Pankaj Raval (00:00)
Welcome back to Letters of Intent, the show where we explore the thinking behind the major decisions before they become transactions, transitions, or turning points.

Sahil Chaudry (00:08)
Today’s conversation is about ownership, not just building a practice, but understanding what it’s actually worth, whether it’s transferable and what happens when founders and partners start thinking seriously about succession.

Pankaj Raval (00:19)
Today’s guest is Gideon Grunfeld. Gideon is someone I’ve had the pleasure of knowing for a while now. He is a polymath. He has many, different ⁓ skill sets and interests. He can talk to you probably about any topic for several hours. And what he does is his day job is actually advise law firms and professional service firms on to think about succession planning, ownership transitions, and exits. He’s a former large firm lawyer.

a litigator Fortune 500 HR executive. And now he’s the founder of Rainmaking For Lawyers. Gideon, welcome to Letters of Intent.

Gideon Grunfeld (00:52)
Absolutely delighted to be here.

Sahil Chaudry (00:54)
Gideon, this is a very, very interesting topic. I think we talk about this often that the lawyer relationship with their client is very personal. It’s unlike, let’s say, a consumer goods driven brand or it’s unlike computer software, which has a value outside of that personal touch. So I’m really excited about today’s conversation. But before we get into this, I want to dig a little bit deeper into

you got started, early influences, where did you grow up? How did you find yourself being drawn to law in the first place?

Gideon Grunfeld (01:25)
Well, on some level, I didn’t have a lot of choice. And what I mean by that is I come from a long family of lawyers. So whether I wanted to be exposed to it or not, was, know, a family reunion in my family is kind of the equivalent of a small bar association convention. I’m a fourth generation lawyer through my mom on three different continents. My mom practiced law for close to 60 years. Her dad was a judge.

Pankaj Raval (01:39)
Hahaha

Gideon Grunfeld (01:51)
in Germany in the beginning of the last century. So matter where my family’s born, they spit out lawyer. So we’re speculating it might be a genetic defect at this point. So kind of grew up around the table. How I got specifically to being a consultant is a different thing, but being a lawyer was kind of literally in my

Sahil Chaudry (02:09)
and so when you started off in terms of your practice of law, what drew you from the practice of law into consulting?

Gideon Grunfeld (02:17)
So I was actually a consultant before I became a lawyer. So I was an HR executive both at a nonprofit teaching hospital in the Philadelphia area. And I was also a campaign manager ⁓ right when I was in college. And so I was running things at a pretty early age and transitioned from that when I was an HR executive, I was doing a lot of work with the lawyers. I was working a lot with in-house law departments.

Sahil Chaudry (02:19)
Okay.

Gideon Grunfeld (02:41)
For many years, I resisted going to law school. My older brother is a lawyer. His wife is a lawyer. I’m really serious when I say a lot of lawyers in my family. And so I sort of reluctantly decided that I wanted to be a lawyer. But after being an HR executive, I saw that the real power, the real influence, the real kind of focus on justice and value and what you could do was just, you could just do much more as a lawyer as you can as most corporate executives. And that’s what led me to law school.

Pankaj Raval (02:47)
⁓ You’re not joking.

Interesting. Yeah. it’s interesting to hear that, you have a family of lawyers and yet, somehow you actually ended up exiting the practice of law. I feel like as a lawyer, I find that so much of your identity is caught up in being a lawyer. Right. And there’s probably some ego there as well. How difficult was it for you to become a lawyer than leave practicing?

Gideon Grunfeld (03:28)
The becoming a lawyer wasn’t hard, given my background, right? The leaving the law, especially when I did it, like people thought I was nuts. I mean, I was working in a big I was on like, they were looking to be partner. You’re going to be this. You’re going to be set for life. of. It’s a really prominent firm. It’s prestigious. I was also.

Pankaj Raval (03:30)
Right. Right.

Yeah. I you’re at the best, one of the firms, right? Yeah. Yeah.

Gideon Grunfeld (03:49)
in DC and there’s no city in the United States where like, 10 % of the population are lawyers. Everybody’s a, you know, and I was working with a very, was considered prestigious firm. And so people thought I was nuts. What’s really been interesting is that over the years, the more time passes, the smarter people think I am. They’re like, wow, you were really, initially it was like, that seemed like unusual and shrewd and now like you’re a genius for having left, so it’s kind of telling you more about what’s happened in the world than

the wisdom of my initial decision.

Pankaj Raval (04:18)
amazing. Yeah, amazing. I want to definitely chat more about that because, we both kind of have an entrepreneurial background. And, I think there’s a lot that you can do with a law degree and leverage it in certain ways. And that’s certainly something, you’ve figured out how to do. So tell us a little bit about that transition from being a lawyer to coaching lawyers, essentially, and consulting with them. was that like? And what does your practice look like

Gideon Grunfeld (04:38)
So initially my practice was on career transitions. of a serial entrepreneur, my first business, which ended up not being super successful, was actually focused on helping lawyers make career transitions. And it took me a little bit while to realize something that’s pretty obvious is that unemployed people don’t have a ton of money.

Sahil Chaudry (04:59)
you

Pankaj Raval (05:00)
It’s a good point. It’s a good point. Yeah. So making a note right now. People, no work equals no money. Okay. Good. Got it.

Gideon Grunfeld (05:00)
Write that down. Write that down.

Sahil Chaudry (04:59)
point. Yeah. I hope everyone’s listening. Yeah. ⁓

Gideon Grunfeld (05:05)
Right. So, no work

equals no money for most people. so unless you’re willing to do like super high volume, like a consulting firm based on that is going to struggle. So it took me about a year and a half kind of learning the hard way that that wasn’t a practice. But what I did have is I had a tribe, I had a niche, I had a group of people I care passionately about that I understood. that’s a little bit a theme of this is not to hold on to your identity too tightly.

