What’s the Truth about Virtual Law Offices?

Two weeks ago, I posted an article about virtual law offices (VLOs) as a result of my concern that lawyers buying these services and the service providers fail to fully discuss and/or understand the marketing challenges involved. I got some great feedback and some criticism. I’m glad to have stimulated some discussion (here, here, here and here).

Just so we’re clear, I love the idea of a virtual practice. We’ve had a client portal for more than a decade, and I’m experimenting with some other VLO concepts on my North Carolina Divorce website. We’re iterating on a weekly basis. It’s a struggle, but I believe it will work—eventually.

In pondering the issues involved, I came up with a modest proposal that I think would help the lawyers thinking about buying a virtual law office as well as the sellers.

Vendors, how about sharing anonymous post-audited financials from some of your customers? Show us that customers are making money using your product. Prove it to us.

Help us understand where virtual practices are working and where they aren’t. Give us data so we can make objective decisions before buying your product. Lot of vendors, of other services, provide case studies. Will you do that for us and provide the data?

That’s a win-win. We, as customers, get proof that we’re making a good investment. You, as vendors, build trust. Plus, if some of you are helping your customers generate greater profits than others, you’ll win even more of the available business.

I’d love to see some financials for the purely virtual practices as well as numbers from more diversified firms showing us the results for the virtual portion of the practice. Assuming that the numbers are good, this can only accelerate the adoption of these technologies.

While we’re at it, wouldn’t it be great if we got financials for the clients of consultants trying to sell us management and marketing consulting services? I’d love it, and I’d be far less skeptical of some of the claims I’ve heard.

What I’m asking for is kind of like what the Federal Trade Commission (FTC) requires of franchisers. The FTC mandates all sorts of disclosures plus a list of 10 recent purchasers in close proximity to the customer. Let’s bring some transparency to the industry so we can all know what we can expect.

Vendors, what do you say? Are you in? Can we bring some tangible reality to the virtual marketplace?

Related articles:

  1. Virtual Practices Must Be More Than Online Offices
  2. The Truth About the Future of Family Law
  3. How To Work with a Virtual Assistant
  4. What the Virtual Office Advocates Aren’t Telling You
  5. Facebook, Guarantees, Margins, SEO and Offices. Super Saturday!

  • http://www.twitter.com/rachrodgersesq Rachel Rodgers

    I have seriously been contemplating purchasing a virtual law office product. I did research by contacting 6 different attorneys/firms that were using it and asking them if they were making money with the product. Some of them were new attorneys, some of them were very experienced attorneys, some were purely virtual and some had very profitable traditional law firms and were adding the client portal to their practice. It disappoints me to say that none of them were making a profit from it. However, they were all still in their first 1-2 years of using the product. I would love to hear from some of the attorneys that have maintained a virtual law practice for longer, say 3-5 years (if there are any), to hear what their thoughts are on how to make it profitable. I do believe that it is a worthwhile venture and the future of law practice but most new solos need to make a living as soon as possible. I think Stephanie Kimbro, through Solo Practice University, has done a really good job of creating a road map for new VLO’s on how to market the product. I think starting a VLO is just like starting a traditional law office, you are taking a risk. You can ask all the attorneys in the world for tips on how to be successful but at the end of the day its about the blood, sweat and tears that you poured into it. I guess my point is, though technology is changing a lot about how we do business, at the end of the day, hard work is the key to success. Only I can measure how much I will pour into my practice.

    • http://www.rosen.com Lee Rosen

      Thanks for jumping in Rachel. It’s great to hear from you. I hope you give it a try and provide some feedback when you have data. I’d love anonymous audited numbers from the vendors so we can really figure out what’s going on.

      I’ve asked some users of these products and they say they’re doing great. Then I push and find out they’re doing $1,000 a month in revenue. I ask others and they say they’re doing horrible. Then I push and find out they’re also doing $1,000 a month in revenue.

      Whoever brings us objective data – showing success – will be the big winner. I wonder if it will be one of the existing vendors or if some big provider will step in to the space.

      Thanks for being here.

      Lee

    • Mike

      I would love to hear more information about this. I have been trying for some time to find some solid information on the earning potential of a purely virtual office and it is surprisingly elusive.

      Personally, I think most of these legal products offered up as beneficial to VLOs are not as good as they seem and are largely unnecessary. To me, the whole idea of a pure VLO is simplification. By doing less billing, more flat fees, and a more limited area of practice you should be using less software, not more. I tried one SaaS office management software and found I get more functionality and better performance out of quickbooks, and over even a year-long period it’s much less expensive, not to mention 2-3 years.

      It seems to me that the most important thing to a VLO must be marketing, as you need higher volume. And low-cost high performance marketing as your gross profits will be lower. The second most important thing would seem to me a business strategy where you’re maximizing the profit per hour of work you put in.

      I have done pretty well since I started my practice fresh out of law school in January of 2009. I focus almost solely on family law issues, which seems a prime area for VLOs. I can imagine earning $1,000-2,000 per month gross fairly easily with the right marketing strategy. It’s hard for me to imagine more than $3,000 per month though. So, I don’t think you could ever make as much as a brick and mortar office (and let’s face it, rent is not that expensive), but it’s a good alternative if you desire mobility, working from home, or some other similar situation. This is primarily due to the fact that as a pure VLO you would be doing uncontested cases, which typically pay the least and have the most competition for them.

      I imagine a lot of people get hyped about the idea of a VLO but don’t have a grasp of web design, SEO, advertising, and internet marketing. If you had to hire someone to do all that you’d be out a lot of money. If you didn’t hire someone and didn’t know how to do it yourself, you’d never make it. If I were to switch to become a pure VLO, I would expect to spend the first 3-6 months making little while spending 40 hours/week designing web pages/content and doing SEO.

  • http://www.myshingle.com Carolyn Elefant

    Lee, thanks for the link. I’ve been curious about this for a while as well, largely because (as I said in my post), basic rules of economics would require large volume for fairly low end work. There’s nothing wrong with that — I love Walmart as much as anyone — it’s just that type of volume is hard for a solo to generate. I did speak with one vendor who shared a business model – decent revenue, but also a significant marketing expense – probably around 30 percent of gross.
    However, to be fair, I also think that it’s important to view the numbers in context. Based on where my practice is now, $1000 per month, while nothing to sneeze at, is essentially negligible. But back when I was working part time with two younger daughters, I would have been overjoyed to find a platform that would let me earn an extra $1000 per month with limited work (since it’s all automated). Since many unbundled virtual law firms are started by lawyers in unique situations – retired or part timers – the lower income may be a trade off for flexibility. But again, that’s a value judgment for a purchasing lawyer to make based on a full assessment of costs and benefits. Your idea about disclosure is a good one (of course, not just for virtual platforms, but for many other services provided to lawyers) and if you decided to pursue that approach, I would lend my support, FWIW.

  • http://www.directlaw.com Richard Granat

    Lee – I agree with your point about transparency completely. I think that transparency is an attribute that consumers truly value, whether the consumers are law firms considering a purchase of a software application, or consumers purchasing a legal service from a lawyer.
    I think you need to make some distinctions between the different types of SaaS Virtual Law Office Vendors.
    Some vendors offer only a web-based practice management system with no client-facing portal. The only claims that these vendors make is that they can help law firms manage their back office systems more easily and at less cost, particularly small law firms.
    Other vendors, include a client portal, as part of their offering, where a client can log on to their own secure and personal legal space and work with their attorney on-line. Depending on the approach taken, these client portals may be revenue generating, or just provide a different kind of client experience. Our SaaS virtual law firm service, http://www.directlaw.com, offers a “client portal” that has multiple benefits depending how it is deployed. Law firms can choose to provide an “unbundled legal service”for a fixed fee, or alternatively, bill for services in the traditional way, using the document automation functionality to simply increase law firm productivity. For example, some law firms, use our web-based document automation functionality primarily as a way to expedite the production of the first draft of a document, eliminating time-consuming intermediate steps, while expediting the collection of information from the client — by using a web-based inter face, rather than a paper-based intake questionnaire. This works for some clients, but not all.
    We are building a set of case studies with financial models, as you suggest, which will be published as they are completed. We believe that every one can learn from these case studies and that the sharing of information is a high priority. For that reason we are creating a learning community for lawyers interested in this subject at http://www.virtuallawyerconnect.com, which is designed to be vendor independent, and will be independent of our company, DirectLaw, Inc. We welcome your participation in this community.

    We are still in a period of experimentation and virtual law office tools will be used differently by different firms based on the differing business models. We all need to learn from each other in order to advance the state of the art, and to figure out what works and what doesn’t work.

