Law Practice Management Asked and Answered Blog

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Sep 02, 2026

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Law Firm Management – What is Keeping Law Firm Owners and Managing Partners Awake at Night

Question:

I am the managing partner of a ten lawyer firm in Kansas City, Missouri. There are five partners and five associates in the firm. We are an insurance defense firm and our clients are a handful of insurance companies. Our cases are primarily slip and fall, premises liability, and auto accident cases. I have been the managing partner for two years and frankly I am getting burned out on the position and none of the other partners want the job. I am working 60-70 hours a week and am spending so much time on administrative matters that I don’t have time to practice law. I would be interested in what is keeping managing partners in other insurance defense law firms awake at night and how they are dealing with the challenges.

Response: 

Managing partners in small insurance defense firms are telling me that the following top five challenges and concerns are what are keeping them up at night:

1.Finding and Retaining Experienced Lawyers and Staff

This is the biggest issue facing many firms. Gone are the days when you could place an ad and have a position filled within 30 days. I have client law firms that it has taken over a year to find and hire experienced (3-5 years) lawyers.  Billable hour requirements of 1800 – 2000 hours are conflicting with work life balance goals of many young lawyers. Retention is also a issue. Losing a strong partner or associate can mean lost revenue, disrupted client relationships, and months of recruiting and training.

You must plan on a longer recruiting timeline and use all avenues available to you. For example:

• Multiple channels for placing job ads.
• Career center on the law firm’s website.
• Ad on Indeed
• Ad on Linked-In
• Ad on state and local county bar associations website’s career centers
• On campus recruiting at law schools
• Using a recruiter when all else fails.

You must offer competitive benefits, work life balance and flexibility. Some form of remote work has become a major requirement and failure to offer schedule flexibility and remote work has resulted in  many law firms losing candidates to other law firms.

2.  Client Concentration 

Insurance defense firms often have too few clients and many insurance defense firms are held hostage by these clients. I have some law firm clients that only have one insurance company client and if that client were to start using another law firm the law firm would be in dire straights. The client controls the amount of case assignments that the firm receives, the bill rate, and the amount of hours that can be charged for various tasks. The firm is so busy working on client files that no one has time to market and try to get additional clients. Partners often know they need a more predictable pipeline but don’t have time—or a repeatable system—for generating new clients. It sounds like your firm depends heavily on a handful of clients. Losing one major insurance company client can materially change the firm’s economics.

Insurance defense firms must find ways to invest the time and other resources to add additional clients to their client roster resulting in less dependence on one or a few clients and move their practice up market with improved hourly rates in areas such as insurance coverage, corporate representation, and self insured clients. Such diversification has made many firms less dependent on 2000 plus billable hours and more attractive you new lawyers.  Many insurance defense firms have effectively done this.

3.  Cash Flow and Collections

It has often been said that businesses are killed by inadequate cash flow. A firm maybe profitable on the profit and loss statement but is cash always tight?” Slow-paying clients, write-offs, uneven matter flow, and payroll/overhead create constant pressure.

4. Technology and AI

Law firms are trying to figure out where AI can genuinely improve operations and lower operational overhead without creating confidentiality, accuracy, ethics, cybersecurity, or malpractice risks. What tools should the firm be using? Costs? Time to implement? Fear of AI reducing the need for lawyers?

You need to attend all the CLE seminars, webinars, etc. that you can and get up to date on AI. This is moving very fast.

5. Succession Planning

What happens when founding partners want to slow down and retire?” How does the firm fund buyouts? Smaller firms frequently have fewer obvious successors. Do the younger attorneys in the firm want to have equity and own a law firm and will they be willing to step forward?

You need to begin addressing this sooner than later. Our blog library has an entire section on this topic.

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Aug 25, 2026

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Law Firm Governance and Management Structure for 14 Lawyer Firm

Question: 

I am a partner in a fourteen lawyer firm in Des Moines, Iowa with seven equity partners (shareholders) and seven associates. We are a business litigation firm exclusively. The seven equity partners (shareholders) have all been practicing law for fifteen years. We formed the firm five years ago when we all left a large law firm in area. The firm is structured as a professional corporation (PC). For the past five years we have managed the firm as a group with the seven of us making all of the management decisions. This requires us coming together at least once a week and often even more frequently. While this worked for us when we were smaller the amount of non-billable time it taking a toll on all of us. We have come to the realization that we have outgrown our management structure and are looking for a better approach to managing our firm. We are looking for ideas and would appreciate any ideas that you may have.