The idea is to go solve problems and find people you want to go serve. And it turned out a little bit by people started asking me on the business development side, the marketing side. I have an economics degree, I went to business school. So it was more using that. And then that’s how I for years was primarily known as business development and marketing and coaching and helping law firms grow. And it was that that now led to

what we’re talking about today, that it transitioned to, how do I sell my firm? How do I buy my firm? How do I do succession planning? But it was really a natural outgrowth of moving from business development, coaching, consulting, and helping firms grow to then, okay, what’s the next chapter of your life? How do you transition? And all the various transitions that are possible.

Sahil Chaudry (06:16)
That’s very interesting and I’m just hearing your story and how drawn you’ve been to people. You’ve been connected to HR, it sounds like, in a very significant way. And even as you’re describing your approach, it sounds like a people first approach. So have you always been a people person? Are you a very extroverted person? What’s the reason that you like HR or connecting with

Gideon Grunfeld (06:36)
it’s I loved what HR should be about, but what HR isn’t. HR in reality is where a lot of good ideas go to die and people who say no, and it becomes de facto kind of protecting the corporate interest no matter how unjustifiable it is. And it’s sort of an early warning system for management to go, not really solve problems, but prevent them from like becoming litigation as opposed to what HR could be and should be.

is as the economy has turned and we become more service oriented, cultivating your people and how to have excellence is such an important thing. And HR, it’s a specialized skill. Just because you’re good at whatever you do doesn’t mean you really know how to go coach people, develop people. And so yeah, I really did have this sort of very innate sense that…

in business school and was taking classes in undergrad at Wharton, everybody wanted to go to finance and I went into it. Like I was interested in the people aspect of this because I realized at the end, it’s the people who really make the difference, not necessarily in the bottom line because we obviously, in law firms in particular, they’re the me, wasn’t worthwhile if it wasn’t about at some point dealing with the people. And some of that has to do with sort how I grew up and where I grew up. But it is something that’s been a big part of my life for very long time.

Sahil Chaudry (07:51)
So when you’re working with people, let’s say, whether this was from an HR perspective or you were working with clients, and now when you’re working with law firms that are looking to further succession planning or they’re looking to sell their firms, what’s the personal outcome you’re hoping for with your clients? What’s the thing that is motivating you where when you see, okay, if this client achieves X target, X goal, I would be very

Gideon Grunfeld (08:16)
So I’ve been sort of in the advice giving business my entire life. I mean, I literally started hiring people and being in HR and I was a campaign manager. I mean, from like age 20, 21, 22, I was a campaign manager. So here’s one the things I learned. I don’t get too caught up in the results. what I want to do is I want to make sure that my clients make informed decisions. Now, obviously there’s some decisions, not every decision is justifiable. So it’s not like I’m never concerned about the results.

Sahil Chaudry (08:24)
⁓ okay.

Gideon Grunfeld (08:42)
But I try to do that in the screening process. If I think someone’s gonna have some crazy result, I just try to avoid working with them in the first instance. But once you get to a point where you’re looking at a reasonable range of results, my job is to help you make an informed decision, figure out what your priorities are, and then help you get there. It doesn’t matter whether that would be my result. It’s sort of taking your ego out of the process and helping it solve problems for that other

Pankaj Raval (09:07)
Yeah. It’s interesting with succession planning for lawyers because just sense that, we’ve helped a couple of law firms have come to us, you know, with kind of thinking about partnership agreements or by people are buying in and, oftentimes there’s a lot of discussion about or I think misunderstanding or misalignment about value in the law firm and where the value is. How do you think about succession planning and

How do you raise the issue and how do you address it initially with clients to set expectations as how to manage that transaction or that

Gideon Grunfeld (09:37)
it’s an interesting question because most of the time I am the one who’s raising the question. It’s really interesting that lawyers, more than most people, are really resistant raise this issue, even if they are in the business of giving people advice about their future plans. instance, you might think that estate planning lawyers who talk to people about wills and trusts and your plans after death and charitable interests would be somehow better at succession planning and they’re not, and I’m not knocking them. It’s just a hard human trait.

Pankaj Raval (10:03)
That’s true.

Yeah.

Gideon Grunfeld (10:04)
And so

the first thing to do is to kind of explode the myth that like talking about a will doesn’t cause you to die and talking about succession planning doesn’t get you like they don’t show you the door sooner. It’s just a normal part of business strategy. It’s a normal part of if you care about taking care of yourself and the people around you and the clients and your family, you’re better off not doing things at the last minute unprepared under the point of a gun or financial pressure.

Sahil Chaudry (10:13)
Hmph.

Pankaj Raval (10:15)
Right.

Gideon Grunfeld (10:30)
So part of it is just framing what the issue is in a way that’s a lot less threatening.

Sahil Chaudry (10:35)
So, you know, that’s so interesting that you’re at this intersection of practicality and philosophy because your people are dealing with their mortality. They’re dealing with, okay, I’m at the end of this like you’re saying, you’re not actually being shown the door. It’s just something that you practically have to deal with. So have you had to develop a communication style to bring up kind of very sensitive issues? I’m sure some of these people

in their business or siblings or they have best friends that they’ve been working with or they’ve had conflicts and there’s sometimes in a business’s history, I feel like there are many ups and downs and many sensitive issues. So how do you approach that?

Gideon Grunfeld (11:15)
There are absolutely better and worse ways to raise this issue. And one is to understand that from the, have to understand where people are sitting and what their concerns are depending where they are in this process. If you are talking either to or about the founder or the founding generation of an entity, and you don’t know anything about them, presume that loss of relevance is their deep concern.

Sahil Chaudry (11:39)
Yeah.

