How to Sell Your Expert Witness Practice

Presented by Steven Babitsky, Esq.

President and Founder, SEAK, Inc. – The Expert Witness Training Company.

The Importance of Expert Witness Succession Planning

Many of you have substantial expert witness practices. Some of you are bringing in substantial amounts of revenue and very few people have any succession planning being done. Similar practices by accountants, dentists, lawyers and other professionals are actually being sold for a substantial amount of money currently. So if you had a business that was generating hundreds of thousands of dollars a year, would you just close it down and walk away from it? I don’t think that you would. I have been consulting with experts who have been buying and selling and taking over practices and I suggest to you that this is actually starting to happen now. We’re right on the cutting edge.

Tennessee Williams said, “I knew none of us was immortal but I thought I was the exception,” and I think a lot of us think that way. Many expert witnesses have developed successful expert witness practices and they have put too little thought into succession planning. Still, due to the press of time, we are all very busy.

How many of you here have thought about succession planning? A few of you. All of us hope that we have the time and the good health to wind down our business affairs when we feel that, that’s the time. Unfortunately, nothing like that always proceeds in an orderly fashion. Too often, you hear of an expert getting sick, he has to close his practice, [with] nothing to show from it. Or an expert has to go out on disability, he has a disability, professional discipline, retirement or other problems.

As you know, sometimes experts, as we get older, the expert passes away and their families have very little, if anything, to show for their practice. In one infamous case, the expert has had his career cut short when [as] an elderly expert, during the middle of a deposition, turned to both of the lawyers and asked which side was he testifying for. That was the end of that expert’s witness practice.

So, I will suggest you that at a minimum, you want to have thoughts, some kind of succession plan and at a minimum, you want to think about what should your spouse or your attorney do if the expert can no longer carry on with his duties.

For example, I had dealt with an expert witness who was getting along in age and unfortunately he passed away. There was no succession plan whatsoever and his spouse had to scramble around, trying to figure out what to do. And the other thing, which is most important, is that his family got nothing from his practice, nothing whatsoever. So, he had a successful business that was generating hundreds and hundreds of thousands of dollars a year, and he got sick, he passed away, that was the end of the business. Then they not only didn’t get anything from the business, then they had to spend money to wind down the business, and they had to hire attorneys and accountants and so forth to wind down the business.

That’s not what you really want to do. You want to have a written succession plan, some kind of plan, just like you would have a will or a trust on an estate. So, we have wills, we have trusts, we have estates, but now we have businesses. We have businesses that are generating $200,000 a year, $300,000 a year, $500,000 a year. There is no plan whatsoever to do with that [expert witness] business after you get sick, you get elderly, you have to retire or anything like that happens, and that doesn’t make any sense to me at all.

Inherent Value in an Ongoing Expert Witness Practice

The contacts and relationships that you have with attorneys, insurance companies, adjusters and others can be transferred, they could be sold, and they ought to be capitalized. Each of you has dozens and dozens of relationships and I think it’s important that you start thinking about that. Who is going to wind down your business? Who is going to return the active files? Who is going to review the outstanding contracts? Notify the clients?

Is there a way to maintain the viability of the expert witness practice? I’d suggest you that there is. You can have a practice, your practice that you spent so many years building up and worked so hard to build up, you can have that practice setup so that can generate business and income for your family after you are no longer practicing. So, it’s imperative that you make a plan, so that your family will be taken care of.

Don’t wait for a crisis. Most of us, unfortunately, are so busy taking care of others, we don’t have time to take care of our own. The old story of the cobbler who doesn’t have time to take care of his own shoes, the plumber, when you talk to a plumber’s wife, that the pipes are falling about, and talk to a builder and their spouse, their house is falling apart. They are building everyone else’s house, they have no time to take care of their own. It’s the same thing there, same exact thing.

Expert Witness Transition Planning Can Extend an Expert’s Working Career

So, determine what are your goals and objectives. When you talk of the reason that this room is not filled with people, it’s a very simple reason. People think when you talk about succession planning, reduced workload or take over, that means you are going to retire imminently. I’d suggest you that it doesn’t mean that at all.

