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Solo & Small Law Firms

Ideas for the Firm of the Future + One: Diversify Your Offerings

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Via Dan Pinnington at, I learned of Merrilyn Tarlton’s excellent article, Figuring Out Your Place in the Race (ABA Law Practice Magazine, Jan/Feb. 2010).  Recognizing that technology advancements and economic upheaval have rendered extinct the high leverage business model, Tarlton predicts that “the future of the business of law is going to be about difference, not sameness.”

Thus, Tarlton offers seven interesting and innovative business models for law firms of the future:

  1. The Virtual Firm:  Typical legal services at a better price.
  2. The Retail Firm: Off-the-rack legal solutions with options for custom-tailoring.
  3. The Legal Line: What You’re Selling: Quick answers to questions like “Can I get a divorce without paying a lawyer?”
  4. The Teaching Hospital Firm: What You’re Selling: Top-drawer legal services and elite on-the-job training.
  5. The Firm’s Firm: What You’re Selling: “Shovel-ready manpower,” backroom legal services.
  6. The Drive-Up Mediation Firm: What You’re Selling: Quick and easy resolution of simple conflicts.

(See Tarlton’s full article for the details of each model, including its potential target client base and competitive advantage).

I’m intrigued by and see the value in all of Tarlton’s proposed business models.  However, as terrific as these ideas are as stand-alone models, many of them operate even more effectively in combination with each other.   Because it’s not just the billable hour and the associate leverage model that left law firms high and dry in a down economy.  Rather, it was also firms’ failure to diversify their offerings, as I described here (see original post for links):

Like the high tech stock portfolio, biglaw’s so-called diversity is illusory.  What’s the point of offering 50 different practice areas if they’re all premised on the billable hour?  When the economy tanks as it has now, clients reach a point where they can’t afford any of the firm’s offerings.  In short, multiple practice areas don’t provide much of a hedge against a poor economy because when the economy hits rock bottom, all of those services are priced way out of most clients’ range.

By contrast, smart solos diversify – for real – both in fees charged and products and services offered.  As to fees, most solos offer a variety, from billable hour to flat fees to phased fees (flat fees for different phases of a protracted process) to value based billing or reduced fees with success bonuses and of course, the good old contingency fee.  Different fee structures mean that clients can always find some service in their price range, which insulates us in a downturn.  Few solos I know (myself included) who offer these varied billing structures have even had to cut rates much, if at all even in the midst of this economic turmoil.

Fees, however comprise only one component of diversification.  Solos are also diversifying the products they offer, many times through leveraging existing expertise.  For example, many family law or estate lawyers provide full service to clients, but also offer unbundled service to clients who can’t afford or don’t want more.  Unbundled services diversify a practice and guard it against economic downturn, but it’s also a form of leverage:  because lawyers already have deep familiarity with certain practice areas, it doesn’t take much effort to squeeze more value out of that knowledge by providing it in an unbundled package. Tollbridge agreements which provide a small service on an ongoing basis are another way for lawyers to diversify their revenue stream.

Diversification can also take the form of different side businesses.  In my own case, in addition to my law practice, I generate a small amount of revenue from this blog (which I hope to increase over the next few months) as well as from work with a trade association that I formed.  Some lawyers offer for-fee seminars on their practice area, coach other lawyers, help them market law practices or build legal reseach and writing outsourcing services.  Some even go so far as to develop software products or other technology that enable lawyers to run practices efficiently.  Some solos ghostwrite for other companies or even operate businesses totally unrelated to law practice (such as party planning or leasing companies) that bring in money without detracting from the practice of law.

For lawyers interested in diversifying the types of services that they offer clients, Tarlton’s business models offer some great ideas on where you might start.

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