Gideon Grunfeld (11:39)
And that goes

to especially lawyers and doctors and the professions. Anytime where you think like, parents are proud that you are X, right? Like, and people tell jokes about it. It’s part of popular culture. People’s identity is tied into that job title, which is exactly the wrong thing to do if you want to have succession planning or get your business ready for sale. But understand that that’s where they are. So the first thing to realize is that you don’t have to lose your identity. The other thing is that people have

is they have an internal on-off switch, as if this issue only has, I’m fully a lawyer or I’m useless, either I’m fully billing 2,000 hours or like sitting in a hammock doing nothing. The reality is that over the last five years, in excess of 90 % of the succession planning projects in which we’ve consulted, if you look at that founding generation or founding individual, they do not dial down to zero.

They are still involved. still using their expertise in some way. Just different. It’s not as if it’s an on-off switch that you only have two options. Either I’m fully on or I’m fully off. That used to be the truth. economy used to be that way, but that’s no longer

Pankaj Raval (12:33)
All right.

I usually have this on my desk and it’s Marcus Aurelius, but with a skull, it’s stoicism talks a lot about memento

And maybe, you know, good opener for you. You could give your client something like this memento mori is essentially the Latin phrase for, remember that, you will die, right? Like everything is finite. And I keep this on my because I think it keeps things in perspective a lot of times for me in the practice. And also like, what is your goal in life? Right. Because I think oftentimes

Gideon Grunfeld (13:05)
Yes.

Pankaj Raval (13:17)
That’s the risk for me is like, your identity gets your ego and identity gets so caught up in the practice and being a lawyer that you forget, okay, well, what is this all for? Right? Like, what is the point of all this? I think see a lot of lawyers fall into that trap.

Gideon Grunfeld (13:31)
And so the other thing we try to do, in terms of a technique is make two techniques. One is have the conversations about a third party because it’s much easier to talk about, okay, imagine we’re talking about X and that person said, the only way I can be a lawyer is I have to be exactly this kind of lawyer and doing exactly this kind of way.

it’s easier to see that that seems a little odd, like whether it’s I have to be in the office five days a week, or you have to build this many hours, or we have to use this software package. It’s like if you start thinking about it somebody else, it’s easier to see because you take yourself out of the equation. The other thing we do is we give people ridiculous examples. And the reason you give them ridiculous examples is when the example is really, really extreme.

people can see the underlying issue or the point you’re trying to make by your example without being feeling it’s so far away from the reality. So if I was talking to you about career transition, I said, well, imagine like, you were gonna be an Olympic gymnast. And by then you really do have to decide by the age of seven, you might be already too late to become an Olympic gymnast. Now, if I say that the two of you, you’re like, I’m never gonna be an Olympic gymnast, but it helps you see the point because I’ve used an example.

that is so remote from you. It’s just not threatening. And that’s sort of one of the conversational techniques. And we actually do advise people not only for themselves, but a more common example is, how do you raise this issue for the founding generation? How do you begin to have a conversation with them? And there are actual techniques about how to do it put in a place where they’re kind of comfortable, but not their home turf.

Don’t have this in their office. And the reason is if their whole experience for the last 30 years is I sit at this desk, at this table, and the people across from me do what I say, do not have a conversation about how they’re gonna go change and maybe we really need to think about winding down or the clients are beginning to complain in the environment where for 30 years they’re habituated to getting their way. yeah, so we really think through.

Pankaj Raval (15:26)
That’s so interesting. Yeah, it’s interesting changing the environment.

⁓

Gideon Grunfeld (15:29)
for individual

where the environment is and it was a neutral place. And the only thing you don’t want to not threaten, you don’t want like eight people showing up and threatening. So we really think about who’s a colleague, who’s someone who’s a peer who can have this conversation and convey to that person that this is coming out of concern and genuine gratefulness. It is an exceedingly hard conversation with lots of very complicated dynamics. A lot of times it’s

the people are reluctant to have this conversation. This is their mentor. This is someone they look up to. They’re grateful for. They’re people who are like in I had situations where they’re trying to talk to someone who literally loaned them the money that allowed them to buy their first house. They were like their godparent or their kids. And they were like, oh, it may be time. It’s like a very hard conversation to have. And the biggest mistake that lawyers and just other people make is they think they somehow should know how to have this conversation as if

Like this is just like a regular, like I went to the fast food restaurant and decided, do I want combo one or combo two? Like people think it’s like, is just, if you think about the context, there’s zero reason that you would know how to have this conversation. So it’s like, take the pressure off and go get some help and talk to people who do this more often. And perfection is not remotely required. What is required is a feeling that you’re not a threat, that you genuinely have someone’s.

interest in heart and that doesn’t mean this is just I’m showing you the door. That’s what actually matters.

Pankaj Raval (16:53)
Do you find

this more difficult for lawyers to have this conversation than others? Or, thinking about like, lawyers have this, yeah, okay.

Gideon Grunfeld (16:59)
A hundred percent. Yeah,

yeah. Actually, that’s actually you could say more than 500 percent. And the reason is couple of things. One is, a lawyer’s communication style tends to be they tend to take words literally as if we’re like we’re taking conversations and translating into parsing contract language. So you have to be extra careful about how you say things. The other is lawyers are relative to the general population.

Pankaj Raval (17:05)
Hahaha

Right.

Gideon Grunfeld (17:25)
more likely to be passive aggressive. And so you can’t infer from silence that they like something. They could be annoyed at you for something you did nine months ago and compared to most people just won’t say it. So that makes this conversation harder to have. And then most of all, it’s a little bit generational. It’s a little bit more gender based. If you look at older men as a generation and how much they want to go talk about their feelings about

this, you know, I find this threatening, I find this annoying. Like, so all of those things together, and lawyers are just being perfectionist, a little bit more resistant to change than the general population. So all of those things together makes this conversation a little harder. And let me also point out, it’s also just a fallacy to think that you’re going to have this conversation once. The idea that like, you’re going to say, we mentioned it, we’ve checked off the box, it’s now covered.

