One size does not fit all: Law firm subscription plans come in all shapes and sizes
Home movies are dominated by Netflix. And Amazon Prime’s subscription-based free shipping model has shaken up online commerce. Are law firms ready to move to a subscription-based model, too?
The hourly billing model has long been a standard for law firms, but as a Georgetown University Law Center and Thomson Reuters report published in 2018 found, these firms continue to report flat service demands, falling productivity and static profits. A year later, the two entities found that while demand, billing rates and productivity had inched upward, most of that increase was confined to the largest, richest firms.
As such, some firms are looking at other ways to bring in revenue. According to a 2019 Altman Weil “Law Firms in Transition” survey, 64.3% of law firms are collaborating with clients on developing alternative fee agreements, and of those firms, 85.6% of firms with more than 250 lawyers are doing so. Nearly 98% of responding firms stated that at least some of their fees come from nonhourly billing arrangements. Additionally, 52.5% of responding firms stated that they’ve added pricing professionals while 50.7% of respondents stated that they incorporate pricing in all planning efforts.
Enter the subscription model, otherwise known as lawyer-on-retainer, legal counsel services and toll bridge agreements.
Instead of paying for the lawyer’s time by the hour (or percentage of the hour), a client will agree to a monthly or yearly fee that will allow them the freedom to contact the attorney as needed.
Subscription models in general are trending, with $300 million in venture capital received by subscription commerce businesses in 2013—a 65 percent increase from the previous year—according to tech market intelligence platform CB Insights.
And like the Netflix plans, where various prices afford customers different degrees of access, legal subscription plans come in various shapes and sizes.
In the legal world of the subscription model, most are geared toward business or corporate clients who have an ongoing need for legal services. But there are also subscription-based models for divorce attorneys: Rosen Law Firm in North Carolina offers one. Additionally there are subscription models for estate-planning lawyers, brand and business development attorneys and essentially any type of law firm that offers services on a continual basis.
Some firms using the subscription model are giving their clients free rein to pick up the phone whenever and as often as they want, while others, like Rocket Lawyer, offer various subscription plans. At Rocket Lawyer, for example, for $49.99 per month, clients are entitled to ask their lawyer legal questions and have access to the firm’s documents so they can create contracts and sign and store documents on the site.
More commonly, however, the subscription model gives clients open access to the attorneys without so many restrictions.
At LegalShield, clients pay a monthly fee of about $25 and have unlimited access to a law firm in their state, including phone calls or letters on the attorney’s letterhead and an unlimited number of documents reviewed by the lawyer up to 15 pages each (there’s an added cost beyond 15 pages).
“[Subscription plans are] making their way into professional services,” says Allen Rodriguez, Los Angeles-based founder and CEO of ONE400, a digital agency that launches subscription-based law firms. “Law firms that offer subscription-based services and generate their revenue through that are providing fractional ownership or access to their subscriber base.”
ONE400 created Fixi Plans, a subscription-based software that works with existing law firm websites. It creates a client portal where subscribers can take advantage of subscription benefits including unlimited or limited consultation calls, document reviews, access to proprietary common legal documents and more.
Fixi was launched earlier this year and is currently in private beta, Rodriguez says.
Chargebee is also another site for legal subscriptions. You simply insert all your subscriptions onto a single dashboard, and you can bill from there, manage trials, prorate and add on extras to the various plans.
HOW MUCH IS TOO MUCH?
It’s a model that consumers are already familiar with: The subscription e-commerce market grew by more than 100 percent annually over the past five years, according to a study by McKinsey & Co., whether it’s the internet, a gym membership, telephone service, food or videos. “It’s kind of the norm,” Rodriguez says.
When it comes to the legal field, however, it’s slightly different, as the subscription is for a service powered by people that could potentially take many hours. That’s where utilization rates come into play.
If a law firm is able to craft a level of access for people for $19 or $29 per month where the legal team presents advice, then it would solve a big problem related to access of justice, Rodriguez says.
A study from the American Bar Association found that 80 percent of Americans can’t receive legal help because of the cost. The average hourly rate for attorney fees ranges from $200 to $520 per hour—and even drawing up a will can cost between $1,000 and $1,500. So the subscription rate, which offers a relatively low-cost flat fee every month, could be a possible solution for clients and for firms.
In Rodriguez’s experience, a healthy legal subscription plan has a 25 percent utilization rate.
In the case of an insurance-based provider, lower utilization means lower reimbursements and potentially higher profits, he says. But plans that have lower utilization rates also have higher customer attrition rates, so it’s a balance.
“The most common law firm subscription service features unlimited legal advice calls and document reviews among a few other additional features,” Rodriguez says. “A plan like this would remain healthy at 25 percent.”
For example, if everyone walked into the gym at the same time, it wouldn’t work. The same would apply here, he says.
“Too high utilization is always the focus of the lawyers. If everyone called me at once, I wouldn’t be able to support it. But too little can also lead to a bad experience,” Rodriguez says.
