Unless you’ve been asleep for the last five years, you have probably heard of LegalZoom, the California-based, non-lawyer legal document preparation company that claims it has delivered over 1,000,000 wills to consumers, and that it is the largest incorporation company in the country.

LegalZoom is only one of hundreds of Internet-based legal form web sites that have emerged during the last 10 years and which are eating away at the market share of solos and small law firms. LegalZoom has been challenged by some state bars with the unauthorized practice of law, but hasn’t lost a case yet. They are serving thousands of customers who ordinarily would be served by solos and small law firms. They must be doing something that is in demand because they continue to grow at the expense of solos and small law firms.

LegalZoom, and non-lawyer legal form web sites like it, have a business model that consists of the following elements:

  • A legal service delivered purely over the Internet;
  • No physical offices, and thus no extensive rental costs to pass on to customers;
  • Limited services offered at a fixed price that can be easily compared with other providers including law firms;
  • The use of web-enabled document automation technology to reduce costs and increase productivity;
  • A secure customer portal where clients can execute legal tasks in their own personalized web space;
  • Access on their web site to thousands of pages of free legal information on hundreds of subjects;
  • Money-back guarantees to comfort consumers; and
  • Reliance on informed consumers to do part of the work, often called co-production, such as filing their own documents or executing their documents on their own based on provided instructions to keep costs down.

Consumers don’t seem to care that they are not dealing with a law firm. As lawyers, we know the service they are selling is risky for consumers, but for consumers it delivers a “good enough” result. LegalZoom would not be growing at this fast a rate if they weren’t offering something that consumers want and value.

How to Compete Against Legal Zoom and Other Non-Lawyer Providers

In the new, competitive environment that solos and small law firms face in the current economy, the keys to law firm survival are to expand the strategic options available by opening new client markets, reducing the cost of services, and delivering legal services in a way that distinguishes your firm from other firms in the pack. These strategic options should be mixed with more traditional approaches to differentiation such as specialization within a niche practice area.

It is time for solos and small law firms that offer personal legal services to the broad middle class to rethink their law firm business models. There are many opportunities for incorporating some of the elements of the LegalZoom business model into a more traditional law practice.

To name a few:

  • Consider offering "unbundled" limited legal services at a fixed price, both on-line and off-line;
  • Leverage a reputation in your local community and a physical office into an on-line brand that is both local to your community and extends throughout your state;
  • Add virtual law office functionality to your web site so that your clients can have the option of interacting with you on-line;
  • Figure out ways of using Internet-based technologies, such as web-enabled document automation to strip out costs from your overhead structure increasing profitability;
  • Figure out how to segment the market offering lower priced services for more routine matters in order to build trust so that when a client has amore complex problems they will turn to you for assistance;
  • Emphasize all of the advantages of using an attorney over a non-lawyer forms provider in your marketing materials and your elevator speech. Click here to see one such comparison.
  • Use web-based technologies to respond to both prospects and clients within hours rather than days.
  • Reduce the perceived risk that consumers have in retaining a lawyer by increasing transparency and structuring forms of performance guarantees.
  • Adopt project management technologies to better estimate costs and fees on more complex projects, translating that data into communications that clients understand.

The current depressed economy and its affect on the broad middle class is not going to change tomorrow. It is likely that solos and small law firms, will have to adjust to new pricing and market realities in the future as competition from non-lawyer providers of legal solutions continues to increase. Large law firms serving large corporations may be immune from these developments, at least for a few years any way, but the fact that Big Law is changing relatively slowly should not mask the rapid changes happening to solos and small law firm practitioners that serve consumers and small business.

I heard a report the other day that the volume of wills and estates practice in one state declined by 50% during the past year. I predict that this trend will continue and not reverse itself, despite any improvements in the economy.

Some commentators think that the monopoly will hold. History and the experience of other countries in deregulating the legal profession suggests otherwise.

Welcome to the "new normal."
 

  • Richard, exceelent article. The comparison chart is good because the law of compare and contrast is a big influencer. I’m going to point my readers to it if I may. Thank you.

  • A really interesting article. The question I guess is how soon are a sufficient number of law firm clients really going to start using the services? It’s undoubtedly the future — but when does the future start?

  • Business history is replete with examples of companies that have dominated their space based on this acquirable capability.

    IBM has never been accused of being a technology leader. In fact, their history has been to let others innovate, after which they come in and legitimize and enlarge the market, eventually dominating it. IBM’s core competency is marketing and sales, not IT. They long ago proved the value of influencing the specs, whether for government or corporate business, and letting competitors attempt to bid against with them in a game defined by rules they helped write. Duh.

    Likewise, the Big Four accounting firms’ hegemony in the corporate space is based on similar advantages. Are there really any accountants or auditors who are that much better than competitors? Or, lawyers?

    You don’t have to be a huge entity like those cited, though, to employ this approach. There are opportunities for firms of any size, including solos, to deliver greater demonstrative value via their marketing/sales interactions than their less savvy competitors deliver via work-product after being hired. Adept salespeople deliver “clarity,” a valuable state of mind that enables business stakeholders to get confident- and comfortable enough to make a decision, accept risk, invest funds and initiate action to solve a problem. Before reaching clarity, you have multiple would-be suppliers wasting the prospect’s and their own time and money arguing about the relative merits of their respective solutions.

    I agree that small firms and solos would be well served to adopt your suggestions, and also that the day isn’t far off when doing so won’t be optional. But it’s also true that one of the most potent tool suites available — marketing and sales — is the one that lawyers are reluctant to embrace despite their clients’ overwhelming reliance on it. Do you really think that your client thinks his bakery, dry cleaner or car repair shop is that much better than the others against which he competes?

  • It’s credit to Legal Zoom for being as successful as they have been. We run an online Will writing website in the UK which is backed by a local lawyer however without that lawyer i don’t think we would be as successful as we are. Maybe it’s just the British mentality that they require a lawyer behind the Will we produce for them.

  • Great article! As always.

  • Great article! As always