Law Practice Management Asked and Answered Blog

Category: Succession/Exit Strategies

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Nov 06, 2012

A Backup Up Plan for Small Law Firm Owners – Using Practice Continuation Arrangements


I am a 52 year old solo practitioner in Memphis with one non-attorney staff member. While I do have some concerns about my long term succession exit strategy my immediate concerns are more short term in nature. How do I cover and serve my clients if I take vacation, get sick, or get busy and need help? What are your thoughts?


Sound practice continuation arrangements can solve this dilemma and preserve practice value
and can help prevent a lawyer’s spouse or immediate heirs from facing a hasty sale or disposition of the practice in an emergency. A practice continuation arrangement can also give lawyer practitioners, their staff, and their family’s peace of mind.

A practice continuation arrangement is an arrangement – typically in the form of an agreement or contract – made between an individual lawyer or a small law firm and another lawyer or law firm. The arrangement describes a course of action to transfer a lawyer’s practice and sets payment for its
value. In the event of vacation, temporary or permanent disability, or death, a practice continuation arrangement protects the practice, the business interests of the lawyer or law firm’s clients and the financial interest of the lawyer and his or her family.

There are different kinds of practice continuation arrangements. Typically a lawyer enters into a one-on-one agreement with another sole proprietorship, partnership, limited liability company, or professional corporation in the community. Agreements can range from simple “dual coverage for each other” for vacation or other temporary absences to sale of the practice in the event of long term disability or death.

Look around for another solo practitioner or law firm that you can partner up with.

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




Sep 05, 2012

Selling Your Law Firm – Readying It For Sale


I am a sole practitioner in Bloomington, Illinois. My practice is general practice and most of my clients are either individuals or small businesses. I have one legal assistant and one paralegal that works for me. I am 62 and am starting to think about what to do with my practice and what I need to be thinking about concerning selling my practice. I would be interested in your suggestions.


I would start by asking yourself when you actually want to retire or quit. Do you really want to stop practicing law or do you want to work forever? Over two thirds of the solo and small firm lawyers that I speak with advise me that they want to practice forever – maybe not full throttle – but on a continued but scaled back schedule.

Review Rule 1.17 – Illinois Rules of Professional Conduct to insure that you understand the method and the restrictions involved in sale of a law practice.

If you want to continuing practicing determine whether selling your law practice is your best option given Rule 1.17. Some of our clients are exploring other options including bringing in other attorneys and forming partnerships or merging with other firms.

If you determine that selling the practice is the route you want to go here are a few ideas to begin readying it for sale:

  1. Decide when you want to retire and leave your firm.
  2. Determine who your would like to transfer the practice.
  3. Determine the your goals for sale of your practice and the priority and what is most important to you. (clients, staff, money or sweat equity, etc.)
  4. Determine how much the practice is worth today.
  5. Begin finding way to institutionalize the firm so the client and other relationships are less uniquely you.
  6. Begin implementing management practices that will systemize your firm and improve it's future value. (written procedures and policies, checklists, forms, automated case management systems, organized client files, accounting systems, etc. ) Document everything.
  7. Draft and implement a succession/exit plan and implement same. Insure that it incorporates safeguards for your clients, employees, and family if the unexpected happens to you.

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



Jun 19, 2012

Law Firm Dissolution/Winddown


Our firm has recently gone through a series of partner defections – we were a 40 attorney firm – now we are 10.  In our last partnership meeting we had some discussions about the possibility of dissolving the firm. If this comes to pass – do you have any tips or suggestions regarding winding down the firm?


Winding down a firm is like starting a firm but in reverse, harder, and has more steps. Sort of like building a house and then later tearing it down. You will have to deal with:

  1. Clients (notification, termination of representation, and disposition of case files)
  2. Retired partners
  3. Current partners
  4. Employees (associates and staff) – job placement, severance, etc.

Unlike other businesses – the major asset of a law firm are its clients, employees, and partners – many of which may have already defected or walked out the door. You may be left with only the liabilities.

