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February 2026

Feb 25, 2026

Law Firm Owner’s Transition and Exit Strategies – Clients and Management Roles

Question:

I am the sole owner of a 20 lawyer litigation firm in Chicago. There are five seasoned non-equity partners and fourteen associates in the firm. I am 63 and trying to figure out what to do with the practice. While I am not ready to retire in the next several years I do want to slow down and be retired in five to seven years. How should I approach my transition and exit from the firm? You feedback would be appreciated.

Response:

You have a valid concern that is shared by many.

The pending retirement of the baby boomer generation and the unrelenting challenge of finding and keeping talented staff can have grave consequences for law firms that fail to develop a succession strategy. Steps that you take or do not take five years or earlier prior to your actual retirement will determine whether your practice, clients, employees, and your legacy transitions to another generation. For a small or solo practice, these steps may determine whether your practice has any terminal value at all.

Many are asking, “What do I do with this Practice?” “Is there value or goodwill? “Where and how should I start?

Early planning will pay dividends. Many firms are in “reactionary mode” and are not adequately prepared to transition firm leadership and client relationships.  A firm’s very survival may very well depend upon the steps you begin taking in the next few years.

How well you transition clients and managerial roles will determine the ultimate success of any succession/exit plan. Transition of clients and managerial roles are the two critical components of any succession/exit plan.

Bring Deserving and Qualified Non-Equity Partners into Equity 

Personally, I believe your best strategy will be to bring some of your non-equity partners into equity sooner than later – either with initial buy-ins or no buy-ins for initial ownership minority shares but agreed to buyouts for your remaining equity upon your requirement. We are finding a lot of non-takers today when it comes to equity and you need to find out sooner than later if you have anyone interested in equity. This will determine whether your strategy will be an internal exit strategy or external strategy.

Client Transition

Transitioning client relationships is difficult, it takes time, and it takes more than one simple introduction. It is a lot like cross selling that attorneys talk about but often fail to put into practice.

In a recent BTI Consulting Group report on Benchmarking Law Firm Marketing and Business Development Strategies, the section on cross-selling was titled, “Achilles Heel for Law Firms.” When BTI interviewed 120 Chief Marketing Officers and Directors of Business Development at leading law firms, they found that only 4 percent of law firms rated themselves as highly effective in cross-selling, and 77 percent thought they were ineffective.

My experience and our surveys of our clients and their clients have shown similar results. Cross-selling is talked about a lot and seldom implemented.

Cross-selling can be an effective strategy – but it is not easy and it requires trust, commitment, communication, hard work, dedication, and organizational alignment.

Challenges and Hurdles

Transitioning clients to another responsible attorney(s) within your law firm or to another attorney in another law firm involves numerous challenges that have to be overcome.  Consider the following challenges and hurdles:

  1. Relationships take an investment of time and must be nurtured on behalf of the parties making the introductions and connections as well as the parties trying to form the new relationship. Attorneys often want immediate gratification and the “quick fix” and are unwilling to invest time needed for longer-term results. More than a “one-shot” simple introduction is required.
  2. Clients hire lawyers not law firms.
  3. Client transition requires trust on the part the client, the relationship attorney, and the future responsible attorney. A high level of trust must exist between the attorneys involved and with the client.
  4. There is potential risk of embarrassment for all concerned. The relationship attorney could risk losing the client if the other attorney does poor work for the client. Another issue is the loss of control over the client. The individuals in the client organization could also risk criticism (or even their jobs) if the new relationship does not pan out.
  5. Many law firms are “lone ranger” rather than “firm first” or “team based” firms. As a result, there is no inclination or incentive to either invest the time and effort or take the risk to refer work to others in the firm.
  6. Lack of knowledge regarding other partners’ practices.
  7. Fear of losing clients.
  8. Fear of losing client control.
  9. Compensation systems in many law firms encourage hoarding of work and discourage the referring of work to others.
  10. Communication systems in some law firms do not facilitate relationship building among attorneys. Effective client transition is simply not possible without strong relationships and high levels of trust among attorneys in the law firm.

Client Transition

Successful client transition – moving clients from one generation to the next – is a major challenge for all law firms. Shifting clients is not an individual responsibility but a firm responsibility. To effectively transition clients the individual lawyer, with clients, must work together with the firm to insure the clients receive quality legal services throughout the transition process. Both the individual lawyer and the firm must be committed to keeping clients in the firm when the senior attorneys retire. Potential obstacles include:

Transitioning institutional client relationships effectively can and where possible should take a number of years – preferably five years – typically not less than three years.