What most people want to do is ignore it. So you’re going to have to have some follow-up mechanism. And part of the conversation is, hey, can we bring in some outsider? Can we begin to think about what a process might be? It’s just getting permission to open the door to this

Sahil Chaudry (18:32)
Well, I listeners are going to benefit, first of all, just from having all of our minds open to the idea that we should be comfortable with this idea that succession planning is not a scary word. And it’s something we really have to seriously consider and think about. And also our whole audience has now been introduced to stoicism and Marcus Aurelius. So that’s, you know, that checks two things off of the boxes. But

Pankaj Raval (18:50)
Yes.

Gideon Grunfeld (18:54)
That helps,

Sahil Chaudry (18:54)
It’s time to get into the money, the nuts and bolts. All right. We’re speeding past philosophy now and let’s talk about the money. You’ve spent your life. You’ve spent hours and hours missing your kid’s soccer games and now it’s time to cash out. So let’s talk about this to kick this off. Is running a law practice a job or an

Gideon Grunfeld (18:57)
Sure. Sure.

Pankaj Raval (19:07)
Hahaha

Gideon Grunfeld (19:16)
It depends if you do it well or not. It depends entirely on your mindset. And it depends to some extent if you make it your entire identity and if you add to it that your identity is rewarded by billing more hours and spending more time doing it, the more you hold on to that part of the identity, then the harder this conversation is going to be. But if you think about it from just a business point of view,

Succession planning is like a blessing. And the reason is that means you have built something valuable enough that either the next generation or your colleagues or someone from the outside thinks, wow, this is a really cool thing to take over and develop and evolve further, or you’re selling it to somebody. And that means you’ve grown actual value, which most people don’t do. If you just look at how big most companies are, succession planning isn’t a…

you are a $50,000 a year business, that’s a job. Succession planning is only relevant if you’ve gotten something big enough with enough value, you’ve served enough clients, you’ve solved enough problems that it has a potential life that’s not dependent on you doing exactly the same thing you’ve done for the last 30 years. That’s a great sign of success, just the very fact that you have this

Pankaj Raval (20:29)
You emphasize timing as well with succession planning. think it’s a big question. What’s the right time? When to start thinking about this? What do you suggest for people who have law firms, for lawyers, whoever are building law firms, when should they start thinking about succession planning and how should they first start thinking about it?

Gideon Grunfeld (20:46)
I would say the first thing to think about whether succession planning ends up being an internal process, like you’re handing it off to the next generation or your colleagues or whether you sell it to someone else. The first thing is a mindset that it’s possible and likely if you plan for it. The issue is that if you look across businesses around the country in all industries, something like 80 % of businesses as the common statistics never get sold, never get transitioned. So the first thing to realize is

lawyers and especially lawyers of a particular generation, they have a sense that there’s some special subset of firms that are somehow eligible for this and I am not. I can’t even tell you how many firms that we’ve helped sell and do succession planning where their initial conversation is, I probably can’t do this. So the first thing is just realize you probably can do this. It’s just like before you get into the hows and the details and how valuation gets done, just recognize that

Succession planning is if you have a successful business and it’s been around for a while you probably can take it take advantage of it in some way So that’s the first thing to realize

Sahil Chaudry (21:49)
what about firms, I mean, maybe it’s a little bit more straightforward to get the mindset about to sell when you have a single solo practitioner. What about when you’ve got a, let’s say a small firm and you have multiple partners, does it get more complicated and how do transfer rights or drag along, tag along? I mean, there seems like at least those concepts might apply even on a practical level. Somebody wants to sell and somebody doesn’t want to sell.

How does that end up working out?

Gideon Grunfeld (22:15)
Yeah, so it is more complicated in sort of the operational aspects of it. So let me give you a concrete example. We’re working with a firm. It’s actually, I use them as an example because they actually had almost everything in place correctly and didn’t really know it. They had scoped out a managing partner. Everybody said this is going to be the next managing partner when I interviewed the partners one at a

When I got to that person and I said, who do you think should be managing partner? They said, I hope it’s me because I don’t think anybody else would do would like to do this. So like everybody, everything fit. So the way we did it that way is we identified in advance in that situation, there were three owners who owned 70 % of the firm and they wanted to transition out and reduce their role over a period of three to five years. And so you can still have an initial conversation. So operationally got broken down by

here’s the road that the path, this is the path that the firm is going down. But then we had conversations about responsibilities and who’s gonna take care of it, who’s gonna be the person who’s gonna be mentoring, who’s gonna be person recruiting, who’s the person who’s doing finances. And you can separate those conversations from ownership. One of the things that people always think is, are surprised by is they think that a conversation about either selling your firm or succession planning, that it goes hand in hand that you have

up your equity or your ownership right at the same pace or plans as you give up your responsibilities. And the easiest way to start this conversation, the easiest way in our experience to make it actually work, is you go to the person who says, OK, I want to wind down. What’s the first thing you want to get rid of? What do you want to take off your plate? And they always say some form of hated administrative task. And you say, great, you don’t want to do

No one so far in my experience, I’ve never had one lawyer say to me, on my deathbed, I want to go argue with clients who are paid us late. I want to do collections. I want to hold that near and dear to my heart. So you say, okay, you’ve been doing collections, who will take over collections? And you start looking function by function, what does this process look like? And then you figure out what are the, like what’s the equity ownership and.

that becomes a trailing issue. But the first thing is practically get people to visualize who’s gonna do what. That’s how you start it. And if you have multiple people, it’s a little bit more complicated, but still essentially the same process.