Response:

I understand your frustration and your experience is typical what I see in newly started law firms. While the approach you have taken to managing the firm made sense and worked when you started the firm five years ago, you have simply outgrown this approach and need to move to a governance/management structure more appropriate for a fourteen lawyer law firm. For a fourteen lawyer firm with seven equity partners, you have enough partners to benefit from more formal governance, but you don’t need the bureaucracy of a large-firm model. The key is separating day-to-day management from major ownership decisions.

Most smaller to medium sized law firms choose one of three fundamental varieties of management structure. These systems may be characterized as management by:

• Democracy
• Managing partner
• An executive or management committee

Democratic

This is the method that you have been operating under. Under a democracy each member of the firm has an equal voice in management. Any decision must be agreed to by all partners. Administrative tasks may be assigned or rotated among partners. Democratic firms traditionally progress more slowly and are less profitable than firms governed under one of the other structural models.

Managing Partner

This approach with a strong managing partner is probably the most efficient form of managing a law firm. Under this approach the administrative responsibilities for other partners in the firm may simplified as the result of the managing partner’s role, however this type of structure has many shortcomings and issues. Egos of the partners is a major issue is many firms. Also the managing partner came become overloaded with firm decisions and his or her law practice, as well as the firm, may suffer financially. The managing partner may not be able to devote the time or follow-through required to handle organizational and financial matters. Since no other partner may be trained in managing the firm, this partner may not feel comfortable in relinquishing power to anyone else. This is a problem which may be especially troublesome if the managing partner dies, becomes ill or disabled.

Some attorneys may be dismayed at the prospect of having their firm dominated by an individual or group of partners. However, if properly handled, this form of structure can be productive, and economically and professionally rewarding. To be effective, the managing partner should maintain communication with other partners. The managing partner should seek advice from other partners (and associates) on matters that will affect them. The managing partner should obtain other partners’ input on decisions, appoint individuals or committees of partners to perform particular functions and require a report of their achievements.

Executive or Management Committee 

The executive or management committee structural concept is a representative form of governance typified by a committee of partners having defined authority, accountability and responsibility. In most smaller firms this committee, frequently consisting of three partners, may be responsible for recommending and implementing policy for the firm, planning for the future, appraising results and recommending corrective action, as required.

I believe that a three partner executive or management committee might be the best approach for your firm and would be the best way to avoid deadlocks or inaction and to spread the burden of firm management among appropriate partners. One of the partners should be designated to chair the committee. Each of the other members may be assigned authority, responsibility and accountability for coordinating and/or performing specific functions. For example, one partner may serve as the financial partner. This would involve responsibility for insuring the preparation and analysis of income and expense budgets and financial reporting. This partner would oversee attorney production, fees, collections, etc. A second partner may be responsible for the personnel functions including associate career development, i.e., employment, training, evaluation, etc., and implementation of policy for the administrative staff. A third partner may serve as the general administrative partner, and oversee the implementation of administrative policy, systems, automation, etc. These partners may be assisted by an office manager, bookkeeper, etc.

To preserve continuity in the management function, it is recommended that tenure of partners on the executive or management committee be staggered over a two or three year period. The executive committee should communicate with the partners regularly or as issues arise. The executive committee should meet weekly, or if that isn’t convenient, as frequently as required. To keep all of the partners apprised of issues before the executive committee meeting is held, it is recommended that the meeting agenda be distributed to all partners within 48 hours prior to the scheduled meeting. Partners should be encouraged to discuss, with members of the executive committee, any items listed on the agenda or recommend subjects for discussion. Following this meeting, minutes should be prepared and distributed to all of the partners for information purposes.

Meetings with all of the partners (shareholders) should be scheduled at least quarterly and possibly even monthly.

You did not indicate whether your firm has a firm administrator on your staff. I believe that this may be a good time to consider hiring a firm administrator and that role should be incorporated into the firm’s management/governance plan. The firm administrator should handle all administrative matters and the the management committee should focus on higher level management matters. The full equity shareholder membership should weight in only on matters reserved for their vote and approval.

You should document your governance/management structure in your shareholder agreement. For example:

Specific policy matters that might be reserved for full equity shareholder vote might include:

• Non-equity partner/member and equity partner/member admission
• Practice composition
• Type of practice
• Size of firm
• Long range planning
• Firm goals, mission, and vision
• Merger or dissolution

Specific policy matters that might be the domain of the management/executive committee might include:

• Equity partner compensation
• Non-Equity partner compensation
• Associate compensation
• Lawyer and paralegal recruiting
• Legal staff compensation
• Budget approval
• Practice management
• Billing practices

Your shareholder agreement should clarify who decides what, by what vote, and within what financial/authority limits. It should address management, voting thresholds, partner rights/duties, compensation, and partner withdrawals.