What it actually means is, that you are making a plan for the future. You may want, at some point of time, to work less hours. You may want a time to reduce your travel. You may want a transition out of your practice. You may want to sell your practice. You may want to continue to work as an expert witness part-time and have somebody else take over the responsibility of the business. You also want to think about what’s going to happen after you transition out or sell your practice.

These are the things that you want to start to think about. Let’s look at some of the case studies which I pushed up in the handbook.

Examples of Experts Selling Their Expert Witness Practices – Case Studies

Case study number one, and these are the cases that I have been involved and worked on already, just over the past couple of years. So for those of you who think this can’t be done, these practices can’t be done, and these practices can’t be sold or modified, that’s just absolutely not correct.

Case study number one, we have 75-year-old expert. He has established a forensic practice. He has written and lectured extensively. He no longer wants to testify, he is 75 years old. He wants to wind down his practice. He has a consultant that he has been working with for many years. The consultant is about 45 years of age.

Now, the expert, the 75-year-old Ph.D. Expert, has been getting all of the publicity. She has written all of the articles, she does all the lectures, and so on and so forth, and it’s her business, and she wants to transition out of the practice. I dealt with both of these people in the practice, I talked to both of them. They talked about their goals and then I wrote them a note and this note is in your handbook.

“I enjoyed working with you. These are the questions that you need to answer that we work to resolve.

“Number one, can Danielle, or the 45-year-old expert, take over the practice at some point? Will she be committed to doing what it takes to make this a success?” She had a long way to go, the 45-year-old expert. She didn’t have a national reputation, she hadn’t been giving lectures, she hadn’t been writing anything. She has been just acting as an consultant for this other expert.

“How can you increase the amount of income from the business? How long is it going to take this new expert to get up to speed? And then, more importantly, how is the new expert going to get up to speed? How can you help build up her brand?” and then we went through some of the things you can do to help build up her brand.

On the articles that are in transition, make her a co-author. On some of the lectures, let her take over your lectures. Increase her visibility, nationally, regionally and on a state basis. These are things that you need to do. Start making introductions to the clients. Clients will understand. Make introductions to the clients. Institutionalize the practice, and that’s one of the things that needs to be done.

This was essentially a one-man consulting practice, and a lot of you face the same problem. You have a one-man consulting practice. You think yourself, “How can I take a one-man consulting practice, when everything depends upon me, and sell or transition out of the business?” and the answer is, by some careful planning, you can actually do that.

I talked to them about reaching an agreement, between two of them, the 75-year-old and the 45-year-old, about short range planning and long term planning. “What do you both want to achieve?” The older expert, 75-year-old Ph.D., she wanted to cut down on the practice. She wanted to still practice, and she wanted to travel less and she wanted to testify less.

What did the newer, 45-year-old expert want to do? She wanted to get more visibility. She wanted to build up her practice. She wanted to substantially increase her income from doing forensic work, and she wanted take over the practice. So, now we have a synergy. They both wanted things and both of them kind of meshed. It’s just a question of working out the details.

We talked about incorporating the business, reaching an agreement, deciding how much the older expert wanted to work. That’s always a tricky situation and you don’t need to come up with a hard and fast number. “I want to work for three more years; I want to work for five more years,” because things develop and we are not sure how we long we want to work for. Myself, could be a week, could be a year, god willing it could be 10 years, it could be a lot more than that. So, who knows how long we actually want to work for?

One of the crucial things was, the 75-year-old expert knew this much about expert witnessing and her field. The other expert knew this much. So, as the part of the package, as the part of the deal, the 75-year-old agreed to mentor and teach this new expert to bring her up to speed so that she can eventually draw cases, bring in cases, go out on her own and bring in cases into this practice. That was the deal that we were working on for them.

So what happened as a result of this consultation they worked on? The consultant had agreed to become part of the practice, and part of this actually I did not get involved in. I told them I did not want to be involved due to potential conflicts of them working out the negotiations between themselves. I thought it was important that they worked that out themselves in satisfactory fashion. And that was actually fairly easy; it wasn’t that difficult.

The consultant agreed to train and mentor using a lot of proprietary methodology that she had, turn it over, and let the new expert get up to speed. Ultimately they decided that the newer expert would pay 30% of their gross receipts for six years to the selling expert.

