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What if you could hang out with successful women lawyers, ask them about growing their firms, managing resources like time, team and systems, mastering money issues, and more; then take an insight or two to help you build a wealth-generating law firm? That’s what we do each week on the Wealthy Woman Lawyer podcast. Hosted by Davina Frederick, founder and CEO of Wealthy Woman Lawyer –– every episode is an in-depth look at how to think like a CEO, attract clients who you love to serve (and will pay you on time), and create a profitable, sustainable firm you love. The goal is to give you the information you need to scale your law firm business from 6 to 7 figures in gross annual revenue so you can fully fund, and still have time to enjoy, the lifestyle of your dreams.
Welcome to the Wealthy Woman Lawyer Podcast. What if you could hang out with successful women lawyers, ask them about growing their firms, managing resources like time, team, and systems, mastering money issues, and more. Then take an insight or two to help you build a wealth generating law firm. Each week, your host, Devina Frederick, takes an in-depth look at how to think like a CEO, attract clients who you love to serve and will pay you on time, and create a profitable, sustainable firm you love. Devina is founder and CEO of Wealthy Woman Lawyer, and her goal is to give you the information you need to scale your law firm business from 6 to 7 figures in gross annual revenue so you can fully fund and still have time to enjoy the lifestyle of your dreams.
Intro:Now here's to Vina.
Davina:Many women law firm owners never ask themselves this important question until it is almost too late to answer well. What happens when I'm ready to leave my law firm? Will you choose the day, the terms, and the people who take care of your clients? Will you walk away with a check that reflects decades of investment? Or will someone else make those decisions for you after the fact because you never made them yourself?
Davina:Every law firm ends. The only question is whether yours ends the way you envision. Welcome or welcome back to the Wealthy Woman Lawyer Podcast. I am your host, attorney Devina Frederick, two time author of books on law firm marketing and management and founder of Wealthy Woman Lawyer, a company that guides women law firm owners in cultivating the mindset, the strategies, and the systems to scale their firms to and through 7 figures in gross annual revenue without burning out in the process. I am so glad you are here with me today because I think this is a really important topic that we, as women law firm owners, do not discuss enough.
Davina:Today, we are talking about law firm exit planning. I'm going to walk you through the five most common ways a law firm owner leaves her firm, and then we'll look at the pros and cons of each path. We'll also discuss why the decisions that determine which paths are open to you get made years and sometimes decades before you are ready to leave. So even if you are nowhere near retirement or don't think you'll ever retire from the law, I still encourage you to listen because after you hear this, you may change your mind. If you listen to episode three forty four, where we talked about what your firm is worth, think of today as its companion episode.
Davina:That episode was about value. This one is about the exit door itself and which doors you may find unlocked when the time comes. One note before we begin, the ethics rules governing, selling, closing, and transferring a law practice vary by state. I will reference the ABA model rules and a few Florida rules because I am licensed to practice in Florida, but please check the rules in your jurisdiction before you make any decisions. Let me introduce you to a woman law firm owner I will call Diane.
Davina:Diane is a composite of several women I have spoken with over the years, and parts of her story may sound familiar. Diane opened her solo estate planning and probate practice twenty two years ago. She does what she does very well. Her clients love her, and they send their friends, their siblings, and eventually their adult children to her. Local financial advisors and CPAs refer to her because they trust her judgment and know she will take good care of the people they send.
Davina:For most of those twenty two years, her practice has brought in $400,000 to $500,000 a year, and she's made a comfortable living by keeping her expenses low. Her strategy has always been keep it small, keep it all. Diane has never hired another attorney. She has always had a small, steady team. And Pam, her paralegal of eighteen years, is the heart of it.
Davina:Pam knows everything she knows which clients prefer a phone call and which ones prefer email. She knows how Diane likes a probate inventory prepared, where every template lives, and the exact order of steps for funding a trust. None of it is written down. If you ask Diane where the firm's procedures manual lives, she would point to two places her own head and Pam's. Last spring, Diane turned 64.
Davina:Her daughter had her second baby, and Diane realized she was missing experiences in time she would never get back. She and her husband want to travel while they are healthy enough to enjoy it, and they want long stretches of time with their grandchildren. So Diane made a decision. She would retire within two years, and she assumed she would sell her practice. After twenty two years of hard work, a loyal client base, and a strong reputation, it seemed obvious that someone would want to buy it.
