A lot of lawyers somehow think you can, again, plug and play numbers with CPAs. And a popular way and a very simple way to value any sort of business is to look at, let’s say, the gross revenue figures, and what you do is multiply that by what is known as a multiple. Another term for this concept is the “rule of thumb.” And then what you do is you take the gross revenues and multiply it by could be 0.5. It could be some industries or service industries have a multiple as much as five, six or seven, or eight. And you use hat to get the value. So whatever the multiple is, well, the – so, in other words you have a $1 million book of business and the multiple of one, it’s worth $1 million. 

The problem is you can’t – at least in my view – you can’t do that with law firms ’cause, again, you’re trying to predict the future. You can’t predict the future that accurately. Another reason why multiples don’t work is that the sale of law practices, it’s a very, very immature business marketplace. Yes, you can have multiples: restaurants in this particular area sell for this, or even CPAs sell for this, because it’s a mature marketplace. People buy and sell all the time. People know what these things are worth. And then it’s so you take what those sale prices is, and then you back yourself into what the multiple is. But there is no – it’s a very immature marketplace. 

In fact, it was only ethical to sell law firms back in – they first made it ethical back in 1990 is when the ABA first recommended it in the model rule. So it’s relatively, still relatively new. Our profession changes so, so slowly. And even when the deals are going on, they tend to be very confidential. It’s not like the house down the street where you know what it sold for. And even if you had that information, just given the nature of practices – they’re so different, each one – to predict the future revenue is not gonna be that easy, even within let’s say estate planning. You know, an estate planning practice that does $250,000.00, that has a heavy dose of elder law, is gonna be completely different than one that has a heavy dose of probate about the predictability of revenue. So even within practice areas it’s hard to even compare that, let alone compare an estate planning practice with a family law practice.