So now we are talking gross receipts. Everybody is on the same page now. They both want to achieve the same goal. They wanted to maximize the amount of income for the next six years. It’s not like they have a conflict. They both want to achieve more income, then they’re going to divide it up. The older expert pays to the new expert, and they both can be successful. That is what happened, and it worked extremely well. Both sides were very happy and they moved on.

The expert who joined the practice would be getting 30%. Yes. So, both parties wanted to continue working, and they both wanted to achieve continuous income. The older expert started at 75, and she really didn’t have any time to waste to get to mentor and get this other person up to speed. So, that’s case study number one.

Let’s look at another case study: a forensic psychiatrist. This is a very interesting case which I just worked on recently. This is a forensic psychiatrist I have been working with for some time, and she is a very very brilliant woman, and she recently started out as a forensic psychiatrist and opened up her own practice. She was working for somebody else before, and she is being mentored by an older forensic psychiatrist. It was very clear that the older psychiatrist liked her, respected what she could do, and he wanted her to take over her practice. He wanted to cut back and stop practicing eventually. He didn’t ask for non-disclosure agreements, he didn’t ask for anything like this. He just told her directly. The practice was generating $1.5 million per year in revenue, and after some give and take he offered that she could take over the practice if she paid him $2,500 a month for 10 years.

Now, that comes out, if my math is right, to approximately $300,000, which is actually not that bad. It’s actually quite good. So she had to consider, and she was my client, she had to consider whether or not that was a reasonable amount and whether or not she wanted to do it. Now, in this slide, we talk about the details of the purchase are crucial. The devil was in the details here.

She had to figure out whether or not in actuality, this was a good deal. We looked at the doctor’s receivables and we looked at the doctor’s account and found out that he had some unique things that he was able to do that probably she couldn’t do. So, we had to take that $1.5 million and reduce that down as to what would happen when she took over the business.

She then looked at his practice and noticed that he was doing a volume practice, seeing a lot of different patients and churning them through. In the end, she decided that she didn’t want, she rejected his offer even though it was actually a pretty generous offer. She rejected his offer to take over his practice, and she went out on her own. She did not feel comfortable continuing on the type of practice that he had. She didn’t feel that that was something she wanted to do.

Let’s take a look at our next case study, 63-year-old expert. He has a big national following. He has no other experts and he is planning long term. He comes to me and says that, he wants to plan for the next at least 5 or 10 years.

His situation was he has built this up as to a one-man, solo consulting expert witness practice, and what he was going to do, what he thought he would do is that he would, he also had a high level person running his office. She knew where all the bodies were buried, and she knew the practice management stuff in the office. He said he was going to rely on her to keep the practice going, and what he wanted to do was to bring outside consultants and have her utilize these outside consultants to run the forensic practice in the future.

I thought that was a rather dicey situation. I didn’t think that made any logical sense to me at all. I advised him of that, and he went off and hired some management consultants, who actually had worked in the cardboard box industry, and sent him some gap analysis and some other things that you see that people do in these kinds of situation.

Of course I mentioned to him that getting somebody that doesn’t know anything about expert witnessing is dicey because now you have to bring him up to speed about what expert witness practice is, the professional ramifications and so on and so forth. So, he went on and we’ll see what happens with that. That’s still a case in progress as we say.

Let’s look at case study number four. This is an interesting one. A physician built a successful expert witness practice in New York. He was an ear, nose and throat specialist. Unfortunately, he passes away. He had no plan whatsoever. His wife had run his practice for many years, so she at least figured out that what she could do, she placed an ad in The New York Times trying to sell the practice after he already died, which is a little unusual.

But she did find a physician to take over his practice. She found another ear, nose and throat specialist that wanted to take over his practice, and he quickly realized, the new doctor, that this practice had a tremendous amount of value because the practice had hundreds and hundreds of relationships with insurance companies, with employers, with attorneys, both plaintiff and defense throughout the tri-state, that New York/New Jersey area.

He was very shrewd in that he begged her and got her to agree to stay on to run the practice for a number of years. She knew all the contacts and she had lot of the goodwill with all these people. She asked for $25,000 for this practice, which he gladly paid. He took over the practice, and what has happened as a result? Because of the fact that he kept the person on, the surviving spouse, they didn’t lose one client during this transition period. They were very proud of the fact that they kept every single client that they had.