Davina:So she called a colleague who had purchased another attorney's practice a few years earlier and asked what the process looked like. That conversation changed everything. Her colleague asked a series of simple questions. Who else in the firm does the legal work? Only Diane.
Davina:Where do new clients come from? Diane's personal relationships with clients and referral sources. Would those referral sources keep sending work to a lawyer they have never met? Diane did not know. What documented processes would a buyer inherit?
Davina:There were none. And who knows how the work gets done, Diane and Pam? Then a few weeks later, Pam told Diane that she wants to retire within the year two. Diane hung up the phone with a hard realization. She had built a wonderful practice.
Davina:She had not built a business that someone else could own. We will come back to Diane at the end of this episode, but just note that she could be in any practice area in just about any geographic location. I've talked to so many of you who are similarly situated. Let's talk about why so many of us end up where Diane is. Most of the women I work with don't avoid exit planning because they don't care.
Davina:It's just not a top priority because they are busy serving clients, running payroll, and putting out fires. The exit always seems like something to deal with later. For many of us, it also touches a nerve. Our identities are wrapped up in being lawyers, and imagining the end of the firm can feel like imagining the end of ourselves. For some, the conversation brushes up against aging and mortality, and nobody enjoys thinking about that.
Davina:The data shows how common this avoidance is. In a state of the solo survey of Colorado solo practitioners conducted by Law Week Colorado, roughly two thirds of respondents said they did not have a written succession plan in case of death or disability. In the same survey, nearly forty percent of the solo respondents were 60 or older. That survey covers one state, the state where I currently reside. But in my conversations with women law firm owners around the country, I see the same pattern again and again.
Davina:Here's what I want you to consider if this sounds like you. An exit plan is not a single decision you make at the end of your career. It is the result of hundreds of decisions you make along the way. Whether you hire attorneys, whether you build a marketing system that works without you, whether you document how your firm operates, and whether your clients relate to the firm or only to you. Each of the five exit paths we are about to discuss requires different conditions to be in place for them to work.
Davina:When you leave, you can only walk through the doors you prepared in advance. Let's look at each one. The first path is the one nobody chooses intentionally. This is what happens when a law firm owner dies, becomes seriously ill, or suffers an accident or other incapacity without a plan in place for her practice. When that happens to a solo, her clients are left with deadlines that no one is tracking.
Davina:Her trust account may be frozen because no one else has authority to sign. Her staff may not know whether they still have jobs or how they will be paid. Her family, in the middle of grief, is left trying to figure out what to do with client files, office leases, and phone calls from worried clients. Many state bars have stepped in to address this. Here in Florida, Rule one-3.8 of the rules, regulating the Florida bar requires every member who practices in Florida to designate another Florida bar member who has agreed to serve as an inventory attorney.
Davina:When a lawyer can no longer practice because of death or incapacity, for example, the inventory attorney reviews the files and contacts clients to ensure their rights are not harmed by inaction. There is an important catch, though. The designated attorney is not obligated to serve when the time comes. Circumstances change, and the person you named a decade ago may have retired, moved, or simply be unable to take it on. It is also important to understand what an inventory attorney does.
Davina:Her job is to protect your clients. Her job is not to preserve your practice's value for your beneficiaries. That is why a better version of this path involves a written successor attorney agreement with someone you know and trust, and someone you know will still be available to help in the event of your passing or incapacity. That agreement can give your chosen attorney the authority to step in, access your calendar and files, communicate with clients, handle the trust account, and work with your family to close or sell the practice in a way that benefits both your clients and your heirs. Your own estate plan should address your law practice, too.
Davina:Many states, including Florida, allow the representatives of a deceased or disabled lawyer to sell the practice. But a sale is only possible if there is something left to sell and someone ready to act quickly. Pros and Cons of Leaving with No Plan The only advantage is that it asks almost nothing of you today. The disadvantages are serious. Clients can be harmed by missed deadlines and delayed matters.
