Law Practice Management Asked and Answered Blog

Category: Succession/Exit Strategies

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Sep 09, 2026

Law Firm Associate Recruiting and Retention Strategies in a Sole Owner Firm

Question:

I am the sole owner of a general practice firm in Indianapolis, Indiana. I have been in practice for 45 years and I am the only lawyer in the firm. I have a receptionist and a paralegal that also serves as my office manager and bookkeeper. I have tried hiring associates over the years, several times, but after spending time training them they eventually go elsewhere. I would like to reduce my workload and eventually retire. How should I approach finding and keeping an associate differently? Thank you for any ideas that you may have.

Response: 

This is a common and a major challenge for sole practitioners and small-firm owners. The mistake many owners make is viewing the associate primarily as someone who will help the owner get the work done. If you are approaching retirement, I would encourage you to look at the issue differently. Your next associate may not simply be an employee. He or she may be your future successor. This changes the recruiting, compensation, training, management, and retention equation.

I am sure that the turnover that you have experienced has been frustrating. Your reaction may be “Why should I spend the time and money training another associate if he or she is just going to leave?” Your problem may not be that you have failed to find good associates. You may have failed to give good associates a compelling reason to stay.

I suggest that you think about and ask yourself the following questions:

Question 1: Why are your associates leaving?

Determine why lawyers are leaving. Do not assume the answer is compensation. It may be. But associates also leave because they don’t see a future with the firm. After two or three years, the associate may be asking:

If the associate cannot answer these questions, the lawyer may reasonably begin looking elsewhere. You need to stop thinking about retention as how do you keep this associate from leaving and think in terms of what kind of future you can offer this associate?

Question 2: Should you Pay Higher Salaries?

You should pay competitively. You cannot expect to retain talented lawyers if your compensation is substantially below the market. But simply increasing compensation every time an associate receives an outside offer is not a retention strategy. You should develop a total compensation and career advancement program. Such a program might include:

The last item may be particularly important. Since you eventually want to retire, the opportunity to become a partner—and potentially the owner of the practice—may be worth considerably more to the right lawyer than another few thousand dollars of annual salary.

Question 3: Does the Associate Even Want to Become a Partner?

Thirty years ago, I would never have to ask an associate during an interview if they wanted to become a partner or own a law firm as everyone would have said yes. This is no longer the case. Not every good associate wants to become an owner. Some lawyers want a long-term professional position without ownership responsibilities. Others may want partnership but not equity ownership. The important thing is to find out. Ask, what does your ideal career look like five years from now? You may discover that the associate’s goals and the firm’s goals are highly compatible. Or you may discover that they aren’t.

Question 4: Should You Tell the Associate That You Eventually Want to Retire to retire? 

If retirement is reasonably foreseeable, I believe you should begin discussing the firm’s future. You don’t necessarily need to say that you are retiring in three years if you haven’t made that decision. However, you should be able to say that you are building this firm for the long term, and you want to develop lawyers who can assume increasing responsibility and potentially participate in ownership. This discussion can be extremely important. Associates are more likely to invest themselves in the firm if they understand that there is a future opportunity.

Question 5: Should you Involve the Associate in Management?

Yes—but progressively. An associate who may eventually become a partner or successor needs to understand that a law firm is a business as well as a professional practice. Over time, expose the associate to:

You don’t need to give an associate full access to everything immediately. But if you expect the lawyer eventually to help run the firm, you need to begin developing management capability well before the transition.

Final Thoughts

If you are a sole owner approaching retirement, I would encourage you to look at recruiting and retention differently. Don’t ask only how can you find a good associate – ask – how can you find, develop, and retain the lawyer who could eventually become the next leader of your firm? The answer to this question changes the entire strategy and you will begin thinking about succession much earlier. The ultimate objective isn’t simply to retain an associate for another year. It is to create a professional environment in which a talented lawyer can say – I can see my future here.