This physician, he went on to expand the practice. He was a very good ear, nose and throat specialist. He was a great expert and still is, demands about $800 an hour, and he’s been running this expert witness practice for probably 20 or 25 years. He has probably taken in $20 or $30 million over these years, if not more. I am not privy to the exact amount, but he has taken in a tremendous amount of money.

What’s the lesson from this situation? You have a doctor who has this very valuable practice, has no succession plan whatsoever. Doctor unfortunately passes away, wife has to scramble around trying to figure out what to do, she does the best she could. She went out and sold the practice, and she sold the practice that would later go on to generate $30 million for $25,000.

The lesson I suggest you is, waiting too long can destroy the value of the practice. Let’s say for example, had this doctor worked at a transition plan, let’s say he brought in this other doctor, they divided up the money and the said, “We are going to split the money 50-50 for 10 years or something like that.” Instead of getting $25,000, the spouse probably would have generated millions of dollars. This is a case of poor planning or no planning and a situation where that’s what happened.

Let’s take a look at our, I think, last case example. This is kind of an amusing one. Forensic engineer, and actually the engineer who purchased this practice is actually at this conference, and he has a relative who is actually in this room. This forensic engineer purchased an engineering practice from a 79-year-old forensic engineer. He was practicing out of his house. The purchaser kept the selling engineer on a salary as a consultant for several years. They had a smooth and orderly transition. Selling expert, I believe, was paid approximately $50,000 upfront plus a percentage of the gross income for the past six years to continue on for the next six years.

The selling engineer, the 79-year-old engineer, signed a six year covenant not to compete. He waited until the six years covenant not to compete was up. The day after the six year covenant not to compete was up, he opened up his own practice. Now, at this time, he is 85-years-old, by my mathematics. He then actually continues to work and at 87 years of age, goes and sells the second practice.

Wait, the story is not finished yet. He sold his practice, he started out at 79, he sold his practice twice after age 79, isn’t that a pretty savvy old guy? He sells his practice twice. You’d think by this time he is 85 or 87, he would retire. Absolutely not. He is still practicing today and the original expert who purchased his practice all the way back, still sees him on the opposite side of some cases. Right now, the expert is in his 90s and he is still banging away at it.

To think that if a 79-year-old forensic engineer is operating out of his house can sell his practice twice for good amounts of money, think of all the experts out there that are generating $500,000 a year, $800,000 a year, a million dollars a year, and what are they doing with their practices? Nothing. They wait till they get sick, somebody closes it up, they put a sign on the door and they send the files back to the attorneys, they go home and his family gets nothing. That, with all due respect to those people, is not that clever. It’s just not clever at all, I’d suggest you.

Further Examples of Successful Transition Planning

Let’s look at some of the mistakes that experts have been making and some of the thinking that goes into this. I have talked to a lot of experts about this area. The first mistake they make is that, their skills are so unique that they can’t be replaced nor they can be replicated. Well, I’ve got news for you and everybody else, everybody is replaceable and everybody will be replaceable, and everybody will be eventually replaced. So to think of ourselves as so unique that we cannot be replaced by anybody is absolutely ridiculous. It doesn’t make any sense.

When Steve Jobs got sick, this is a man who was compared to Thomas Edison, a visionary, a person that was compared to Thomas Edison as one of the leading business people in the United States in the last 100 years. When he got sick, Tim Cook took over. Apple stock now is $1,000, $900. They are doing better now than they did ever before.

I, myself, can give you three quick stories about myself. I had a law practice, right here in Falmouth, Massachusetts. I practiced for 20 years. I graduated law school at age 24. I practiced until the age 44. At 44 I sold my practice to my partners and I left, and I sold my practice for a good amount of money spread out over 20 years. I, at that point, considered myself a very, very good trial lawyer, a very good worker’s compensation lawyer. I had a national reputation. I spoke all over the country. I wrote newsletters. I testified as an expert witness in worker’s compensation. I was, in my view, right in the top 5% of worker’s compensation lawyers.

I knew that I could be replaced and I wanted to be replaced. I trained the person under me, I trained a few people under me whose practice is still going very successfully. It can be done. I started the National Organization of Social Security Claimants’ Representatives, or NOSSCR, actually in my office. That’s lawyers who represent people on Social Security disability claims. At one point, we had 2,500 members, lawyer members. After a while, I decided to transition out of that. I trained the young lawyer in my office. She took over. Thirty-some odd years later, she is still running that business. No problem.

