Since I will be moderating the state of the industry panel at the upcoming GLSA conference, I was inspired to write a comprehensive piece on subscription legal plans. Subscription legal plans represent one of the greatest opportunities for growth for law firms. The following post explains why you should consider creating one at your firm today. For those that aren’t yet familiar with legal plans, let me first start with a little history.
Legal access and legal insurance plans are not a new concept, having been around since at least the ’70s. They were originally pioneered by Harland Stonecipher, an insurance salesman who, after suffering through his own legal troubles, was inspired to create a legal insurance product to help consumers.
Most legal plans are designed to meet the needs of the 70 to 80 percent of Americans that forego legal assistance because of costs. While the promise of low-cost legal services makes a lot of sense, especially considering that the Legal Services Corporation estimates that 63.4 million Americans would qualify for legal aid funded services. Even with numbers like those, adoption of many plans has not achieved the subscription numbers we all know that legal plans are capable of reaching. However, I think that we are at a point in time where all of that is about to change. The key reasons for that change will be driven by changes in consumer behavior and the creation of newer, significantly more niche legal plans that are now becoming available to consumers and small and micro businesses (SMB).
Let’s first start with changes in consumer behavior. While paying subscription fees for services such as access to a gym, your cell phone, internet and even your food is commonplace today. There was a time in the past where being signed up for a subscription was not desirable. Going back to the early ’90s signing up for a Columbia House music subscription was considered to be a bad move.
While the Columbia House model was a subscription plan, it was really based on negative option billing. They would send you an initial gift of 12 CDs or so, but then in the fine print, you agreed to regular billing on future deliveries of full-priced CDs for a minimum amount of time. You see this often with magazine subscriptions as well and now with just about every SaaS software in the marketplace. With regards to software, you are lured in with a free trial, and if you don’t cancel before the end of the trial period, your credit card is charged for the service automatically thus making your silence your consent to ongoing billing.
While the Columbia House negative option billing model may have been unpopular then, subscriptions for just about everything we consume are popular now, and we are seeing success with that model when it comes legal services as well. So, how does collaborative consumption work? Let’s look to Netflix for an explanation.
For at least the past ten years, consumers feel differently about subscription services. This is mostly because technology in the last decade has allowed the creation of services/business models that can quickly distribute shared goods and services to communities of users. I’ll use Netflix as an example of what I mean. You see at one point, many of us either (a) heavily relied on the video store around the corner for weekend entertainment or (b) built a DVD library of our own by regularly purchasing movies. If you were building your own library of movies, this could get pretty expensive.
When Netflix entered the market, they proposed a different model. By offering their entire library of movies for a low flat fee every month, they were essentially saying to users, “you can all own the largest library of movies online collectively through your monthly contribution that provides you access.” In other words, we can collectively contribute small amounts to a system that uses the money to continue to build a library of movies that we (a group of like-minded users) can all enjoy. We collectively consume the product, and because we do, costs are low while benefits and features are high. Netflix changed the supply and demand economics of movie consumption under this model by increasing the convenience of the user, lowering the cost and creating an effective distribution system.
Today, many major disruptive business models such as Uber, Google Apps for Business and just about any other software platforms use this model, and we consume these goods and services happily. Subscription services are no longer thought of as a pariah of business models. This change in consumer behavior is great for law form legal plans. That sounds reasonable, but what is the business case for a law firm subscription legal plan? The following makes a strong case.
In Europe, most subscription legal plans are actually legal insurance. There are various reasons for this, one being that in most European countries contingency fee agreements are not allowed. However, unlike auto insurance, legal insurance is not mandated in European countries yet still experiences high adoption there.
According to Riad, International Association of Legal Expense Insurance, it is estimated that over 10 billion Euros are spent on legal insurance premiums annually.
And while that is a lot of money being spent on ensuring legal help, the market is still seeing growth across many European countries. While the U.S. market has less adoption (market penetration) than in Europe, the U.S. market is still experiencing growth as well.
While the consumption of legal services may be different in Europe than in the U.S., the demand for subscription legal plans has clearly been validated by consumers and business there.
For an example closer to home, LegalZoom’s Legal Plan, a plan that I helped to create in 2010, also demonstrated substantial success early on. While I obviously can’t disclose specific numbers, you can view the S1 filing here and see that subscription legal services were accounting for about 24% of their revenue only one year after launching them. LegalShield has also indicated that they over 1 million subscribers across the United States. The point is, subscription legal services are a huge opportunity for law firms, especially those that create niche legal plans that serve a particular community.
Even the largest organizations in the legal plan market have very little market share compared to many European countries. This happens even while the Legal Services Corporation (LSC) estimates that millions of Americans go without basic legal services annually. Subscription Legal Plans help solve this access problem by reducing the barrier of entry to high-quality legal services – many subscription fees for legal services range from $14 a month on up to $500 depending on scope – while creating recurring revenue opportunities that scale for the law firm. In fact, according to a recent post in Stanford Business most business in the future will be subscription based:
To get a sense for the size of the market, we can look to a fairly recent estimation by Magnify Money. They estimate that approximately 36 Million households in the US have less than $1000 in savings. The unexpected need for legal services and the cost of an average retainer is likely to exceed what they can afford and therefore Americans go without legal services every year. Paying for services in smaller incremental amounts allows one to be more proactive in avoiding legal issues and offers legal protection for the most vulnerable in our society.
