Valuation of the practice is a valuation of goodwill. Determine the firm's net tangible assets on an accrual basis. Calculate reconstructed net income for three to five years and average. Multiply net tangible assets from the above figure by a reasonable return rate. Capitalize the excess net income to arrive at goodwill.
Rules of thumb borrowed from firm buyouts indicate that goodwill is roughly one times earnings.
Do a conflicts check. Consider a structure that values retrospectively but pays prospectively. If you are buying a future stream of income, then pay based on future income. This is riskier for the seller, and may mean a higher multiple. The seller of a law practice is primarily interested in assuring that the clients will have quality legal services, payment will be received, and personal liability will be protected.