Law Firm Economics: The Case for Variable Software Pricing
As we approach the 10-year anniversary of 9/11, I’m reminded of the financial troubles that my immigration firm experienced in downtown Manhattan shortly after the attack. Being locked out of your own office for an entire week is almost never good for business, plus there was the logistical nightmare of making sure all of our employees were okay and dealing with those who understandably decided never to return to work. But like many businesses in New York, we survived thanks to our employees’ dedication and the understanding/compassion of our corporate clients. And having an off-site immigration case management system didn’t hurt either!
Like so many other immigration firms though, we struggled to cope with the post-9/11 immigration reality. Longer visa wait times, stringent entry/exit requirements, and dealing with the newly created immigration agencies meant that cases took longer to process, required more hand-holding, and had unpredictable outcomes at best. Aside from these “procedural” challenges, there was also the local and national economic downturn which led to fewer jobs, fewer international assignments and a severe reduction in employment-based immigration matters. Faced with these dire consequences, we naturally looked to cut back on our overhead expenses as much as possible, scrutinizing those “fixed costs” which had to be paid regardless of how our firm was doing. Personnel, facilities and services were the three fixed expense areas that we examined, and sadly, cuts in personnel became necessary. Fortunately though, our firm had a high degree of variable costs which fluctuated directly with the number of cases we handled. As a result, we were able to weather the perfect storm and rebound again by paying less during those difficult times.
Fast-forward to 2011, and many immigration firms are still struggling to survive amidst the lackluster US economy and ever-thickening immigration red tape. While navigating the murky immigration waters has not gotten any easier, there have been significant advances in case management technology which enable immigration firms to run their entire practice from one comprehensive application. Gone are the days when you needed a word processor, forms program, separate database, a billing program, and a typewriter (remember those?) to complete all of the paperwork. In today’s world, information technology is now mission critical to just about every function your immigration law firm performs.
And yet, many organizations naturally worry about the costs of such a system. What if my case volume plunges suddenly or I’m unable to attract new clients? How will I afford to pay for a fancy tech system during difficult times? The answer: turn that “fixed” technology expense into a variable cost. Or in other words, choose a system where you pay only for what is needed, when it’s needed.
Immigration Case Management Pricing 101
When shopping around for an immigration case management system, you’re likely to see a variety of pricing models, making it difficult to compare apples to apples. A forms-only program (“immigration management lite” if you will) may charge a low yearly fee, but will usually not include the level of features and support needed to truly streamline a law firm’s operations.
Another common pricing approach is to charge a “Per User per Month” fee with gradual price increases over time. Assuming your staff levels remain fairly static, this “case management fee” essentially resembles a “fixed cost” which you will have to pay regardless of how your business is doing. Having a slow December due to the holidays? Is the economy making PERM applications impossible to start? Regardless, your case management fee remains the same on a month-to-month basis. Some firms may try to get around this “monthly nut” by sharing user logins, which isnot a good idea for several practical and legal reasons. Sharing a login is akin to sharing one’s identity – it eliminates accountability, increases the likelihood of untrained user error, and in the worst case scenario, can facilitate fraud! Whatever pricing method you choose, never share user logins or passwords.
A third approach, championed by LawLogix, is to charge a much lower “Per User per Month” fee (to account merely for the provisioning of user support) plus a fee for each case that you open in the system. How does this impact your bottom line? Well, just like any other variable cost, this pricing enables firms to pay only for what they use in a given month while still maintaining the same professional system for existing clients and matters. So using our example above, the firm with a slow holiday season will have a much lower case management expense due to the variable nature of the fees. How significant is this? Well, imagine you were having a difficult month and your landlord came to you and said, “I noticed you are hardly using the office these days, so I figure you only need to pay me for the days that you were physically here. Sound okay to you?” Yes, I know…unless your landlord is your mother, that’s probably not going to happen any time soon. But, with variable case management fees, you can enjoy the flexibility to pay less.
Let the good times roll
Thus far, we’ve only been talking about case management fees during the down times. How will variable costs impact me if I suddenly pick up a new client, or against all odds, Congress passes pro-immigration legislation? This is what we like to call a “high class problem” – having more case fees is certainly a concern, but at the same time, having more cases is a problem we’d all like to have! So yes, the flip side of the coin is that your variable case management fees will naturally rise as your business grows and expands. However, as we’ll explain in a future blog post, most firms will choose to pass that case fee along to their clients in exchange for convenient online case status updates, a wide variety of reports, and quicker case processing overall. In this regard, it’s important to note that a case management fee is usually not considered to be an “overhead cost” by your clients, but rather a value-added benefit of doing business with your firm.
Aligning your vendor’s interests with your own
A funny thing happens when you adopt a variable case fee approach with your vendor: suddenly, your interests are both perfectly aligned. The more cases you prepare, the more fees the vendor collects; conversely, if you are having a bad month, so does your vendor. This alignment of interests is important because it creates a natural incentive for your vendor to help you get more business by continually innovating and improving the product. And as we have frequently discussed on this blog, it’s absolutely essential to choose a vendor who will act as your partner by listening to your suggestions and even anticipating new trends or desires.
In today’s new economy, immigration practitioners know that their fixed costs have become a major business liability which can doom their operations in bad times. Moreover, getting locked into a long-term, traditional “pay per user” software license agreement can be expensive and painful, especially if your vendor is not motivated to improve its interface or offer new features. Plus, on principle alone, many firms find that paying for unused portions of your system is like throwing money out the window.
Conversely, having a variable case management fee (as offered by LawLogix) enables your firm to remain nimble as expenses are automatically scaled with actual case revenue. This financial balancing is essential for any law firm, but is absolutely critical for solo practitioners or any firm on a tight budget. And when conditions improve, you’ll appreciate having a system (and a partner) that works with you to ensure your continued success.
If the post 9/11 (and now post financial crisis) economies have taught us anything, it’s that we must prepare for the unexpected, but always hope for the best!