Pankaj Raval (24:32)
Absolutely. So once you have that conversation, that initial conversation, you kind of get people kind of comfortable with this idea of succession planning. What does that look like in terms of the next, like something in writing? Is it an LOI, a term sheet? Is it that formal? Where do you go next in terms of trying to kind of synthesize what their plan is for

Gideon Grunfeld (24:52)
Great. So it’s two steps. if you think about it, and first of all, I’m delighted to talk about letters of intent in a podcast called Letters of Intent. I know I’ve shown that before, but happy to do it. Very meta. Marcus Aurelius would be proud. So, okay. So before you get to the letter of intent stage, here’s what happens. So the first thing you need to do is you need to have

Pankaj Raval (25:00)
Yes, we’d be remiss if we didn’t raise it.

Sahil Chaudry (25:03)
Very meta.

Gideon Grunfeld (25:13)
a sense of usually you bounce around negotiating as a group and as an individual. You talk to individual partners, you look at stakeholders, you figure out and get a consensus of what people want. And then you need, before you get to a letter of intent stage, you need, before you can get an actual term sheet, you need to get scenario analysis. You need to get a sense of under various, okay, if this person leaves in two years, if this person gets 10 % equity, if this person’s billable hours go down in half, what does that look like?

so that’s where we come in. So we’re doing scenario analysis to help people make an informed decision. And sometimes it’s really detailed. We’re talking with a partner and she was like, she was willing to do a five year buyout period. And so I said, well, do you think you want interest? And she goes, I’ve never thought about I don’t need interest. You don’t have to pay me interest. It’s five years. So I said, just go talk to your spouse.

I knew her spouse. Her spouse was in the building contracting thing. And I suspected that exactly what happened happened is like 10 days later, we had another meeting and she was like, well, we did the math and we helped them do the math. It’s like she was walking away from like $265,000 of accumulated interest at 5%. And all of a sudden they were like, well, that’s a lot of money. So what you do is you need to get

Pankaj Raval (26:23)
Alright.

So you just made them

$260,000 by that one little pushback. think it’s a pretty good ROI, pretty good ROI. Yeah, ⁓

Sahil Chaudry (26:30)
That’s right. Yeah.

Gideon Grunfeld (26:32)
100%. It is a good ROI. And so that’s one of the fun things about it is you can show people the

options and they really make big differences. And so we just, you need scenario analysis. And the way it happens is you begin to narrow the solution and then you get to a point where, okay, that scenario, it may not be done exactly what we need. It won’t be 100 % correct, but now we can get to an LOI. An LOI is just a document that is basically a statement that whether you call it a memorandum of understanding, a letter in intent, I haven’t found any practical

difference, but here’s what matters and this is why you really should be in writing. What it does is when you don’t have it in writing, you’re like, well, I’m dating, it seems like a good When you put it in writing and you print it out and you look at it and then you show it to other people, it really does get you to think, is this what I want? And it’s basically saying, here are the basic terms. This person is going to leave over five years. We’re going to pay them this amount per month.

We’re going to, they’re going to reduce the role by doing this, this and this. These are the errors and responsibility. This person is going to go take over. That person’s going to go buy into the partnership or not. We’re going to go replace our computer system, whatever it is that we’ve decided that they’ve see as a common scenario. What it does is it has two practical effects. One is for us, we’re the consultant.

we’re not the lawyer on the deal. We’re not going to paper and document the deal. So this is like very standard corporate lawyers. You guys are corporate lawyers. You know it. So even if you, whether you’ve been involved in the negotiation and you haven’t, you need some document that tells me what have the parties agreed to do so that you can, okay. The other thing it does from a practical point of view, and this has a lot of importance to it in addition, is once you have an

Pankaj Raval (28:03)
Yeah, ⁓

Gideon Grunfeld (28:14)
You also then have a process around it. So for example, let’s say you’re talking to multiple parties about, let’s say you want to bring someone else to your succession plan. You say, we have everybody in place, but we don’t have a managing partner. We have the managing partners retiring, and we want to bring in a new managing partner. When you have an LOI, a lot of the information that has been shared in this example with this incoming potential managing partner has probably been anonymized. It’s

aggregated. still have a conflicts check issue, right? You have all this stuff. And so the question is, at what point in the process can you actually show them the names of the actual clients? At what point can you actually run a conflicts check? And traditionally, it’s not the only answer, but a very common point in the process is once someone signed in an LOI, you’re like, I’m dating, I’m stating dating with you, we’re moving in together, that’s our intent. And now we’re going to start sharing.

Pankaj Raval (29:03)
Yeah.

Gideon Grunfeld (29:04)
the due diligence process with you. Now you can start looking at actual documents. You can look at, don’t have to rely on us. So that written document has not only substantive information that’s important to getting the deal documented, it also has practical information because that’s how you go from having generalized conversations to the actual due diligence. Let me actually go look at your lease. Let me actually go look at all the stuff I need to do. And then you have a week, you have two weeks, you have a month, however long you have to then close the deal.

That LOI is an incredibly important. Deals that don’t have LOIs, first of they’re not that serious, but then they tend to fall apart at a much higher rate. And then the other thing about it is if you want to maximize your legal fees, don’t have an LOI, because then you’re going to have your lawyer have to go figure all this stuff out, and then it wasn’t documented, and then you’re going to send them 18 emails that they’re going to have to piece together. like, what do they really mean? So like an LOI is just a very, there’s a reason we’re like,

Pankaj Raval (29:46)
⁓

Yeah.

Gideon Grunfeld (30:01)
Thousands, millions of deals have been conducted by, need a document that sort of says, here’s kind of what we’re agreeing to. It doesn’t mean you can’t change it after the fact, but it does mean have a serious intent of here’s what we wanna do together.

Pankaj Raval (30:16)
Absolutely. And if there’s anyone listening who wants to maximize their legal fees, just let us know. We’re always happy to help. Yeah. Ignore what Gideon’s telling you.

Sahil Chaudry (30:19)
Yeah.

