I have defined freelance lawyers  as “skilled lawyers who market and deliver legal services to retaining attorneys to assist them in representing their clients.”  Each freelance lawyer is a business and when viewed as such the freelance profit potential comes into sharp focus. Let’s talk about the business of law. 

Integrating business concepts into the legal profession is a mixed blessing. Lawyers were  once prohibited from advertising and charged clients based on their assessment of its value, now we sell legal services by the unit and market them like products.  While the billable hour and attorney advertising are contentious topics, other business concepts, like efficiencies enabled by modern technology and value-added profit related to quality services are clearer cases. Freelance lawyers give law firms the opportunity to take advantage of both.

Law Firm Associate Profit Model

A partner at a mid-size law firm told me that the his firm’s goal is to make 50% of the total amount billed to a client for an associate’s work.

But he also said that the firm loses money in the first couple of years.  Not every hour an associate works is a billable and not every hour the associate considers billable will actually translate to firm revenue.  But a firm must have associates and partners to grow as a business because a law firm can only sell time that generally only comes from partners or associates.

But what if a third option existed?

Freelance Profit Potential

A freelance lawyer introduces an additional source of revenue to the law firm on terms that shatter the conventional expectations of return on investment.  By definition, a freelance lawyer has a proven track record and skills with a high market value. That coupled with the fees freelancers actually charge gives rise to an enormous profit potential.  Law firms are uniquely positioned to capture that profit with very low risk and minimal or no investment. 

Freelance lawyers produce a unit that can be sold by the firm on terms similar to a consignment.  The law firm has units, i.e. hours of legal services, available for sale but pays nothing until those services are required.[1]  Once sold, the firm just takes a profit.  Alternatively, the firm acts like a general contractor tasked to produce custom goods.  The firm finds the best supplier, i.e. freelance lawyer, and then incorporates those services into the total value added representation and then takes the profit. In either case,  the firm pays nothing and realizes a profit at least equal to the firm's ideal scenario under the associate model. 

The only investment a firm must have in a freelancer is the time it takes to locate and qualify a suitable attorney and then whatever transaction cost that may arise thereafter to continue the relationship. Freelancers tend to market their services online directly to firms, which eliminates agency costs and increases the amount of information available about each freelancer.   Computers and the internet have virtually eliminated the transaction costs associated with information exchange and collaboration.

What is left after that? 

Pure profit and a risk that precisely mirrors the firm's ability to collect the total fee from the client. And when a firm is operating within a retainer and using a freelancer, the ROI approaches mathematical infinity.  Invest nothing new and make a profit, a great deal and a firm can always have it. [1]