Let’s look my the current business now, SEAK. I started this in 1979 and 1980. About 15 years ago I took on a partner, James Mangraviti. When I started with Jim, he was kind of new. He started out as my law clerk actually. I liked what he did and he has stuck with me.

Over the years, we have achieved a lot of things that I would have never achieved by myself. And that’s something very important to think about. This is not something where you are going to lose something by bringing somebody on. Over the past 15 years, we have written over 20 textbooks. We have increased the number of things that we do. We hold conferences all over the country. We consult for the FBI, the IRS, the Department of Defense, the FAA. We have a very significant consulting practice with the government.

A lot of these things could not have been achieved by one person. I needed at least more than one person. I no longer have a one-man consulting business practice. I now have an actual business. Both of my adult children work for the business. When I retire, when I am gone, the business will go on. There is a plan to continue on the business. There is no question about if the business will go on.

What I have done already over the past 14 years is work with Jim, increase his visibility. For example, the last years 3 or 4 years, I have been harassing him and saying, “I want you to be the lead author on our new textbooks.” For years, due to respect, he said, “No, no. You should always be the lead author.” I said, “Listen, there comes a time when we have to plan for the future,” and finally, I think it was a year or two, he said finally, “Okay. From now on, I am going to be the lead author on our publications.”

It was a little thing but it was actually a very big psychological thing for both of us. Something I knew that the better he gets, the better off I am, and not only that, the better off my children are. I am 64, he is 44, they are 35. So there is a hard, fast plan here that’s being implemented.

Not only that, it’s not only about the money, I do want to make that very clear. You have done a lot of hard work in your career, you have learnt a lot of nuances, you’ve helped a lot of different people. The work that you have developed, the protocols, the procedures, the techniques should not just be lost when you have to retire one day and just close up shop.

I want my work to continue, I want SEAK to go on. Maybe it’s selfish, maybe I am worried about my children. I want them to have an income from now on till they stop working. That’s important, it’s not only about the money but also work. That’s the first biggest mistake, thinking that your skills are so unique that you can’t be replaced.

An Expert Witness Practice Does Indeed Have Value

Let’s take a look at the next one, and this is a similar one. My practice is so dependent upon me that there is no way that this practice can be sold or transitioned. I’ll give you some exact quotes because I did research, I sent e-mails to lots of experts about it and I said, “Tell me what you think about selling your practice.” Here’s what they said. “My expert witness practice is specific to the individual and there is no value to the buyer. My practice is based on myself, experience, credentials, reputation, and is not really transferrable.” And I see some of you smiling because that’s what you actually think.

“There are only two things to sell. The first is my client list, and this can be generated by means of a couple of directories, Internet and a little effort. The other thing is my personal skill, which cannot be transferred.” And I’d suggest you that is absolutely, positively wrong. The true measure of how smart, how clever and how good somebody is whether or not, no matter how good they are, they are able to replicate themselves.

I have done it three times already. I did with my law firm. I was the national leader in workers’ comp, I turned it over to somebody else after a period of training, yet the practice continued on. I started a national organization of 2,500 lawyers, I built up the person that was my executive director, and at one point I said, “Here, you are in charge. Take it over.” She is still running the practice for 35 years now. I took Jim, who started out as my law clerk, who had little experience, and now he is fully capable of running the entire show many times and actually does run the practice.

Bringing on an Associate Will Keep You On Your Toes

The other thing is, hiring somebody like that, somebody younger, will keep you on your toes. When I get evaluations on my presentations, Jim has scored higher on his evaluations, I hear about it the next day. When I score 4.93 for an evaluation, he scores 4.95, I know when I get up in the morning, the next morning, that evaluation is going to be in my e-mail, no question about it. So I have to be on my toes, and that’s really very important.

You need to think of your practice as a business. It’s a professional practice and it has market value. You need to think about finding somebody to buy the practice or enter your practice.

Don’t Wait Until The Last Minute

Okay. What else do we have here? What other mistakes are we are making? They wait until they are in a crisis before they start to think about succession training and transitional planning. This almost sounds like the federal government. Everything is a crisis in the federal government now. “We’re running out of money. We’re running out of this. The budget has to be done by certain day. Well, let’s wait until the last two weeks and then we’ll decide what to do.” That’s endemic currently in the government.