If you don’t develop a successor, you may eventually find yourself with:

The solution isn’t to avoid developing people, it is to develop them within a deliberate succession strategy. One of the biggest mistakes I see is sole owners waiting too long. A successful succession often requires several years. The owner must have time to:

In todays competitive market for talent you may find that you are unsuccessful in finding, hiring, and retaining an associate that is able or willing to be your successor. I am finding this to be the case with many sole-owner firms. In these situations, an external strategy such as merger or an Of Counsel relationship with another lawyer or firm is the course taken.

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

Aug 19, 2026

Law Firm Acquisition – Acquiring a Founder’s Practice

Question: 

I am an associate working in a small family law practice located in Chicago. There are two attorneys in the firm – the owner/founder who is 74 and me. I have been out of law school for seven years and have worked with the firm since I graduated. Virtually all of the business that comes into the firm is originated by the owner. The owner of the firm has advised me that he wants to retire and would like me to take over his practice. I am interested. What are the potential issues and how should I proceed?

Response:

I assume that the owner plans on selling you the practice and has or will be providing you with a proposal outlining the purchase price or earnout arrangement, terms, etc. However, sometimes owners ask the potential successors/buyers such as yourself to provide the initial proposal. You have probably never seen the financial statements of the firm. This would be your next step:

I would initially ask the owner for the following:

  1. Five years profit and loss statements and balance sheets and tax returns.
  2. Current hourly and flat rate fee schedule if you are unaware of rate and fees charged.
  3. Copy of leases (space and equipment).
  4. Copy of malpractice insurance policy and last application.
  5. Salaries and benefits for attorneys and staff members.
  6. List of the matters that he is handling, status of the matters, and fee arrangements.

This will give you a good idea of what you are dealing with and whether the opportunity is worth pursuing further. If you decide you want to pursue this opportunity you can ask for additional information as the discussions unfold.

Since you have been working in the firm for seven years you are aware of the nature of the clientele that you would be acquiring.  Since your practice is a family law practice you need to give some thoughts as to how the firm get’s it’s clients. Internet and other forms of marketing, word of mouth referrals, or from other referral sources. Owner dependency can be a real problem if after the owner retires past clients no longer come to your firm, no longer refer clients, or referral sources no longer refer new clients to the firm since the owner who had the relationships is no longer there. If the owner has relationships with referral sources and you do not, you need to determine how much business comes in from those referral sources. You need to determine whether the owner is interested in remaining with the firm for a period of at least one year so you can get plugged into his referral sources, acclimated to his clients and files, and trained on office management and administration. If the owner’s  clientele are older, what will their reaction be if they were represented by a younger attorney? People chemistry is very important. It has often been said that clients hire the lawyer and not the firm. While this is not totally true – there is some truth in this statement. A successful client and referral source transition and retention is crucial, and the value of the firm is dependent upon such.

Some form of an earnout or combination of a fixed price with earnout would be in your best interest. What you would be buying are the future cash flows from future clients if they materialize. Another approach might be a fixed price with a reduction of price if certain revenue targets don’t materialize. If the owner is interested in selling out and leaving the area, then you may consider proceeding with the transaction with payments which would be based upon subsequent collections during a period of three to five years after the acquisition. In other words, the more the owner participates during the first year to retain certain clients, the more he should receive.

The worst scenario is if the owner dies unexpectedly after signing the agreement. This recently happened to one of our clients, and he had to spend a great deal of time and effort trying to retain clients that he never had contact with.

You must also review the financial records to determine the profitability of the practice. Many owners of small law firms do not keep adequate time records, don’t have automated practice management systems, and are not paperless. What is the shape of his client files and how well are they organized? Certain data is stored in their heads. In many cases, the hourly rates or flat fees are low and could be raised during the first year to make the practice more profitable. However, this increase must be one that will be accepted by the client. The next question would be whether family members are involved in the practice, if they are, there may be problems in the future. The clients know the family, and if there are any remaining family members working in the firm, they may leave your firm empty-handed. For example, if a paralegal who is a family member leaves the firm after the acquisition is consummated, several clients could follow the paralegal to their new place of employment. In such situations I have had client law firms that have had such persons execute non-compete agreements. In one situation the deal was aborted by the acquiring firm due to the paralegal not willing to sign a non-compete agreement. This was a situation where the paralegal in the firm actually had the client contact relationship. The owner’s contact with the client was limited. The paralegal had the relationship.

