Ep 31 Building a Sellable Law Practice: Even if you are not selling.

Ready to unlock the potential of your law practice and navigate the complexities of elder law? Join me, Todd Whatley, as I sit down with financial gurus Joel Houser and Ian Winer to demystify the process. We examine the value of building a lucrative wealth team, delegating tasks beyond your expertise, and the importance of planning for the future sale of your practice from day one. We also delve into the necessity for regular business valuations and adopting effective business practices to enhance the appeal to potential buyers.

In this episode, we also pull back the curtain on creating a sellable professional service business, particularly in the fields of law and dentistry. We illuminate the importance of a well-structured business plan and efficient systems, plus the untapped potential for enterprise value and growth through acquisition. An organized financial plan isn't just about retirement - it's a roadmap to your future. Discover the perks of being a business owner in the USA, and how strategic tax planning can help you keep more of your hard-earned money. Whether you're an aspiring entrepreneur or a seasoned pro, you won't want to miss this enlightening conversation.

Check out our new website www.TheElderLawCoach.com.

Transcript

Speaker 1: 0:02

You're tuning in to the Elder Law Coach podcast, the definitive resource for attorneys delving into the world of elder law, with your host, todd Watley, a certified elder law attorney, past president of the National Elder Law Foundation and renowned coach with a quarter century of specialized experience. Whether you're an established attorney looking to refine your expertise or an emerging lawyer seeking a successful foray into elder law, this is your masterclass. Now let's get started with the luminary in the field. Here's Todd Watley.

Speaker 2: 0:37

That's right. This is the Elder Law Coach podcast. My name is Todd Watley and, as always, I'm extremely thankful for everyone who listens, and today I'm super excited because I have two guests on that are experts in finances and business and just the things that I'm not strong on, and so they are here to help me personally, but I think this will also help you all, too, to think about things not just today, but in the future. Okay, thinking about your practice, how your practice is doing now and how you should be thinking about the future. And so welcome guys, and my first guest is Joel Houser and Ian Winer. Thank you for being here.

Speaker 3: 1:23

Thank you, thanks for having us.

Speaker 2: 1:25

And I'll just tell you a little bit about yourselves and how you can help us today.

Speaker 3: 1:31

I'll get us kicked off here. My name is Ian Weiner, I'm a certified financial planner and I specialize in working with families and business owners in making sure that they maximize their wealth. Now, I consider wealth your time, your energy, your assets and your attention. These are finite resources that everyone has, and so we want to spend them well, so I help families and businesses to maximize their wealth and be as efficient as possible with taxes.

Speaker 3: 2:01

In a lot of cases, what that looks like is we set up a team and this is a kind of a new concept for the industry it's not for a lot of folks, it's not a new concept in general and so I help my clients create what we call a wealth team. So that consists of a financial planner. That's going to consist of maybe an investment person, typically an estate planning attorney, if they have a business. It's going to be a corporate attorney as well, sometimes a banker, real estate folks, investment folks, insurance specialists and all of these specialists are A players and they're going to communicate together and work together for my client.

Speaker 3: 2:44

And so we talk about okay, you don't have to be an expert in every field, and I appreciate the candor with that time, because this is really the case, and especially attorneys are experts in what they're an expert in and they understand the value of delegating and outsourcing those other areas. And so that's what I help my clients do I help them to delegate those areas, but I help them to manage that team. So the team is working together for them. But they don't necessarily have to be in every single meeting, and if there's a financial matter that comes to them whether it's a pitch of a product, whether it's a professional trying to get their business or it's a problem they throw that over the fence to us and we either evaluate it or handle it for them and they don't have to worry about it. And so Joel is one of the specialists that I work with.

Speaker 4: 3:33

Yeah, I'm Joel Hauser. I am actually a certified exit planning advisor and all that means is we've bought and sold and advised on buying and selling lots of businesses over the years. I spent the first part of my industry experience a little over a decade in the family office space and, as Ian said, this is something that we have found. A lot of business owners not even just from an attorney aspect, but business owners in general they focus on the operation of their business, they focus on the day to day Sales. Really, they don't necessarily focus on their business.

Speaker 4: 4:07

And attorneys really are no different in that Attorneys are looking at billable hours, they're looking at obtaining clients and very often have not looked at the aspect of their business itself and creating an optionality in the business of how do we exit this practice. How do we make this practice worth enterprise value without us, as the attorney that's sitting in there generating it? What does that look like? And so that's part of what we do is we come alongside and look at what the options are and how do we create those intentionally moving forward. It doesn't necessarily mean you're selling your practice externally. It may be an internal sale. It may be an external sale, having your business ready to be sold as a business at any point in time is just good business.