One of your priorities will be to decide who will manage the winddown and who will manage internal and external communications.  Then you will need to develop a project management plan and dissolution/winddown plan/checklist. Major priorities will include:

  1. Bank Loans
  2. Building Lease
  3. Retainer Obligations to Clients
  4. Equipment Leases
  5. Retirement and Other Payouts to Former Partners

Firm should consider if it will retain a caretaker or trustee to manage the winddown.

You should insure that you review the ethical requrements with your state bar association concerning:

  1. Clients right to choose legal counsel.
  2. Notice to clients
  3. Proper and continuous handling of a client's matters
  4. Protecting a client's interest
  5. Disposition of client files
  6. Conflict of interest due to any new affiliations

Click here for our blog on mergers

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John W. Olmstead, MBA, Ph.D, CMC 







Apr 18, 2012

Law Firm Succession: Using Affiliation As a Phase I Pilot Test


I am sole owner of a law firm in Chicago with an elder law practice. I have two paralegals and two legal assistants. Although I want to continue to practice as long as I can I am in my late 60s and am beginning to think about what to do with my practice. I have recently had several discussions with another sole owner that is interested in buying my practice. Since I want to practice as long as I can I am concerned about the timing of selling my practice due to the current ethical rules. I also want to insure that the other firm would be the right fit for my clients and staff. Do you have any thoughts or suggestions?


Making the right decision concerning the "Who" is usually more important than the "What" or the "How". Take your time to do the proper due diligence regarding the other firm. Get to know the owner as well as the employees of the other firm. Ascertain practice, client, and cultural compatibility. If you both determine that a a deal might make sense – then move to the "How". Even though you have done the best due diligence you can – you won't really know about the other firm until you try working together. So before you jump – consider taking a few baby steps first. You might start with an affiliation arrangement (Of Counsel) as a Phase I pilot test for six months. Under this arrangement you can both refer work to each other as well as have the other attorney work on some of your client matters at your office. Outline the details of the relationship in an affiliation (Of Counsel) agreement. After six months review the success of the arrangement and whether it makes sense to take the next step. If it does – a Phase II step might be to enter into a more formal practice continuation/transition arrangement with the other firm. Phase III would be either the eventual sale of your practice or merger with the other firm. Taking a phased approach allows you learn more about the other firm which will increase your odds of a successful transition and buys you time before actually selling your practice if that is the direction you should go.

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

Jan 24, 2012

Starting a Law Practice: Challenges and Tips – Partnership – Phase III

Over the last two weeks I responded to a question concerning starting a new law practice and I outlined the first to phases of start-up. Eventually, you must address and face Phase III.

Phase III – Partnership – Internal/Other Firm

Eventually the question of partnership arises – weather sooner based upon the need or desire to transition an associate into a partnership or to add a practice area by acquiring a lateral partner with his/her book of business. Maybe you are thinking about merging with another firm. Or maybe you have been solo or a sole owner for your entire career and are now contemplating retirement and are looking for a succession/exit strategy and now must either bring in a partner, merge with another firm, or sell your practice. Partnership with another attorney creates another set of interpersonal dynamics and another set of skills that will need to be developed at this stage of your practice.

Phase III Survival Tips

1. Partnership is like a marriage. You must marry the right person. Most partnerships that fail do so as a result of partnering up with the wrong partners. Compatibility is critical. Consider:

a. Long term goals of both parties

b. Work ethic computability

c. Common interests

d. Money and compensation

2. Thinking of merging? Research indicates that 1/3 to 1/2 of all mergers fail to meet expectations due to cultural misalignment and personnel problems. Don't try to use a merger or acquisition as a life raft, for the wrong reasons and as your sole strategy. Successful mergers are based upon a sound integrated business strategy that creates synergy and a combined firm that produces greater client value than either firm can produced alone. Right reasons for merging might include:

a. Improve the firm's competitive position. .Increase specialization – obtain additional expertise.

b. Expand into other geographic regions.

c. Add new practice areas.

d. Increase or decrease client base.

e. Improve and/or solidify client relationships.