Davina:Your family carries a heavy administrative and emotional burden at the worst possible time. Your team is left in limbo, and whatever value your practice had begins draining away almost immediately because clients with active matters cannot wait for your estate to sort things out. They will find other lawyers, and those lawyers will pay your family nothing. When Diane started looking into her own situation, she checked her inventory attorney designation she had named a law school friend years ago. That friend retired three years earlier.
Davina:If something had happened to Diane last spring, her plan for her clients would have pointed to someone who was no longer practicing. The second path is the most common for solo practitioners and often the default for owners who don't think about succession until they are ready to retire. In this path, the owner stops accepting new matters, finishes the work she has, refers out what she cannot complete, sends closing letters, handles client files according to her state's retention rules, properly closes out her trust account, and purchases extended reporting coverage, often called tail coverage, for her malpractice insurance. Then she turns off the lights and walks away. This path has real advantages.
Davina:It is simple. You keep full control of your timeline and how you treat your clients. There is no buyer to negotiate with, no due diligence, and no partner whose opinions you need to consider. For a practice built entirely around one lawyer's personal relationships and skills, winding down may be the most realistic option. For some owners, it also brings a sense of peace.
Davina:You finish your work, you say goodbye on your own terms, and you are done. The disadvantages are significant, though. When you wind down, you walk away from the goodwill you spent decades building. Your clients and referral sources do not disappear. They go to other lawyers, and those lawyers receive the benefit of your reputation without paying you anything for it.
Davina:Maybe that doesn't bother you, though. Maybe you've invested well and don't really need or want the money. Some people feel that way, and that's okay if that's you. Winding down can also take longer than most people expect. Matters don't always wrap up neatly.
Davina:And in a practice like Diane's, probate administrations can run for months after she stops taking new clients. Your team loses their jobs. Your income stops when your billable work stops. For Diane, there is another loss as well. Over twenty two years, she has drafted estate plans for hundreds of families.
Davina:Those families will need updates, administrations, and trust work for decades to come. In a wind down, all that future work walks out the door with no return to her. Winding down is not a failure. Sometimes it is the right choice. The problem comes when it is the only choice because the owner never built anything else.
Davina:The third path is selling your firm to another lawyer or law firm. For a long time, lawyers could not ethically sell their practices' goodwill. That changed when the ABA adopted model rule 1.17 in 1990, and most states now have their own version of the rule. Under the model rule, a lawyer may sell a law practice or an area of practice, including goodwill, if certain conditions are met. The seller must stop engaging in the private practice of law or in the area of practice that was sold in the jurisdiction or geographic area where the practice was conducted.
Davina:The entire practice or the entire area of practice must be sold to one or more lawyers or law firms. The seller must give each client written notice of the proposed sale, including the buyer's identity, the client's right to hire other counsel and take their file, and that the client's consent to the transfer will be presumed if they do not object within a set period. Under the model rule, that period is ninety days. Here in Florida, Rule four-1.17 sets it at thirty days. Finally, fees charged to existing clients cannot increase.
Davina:The ABA has also addressed how quickly a seller must step away. In Formal Opinion four sixty eight, the ABA ethics committee said that a selling lawyer must stop accepting new matters right away, but she can have a reasonable period after the sale closes to help transition active client matters to the buyer. So the rules allow a sale. The bigger question is whether you have something a buyer wants to purchase. As we discussed in Episode three forty four, buyers are not buying your past profits.
Davina:They are buying future profits that will keep coming after you leave. That means a saleable firm has a few things in common. It has attorneys other than the owner doing much of the legal work. It has a marketing system that brings in new clients without depending on the founder's personal referrals. It has documented processes so the work gets done the same way no matter who does it.
Davina:It has a team that knows how to run the firm and plans to stay. And it has clean financials that show a buyer exactly what they are purchasing. Many sales are also structured so that much of the purchase price is paid over time and tied to how many clients stay with the buyer. That structure means the seller continues to carry risk after the sale. The more your clients are attached to you personally, the more likely they are to leave when you do, and the less you will collect.
Davina:Here are the advantages of selling. You're paid for the goodwill you built. Your clients continue to be served by a lawyer you chose. Your team may keep their jobs. You get a clear end date and ideally a meaningful sum of money to help fund your retirement.
