Law Practice Management Asked and Answered Blog

Category: Succession/Exit Strategies

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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 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

Dec 31, 2025

Law Firm Succession Planning – Retire or Continue Working?

Question:

I am a 64 year old lawyer that owns a small general practice law firm in Springfield, Illinois. There are two associates in the firm and two staff members. I have been thinking about retirement and how I should begin planning for it which I have not done. I love the work that I do for clients and have very few other interests. I get satisfaction and fulfillment from my work. I really want to work for ever. I would appreciate you thoughts.

Response:

You are not along. I have many lawyer clients that are in the 80’s and still working and going strong. I had a personal injury plaintiff attorney in his mid 80’s that tried a large medical malpractice case last year and obtained a very large jury verdict in the case.

Many lawyers, more so than many other professionals, are high achievers that are married and addicted to their law practices.  They believe that their self-worth is reduced if they are not accomplishing something important. Psychologists refer to this as “achievement addiction.” In his book, The Psychology of Retirement, Derek Milne advises that surveys in the United States suggest that over sixty percent of retirees “un-retire” and continue to work in some form of paid work, then “re-retire” or semi-retire” later on in their retirement (Milne 2012, 11-05). A major challenge for lawyers that have an achievement-focused personality will be to find ways to replace the sense of achievement that they have experienced from the practice of law after they retire. While playing golf may be a worthwhile recreational activity for those that enjoy it, it will not be enough to fulfil the needs of those with an achievement-focused personality. These individuals will need activities where they can contribute and make a difference and continue to fulfil their self-actualization and self-esteem needs. Activities such as mediation, teaching, consulting, volunteer work and community leadership often fulfil these needs.

Identifying Other Interests

Many of us have heard some of the stories of unhappy retirees ranging from poor health, depression, and premature death. Years ago when my mother passed away my father’s boss asked my father what he could do and how he could help. My father told him, “keep me working.” My father’s boss kept my dad working and he worked every day of his life until he passed away at 84. Dad used to tell me that when you enjoy your work and your work is your hobby, it is not work. For some people the best way to retire may be to continue working.

For others, rather than being a time of easing back and retiring into old age or continuing to work in one’s old job or career, it can be a time of personal growth and an opportunity to explore other interests, callings, and vocations. It can be a time of freedom to do what you always wanted to do but could not because you had to earn money and the pressure of work prevented you from pursuing you dreams and interests that were in tune with you values and beliefs. Here is a list of a few areas that you might want to explore:

  1. Teaching courses at a local law school or university
  2. Mediation
  3. Pro-bono work
  4. Writing
  5. Photography, gardening, travel, or other hobbies
  6. Serving as a director on a profit or non-profit board
  7. Counseling
  8. Volunteering

Planning Your Retirement

One way to begin to visualize getting older, your mortality, and retirement is to think about the amount of time that you have left on this earth. If you are sixty-five you may live to be eighty. Thus, you have fifteen years left and this is your planning horizon. Retirement planning is deciding on how to use this time. It is about the process of deciding what you will do in your retirement and putting a plan into practice. As the amount of time left to you decreases, its value increases to the point where it will be more valuable to monetary assets.  It will be more valuable that a new house, a new car, a new boat, or a chest full of cash. Time enjoying life, being with your family, and spiritual renewal will become more important than earning money. The greatest change when you retire is how you will use your time.

Retirement planning begins with taking the time to think about how you will use you time. If you live fifteen years beyond your retirement your will have 28,800 hours that will have to be filled with retirement activities. (five days a week, eight hours a day, 48 weeks, for fifteen years)  Start by creating an interest activity list, a time plan, and then DECIDE, PLAN, and ACT.

Options include:

  1. Continue working in your present situation;
  2. Continue to work for compensation but in another occupation; or
  3. Retire and pursue recreational and other retirement activities without compensation.