Gideon Grunfeld (30:19)
Yeah, don’t just scribble it on the back of an envelope or just say no, me

Sahil Chaudry (30:23)
Ignore

Gideon Grunfeld (30:27)
verbally. And that’s just nightmare. Just don’t do it here.

Sahil Chaudry (30:30)
Ignore

Pankaj Raval (30:30)
Yeah.

Sahil Chaudry (30:31)
the title of this podcast. ⁓ Yeah.

Pankaj Raval (30:31)
Yeah, exactly. Yeah. If you want to maximize your legal fees for sure. This is the reason why we yeah.

Gideon Grunfeld (30:37)
And increase litigate, I didn’t even say it. If you want to

Sahil Chaudry (30:39)
Right.

Gideon Grunfeld (30:40)
really go to litigation and then have arguments about what they meant and what you meant, then certainly don’t have anything written down.

Pankaj Raval (30:43)
Right.

Sahil Chaudry (30:47)
fun.

That’s right. That’s a party. what’s the actual okay we’re talking about the LOI but what’s the actual transferable value here? Is it goodwill, reputation? Is it IP, contracts? What is it?

Pankaj Raval (30:49)
It’s last thing anyone wants

some

all of above, yeah.

Gideon Grunfeld (31:03)
Maybe all of

the above, but let me talk. So professional services firms have really idiosyncratic aspects to it. So let me give you an example of how idiosyncratic it is. So let’s say you’re a lawyer at a large law firm and you’re an equity partner. Most equity partner agreements, partner agreements at that level explicitly disclaim goodwill. So basically they’ve avoided the situation saying if you leave the firm, you don’t have the right to goodwill. Everybody disclaims goodwill. And imagine if you have

800 lawyers and 200 equity partners and they’re all lawyers, you wouldn’t want to be, unless you have a cousin who’s a business valuation person that you want to keep busy for the rest of their life, you’d be like, we’re not going to deal with goodwill. So professional services almost, I wouldn’t say I’ve never seen it in other industries, but it’s much more likely that goodwill in that kind of context, just people contractually take out of the

So what is the stuff really worth? So I would say the number one thing of what’s value is future revenue flow. Future revenue flow. You’re buying a stream of income, so whether it’s through the next generation in a succession plan or a buyer, the money has to come from somewhere. The purchase price has to be financed by something. And what they are building is, you have a value. We think that this is gonna continue or better yet, we’re gonna be able to increase it. We’re gonna be able to do marketing. We’re gonna do stuff you didn’t

And we want to know what that future value is. So here’s the mistake that lawyers make. They only think about that value in a very limited way. They think the only value that counts is the value of my clients, how much I bill my clients. They think that’s the only source of value, and that’s wrong.

Sahil Chaudry (32:39)
Interesting. but if we, but you’re talking about the future revenue, so what’s the way to, when we’re talking about the law firm, the owner thinks, okay, the value is my clients. Now, presumably that future revenue is coming from the clients. how do you, is there really a separation between those two

Pankaj Raval (32:39)
Interesting.

Gideon Grunfeld (32:58)
It is. So let me give you an example. And the recent developments in law firms that deal with the public have made this really clear and sometimes shock lawyers in the process. And that is, if you look exceptionally rare situation, but a very informative situation the world of private equity all of a sudden getting into law firms, right? So it’s still not going to apply to 99 plus percent of law firms. does it

Why would a private equity company be interested in this, assuming they can get around the legality and they can by having an intermediate entity? So just setting aside and trust me, you can structure it and it’s going to probably be blessed. What is it the private equity buying? They’re buying a lead generation engine. So what they’re buying is, okay, the billboard, their phone number. If you have a law firm that almost all of the business doesn’t come from the lawyers, it comes from marketing.

It comes from your SEO, comes from your billboard, comes from intellectual property. I’m still buying a source of future income, the clients, that’s where the money comes from. But the asset is not the billable hours of the lawyers. It’s not even the marketing efforts of the lawyers. In this case, it’s the IP. I’d be like, I’m still surprised by how few lawyers understand that what drives valuation, why you get more

You have two companies or two law firms that have the same amount of revenue, but one has systems and the other one is all the knowledge is in the owner’s head. And they have vastly different valuations. So let’s say there’s a firm out there that says they’re listening to this and saying, well, we don’t have a website, we don’t have a billboard because we’re not directly the consumer. It’s your systems, it’s your database, it’s your referral sources. Do you have standard operating procedures? The irony of what

brings value, and this is what most lawyers and I would say when I’ve dealt with non-lawyers too, is you spend your whole life building your business saying, I’m a CEO, I’m this, I’m this, I’m that, this is my title, here’s why I’m important. And then someone like me shows up and says, great, can we sell this business to show that it runs as profitably or more profitably without you?

Because that’s what a buyer really wants. And that’s what the next generation in your own firm was. They go, well, if the entire firm is just you and your name and your personality and your charisma and all your resources and all your connections are your cousins, well, what am I going to do with that? The answer is I’m going to pay you 10 % because I don’t think I could remotely replicate what you

Right. And that’s kind of the irony. That’s why so many firms have value. That’s why so many firms don’t sell for anything close to their value because people get caught up in the it’s about me as opposed to I have a problem I solve. That problem isn’t going away. There’s SOPs in place. I’m to be around to transition. Your value will go down a lot if you are as the value as the owner say I’m disappearing in a week. You’re never going to talk to me again.

Pankaj Raval (35:50)
Right.

Yeah, I can imagine that.

Gideon Grunfeld (35:52)
So we want as the buyer, we want

you to hang around, but ultimately the buyer or the next generation wants to know that this is going to be as much revenue or more profits without you. And that’s where me and my team come in. How do we make that

Pankaj Raval (36:07)
That’s amazing. Yeah, I know. I think it’s so interesting because such an important point about separating it from you. I’ve heard like a while back about like if your business can’t run without you, you’re just an underpaid employee usually, you know, like, yes, exactly, exactly. And I think a lot of professional services. I talked to my CPA today and how he’s overwhelmed and, lawyers,

Gideon Grunfeld (36:18)
You have the worst boss in the world, you.