3. I would start by thinking about your reasons for wanting to merge and your objectives. Ask yourself the following questions?

a. Do you want to practice in a large firm? If not, what is the largest firm that you would want to practice in?

b. What is driving the desire to merge?

c. If the desire to merge is being driven by a desire to retreat from internal problems – what have you done to address these issues internally?

d. Is your name being part of the firm name important to you?

e. What are your expectations and objectives for a merger?

f. What are you looking from a merger partner?

g. Make sure that you look for a complimentary fit. If you are weak in firm leadership, management and administration – look for a partner that is strong in these areas. Strong leadership, management, and administration may be hard to find in a firm under 25 attorneys.

Are you ready for the challenge?

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

Sep 14, 2011

Law Firm Succession: Opportunities for Solos and Small Firms to Join Other Small Firms Looking for Talent to Implement Their Succession Strategies


I am a solo practitioner located in the Chicago suburbs. I have one staff member. I am 53 and have been practicing law for over 25 years. I try to limit my practice to estate planning and estate administration. However, I do have to take on other general practice type matters to stay busy. Practicing law by myself is beginning to take its toll on me – it gets lonely practicing alone, coverage and backup for clients is difficult, and I have the full burden of the worry 24/7. What do I do with the practice when I get older and reach retirement age? I have not taken a vacation in years. I have been thinking about the pros and cons of joining another firm? What are your thoughts?


One option would be to grow your practice internally. You could add a younger associate attorney. However, it sounds like you currently don't have the business that would support the position. Then you would have to train the mentor the assoicate and pray that once they become productive – two or three years down the road that they stay with you and don't leave for greener pastures.

Another option would be to bring in a more senior lateral attorney with experience and a book of business.

A third option would be to look around for another solo or small firm that is looking for someone to carry the firm into the next generation as a part of their succession strategy.

According to a 1995 American Bar Foundation Lawyer Statistical Report the number of bar admissions has been consistently around 30,000 each year since 1977. Further, the number of lawyers by age reached 30,000 for lawyers under 50. Those lawyers in 1995 who were in their late 40s will be reaching retirement age between 2010 and 2015. Law firms have a larger population of lawyers in their 50s and 60s that will be approaching retirement and must develop strategies for transitioning their legal and leadership skills as well as their client relationships and market presence.

Sixty-five percent of law firms’ equity partners are in their late 50s or early 60s. Over the next 10 years there are going to be a lot of successions.

There are a lot of firms looking for someone just like you.

I am currently working with several firms in the ChicagoLand area that have asked us to help then find someone just like you. So there is a lot of opportunity to join a firm that is looking for a succession strategy that will carry the firm into the next generation.

The big questions is always the "who" more than the "what". So put together a plan and start looking around and see if you can find a compatible firm.

Click here for our blog on succession topics

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


Aug 16, 2011

Law Firm Acquisition Due Diligence – Using Client Surveys To Ascertain Client Retention


Our firm, a 22 attorney law firm in Chicago, has been contemplating acquiring a 6 attorney firm in the suburbs. We believe we have done an adequate job of due diligence regarding financials, people, culture, systems, and practice-mix compatability. Our concern is client retention. What are you thoughts concerning how we can determine if the clients will stay with us?


Why not ask the clients.

Much can be learned by talking to the firm's clients. Structured telephone interviews and other forms of surveys conducted by a neutral third party can uncover many surprises as well as answers. Client satisfaction surveys can be one of the best due diligence tools that you can use. 

It is good business practice to see how clients might react to a acquisition or merger. Understanding where your prospective firm's clients stand and how they feel about service quality can be one of the most valuable inputs into your due diligence process that you can get your hands on. By finding out where your prospective firm's clients stand can tell you a lot of their future retention. 

Before you invest significant time, money, or effort in developing an overall acquision/merger implementation strategy, survey your prospective firm's clients to understand where their clients stand.   

You must be careful using this approach and insure that it is done with the permission and in concert with the prospective firm.  The approach must setup, communicated and coordinated properly. It must be sensitive to clients and done in a way to communicate and reinforce positive rather than negative signals to the clients involved. 