The following client transition plan might be an approach you could take to transition clients over a three to five year period:

  1. Review your Top Client List and develop and implement a detailed action and milestone plan for each significant client.
  2. Designate one or more Co-Responsible Attorney(s) for each existing client, and each new client as to which you are the Responsible (Primary) Attorney.  The stated goal in designating one or more Co-Responsible Attorneys for each client is to facilitate the transition and retention of your clients upon your retirement and phase-out from the practice of law. You will agree to introduce the Co-Responsible Attorney(s) to the client when you are reasonably available, and work with the Co-Responsible Attorney(s) to transition the client and client matters to the Co-Responsible Attorney(s). You and the Co-Responsible Attorney(s) shall meet to discuss and evaluate the timing for the transition of each client. However, notice to clients shall be solely at your discretion. The Co-Responsible Attorney(s) may, at your discretion, prepare all invoices for legal services rendered. You will review and approve all invoices unless you agree to the contrary in writing. The client’s wishes shall be paramount in the designation or selection of any Co-Responsible Attorney(s) and client satisfaction shall allow for change of the designation.
  3. You will perform such duties from time to time that you determine are in the best interest of the Firm and which are agreeable to you.
  4. Of Counsel. After the conclusion of the final transition year, the firm may enter into an “Of Counsel” relationship with you. In that event, you would be listed as “Of Counsel”. The relationship would be subject to both parties agreeing on the terms and conditions of the “Of Counsel” relationship.

Effective client transition takes time so start early. Clients hire lawyers not law firms.

Management Transition

Successful management transition – moving management and leadership from one generation to the next – can also be a major challenge.

Consider undertaking the following, as well as other, management and leadership activities, which may assist you and the firm transition management and leadership roles over the next three to five years.

  1. Invite new equity partners to serve as members on a executive committee, Chair of the Executive Committee, other committees, or assigned direct responsibility and oversight for a specific management function such as:
    1. Client development/marketing
    2. Human resources/personnel
    3. Financial management
    4. A specific project
  2. Allow new equity partners to participate in the development of the firm annual budget and financial plan.
  3. Allow new equity partners to participate in performance reviews of non-equity partners, associates, and staff.
  4. Provide new equity partners with access to all firm financial records and reports.
  5. Allow new equity partners to attend all partner meetings.
  6. Invite new equity partners to meetings with the firm’s accountants and other advisors.
  7. Have new equity partners participate in the recruitment and hiring of attorneys and staff.
  8. Rotate new equity partners in a variety of management and leadership roles over the three-five year transition period.

An effective succession and transition strategy involves coming to terms with aging and retirement, developing a timeline, and identifying transition candidates either internally or externally. An old saying at IBM when I was a business partner with IBM – what gets planned and what get measured is what gets done. You have worked hard to build your practice. Your practice may or may not have value depending upon the steps you take and when you take them. Start early.

Click here for our blog on succession strategies

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

Feb 18, 2026

Law Firm Leadership – Midsize & Smaller Firms

Question: 

I am a partner in a 30 lawyers insurance defense firm in Phoenix, Arizona. We have 7 equity partners, 10 non-equity partners, and 13 associates. We represent insureds through insurance companies that are our clients and pay our bills. We also represent self-insured companies as well. Our firm is in second generation. The original founding partners have all retired and they are the ones that brought in all of the clients and managed and ran the firm. The firm was primarily run by a strong managing partner. Since the founding partners retired we have been struggling in managing the firm, getting new clients, and finding and retaining lawyers and staff. Now all seven partners are involved in managing the firm and while we are all good lawyers we are not good managers or leaders. The firm has lost clients and lost lawyers and we are struggling. All our partners want is to work in their own silos and work on their files and cases. They consider firm management “non-billable” and not deserving of their time. Do you have any thoughts?

Response: 

Law firms are finding that developing effective leadership skills can be a very difficult task. Dealing with leadership is a very emotional issue for most law firms due to the independent nature of most lawyers and the general unwillingness of firm lawyers to put aside their personal interests for the good of the firm. In fact, in many cases existing law firm partnership structures and compensation systems reinforce this tendency. What is needed is a balance between partner autonomy and partner accountability. Leaders will either have to be recruited externally (i.e. lateral partners) or skills will need to be developed internally.