If you decide to keep working you need to begin thinking about your succession plan when and if something happens to you. It may be time to consider bring lawyers in the firm into equity ownership or at least have in place an arrangement or agreement with them in event that something would happen to you – a practice continuation agreement. 

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

 

Dec 10, 2025

Law Firm Succession – Encouraging Partners to Transition Clients

Question: 

I am one of eight partners in a fourteen lawyer insurance defense firm located in Indianapolis, Indiana. Besides the partners there are six associates working in the firm all of which are newbies. The partners ages are 70, 68, 65, 62, 60, 58, 54, and 51 respectively. We have several partners at retirement age and we are looking for ideas on succession planning and how to encourage retiring partners to properly transition clients. We have had partners retire in the past and we did a poor job of client transition and the firm lost clients as a result. We appreciate any thoughts that you might share with us.

Response: 

There needs to be a process established for retiring partners with specific agreed to activities on the part of the retiring partner with firm management. Steps should be taken to allow and assist other designated partners (transition partners) within the firm to develop a direct relationship and have responsibility for managing these clients. Such a process should include:

  1. Notification by retiring partners of intended retirement date – three to five years before actual retirement. At this time client transition should begin.
  2. Identify clients that will be transitioned and to whom. Specify specific transitioning tasks that are to be performed by the retiring partner and transition partner, or partners and timelines.
  3. Consider assigning Co-Responsible Attorneys to each client matter that will be transitioned. Have the attorney to which the clients are to be transitioned begin approving client invoices for services performed.
  4. Ongoing follow-up and evaluation on at least an annual basis by firm management as to the status and level of success of agreed to client transition activities.

Don’t Forget the Money – Financial Incentives To Transition Clients 
Generally, the compensation of those partners who are transitioning towards retirement will be determined in the same manner as compensation for all other partners, taking into account partner origination collections, client liaison collections, matter origination collections and working attorney collections, together with other factors that the managing partner and members of the management/compensation committee may consider relevant. However, with respect to the retiring partner, the managing partner and members of the management/compensation committee will pay particular attention to the former’s performance of the transitioning duties assigned. If it is determined that the retiring partner is satisfactorily performing the transitioning activities, the retiring partner will continue to receive full credit for those fee collections from clients being transitioned, in the various categories considered by the managing partner and members of the management/compensation committee in setting compensation. However if it is determined that the retiring partner is not satisfactorily performing the transitioning activities, or if the fees generated from these clients increase or decline, those factors will also be considered by the managing partner and the management/compensation committee in setting the retiring partner’s compensation, and the compensation may be increased or reduced appropriately.

Consider Dual Credit for Client Collections
In order to provide incentive to those partners to whom clients are being transitioned, and to insure that those attorneys are fairly compensated for their efforts in transitioning and maintaining these client relationships, the partners designated to be the transitioning partners for the client to be transitioned will also receive credit under the categories as may be applicable, for the fees generated by these clients during the transition period, provided that the managing partner and the members of the management/compensation committee determines that the transitioning partners are making satisfactory efforts to  accomplish the transitioning of clients.

Assignment of credit to the transitioning partner should not reduce the amount of credit allocated to the retiring partner, unless the retiring partner is not satisfactorily performing the agreed to transition activities.

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

Dec 03, 2025

Law Firm Succession Planning – Spouse Having to Windup a Husband’s Practice

Question:

My husband’s ( Robert) practice is located in Alexandria, Virginia. The practice is a general practice with a focus on estate planning, family law, and real estate. He is now sixty and suffering from Alzheimer’s.  He has three legal assistants and two associate attorneys. The associates are newbies each out of law school less than three years, are risk adverse, have no client book of business, and have no desire to own a law firm.  As my husband’s physical health has declined his mental acuity has declined as well. However, rather than examining possible succession alternatives he has continued to practice and the quality of his services to clients has declined. Clients have taken notice and many have taken their business to other law firms. Recently I, who serves as the firm’s office manager,  approached several law firms regarding possible sale of the practice. All of the law firms that I approached have rejected my proposals advising me that since the firm is “uniquely my husband” and without a lengthy transition, they do not believe that there is sufficient value to warrant a practice acquisition. Four weeks ago, I approached both of the associates and both advised me that they did not wish to acquire this or any other law practice. Last week both associates gave their notice and advised that they were joining other law firms in the area. Based upon the medical advice of my husband’s  doctor he has decide to close the practice and has asked me to handle the logistics of closing down the practice.