 Click here for our blog on mergers

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

Aug 02, 2011

Key Documents Needed to Launch a Law Firm Merger/Acquisition/Sale Initiative


Our firm is a 5 attorney firm in Detroit with three partners and two associates. The three partners are 79, 72, and 67 respectively. All three are considering succession and exit options. While internal succession is an option the firm has had a few merger chats with larger firms – on isolated unplanned occasions. We are having problems getting focused and generating interest from other firms. Is there a suggested process and or documents that we should prepare to generate interest and properly package our firm?


Suggest that you start by preparing an offer package that can be provided to other firms that you may approach directly or indirectly. A good offer package consists of the following:

  1. A firm profile (without identity for some presentations)
  2. Nondisclosure Agreement
  3. Detained Offering Memorandum (Confidential Descriptive Memorandum)

The Offering Memorandum

Tells the firm's story
Provides relavant facts other firms want to know including:

  1. Legal structure of the firm
  2. Ownership & Governance
  3. Key Management
  4. Organizational Chart
  5. Client Breakdown
  6. Practice Areas/Mix
  7. Marketing
  8. Historical Financial Performance

Potential Growth Opportunities
Potential Synergies or Economies of Scale
Proposed Deal Structure

The firm profile is the first point of contact with potential buyers/merger partners. It summaries the key points and describes the firm without revealing any identifying information. If an interested party wishes to go to the next step a nondisclosure agreement is executed an a offering memorandum with more specific information is then provided.

Using tools such as these can help you focus your effort, cast your firm in it's best light, and reduce wasted effort on the part of all parties.

Click here for our blog on law firm mergers

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





Jul 26, 2011

Law Firm Succession and Retirement Options


I am the senior partner in a six attorney firm in Los Angeles. I am 68 years old and thought that it was  about time I begin thinking about retirement and begin discussions with my other partners. We have no partnership agreement and no plans in place to effect the transition of partners. What are some of the methods being used by law firms effect the retirement of partners?


There are almost as many approaches as there are law firms – ranging from partners that just leave and give their practices to the others partners to various methods for buying out the departing partner's interest in the partnership. In the final analysis the optimal approach is what makes everyone happy and a solution that everyone can live with. Here are a few illustrations:

Fully Funded Retirement

50 Percent Wind Down Option – Then Retirement Payments For Live 

Pension For Life

Mandatory Wind Down

Five Year Retirement Benefit Payout Based On Earnings

More and more firms are avoiding payouts for life and even moving toward funded buyouts.

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

Apr 06, 2011

Law Firm Succession – Transitioning and Grooming the Next Generation


I have a general practice firm in Southern Missouri. I am the sole owner and I am 64 years old. There are three associates in the firm and four staff members. I have recently been giving some thought to my future, what to do with the practice, and how to salvage any sweat equity or value from the practice when I am ready to retire. The problem is that I love my work and really want to work forever. Suggestions?


Succession and exit questions are a hot topic in law firms of all sizes today. I find that in small firms it is not unusual for partners and owners to want to work as long as they can. In fact, in approximately 75%-80% of the firms that I am working with this is the case. Many attorneys enjoy their work and obtain great fulfillment from the work that they do.

The key is to start early and develop a transition strategy and plan. In your situation since you, health permitting, want to practice as long as you can, a sale of your practice is not really your best option. I would think that you need to focus on grooming your associates and gradually, over a phased basis, transitioning interests to them. Get a feel for the value of the practice, put together a firm financial profile and a quality proposal, dress up your financials, and sit down with you associates and discuss your ideas and plans with them. Determine their state of readiness. If they are not interested – keep your succession plans in mind when hiring others and screen for new hires that have an interest in owning a law firm.

As you look toward grooming the next generation keep in mind that you must find ways to get your associates invested in ownership both financially and emotionally. They need to believe that they are part of the firm and that down the road that it is in their best interest to someday own your firm rather than start their own. This will mean gradually giving up some control. You can't have it both ways.

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

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