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November 2025

Nov 26, 2025

Law Firm Succession Planning and Transitional Work

Question:

I am the owner of a 16 lawyer litigation firm in San Diego, California. There are 6 non-equity partners and 9 associates. I am 65 and hoping to retire in the next five years. I am planning on offering equity to two non-equity partners next year and possibly offering equity to other non-equity partners in the next few years. In addition to working out the financial arrangements and partnership structure issues that are typically documented in a partnership agreement, what sort of transitional issues should I be concerned about and plan for. Your advice is appreciated.

Response: 

Transitional work typically falls into three general categories:

  1. Legal (lawyering) skills
  2. Client and Referral Sources
  3. Firm Management

Legal Skills

Frequently this is a major issue that requires attention in small sole owner/founder firms. There are no other lawyers in the firm with the legal skills that the owner has and will be required for the firm to be successful in the future. For example, I have worked with some litigation firms where the other attorneys in the firm (associates and non-equity partners) have not ever tried a case. In such situations several years of training and development in this area will be required and seasoned laterals may have to be hired or the firm sold or merged with another firm. In your case since you have several non-equity partners on board I assume that they are seasoned lawyers and this is not an issue at your firm. If this is the case there be no to little transitional time needed in this area.

Client and Referral Sources

This is an area of concern for most firms. Typically, the firm owner/founder has brought in most, if not all, of the client business into the firm and he or she controls the clients and the relationships with clients and referral sources. In these firms if the owner/founder were to leave the firm abruptly it is questionable whether the firm could survive after the owner/founder is no longer there. If this is your situation you will need to begin a focused and planned transition with specific clients and referral sources, tasks, timelines, and assigned lawyers. How long this will take will be dependent upon the number of clients, number of relationships that you have within the client organization for institutional clients, and the number of referral sources that you have that send the firm business.

Law Firm Management

Law schools do not train lawyers in management. Highly competent attorneys do not necessarily make good managing partners or lawyer managers. Some of the best lawyers are the worst managers. It has been my  experience that lawyers who are “loners” have traditionally been poor managers. You are going to have to decide who will be good manager, or managers, and begin training and transitioning appropriate functions over to them.

The following are recommended areas in which the management skills should be developed:

  1. Client relations, including origination, development and retention.
  2. Acceptance of new clients and matters and the management of performance of legal work in substantive practice areas and sub-specialties.
  3. Associate recruitment, training and development of a personal and professional nature, promotion, evaluation and compensation and termination.
  4. Administrative staff organization, relationships and utilization.
  5. Financial management including budgeting for revenue, expenses, capital expenditures; billings and collections; financial and variance reporting and utilization of resultant financial data and management information to manage and run the firm.
  6. Technology including computers, software, other equipment and technical support from non-lawyer specialists.
  7. Leases, space utilization, negotiations and construction.

Techniques for Developing Skills

On-the-job-training is the most effective technique for developing and refining the management skills that will be required.

I suggest that your develop a transition project plan in Excel with a breakout of tasks, responsibility for accomplishment, start date, and end date under the following broad categories:

Legal skills
Client and Referral Source
Firm Management

Under the client and referral source category each client/referral source contact should be listed.

You should also begin bringing other lawyers into your cases in order the your clients can experience working with them. Assign them as co-responsible attorneys on cases and gradually have them be responsible for billing and communications with your clients.

Click here for our blog on succession/exit strategies

Click here for articles on other topics

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

Nov 19, 2025

Law Firm Succession Planning – Selling Practice to Non-Equity Partners or Associates in the Firm

Question:

I am the sole owner of a five lawyer business transactional law firm in Cincinnati, Ohio. I  am sixty-seven and hoping to retire in the next three to five years. Besides myself there are two non-equity partners and two associates in the firm. I have not properly saved for my retirement and I am hoping to sell my practice to the two non-equity partners in the firm for a substantial sum. I founded the firm thirty years ago and believe that I have invested substantial sweat-equity in building the firm up to where it is today. I am not sure where to start and whether my expectations are realistic. Your suggestions and recommendations are most welcomed.

Response:

Years ago when interviewing non-equity partners or associates in a law firm I would never have asked them if they were interested in equity ownership or partnership since the answer would have been yes. Today, this is another story. Many non-equity partners and associates today do not want to own a law firm as sole owners or even have equity in a equity partnership. Don’t assume that your attorneys even have an interest.

So your first step will be to talk with each of them and determine their level of interest.

Your next step will be to determine the value of the firm and what you hope to ask for and how you want to be paid. Some firms have substantial goodwill value and others have little goodwill value at all. Firms that have little value are those where all the business is originated by the owner and he or she controls the referral sources. In these firms when the owner leaves there may be little to no future business.

In the final analysis the value of the practice is what an outside buyer or an attorney working for the firm will pay for (or invest) the practice. A balance often has to be struck between valuation and affordability. The valuation process is simply a tool to use to help you begin discussions and get to this point.

You also have to keep in mind that many of your competitor law firms are offering equity partnership with no buy-in at all.