Pankaj Raval (36:27)
I can admit early on, I’ve worked on building systems and processes, probably thanks to talking to you and others and working with coaches to say, okay, how do we build better systems and processes? So it’s not so dependent on me and building a team around you. But, that’s awfully not easy. And I think one of the hardest things is for lawyers to give up a little control. I see the people who are is people who are unwilling to give up and unwilling to make some minor mistakes, personally, because I think those are the people get trapped in the business.

and then run into this succession issue later on.

Gideon Grunfeld (36:55)
Yeah,

the other issue is, and is very related, is people who define their identity as lawyers in extraordinarily narrow ways. Let me give you a weird, exaggerated example. So I was working with a client, and this is sort of a good example of when I started working with them and growing their business on the business development side, on the growth side. And they worked with a particular industry and they litigated cases that basically when a certain kind of contract got like,

they stepped in and they had a specialty about how to go litigate that case. And there was a lot of collateral. And so this involved getting into the weeds a certain article of the UCC. It was like, I think, chapter two of the UCC. And then for reasons I won’t bore you with, like 90 % of their business went away because of economic changes. Basically, the underlying contracts stopped being negotiated. And then we had a conversation. And their sense was like, I

Not that I’m a lawyer, I’m a transactional lawyer. They were like, I am an Article II lawyer. So when we had a conversation, like, could you flip the page over and do anything in Chapter III that could possibly do it? Like, I see if I’d ask him to do like a root canal extraction while going to dental school. I’m like, like, seriously, you’re a really good lawyer for 35 years. Like, your whole expertise is like, stopped. You couldn’t flip one page, really? It’s like, you’re done.

Sahil Chaudry (38:01)
.

Gideon Grunfeld (38:17)
He recovered, he did fine, but I use it as an example because he had such a narrow definition of, and he had imposter syndrome. I only know to do X. It’s a much healthier and more valuable and profitable to go define what you do in terms of the people you help and the problems they have. Because if you do it that way, and which is a much more entrepreneurial mindset,

you can deal with geographic variations. McDonald’s doesn’t sell the same thing. Go to a McDonald’s in Germany, they sell beer. They’re trying to cater to a certain situation and they’re flexible because they don’t define the problem as like, I have to sell you a particular thing. And that approach also means that maybe the problem you’ve been solving has become obsolete

or the problem that you’d be coming, I can’t solve it unless I become a mass market high volume commoditized thing and I don’t want to. And so your option is not like, therefore I will never be a lawyer again or I’m done. It’s okay, let me pivot from my expertise to even a higher and better use of my expertise. And then when you start thinking about that process, then you’re committing yourself not to like, I always have to have

this treatise at my desk, I have to always use Westlaw, I always have to use this process, but here’s a group of people that I really want to help and here’s the problem that I want to solve. And strangely enough, that approach gives you a much higher multiple because it’s much more accessible. It means that you’ve taken the time to think about for a buyer,

Pankaj Raval (39:35)
Yeah.

Gideon Grunfeld (39:52)
I’m not trying to do it at the last minute and we can talk about what last minute stuff looks like and what to avoid, but you generally want to give yourself, you don’t have to give yourself decades, but you want to give yourself some amount of time to put this in place. You’ll just do better. It’ll be less stressful. You’ll make a lot of money in the process.

Pankaj Raval (40:05)
Absolutely

Love it. That’s such valuable advice. One question before we get to our rapid fire round, I this is a longer episode and I love it because there’s so much valuable insight here. I’m glad we were able to get so deep into some of these questions. But you and I have had some interesting conversations getting in about the future, right? Like about law firm succession

even expressed interest about, okay, you potentially acquiring other firms because there’s a lot of lawyers. I think you said the average age of like lawyers is what, like 50 something or 60 something. So, I looked into acquisitions, but also there’s this other wave in law and the legal world with these alternative business structures where now states are allowing non-lawyers to own law firms. Where do you see that going in the next 10 years and

How will that change our industry?

Gideon Grunfeld (40:51)
Yeah, and so I think that this growth of, it’s sort two separate acronyms that end up meaning the same thing. So the statutes refer to ABS, alternate business structures, but the actual alternate business structure that end up being used is an which is a management service organization. So what a management service organization is, is this intermediate entity that a law firm or other

Pankaj Raval (41:06)
Yeah.

Gideon Grunfeld (41:14)
an accounting firm, a doctor’s office can contract with that basically runs the back end of your business. And what’s interesting about that is one is it makes it much easier to scale a business because you’re literally getting the firm professionally managed. So many firms you have the person who like I’m a good lawyer, therefore I’m going to go run my firm, which is like totally different skill sets. And in a world where you have IT and AI and HR issues and all the complexity, having a professionally managed firm

scaling it from the outset is going to be an enormous advantage. The other is, if you’re wondering how do outside investors get into your firm, how does private equity get involved in investing in a law firm? Is there not legally entitled to own or run the law firm? The law firm still needs to be professionally independent so lawyers can exercise independent judgment, but they can own and run and invest in the MSO, and that’s what’s happening, and states are allowing it. So what does it mean? It means

Pankaj Raval (42:06)
Mm-hmm.

Gideon Grunfeld (42:10)
The days of being like a young solo and thinking you’re gonna replicate what the prior generation did. I’d like open to shingle and I was 30 years old and I’m still gonna be around 30 years is vanishingly unlikely to happen. And the reason is, if you look at the whole economy, we’re no longer a mom and pop business economy. Since about 2016, a majority of people in the workforce, this isn’t about law, this is the whole economy, work in businesses with 10 or more employees.

