Have you started planning for your exit?
If you own a small law firm and are yet to start planning for your exit, then you’re not alone. According to a 2018 Thomson Reuters survey, only 37% of law firms have an official exit and succession plan in place. However, failing to develop an exit strategy could have major implications down the road and leave you with no other option than to close your firm and enter run-off cover.
To ensure your law firm doesn’t follow in the footsteps of the other 63% of the industry without a plan, keep reading to find out how you can protect your law firm from premature closure.
The difference between exit and succession
Before you can start to prepare a strategy, you need to know the difference between exit and succession. Whilst both terms are often used interchangeably, they have a number of key differences, which could determine the route that you take when you leave your firm.
Exit planning is when you find an external buyer to sell your firm to. Whether through a merger or acquisition, exit planning means your law firm can continue operating under the management of a new owner. Succession planning is when a member of your existing team is trained to become your successor and take over your firm. Once you decide you’re ready to retire, your successor will have the opportunity to buy your firm, with the knowledge required to confidently manage its operation.
The risks of not planning for your exit
If you put off planning for your exit, you could risk your financial stability if something happens to you or your firm.
Failing to secure PI Insurance
As a law firm, you need to renew your professional indemnity insurance every year. Whilst you might previously have had no issue with securing insurance, the current market is particularly challenging to navigate, meaning your firm might not be approved for insurance. In the event that you fail to secure PI insurance, you will have just one month to sell your firm. However, without a buyer or successor ready to take over, you will be forced to close your firm and pay for run-off cover. To safeguard against premature closure, it’s vital you have an exit and succession plan to fall back on.
Being unable to work due to illness
Even if you believe you have plenty of time to prepare an exit and succession plan, you could be wrong. Unfortunately, you cannot predict if or when you will be forced to stop working. However, by preparing an exit plan, you can be confident that your firm will continue to operate, even when you are unable to oversee it.
Cost of closing your firm
The cost of closing your firm can be an overwhelming expense, especially if you are not prepared. Due to the challenging PI market, the cost of run-off cover has gone through the roof. If you were to face closure in the coming years, your run-off cover would likely be 300% of your base premiums. By planning for your exit, you can prepare your finances, to ensure you can afford the run-off cover and enter a comfortable retirement.
The benefits of planning your exit with Bamboo
As you can see, failing to put in place an exit plan can put you and your firm at significant risk. Luckily, the Bamboo Platform is here to support you through your exit and succession plan.
The Bamboo Platform is a law firm operating system, which handles all the back-office processes required to operate a law firm. Once your firm joins the Bamboo Platform, we cover any obstacles which could halt your operation, including insurance, compliance and annual audits. With your firm in good hands, we enable you to focus on searching for a buyer or mentoring a successor. By supporting the day-to-day operation of your firm, we ensure a smooth transition for you and your clients.
Whether you are yet to prepare an exit plan or are already thinking of retiring, join the Bamboo Platform. We can provide you with the support you need to exit confidently and comfortably.