Finally, there should be other safety valves for the purchaser in acquisition of this nature. On a positive note, the situation could present a fine opportunity for growth. Just ensure that the  buy sell and other legal agreements provide the appropriate safeguards.

The above issues such as non-compete and practice sale agreements should be addressed with your business attorney.

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

 

Aug 05, 2026

Law Firm Sole Owner Succession and Exit – Top Challenges

Question: 

I am the founder and sole owner of a business litigation firm in Orlando, Florida. I am 72 and want to retire and exit the practice within the next year. My office lease expires next year and I am not willing to sign another lease. There is one associate attorney that has been out of law school and with me for two years. He has yet to try any cases. There is also one paralegal in the firm that has been with me for 20 years.

While it would nice to receive some value and monetization for the effort, time, and sweat that I have invested in the firm I have made a good living over the years and have saved adequately for my retirement. So monetary compensation for my practice is not as important to me as finding a home for my clients and employees.

Since my associate does not have the experience to buy or take over my practice I must either find another practitioner or firm that I can hook up with or close the doors next year.

Any advise and thoughts that you may have are appreciated.

Response: 

Unless you have a candidate practitioner or firm in mind, one year to your planned retirement/exit may be a problem both from the standpoint of the time it will take to find candidates as well as client transition. Challenges you will face include:

  • Limited number of interested firms.
  • Candidate firms often prefer firms with multiple attorneys rather than a solo practice.
  • Some candidate firms may want only selected clients rather than the entire practice.
  • Many firms are having issues staffing the work they have and are not hungry for additional work. They are hungry for talent.

Candidate firms often want a transition period of two or three years whereby the retiring attorney works as “Of Counsel/Senior Counsel” and helps ensure the firm transition client work and relationships. Candidate firms know that clients hire the lawyer—not the firm. So they will be concerned about:

  • Whether clients will stay after the you retire.
  • How much revenue will disappear.
  • Whether your referral sources will continue sending work.

This often results in earn-out structures where your compensation or payment for your practice depends on client retention.

Your best option would be to merge and part of the arrangement would be they would hire your associate and paralegal. To accomplish this you need to start your search for candidate firms right away and see what happens. Be prepared to stick around for awhile to effect client transition. Generally you would be compensated under a eat-what-you kill arrangement. Another option would be to try to hire an experienced lateral attorney that would agree to purchase you practice when you retire. If all else fails you will need to refer out your existing clients and close the doors next year.

Concerning compensation or value from your practice, I find that many sole owners expect the sale of the practice to fund retirement. However, I generally see the following:

  • Most value comes from future earnings rather than hard assets.
  • Purchase prices are often paid over several years.
  • Client retention affects the final purchase price.

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

 

 

 

Jun 03, 2026

Law Firm Value – What is a Firm Worth

Question:

I am the owner of an estate planning firm in San Rafael, California. There are two associates in the firm, two paralegals, and two legal/administrative assistants. I am 58 and still going strong and not planning on retiring in the near future. However, I would like to get a sense of the current value of the firm and what we could be doing to enhance the value of the firm as well as seeking potential buyers or merger partners. Any comment that you might have would be appreciated.

Response:

When it comes down to it the value of a firm is what another lawyer or lawyers in the firm or another law firm will pay you for the firm. The terms. method of payment, etc., is often more important that the price or value. However, having a general sense of the value of a firm helps you establish an initial asking price in several situations, including:

While financial performance matters, the true value of a firm often depends on far more than annual revenue. Even attorneys with thriving firms are often surprised to learn that two firms with identical revenue can have dramatically different market values.

Key components of firm value.

