Goodwill valuation for law firms

BVWireIssue #150-2
March 11, 2015

When valuing a law firm, how do you put a price on a lawyer’s reputation? An earnings multiplier is a common method for goodwill valuation, according to experts in law firm valuation. “Goodwill, if there is value in it, flows from the ability of the seller to successfully transfer a book of business to the buyer,” says Dale Lash, partner-in-charge of RubinBrown’s Business Valuation Services Group in Denver. Lash is quoted in an article in the March 2015 issue of the ABA Journal.

Current range: Common factors for a solo practitioner’s earnings multiplier calculations include earnings history, geographic location, the practice’s marketing plan, and the seller’s competition. “Each practice is unique, just like each lawyer,” says Ed Poll, author of Selling Your Law Practice: The Profitable Exit Strategy. “That being said, a general rule of thumb for a standardized multiple range is one-half to three times the gross revenues.”

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