Speaking recently on The Lawyers Weekly Show, Mr Singh said that he considered starting up his own firm, but in the back of his mind was the knowledge that, when one goes out on their own, “the biggest disadvantage you have is you’re starting from scratch, so you don’t have a client base, you don’t really have any money coming in. You have to keep your expenses low”.

“That obviously affects you in terms of marketing and how much you can put towards that. You’re going to have to do it tough for six or nine months, maybe even longer, before you can really start seeing any gains,” he said.

The advantage of purchasing a firm that has a solid foundation, Mr Singh explained, is that you’re “stepping into something that’s got an existing client base”.

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“There’s a turnover, there’s a cash flow that’s already set up there, and you’re essentially going to get past that really tough first year where you’re not going to be making a lot of money. What you’re banking on is that, in the long run, it’s going to be more profitable for you to go down this path as opposed to starting from scratch,” he said.

Fiscal considerations

However, determining whether it is fiscally responsible to make such a business purchase, rather than building from the ground up, is not an easy decision, Mr Singh acknowledged.

“With Astor Legal, part of the business is based on the website and new clients coming in on a regular basis, so with that in mind, and having looked at the finances, having looked at the last three years, the financial statements, the clients that were coming in, how the business was growing, I thought that, ‘Even if it is a significant amount of money, it’s something whereby you’re not just paying for the here and now, you’re paying for something that’s going to keep developing over time’,” he reasoned.

“Then, you take a look at what profits are likely to be, what you’re going to be outlaying upfront, and you just have to make your decision. It’s ultimately going to be up to you as to whether you think it’s worth it or not.”

Learning from others

Speaking to other lawyers who have become business owners to identify what works and doesn’t work in the acquisition process is fundamental, Mr Singh posited.

“When I was going through the decision-making process, I spoke to people who had their own practices, who’d gone out on their own, to see what were their pitfalls, what were their thoughts on what to look out, and what they thought the advantages and disadvantages were,” he recounted.

“Obviously, there’s nothing that’s happened that someone else hasn’t done, so if you can find someone who’s gone through the process before, that’s normally a good sounding-board to see what you should look out for, and perhaps, really what you should be looking at, as opposed to what you think from your perspective that you actually are looking at.”

Types of businesses

An aspect of a firm’s worthiness or otherwise, Mr Singh noted, is its corporate structure.

“If a business is incorporated, there is a decision about whether you buy the corporation itself and just keep it running, or whether you don’t buy the corporation and just buy the business name and everything that comes along with it. There are pros and cons of that,” he said.

Understanding your niche

An intimate knowledge of one’s practice area is also critical, he added: “I’ve had enough experience with criminal law to know what you’re looking at in terms of monster months, or what should be coming in, and what’s going out.”

“Then, it was a matter of negotiating the price for something that I thought was reasonable, and then, when you’re undergoing that negotiation, when you come to a final figure, you just have to sit back, take a look and say, ‘Okay, is this something that I think’s fair? Is this something that’s going to turn me a profit in the long term?’ And, you make your decision based off that,” he said.

Advice post-purchase

Reflecting on the process of purchasing his firm, Mr Singh said that anything that can go wrong, will go wrong, and prospective business owners have to be prepared for the unexpected in order to attain their end goal.

“The amount of things that you don’t even anticipate is going to be an issue, that ends up being an issue. It’s just astronomical. Make sure you take your time, look at the industry, look at the company itself, have a look, not just in the last 12 months, but look even beyond that in terms of how the company is doing, and then, have a look, and say, is this a foundation that you can use as a launch pad, essentially, to move further into the future?” he said.

Acquiring an existing law firm is a huge vocational step, Mr Singh concluded, but for him, it is a risk that is worth it.

“Essentially, you’re taking a gamble on yourself. If you’re confident in your own ability, you’ve done the research through the industry, then I would think there’s nothing that’s stopping you,” he proclaimed.

To listen to the full episode with Avinash Singh, click below: