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The Virtual Law Office Debate: Virtually Impossible To Succeed or Not?

by Carolyn Elefant on August 22, 2010 · 22 comments

in Client Service, Marketing & Making Money, Office Options

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There’s an interesting debate over at Lee Rosen’s Divorce Discourse blog, in response to his provocatively titled-post, What the Virtual Office Advocates Aren’t Telling You. Lee argues that despite all of the buzz over virtual law offices, they’re unlikely to succeed because “there’s not much demand among clients for a virtual practice.” Lee elaborates:

A virtual lawyer isn’t what most clients are thinking of as the solution to their problem. If they want something virtual, they’re perfectly happy with services like LegalZoom.

Via comments come the dissenting views of Donna Seyle, Richard Granat and Stephanie Kimbro. Donna disputes Lee’s premise that there’s no client demand for virtual law providers, while Richard and Stephanie assert that lawyers must market virtual practices just as diligently they would traditional practices.

In my view, all sides of this argument have some merit, which is why featuring this debate is so important. First, it’s worth clarifying that virtual law platforms aren’t the problem, per se. Most clients now, or very soon will, demand a way to communicate with lawyers online, at a minimum by email, but increasingly, via a secure portal where clients can access their files on their own. The debate over virtual law practice isn’t about adding client portals, rather, it’s about whether using a virtual law platform to provide low-end unbundled legal services, either exclusively or as part of a full service practice, is a viable business model. Here are my thoughts, after the jump.

In my view, using a virtual law platform to deliver unbundled, low-end services exclusively is a tough sell.  For starters, as Lee contends, many clients would just as well use non-lawyer assisted online legal services like LegalZoom which have the added advantage of huge advertising budgets and exemption from the sorts of advertising restrictions that plague lawyers.

Second, basic laws of economics stand as a hurdle to a successful unbundled virtual law practice.  Unbundled services are low-end, and the only way to make money off low-end service  is through a volume case load. This is so whether a volume practice involves immigration law or court-appointed criminal work or unbundled incorporation.   In theory, the virtual law platform is supposed to make volume practice more profitable by automating the work, eliminating the need for an office and cutting down on face-time. But despite these cost savings and modern technology, at the end of the day, a volume practice is a volume practice, and lawyers need a find a constant stream of clients to feed the beast.  And to complicate matters, most solos stand at an inherent disadvantage when it comes to volume because they don’t have the low-end staff (e.g., an underutilized paralegal) or other benefits of economies of scale that larger “mill” practices, or a Legal Zoom type operation enjoy and that can increase the profitability of a volume shop.

So does that mean that there’s no room for virtual law practices that deliver unbundled services? Absolutely not. Remember, unbundled services represent a whole new market of clients who never had the means or desire to hire lawyers to begin with – so a virtual practice opens doors to new opportunities. In addition, providing unbundled legal services can serve other personal goals – a desire to help those who cannot afford full service, or a way to accommodate lifestyle choices.  In these situations, lawyers may be willing to sacrifice some level of income to achieve other ends.

But — don’t expect to open up a virtual law practice and have the dollars start pouring in, unless you’re prepared to invest substantial resources in extensive online marketing or you’re able to create a “referral pipeline” from courts or legal aid groups that will send a steady stream of work.  You may need to balance your virtual practice with full service practice, or  use the low-end work to build relationships with clients who might graduate to full-time service, like Upstart Legal, which I blogged about last month.

As with most discussions in the 21st century, we get so caught up in the technology, we forget that underneath many of the same principles apply. Low-end service = volume, always has, always will. Technology, efficient management and economies of scale can reduce the cost of providing volume services and make them profitable (ala Walmart) but they don’t change the laws of economics.  To the extent that any vendors have held out virtual law practices as a get-rich quick scheme (and certainly none of those I’m familiar with have done so), well, for goodness sakes: shouldn’t lawyers know better?

What are your opinions on virtual law practice platforms for unbundled services?  Do clients prefer lawyer-assisted virtual service to non-lawyer providers, and are they even aware that a lawyer-assisted option exists?  If you are using a virtual platform, has it met your expectations?  The comment section is open – so please post, or link to a post at your site that discusses these issues.

  • Carolyn Elefant

    I did not mean to suggest that lawyers can ever unbundle criminal defense work, or represent criminal defense clients virtually, e.g., by not showing up for court. The only reason for mentioning court appointed work is that it's an example of a situation where lawyers take on low-paid cases, and try to sustain a practice by upping the volume. During the brief period that I did court appointed cases in DC, I observed lawyers who handled only court appointed cases, no private clients and they were always scrambling (and DC rates were somewhat generous compared to jurisdictions that cap fees or have low hourly rates). I don't have a problem with the court-appointed system per se (I know that you are posting about New York's efforts to outsource court appointed work to one provider or something like that) – but I don't think it's wise for a lawyer to build a practice on low-paid work only, without higher paid work to balance it out.