  1. Revenue and Profitability.

    Gross revenue alone tells only part of the story. Buyers and valuation professionals focus heavily on net income and owner earnings. A firm generating $1.5 million in revenue with strong profit margins may be worth substantially more than a $2 million firm burdened by excessive overhead or inefficient operations.

  2. Area of Practice.

    Not all practice areas are valued equally. Firms with recurring clients or subscription-style revenue often command better valuations and sale price because of predictable future income.

  3. Transition Process.

A law firm that depends entirely on one attorney’s personal relationships is generally less valuable than
a firm with institutional systems and transferable clients.

          Internal and external buyers look for firms with:

Simply put, the easier the practice can operate without the owner, the higher the value.

Future owners, internal or external pay attention to trends, not just current numbers.

Questions often include:

A growing firm with momentum may command a premium valuation.

Firm value can be reduced by:

Law firm owners who plan ahead often achieve significantly higher valuations.

Practical steps include:

Firms that operate like businesses — rather than solely professional practices — tend to attract stronger buyers and higher valuations.

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

 

 

 

 

 

Apr 29, 2026

Law Firm Succession and Transition – What is the Best Strategy?

Question:

I am a partner in a three partner firm in Fresno, California. We handle exclusively personal injury plaintiff work consisting of auto accidents, slip and fall cases, premises liability, etc. We do not handle medical malpractice, products liability. or mass tort or class action cases. We have no associates working in the firm at the present time. While we have had associates in the past we have not had good experience in recruiting and retaining associates. In addition to a receptionist we have four paralegals.

I am 73 and still trying cases and my other partners are 62 and 68 respectively and still trying cases as well. We recently starting discussion our individual long term plans regarding eventual retirement. I plan on retiring in a year and my other partners are planning on retiring in the next five or six years. What is our best strategy concerning the law firm and our transition? We would appreciate any comments that you may have.

Response:

The biggest challenge for many firms, is finding the right WHO.

The who dictates the what – the actual succession/transition/exit strategy whether it be internal (hiring an associate to groom to take over the practice, merger, practice sale, or referring out cases and closing the doors. In other words, many law firms find that they start down one path and end up on another. Not all non-equity partners and associates want to own a law firm. Not all lateral and merger candidates will be a good fit for your firm and culture. The key is the right relationship and sometimes that takes the form of making someone at the firm a partner, bringing in a seasoned lateral, merging with another firm, selling the practice, or referring out cases and closing the doors. Therefore, succession/transition plans have to be flexible and often the key is not get stuck in creating complex succession plans at the onset. Establish candidate search timelines, outline a general course of action, generate some momentum and see where that takes you. Then build the plan when you can see where the firm is headed.

You are going to have to begin sooner than later exploring your options and conduct a search for the following:

This search and exploration often is the most time consuming and difficult part of the process and often the options identified through this process ends up dictating the succession/transition/exit strategy.

Associate Candidates

You have tried this strategy without success. Years ago, it seemed that all the associates working in law firms wanted to become a partner in the law firm. This has changed because of the new mix of women and men graduating from law schools and entering the legal profession, changing attitudes toward work life balance, other opportunities outside law firms, and other variables. While partnership/ownership is still important to many – do not assume that all the associates that a firm hires hire will even want to be equity partners – especially if it means a hefty capital contribution and signing personal guarantees for a large amount of firm debt. This could be a strategy if you could find an experienced lateral attorney interested in law firm ownership or partnership. I do not believe you have time to invest in the care and feeding that you would need to do with an inexperienced junior associate.

Merger Candidates

 Another option would be to merge with another firm. This could be a viable strategy for your firm. It all comes down to whether the relationship is right for you and your firm. While mergers can be a valid option making them work is often another matter. Our experience has been that that one-third to one-half of all mergers fail to meet expectations due to cultural misalignment and personnel problems.

