Subscribe to Ivey Business Review


1) Enter your email:




Digital Justice: Improving Access to Legal Services

LawyerLocate.ca can capture a million dollar opportunity by developing an online legal services marketplace.
billablehoursheader

Equal access to legal services is a concern amongst practicing lawyers and professional associations. High and rising legal costs hinder low-income Canadians from accessing fundamental personal and small business legal services, thus creating a culture of vulnerability. This unsettling picture, however, presents a multi-million dollar business opportunity, where an intermediary can serve to connect lawyers to this underserved market.

My Kingdom for a Lawyer

Most Canadians require legal services at some point in their life, such as for estate planning, real estate transactions, marriage and divorce services, or small business incorporation. Yet, for many Canadians these necessary services are unaffordable. For example, crucial labour employment services, such as reviewing basic employment contracts or severance packages review, cost upwards of $559. Lawyer fees are equally as expensive, costing over $360 per hour for an experienced lawyer—an increase of 12% since 2014.

Provincial governments have tried to increase access to legal services through government-funded legal aid programs. However, these programs only assist people below the Low Income Cutoff. A family of four, for example, must have an income of less than $520 per week (37% lower than the median weekly household income of $825) to qualify for legal aid. This creates an underserved market of Canadians who do not qualify for legal aid, yet are not wealthy enough to seek and retain private legal counsel. This segment has weekly household incomes between $618 to $1766 and makes up 71% of the national population. As such, it is unsurprising to find that 56% of Canadians do not have a will, and less than 15% of Canadians seek legal advice when they are faced with legal problems. This underserved market represents a lucrative business opportunity.

Small Business vs Big Law

Of Canada’s 1.2 million Printsmall businesses, only 8.1% have a lawyer on retainer. Similar to individuals, many small businesses are unable to afford legal services. Incorporation documents for a simple business carry an upfront cost of $1,070, and the filing of an uncomplicated patent is, on average, $7,100. In the last 3 years, 30% of small businesses have faced unforeseen legal disputes.

These companies are billed an average of $31,330 for two days of civil litigation, representing a 43% rise from 2014. In comparison, the annual average small business revenue is $675,000 and, at an average profit margin of 5%, this translates into $33,000 in annual profits. As a result, 73% of small businesses are not financially prepared for the cost of unforeseeable legal action. This exposes small businesses to a significant level of liability risk, making them another potential market in need of affordable legal services.

An Online Opportunity

There is an opportunity to create an online legal services platform that will connect lawyers with traditionally underserved Canadians, providing affordable legal services to middle-income households and small business owners.

Increasing access to justice is two-pronged. First, lawyers need a new way of connecting with Canadians who have traditionally not been legal clients. Second, cost concerns must be addressed by maintaining low operating costs and delivering services at discounted prices.

The internet represents an easy and scalable medium to connect lawyers to clients. By transcending geographical barriers, accessibility to legal services can be increased. Currently, 87% of Canadians have access to the internet, and the majority already trust the internet with personal activities, such as healthcare and banking advisory. The legal industry is not unfamiliar with the internet, as the Law Society of Upper Canada and private corporations already use the internet as a medium for facilitating referrals for lawyers. Therefore, transitioning from referral services to digital services is the logical next step in the evolution of the legal industry.

By using the internet as a medium for facilitating legal services, lawyers will be able to enjoy additional revenues without incurring additional operating costs. Offering online services will be attractive to lawyers with excess capacity, as it provides a way for them to earn additional revenue without the need for additional office space or other expenses. Lawyers from a recent year of call, or located in quieter geographies, will be incentivized to offer cost-effective hourly and fixed-fee legal services, without the risk of higher operating costs.

A Case for LawyerLocate.ca

LawyerLocate.ca Inc is the ideal candidate to launch a website that facilitates legal services. The company launched in 2002, and was recognized as Google’s first Canadian legal industry partner. LawyerLocate.ca is now Canada’s leading lawyer referral website and welcomes an estimated 70,000 unique visitors each month, with annual estimated revenues of $1.9M. These revenues are generated through monthly fees that lawyers currently pay to be listed on the referral database.