Speaker 2: 4:48

Well, I was just going to say so. There's probably some of these folks listening. They're like I just started my practice. That is way down the road. Why should I be worried about that now? But you're saying and it is definitely true having an eye toward selling this eventually will make you a better business person. Now, absolutely, talk about that, just.

Speaker 4: 5:11

Yeah, when we see this all the time, companies will come to us and say, okay, I think it's time for us to sell. Well, the time to decide that it's time for you to sell is not when you're actually selling the business. It needs to be at least three to five years before. But just good business practices, as far as we need to go in with them and take that time to clean up the practice, to clean up their books, to go through financials, to do backcasting and forecasting. But those are things business owners should be doing all the time.

Speaker 4: 5:38

Sure, and most people have no idea what their business is worth.

Speaker 4: 5:41

They've got some idea in the back of their mind. Getting a true business valuation of your company needs to be something that happens on a regular basis. We usually recommend to our corporate clients that it's done every two years just to keep it there, to keep it fresh. And there are ways to adjust that valuation just by internal practices on how the business is run. Those have enterprise value to the company, those make it more attractive to prospective buyers and certainly, if it's going to be an internal transfer, is there a way that over the next 10 to 15 years, we can set it up so that the internal employees have the ability to buy out, you know, the generation one owners. That's something we want to start now, and even if they don't do it, it just means there's money there that the company itself retains and holds to either buy out the generation one attorneys or to not to use it as a retention or a bonus program for the existing attorneys. You know, should you stay, those are all just good business practices, interesting.

Speaker 3: 6:41

This is just planning in general. I mean, a lot of the folks that are listening to this do a stay planning in elder law and the best time to do that is sooner rather than later. Always, yes, and we're creating plans for our clients, the thinking of stuff down the road and making sure there aren't roadblocks or obstacles or huge problems. We should take the same approach to the business, whether it's a. You know, there's like kind of three levels. Right, there's the lifestyle practice that some folks have. It's built around them and if they weren't here, the value of the business is essentially zero because they have other relationships and they do most of the work.

Speaker 3: 7:17

There's not necessarily anything wrong with that. You just have to understand what you're building. And you know there's small practices, maybe a couple of partners that are working together, small team, and then you know, as that grows it becomes a little bit more complex the more layers that you have, but the same. What's so beautiful about business is the same principles. The same things apply to all of them to increase, you know, enterprise value, to increase the ability for the practice to be sold, if that's the goal or to be transferred, and so you know it's doing the basics really really well. But most folks aren't taught that and I think for many attorneys that's very. They're taught how to practice law yeah, not how to run a business.

Speaker 2: 8:00

I know a number of times when an attorney just worked and we attorneys it's not physically laborious, you know you can do it well into your very later years and those attorneys have just died. And if you're a solo practice, the state bar comes in when the attorney dies and takes over those files, farms out those files, you sell the tables and chairs and lock the door and you're done and there's zero money there. Or if they retire, they're just like, okay, I'm done, who wants my clients? And you know they just hand them out and they go sit on a beach somewhere Getting zero money, when I'm like, oh my God, I know there's some value there, there can be some value there. So how do you go from what I just talked about to selling this for money and having people come in and take over your practice?

Speaker 4: 8:56

Yeah, there's a lot of things, especially from the legal field, that get overlooked and but that do have value. So there that there is value in the practice, and a lot of that has to do with your systems, your marketing systems, how you retain clients. You know law firms are famous for, you know using last names to name the law firm. But you know, especially in the elder law field, I mean that is a saleable practice once it's up and developed. You know what the concept is, what the process is. That's what you're selling. You're selling the effectiveness of that business and of that practice and we kind of walk alongside you.

Speaker 2: 9:32

It's a piece of brand, right yeah yeah, it's exactly what you're doing, all right, so I'm making a note. Todd Wattley PA now becomes something besides Todd Wattley PA. Yeah, thank you Joel.

Speaker 3: 9:45

Okay, but this is a perfect example. Yeah, perfect, we can, and I appreciate the candor letting us use this as an example. But if Todd Wattley is not involved in Todd Wattley PA, what is it?

Speaker 2: 9:56

It's nothing, yeah, it's not, it's not.

Speaker 4: 9:59

Yeah, and I actually made the reference earlier in the day dental practices. I mean, you're watching the transition with dentists because they're getting smarter about how they manage their business, but dentists used to be by name, and by name only as well. Now you drive down the highway and you see all kinds of brands and they are making themselves enterprise value and a saleable business. At that point in time, Because a dentist is the same way as an attorney, you know it's got to be another dentist that takes over the practice. I forgot. A good friend of mine, whose dad was a dentist for 40 years, locked the door, closed up for a day, went and sat in his car, didn't even shut his car door, had a heart attack and died. There was no business plan, though, so you know my friend has to get up the next morning and go and unlock the door of the practice and try to figure out what do we do and is this a saleable business? And they did ultimately end up selling it, but you know they sold it for $400,000 when.