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

Aug 19, 2026

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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 12, 2026

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Estate Planning Firm Needs Help – Should we Hire an Experienced Lateral Associate

Question:

I am the managing partner of a three lawyer estate planning practice in Bloomington, Illinois. I am the sole owner with no partners. The other two lawyers are associates that have been with the firm for several years. (One three years and the other seven years.) In addition to the attorneys we have a receptionist, a bookkeeper/office manager, and three paralegals.

We have recently gone through some lawyer and paralegal turnover and we are way behind in servicing client work and are experiencing client complaints. We are in the process of trying to staff up and hire another lawyer for the firm. We do not have the time to train up a new lawyer right out of law school and we need a seasoned associate with three to five years estate planning and administration experience – especially probate and trust administration. We have only received a couple of candidates and we are finding:

• They have no book of business or referral sources that they can bring with them.
• They are demanding salaries of $150,000 – $200,000.
• They are asking to work remotely for much of the work week.
• We had one candidate ask for a sabbatical after seven years.

We are at wits end and would like your thoughts on whether hiring an experienced lateral associate lawyer even makes sense for our firm or should we hire a new graduate and try to grow our own. In the past we have hired associates with a few years experience? Any suggestions that you might have will be appreciated.

Response: 

Small firms such as yours often have not invested the time in developing procedural manuals and other training tools that makes onboarding new lawyers and staff easier nor does anyone have the time to train newly hired lawyers and staff. While you don’t have the time or resources to develop such tools now this is something you should consider in the future. Such tools enable law firms to onboard both new and inexperienced lawyers as well as experienced lawyers much quicker that the trial and error method that occurs without such tools.

Keep in mind there is still a learning curve and spin time even for experienced laterals who have to learn jurisdictional ways of doing things, your internal office systems and procedures, etc. There is also a work in progress billing lag that occurs. A small estate planning/administration firms such as yours should generally avoid hiring lateral associates unless the firm has steady excess work and clear profit margins and a need for a senior associate. Laterals often demand high salaries, benefits, remote work options, bring along bad practices and cultural experiences, and may not bring in sufficient fees to cover their overhead. It usually takes at least a year before you begin to make a profit from a new lateral – sometimes longer.

Adding an expensive lateral lawyers to your existing team will be a major financial risk for the firm. In addition to the new lawyers salary and other expenses a new lawyer will likely need additional paralegal support and a paralegal may need to be hired as well.  As a result the firm could experience:

• Cash flow problems
• Strain on firm profits
• Firm may operate at a net loss for a year or more
  
• Problems working the new lateral hire into your existing associate compensation structure.

Better options for your firm:

Aug 05, 2026

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Law Firm Sole Owner Succession and Exit – Top Challenges

Jul 29, 2026

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Law Firm Operations Management Exception Report

Question:

I am the owner of a five-lawyer estate planning/administration firm in Fresno, California. The other four lawyers are associates in the firm with estate planning and administration experience ranging from one year to ten years. We have three paralegals, a office manager/bookkeeper, and a receptionist. We are using state of the art cloud-based practice management software for billing, accounting, calendaring, document storage and management, and lead tracking. We use MS 365 products for e-mail and word processing. We use specialized cloud-based software for estate planning document drafting and preparation. While most of our estate planning work is billed on a flat fee basis we keep timesheets on all matters – flat fee and time bill matters.

As the firm owner and manager, I am finding it difficult to manage the store. Getting the attorneys to stay focused and attain their billing/collection targets is a major challenge. Recently we have had situations such as the following:

1. Estate administration matters that have not been worked on for months resulting in client complaints and retainers tied up in the IOLTA account where work has not been done and can’t be billed.
2. Estate planning matters where clients got tired of waiting three months for their estate plans and fired the firm, requested refunds, and took their work to competing law firms.
3. Lawyers that are way short of their production targets. Some are not even billing/collecting $300,000 a year and are being paid salaries of $150,000 plus a year.

I receive more reports from our bookkeeper than I even have time to read – alone understand what they mean. I need better tools to stay on top of things. Any ideas that you may have would be appreciated.

Response: 

I understand your frustration. Years ago, when computer software was first being implemented in law firms a managing partner told me – “I am tired of receiving reams of paper every time I want to know the status of something. I want to be able to push one button on the computer, have the information that I need in one minute, and printed on one piece of paper.”

Since those days there has been improvement but getting the information you need and when you need it can still be frustrating.

Many of the leading law firm software developers are beginning to incorporate dashboards into their software and this is providing some assistance. However, these dashboards often do not provide the precise information or reporting flexibility that is needed.

What is drastically needed is a law firm operations management exception report that presents you with red flags and identifies areas in the firm that require leadership attention. Rather than reviewing pages and pages of detailed reports and every operational metric, an exception report focuses on exceptions—areas where performance is significantly above or below target, deadlines have been missed, risks have emerged, or corrective action is needed. For example:

1. List of client matters that have not been touched (worked on) for x days per timesheets, calendar entries, etc.
2. List of lawyers that billable hours, fee collections, are below target.

The goal of management exception reporting is to enable owners and managing partners to manage by exception, and spend their time on issues that require decisions rather than reviewing detailed and lengthy operating reports.

I suggest the following:

1. Ensure that you are using all of the capabilities of your practice management software.
2. Fully deploy your dashboards if your software supports them. Some systems require a higher-tier subscription to access dashboards or full customization. Check with your software provider.
3. Ask your software provider if, for a fee, they will provide you with a customized report.

Recently one of our clients was able to have a custom report designed for them that allowed them to query the system and have exception report of matters no touched – no work done for a specified number of days, etc. A fee was charged for the development of this report.

Software is getting better with dashboards, etc. but often custom reports are still required.

Talk with your software vendor.

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

Jun 03, 2026

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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:

• Retirement or succession planning
• Sale of a law practice
• Partner admissions or departures
• Mergers and acquisitions
• Buy-sell agreements

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:

• Documented systems and procedures
• Stable staff
• Strong management infrastructure
• Multiple referral sources
• Established brand recognition
• Modern technology and CRM systems

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:

• Is revenue growing year over year?
• Are profit margins improving?
• Is client acquisition sustainable?
• Does the firm have expansion opportunities?
• Are systems scalable?

A growing firm with momentum may command a premium valuation.

Firm value can be reduced by:

• Poor financial records
• Heavy owner dependence
• Declining revenues
• Excessive overhead
• Lack of documented procedures
• Outdated technology
• Weak staff retention
• Ethical or compliance concerns

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

Practical steps include:

• Improving profitability
• Building systems and automation
• Reducing dependence on the owner
• Diversifying referral sources
• Strengthening management teams
• Investing in technology
• Maintaining clean financial records
• Creating a succession strategy

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

 

 

 

 

 

May 13, 2026

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Estate Planning Firm – Flat Fee Effective Rates

Question:

I am the managing owner of a three lawyer estate planning and estate administration firm in Nashville, Tennessee. There are three paralegals, a receptionist, a bookkeeper, two legal assistants, and a firm manager working at the firm. Our estate planning has for many years been billed on a flat rate basis. Our effective rates have been and continue to be much lower than our time bill rates and this is having a very negative effect on firm profitability. Should we consider billing estate planning matters on a time bill basis? I would appreciate your thoughts and suggestions.

Response:

I am currently working with quite a few estate planning/estate administration/elder law firms that have high net worth clients. The majority of these firms use “time bill” billing arrangements. Firms that represent mom and pop smaller net worth clients are using flat fee arrangements for estate planning and asset protection matters and “time bill” arrangements for estate administration and other matters.

Few firms that are using flat fee arrangements are realizing effective billing rates even close to their standard “time bill” rates. In some cases I have found effective rates $100 to $150 per hour less than their standard “time bill” rates for attorneys and paralegals. In some cases the problem is not working effectively or efficiently. In other cases the flat fee price has not been properly set or limits placed on the work that will be done for the flat fee – for example – number or document rewrites, etc.

I believe that more than ever clients are wanting the budgetary certainty that flat fees provide.  I think that a flat fee pricing strategy is a good strategy but the scope of work and proper price point must be properly established. A couple of suggestions:

1. Do some basic market research – secret shopping – and obtain the best information that you can on competitor pricing.
2. Review time charges on typical estate planning matters and get a handle on the amount of time that it typically takes – by each office professional – for matters of varying levels of complexity. Include time that is not obvious for administration of the matter, calendaring, communications with client, etc.
3. Based on these time estimates determine flat fees using the desired standard hourly rate and then add a risk premium of 10% – 20%. If a matters typically takes 10 hours and your desired rate is $200 per hour – set the flat rate fee at $2200.00 – $2400.00.
4. Incorporate into your engagement letters, fee agreements, etc. Include a provision that allows for time billing when there are extra re-drafts, unforeseen events caused by the client, etc. specified beyond the limits specified for the flat fee amount.
5. Get at least 1/2 of the fee before commencing work and the other half before delivering and executing the final documents.
6. Keep time sheets on the matters for time expended.
7. Review at least quarterly effective rates realized on completed flat rate matters.
8. If effective rates are below your target rate review the time detail and determine where the problem lies.
9. Make changes and adjustments if needed.