Gina Bongiovi, managing partner at Bongiovi Law Firm in Nevada who has offered a subscription plan since establishing her firm in 2008, says it’s always a fine balance.
Bongiovi likes the subscription model because it helps small-business owners—and because she appreciates the financial predictability. She also loathes tracking her time in tenths of an hour, so she sees this as a win-win.
Her firm also offers flat fees for one-off clients who just need a project or two handled before closing their files, while the remainder of the clients can choose a tiered model where they’d pay a monthly fee, which is automatically charged to their credit card. That fee offers them access to a handful of services, or it can provide them with a discount off the firm’s flat-fee services. The firm also has one plan that provides carte blanche access to the attorneys and staff for a monthly price.
“Clients love it because there is no mystery as to what they’ll pay for a certain service, and we require payment upfront, so we are never chasing our receivables,” Bongiovi says. “We enjoy it because it incentivizes us to dive more deeply into a client’s company to uncover ways we can help which the client might not otherwise share, or even be aware of.”
But, Bongiovi says, she soon realized that there are major downsides to the plan that she’d need to correct.
The work is heavily front-loaded, so oftentimes, she’s buried in documents for the first three months and then doesn’t hear from the client for the next two.
“That works only if the client commits to a longer term, so that the peaks and valleys in work are smoothed out.”
Scaling the Subscription Model
Bongiovi points out that the unlimited access model is tougher to scale, as you need the personnel with the appropriate experience to bring value to the client.
If one person is unavailable, the expectation is that the client’s matter will be addressed immediately by someone else with the requisite experience.
“With two attorneys and two staff, we believe we can effectively serve a maximum of six of these clients, provided we continue to take the one-off work that rolls in the door.”
Bongiovi’s firm often discusses whether they should, instead, pursue serving a smaller number of these types of clients or continue serving the 150-ish clients they have at any given time.
“Having fewer clients, of course, makes it harder to lose one or two, but we know we can provide superior value to those who opt for that unlimited model,” she says.
It’s a matter of educating the client as to the value her firm can provide, and why it’s worth paying upfront, like an insurance policy, before a legal issue hits the fan, Bongiovi says.
Scaling is key, says Jon Tobin, founder of Counsel for Creators, a law firm consisting of four people plus a large network of contract attorneys.
Counsel for Creators launched its subscription offerings in late 2015, realizing that there were many people who had basic legal questions they wanted to run by an attorney—and needed an affordable price without the regular hoopla associated with hiring a law firm.
Members can sign up for month-to-month memberships and get access to attorneys specializing in forming and operating small businesses.
“Some people only need us for a month or two, while others have been members for years,” Tobin says.
But, he warns, a law firm implementing a subscription model will meet with failure unless they have a focus on scale—along with the technical abilities to manage hundreds or thousands of members.
“Additionally, this model forces us to stay oriented toward providing ongoing value rather than simply billing for time, which is a concept that is ultimately at odds with scalability,” Tobin says.
It is possible, however, for the subscription model to be scaled, even for large firms.
Rodriguez found that one attorney dedicated to servicing the subscription model can handle about 2,500 subscribers if his role is to speak with clients on the phone, providing advice and explaining the benefits. If a firm offers a subscription service at $99 per month, and it has 1,000 subscribers, they can hire associates, he says.
“It’s all relative—the large law firms have done this for the Walmarts and the Targets of the world,” Rodriguez says. “The big corporations are very interested in reducing their legal spends, and they’re interested in getting more legal predictability, so they negotiate better terms in a flat amount.”
Though many experts say the subscription model will expand to the bigger firms because it’s scalable in a way that the hourly practice model isn’t, there have been few cases of larger law firms offering it to their clients.
“When you’re billing hourly, you have a hard cap on how much revenue you can generate,” says James Goodnow, an attorney and legal analyst who is the president and managing partner of Fennemore, headquartered in Phoenix. “There are only so many hours in a day. The subscription model unbundles your revenue from your time, making it much easier—theoretically—to increase your revenue without substantially increasing your staffing and overhead.”
But the danger is that clients can pick up the phone at any time for no additional charge, and some will pick up the phone too often. If multiple clients have massive needs in a single month, an attorney can end up wildly slammed for no added benefit, Goodnow says—similar to the utilization issue.
“At its root, the benefits of the subscription model comes from uncoupling attorney time from attorney fees, but the power to choose how much time gets allotted remains in the hands of the client,” he says.
Therefore, it’s very easy for an attorney to end up overcommitted in a system like this, with no built-in mechanism on the attorney-side to release to the pressure.
Creating your Own Rules
That’s why David Reischer, attorney and CEO of LegalAdvice.com, created some rules with regard to his subscription service, which he began in 2012.
Customers who sign up for the program have to commit to six months, he says.
That number was determined by figuring out the cost of Google keywords needed to acquire a new customer—his primary marketing expense.
