Law firms must raise capital in order to grow. Law firms are always ten years (minimum) behind other industries. Most lawyers are now just starting to discuss social media. That something that was popular for businesses to expand their marketing into a decade ago.
Most old school lawyers fight against innovation. They do this as they feel it will jeopardize their cash cow. I get anonymous hate email from lawyers all the time. They don’t appreciate me pointing out issues with the industry.
Why are some lawyers from Mars?
For a century, lawyers didn’t believe in marketing or having a law firm name. That is something that has now changed. Most law firms still don’t use practice management software. Firstly, they write down their hours on a piece of paper, or in Excel, which is insane.
At many law firms, it’s like going to a doctor’s office. You book an appointment, sit in the waiting area for as long as the lawyer feels like, and then you find out if you are in trouble.
Prior to Google and Facebook reviews, lawyers didn’t need to worry about the customer experience.
Law Firm’s Raise Capital
But perhaps the most “banned” subject them all in the legal industry are law firms raising capital. This is often the lead source of lawyers get annoyed with me. Law firms have extremely limited ways to raise capital to scale. And for the law firms that can raise capital, they can invest in things that other law firms don’t have.
In the past, the only way for law firms to raise capital to expand into new markets or to invest in technology was for them to get partners to “buy-in” to the practice and become a partner.
When an associate lawyer became a partner, it meant that the lawyer had equity in the law firm. This meant that the law firm and the lawyer were going to work together for a long time.
It’s not worth talking much about the partnership model, as most millennial lawyers are not interested in working 70-hour weeks for the opportunity to invest in a law firm in 15 years.
Younger lawyers want work-life balance and to be in control of their future. Many lawyers are willing to work from home and to work with several different law firms at the same time as a contractor.
Millennial lawyers are more open-minded, but they were still mentored by old school lawyers. This means that sometimes they hit “mental roadblocks” and cannot make needed changes.
Law Firm’s Raise Capital
There’s a lot of money to be made for law firms that can truly offer a different experience to the customer. Just like in any industry, the company that can make improvements in the industry is well-suited for growth.
And right now, legal services are a very inefficient industry, which could really use the benefit of technology. But these things cost money and law firms are in a very challenging place to raise money.
Besides the partnership model, the other way for law firms to raise money is for managing partners or CEOs to borrow money personally from the bank. That’s a lot of risks, and certainly, not one that risk-averse lawyers would be willing to take.
Law Firms Must Raise Capital- Innovation Costs Money
If you want to innovate in the industry, you don’t need to raise tens of thousands or hundreds of thousands of dollars.
A company needs to be able to raise $50m+ to build out the technology, marketing, and education campaigns, to build out internal structures, and to build out the team.
You also need to have a little cushion for when things don’t go exactly as you planned, which always happens in business, regardless of how much you plan and how smart you are.
These things, if you want to roll it out across the country and truly innovate the industry, are going to cost lots of money. Further, there is no way that a law firm can do that with their own resources or through cash flow.
It would take a hundred years for them to save up enough money through cash flow to achieve their goals. So, we’re stuck in this place right now where law firms cannot deliver the ideal customer service.
Law firms must raise capital to be able to grow.
Law Firms Are Not Sexy But Still Need To Raise Capital
And for the law firms that are trying to do something truly entrepreneurial, they are overseen because they’re not a sexy industry. There is nothing exciting about doing separation agreements online or filing online divorces.
And the competition on the marketing front is low. Most lawyers don’t have websites. If they do, sometimes it’s a one-pager with a broken contact form. My law firm is doing something truly creative and these other lawyers don’t like it.
Law Firms Need To Grow Their Teams
*Clearway Law has switched from being a law firm to an online marketplace for the law. The information below is about when we were a law firm.
We are fortunate and unfortunate because we are stretching at the seams and we cannot expand until we raise capital.
We don’t really want people to call us right now because we cannot service that many clients without building out the proper team.
Our law firm doesn’t want to do what some law firms do in this situation. Some lawyers basically collect boxes of files and then they get to it when they can, and they just keep these people waiting. I don’t want that to be ClearWay Law.
Further, I’d rather them not call right now until we can properly deliver on the service. When we started, we put the brand and the marketing upfront to see if clients would identify with our brand. Now we need to raise money and build out the operations team.
In conclusion, law firms must raise capital if they want to do better. If you would like to learn more about our law firm, please see our videos.
Alistair Vigier is the CEO of a law firm that is raising $1.5M to expand across Canada. In 2017 he won the 30 under 30 award.