Recently, there has been much discussion of the idea of “productized legal services” as the next transformational strategy that will enable lawyers to make money while they sleep, increase the volume of potential clients, and move away from the tyranny of the billable hour.
Some law firms have developed a product approach as a method of capturing potential clients and then upselling them to more traditional legal services. (See, for example https://www.cooleygo.com/). Other law firms have created law products to create additional revenue streams. (See https://afterpattern.com/siskind-susser).
Here is my definition of “productized legal services”: A software application that enables a user to solve a legal problem without the assistance or services of an attorney. A “law product” is a digital application. A “law product” doesn’t have to be a digital application, but in almost all cases it is. An exception, for example, is a self-help legal forms book. Unlike a traditional legal service, it is scalable and is sold to many users.
A variation of this “product” concept is automated legal services. One can think about the concept of “productized legal services” over a continuum, with one end of the spectrum represented by a law product that does not involve an attorney’s services. An example is a DIY interactive legal form that a consumer purchases directly. Software-powered legal services can also be scalable and packaged and sold as if they were a “product.” An example would be a software-powered legal service whereby the client completes an online questionnaire that generates a legal form for an attorney review. The attorney provides assessment, advice, perhaps custom drafting, and interaction with the client. It is less scalable than a “law product” but still scalable. I would call these hybrid services – an “automated legal service” – because there is a human service element.
Other examples of “automated legal service” are applications that analyze contracts, and software applications that do predictive coding as part of the discovery process. In both instances, the software is replacing the work of lawyers. Companies that provide these applications to law firms are providing pure legal products in my view. If these products are provided as part of a subscriptions service, the service is usually called a SaaS, or a Software as a Subscription, but this pricing mechanism doesn’t change the underlying product character of the software application.
Differences between a “law product” and an “automated (productized) legal service”:
Law Product Characteristics
- One to many scalable distribution models.
- Off the shelf buying experience.
- Not subject to state regulation in most instances.
- High margins.
- Larger addressable market.
- Attorney-client relationship is not created.
- Financing external. Can attract outside investors.
- Easier to sell as an asset – a better exit.
- Development costs can be expensed when software applications are developed for external sale.
Automated Legal Services Characteristics
(often called “Productized legal services“)
Similarities to Law Products:
- One to many scalable distribution models.
- Service is standardized so that all clients receive the same experience at the same price.
- Fixed pricing.
Differences from Law Products:
- Regulation of the attorney relationship applies.
- An attorney-client relationship is created.
- It can be offered only in the state where the attorney has bar membership.
- Subject to affiliate business rules.
- Often subject to “Unbundled legal services” rules.
- Attorney has strict liability and is covered by the attorney’s malpractice insurance.
- Financing development from the law firm or personal funds. You can’t have outside investors.
- If software applications are owned by the law firm, must sell as part of a law practice sale. Harder to exit or sell effectively for capital gain.
- Development costs should be amortized when software applications are developed for internal use.
Here is a short summary of the differences in these service offerings:
|Traditional Legal Service||One to One||In-Person or Virtual||Hourly Billing||Legal Advice|
|Automated Legal Service||One to Many||Virtual||Fixed Fee||Automated Legal Form + Legal Advice|
|Law Product||One to Many||Virtual||Fixed Fee||Automated Legal Form|
|SaaS Service Subscription||One to Many||Virtual||Subscription Pricing||Newsletter|
Make Money While You Sleep?
Lawyers have visions of making money while they sleep.
Unfortunately, it is not as easy as it seems. The journey towards making a successful legal product is complex, with lots of detours and failures.
I know this because I have been working actively in this market space for more than 20 years. In 2003, I launched one of the first online lawyer firms that offered a highly productized legal service in family and divorce matters at www.mdfamilylawyer.com, but it required a few years of further development before volume scaled. I continue to operate this online law firm and enjoy residual payments from several other law product ventures, but these ventures were not overnight successes.
Often failure can be attributed to a single factor, such as not understanding how to reach your target market.
You don’t have to be a programmer to create a productized legal service business. I am not a programmer but know enough to recruit and manage programmers at the right price. You need to have entrepreneurial skills and the know-how to develop a business. If your law firm is failing because you do not know how to develop the business side of your law firm enterprise, I would be wary about jumping into the software application business which can be equally challenging. Lawyers, like programmers, are trained to be technicians, but the major factor that accounts for success is possessing entrepreneurial skills. If you don’t have those skills, you need to learn them fast, or get a job and work for someone else.
Who this blog is for?
This blog is for attorneys and others who develop and sell law products and productized legal services.
In this blog, I plan to report on the following topics:
- Law firms developing automated legal services.
- Law firms developing law products.
- Non-law firms who are developing law products.
- Pro bono and Legal Service Program efforts to encourage the development of law products and automated legal services.
- Regulatory and ethical issues involved in offering law products.
- Marketing approaches to providing law products.
- Tech tools that enable the development of law products.
- Financing the development of your law product.
Other relevant topics will be addressed as the idea of productizing legal services takes hold and new issues and topics arise.
I hope to help lawyers and entrepreneurs who have decided to go down this path avoid mistakes and increase their chance of success.
If you think this kind of analysis is helpful on your journey, please subscribe: