Episode Transcript
[00:00:01] Speaker A: Welcome to the Relay, the legal show for personal injury law firm owners, presented by Lexamica, the number one attorney referral network.
I'm your host, Gabriel Stiritz. And joining me today is John Nachazel, chief operating officer of Mike Morse law firm and co author of Fireproof, a five step model to take your law firm from unpredictable to wildly profitable. With over 13 years at one of the country's most successful personal injury law firms, John brings a wealth of knowledge on operational excellence, scaling systems and building resilient law firm businesses. Today, we're getting into the frameworks that can help you navigate the rising costs, talent challenges and technology disruption to create a more profitable and stay sustainable practice. So diving right in here, John, the fear I hear from law firm owners across the country is running my firm is getting harder and more expensive. You've literally written the book on making firms fireproof against these pressures. Super excited to have you on the show and to get your thoughts on what's going on and how law firms can survive in this new environment.
[00:01:04] Speaker B: I'm very excited to be here. Thanks for having me.
[00:01:08] Speaker A: Absolutely. So just to open things up, I, I think the, the top of mind thing that I'm seeing is that we have what I would say is a marketing economics crisis, for lack of a better word, which is that channels are getting more expensive every single day. I actually just did a podcast interview with Ben Glass, another guy who spends a lot of and talking in the industry about this, mostly for smaller law firms. You're working with mid sized to large law firms a lot. I'd love to hear your thoughts. What's going on right now? What are you seeing?
[00:01:35] Speaker B: So what I'm seeing is exactly what you said. There's a lot of brand new players with huge deep pockets, whether it's private money, whether it's larger national players with greater aspirations to continue spreading geographically. I would say this jumping ahead to okay, it's happening. What can we do about it is we've had a big player come into our market as of last spring and it hasn't affected us even a little bit. In fact, it's kind of interesting that.
[00:02:06] Speaker A: John, just real quick, this big player, is this someone who's nationally been around for a while or is it new money coming into the market? I'm not asking you to name names to explain this. The case study.
[00:02:17] Speaker B: Yeah, it's more going to work.
[00:02:18] Speaker A: Okay.
[00:02:19] Speaker B: They're coming to every market eventually, no great secret.
So it has not harmed us, it has not impacted us. Now we're a significant spender in our market. So, you know, that's. That's part of the deal. But part of what happened was a firm like us. The way I think of it is that there's trees and a big breeze came through and dead leaves all fell to the ground. And the good, strong ones actually had more space to grow and. And are hardier. So if anything, it didn't hurt us. We didn't feel it. And if anything, it just educated the market on the need for attorneys, which was great. So it grew the size of the pie, and it also shook away all of the smaller players and maybe made it more disheartening for them to even enter and try to compete. So it hasn't really harmed us. And I want to get into why I think it didn't really harm us.
[00:03:16] Speaker A: Yeah, absolutely. I'd love to hear. Oh, quick question. Would you consider. And look, I know Mike Morse is very significant. Would you still consider yourself, at the end of the day, a local brand presence or larger than that?
[00:03:28] Speaker B: No, that's exact. And that's exactly where I'm going with the answer, and that's what it is, is we have very credible evidence we. We have a sustainable competitive advantage against these large outside firms because Mike is known in the community for. He's given over 300,000 backpacks away to the poor in our community for over a decade every year. He hosts, for many years in a row, the largest pet adoption event here at the Paw firm for the Day for Michigan Humane. And he's given them a million dollars. And just. We have the credibility of. We're actually from the community. Mike was born here. He went to University of Detroit Law School. That's something that can't be replicated. He has done nil deals with Michigan and Michigan State athletes and now other schools as well. So you can't see Mike and not think of Detroit and the Michigan market. And it's credible in a way that the others just can't replicate.
[00:04:31] Speaker A: One of my favorite things to do is go to local restaurants with personal injury law firm owners who've invested in their local brand because they're actual celebrities. The waiter waitress comes out. Can I get a photo with you? I've seen you all over. I know your jingle. I've talked to flight attendants on the way out of town who can sing the song. They've grown up listening to it. That's really deep brand equity. And I really do think that there's something powerful about that.
You, unlike when I was talking to Ben on the episode Y' all are spending a lot on paid ads. Ben is very much more on the grassroots side of things.
Did you have to increase your cost just to compete on the spin side or were you able to avoid a bump in just the rising cost of keywords and everything associated with a new comp, a new entrant?
[00:05:14] Speaker B: Yeah, the cost of poker has gone up. It has. And so it's, it's gone up a bit, but not to the point where we can't survive it. But yeah, it's, it's, it's tough out there and.
But it's all right. We have deep pockets. We can, we'll be fine.
[00:05:29] Speaker A: Yeah. So for someone who doesn't necessarily, what would your suggestion be for weathering that storm? Is it to pull out of this spin for a little while until that other law firm, the things cool down? Is it to say, look like you're going to have to go get your credit line out and you're going to need to, you know, you're going to need to just go head to head for a little bit. How do you deal with that when you are in the paid spend category and a big competitor comes to town?
[00:05:54] Speaker B: Yeah, I guess that, what I would say is you can try to wait the storm out. The storm is never going away, ever. It's, it's here and it's just going to intensify. So I think that's not the way to do it. I think the most important question centers on do you want to create a brand? Creating a brand is very expensive and it's not for everybody. So it takes a lot at first. You're going to spend a lot of money, not get a lot of bang for the buck. Eventually you break through and in theory you get the better cases and it becomes less expensive. But that's a really tough road. So maybe you really need to lean into the grassroots if you don't have a brand yet, or you need to become great digital in the direct response arena and really concentrate on operational excellence and being able to allocate as much money as you can to marketing because all of your operations are so tight and streamlined.
[00:06:51] Speaker A: I have a high degree of conviction that brand based marketing and advertising for law firms is the best way to go, whether you're talking about competitively or from a cost per perspective. You're a numbers guy. How do you reconcile brand based, because I hear that conviction in your voice too, with the fact that it's harder to measure brand equity and it's harder to attribute cases directly to brand when you want to nail down and you have some of the most robust spreadsheets I've ever seen, how do you reconcile the fuzziness of the brand and the, and the power with the fact that you really want to understand your numbers?
[00:07:25] Speaker B: Right. No, it's, it's. That's a great question. So luckily we have. I don't have to do it alone. I've Trudy and she's our of marketing and she's obsessed with getting the market, the attribution as tight as possible so that she knows exactly where the cases came from. And we're able to look at it holistically and then also on an individual case level. And we're, we're looking at it that way and we're using the different means for different purposes. So TV and billboard, we use those for building the brand.
But the call to action, the direct response is more digital. So we're looking at our overall spend and seeing if the cost to acquire a case is going up, down. We're looking to see if the value of those cases when, when they ultimately resolve, is it going up or down?
[00:08:15] Speaker A: Ed, are you intentionally saying, hey, we're going to change TV spin in this area, see what happens over the course of a few months to, to continue to validate if that is a channel that we shouldn't. And essentially running a sensitivity analysis to changing dollars on that of test you're running because otherwise you're just in some type of a last touch attribute analysis for your campaign. And we all know that that's a kind of a losing battle.
[00:08:42] Speaker B: So it's funny, literally today in my office right here, Trudy was sitting there and we were talking about it and I, I revisited why I hired her in the first place. She was working for the cable company, she was selling us media. And the. What I told her was I loved her AB testing. I would give her budget and she would conduct two tests. Then she'd present the results and say that B outperformed A. We're going to shut down A and increase the budget on B. And I'm like, that's exactly why I chose to hire her and add her to our team, because that's the way to do it, is try something. You have to experiment and you never stop conducting experiments and you just stay on top of it to find out what's working.
[00:09:29] Speaker A: Absolutely. And I think my camera's having difficulties, but I am very much here still. We're just going to roll with it.
Yeah. So how do you, how do you decide then? So So, I mean, let's, let's, let's talk a little bit about the technology side of things.
