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Sep 02, 2026

Law Firm Management – What is Keeping Law Firm Owners and Managing Partners Awake at Night

Question:

I am the managing partner of a ten lawyer firm in Kansas City, Missouri. There are five partners and five associates in the firm. We are an insurance defense firm and our clients are a handful of insurance companies. Our cases are primarily slip and fall, premises liability, and auto accident cases. I have been the managing partner for two years and frankly I am getting burned out on the position and none of the other partners want the job. I am working 60-70 hours a week and am spending so much time on administrative matters that I don’t have time to practice law. I would be interested in what is keeping managing partners in other insurance defense law firms awake at night and how they are dealing with the challenges.

Response: 

Managing partners in small insurance defense firms are telling me that the following top five challenges and concerns are what are keeping them up at night:

1.Finding and Retaining Experienced Lawyers and Staff

This is the biggest issue facing many firms. Gone are the days when you could place an ad and have a position filled within 30 days. I have client law firms that it has taken over a year to find and hire experienced (3-5 years) lawyers.  Billable hour requirements of 1800 – 2000 hours are conflicting with work life balance goals of many young lawyers. Retention is also a issue. Losing a strong partner or associate can mean lost revenue, disrupted client relationships, and months of recruiting and training.

You must plan on a longer recruiting timeline and use all avenues available to you. For example:

You must offer competitive benefits, work life balance and flexibility. Some form of remote work has become a major requirement and failure to offer schedule flexibility and remote work has resulted in  many law firms losing candidates to other law firms.

2.  Client Concentration 

Insurance defense firms often have too few clients and many insurance defense firms are held hostage by these clients. I have some law firm clients that only have one insurance company client and if that client were to start using another law firm the law firm would be in dire straights. The client controls the amount of case assignments that the firm receives, the bill rate, and the amount of hours that can be charged for various tasks. The firm is so busy working on client files that no one has time to market and try to get additional clients. Partners often know they need a more predictable pipeline but don’t have time—or a repeatable system—for generating new clients. It sounds like your firm depends heavily on a handful of clients. Losing one major insurance company client can materially change the firm’s economics.

Insurance defense firms must find ways to invest the time and other resources to add additional clients to their client roster resulting in less dependence on one or a few clients and move their practice up market with improved hourly rates in areas such as insurance coverage, corporate representation, and self insured clients. Such diversification has made many firms less dependent on 2000 plus billable hours and more attractive you new lawyers.  Many insurance defense firms have effectively done this.

3.  Cash Flow and Collections

It has often been said that businesses are killed by inadequate cash flow. A firm maybe profitable on the profit and loss statement but is cash always tight?” Slow-paying clients, write-offs, uneven matter flow, and payroll/overhead create constant pressure.

4. Technology and AI

Law firms are trying to figure out where AI can genuinely improve operations and lower operational overhead without creating confidentiality, accuracy, ethics, cybersecurity, or malpractice risks. What tools should the firm be using? Costs? Time to implement? Fear of AI reducing the need for lawyers?

You need to attend all the CLE seminars, webinars, etc. that you can and get up to date on AI. This is moving very fast.

5. Succession Planning

What happens when founding partners want to slow down and retire?” How does the firm fund buyouts? Smaller firms frequently have fewer obvious successors. Do the younger attorneys in the firm want to have equity and own a law firm and will they be willing to step forward?

You need to begin addressing this sooner than later. Our blog library has an entire section on this topic.

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John W. Olmstead, MBA, Ph.D, CMC

 

Posted at 09:02 AM in Management, Strategy, Trends

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