Providing this untapped market with high-quality legal services is one way to solve the A2J problem and earn a great living too. Why, because recurring revenue coupled with the use of technology to better serve your clients is a much more scalable system than the current law firm business model. In fact, a modest legal plan with a cost of $29/mo that can get to an acquisition rate of 50 subscribers per month can see exponential growth in terms of revenue:
In my example above, you have a plan that is selling at $29/mo and is now acquiring 50 new subscribers per month. Even when you consider attrition/churn rates a plan like that can get to about $15K a month in pretty short order. Also, because our data shows that utilization rates tend to hover around 25 to 30% the model is scalable with one attorney being able to service thousands of customers at once. Still interested? Great, here’s what you need to know next.
Up until now, most legal plans tried to take on as many users as possible. Some plans – LegalShield, Hyatt and ARAG, for instance – would create benefits strategies targeted at large segments of the population. While this model has worked well for them, gaining high adoption under these models typically involves significant marketing costs as they try to reach all consumers for all legal issues. Just as technology companies are creating more and more niche solutions for particular problems in certain industry verticals, legal plans that follow this trend will also have greater chances of achieving low-cost adoption by their intended audience.
Even while the overall legal benefits for these targeted groups of users may be similar to those offered by mainstream plans, the messaging and understanding of a particular problem for the niche plan users make it unique enough for the end consumer to feel confident that the niche plan was specifically designed for them. This helps accomplish two things for the law firm provider:
It accomplishes this because the niche legal plan is able to create and target its messaging more specifically and create unique and engaging experiences for its users. Furthermore, there is this “the law firm gets me” type of experience because the lawyer servicing the plan can use the communities particular vernacular and relevant analogies.
We have seen significant increases in demand for legal plans at ONE400. In fact, we have worked on several this past year. There are three examples worth mentioning Goodman Law Group, The Creators Legal Plan and Debt Cleanse. In each of these plans, they are targeting a specific niche segment of the total legal plan market. Once they have strong adoption and have gained market share in their given niche, they can always expand and offer additional services to reach a different segment (think Uber Black going after high-end business travelers as opposed to merely solving the last mile problem).
Here is a brief look at each of these legal plans.
Goodlaw.legal was started by Arizona HOA lawyer Clint Goodman. Clint decided pretty early on that he wanted to be the best and most innovative lawyer servicing homeowners associations (HOA’s). That business is largely a transactional one (e.g., demand letters, resolving board disputes, etc.). However, because of the frequency of common legal needs within that category, it is one that was also a great model for building a subscription offering. With a bit of collaboration, we were able to create a set of features and benefits that would benefit his clients, lower their costs and reduce the amount of manual process on his end by leveraging automation and other technology for servicing his subscribers. He now offers a monthly subscription service and client portal on his website where his customers can take advantage of many of the services they need frequently.
The Creators Legal Plan is the brainchild of Jonathan Tobin, an attorney, designer, coder and musician whose practice serves mostly creative freelancers, agencies and tech startups. He offers a suite of services that are particularly important to creative professionals, mostly intellectual property issues. Because he understands this population of consumers, he is able to target them with benefits like trademark, licensing and copyright issues that are highly relevant to his end user. His attrition is very low, and his platform is gaining traction daily.
Debt Cleanse is one of the non-attorney owned plans we helped develop. The plan aims to help millions of Americans reduce their debt by offering automated debt mitigation services online through their platform. However, the service is not just software; there is a robust attorney network to provide support to Debt Cleanse customers when needed. Subscription fees for this offering start as low as $29/mo and go up from there for small business or annual plans. As with some other of our clients, we took the system Debt Cleanse’s founder Jorge Newbery had developed for the product and turned it into a platform and helped navigate the regulatory requirements for operating a legal plan as a non-law firm entity.
Now that consumers are more comfortable than ever receiving services under a subscription model, legal plans are poised to gain strong momentum. However, it is the niche legal plans that will be the real winners in all of this because they will be creating specific solutions based benefits that will resonate well with their target markets. In today’s “there’s an app for that” consumer mindset, consumers will look for very specific (niche) solutions to their legal issues, and that will be the primary drive for low-cost adoption and longevity in these plans. I predict going forward, we will see many more niche legal plans being developed by law firms, to help steadily increase revenue and stabilize cash flow issues. In fact, I wrote a piece on law firms of the future using a model like this.
If you are interested in creating a legal plan for your law firm, I can help. Just shoot me an email or give a call. Also, for those of you interested in learning more from other people involved in legal plans, I highly recommend you attend the GLSA conference in Tampa.
The GLSA 2019 Conference in Tampa Florida, is a two-day conference providing lawyers and other legal services industry stakeholders with opportunities for education, business development and fun in an idyllic setting. Guests will principally be legal plan administrators, legal plan panel attorneys, solo and small firm attorneys, general practitioners, investors, marketers, trustees, and professionals at the nexus of law and technology.
To register for this May 9-11, 2019 conference, call GLSA at 312-736-2924 or sign up online.