Why Downsizing Your Practice Is Underrated

The most common exit strategies for retiring solo practitioners and small law firm owners typically include recruiting a successor, merging with another law firm, selling the practice, or shutting it down.

However, one strategy is often overlooked, though it may make the most sense regarding finances and personal well-being. That strategy is downsizing.

Downsizing is a relatively simple concept that works well for solo practitioners and small law firm owners. In a nutshell, the attorney takes fewer cases and works less while reducing overhead expenses. This post will cover why downsizing is a good idea and what it looks like in practice.

Why Downsizing Works For Lawyers

Small Changes: For most attorneys, it's challenging to go straight from being a full-time practicing lawyer to someone whose primary focus is sampling the new restaurants in town. I rarely meet a lawyer who, when contemplating retirement, wants to quit the practice of law cold turkey. Many attorneys want to wind down over a few years and gradually ease into full-time retirement. Downsizing accomplishes this objective.

Financial Freedom: When contemplating retirement, many lawyers get nervous about depending upon only Social Security benefits and their IRAs to fund their retirement lifestyles. Downsizing can still free up time to take those vacations you always wanted, while still bringing in income to fund them.

Work-Life Balance: Downsizing allows lawyers to strike a better work-life balance by freeing up time for personal pursuits, hobbies, and spending time with family, all while maintaining a connection to their profession. You can ease into retirement at a more relaxed pace. Further, you can experiment with ways to spend your free time without feeling overwhelmed with too much free time.

Preserving Professional Identity: Many lawyers find it hard to detach from their professional identity completely. Downsizing helps maintain a sense of purpose and identity without the stress of a full-time caseload.

Lower Stress, Higher Control: By taking on fewer cases, downsizing reduces the daily stress and pressure of managing a heavy workload. This gives you more control over the types of cases you accept and the quality of your work.

Downsizing Tip #1: Be More Selective

As you downsize, you'll want to take fewer cases, and better ones. For example, if you're a personal injury attorney, you'll want to be even more selective when screening cases. In the past, you may have taken risks accepting cases that were "close calls." When downsizing, decline those cases without hesitation and refer the prospective clients to other attorneys.

If you're a family law attorney, screen out cases likely to be overly contentious (assuming you're tired of doing those) or the lower-asset cases in which payment is less of a sure thing.

If you work in estate planning, set a higher asset threshold for clients, or stop doing probate work if you prefer a more predictable schedule.

How To Know Which Clients To Say "No" To

Hindsight vision is 20/20. Think back to the cases where you felt drained or frustrated. Were there early warning signs, such as difficult personalities or unrealistic client expectations?

Some questions to ask yourself to help with client selection:

  • Which clients consistently questioned my judgment or were reluctant to follow my advice?
  • Were there any cases with low fees that took up a disproportionate amount of my time?
  • What client behaviors did I overlook in the beginning that caused stress later?

Also, consider which cases brought you fulfillment and which felt more like a burden. Were there common threads among your fulfilling cases or your burdensome ones?

If you can note the patterns and signs from the past, it'll help you know which cases to turn down moving forward. When in doubt, ask yourself: Am I excited to work with this client, or am I dreading it?

With your experience, you can spot clients from you know where after talking with them for less than a minute. Trust your instincts and act upon them. Just say no!

Downsizing Tip #2 Raise Your Fees

Another effective way to reduce your caseload is to increase your fees. This weeds out potential (or existing) clients who are too sensitive to price. If they don't want to pay the higher amount, let them take their business elsewhere.

I hardly suggest that you gouge your clients, but why not price your hourly rate or fixed fees at the higher end of your market? Your extensive experience justifies the higher fees. After all, many experienced lawyers are more efficient and exercise better judgment than younger, less experienced ones. Clients will pay for that benefit.

Will you lose some business by doing this? Of course; that's the whole point. But you probably won't lose as much business as you may fear. Some clients are actually impressed by lawyers who charge at the top of the market and are happy to pay top dollar for high-end services.

Raising Your Fees: Tips and Communication Strategies

For Existing Clients:

Send a letter or email well in advance of any fee changes. Be clear but polite, and emphasize the value they receive from your expertise.

Example: "After careful consideration, we will be adjusting our fee structure to reflect the level of service and experience you have come to expect. Our new fee structure is _____.

This change will take effect on [date]. We truly appreciate your trust in us and are confident that this adjustment will ensure the same high-quality legal representation you deserve."

If applicable, consider offering a transition period for long-time clients where the old fee applies to cases already in progress.

For New Clients:

Position your new rates as a reflection of the value and premium service you deliver.

Example: "With over 30 years of legal expertise, my services are specifically designed to meet the needs of clients seeking exceptional legal representation and are ready to invest in the highest standard of counsel. While my rates reflect this level of service, they also ensure you receive the benefit of decades of experience and proven results."

This helps set the expectation that your rates are aligned with the quality you consistently provide, especially for those referred by previous clients.

Downsizing Tip #3: Reduce Your Overhead

Reducing overhead can be accomplished in several different ways. If your firm has staff, perhaps some can work fewer hours. Some may not be even needed at all. If this is the case, you may need less space.

Another way to reduce overhead is by reducing your marketing budget since building a caseload isn't as important as in the past. Admittedly, some practices will be more able to save on overhead than others. It will be harder to cut expenses for solo practitioners who have no staff than for small firms that do. Regardless of your situation, you can almost certainly find some savings if you look hard enough.

After Downsizing, Is a Sale or a Merger Still an Option?

It depends on the nature of the practice and how much overhead can be reduced. When you're ready to retire completely, there may not be much of a practice left to sell. If that happens, don't lose too much sleep worrying that you may have left money on the table by not getting out early enough. While that may be partially true, you will likely recoup that money and perhaps even more by working a few more years under circumstances more suitable to your personal needs. In other words, your overall retirement nest egg will not take a hit and, in fact, could ultimately be larger at your target retirement age.

Is Downsizing Your Firm A Good Option For You?

Downsizing your law practice is a practical and often overlooked exit strategy for solo practitioners and small law firm owners who aren't quite ready for a full stop. By taking fewer cases, raising fees, and reducing overhead, lawyers can maintain both their professional identity and financial security while easing into retirement.

If you're contemplating the next chapter of your career and are unsure about the best exit strategy for you, I can help. With decades of experience, and having worked with over a hundred law firms across 30 practice areas, I provide expert guidance in law firm succession planning. Whether you're considering downsizing, merging, or selling your practice, I can ensure your transition is smooth and successful.

If you're looking for expert advice, please call me at 612-524-5837 or reach out online. Together, we'll find the best path forward that suits your needs.