The traditional law firm model is broken. Partnership tracks, incremental time tracking, unhealthy work hours and annual hourly billing requirements are features of an outdated law firm model that creates unhappy lawyers, unhappy clients and declining revenues. Moreover, this same model has led to an inexcusable access to justice gap where 70 percent of the global legal needs are unmet. As a result, many individuals and small businesses either forgo legal representation or opt for do-it-yourself solutions that may lead to less favorable outcomes or set bad precedents.
As an industry, we are failing the communities we have been tasked to serve. Clients are expecting faster service, transparent fees and superior customer service. We need bold, impactful and immediate transformation to change this unacceptable status quo. While some law firms are slow to respond to the changing landscape and shifting client needs, other service providers (e.g., LegalZoom, LegalShield, Amazon and more) are capitalizing on our stagnation by providing less expensive, frictionless options for clients and, as a result, they are capturing revenue traditionally reserved for law firms.
Although we may dislike the growth of these legal service providers, their success represents more, not less, opportunity for all providers in the legal industry, especially for lawyers. If we shift our mindset and embrace the changes happening in our industry, we will find opportunities to design new legal services and, possibly, even new practice models.
To craft these new services and models, we must commit to eliminating hourly billing and transform our practices with subscription legal services.
Law firms are losing money billing hourly. Clients are becoming increasingly frustrated with unpredictable legal fees. The 2022 Clio Legal Trends Report indicated that whether it's reducing bills for clients, not tracking time well or getting pushback from a client over an invoice, lawyers are receiving less than their hourly rate for services they have performed and billed to a client. Yet, even with this attorney-client friction, legal teams remain in an unhealthy cycle of overwork, overwhelm and overcommitment.
So, we must ask ourselves, does it make sense for lawyers to continue to build businesses based on a traditional model that is clearly not working? Of course not!
As you transition your practice to a modern, client-centric law firm, the opportunity for growth with automation and alternative revenue streams comes when you eliminate the billable hour. By preserving hourly billing as an option for revenue generation, some attorneys are maintaining a model that rewards inefficiency, devalues creativity in problem-solving and focuses a client's attention on hours worked instead of the problems that we strive to solve. Abandoning the billable hour is critical to nurturing a thriving, automated, revenue-generating law firm.
Subscription legal services are built on developing and growing relationships. Instead of exchanging time for money, the law firm is exchanging value for an ongoing monthly investment by the client. This ongoing investment allows the legal team to gain clarity on their client's needs, provides the opportunity to develop trust and allows both parties to move from reactive to proactive legal counseling and support. Moreover, when designed intentionally, legal teams use technology to scale their subscription services easily and effectively. As a result, legal teams can redirect their valuable resources––time and energy––to their strengths as advisors, issue spotters, problem solvers and forward thinkers. With subscription legal services, creativity in problem-solving is amplified, curiosity in the delivery of services is encouraged and efficiency is a win.
The subscription legal services model builds proactive attorney-client relationships, focuses on exchanging money for ongoing value, provides consistent and predictable recurring revenue, incorporates tech-driven processes to eliminate repetitive tasks and creates a path to sustainable and scalable business development and growth.
Just like there is no one way to build a business, there's also no single way to design a subscription. However, there are elements of the design process that you should consider as you craft your subscription offering. When creating your subscription:
Pricing subscription legal services is both an art and a science. The science is based on foundational business principles, while the art comes from experience and iteration. Ultimately, as you design and refine your pricing, you will engage in a strategic process that leads to a thorough understanding of the target market, the value you are providing to your clients and your firm's operational costs.
Five points to consider when pricing your subscription legal services:
Successful subscriptions exist whether you price it at $95/month or $20,000/month. The key isn't the amount; instead, the key to subscription pricing is knowing your market and your target client and then designing your services to align their needs with your expertise. Ultimately, your pricing should balance value, impact and profitability. By addressing these factors, you can create a pricing model that attracts and retains clients while ensuring the sustainability and growth of your legal practice.
Finally, before you begin designing your subscriptions, take time to review your ethical obligations.
Client communication. One of the biggest complaints about lawyers is the lack of communication between the firm and the client. With a subscription model, you eliminate this risk and implement key ethical requirements for ongoing interactions with clients by building ongoing, proactive communication between the firm and the client into your subscription package. For example, a subscription could include a monthly check-in call, access to unlimited scheduled calls, direct communication via secure messaging inside your branded client portal, client-only email reminders to understand changes in the law and more. The key is to be creative and responsive to your client's needs while creating a process to provide streamlined and scalable communication.
Protecting client funds. This goes without saying––you must manage your client's money compliantly. Subscription legal services fees can be earned upon receipt (and deposited in your operating account) or deposited into your trust account at the beginning of the month and then transferred when earned as per your engagement agreement to comply with your state's rules of professional responsibility. There is no barrier here. The key is to review your state's ethics and make sure you are compliant. Then, begin billing your client in the most frictionless way possible.
Limited scope representation. Limited scope representation gives clients more control over their cases while they access limited legal services via their firm or attorney of choice. To achieve and comply with most states' limited scope representation requirements, you need clarity regarding what's included and what's not included in your subscription offer. A properly designed subscription service allows you to meet and exceed this requirement by providing a clear scope of services that your clients understand and your team can execute at scale.
Modern billing models. While, sadly, hourly remains the primary billing method in the legal industry, flat-fee billing is embraced and supported by the ABA and state bars. More importantly, clients also recognize the advantages of transparent billing practices that come with flat fees. Subscription services are flat-fee services at scale. Each month, your clients pay you a flat fee in exchange for the opportunity to use a set of services or products. This fee is not an advance payment you bill against; instead, your clients are reserving access to your services, removing the possibility of others accessing your services, and they are receiving immediate value each month. For your clients, the value may include access to template agreements, a yearly review of their estate plan, ongoing updates to changes in employment law and more.
Reasonable fee structures. Subscriptions are proactive, relationship-driven legal services. By design, you are actively engaging with your clients to help them achieve a goal––whether solving a problem or seizing an opportunity. First, understand your market. Second, learn (really learn) about your clients. Third, know your value. Then, price accordingly. The reasonableness of fees is not an issue specific to subscriptions. If you are proactive, thoughtful and ground your decisions in data, you will find the right balance that keeps you compliant and profitable while you amplify your impact by serving more clients via a streamlined and systematized service.
Subscription legal services have the potential to close the access to justice gap by providing affordable, accessible and proactive legal support to individuals and communities. By fostering long-term relationships and offering a predictable cost structure, these services make legal representation and advice more attainable for all clients. Moreover, subscription legal services offer numerous benefits to lawyers, including greater flexibility, increased efficiency, predictable income, improved client relationships and, most importantly, improved well-being. Therefore, transitioning from hourly billing to subscription-based services is the best way for our industry to make any impactful change in solving the access to justice gap.
Subscription legal services are the sustainable and scalable way to provide continuous value to your clients without burning out you or your team. When designed intentionally, subscriptions are ethical and improve client experience and attorney and legal professional well-being.
Opportunities to break free of the traditional law firm model, particularly the billable hour, already exist in your practice. The challenge many solo and small-firm attorneys face is finding the time to capitalize on this hidden potential. Hopefully, this discussion will push you one step (or many steps) closer to designing a modern law practice focused on subscription legal services.
Have questions? Don't hesitate to reach out. I love this topic.
Now, go launch! You've got this.
