October 16, 2025
If you run a small law firm in the UK—perhaps a sole practitioner or two-partner practice — you might have started to wonder what your firm is actually worth. Maybe you’re thinking of selling to retire, merge, or simply reduce the day-to-day pressure.
We know you get regular phone calls and emails from brokers; we get them as well to our legal recruitment business (we have the word ‘legal’ in our title and have made it onto a few law firm marketing databases!). During these calls the brokers will offer you a dazzling range of services and will spend a lot of time telling you how amazing your business sounds and how many buyers will be champing at the bit to acquire your firm.
When you begin exploring valuations, you’ll quickly find a dizzying range of numbers put forward by ‘enthusiastic’ brokers. Sellers and brokers often boast of multiples that seem extraordinary: “four times turnover” or “five times EBITDA.” Others claim their client base and brand alone justify a high premium. Unfortunately, these unrealistic valuations often have little grounding in how deals for SME law firms are really done.
Why Smaller Firms Often Overvalue Themselves
1. The Owner’s Emotional Connection
You’ve invested years building your client base, managing staff, and keeping the doors open through changing market conditions. It’s only natural to see your practice as worth more than a spreadsheet and a dose of harsh reality might suggest.
2. Using Big-Firm Multiples
Large commercial firms sometimes sell for high multiples of earnings (EBITDA). For good reason – they have a lot going for them and there is substantial interest from very well backed buyers. A high-street practice with £200,000 turnover simply doesn’t attract the same scale of buyer interest.
3. Ignoring Buyer Risk
Buyers of small firms assume higher levels of risk. SME buyers always worry about client retention, how much work arises from personal goodwill and what dependence there is on the principal solicitor. If clients are loyal to you as an individual, not the firm name, then this dependency limits value.
4. Not Accounting for Deferred Payment Structures
In small law firm sales, buyers rarely pay 100% upfront. Deals often involve deferred payments or even earn-outs, which is where part of the price depends on future revenue after handover.
5. Lack of Market Intelligence
Without visibility of comparable transactions, it’s easy to set prices based on hearsay rather than evidence. One of our USPs is our data set for valuations. Jonathan Fagan Business Brokers maintain direct data from real legal practice transactions across England and Wales we have been involved in or have made aware of. Market valuations are the best method of valuing.
What an SME Law Firm is Typically Worth
This question cannot be answered – and if anyone tells you a formula for doing this they are talking complete nonsense. Each law firm sale is unique, each sale depends on the demand from buyers active in the market at any time, firms have differing PII history & premiums, reasons for sale, billing levels per staff member, staff teams (ages, structure) and geographic location. We could go on. A typical valuation takes us about 3 weeks to complete and we look in detail at the workings of every firm we value.
One rule of thumb that is possibly worth sharing is that we do not see any law firms with a turnover of less than £1 million selling for more than 50% of the last year’s turnover. It would take something exceptional to go higher, and I am not sure there are many firms out there who are able to offer anything exceptional at this level of turnover. Don’t shoot the messenger, but we hope this is useful for listening to the sales pitch from business brokers offering you the earth..
Common Signs of an Unrealistic Valuation
- Asking price for 1× turnover or higher
- Limited data provided to buyers (or used to complete a valuation)
- No mention of a handover period or consultancy
- No flexibility on payment terms (upfront cash)
- An assumption that a deal will always be mostly cash upfront
Common Signs for Sellers having a Realistic Valuation
- Seller provides you with last 3 years of accounts and professional indemnity insurance proposal form
- Indicates their preferred deal structure – eg cash, consultancy plus WIP
- Does not rule out offers, but instead comes back with alternative suggestions
How Jonathan Fagan Business Brokers Help Small Firms
Jonathan Fagan specialise in law firm valuations and sales across the UK, especially for small to mid-sized practices. Our services include:
- Initial valuation guidance
- Confidential marketing to verified buyers
- Deal structuring advice
- Exit strategy support
- Independent perspective
The Real-World Consequences of Overvaluation
Put very simply, you miss out on deals that may well have been perfectly acceptable, if only you had been aware of the market prices. We see a number of law firms listing for sale and taking years to achieve a deal because the sellers have been given an unrealistic valuation. Although some firms just take a long time to sell for a whole host of reasons (eg specialist type of law, geographic location), others just miss out.
Practical Steps to Prepare Your Firm for Sale
- Tidy up your accounts
- Diversify types of law
- Plan your handover (recruit staff if you have to)
- Resolve compliance issues early
- Delay listing for sale if there are any issues (eg outstanding PII claims)
- Seek a professional valuation
The Role of Deferred Payments and Earn-Outs
Many small firm owners dislike deferred payments, but for sub-£250k practices they’re almost unavoidable. We are starting to see earn-outs featuring more often these days; reassuring for buyers that clients won’t vanish once you retire, but not so good for you relying on the buyer to keep the business ticking over.
Conclusion
For SME law firms with a turnover of less than £1 million, unrealistic valuations can waste time & energy, and mean that you miss out on good opportunities. Whenever you are thinking about a value, take a step back and consider what you would pay for your business if you were a buyer. What are they actually getting at the point they buy? Is it really worth the amount your friendly business broker is telling you? Would you hand over that amount yourself to someone? NB: you cannot sell future potential to buyers; they’ve seen it all before and its a bit like flogging a dead horse (we hear this time and again – a buyer could open a family law department and make £000s, a buyer could do some marketing – we never have, etc.. etc.).
Market value depends not on effort invested to date, but on how profitable and transferable the firm will be for a new owner.
Visit Jonathan Fagan Business Brokers for confidential, realistic valuation guidance: https://www.jonathanfagan.co.uk/business-valuations/
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