Response:

Unfortunately Robert’s failure to plan for his succession and transition has resulted in:

  1. Loss of compensation for the goodwill of his practice and the sweat equity that he invested because of the need for a hasty practice sale;
  2. A one generation law firm;
  3. Loss of peace of mind for Richard’s family and employees;
  4. Failure to provide continuity for clients and employees; and
  5. Failure to continue the legacy of the firm that Robert built.

Had Robert reconsidered his attitude of having partners, hired and groomed entrepreneurial associates with a desire to own a law firm, institutionalized the firm’s brand to be less uniquely Robert, and put in place both a short-term practice continuation plan and a long-term succession plan, the story may have ended differently.

You may not have much choice but to close the doors and windup the practice. You should check with your state bar association regarding your state court’s rules for the proper procedures for doing this. In many states a court may step in when a solo attorney:

Because clients’ cases, funds, and confidential information must be protected, the court ensures there is a responsible lawyer to manage the transition. Typically the court-appointed attorney (sometimes called a practice administrator, trustee, or receiver) is authorized to:

  1. Secure and inventory client files
  2. Notify clients of the situation and their options
  3. Return client files and property
  4. Manage trust accounts and distribute funds properly
  5. Seek continuances or withdraw from cases appropriately
  6. Close the office, handle billing, and deal with vendors
  7. Ensure ethical obligations are honored

They do not usually take over the cases themselves unless the clients choose to hire them separately.

The goals are to:

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

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.

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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.

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

 

 

Aug 14, 2024

Law Firm Succession and Exit Strategy – Referring Out Work too Soon

Question:

I am an estate planning attorney in Chicago. I am currently 72 and have been in practice and owned my own firm for 45 years. In the past I had an associate attorney in the firm and a couple of legal assistants. Currently I have one part time associate no assistants. I do all of my own paralegal and administrative work. My associate has no interest in taking over my practice. Therefore, I am considering options as what to do with my practice. I have wound down over the last few year by cutting back on my time and hours and referring out almost all of the new prospective clients that contact the office to several other law firms. In fact, I quit taking on new clients three years ago and have referred out a substantial amount of work – gratis – without any form of compensation or referral fee.

I plan on speaking with a firm other law firms concerning joining as an “Of Counsel” with a transition plan for my retirement and taking over my practice. I would like to receive some compensation for the “sweat equity” for building the practice.

I would appreciate your thoughts.

Response: 

Of Counsel arrangements are the most common arrangements for sole owners/solos in situations such as yours. While practice sale is an option, I find the OC route the most common approach acceptable to other law firms. Your financial performance over the last five years often has a lot to do with the level of interest that there will be from other law firms, the compensation arrangements they are willing to offer, and if and whether they will be willing to compensate you for your “sweat equity” or book of business either while you are there as OC or post retirement. Unfortunately, your early winding down and referral of clients has resulted in your financial performance over the last three years dropping from what it was in the past. You have also referred out clients which also would be future referral sources to other law firms which would be a major selling point for establishing a “sweat equity” value for your practice. I often advise my clients – don’t wind down or referral out clients too early – do so when you have an arrangement with another firm. 

This does not mean there is not hope or that any other firm’s will have an interest in you or your practice. It could be that another firm is interest in you, especially if you have a unique skill set that the other firm does not have, and what you can do to help take their firm to the next level in a couple of years. When you are asked to provide financials to prospective law firms you might want to provide a list (redact the names of the clients) illustrating the value of referrals you have made to other firms over the last few years with fee estimates.

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

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