Speaker 3: 10:55

If they had used the process and the systems and built those, it could have been a couple million.

Speaker 4: 11:00

Yeah, and likewise I've got another client that is a dentist as well, but he has branded his practice and he's actually franchised out his brand at this point now, and you know he's got an enterprise value of $7 million on a dental practice. Well, that didn't used to happen, but we're starting to see that same transition in the legal field as well. You know, making something a saleable practice whether you sell it or not, is irrelevant, but making something that has enterprise value that goes beyond you know how fast you're willing to run and put in the hours.

Speaker 3: 11:33

Interesting and for a lot of folks, where it starts is when you're in the trenches, when you're building something or when you're just used to doing day-to-day stuff that you're doing. You don't think about this, but sitting down and asking the question what do you want to happen? You know, maybe the traditional retirement is not what someone wants, but do you want to continue to be putting your hand to work in the same way that you are now indefinitely Sure? And maybe the answer is yes, but can we optimize that for tax efficiency? Can we make sure that if something happens, you know where you're not able to practice in the same way, you're still going to be? You're not going to be destitute? I mean, these are all concerns that we've got to think about. But maybe you do want to sell the practice at some point. Maybe it's not right now, but if you start out saying, okay, I want to sell the practice, we can build it from the ground up much easier with a sale in mind, by laying the right foundation and building with that in mind.

Speaker 3: 12:34

What ends up happening with professional service businesses most of the time is this isn't necessarily a bad thing, but you got to sell. If you're in a professional service, whatever your service is, and so those types of folks end up. You know they're focusing on selling, they're focusing on servicing their clients and the business isn't so much a business, it's just their, their personality. And so we've got to add a little bit of structure, we've got to add a little bit of process and operation so that if they wanted to step out, someone else could step in and the business still exists and continue that process.

Speaker 4: 13:05

Yeah, that's what I meant when I said in the beginning. You know your processes and your marketing systems. I mean those are all tangible pieces of the business that do have value. Those have enterprise value if set up properly so that, like you mentioned, someone can come in and step into that footprint and become that person or be that person, whether that's a larger firm that comes in and takes it up, or I mean even a sole practitioner to a sole practitioner. Would you have rather started out as an attorney on your own, by yourself, or would you have rather walked into a practice that was already up, thriving in? The systems were in place.

Speaker 3: 13:37

You're able to make a great deal to come in and buy it and grow it from there. I mean, that's another piece that we haven't, we haven't talked about, but there's this. There's this movement right now called ETA, entrepreneurship through acquisition, and this is sweeping all the big business schools right now because, if you can, if you can walk into an established business and purchase it and grow from there, it's much more efficient than trying to start it yourself.

Speaker 3: 14:02

And so there's two sides of this. Right, there's the side of okay, you could build the business to sell and do it again. Or you could think about okay, if I build a business, I can acquire other similar, you know practices and incorporate them into the business. If you have the systems, the marketing, the operations to be able to do that, you can double triple your revenue almost overnight, and there's very competitive financing available for it.

Speaker 4: 14:26

So then you really do have a saleable practice that's not just dependent upon your efforts and your work. Interesting.

Speaker 2: 14:32

Yeah, so my practice twice to the same person and I brought him in as a new attorney, and so, yeah, it's much easier to jump on a moving train than to get that train moving.

Speaker 1: 14:44

And.

Speaker 2: 14:45

I've spent my entire life getting trains built and moving and you know, then someone comes and just jumps on and so anyway, yes, I do get that totally so interesting.

Speaker 3: 14:59

Well then the other part that we should talk about too is like okay, maybe you're getting ready to retire or you want to retire someday. How do we organize finances so that that's efficient? You know, I love working with physicians, with attorneys, because they are specialists in their field. But the ones that I enjoy working with the most understand that just because they're specialists in their field, they're not specialists in every field and competence doesn't necessarily transfer, you know and so. But they're intelligent and they're smart, they're fun to work with, and so you know, running a business in the United States is probably the best opportunity to pay as little tax as legally possible.

Speaker 3: 15:38

It's just, the rules are made for business owners, and attorneys that run their own practice are business owners, and so I mean there are a number of tax strategies that we can use that sometimes folks do and sometimes they don't just in the day to day practice, but also when we're getting a business ready for sale or you want to retire.