There can be a whole list of reasons for failure including poor financial performance, attorney defections, loss of key clients, and leadership and management issues. However, it has been our experience that most failures have been the result of poor cultural fit ‑ the wrong WHO. The merging 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 assessment process. Philosophies, personalities, and life styles should be generally compatible. The partners should like each other, have a common vision of the firm’s future, and the deal should make sense. The question is not the what (merge) but the who (people).

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

Practice Sale

Practice sale is an approach that is available in most states. Typically, there are very specific requirements and procedures that a lawyer or law firm must follow in accordance with a state’s rules of professional conduct. Many states have followed or adapted the American Bar Association’s Model Rule 1.17 regarding sale of a law practice.

Referring out Cases 

Some personal injury plaintiff firms simply refer out their cases under a fee arrangement with another firm and close their doors.

You need to discuss among yourselves your individual specific retirement timelines as that also will impact your strategy and how soon you should get started on identify potential candidates – attorneys or law firms.

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

 

Apr 01, 2026

Law Firm Succession Planning – Client Transition in a Multi-Partner Firm

Question:

Our firm is a 24 attorney firm in Memphis, Tennessee.  We have 10 partners – five of which are in their early 60s. We represent small to mid-size business clients. Recently we have been discussing the eventual retirement of the senior partners and approaches to client transition. We would appreciate your thoughts.

Response:

Client transition involves different challenges that have to be overcome in order to successfully transition client relationships. 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 of all parties (introducers and new players). A high level of trust must exist within the law firm organization between the attorneys involved and within the client organization between the parties there as well.
  4. There is potential risk of embarrassment for all concerned. The transitioning attorney in the law firm 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 invest the time and effort nor 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.

Effective client transition is not a one-time lunch or introduction event – it most go deeper to bind the new relationship. This takes time. Start early and allow ample time for an effective partner winddown.

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 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. In consultation with the Firm Executive Committee, 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. You, in consultation with the Firm Executive Committee, may for cause adjust or amend the Co-Responsible Attorney(s) designation as to any Transitioning Client. 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 at any time allow for change of the designation of same.
  3. You will perform such duties as the Firm Executive Committee of the Firm may from time to time determine to be in the best interest of the Firm and which are agreeable to you. You will  agree that your professional procedures will be in accordance with the rules and regulations promulgated by the Firm Executive Committee. You will also maintain the records as reasonably required by the Firm Executive Committee.
  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.

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

Mar 18, 2026

Law Firm Practice Sale to Another Firm or Merger v.s. Internal Sale to Associates

Question:

I am the owner of a small estate planning firm in Columbus, Ohio. Besides myself there are two associates working in the firm. I am 67 and the associates are in their early-fifties. I am planning on retiring in the next couple of years and moving to Florida. I would like the practice to continue after my retirement and I would like to (in order of priority):

What is my best option – sale or merger with another law firm or sale of the practice to the two associates working in the firm? Please share any thoughts that you may have.

Response: 

I always suggest in situations such as yours that internal sale/transfer be the default option – the option that you consider first. However, this assumes the following:

  1. That your associates want to own a law firm – either as partners with each other or individually. I am finding that many associate candidates do not want to take on the responsibilities and risk of law firm ownership.
  2. That your associates would be willing and able to be partners with each other.
  3. That your associates have the experience and legal skills to serve clients in your absence.
  4. That your associates will be able to retain your clients and referral sources.
  5. That your associates will be able to effectively run and manage your practice after you are no longer there.

If the above listed assumptions are not the case you may have no choice but to sell or merge your practice with another practitioner or law firm.

If you don’t wait too long you may have time to develop your associates if the interest is there.

Developmental and 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 two associates 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. If not, you have work to do.

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 a 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 matters 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.

I have recently completed engagements with two estate planning firms where two associates bought out the equity interest of the founders. In both firms, the results turned out exceptionally well.

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

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.

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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.

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

Jan 07, 2026

Law Firm Succession Planning and Retirement – Coming to Terms with Aging

Question:

I am a partner in a seven lawyer firm in Mesa, Arizona. There are five partners in the firm. We are a boutique business litigation firm that was formed seven years ago.  I am 64 and the others partners are 62, 60, 55, and 53 respectively. I would like to retire in the next few years and our firm has never really discussed or planned for partner retirements. We don’t even have a partnership agreement. I would appreciate you thoughts.