Again, as someone who's really focused on the numbers, we're seeing AI products coming to market constantly around demands, drafting, analysis, client communication. My thesis and I posted this on LinkedIn, is that the cost to do case management has decreased dramatically even over the past 18 months. And now not all law firms have adopted those technologies. But at the kind of a theoretical maximum point for optimization right now, you can pretty dramatically reduce your human labor costs. Do you agree with that thesis, or do you think that it's still too early to see those, those labor costs going down with AI?
[00:10:22] Speaker B: So I think it will happen. In my opinion, it has begun to happen, and people are, we are, and others are realizing the gain.
But it pales in comparison to what's actually we're looking at. I see advances every three months. Someone is leapfrogging somebody else, and it's just staggering. And, and I think we have barely scratched the surface. Yes, benefits have happened, but in the next year, the next two, three years at most, that's when we'll look back at the wild change. Because right now, the techniques and tools are still being perfected. Even once they're perfect, there's going to be a lag, and are people going to adopt it? So I think, I think we barely touched what it's going to be.
[00:11:08] Speaker A: So, I mean, I think one of the things that's crazy right now is the rate of change, like you alluded to.
I think that at some point, I don't know that that's going to slow down. And so I think that law. You're going to have to pick a horse at some point. It may be too early in the race, but you got to get riding because it feels like everyone else is walking or running. And then some people are getting on horses and going. And the scary thing is I'm running and I got to get on a horse that's running, and I got to make sure it's the winning horse.
How are you thinking about that? Have you, are you testing AI tech? Have you implemented it yet? Are you saying, hey, it's too early to get on a horse? Where, where are y' all?
[00:11:44] Speaker B: Yeah. All right, so I'll, I'll, I'll share this. So we've, we've tried some stuff. One of the things we've done recently, we've been to the Microsoft Technology center here in Detroit, and we looked at all of their investments in the AI and how it could possibly be applied to law firms. We have partnered with some of the major players, more than one of the major players in the, in the space and tried their products and tried to realize gain from it. And then we've even tried to invent some of it on our own with two different ventures. And I'll just share what I my personal philosophy on it is if we can resist the idea of inventing stuff by ourselves and patiently sit there and wait for someone to develop the technology and focus on being really fast adopters, I think financially that makes the most sense. If we can exercise that patience and discipline to not just say we have a need today, let's go invent it on our own instead, sit there and wait, save your money and as soon as somebody invents it, be a really fast adopter of the tools that somebody else is building.
[00:12:55] Speaker A: Well, you answered my question about build versus buy perfectly. That's amazing. So just kind of throwing out some names here. Even up you've had for two, three years now. Now you've got Evenup Supio, you've got Litify and Five Iron putting in AI features.
[00:13:10] Speaker B: Yes.
[00:13:10] Speaker A: Do you think that the best approach is to say almost on a year by year basis, let's take the best currently available product, pull that in. We may have to change that next year, but it's worth it. Or it's still too early to really push because the time to adopt and implement and train your team on these is going to outweigh the benefits. You get over a 12 months lifespan on some of these products that are going to be out innovated in a year from now.
[00:13:36] Speaker B: So it's probably the sensible middle. So I've got my cell phone here, a better one has come out and there'll be a better one three months from now and a better one next year. But at least I have a cell phone and it's got a good camera and video and things and it's great. And so I think that's where we are, is get a phone, start, start somewhere. Understand that you may need to jump off that horse quickly when somebody else appears. And I do think that the vast majority, I don't know if that's fair. I think a lot of the AI is going to be in some of the major players, whether it's Salesforce, whether it is Microsoft, they're going to be embedding the AI into their products. So we were actually the first law firm to use Salesforce's Einstein, their AI. And we've been using that in our intake and you know, coming up with a score to determine the viability of whether or not a case is likely to sign or and produce. So we're trying to find things like that. But I think that yes, find a horse or two to ride but keep aware of what's going on because it's changing rapidly.
[00:14:48] Speaker A: That seems like incredibly sensible advice. And spoken like someone who's deep on the operations side.