Speaker 3: 15:59

What if we could optimize the way that you're saving? What if we could optimize the sale of the business so that you can retire and pay as little tax as possible? We know one of the challenges with law practices, that they're typically set up as partnerships, which is a good thing in some cases in a challenge and in some other cases there's some tax advantages and some challenges there. So you know, having traditional quote, unquote retirement plans in a law practice can be a little bit challenging. But if you're a solo practitioner or maybe your spouse works with you, I mean, the ways that we can save on taxes are incredible and folks just don't realize that it's not about what you make, whether that's your day to day what you make or what you make when you sell the business.

Speaker 4: 16:41

it's about what you keep.

Speaker 3: 16:42

Keeping, yeah, keeping is the key and being proactive on these things can be. The difference of this is not exaggeration. Millions of dollars, joel. You see this all the time. When folks are, you know, and usually folks. The traditional way that things happen is folks come to us after they've sold or they're getting ready to sell, and then we see it and we're like what I would give to have met you two years ago, because it could be another zero in a lot of cases. And these are not. These are not exaggerations.

Speaker 3: 17:16

I mean imagine, you know, think of the person in your town that is the attorney that has been in practice for a hundred years. We all have this person right, or the CPA, or the dentist, and it's them. They're the brand. They've helped everyone's family forever. What is their business worth? It's not because it's just them. Now they may enjoy it and that's okay if that's what you want. But a lot of times what we see too is the main retirement plan for an attorney is the business, the building that they own. They buy the building downtown and it'll appreciate over time. Then they'll sell the building or they'll lease it and that'll be their retirement. Now, that's not necessarily a bad thing, but if we're intentional about it. It could be two, three, four times better.

Speaker 4: 18:02

We can still optimize taxation, even if you know your only intent as an attorney is to have a lifestyle business, that I don't want to overly complicate it. That's when it becomes really, really important to focus on okay, how can we optimize your taxes on an annual basis and optimize your savings for retirement? Because if it's a lifestyle business, you're not selling it at some point in the future. We still need a strategy for how am I going to get out of this business and how am I going to retire and what's that going to look like when I quit?

Speaker 3: 18:31

That year-to-year saving is arguably more important in that case.

Speaker 4: 18:36

Absolutely.

Speaker 3: 18:36

Doing it in a tax efficient way. I have some attorneys that I'm working with, husband and wife. One works for a bigger practice, the other one starting to a smaller one, and they're in different fields. I mean they're top of their field in their area objectively. And the husband goes, hey, should we set up a? Is it a SEP? And he's one of the top corporate attorneys in his area and he's like, would that be good? And I'm like, well, let's look at it. And so it's like it's okay to get help with this stuff to make sure that who wants to overpay on taxes and so in his case, for he and his wife we'll end up being able to save them about $100,000 a year in Texas Real money, and that's conservative.

Speaker 2: 19:28

Real money. Yeah, that's real money yeah.

Speaker 3: 19:32

And that's not even getting a little bit more aggressive with. That's one move, that's one thing that we're doing, and for us it's like 101. Yeah, it's very straightforward, sure, and so the more time we have with them to actually help them build the business and to grow it, how much more can that be? So it's one of those things where it's like the investment in education and building the right team is worth every penny that one recommendation alone will pay for us indefinitely.

Speaker 2: 20:04

Yeah, oh, yeah, yeah, For sure, all right. So if someone's interested in this, if they do have questions, can they just contact me and then I'll form it out to you all.

Speaker 4: 20:16

Absolutely, absolutely.

Speaker 2: 20:17

Yeah.

Speaker 3: 20:18

Okay, that's a piece of cake and I'm updating the website right now, but the website is justretirenowcom, so there's some fun stuff there. But, yeah, communicate with Todd. We work very closely with Todd. Todd is one of the specialists in some of our wealth teams, and so this is an area where we help one another, but we're helping Todd do this with his business, and so this is definitely a situation where it's always good to have a team of professionals and to get a second opinion on stuff. I think that's a little piece of cake.

Speaker 2: 20:54

So email me at Todd at theyotlerlogecoachcom. That is the best way to get me. Just email me. You can always call the office at what is now known as Todd Wotley, pa.

Speaker 3: 21:10

Right into today, man.

Speaker 2: 21:13

Get off this and go find a new name. Call the office or email me at Todd, at Todd Wotley, pa, and I would love to help you out with this and get this thing. Get serious about your business, start thinking about the business of business, not just being an attorney. So thank you all very much for listening and we will see you next time.

Speaker 1: 21:35

Thank you for joining this episode of the Elder Law Coach podcast. For those eager to take their Elder Law practice to new heights and are interested in Todd's acclaimed coaching program, visit wwwtheelderlawcoachcom. With Todd Wotley by your side, the journey to becoming an Elder Law Authority has never been more achievable. Until next time, keep learning, keep growing and stay passionate about Elder Law.