We’ve spoken to countless business lawyers who help their clients with company formations and continue to hear the same thing. Making a profit while performing this type of work is hard.
New business owners searching for a lawyer to help them get organized are often looking for a deal. Since they haven’t started to make money yet, they don’t have much to spend on legal fees. Because of this, lawyers will offer competitive rates to attract new businesses. They will draw up shareholders’ agreements, by-laws, resolutions, and more for highly affordable fees. Sometimes, the firm will only break even, or even lose money, in the hopes that the client eventually requires more lucrative work down the line.
Unfortunately, it’s widely known that most new businesses fail and, thus, don’t end up requiring additional services. Furthermore, once a new company is formed, a lot of additional legal work needs to be done to get them off the ground. They’ll need employment agreements, sales contracts, NDAs, etc. Generating these vital documents can’t be that profitable either as the business still isn’t making much money and so they must still be done at lower fees. Sure, you could try asking for a higher fee - but that runs the risk of the client soliciting another firm. Even worse (and more likely), the client might try and do the legal work themselves with tools like LegalZoom. We all know how that turns out.
While this work is fairly routine and a great way to bring clients in the door, lawyers need to ask themselves if providing these services is really helping their firms in the long run.
Here’s the good news: we are seeing a massive shift in how firms are capitalizing on this type of high volume, low margin work. By evaluating your current processes and embracing best-in-class technology, you may be able to lower your fees for these types of services to more effectively compete, all while continuing to make a meaningful profit.
Read on as we outline how to determine if your current process for new company formations is making you money and what you can do to boost profitability.
These documents can be critical in starting a new company but can also be time-consuming for lawyers to generate and don't command a high rate. Start a spreadsheet and list the services that fall into this category.
Add the answers to these questions to your spreadsheet in a new column beside each listed service. Take note of how much time and energy you spend fact-finding, it will be important later.
Add the answers to these questions to your spreadsheet in a new column beside the answers in the previous step.
Once you have laid out all of the above information, now what?
Check to see if any of the services you listed have the following features:
If the service checks these boxes, it is likely that you have room for automation within your process and can dramatically increase profitability on these types of matters.
For the services that don't match the criteria above but you find are not profitable, it is possible there are other methods you can use to help change that.
Imagine a world where you can send a simple questionnaire to your client with the click of a button, gathering all necessary information without the endless loop of emails and phone calls. And, with document automation technology, you can use their responses to instantly generate the documents they require. Or, you can copy their responses directly into an online filing system.
Benefits to you:
Benefits to your client:
Through the benefits outlined above, you could significantly reduce the amount of time it takes you to do your work while decreasing the cost to your firm. Once you have figured out how to reduce the costs to perform your services, you have a few options for how to adjust your pricing:
Now that you’ve determined which services you can provide at a lower cost, implemented automation, and adjusted your pricing (if necessary), you should be well on your way to increasing profitability when performing new company formations. If you would like to learn more about how Rally can help you embrace automation, book a demo, we’re happy to chat!