    Finally, I while I self-correct frequently here, I rarely, if ever delete my posts.

  • shg

    I've got no idea how court appointed criminal work fits within your post, but I suggest that it's not a good example for any aspect of the discussion and would be best deleted.

  • shg

    The reason I question the inclusion of court-appointed defense is that it's not a matter of obtaining low-paying clients, since the attorney is appointed via the court, not chosen by clients. The suggestion that they can do anything other than what they are appointed to do might suggest to those who read it and are unfamiliar with the work that there are choices the lawyer can make, such as the virtual law office and unbundling services. As you know, there is no choice. The clients are appointed. The work required is not subject to the lawyer's choice of providing it in an alternative fashion and there is absolutely nothing the lawyer can do to unbundle or alter the relationship.

    I am concerned that an already maligned group not be further impugned by inclusion in a post that doesn't apply to them under any circumstances. Just trying to make sure that people outside criminal law don't get a gross misperception of the options available to court-appointed lawyers.

  • Mike Whelan

    I'm thinking I will combine the virtual with a different pricing structure. Like we'll do the LegalZoom stuff but with attorney review and a Skype follow up interview. A subscription plan will include that first document (say, a will) then over the course of the year for $50+ a month they get other services based on what plan they want to get on. Maybe the low end gets one other doc, all of our firm publications like how-tos, maybe a couple of hours of attorney time for tickets or whatever; with pricing going up for increased standardized services. Not sure yet how the plan will play out, but I am thinking that a subscription-type model will allow lower income clients to get access to services while also solving cashflow issues for the firm. I mean, $50 a month is nothing ($600 for two docs over the course of a year) but those things cost little to create. And if I get 10 new clients a month on the lowest plan for a year, then the next year I have $6k a month coming in with only a fraction of those clients actually needing attorney hours that month. After reading Susskind's book, the new E-Myth Attorney, Linchpin, etc. (unusual amount of free time during my 2L summer, I know) I have realized that I need to find a way to price freer client access, since that is coming whether I like it or not.

  • Carolyn Elefant

    I like the subscription model – makes a lot of sense. And you're right, free is coming to a market near you!

    You know, I read the E-Myth by Michael Gerber, which I liked a lot, but was not crazy about the E-Myth attorney, though I'm not sure why. But I do agree with Gerber's general principles, which carry through both books, and I only wish I'd read him before I started my firm 18 years ago. So you are definitely ahead of the game.

  • Rgranat

    A client portal can be useful for all types of law practices. Not just for low end legal services. Moreover, it's my experience that clients benefit enormously from a little bit of legal advice with their forms. This is a service that LegalZoom can't provide and which is greatly needed.
    You are correct that it would be difficult to build a business model where all of one's income is derived from low priced legal services over the web, because it would require high volume. On the other hand, it can be another revenue source that goes into the income mix that raises gross margins.
    There are also real benefits to using a web based document assembly solution for collecting information from clients through the web browser which flows into a document assembly engine. Other alternatives, like taking notes over the telephone, or on a yellow pad in an office meeting, are much more inefficient and result in a higher cost structure.

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  • http://twitter.com/SCartierLiebel SCartierLiebel

    Carolyn, I've weighed in on this 'debate' here: http://buildasolopractice.solopracticeuniversit

  • Carolyn Elefant

    Unfortunately, one problem with Legal Zoom is that because it was founded by lawyers, it gives customers the impression that there are in fact lawyers on the “back end.” This is a misperception that should be cured through additional consumer education or (if needed), a response by the FTC.
    I agree with use of document assembly, or at least forms to gather basic information from clients. Can always follow up if the answers aren't fully understandable.

  • Carolyn Elefant

    I posted a comment on your site. While I agree that virtual services are not necessarily “low end” services, that seems to be how many virtual law platforms are being marketed. As I wrote at your site, many lawyers, myself included, with more specialized practices (regulatory or appeals) have for years represented clients remotely through a combination of phone calls, emails and client portals – yet this is not considered a virtual law practice.

  • Stephanie Kimbro

    Another perspective that hasn't been mentioned as much is that virtual law practice, if completely web-based and not integrated with a traditional practice, can be used as a way of transitioning between careers, legal jobs and other personal and professional phases. I mention this because that's actually how my practice started – as a way to transition out of a small firm and into a solo practice to give me the time to care for my young children. It grew from there to a full-time web-based practice.