Davina:Here are the disadvantages. A sale requires years of preparation to bring a strong offer. The pool of qualified buyers can be small, especially in smaller markets or niche practice areas. Earn out structures may make you dependent on the buyer's performance after you leave. You must stop practicing in that jurisdiction or practice area, so a sale is not a good fit if you want to keep a few favorite clients.
Davina:You also give up control over how your clients will be treated once the sale closes. And due diligence means a buyer will see everything, including the parts of your firm you would rather not show anyone. Hopefully that's not you and you are proud to show your financials and your processes and systems. The fourth path is transitioning ownership to attorneys who already work inside your firm. In the most common version, the owner invites one or more associates to buy a minority stake.
Davina:Over time, those new partners increase their percentage, and as the founder approaches retirement, they buy out her remaining interest. This often happens in stages. The new partner buys an initial share, proves the relationship works, and then completes the purchase of the founder's remaining share on a set schedule. Transfers to your own partners generally fall outside the sale rule we just discussed because your firm's governing documents, like your operating agreement or shareholder agreement, govern them. Those documents need to address buy in costs, how ownership grows over time, how the founder's interest is valued, how and when she is paid, and what happens to things like office leases and lines of credit she may have personally guaranteed.
Davina:Timing matters a great deal on this path. Law firm succession consultants often recommend starting these conversations at least five years before a founder plans to retire. That runway gives new owners time to buy in gradually, build relationships with clients and referral sources, and learn how to lead. Waiting too long creates its own problem. If associates sense the founder is leaving without a plan, some may conclude they can wait her out and inherit the clients for little or nothing, or they may start job hunting and leave before the founder is ready.
Davina:Internal succession offers substantial advantages. Clients get continuity with attorneys they already know. Your team stays together. You get to choose and train your successors, and you can phase down gradually instead of stopping all at once. Your buyers already understand the firm, so there are fewer surprises.
Davina:Offering a real path to ownership can also be one of the most powerful tools for keeping your best associates, as we discussed in our episode on retention, career paths, the partnership question. The disadvantages are just as real. This path only works if you have attorneys in place, and if at least one of them wants to own a law firm. Not every associate does. Many would rather keep a steady salary and leave ownership responsibilities to someone else.
Davina:Partnership is a lot like a marriage, and choosing the wrong partner can be painful and expensive to undo. The firm must also be profitable enough to pay the founder's buyout while still paying the new owners a fair income. The founder may also have to share control earlier than she'd like because nobody wants to buy into a firm where they have no voice. The fifth path is the family legacy firm. In this path, at least one of the founder's adult children is a licensed attorney in the same jurisdiction and wants to take over the firm as the parent ages.
Davina:This option can be one of the most rewarding exits a firm owner can experience. It can also be one of the most challenging. The rewards are easy to see. You have a successor who shares your values and your name. Your clients may love the continuity of working with the next generation of a family they already trust.
Davina:You get to watch your son or daughter grow into a leader in the firm you build. And because your child may join the firm years before you retire, you can have the long runway that any good transition needs. The challenges deserve just as much attention. Family businesses of all kinds struggle with this transition. Lawyer's Mutual of North Carolina has noted that studies show more than 70% of family owned businesses do not survive the transition from the founder to the second generation.
Davina:In many cases, the adult child attorney hasn't yet proven she can bring in clients or manage the team, but she never gets the chance because she always works in a subordinate role to her founder parent. Clients keep calling the founder. Referral sources keep sending work to the founder. The team keeps taking direction from the founder. Meanwhile, the child is expected to lead someday, but is never allowed to lead while the founder is still present to help with the transition.
Davina:That brings us to the most important requirement of this path. The founding parent must be willing to train her adult child and then transfer real authority. Transferring tasks is not enough. She must let her adult child make decisions, including some decisions she would have made differently. She must introduce her adult child to her best clients and referral sources, and then step back so those relationships can shift.
Davina:She must let her team see her adult child as a leader, not as the boss's kid. For many founders, this is the hardest part because the firm has been their identity for decades. And let's face it, they may still view their child as a child, not an adult. There are other challenges, too. Family dynamics have a way of showing up at the office.
Davina:It is hard to give a performance review to someone who will be at your dinner table on Sunday, and it is even harder to fire them. Staff members may resent what they see as favoritism. If you have other children who are not lawyers, the question of fairness in your estate plan becomes important. Is the firm a gift to one child, a purchase, or something in between? And how does that affect what your other children inherit?
Davina:And sometimes, a parent assumes a child wants the firm when the child is only saying yes out of loyalty. If this sounds like you, then consider encouraging your adult child work at another firm or organization before joining the family practice so she builds her own skills and credibility. Also draw a clear line between family roles and firm roles. Create formal written agreements, a defined transition timeline, and have candid conversations with everyone in the family who will be affected. When those pieces are in place, the family legacy firm can be a beautiful thing.
Davina:Now let's return to Diane. She has a two year timeline, no other attorneys, no marketing system that works without her, no documented processes, and a paralegal who plans to retire within the year. What are her options now she can wind down? That path is fully open to her, and it may be the right choice. She can also pursue a sale to a local estate planning attorney or firm, but she needs to go in with realistic expectations.
Davina:Because her clients and referral sources are tied to her personally, a buyer will likely want to pay much of the sale proceeds over time tied to client retention. To make that kind of sale worth her while, Diane would need to spend her remaining time with Pam, getting the firm's processes out of their heads and into writing, introducing the buyer to her referral sources, and staying involved through a structured transition period. Diane may struggle to build firm value independent of herself in just a couple of years. It can be done, but it may not be easy. The paths that pay the most often require the most time.
Davina:Internal succession requires attorneys you hired and developed over time. A strong outside sale requires systems, a team, and a marketing engine that have been running long enough to prove they work without you. A family transition requires extended periods of training and a gradual handoff of authority. None of those can be rushed. I will say this, though.
Davina:As someone who is in her 60s and has clients in their 60s, it's not uncommon for law firm owners to envision that they will continue to work in their firm in some capacity for years to come. So depending on how long you are willing and able to work, you could still build tremendous value in your firm, even if you are starting in your early 60s. If you are in your forties or fifties, this is where your advantage lies. Time is on your side. Look at what every planned exit path has in common.
Davina:Whether you sell to an outside buyer, transition to your own partners, or pass the firm to your daughter or son, the firm needs other attorneys doing the legal work, a marketing system that generates clients without your personal referrals, documented processes, and a team that can run the business without you in the middle of every decision. Those same elements also protect your clients and your family if the unplanned happens. Those elements also make your firm more profitable and more enjoyable today. A firm that can run without you lets you take real vacations this year. It lets you show up for your grandchildren, your children, or your own health now instead of waiting until you retire.
Davina:Building a transferable firm is not only about the day you leave, it is about the life you get to live in the meantime. To recap, there are five common ways to leave a law firm. You can leave with no plan, which leaves your clients, your team, and your family to handle the fallout. You can wind down and walk away, which is simple but leaves your goodwill behind for others to collect. You can sell to an outside buyer, which can pay you for decades of work if your firm is built to run without you.
Davina:You can transition ownership to partners inside your firm, which offers continuity but requires the right attorneys and a long runway. Or you can pass the firm to an adult child, which can be deeply rewarding if you are willing to train them and hand over real authority. Every one of these paths, except the first, gets better when your firm can operate without you at the center. If you heard yourself in Diane's story or you realize today that only one or two of these doors are open to you right now, I would love for you to take the next step. At Wealthy Woman Lawyer, our team works with women law firm owners to build the team, the systems, and the client attraction engine that turn a practice into a firm someone else can own, so you have real choices when you are ready to leave.
Davina:Schedule a practice growth needs assessment call by visiting wealthywomanlawyer.com and clicking the Apply button at the top of the page. On that call, we'll review where your firm stands today, which exit paths are realistically open to you, what it would take to position your firm to sell or transition on your terms when you are ready to leave the practice, and if we are a good fit to work together to help you achieve that goal. Thank you for spending this time with me today. If this episode resonated with you, please share it with another woman law firm owner who may need to hear it and leave us a rating and review wherever you listen. Until next time, keep building the firm and the life you deserve.
Intro:If you're ready to create more of what you truly desire in your business and your life, then you'll want to visit us wealthywomanlawyer.com to learn more about how we help our clients create wealth generating law firms with ease.