Good time to buy solicitors practice?

dee75

Hi all

I'm a new poster here but have been reading various threads for a year or so.

I'm a solicitor with 2 years PQE in a general practice outside Dublin firm. I'm aware of an opportunity to purchase a sole practitioner's practice and because my own job is very much on the cliff edge here, I was thinking about looking into this prospect.

I'm aware of the whole PI Insurance debacle.

I'm just looking for any advice or information. Do you think I am cracked to even consider it? I know there are a good few sole practitioners who post here, so their advice would really be appreciated.

Thanks!

Dee75

TobyZiegler

Its really hard to comment without knowing the ins and outs of your situation but it does seem that more and more sole practitioners are merging with each other at the moment which might suggest that it isnt a great time to go out on your own. I suppose the insurance issue is driving a lot of that too however and you are already aware of that.

Reloc8

Well it is a buyers market out there.

But I'd say it totally and utterly depends on what level of business this firm is doing and how that business is likely to react in the short, medium and long term. Impossible to offer a view without knowing that. You'd need to see the practice accounts for a start. You need to know what the relationship with any creditors is like, how the practice is fixed with its bank etc.

Also you are basically considering starting up your own business - approach it like you would any other business start up (yeah I know the practice exists but these principles are applicable) - what's your business plan, expected growth over given period of time, profitability, how you will finance everything, what contracts are you locked into (employees principally - transfer of undertakings etc) etc. etc. etc.

Not a decision to be made lightly.

I'd need someone else to confirm btw but is there not some minimum period of PQE which you have to have before you can be the Princiapl or sole practicitioner in a firm ? I have 3 years in me head but I could very well be wrong.

dee75

Thank you both for your answers so far.

TobyZiegler - I can't put too much info in here because it's a public forum, but I have heard about practices merging alright. Maybe it might be a better option to approach sole practitioners about partnerships.

Coler - As far as I know, the Law Society don't set any minimum PQE on becoming a sole practitioner - they recommend you have one year PQE but there is nothing to stop you setting up the day you qualify! Thanks for the advice too. It's just extremely difficult to come up with a business plan in the current economic climate - predictions could be absolutely pie in the sky.

My main worry though is PI Insurance - it has been indicated to me that the outgoing sole practitioner would be willing to work part-time to ease themselves out of the practice. In terms of insurance they've advised that I would have to cover my own insurance, the outgoing solicitor's and also (correct me if I'm wrong) a separate run-off cover for 6 years. Surely that will be an astronomical sum this year? Can anyone give me any idea what the combined annual cost of all that insurance might be?

It might be a bit naive of me, but I'd prefer to take this on (and work my ass off to make it work) rather than sit at home and draw the dole. I just need to face what the risk and worst case scenario could be.

Again, thanks for any advice or info given.

r14

Coler wrote: »

I'd need someone else to confirm btw but is there not some minimum period of PQE which you have to have before you can be the Princiapl or sole practicitioner in a firm ? I have 3 years in me head but I could very well be wrong.

It used to be three years but then the Competition Authority got involved and got the rule scrapped. There is no minimum PQE to start out on your own now so that shouldn't be a problem.

I've no special experience here but I think common sense rules apply. There must be a reason why the practice is up for sale so lots of due diligence.

Reloc8

^ Ah - that must be what I was thinking of.

Good old Competition Authority.

It always irked me that there's only one of it.

dazza21ie

As stated above due dilligence is very important when buying a practice these days. The phrase "past performance is no guarantee as to future permonance" is also very relevant. The traditional ways of valuing a legal practice have gone out the window in my view.

By taking over a practice of a sole practitioner you are saving him/her the cost of run-off cover so this should be incorporated into your calculations. I wouldn't pay too much relevance to fee income or profits made 3 or more years ago as this was during a massive property boom. I would concentrate on current cashflow, invoices raised in the last 12 months and work currently in progress as this is where your income is going to come not some fictional goodwill.

You might get a sole practitioner that will just hand you the keys and walk away but you should ask yourself why s/he is willing to walk away. Its very hard to project future income at the moment so you should consider how you would cope with no income for the forseeable future.

Best of luck if you go ahead with it. Remember fortune favours the brave and there is a very fine line between bravery and stupidity.