The firm can begin by conducting a self-assessment using the following 10 point checklist:

  1. Only the best should lead and be placed in key leadership positions. Does the firm have its most capable people in leadership positions?
  2. Does the firm have partners or other lawyers with leadership skills or potential leadership skills? How many?
  3. How many lawyer leader positions are there in the firm that require leadership skills? How many lawyers have these skills?
  4. Does the firm’s compensation system reward management and leadership activities?
  5. Does the firm’s compensation system have a team reward component and are non-billable firm investment activities respected and rewarded?
  6. Does the firm’s culture support a team orientated practice or an individual type practice?
  7. Does the firm’s governance structure provide for administrative, management, and leadership roles and responsibilities?
  8. Does the firm have an in-house leadership training and development program?
  9. Does the firm invest and budget funds for leadership development?
  10. Is the firm willing to make the commitment?

While professional non-lawyer executive directors, administrators, and office managers can provide some relief, the equity partners must still develop appropriate leadership skills and perform upper-level leadership roles. In some firms these skills are simply latent and need to be identified and appropriately reinforced. In other firms such skills are nowhere to be found. Such firms will have to either recruit partners with requisite skills from the outside or develop leadership skills internally. This will take time and will require dedication, focus, patience, and hard work.

This author believes that improvements in law firm leadership will only come about as a result of improved leadership selection and action orientated leadership development programs. Attorneys must begin to shift their attention from a transaction orientation to a firm-first client orientation. Attorneys must begin to make investments in non-billable time and consider such as investments for the future. Attorneys must begin to formulate a balance between accountability and autonomy and begin to embrace change. Only then will an environment be created that supports leadership development that fosters an organization that can facilitate ongoing new client acquisition and retention in the future.

Click here for our blog of leadership

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Click here for out articles on various management topics

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

Feb 11, 2026

Law Firm Succession and Exit Planning – Merger Option for Small Firms

Question:

Our firm is a two partner general practice firm in Akron, Ohio. I am 70 and my partner is 68 and contemplating retirement in the next few years. There are no other lawyers in the firm. We have two paralegals, one bookkeeper, and a receptionist. We have tried associates in the past but after we train them up they leave and go to larger firms. Our main concern is that we want a future home for our employees and our clients. We have been discussing whether a merger would be a good option for us. It seems that we either have to hook up with another firm or close our doors. Can you share any thoughts that you have?

Response: 

Merger, lateral non-equity partner, and “Of Counsel” arrangements are approaches that many firms in your situation are taking. But don’t wait too long as many candidate firms want a two or three year transition period.

It has been our experience that most of these type of arrangements have been very successful. Failures have been the result of poor cultural fit. The candidate firms – after they have moved past conflict checks and excitement about new client potential – jump immediately to an examination of practice economics and the financials. They fail to perform proper due diligence on the people. It is critical that firms insure that cultural due diligence is a key component of the merger, or other form of arrangement, assessment process. Philosophies, personalities, and life styles should be generally compatible. The parties should like each other and the deal should make sense.

The question is not the what (merge or other form of arrangement) but the who (people)

You should do all the due diligence that you can with whatever arrangement your are examining – start with the people – then move through the rest of the process.

Start by thinking about the reasons that your firm wants to join another firm and your objectives. Ask yourself the following questions?

Getting Started Preparing for a Merger or Other Arrangement

Start with determining your objectives. Why do you want to merger or join another firm? What do you hope to achieve? Is merger or other arrangement compatible with your succession exit plan? What size of firm are you considering?

Once you are sure that merger or other arrangement exploration – in general – makes sense – you should insure that your house is in order. In other words – can anything be done to enhance the value and/or marketability of your firm? For example:

Next, develop a merger marketing plan and begin working the plan. Try to generate enough leads that you can explore merger with several firms rather than engaging in “random merger talks” which often result in isolated merger offers with you having no framework for comparison.

Use an outside consulting firm if you need help organizing, identifying candidates, and managing the process.

Once you have merger candidates identified – the real work begins. Here is a general outline of the process:

Merger Assessment (Due Diligence)

People

Philosophies, personalities, life styles, do the partners like each other, why does the deal make sense.

Merger Implementation

If the two firms decide to proceed with a merger or other arrangement – then the process of implementation begins. A merger, lateral, or counsel agreement is executed, and a implementation plan is put in place. Then you begin working the plan. If the two firms are of similar size (as opposed to a large firm acquiring a smaller firm) a lot of infrastructure work will need to be done – ranging from IT systems, management structure, space, etc. to accommodate the larger entity.

Click here for our blog on mergers

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

Feb 04, 2026

Law Firm Associate Compensation and Bonuses – Salaries & Fee Production

Question:

I am a partner in a five lawyer firm in Columbus, Ohio. There are two partners in the firm and four associates. Our practice specializes in corporate business law and is one hundred percent transactional. We do not do any litigation work. Several of our associates started in BigLaw. All of our associates have been practicing for over ten years and some longer than that. None of our associates bring in – originate any client business. They are paid salaries and discretionary bonuses. While we have a billable hour requirement of 1600 hours none of our associates are even close – they are not even hitting 1200 hours. Their salaries are pushing $200,000 and their fee collections are no where they need to be. Any suggestions?