I believe that firm value has to be balanced with affordability and a prospective equity member’s ability to pay for the shares. It all comes down to compensation. Generally, I find that a prospective equity member or partner must be able to see a significant compensation increase with a breakeven/payback period of around three years – no more than five. I also believe that when shares are seller financed the period should be no longer than five years. Many firms do not sell shares based on formal valuation – other methods are used.

Questions that equity member candidates usually raise:

1. Is the breakeven/payback from the investment in say three years as a result of the compensation gap?
2. How much more will he or she earn as an equity member?
3. Can he or she earn enough as an equity member to justify the investment?
4. Can he or she earn more as a partner somewhere else with as large investment, a smaller investment, or even with no buy-in at all?
5. Can he or she earn more somewhere else as an associate or non-equity partner?

In many law firms’ compensation is based upon performance and contribution and ownership shares have little or no bearing on member or partner compensation. Their primary goal is to acquire and retain talent.

Your expectations may be realistic if the clients and referral sources stay with the firm when you are no longer there and if your non-equity partners care about equity and owning a law firm and are willing to make the investment and take the risk.

Click here for our blog on succession

Click here for out articles on various management topics

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

 

 

Nov 12, 2025

Law Firm Marketing – Referral Networks

Question: 

Our firm is a six lawyer firm in ChicagoLand that specializes in the areas of estate planning, estate and trust administration, and elder law. Four of the six lawyers in the firm are equity partners and two are associates. Our firm was formed ten years ago and almost all of our business comes from the internet. While we are grateful for the success and business that we have developed we believe we have missed the boat is getting more business from referrals from lawyers and other professionals as well as past clients. We are spending a fortune on marketing and would like to take advantage of less costly means of acquiring business. Your suggestions are appreciated.

Response:

Past client, lawyer and other professional referrals are still are very viable methods for acquiring business even in the internet age. I have many estate planning/administration/elder law firm clients that obtain all of their business through these referral sources and spend very little on marketing.

Referrals from former and current clients and friendly third parties are among the most desirable sources of new business.

It has been my experience that referrals generally occur because of the efforts of the attorney who is receiving such referrals. You should not expect such referrals to “fall into your lap.” You must initiate certain actions to try to make them occur.

There are two kinds of referral networks. One is an attorney referral source. The other is referral from clients or other “friendly third parties” who are not attorneys. Both types of referral networks are important to an estate planning/administration/elder law practice.

Attorney Referrals

To be in a position to receive such referrals, an attorney should develop an expertise in one or more areas of legal work and become recognized by other attorneys as being especially skilled in those areas. It is also necessary to inform attorneys who may be referral sources that you have such expertise and that you are interested in accepting referrals in these areas. To the extent you are interested in receiving referrals, you should get to know attorneys likely to be in a position to refer such matters. This may be accomplished by participating in bar associations, by writing on estate planning/administration/elder law issues, by speaking at CLE programs and by maintaining an active role in selected committees. Having your firm listed in legal directories may also help.

Once an attorney referral base has been established, it is important to maintain your network.

Non-Attorney Referrals/”Friendly Third Parties”

The first step is to identify potential referral sources. The best referral sources will have significant and repetitive contact with individuals who need your legal services. Examples for an estate planning/administration practice include accountants, financial planners, bank trust departments, etc. These sources should be able to identify the needs of potential clients and have their trust in order to make a referral. Identifying friendly third parties and cultivating their confidence is time consuming. Patience and perseverance is essential.

The initial contact with potential non-lawyer referral sources may be made by joining a professional, trade, social, civic, service or religious organization. You may be recognized by maintaining an active profile on influential committees.

Once these referral sources have been identified, you should develop and reinforce a personal relationship with these friendly third parties who come in contact with potential clients.

Maintaining the Referral Network

Once referrals from non-attorney sources are received, it is important that you work to maintain that base. Providing good service to referred clients and keeping them happy will reflect well on the friendly third party and encourage them to make additional referrals.

Maintain contact with referral sources even when you are not working on a referred matter. This keeps your name in front of that source for the next referral. A phone call, letter or lunch is easy to do and can be valuable in maintaining and reinforcing your relationship.

Set monthly goals for the number of referral sources contacted. Allocate time for this important activity. Make it part of your regular routine.

Satisfied Client as a Referral Source

Most satisfied clients are willing to make referrals.

The development and maintenance of a referral network is an excellent technique for marketing your practice and obtaining legal business from attorney and non-attorney sources. A successful referral base will require work and take time to establish. You must have patience and persistence. Most referrals go to those attorneys who have worked to establish and maintain their referral network.

Another successful approach used by estate planning/administration/elder law firms over the years has been seminars sponsored by the law firm. Today I am seeing more and more firms doing webinars and they are finding webinars to be a suitable replacement for live seminars and at a lower cost and time investment.

Don’t forget the importance of having a program to encourage Google reviews from completed client engagements.

Click here for our blog on marketing

Click here for articles on other topics

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

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