Recently an estate planning firm client of ours asked their attorneys and paralegals how much time is took for a typical estate plan (trust). They advised as follows:

• Initial consultation with client – 1 hour.
• Drafting estate plans – 4 hours.
• Review and corrections estate plans – 1 hour
• Meeting and document signing with client – 1 hour

The problems with the above time estimate was that it did not provide time spend writing up consultation notes and posting to the system, communication with clients, modifications and changes to documents, calendaring, notes to the file, and all the other administrative matters pertaining to the matter. While the initial analysis showed that the effective rate per hour far exceeded the time bill rate – such was not the case when the actual total time expended on the matter was considered.

I believe that properly implemented and managed flat fees can be a worthwhile strategy.

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

 

Apr 29, 2026

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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:

• Associate candidates that can be groomed for either partnership or to buy the practice
• Lateral partner candidates
• Merger candidates
• Practice sale candidates

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 08, 2026

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Law Firm Owner – Lawyer or Businessperson?

Question: 

I am the owner of a three attorney general practice firm in Chicago, Illinois. The other attorneys were recently hired associates right out of law school. We have two legal assistants, one paralegal, and a receptionist/bookkeeper. I manage the firm and practice law. I am finding it more and more difficult to do both and I am discovering that I enjoy managing and running the business more than I do practicing law. I would like to spend all of my time to running and managing the firm. Your thoughts are welcomed.

Response: 

You are not alone. This is a common problem in law and other professional service firms. I have similar problems in my own firm – it is very difficult to serve two masters – serving your clients and managing your firm. Eventually as you grow you have to pick one – client service (doing legal work) or managing and running your business – as the area that receives your primary focus. This is not to say that you should not do both – but you select the primary area that you are going to focus on and get help with the other area.

A question that I typically ask my new law firm clients – what do you want to be or do – be a business person or a lawyer. The answer to the question often provides a hint to how you should structure your firm. If you want to be more of a business person – hire legal talent to help with serving clients and performing legal work and spend more time working on your firm rather than in it. If you want to be more of a lawyer and do legal work and serve clients hire a legal administrator or business manager (this is more than an office manager) to manage and run your firm.

I have more and more owners of small law firms that are managing their law businesses and not practicing law. I believe the appropriate direction is what makes you happy and what type of work you enjoy doing. Your practice should support and fulfill your personal goals, what you want out of life and what makes you happy. If that is managing – then manage. If that is doing legal work – do legal work.

Two great books on this subject are – The E-Myth Revisited and The E-Myth Attorney – available on Amazon. The theme of both of these books is:

• Work on your business rather than in it.
• Small business owners wear three hats – entrepreneur (10%); manager (20%); and technician (70%)

Small law firm owners often spend too much time being the technician (i.e. lawyering) and not enough time managing and innovating. In the long term this can have a negative effect upon value when the owner decides or retire of otherwise exit the practice.

Think about where you want place the priority of your focus – working on your firm (business) or in it.

I believe that at your current size and your limited number of revenue producers you can’t afford to be a full-time manager until the firm grows to at least five lawyers and or several serious revenue producing paralegals (not dabblers but producing $150,000 – $250,000 per year). I suggest that you take a phased approach toward this goal. In the short term you may have to work harder as a revenue producer and a manager and business developer. In the meantime you will have to wear both hats. Be patient.

As AI continues to reshape all walks of life as well as the practice of law, firm management and innovation will become even more important to remain competitive. This is a strategic management area that will require more of your management time. Small law firms that have implemented AI are reporting efficiency gains that have translated into higher profitability and improved well-being.

• Increased Matter Capacity. Firms have reported 10% to 40% increases in matter capacity per attorney after implementing AI, leading to significantly higher revenue potential.
• Pricing Flexibility: High efficiency is allowing sole owners to move away from billable hours toward more profitable flat-fee or value-based pricing, which 38% of prospective clients believe will make services more affordable.
• Work-Life Balance: Instead of working 70-hour weeks to keep up, solo attorneys are using AI to reduce their hours while maintaining—or even increasing—their income

Good luck with your transition.

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