7/22/13

Introducing the Price Point Law Firm

What is your reaction to that title?

Most lawyers will probably turn their noses up at this. Since law is a reputation-based business, who in their right mind would want their reputation associated with being cheap?

Many clients will likely be quite interested in this concept. Not that all of their work will ever go to a price point firm, but currently their work that is more driven by price has few, if any, law firm provider options. So client ears will perk up when hearing this firm mentioned.

What would this Price Point Law Firm look like?

I propose a firm that strongly differentiates as a price point alternative. For hourly deals they might have some maximum rate, say $350. For other pricing options, they would provide very competitive bids.The focus of this firm would be on 2nd and 3rd Tier legal needs, also known as the high volume aspect of legal services.They could easily serve everything from very large companies, down to small businesses. This would mean they would have an extremely large market to attack.

Of course this Price Point Law Firm would structure itself such that it could profitably serve such a market. Given the over abundance of legal talent available in the market, finding suitable lawyers should be relatively simple. Their starting pay could be kept reasonable - say $40k to start. With their starting rates at $150-200 and only a billable base requirement of 1500 hours, they would be quite profitable for the firm.

Our Firm will spend more money on professional development for these lawyers than traditional firms. And by professional development, I mean actual skills training, with management oversight and hard goals. This also means our lawyers will have well-defined career paths, especially ones that do not lead to owner positions, since most people are not suited for or even desire that level of responsibility and stress.

The Firm will have extremely strong leverage, meaning you do not become a partner unless you want to act like an owner. How does an owner act? They drive business, over performing client work. We won't expect our front-line workers to be sales people, and we won't expect our owners to be front-line workers. A recent conversation with a "partner" in a non-law professional services organization told me his annual billable expectation is about 400 hours. His biggest expectation is bringing in business. Our Firm owners will be compensated based on similar factors, versus how many worker hours they bill.

In this scenario, the owners of this firm will easily enjoy profits at or perhaps above what BigLaw partners currently make.

So why isn't anyone creating a Price Point Firm? From an economics perspective, it is absolutely crazy (or more appropriately - stupid) that no one is. The market is screaming for such a provider. The sad truth is that too many lawyers have become so internally focused that the screams of their clients are not being heard. True - many firms are providing bigger discounts to clients, which is responding at some level. But clients are literally begging for quality legal work at reasonable prices. Absent the LPOs and a few niche firms, no one is listening.

Do I hear opportunity knocking ...?

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4 comments:

Timothy Dorr said...

Shhhhh . . . you'll give it away

Anonymous said...

I don't necessarily agree with you. The current law firm models are not making sense with the amount of lawyers out there looking for work. However, what exactly are these "third tier" legal services that are in such high demand. What is the barrier from someone starting a major company around servicing them? I find it hard to believe it's merely lawyers being short sighted.

researching business law said...

I agree with Anonymous - we have so many lawyers out there and more coming into the market each day.

Rubsun Ho said...

Interesting post - I would argue many such firms already exist: Axiom and Clearspire in the US, Riverview Law in the UK and up here in Canada, Cognition LLP. Having co-founded Cognition 8 years ago, I can tell you that while the "Price Point Law Firm" is a good model and we are growing rapidly, it is not without it's challenges. Competing on price alone is always a bit dangerous because no matter how "cheap" you are, there is always someone who is willing to work for less (whether locally or internationally). And especially in the legal world (even more so in Canada, where we the market is more conservative by nature), it can be challenging to get clients to recognize that cheaper doesn't necessarily equate to inferior quality (i.e. fighting the "Nobody ever got fired for hiring IBM" mentality). Having said that, we have increased our top line every year and as referenced in your post, we service companies ranging from startups through to the Fortune 100 of Canada, so the model is proving to be a good one.

 

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