That obviously doesn’t make any sense and as an expert witness, many of you are planners, strategic thinkers. You don’t like to leave things hanging until the last second. It’s not your personality, and I’d suggest you that is a serious mistake. We get into our 60s or 70s, we suffer a medical emergency, and too often the practice is just closed. Every few months, I hear about an expert who either passed away or had to close his practice and had to hire somebody to take over the practice.

I would suggest to you two things and they seem to be mutually inconsistent. Start planning your transition practice as early as possible, don’t wait until you are in the midst of a crisis. You don’t want to be a situation if you were a doctor, perhaps spent 40 years overeating, eating fatty foods, not exercising, being 100 pounds overweight, and then walk into the cardiologist’s office when you’re age 70, about to have an heart attack or need a triple bypass and say, “Doc, what can I do now?” What you could have done now is you should have taken care of yourself for the last 10 years. There’s not much we can do now except to give you the bypass, or maybe if you are lucky, a stent.

The second thing, which is sort of counterintuitive, is, even if you have waited a long time, it’s never too late, and as we saw by our 79-year-old engineer who apparently has his covenant with God that he is never going to die. I think he is too busy to die.

Transition Planning Does NOT Mean That You Have to Retire and Stop Practicing

What’s the next mistake we run into? Transition succession planning means that you have to retire and give up your practice. For some reason people think if you talk about it, it’s like certain things you are not supposed to talk about: death, taxes, retirement. It’s not that pleasant but on the other hand, I am the kind of person who likes to make a plan. I just don’t want to let it fly and see what happens. I don’t want to wake up one day in a nursing home and find out that SEAK went out of business because there is no plan, and everything went to hell in a hand-basket and a very nice business had to close up because it had nobody take it over.

I think that it’s a serious mistake, and the thing is that, just because you start planning doesn’t mean you have you have to stop practicing, at all. In actuality, what actually happens, I have found over and over again is, as we take on somebody new, you start acting as a mentor, in actuality your longevity is extended. That’s what happens.

Cherry Pick out Your Cases

First of all, your level of practice goes up because the new guy is going to keep you on your toes. They’ll have more knowledge about the technology. They’ll bring a new insight into things that you have been doing for years that you can’t really explain anymore why you are still doing it. They’ll bring new knowledge to you that they have learned in school and so on and so forth.

It does not mean that just because you are thinking about succession, that means you are closing up your practice and it’s all over with. In actuality, you can continue to practice. What I did when I was practicing Workers’ Comp, and what I am doing now, winding down my law office, I started to choose and cherry pick out the cases I wanted to work on and said, “I want to work on these 10 cases, I don’t want to work on these anymore. Turn them over to somebody else.” It’s the same thing at SEAK. I’m at SEAK, I can work on the projects that I want to work on. I don’t want to work on a project, I ask somebody else, “You, please work on this project.”

In actuality, it increases your longevity and actually makes you, in my view, a better expert because now, you can pick and choose if you want to, you don’t want to take the red eye back and forth to California when you are 80 years old, you don’t have to do it. Someone else can do it.

When I was practicing workers compensation law in the beginning, my partner was 40 years older than me, and the first few months, six months, I would follow him around and he would teach me. He said, “Sit next to me and I’ll teach you.” “Great.” We trudge up the Boston, and in a snowstorm we’d be walking up this hill near the Saltonstall Building. He is like 75 years old, carrying a briefcase, trudging up the hill against the 50 mile an hour wind. All I could say to myself at that point was, “I am not going to be 75 years old, trudging up a hill in a snowstorm, carrying a briefcase. When I am 75 years old, that is not going to happen.”

Don’t think that just because you start thinking about this, that means you have to stop practicing. So what can you do? You get to pick the cases you want, you can cut down on travel. If you don’t like certain contentious cases, turn them off to the younger guy. Let him get experience. I’ve got news for you: what is a chore to you, is a joy for them. They have never done it before. They are all excited.

You send a young lawyer out to a case, could be a small claims case, it could be a slip and fall on a banana peel, if it’s a jury trial there, they’re loving it. For you it’s just, “Oh, I have done that. I’ve crawled under a million buildings. I have done all this stuff before. It’s not a big deal.” It’s just like a football team or a baseball team, every year or two they try to get some younger players in there to keep the age of the team down. It’s important.