Response: 

Looks like you have some real challenges. The salaries that you are paying are what we are seeing for associates and non-equity partners in firm’s your size and that have been practicing for the number of years that your associates have. For years the guidepost has been that an associate’s fee collections should be three times salary/compensation – one third to cover an associates salary, one third to cover overhead, and one third for profit. That was back when overhead was running at thirty percent. Many firms today have much higher overhead than thirty percent. Using three times salary the fee collection bonus threshold would be fee collections of $600,000 for an associates being paid $200,000. The salaries you are paying are in the ballpark with what many other firms are paying. Your issue is not so much what you are paying your people as is their fee production and collections.

Obviously the billable hours are to low as well as the fee collections and this is eating into the profits of the partners. While 1600 annual billable hours is appropriate, based on where your associates are now it may be an unreachable goal and you may want to consider taking baby steps and setting a billable hour expectation of 1400 hours. For years the national average annual billable hours reported in surveys has been 1750 and this was the expectation for many firms for many years and still is for many firms. In the past few years, due to lack of work, work life balance, and other factors some firms have lowered the annual expectation minimum to 1600. Litigation firms, especially insurance defense firms, currently have minimal expectations ranging from 1800 to 2000 hours. Firms that represent individual clients such as general practice firms, family law firms, and estate planning/administration firms currently have minimal expectations ranging from 1400-1600.

I suggest that you look into your situation and determine the reasons for the low billable hours. It could be that they are not putting in the work because the firm does not have enough work for them to do. Look into the following possible causes of their low billable hours and take corrective action:

An approach that many firms are taking is to incorporate performance bonuses such as the following to motivate additional production. Usually these are on top of a base salary. Here are some examples:

  1. Base salary plus 5% of base salary if the billable hour expectation of 1600 is attained, discretionary bonus, and a 15% client origination bonus for bringing a client to the firm. The bonus is for the first year only.
  2. Base salary plus $50.00 per billable hour actually billed to clients that exceeds 1600 annual billable hours. 10% bonus on the collected revenue from other timekeepers that work is delegated to.
  3. Base salary plus 20% bonus for collected working attorney fees in excess of three times salary during the year. For example, an associate that is paid $200,000 would have an working attorney collection expectation of $600,000. If the associate had collections of $700,000 he or she would receive a bonus of $20,000. The associate also is entitled to receive a client origination bonus of 10% for business brought to the firm.
  4. Base salary, 1600 annual billable hour minimum expectation, quarterly production bonus of 40% of working attorney collected fees less salary paid for the quarter, and 20% client origination bonus for work done by others in the firm.
  5. Base salary plus 1/3 of hourly billing rate for hours billed to clients that exceed 1800 annual hours billed to clients.

Some firms have lowered base salaries when incorporating new performance bonus systems when the current expectation is far below expectation. Other firms are terminating under-performing associates.

Many firms are finding that many associates in small firms that have salaries of $200,000 or more are content and are not motivated by the bonuses available to put in the time to earn the bonuses. Work life balance is more important that earning additional income for some associates. The bonus systems works better for associates that are still hungry or have lower base salaries.

Firms that have had the most success in getting associates past the “entitlement mentality” are those that incorporate goal setting, accountability, and individual twice a month coaching meetings with associates in addition to the performance bonuses.

You might want to consider the following approach to associate compensation:

  1. Base Salary at current level or lower.
  2. Working attorney bonus of between 20-40 (one or the other) percent of fees collected in excess of a threshold of 3 times salary.
  3. Delegation bonus of ten percent for fee collection from others working on matters for which an associate is the responsible attorney.
  4. Professional and practice development bonus based on results rather than activity. (Maximum bonus of 10% of salary.) For example:
    1. Two speaking engagements during the year for attorneys or other professional groups with quality PowerPoint presentation approved by the managing partner. $1,500.
    2. Writing article in Bar Assoc. Section News Letter-ANNUAL. $500.
    3. Writing article in Bar Journal or other professional Journal (Ohio Bar Journal, American Bar Journal). $1,000.
    4. Writing Chapter in Legal Professional Book, i.e. 1,500 author – as a c0-author $750.
    5. Bar association or Non-Bar association (if prior approved) leadership position such as chair, etc.(not just membership). Maximum 1 leadership position through 1 year duration of the position. $2,000.

Good luck with the challenge.

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

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