Article by Stanislav Roth. This article was originally published in Inside Small Business
The recent release of the annual ‘Legal Market Pulse’ by the Commonwealth Bank confirms that terms such as NewLaw and ‘alternative business models’ (ABM) firms are now firmly entrenched in the lexicon of not just the legal industry, but the broader business sector as well. As early as 2010, businesses have been voting with their budgets by flocking to ABM law firms for legal support. It’s clear that increasingly, people don’t want to pay for the clock ticking on a lawyer’s desk.
If you’re a start up, or small business owner, it doesn’t matter if your business is not in the legal sector – the lesson for any small-medium services business is this: Clients want to buy expertise and solutions, not time. We all want value, not just services.
There are three overwhelming reasons why you should consider adopting an alternative business model, to ensure you are not missing out on capitalising on this inexorable shift.
Firstly, how does happy customers sound? from a client’s perspective, alternative pricing models, such as monthly retainers, deliver unparalleled budget certainty. Having services ‘on tap’ offers extraordinary advantages for clients. It doesn’t matter if we are talking legal services, marketing services, or any other type of professional service. For smaller- or medium-sized enterprises (SME), it means they can avoid the need to employ people with those skills directly, which is often an unjustifiable expense when your operating budget is small. I find my clients prefer a retainer that covers an agreed scope of work, but is unlimited in terms of time. That means regardless of what each month brings, if there’s work to be done within the agreed scope, we do it. In my experience, clients appreciate the confidence of knowing they don’t need to worry about paying someone for every minute of their time, but that they can rely on quality outcomes. This approach not only represents incredible value to SMEs in particular, it can mean leveling the playing field, as SMEs are often attempting to disrupt businesses whose resources far outweigh their own.
Secondly, let’s talk about staff wellbeing. From my experience as a lawyer, moving away from the pressure of 6-minute billing, and focusing instead of creating value, generates an entirely different way of working. Not to mention living. Skyrocketing mental health issues across the legal industry speak volumes as to the fundamentally flawed approach of the traditional way of practising law. Of course, mental health is a complex and multi-layered issue, but clearly the relentless pressure and dissatisfaction involved in tracking time and delivering on unrealistic ‘billable hours’ targets is a huge contributor to the problem. It’s clear that this is not sustainable, unless we want to condemn thousands more lawyers to burn-out, and serious impacts to their wellbeing. ABM law firms are paving the way for generations of lawyers to come, enabling its lawyers to have increased independence and choice regarding the work they do, and what they charge for it. No timesheets, no budgets, and no set hours, combined with full autonomy and responsibility for clients, and backed by strong mentorship and support, all add up to a more profitable and rewarding way of practising the legal profession.
Thirdly, it’s a business differentiator. There are plenty of people out there charging by the hour. It’s not hard to see why – it’s the ‘safest’ way of ensuring your time and effort is rewarded. But safest doesn’t mean the smartest. And it’s safe in the short term only. Take a lesson from the legal industry, where the rise of ‘NewLaw’ as a genre underpins the trend of clients increasingly moving away from traditional law firms to procure legal services at alternative law firms.
If you offer your clients alternative pricing models, you are providing a clear distinction as a service provider. If you offer your staff flexibility with hours and workload, you set yourself apart as an employer. Differentiation is key.
Finally, put yourselves in the shoes of your client. If you had to choose between paying by the hour for uncertain outcomes, or paying a fixed retainer where you knew all your needs would be met, what would you choose?