Expanding into legal services is a natural adjacency for LawyerLocate.ca. The present legal referral industry is maturing and margins are likely to erode as new start-ups such as Kabuk Law and LawyerLinx compete with LawyerLocate.ca. American referral websites such as Avvo (valued at US$650M) and FindLaw (owned by Thomson Reuters) also represent competitive threats that may enter the Canadian market. These competitive pressures demand that LawyerLocate.ca solidfy its position in the Canadian legal market by developing a platform for online legal services. LawyerLocate.ca has the largest database of lawyers in Canada and can use its exisitng relationships with lawyers to form the legal base of this new platform. Additionally, the site’s current reputation can aid in attracting new patrons.

New Platform in Session

LawyerLocate.ca can develop an online legal services platform that facilitates virtual transactions between lawyers and clients. The platform would be an online marketplace where lawyers post their services, clients purchase these services and then rate lawyers following the transaction. In this manner, LawyerLocate.ca is similar to Uber and Amazon, in that it connects independent lawyers with clients. The platform would then provide value-added services, such as secure document transfers, and earn a fixed percentage fee on all sales made.

On LawyerLocate.ca, clients enter their search criteria to generate a list of suitable lawyers for hire. Lawyer profiles and ratings would be available to clients, but lawyer names would be hidden to protect lawyers’ ability to charge higher costs to clients they meet face-to-face through their traditional avenues (although names may be  revealed after payment).

Once a client chooses a lawyer, they would then enter their personal and billing information. Clients would agree to the cost of the service and would be required to provide payment information upfront. They would then be asked to upload the files necessary for their service, and the lawyer would then fulfill the order. For legal purposes, any communication would be conducted through the platform’s messaging service. Clients can then rate their lawyers, which will be valuable to future prospective clients and incentivizes lawyers to provide quality service.

The online platform is limited in the type of legal services it can facilitate, as it will be more conducive to standard form transactions with minimal complications. These include personal wills, power of attorney documents, uncontested divorces, and small business incorporations. Potential hourly-based legal services can include online or phone consultations in order to prepare clients for self-representation in court. In traditional law firms, the aforementioned services are considered to be low-margin and, depending on the firm, avoided. However, lawyers working with an online platform will have lower overhead costs, allowing them to enjoy incremental profits above the current levels. Cannibalization from operating a new online platform can be minimized by targeting online clients from disparate geographies, who would traditionally not have accessed legal services at all.

Mandate for Action

The lawyers targeted by this platform are those with below-average wages or excess operational capacity. These lawyers will likely be employed at small and medium-sized firms, likely in smaller communities, with occasional downtime and an inconsistent client base. Young lawyers trying to gain experience and lawyers that cannot organically grow their client base are the two main target subsets. Approximately 22.2% of the 90,000 Canadian lawyers fit this target profile.

Based on the projected clientele demand, this would require LawyerLocate.ca to capture an additional 7% of the target lawyer market, and require each lawyer to work on one client case every two days. This is a reasonable standard given that most of the proposed services are standardized, and require approximately only two hours of work per client.

The proposed online platform must conform with all fourteen sets of provincial, territorial, and federal regulations governing the legal profession and different aspects of the law. While in all Canadian jurisdictions, an online platform is prohibited from providing legal advice, this platform only facilitates legal services by connecting independent practitioners with clients. To better serve clients, the platform should include lawyers from all 14 Canadian legal jurisdictions to provide services tailored to each locale.

LawyerLocate.ca Inc owns Emspace.ca, a digital marketing firm with the capacity to develop websites. This relationship will provide LawyerLocate.ca with the skills and expertise needed to develop most of the platform. However, there will be additional costs associated with security, due to the sensitive nature of the information shared between lawyers and clients.

MarketSizeThe Verdict is In

By charging a fee of 1% on all transactions, it is projected that LawyerLocate.ca could earn an additional $1.6M in annual incremental revenue. Average fees of $150 per hour of legal service, and fixed-fee standard form services of $250, will be on average 50% less than current market rates. Additionally, by continuing to charge lawyers a listing fee for its referral platform, an additional $1.2M in incremental annual subscription fee revenues can be captured. After factoring in costs of marketing, platform development and maintenance, and minimal variable costs, this platform represents a $2.1M annual opportunity for LawyerLocate.ca.

The existing legal industry is accessible to the wealthy and subsidized for individuals below the poverty line. However, it fails to meet the needs of middle-income Canadians. By addressing this market, LawyerLocate.ca has the opportunity to potentially increase profits by 212%. LawyerLocate.ca can cement its industry leadership while also making law accessible to millions of underserved Canadians.