“Google keyword buying pricing is dynamic and hard to predict, and the steady revenue from a subscription customer is also similarly unpredictable,” Reischer says.
The key to scaling the program for his firm is to maintain a very low churn rate, as gaining a new customer is high yet keeping a customer for the long term makes the subscription model a success.
If the subscription model works, however, it can be the key to keeping a firm afloat, as it’s very helpful for those slower days.
“Sometimes, clients don’t call us as often as we’d like,” says Andrew Legrand, owner of the one-attorney Spera Law Group. “When they don’t call, we don’t earn any revenue from them. So we wanted to ensure we could remain in business even when they don’t call.”
Legrand began using various iterations of the subscription model in 2012 partly for his own financial reasons and also to prevent clients from allowing relatively minor issues to snowball.
He realized that many clients were having a hard time finding an attorney who would answer their questions. Either the questions were too minor and the attorneys weren’t interested or the attorneys would quote a retainer and an hourly rate.
“In that situation, the owner usually rebuffs because they don’t know the exact price,” Legrand says.
So he created the subscription model for his business clients who needed legal services but also wanted predictable monthly billing. This allows the firm to manage its hourly rate.
“If it’s too low, we’re not profitable,” Legrand says. “If it’s too high, we’re not doing enough for our client.”
So far, it’s working well. Legrand says his clients love his subscription model, and he plans on having it replace almost all of his hourly billing for planning and consulting.
For other attorneys, it takes trial and error to get the subscription model to work.
Kimberly Bennett, founder and principal attorney of K Bennett Law, started as a solo attorney but is focused now on growing a team. She began the subscription model about seven years ago, after experiencing some of the common frustrations of solo and small firms: unpaid fees, inconsistent income and a disdain for the hourly billing model.
After a few experiences with large unpaid fees, she decided she needed to do something different and began her journey to build a subscription law practice, though she didn’t have a name for it at that time.
“Like anything new, it took time to create a model that was outside of the traditional law firm framework, especially a model that does not use the billable hour,” Bennett says. “After building and adjusting the model over these past few years, I’ve learned what does and does not work.”
The biggest thing she learned is that subscription plans must be client-centric. They must focus on what the client wants and needs, rather than what Bennett believes her client wants or needs. “This is something many do wrong when building these plans,” Bennett says.
That’s why she has a project-based subscription plan, which allows for creativity and innovation in how Bennett delivers her services.
She also realized that she’d need clear and consistent marketing. Clients, Bennett says, love this model—once they know it exists.
Bennett markets herself as a client’s “legal business partner,” who provides “business-centric legal advice.”
Subscription options for her firm range from the $95 per month (plus a $395 initiation fee), which is geared toward entrepreneurs who need additional legal advice. It includes unlimited consultations, one monthly legal workshop, one monthly document review and an annual business assessment.
On the higher end, clients can pay $395 per month, with a $995 initiation fee for everything included in the initial plan plus a trademark search, a trademark application, ongoing trademark guidance, unlimited cease-and-desist letters, a quarterly strategy session and a quarterly legal project that could range from a business setup to a customized contract creation.
Bennett has her plans outlined on her website, but she says she constantly educates her clients, along with other attorneys, about the benefits of a client-centric subscription model that focuses on providing ongoing value to clients.
Also, although a subscription model tends to include almost all services, the firms need to constantly reevaluate their offerings to make sure this makes sense financially for everyone involved.
“Over the last 10 years, our rate sheet has been a living document,” Bongiovi says. “We tweak the list of services and the rates based on demand, fluctuations in hard costs and regulatory changes.”
Hard Habit to Break
Still, there are some clients who still prefer the hourly billing method.
Johanna Hyman, former senior associate attorney with Vivek Jayaram and currently at Greenberg Traurig, says Vivek Jayaram began using the subscription model in 2017 after representing a Silicon Valley-based technology company. That company’s CEO believed that representing early stage organizations should consider this model— much like the type that were becoming popular in the consumer software space.
Ultimately, Vivek Jayaram wanted to decrease, if not eliminate, any sense of economic uncertainty when it came to retaining a lawyer for corporate and intellectual property counseling.
“A subscription model not only accomplishes that, but does so while also speaking our clients’ language,” Hyman says.
She began suggesting the subscription plan to early stage ventures who needed to get their legal house off the ground, along with offering it to scaling companies that needed a competent firm to act as their outside general counsel.
“In terms of outright subscriptions, I’d say the startup package is very popular, whereas the ongoing packages not so much,” Hyman says. “Many clients would rather pay hourly for work, or maybe even a flat fee per deliverable, rather than a flat fee on a monthly basis.”
But she says the fact that they have a subscription service makes her early stage and other tech clients feel comfortable. It’s a sense of familiarity that they probably aren’t getting culturally from most law firms, she says.
“We’d love to find a reliable way to charge a flat fee each month in a way that doesn’t implicate the billable hour,” Hyman says. “That’s the real challenge and goal here.”
Danielle Braff is a freelance writer based in Chicago.