale of their firm to do that. And so having that type of opportunities and everything else I think just helps change the mindset, maybe makes the tough days a little easier and hopefully also refocuses attorneys that the things you do to help your law firm, to invest in your law firm, aren't just for you today. It is actually building something for the future.

Ali Katz:
Yeah, I want to just double down on how important that is. It is the thing that I did not understand when I was building my practice. To me, success was a million dollars a year of revenue because that was the only success metric I understood. And I didn't realize the building value piece until I sold the practice to the wrong person and took what could have been a $500,000 asset, ended up with a $250,000 liability. It's a $750,000 swing. And so painful because I didn't understand what you're talking about now with this building value in the way that would have really allowed me to value what I had built properly. And I think it's just because we don't learn it. And so I want you all that are listening here to learn it now, which is that, yes, of course, you need to make a good living and pay your bills now, obviously.

Ali Katz:
And you're also building something for the future that you can, without a doubt, when you build in the systems and the processes that build value, the team, even insofar as the name of your firm. You know, Tom, your firm was NC Planning because you were in NC, North Carolina, NC Planning. Not, not very, you know, creative or fancy there, just straightforward NC Planning. But it wasn't your name. So that had to have made it so much easier to be able to bring in other partners. Now, you don't have to be adding a whole bunch of names to the back end. It's still just NC Planning. Just a small decision like that can build so much value.

Ali Katz:
The other thing that we're starting to implement right now, and I'm curious to hear from you about this Tom, is really getting all of our firms on recurring revenue, where it's not just a one and done transaction starting every month, over at zero, constantly. Next new client, next new client. But they're building in their recurring revenue systems. Are you seeing that more and more now?

Tom Lenfestey:
We are seeing it more, not enough. And it's a huge value driver. And what I mean by that is if we're talking to a buyer, a potential buyer, whether that's an internal successor, external, anything else and you have x amount, maybe it's only 25% of your total revenues are reoccurring, at least they like. Oh well, I know 25% are going to be there on a reoccurring basis. And it's just a huge concept for buyers to get behind. Make your firm more profitable, but also is going to make your firm more sellable because you're giving essentially some kind of security in those future revenues. And again on anything, I mean if you look at like software companies, the reason why they sell for such high multiples is because they got these subscriptions at $10 a month. You're like wait a minute, how can that be? And it's because again, it's the future revenue stream that's compounded and everything else.

Tom Lenfestey:
So yeah, it's a great way to hopefully do more for your clients, hopefully make more profit now, but also it's going to make you more sellable going forward.

Ali Katz:
Yeah, I implemented a membership program in my practice 20 years ago. I just had started to get it off the ground by the time I sold. And now today, all of these years later, what I'm really seeing about it is it's not even so much about the recurring revenues that are coming in monthly, it's about keeping the relationship with the clients because so much in an estate planning practice, so much of the value is in the post death work. There's so much revenue there, there's so much profit there that lawyers just like, I don't know, maybe sometimes just don't think about. And I'm wondering how do you value that when you are valuing an estate planning practice, when you don't know if those client files are going to come back? I guess with the recurring revenue, you can say they are going to come back because they're paying, their family is going to work with you. How do you differentiate and value drivers with that kind of thing?

Tom Lenfestey:
Yeah, absolutely. And so a lot of it is looking again at how much or what that subscription or membership service is. Some of it's based on the planning, some of it's like, hey, you're signed up and we will do the post mortem planning, the estate administration, the probate process as well. But for estate plans, estate planning attorneys overall, the typical is if they're doing a state administration, that is more valuable work than the planning side. Right. But it really sticks when they do have true relationships with clients, the planning clients and everything else. So I know, Ali, again, it's like, have you met the kids? And is that part of your process and everything else, as well as really looking at the age demographic of the client base? Because we do have some attorneys that have done a lot of planning, and then their practice has kind of, you know, gradually over time turned into more probate. But we see it switch from like 5, 6, 7, 8 years ago, they were 70% planning and 30% probate, and now they're like 70% probate, 30% planning.

Tom Lenfestey:
And to a buyer also, when you get to that stage, they're getting a little concerned that the work is drying up from that and everything else. So it's really looking at the kind of the demographic, the whole database, the age of that potentially, and then what type of membership program is there. But when we do evaluation, you know, of a firm, we're really trying to look at historically, what have you been doing? And then projecting that forward, you know, under a valuation method.

Ali Katz:
And you do that. Is that included in what you're doing as part of the Law Practice Exchange? Is valuing the firm and then marketing it for sale, helping to close the deal, the whole thing?

