Imagine this scenario: you sit down at a new restaurant and are eyeing the steak on the menu. There is no price next to it (it’s one of those fancy places with no prices), but you’re kind of on a budget so you ask the waiter how much it costs. The waiter responds, “Well, it really depends on what type of meat we decide to use and how long it ends up taking to cook. It could range from $50 to $300, but it’s hard to say until the food is on your plate. Don’t worry though, you’ll find out how much it costs when we give you the bill.” Ask yourself, would you ever eat at that restaurant? Didn’t think so. Well, now you understand how your clients feel.
This is how the traditional law firm business model worked.
Here is the problem though: historically, there has been no need to innovate the law firm business model because our industry inherently rewards inefficiency. The longer it takes to complete a project, the more hours that are billed, the more revenue the law firm makes. But the tides are turning and clients are now demanding more for less. It presents a necessary and scary question of whether law firms can survive the downward pressure on prices.
This is a pivotal point in the legal industry; those who recognize the trend still have time to adapt and survive. The challenge that law firms are faced with is how to address this changing market climate and how to develop a business model that enables them to deliver quality legal services without the high price tag. Those who ignore the obvious will inevitably go the way of the taxi driver (see: Uber). As Richard Susskind said, “For many lawyers… it looks as if the party may soon be over.”
Existing Solutions and What They Do (Or Don’t Do)
A big challenge for these firms as they try to implement new models is that they have no clear solution for determining how to price their services and how to provide more predictability in their pricing. This poses a problem for both the clients as well as the law firms themselves. The existing solutions in the legal technology market are great and improving every day. However, to their detriment, these solutions focus on one thing and one thing only: they allow your staff to better manage your case work. While this is great for lowering some costs and saving time, it lacks the power to help you make better business decisions for your firm, which is where the future of the industry lies.
This next wave will be focused on analyzing key business metrics that facilitate better business operations. In addition to many other benefits, this will enable law firms to optimally price their services and discover that win-win price that allows them to operate at a profit while still being affordable for the client.
The Future is Data & Analytics
In order to collect and get any use out of your data, you must keep track of that information from step A to Z. The inherent problem is that there is so much manual data entry and upkeep before that data can be evaluated. Nobody has the time or energy to do that, and that is where the legal technology firms should focus on.
Future technology should address this problem. We will do the work for you. We will automatically take all of your inputs and produce tangible, useful data sets to make your firm smarter, faster, and better. As we in the legal technology industry begin to provide more data and analytics to our law firms we will enable you to run your law firm more like a business and less like a service professional.
If a system can tell you what your current Client Acquisition Cost (CAC) is as well as the Lifetime Value (LTV) of a client, then it will be easy to calculate that perfect win-win price. No longer will prices be arbitrarily set, but rather, calculated in a shrewd and business-like manner.
Let’s use a real life example. If I told you that you were getting 30% of your client leads off of Twitter and only 5% from Google ads, you would probably strongly consider investing most of your marketing dollars money into Twitter ads. Well, what if I also told you that only 3% of Twitter leads convert into clients while 40% of Google leads convert, would you think twice about your investment into Twitter?
While many people might answer that question differently, there is one constant. That type of data will enable you to make more educated decisions and after all, isn’t that what we in the legal industry should care about, being smarter than our peers? We need to be smarter to win cases, so why don’t we be smarter to win business.