Response:

At a personal level, you should admit to yourself that, regardless of your current age, you are getting older and you will eventually retire – one way or another. The sooner you begin thinking about this the better prepared you will be. I have many clients that have started their succession/transition planning in their mid-forties and early fifties. Unfortunately, many have waited until their mid-sixties and early seventies. For these folks there has been little time to make adequate preparation and often adverse consequences have resulted. At an absolute minimum, you should start your succession/transition planning five years before you plan to begin your transition. It simply takes this long to put your house in order, to locate or groom succession/transition candidates, find a candidate law firm interested in your practice, and transition clients and management responsibilities. Here are a few ideas that I suggest to multi-partner firms and sole owner/solo firms:

Multi-Owner Firms

  1. Stop giving succession and transition lip service – if you are serious – put in place organizational systems that will facilitate the process.
  2. Put in place a firm strategic plan that incorporates a succession plan.
  3. Host a partner brainstorming retreat to address key questions surrounding your firm’s plan and identify a course of action that will be supported by all.
  4. Make long-term plans for the firm.
  5. Insure partner accountability.
  6. Implement funded retirement plan for partners and other employees in the firm.
  7. Consider Key-Personal life insurance to fund buy-out of ownership interests of partners that die or are disabled.
  8. Execute partnership/operating/shareholder and buy-sell agreements.
  9. Consider buy-out plans that are not funded out of future earnings (post retirement) and are paid by the end of the wind-down or transition period.
  10. Urge partners to think about and plan for retirement. They should start early and start on a wind-down program at least five years before they are ready to retire or exit. Each partner should decide when they want to exit the practice and begin a disciplined phase-down (wind-down) in which legal skills; leadership and management, and client relationships are transitioned to the next generation of attorneys in the firm.
  11. Provide financial incentives for partners to transition clients.

Sole Owner & Solo Practices

  1. Decide when you want to retire and leave your firm.
  2. Determine how much cash or annual cash flow you need when you exit the firm.
  3. Fund a retirement plan in the early years of your practice and project how much income it will generate at various exit points.
  4. Determine who you would like to transfer the practice. (Family members in law school, other attorneys in the firm, another firm, etc.)
  5. Based on future cash flow, ascertain how much the firm is worth today. Value the practice.
  6. Begin implementing management strategies that will maximize the future value of the firm – before you exit and afterward.
  7. Institutionalize the firm so that it is not uniquely you.
  8. Determine if the firm is even saleable.
  9. Draft and implement a succession/exit plan. Insure that it incorporates safeguards for your clients, employees, and family if the unexpected happens to you.
  10. Take steps to protect your family’s wealth.
  11. To retire and exit successfully you need:

A plan – a roadmap that outlines the process and helps you decide on where you want to
go and how you will get there.

Timeline – a disciplined implementation timetable keyed to your
Succession/Transition/Exit Plan.

Start Early – Getting ready for exit takes time. Start early – 5- 8 years before you are
ready to retire or exit.

Decide – When do you want to leave the practice?

Decide – How much cash you will need when you exit.

Decide – To whom you want to transfer your clients or practice.

At a firm level, especially if you are a member of a multi-partner firm, start sharing your ideas and plans with your partners. Have an ongoing dialog with you partners. Review the firm’s partnership/operating/shareholder agreement. If the firm has a succession/transition plan review the plan. After reviewing these documents, determine how the firm’s policy regarding retirement will affect your retirement timeline, compensation, and payout. Does the policy require mandatory retirement at a certain age? Ascertain whether the policy provides for phasedown. How does the phasedown handle management and client transition? Is there an “Of Counsel” provision after retirement? Reach an agreement with your partners concerning your retirement timeline, client and management transition, and retirement payout or return on invested capital.

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

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