Tom Lenfestey:
Absolutely. We're here to really help, you know, get deals done for law firms. And those are solo to small ownership group law firms, they may be bigger on revenue or profits, but really solo owners to small ownership groups. And, yeah, valuation is really in our world where everything starts, Ali. So knowing the value of what you've built and in our valuations, it's just not about getting that number, but it's really looking at, okay, based on your type of practice, everything else, how long would it take you to transition successfully and building, like compensation for you to stay on for the next two years, you know, post sale, six months full time, six months half time, and after that as needed, maybe for like that key, you know, referral source or otherwise, that they're going to have an event that you need to show up at just to preserve value.

Tom Lenfestey:
So we really try to think more from this is a number, but it's really opens up to a model of what might be possible and to get you thinking about, you know, potential structures, who the potential buyers might be, what terms like payment terms and everything else would work for your type of practice because again, certain practices are just going to go more to certain types of payment terms which have more risk to the seller, less risk to the buyer. Other types will be the buyer needs to take on more risk because this seller has built a better business. So just kind of going through that from evaluation beyond the number. Right. Knowing the number is great, but really, where do you go with that is the key part.

Ali Katz:
And how far before a potential sale should somebody start to get in touch with you at the Law Practice Exchange?

Tom Lenfestey:
Yeah, there's always this saying, oh, five years before you sell or you want to sell. Our thing is if you're to a point where you don't have that successor and, you know, you need one, like you want to slow down, you want to go to a different thing. Right? You want to have that. Like, it's time, you can keep practicing law for, you know, as long as you want to. Selling or changing ownership of your firm, developing a succession plan has nothing to do with, you know, again, the seller, the ownership piece. But really, I mean, we have clients in the market and everything else that have come and done evaluation and said, great, thanks, I'm working on some things. I'll be back next year. Right. Like, you know, they're not ready to go, but they're really building to where they're ready to go. And so five years is the guide. But overall, it's, you know, know, know, what you have and know what your options are. And if you don't, then, you know, take an opportunity to really see what you've built, see what your potential options are. And the coolest thing, like we just rolled out, is our marketplace to really allow buyers and sellers to directly, like, create accounts, create listings, match with each other quickly.

Tom Lenfestey:
And our goal is to scale this marketplace and then be there to, of course, help them on a consulting brokerage service basis. But the neatest part about that is we have a lot of clients are like, I just don't know. But I do know that it's going to take some time to find a buyer. Right? Like, because I'm in a niche area or because I'm in this small town market, right. It's going to take a while. Well, then going into the marketplace doesn't mean you're going to do a deal tomorrow. It just means you can start really finding and having choices and having the ability to say no to potential opportunities to find that right fit. Because our biggest thing is time is either an asset or a liability. And in our world. I mean, with anything. But in our world, if you give yourself time, you're just giving yourself that opportunity to say, nope, this isn't a right fit compared to, hey, it's mid 2024, in June or July, I'm thinking about retiring end of the year. I need to find a buyer. What you got? Right. And lawyers don't move that fast, so finding a lawyer that's going to move that fast is going to be a challenge.

Ali Katz:
Yeah. Yeah. Great. So to get started, people would just go to lawpracticeexchange.com and then set up a profile and begin to be able to explore listings. Is that how it works?

Tom Lenfestey:
Absolutely. Yeah. You can go to the website, create an account for the marketplace that allows you, if you're interested in buying firms or if you're interested in potentially being a seller. And then again, we're there hopefully as resources and otherwise we're a help button away or anything else to really step in and help you value or structure. We've had a lot of deals where they're like, great, I found a buyer, but we don't know where to go next. And so stepping in to do that, or our team just had a deal where the deal was done dead and the potential buyer engaged us to see if we could resurrect and make it work, which was honestly, I think, more emotional therapy to the seller of just helping them through their emotional and mental roadblocks than financial terms or anything else, but of just, hey, we understand what you're doing. We've been through it before with others, and here is how it's going to look better once you get through this process. And so sometimes we think we're therapists because that's just sellers. It's scary, right? They're facing the R word of retirement. They like controlling their firm. You know, this is a tough area. And so the emotional counseling comes into play quite a bit.

Ali Katz:
Well, the best lawyers are counselors.

Tom Lenfestey:
Sure.

Ali Katz:
Without question. So you're just, you're just using it here. So what would you leave the listeners with today as one of the most important things for them to take away, to love their lives as lawyers. Seems like you've made the journey. You've found a way to really love your life as a lawyer. So for the lawyer who's out there, who's not there yet, what's the best advice you could give Tom?