How are you vetting these vendors in the space that are cropping up? They raise 10, 50, $100 million six months ago, but no, their product is basically brand new. How much are you willing to take a flyer on? Look, we got to get on some horses here versus saying, look, we're going to not be the first adopters. I've talked to people in law firms who are like, yeah, if you can't give us five just for Lexam, because if you can't give us five references, we're not even going to buy. And other people who are like, yeah, I'll get in early, I'll help you make sure the product is really good and then we'll purchase. Where are you on the spectrum and what's your advice to people who are maybe not like you guys are forward thinking technologists and, but a lot of people aren't.
[00:15:33] Speaker B: Yeah. So it's, we actually have to exercise patience to wait long enough to be the beta. We're in a beta right now with someone and helping them make their product better. And I think that that's the right path for us. Not waiting until it's perfect, not inventing it ourselves, but saying we are a happy beta tester, put it through the rigor, we'll test it for you, provide the feedback, let you know what needs to be improved. But we know that we are gleaning the benefit from it at least as soon as, if not before anybody else.
[00:16:10] Speaker A: At this point in time. And I'm not asking you to make a prediction about the future. Are you more bullish on the highly verticalized solutions like even up and evensupio or more on the Generalized Salesforce, Microsoft OpenAI solutions that can be customized to your use case but have larger budgets behind them and maybe and have been around longer than some of the other like where do you have a, do you have a point of view on that or are you pretty agnostic kind of agnostic.
[00:16:38] Speaker B: But I guess what I would say is this, is that, that yes, Salesforce and Microsoft, they're going to have the huge budgets and they're going to be buying the Companies and doing all the things and making it mainstream for every vertical will always, always be a place for the industry specific players where some of it's having the technology. That's neat. The technology exists to do so many things and solve problems and really the adoption is not learning that this technology exists, but applying it to an industry specific problem and communicating it in a way that it becomes accessible to the user. So I think we'll always need industry specific champions that serve it up on a silver platter for us.
[00:17:27] Speaker A: Absolutely. I think, I mean, look, application layer. I actually was way more bearish on the application layer for a while and then started to see how important it was for those companies to come in and develop specific solutions for legal, for whatever the vertical is. And so I, yeah, I'm certainly, I'm leaning more toward the application layer. It's unclear to me who the winners are going to be. And that's the one thing that concerns me. Like are we going to see a lot of roll ups? Are we going to see some companies go under? I don't know exactly how that's going to play out. That's my only concern with application layer. But in terms of the actual products, I think they're getting very sophisticated.
[00:18:06] Speaker B: So for sure. And I guess maybe an example, what I would say is that okay, when ChatGPT came out, we saw that it could write anything that we wanted in the form of a Shakespearean sonnet. Cool. So what and what that created was the need for someone to show not here's the technology, it's here's how the technology applies to your specific use case. That it's bridging that gap that has not allowed the technology to be fully embraced yet is because there needs to be that hand holding by those industry specific players teaching us what to do. Not just that it exists, but how can it be applied to our specific problem that I'm experiencing today.
[00:18:58] Speaker A: Yeah. And I mean using the headline making issues have been when a lawyer goes straight to OpenAI, asks it to draft something and doesn't understand that while it'll give an output that's not necessary. And that's what the application layer like the vertical specific adds a lot of value. Even if that's just de risking the tool itself because the tool has so much power. De risking it can be a lot of the value proposition. So that's, that's a really great point that you make. We're coming up on time on the episode. I feel like we could go for 50 minutes here. This has been fantastic. We've only covered two of the points I was hoping to get to so we'll have to do this again. But just in summary, a lot of big changes here. You're seeing local competition, you're doubling down on branded campaigns. Your local brand as one of the biggest local brands in America. You have a lot of authority in that domain and, and you're testing A.I. you're, you're riding some horses. You're seeing how things are going. Fascinating, John, really appreciate it. We're going to be at the Fireproof conference. I would tell anyone who is looking to build their firm go to the Fireproof conference. Read the Fireproof book, talk to John Knockhazel. He's at the forefront of all of this change and if you're looking to not get left behind, he's a great horse to bet on. John, thanks so much for being on the show today.
[00:20:10] Speaker B: Thank you, Gabriel. That was really kind. I appreciate it.