We have a vision like farmers are small farmers and businesses are all mom, like that’s not the economy. So what it means is the ability to scale, people to manage, the people to manage systems, the people to have an executive team. That is where all of this is moving. And if you really want like to blow your mind, this idea of not only is law and accounting as like separate identities, like at risk in

In England, for example, we think England is very everybody’s powdered wigs and barristers. It’s been 15 plus years where the law in England has allowed non-lawyers to own law firms. I mean, obviously it doesn’t mean like the non-lawyers giving you legal advice, but you also commonly have accountants and lawyers working together in the same entity serving the same mid-sized business. That is in my view, exceedingly likely to happen. So it puts a premium

Pankaj Raval (43:07)
Yeah.

think that makes perfect sense.

Gideon Grunfeld (43:30)
strategy, positioning, scaling, systems, leadership. If you’re 60 years old already and older and you have a long history of referral sources and have people who have been referring to business for years, and you want to retire in the next five years, you’re probably going to be fine. But for people earlier on in their careers, we’re going to see something akin to what you saw in travel agents. You’re going to see something akin to what you see in mom and pop stores.

it’s going to be very rare. The market share is all about people who conserve big problems, build systems, sophistication, nimbleness. It’s also the idea, like you can’t assume that people just want to sit in your office as employees and work 70 hours a week anymore. So having those kinds of systems is absolutely where we’re

Pankaj Raval (44:16)
Amazing, love it. Sahil, you can go ahead with the final questions there.

Sahil Chaudry (44:20)
Okay, here we go. This is the Letters of Intent Rapid Fire Reflection Round. So I’m gonna ask a series of questions and the goal is just for you to let us know what pops up on top of your head. So, what’s a belief about ownership or succession you’ve changed your mind about?

Gideon Grunfeld (44:36)
that everybody is supposed to be an owner. There’s some people we have consulted where we tell them, you know what, you’re a really good lawyer, just work for someone else. Not only does it not come naturally to you, you don’t have any desire to do it. It gives you huge amount of stress. And people are like, oh, I have to go. It’s like someone who says, I have to have a house as part of the American dream, even though they hate every aspect of home

Pankaj Raval (44:58)
Yeah.

Gideon Grunfeld (44:59)
That’s something

that took me a while to realize. And because I’m an entrepreneur myself, I was a little bit, I’ll say judgmental and realized you gotta let people be in the right lane. And there are occasionally people who approach us and we go, you know what? Let’s help you get a better solution. You don’t have to be the owner. There’s still happiness in that place

Pankaj Raval (45:15)
What’s one habit firm leaders should adopt much earlier in their careers?

Gideon Grunfeld (45:20)
Can I give you One is listen and don’t speak first at meetings. And the reason is that you just shut down all the conversation and if you want to have an honest conversation, surround yourself with people who are better at what they do than what you could do for them. That’s the whole point of surrounding yourself with talent, but then give them the oxygen to talk and don’t blame people

Pankaj Raval (45:21)
Please, yeah, we’ll take it.

Gideon Grunfeld (45:42)
wrong outcomes. That’s another thing I see all the time is that like leaderships don’t, they blame person for the result not being right and that quashes innovation. No one wants to take risks. And so part of it is you still have the last vote. You don’t have to be, you don’t have to dominate the room. It often has lots of bad consequences in the long term if you do.

Sahil Chaudry (46:04)
What is a common myth and very annoying myth for you about succession planning?

Gideon Grunfeld (46:10)
It doesn’t apply to me. couldn’t possibly be me. It’s too late. I’m too young. I’m too old. I’m in the wrong practice Yeah, some endless variation of

Yeah, I’m only here because my spouse wants me to be here. I have absolutely heard that a million times in my life. dream is to die at my desk and to hit my head, hit the treatise I’m reading. I’ve heard very good from that. So yeah, so it’s like the mindset, like, yeah, you’ve built something great that other people want to continue. That’s an incredible compliment. And people who don’t get that, people somehow exclude themselves from that

Pankaj Raval (46:27)
wow.

⁓

Sahil Chaudry (46:45)
Okay, attorneys, listen to Gideon. It is time to start thinking about your future know that you don’t have to die at your desk reading Atreides. There are other options. If you don’t want to, yeah. In that case, read Meditations by Marcus Aurelius. Gideon, this has been a very thoughtful and important conversation

Pankaj Raval (46:54)
If you don’t want to, if you don’t want to, if you do, that’s a that’s a different

Exactly.

Sahil Chaudry (47:08)
We were thinking this was going to go for 20 minutes and we’ve gone for almost an hour. This has been a really helpful conversation. So I want to make sure our listeners know how to reach you. Before we wrap, where can listeners learn more about you, your work, and what you’re

Gideon Grunfeld (47:22)
The beauty of having a name like Gideon Grunfeld is I’m really easy to find. So like number and my name is spelled correctly underneath this, just go find me on LinkedIn. I’m the only person with that name. The other is if that’s too hard, the name of the company is Rainmaking for Lawyers. So just rainmakingforlawyers.com. Just shoot me. We have an intake form. It goes right to my inbox. Just contact me through there. Either LinkedIn or that will always do the trick.

Pankaj Raval (47:31)
Yes.

We’ll include in the show notes. You can find Gideon on LinkedIn. He has great posts, really great insights. He’s also the group leader for ProVisors, a professional networking I’m in Gideon’s group and ⁓ he does a fantastic job leading the group. It’s one of the best B2B groups in I think Provisors, which is a national professional networking

in closing, just if we mentioned it enough, listeners understand, Succession isn’t about stepping away, about creating a legacy for you and those after you and making sure that all you’ve worked so hard to build is not

Again, thank you for listening and thank you for commenting and your participation in Letters of Intent. We can’t wait to hear from you. Please drop a like, follow, share if you want to hear more of this kind of content. And until next time, thank you again.