There are new kinds of companies competing with law firms. Many lawyers want to start their own business. The idea of being their own boss is very attractive. The idea of working for 10 years just to have the opportunity to invest money and “make partner at the firm” isn’t as attractive to millennial lawyers.
Old school law is failing. Younger lawyers want work-life balance. They want to help clients, earn money, and go hiking (or drinking) on weekends.
But things are getting hard for new law firms these days. Technology companies such as Almu and LegalZoom are entering the industry and crushing small law firms that don’t have a marketing budget to compete. Many clients find their lawyer online these days and many lawyers don’t understand things just like SEO and pay-per-click advertisements.
The tech companies have other advantages as well. They are not regulated in the same way that law firms are. They don’t have to report to the law society. Tech companies have no industry-wide regulator.
This means tech companies can grow much faster than law firms. Further, they also often have a better business model, since the management is made up of businesspeople instead of lawyers. Many lawyers are too risk-averse to grow a company.
Tech Companies Can Raise Capital Easier Than Law Firms
It’s also easier for these technology companies to raise capital. Some companies such as Avvo are a success story in how legal tech companies can raise money. The owner of Avvo just sold his company for around $850 million USD. Other companies such as Atrium are a warning to other legal tech companies. Atrium after raising $65 million dollars appears to have failed.
They just laid off most of their legal staff. Atrium tried to run a law firm and a tech company at the same time, and it seems they are shutting down the law firm part of their business. Instead, they plan to focus on providing tech services to lawyers.
If you are starting a legal technology company, below are some tips on how to be successful.
You Should Know How The Law Works
The best legal tech companies are created by people who understand the legal space. You should have been a lawyer or have at least worked in the legal industry for many years prior to starting a company that sells to lawyers.
How can you tell lawyers if you don’t understand their needs? How can you help lawyers improve their efficiency in going to court when you have never been to a courthouse? If you don’t have a legal background, then find a business partner who is a lawyer or comes from the legal industry.
Lawyers are heavily regulated
It’s also important that you understand what can be improved and what can’t be in the legal industry. Lawyers are heavily regulated, and they must follow the law society rules. If you design something that helpful for them, but they can’t use it, then it’s useless.
Lawyers are not going to risk losing their license to use your product. Lawyers that get disbarred are publicly shammed on the law society website.
Know the law society rules before you start selling to lawyers. Keep in mind the rules are different (but often not much) in each state and province. Some places like Quebec and Louisiana follow a completely different legal system (based on French law) instead of British law. Most of the other provinces and states follow the same laws.
Law Firms Have Dropped The Ball
According to the Clio Legal Trends Report, 64% of law firms don’t even answer their phones when called. This makes competing against law firms easy. All you really have to do is answer your phone…
There are very few law firms that do anything creative. There are some law firms that meet clients over video conferencing. Axess Law is another creative law firm, that has office space inside of Walmart’s.
Competing With Law Firms
Most law firms just hope that any company or law firm that tries something innovative will fail. Many companies that try to beat a new path do fail, but it only takes a few to change an industry.
These law firms that wait and see what happens will be out of business in the next decade. Avvo changed the legal industry in the USA, but Canada hasn’t had any game-changers yet.
Most law firms are a decade behind in technology and are just starting to look at using Facebook and Google for marketing. Perhaps next decade they will consider AI and big data. Lawyers are often the last people to adopt new technology.
Law firms need to catch up to other industries, or they will be in for a hard time over the next decade.
Author: Alistair Vigier is the CEO of ClearWay Law