Exit Strategy 101: How to Prepare Your Law Firm for Sale or Succession

Why Every Law Firm Needs an Exit Strategy

Ryan emphasizes that every law firm owner will eventually leave their business — voluntarily or not. Some firms even build this into their bylaws, requiring partners to exit or sell their shares at a certain age, often for cognitive or operational reasons.

Regardless of the reason, Ryan explains that an exit is inevitable. “It’s not a matter of if, but when,” he says. “So it’s better to prepare early rather than be forced into it later.”

Sale vs. Succession: Knowing the Difference

There’s a major difference between preparing a firm for sale and planning for succession.

A sale involves transferring ownership to an outside buyer, which means the firm must be able to operate independently of its founder. In contrast, succession involves transferring leadership internally — often through a buyout by existing partners or key team members.

Ryan notes that while both paths require preparation, the processes are entirely different. In a sale, the buyer must see that the firm can thrive without the original owner. In a succession plan, the focus is on grooming the next generation to continue what’s already working.

When to Start Exit Planning

Ryan advises law firm owners to begin planning years in advance — ideally several years before the desired exit date.

“The sales process alone can take six months from start to close,” he explains. “That’s just the transaction. Preparing your numbers, your client base, and your systems can take years.”

By thinking about exit goals early, firm owners can make intentional decisions that increase their business’s value over time. Even if a lawyer plans to close shop rather than sell, Ryan stresses that having a plan for client transitions still matters — both ethically and professionally.

What Makes a Firm Attractive to Buyers

When buyers evaluate a law firm, they don’t just look at the last year’s numbers. They analyze several years of financial performance to assess consistency and growth.

Ryan highlights two key financial indicators:

• Seller’s Discretionary Earnings (SDE) – The total financial benefit to the owner, including profits, salary, and perks such as company vehicles or benefits.
• EBITDA – Earnings before interest, taxes, depreciation, and amortization — a common measure of profitability across industries.

A firm that consistently produces higher profits and owner benefits naturally attracts more buyers and commands a higher price. Ryan also stresses the importance of having reliable financial controls and dashboards. “You can’t grow what you don’t measure,” he says.

Reducing Owner Dependency

Beyond the numbers, owner dependency is one of the biggest factors influencing a firm’s value. Buyers want to see that the firm can run smoothly without the founding attorney.

Ryan suggests a simple test: “Ask yourself, how many weeks of vacation do you take each year — and how does your business perform when you’re away?”

If the firm’s revenue and operations depend heavily on the owner, its value decreases. Building a strong team, developing internal leaders, and creating systems that allow others to take ownership are key to increasing long-term value.

Improving Profitability Before an Exit

Ryan shares that many firms intentionally boost profitability in the years leading up to an exit. Improving efficiency, reducing waste, and tightening financial management not only raise earnings but also make the firm more appealing to buyers.

“Even if you’re focused on minimizing taxes each year,” Ryan explains, “buyers will make adjustments during due diligence to see the real profitability. But you’ll still benefit by showing steady, sustainable growth.”

The Cost of Waiting Too Long

Waiting until the last minute to plan an exit can have serious consequences. Without enough time to train staff, build systems, or grow profits, owners risk falling short of their financial goals.

Ryan gives an example: a lawyer who hopes to sell for $2 million but discovers their firm is worth only $1 million a year before retirement. With limited time, that gap is nearly impossible to close.

In other cases, owners who are overly involved in daily operations may find their firms are worth little to nothing once they leave. “If the business can’t run without you,” Ryan says, “it might not be sellable at all.”

Where to Begin

For law firm owners unsure where to start, Ryan recommends three immediate steps:

• Don’t rely solely on your business for retirement. Build separate financial plans and savings.
• Start planning now. Use the end of the year to review performance and set goals for the next 12 to 24 months.
• Map out your timeline. Know how many years you have until your target exit and plan accordingly.

He also suggests working with a trusted financial or retirement advisor who understands both the legal and business sides of the profession.

Final Thoughts

Exit planning isn’t just about money — it’s about legacy, client continuity, and peace of mind. Ryan Kimler encourages attorneys to take control of the process early, rather than letting circumstances decide for them.

As he puts it, “It’s never too early to plan, but it can definitely be too late.”