Hand Over Administrative Chores

You can handover administrative chores. When I was practicing law, I got tired of dealing with things I didn’t want to deal with. I didn’t want to deal with, after 20 years of practicing law, the fact that the toilet was stuffed up. I didn’t want to deal with it anymore. I didn’t want to deal with personnel problems, with people coming in later, not showing up. I didn’t want to deal with it. I had somebody else, I turned that stuff over to them and said, “You deal with that. I am going to cherry pick out the big cases to work on so that we can make more money, be more successful. I don’t have time to waste on this anymore.” That allowed me to get a better result. Keeps you on your toes.

What actually happens is several things. Number one, it extends your career. Instead of shortening it, it extends it. It’s counterintuitive but it’s definitely true.

Second thing is, it makes it more fun. Working by yourself, if you are a loner or you like to work by yourself, it can be fine. Working with somebody else, if they are on the same team with you and the system, it can be a lot more fun actually. The mentoring relationship between an older expert and a younger expert can be a lot of fun, especially when you see how you can bring them up to speed, and how much better they are getting. So it’s not all or nothing. I think it’s actually a good thing.

Your Client List Has Value

Let’s move along to our next mistake, mistake number five. The experts don’t consider the value of their client list and the goodwill. All of you have dozens of clients, if not more. You have a lot of goodwill built up. You have a lot of attorneys that you have dealt with for years. You have a lot of relationships with insurance companies, insurance carriers and other people. This is extremely valuable, and if you can pass it on to another person in your practice, there is a lot of money involved. It’s your reputation and it takes some work.

Let’s take the person from the first case study with a 45-year-old expert. It might take her years to build up a practice. She has to learn all the stuff herself. She has to get clients. She has to get relationships. She has to build momentum and all this other stuff. So if a new expert can hook up with an expert who is thinking about succession planning, this is already made for them. If anybody has any brains at all, the new expert, they look at the expert, he’s 60 or 70 years old and says, “I want to wind down my practice,” they realize this is an extremely valuable opportunity, first of all to learn from the master, and not only that, to have these readymade relationships that would take them 10 years to build up. There is no need to do that. These people can introduce you to other people.

I was always introducing my younger lawyers to clients. Even now when we get a consulting client, if I get a big consulting client, I go out of my way to try and have Jim, after one or two attempts, to go in there and start working with that client.

I am not going to be here forever. I would rather now try to get another big consultant client — this way we have more big consultant clients — rather than keep servicing the same client over and over again. It makes a lot more sense. You teach them the nuances. You spent years building up this client. These contacts are valuable and the up and coming expert will pay to get into this kind of situation. Either they’ll pay out of their pocket if they have the money, which most of them don’t, or pay a percentage of the receipts as time goes along, They will pay to do this.

I’ll give you one quick story. My partner, as I said, he was 40 years older than me. As soon as he took me in, because I was a young go-getter in those days, the practice started to flourish and expand. At one point he said, “You know, Steve, I want to sell this practice to you,” and I said, “Fine.” He said, “I think I want $20,000 a year for five years,” he said, “But I’m not ready yet.” I said, “Fine, whatever you want,” because he was a very nice guy.

A few years go by and now the practice has gone from, whatever to five times the amount of money. He said, “Steve, I am ready to retire now” I said, “Okay.” He said, “You know, the gentleman’s agreement we had a few years ago about $20,000 a year for five years, but now the practice is a lot bigger.” He didn’t say I helped make it bigger, but I said, “Yes.” He said, “Well, I think maybe you could give me more than we agreed on.” I said, “What you want?” and then he named a figure at $30,000 or $40,000 a year and I said, “Done.” It didn’t matter, the practice was usually successful, whether it was $20,000 a year or $40,000 a year, it didn’t matter at all and I was happy to pay him.

Clients Will Indeed Accept New Experts

The next mistake we see, mistake number six, client, lawyers, insurance companies will not accept a new expert. I’m the old pro, they want the old pro, they want me, they don’t want anybody else, they’ll never accept anybody else. Every old pro goes eventually and is replaced by somebody else. Nobody lives forever, except for that 79-year-old engineer. Everybody is replaced eventually and I have done it many times. You can bring in a new expert, you can introduce him, you can train him, and the old addage is, you watch one, you do one, you teach one, for doctors and for other people, and it’s the same thing here.