Tom Lenfestey:
Yeah. You don't have to stay within the box, right? I mean, you're not confined truly, you know, to be in that box. And again, Ali, something we were talking about earlier, like, as I was going through school, it's like, oh, well, this is what an accountant will do, or this is what a lawyer will do, and this is what I want. And then you get in and you kind of get more facts, and you're like, I don't know if I like where I am or this daily or whatever of what I'm trying to build. You can be creative. Lawyers are creative as hell. I mean, that's the one thing I will tell everybody, is there's lots of lawyers like to think of worst case scenario, really tough to make decisions. But we are creative because we're used to being creative for our clients and everything else in that counselor, in that strategic fashion.

Tom Lenfestey:
And so if you're in a place where, whether you're running the firm and it's not going, like, great, look outside the box to do something different, seek help to do so. I think that's the big thing. When I started this, I mean, I started reaching out to other brokers I know, dental brokers, general business brokers, intermediaries, big M&A's, because I wanted to kind of know, like, what's this world like? And to really see if this is something that I want to do. And, you know, do I want to be a dental practice broker or do I want to take up this charge to do this for a law firm? So, yeah, just if you're in a spot and you don't like where you are, then just, you don't have to be in this box. Just because you're a lawyer doesn't mean you have to be an associate in this box or an owner that's doing this. There's great opportunities. And I think that's, again, I just to go back to your community, there's people to help, whether it's just good discussion or you're really struggling with certain things and you're trying to get to that next stage or you're trying to get to a different stage. There's awesome people. There's so much resource now, good resource to talk to, to help you make those decisions and get to the place you want to be.

Ali Katz:
Yes. Yes. We're big fans of don't go it alone. Don't reinvent the wheel. Use all the shortcuts you can. Tom, thank you so much for being here with me today. Thank you for starting the Law Practice Exchange. I wish it had been around in 2008. I wish I had known about you. I wish I had known how to ask for help and who to ask for help, but I had to learn the hard way. And I appreciate you taking your lessons and sharing them with the lawyers through the Law Practice Exchange. So you can all find Tom at thelawpracticeexchange.com. At least five years. At least five years before you're thinking about selling, start to have the conversation so that you can really build that value. And that's my big takeaway, Tom, from this is really looking at what are all the things that we can do to help our member firms to build value, not just revenue, not just profit, not just distributions, but the value to make that sale as good as it can be down the road. Because that's the legacy, right? You got life and legacy. That's the legacy part. So thank you so much, Tom. Appreciate you being here today. We look forward to being with you again.

Tom Lenfestey:
Yeah, thanks so much, Ali.

Ali Katz:
I hope you loved that episode with Tom as much as I did. I sure do wish I had found him before I sold my law practice. So if you're considering selling your law practice anytime in the next five years, reach out to Tom at thelawpracticeexchange.com. and in the meantime, if you are looking to build a practice that you can sell or grow a practice that you can sell, and you're either already doing estate planning, or you want to offer estate planning and turn it into a saleable business, then you'll want to go to newlaw.co/show and apply for a call with a law business advisor so we can map your path to PFL and a salable law practice. Just tell you a quick story of a lawyer who joined me many years ago, Robert Galliano. He had already been in practice for 25 years when he found me. I was a young whippersnapper back then, and he was getting my emails and he said, oh, this, you know, she can't teach me anything. I've already been in business almost as long as she's been alive.

Ali Katz:
Well, one day he finally opened my email and decided to learn from me and completely, radically changed his life, changed his business, immediately went from charging, I think, 4 or $500 at the time for, like, you know, a will plan to 4 to $5,000 for a trust based plan consistently. And then in, I think it was 2018, sold his law practice for a million dollars, and he was going to walk away from his practice. That's what got him to open my email, was the consideration that maybe he needed to just throw in the towel. Well, luckily, Robert didn't throw in the towel. He became a Personal Family Lawyer firm, learned from me, and went on to have a million dollar payday as a result. And I'd love for you to have those results, too. And I think it only took him about five years, maybe five, six years after joining us to sell, and you could have an experience like that, too.

Ali Katz:
Tom had his practice for six years before selling. I had mine for three years before selling. So no matter where you are right now, you could build your law practice into a business that you love and you want to work in forever. Or maybe want to have some associates where you get to take long vacations and your associates, future equity partners are running the show and you're taking home great money. Or maybe you want to sell and go on and do something else next, like Tom did, like I did. Either way, you can do it when you have built your law practice into a business with life and legacy planning as a Personal Family Lawyer. So if that is what you want, go to newlaw.co/show, and we would love to support you each step of the way. I look forward to seeing you on the inside.