In this blog, legal industry expert  Tom Lenfestey, founder and CEO of The Law Practice Exchange, explains how law firm valuation really works for plaintiffs law firms, and why understanding valuation drivers early gives firm leaders more control over future outcomes.

Watch the video featuring Tom Lenfestey.

The Four Key Drivers of Law Firm Valuation

As Tom explains in the interview, law firm valuation is driven by a number of key factors that consistently shape how plaintiffs law firms are evaluated:

• Your financials, brand, systems, and people drive value
• Your financials are a key driver of firm value
• Your systems and processes support scalability and continuity
• Your people and leadership structure influence transferability

Law Firm Valuation Is About More Than Revenue

A common misconception among law firm owners is that valuation is solely a function of topline revenue. However, as Tom notes, the true measure of a firm’s worth lies in its operational resilience and future reliability.

“People think valuation is just revenue,” Tom explains. “But valuation is really about how predictable and transferable that revenue is.”

This critical distinction holds significant weight for plaintiffs firms. Those structured entirely around a single rainmaker or founder, for instance, often encounter valuation hurdles that financial statements alone don’t reveal. The key is analyzing the factors that contribute to predictable and transferable revenue.

Owner Dependency Has a Direct Impact on Valuation

One of the most common constraints on valuation is excessive owner dependency. “If the firm can’t run without you, that’s a problem,” says Tom. “The more dependent the firm is on one person, the more risk there is from a valuation standpoint.”

This perspective is important because potential buyers and successors prioritize firms that can confidently operate, grow, and retain a client base regardless of leadership changes. When a law firm’s systems, client relationships, and core decision-making are intrinsically tied to one individual, the perceived risk escalates, directly impacting its market value.

Robust Systems and Processes Drive Transferable Value

For law firms aiming for stronger valuations, the presence of thoroughly documented processes, consistent intake practices, and a clear operational structure is paramount. This robust framework provides the transparency and reliability that stakeholders seek.

“Buyers want to see systems,” Tom notes. “They want to know how cases come in, how they’re worked up, and how results are produced.”

Such operational clarity is invaluable, as it reduces uncertainty and enables more accurate forecasting of future performance, qualities that are directly correlated with an enhanced valuation.

Proactive Succession Planning Influences Valuation Outcomes

Valuation and succession planning are closely linked. Firms that wait too long to address leadership transition inadvertently restrict their future opportunities and leverage.

“If you wait until you have to do something, you lose leverage,” Tom explains. “The best valuations happen when firms plan ahead and still have flexibility.”

Cultivating succession readiness signals stability to buyers, partners, and internal successors, helping preserve value during transitions.

Maximize Value Through Early Planning

The most favorable valuation outcomes typically result from a deliberate, long-term strategic process for law firms.

“You don’t wake up one day and decide to maximize value,” Tom says. “You build toward it over time.”

By proactively addressing owner dependency, strengthening operational systems, and planning for succession early, plaintiffs firms can improve valuation while retaining control over timing and structure.

Looking Ahead

Law firm valuation is not just a number assigned at the point of sale or transition. It reflects years of decisions around leadership, operations, and planning.

Firms that understand these valuation drivers early are better positioned to protect and grow their firm’s worth, expand future options and unlock greater value, and navigate transitions on their own terms.

Watch the full video interview to hear Tom Lenfestey further explain how law firm valuation really works.