    More recently, I have spoken with other attorneys who are considering a virtual law office as a way to continue working with clients after being laid off from BigLaw and until they either find a new position at a firm or decide to take that leap into a solo practice. It allows them to continue using their skills and to learn new ones to build their resume. Other attorneys I've spoken with are opening virtual law offices to wind down their practices and ease into retirement. One will be taking only his HOA clients to work with them online as he leaves the firm to travel in his retirement. The flexibility of not having to invest in the infrastructure of a traditional firm makes this a cost-effective alternative.

    So aside from running a virtual law office as a full-time practice, there are these other options that I think provide a real value to members of the legal profession in terms of quality of life.

  • http://uslegal.com Frank Edens

    Carolyn, Thanks for this article. It is an interesting subject and one we have been studying and planning for years. The services that Companies like LZ can provide are greatly limited by unauthorized practice of law regulations. The lack of the ability to provide legal advice also limits potential services that could be offered. While incorporation and similar services are now allowed to be provided in almost all States by non-lawyers, there are countless other matters that cannot. We see a Virtual Law Office as not only a means for lawyers to provide unbundled legal services, but also as an effective intake and communication tool for traditional representation. Richard has been as advocate of the VLO for some years now and we agree with a lot of his assessment.

    The VLO opportunties at USLegal will not only provide attorneys with the technology to operate, but will also provide them with the marketing platform and business.

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  • Vincent

    As you know, Carolyn, Dawn and I are going all in with a virtual law office for family law cases. In the area of family law most of the work is what you might call low end anyway. Our problem is one of marketing. You mentioned referral lines from courts or legal aid groups. Sounds great but so far we've just hit walls because the courts and aid groups don't want to direct business to a for-profit organization. If you're non-profit you can put up fliers and brochures at the court and the legal aid centers but if you're for-profit, then they are afraid it will be endorsement and you can't get in the door.

    Also, I was talking to someone at a Chamber of Commerce event and she posed a question I hadn't thought about honestly: How do you convince people you're not a scam? Being solely online does limit the trust you get off the bat. People don't know you won't just disappear the next day. Your competition for they consumer's eye on the web does include a lot of fakers. So we're still working on figuring out how to promote ourselves and in the mean time taking traditional full rep services to pay the bills.

    I do firmly believe though that online legal help will one day soon be where online banking is today.

  • John D

    Carolyn brought up a very good point here. While the idea of a completely virtual office leaves much to be desired, there are many tools out there which can give practices a technological advantage. Our client portal has been a great tool for us. Clients can get to their files securely 24/7 and upload files to us using the same portal. We love PortalsXpress. They were created by The ShareVantage who we've been using for digital file storage for years now.

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  • mike

    Can anyone provide any sort of hard data on gross profits for a law firm selling unbundled legal services over the internet? Or at least anecdotal? I run a modestly successful, fairly litigious brick and mortar solo practice (in a small town) but would gladly trade a chunk of my profits for less stress and more mobility. But I’ve also got a (pretty small) mortgage to pay and those pesky student loans. If I could gross $35,000+ per year (my current gross profits are about $90,000) it would be a worthwhile switch. Even at $25,000-30,000 I might consider it so that I could rent out my house and travel around SE Asia for a year or two while working essentially part time. I bill at $150/hour and most attorneys in my area bill $225. It just seems like most of my money comes from court hearings and settlement conferences, mediations, and trials.

    I am fairly good at SEO and selling services over the internet, but going virtual is a big leap. It seems hard to transition into because you’d have people who wanted to meet in person if you had an actual office, and i would probably charge less per hour if I was totally online, so it seems easier just to save up some money and take the plunge. But hard to find much solid data on those who have plunged in and succeeded.

  • Mike O’Horo

    Before anyone gets too caught up in the semantics of “virtual lawyering,” it would be wise to recall the late ’90s dotcom era, during which every product suddenly inherited the “e-” prefix. It became de riguer, without which you branded yourself as “so yesterday.” Similarly, the whole “virtual” language has been misappropriated. Too many usages of “virtual” actually mean merely “online.” Just because something is accessed or delivered by the Internet does not make it virtual. Virtual means “as if,” e.g., a virtual event is one that you experience “as if you were actually there.”

    Ultimately, none of this will matter for long, anyway. You’ll recall that by the early 2000s, the e- designation was so ubiquitous as to be meaningless. Likewise, the novelty of Internet-based or -delivered legal service will wear off before too long — even in the stodgy law field.

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  • GCarl

    A virtual office is a good idea; in the day-and-age its important to get up-to-speed with the technology. But, eventually, you’re going to need an actual physical location to receive process (for example) and responses. A P.O. Box or a website/email address just won’t cut it.

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