    One thing is clear: Since these tools are still “back-office” tools and technology the success of a particular implementation is largely dependent on the quality and the success of the law firm’s front-end web site. As a vendor we have little control over this, unless we develop the firm’s web site. Even then, the law firm’s web site has to be findable on the Net and a certain amount of funds has to be allocated to marketing. The law firm’s needs to have the know-how to market their firm on online. So if the law firm has had a web site for several years, it is likely to have much better search engine organic placement , then one that was recently launched.
    My point is that there are many variables that control whether a firm will be a successful, and more importantly, success can be defined in more ways than just revenue generation. I think that is too narrow a focus and confines the conversation.
    The cost of adding a virtual law firm functionality to one’s law practice and web site, is really not very high, if the SaaS model is used. A single transaction, in terms of revenue generated, or lawyer time saved, is often sufficient to pay for the monthly cost, so the cost of experimentation is very low. In my opinion, the law firms that start experimenting today will be the ones that will be successful tomorrow, as market dynamics change. The law firm’s that wait until all the questions are answered will pay a penalty.

    It is typical for lawyers to hold back until a change works its way into the main stream. This hold back has accounted for the rise of LegalZoom, and the rise of the “pro se” litigant. As you know, in many states 80% of parties represent themselves in family law matters, primarily because they cannot afford legal fees charged by the family law bar. As a result the courts have released standardized forms and provide direct help to “pro se” litigants in family law matters because they are over whelmed by “pro se parties” in family law matters.

    If the legal profession is unable to service the broad middle class in an area like family law, at a price that is affordable, and can only really the serve the most affluent, than I would argue that the business model for the typical divorce lawyer is broken. I am not suggesting at all that a virtual law firm concept is an answer to this broken business model. I am saying that there needs to be a re-examination of the way in which legal services are delivered to the broad middle class in this country. If lawyers only serve the most affluent among us, then it will become harder and harder for lawyers to justify their monopoly position as the only source of legal services.

    • http://www.rosen.com Lee Rosen

      Fantastic, I can’t wait to see the case studies and the numbers. I appreciate the complexity of the situation and recognize we’ll all have to learn from the numbers and apply them to our unique situation. You’re doing a great job of “opening up the kimono” and I’m sure that will accelerate adoption. I suspect you’ll leave your competition – if they don’t adopt your transparency – in the dust.

      Good luck and thank you for your, as usual, thoughtful response.

      Lee

  • http://www.thesharevantage.com John Alan

    Hello. You had asked for some input from vendors. I work for a company called The ShareVantage (www.thesharevantage.com). We offer a variety of virtual office solutions. Although we do target law and accounting firms (we used to exclusively develop Fiduciary Accounting software, and are familiar with those industries), our customer base is pretty diverse. We additionally service debt settlement companies, credit restoration companies, printing companies, and many more.

    Although I’m not sure it would be appropriate for me to ask our customers for financial information, I can assure you that we service a number of companies whose businesses have grown dramatically, thanks to our virtual office solutions.

    A few examples…

    Late last year, a small debt settlement company came to us, initially interested in just our client portal solution (which we market on our sister website “www.portalsxpress.com”). During a needs assessment discussion with them, we learned that they were manually submitting payment transactions for their customers via a national bank’s website. It was a very time intensive process, and keeping track of payment schedules was a nightmare for them. We determined that if they implement our full virtual office solution (which includes process automation, client portals, and document management), we could quickly customize a solution that let them schedule payments (both one-time and recurring). At the end of each work day, they now click on a button that builds a single ACH batch file, which they simply upload to their bank’s website. This takes care of all of that day’s scheduled transactions at once. Our client portal solution lets their clients and vendors login via a web-browser to view the transactions and payment schedules, and run reports with date ranges. Their customer base has shot through the roof now that they can handle the volume, and they spend little time on support incidents, due to their customers being able to access their information 24/7 via the secure client portal.

    We have a printing company that previously did all of their business via phone or email. With our help, they now have a virtual office solution that lets customers place print-orders directly through their client portal 24 hours a day, 7 days a week. The process automation lets their customers receive notification emails on the status of their order, along with tracking information, and helps the printing company’s employees perform the sequential tasks needed to quickly process orders. I believe they’ve increased their order volume by 20%-25%.

    We have many customers that use the virtual office for simpler processes such as scheduling e-mailings to their clients, scheduling the upload of relevant files to their clients’ portals, or simply performing the secure transfer of large files (which is problematic and in some cases illegal to do through standard email, which is not secure).

    Our annual renewal rate is very high, and we’ve had numerous customers describe us as life-savers for their companies.

    There is absolutely no doubt in my mind that virtual office solutions are extremely beneficial to the organizations that choose to implement them. The key is to find a solution that, again, integrates process automation, document management, and client portals. And that’s what we provide.

    - John

    • http://www.rosen.com Lee Rosen

      John,

      Great looking product. I hadn’t heard of it before and I appreciate your explaining it here.

      Thanks.

      Lee

      • John Alan

        Thank you. If anyone’s interested in our service, and would like to evaluate us, please feel free to create a trial account from our website: http://www.thesharevantage.com. It’s free!

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