I have done it many times. I’ve introduced people, you introduce them. You show them how to do it. You start them out with smaller cases and the cases build up, and eventually the new clients like them and actually sometimes wants them over you, which is great. Is it easy? No, it’s not easy but it certainly can be done. Introduce them to clients and so forth.

Couple of more things, a few questions. “If I train a mentor, they are going to steal all my clients.” “I train a new expert, they are going to steal all my clients.” I follow the golden rule. I treat people the way I want to be treated. I’ve never had anybody steal anything from me in over 40 years. Nobody wants to leave when they work for me. They are overpaid, which I do intentionally. I’m an easy boss to work with and I am giving them stuff they can’t get anyplace else. It’s that simple. If you give somebody a great opportunity, unless they’re an idiot, they’re not going to try and take anything from you. That would really be a bad idea.

Taking on an Associate Can Be Joy Not a Chore

Number eight, “Taking on an associate can be a chore and a distraction.” I would suggest to you that it’s actually not a chore. It’s actually a joy to have somebody working with you and helping you. It extends your career, gives you incentive to do things, you have a youthful vigor. The first time they ask you, “Why can’t we do it this way?” and you have no answer, that’s when you know you’ve got the right person. They’ll ask you, “Why are you doing it that way?” “But we always did that way.” “Yeah, but you could do it this way, it’s a lot better.” “Okay, you are right, I am going to do it that way now.”

Associates Can Make You Money

Next mistake, number nine, “I am going to make less money when I have to support an associate. When I bring in an associate, I’m going to have to pay him $40,000 a year, $50,000 a year, I’ll have to take $50,000 out of my pocket, I am going to lose money, blah blah blah.” Answer: absolutely not. One plus one very often equals to three, four or five. No question about it.

You have synergy, you have leverage. You can work on bigger jobs. You can spend time doing things that are more productive, working on bigger jobs, building up bigger clients, doing promotion, doing other things like that which you never could do because you were so busy taking care of all the little petty things you had no time to plan and do things for the future.

Last mistake, number 10, “Bringing a young less experienced expert, they are not going to have the money to buy my practice,” and that probably is true. They are not going to reach into their pockets and say, “Here is $250,000,” because very few people have that. They have something that is very valuable to you and that’s sweat equity. They may have to put in a year, two years, three years, four years, just like they do at at law firm.

You bring in a young associate, you know you can’t make partner for five years. What you have to do in those first five years? Bust your hump. You are working 18 hours a day, why? Pie in the sky. If you make partner, you are going to have it made for the rest of your life. If this person impresses you and he takes over your practice and you divide up the income for the next 5 or 10 or 15 years, it works to everybody’s advantage.

The biggest source of money is not how much money the person buying the practice has. The biggest source of future income is the future income of the business. The business generating $1 million a year, they can continue the business for 20 years, that’s $20 million to divide out. So whether this person has $10,000 in their bank account or $20,000, doesn’t mean anything. What’s the most important thing is that, they can run the $1 million business for 20 years. Now, that’s $20 million and there should be plenty of money for everyone.

I would suggest to you some takeaways to start. I’d suggest that the art of succession planning is in its infancy. Most of people don’t know anything about it, nor do they care about it. “I am going to live forever, I am going to work forever and why think about this?” More and more experts are starting to look at this as a business. Most businesses have, if you are a smart business person, you have an exit plan. What is my exit plan? How am I going to end this practice? How am I going to end this business?

If you develop an exit strategy, your best possession is the generated stream of income. And it’s not always for you. Very often it’s going to be for your family. If something happens to you, you’re no longer going to be there, but what’s going to happen to your family? They’re going to be left with this business and they’ll have to wind it down. Where are they going to get the money from? “They have insurance.” Well, that’s going to go pretty quick. Where is the ongoing money that you could have generated from the sale of the practice?

We’re going to have to end it now, thank you very much.

***The above was recorded at SEAK, Inc.’s 21^st Annual National Expert Witness Conference in 2012.  SEAK is the Expert Witness Training Company.  For further information please visit www.testifyingtraining.com and www.seakexperts.com***