← Personal Injury Mastermind w/ Chris Dreyer
Personal Injury Mastermind w/ Chris Dreyer
459. When Clients Become “Inventory”: How Private Equity Is Reshaping the Legal Industry
00:14:43
Private Equity Is Quietly Taking Over Legal. Here's How to Tell if It Already Affected You.
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I want to take a quick second to say a massive thank you to our clients. Thanks to the verified reviews you left on Clutch. Rankings just took home six CLUTCH Global awards for SEO and advertising. The public recognition is nice, but it's much better getting to help law firms all around the country take the stress out of their marketing. Thank you for letting us drive your lead so you can focus on winning cases. Visit Rankings IO Clutch to see what our team can do for you. That's Rankings IO Clutch. I want to take a quick second to say a massive thank you to our clients. Thanks to the verified reviews you left on Clutch Rankings just took home six CLUTCH Global awards for SEO and advertising. The public recognition is nice, but it's much better getting to help law firms all around the country take the stress out of their marketing. Thank you for letting us drive your lead so you can focus on winning cases. Visit Rankings IO Clutch to see what our team can do for you. That's Rankings IO Clutch.
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You've seen it happen.
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A private equity group buys out a top tier legal marketing agency and overnight
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their service falls off a cliff.
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The passionate founders are replaced by fly in CEOs with fancy resumes and suddenly your law firm is treated just like another widget on a spreadsheet.
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PE is aggressively infiltrating legal space from mass towards to the vendors you rely
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on and it is prioritizing profit margins over people. Today I'm breaking down exactly why who you choose to partner with matters. We're looking at why the founder led agency model is the greatest strategic advantage, the massive value of institutional knowledge and why month to month contracts keep your marketing partners hungry. This is Personal Injury Mastermind. I'm Chris dreier, founder and CEO of Rankings IO, the elite performance marketing agency
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for personal injury law firms. Let's get into it.
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Today a big topic is PE versus
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Founder led and what are the pros and cons? And there's one side of the fence and there's the other side of the fence. And from my vantage being founder led, here's the big thing. There was a book called Good to
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Great by Jim Collins where it talked
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about the Venn diagram, the hedgehog concept of purpose, passion and profit and needing all three to build a great business. Whenever you sell to private equity, the purpose and the passion seem to really go away for most individuals. Now they got the profit right. But the founders. He doesn't have the same he or she doesn't have the same motivation to get out of bed to answer those late night emails to really Push and do the hard things because you've got that, that security blanket all snug and tight, which is the dollars in the bank, right? When you're hustling, when you're bootstrapped, you have to make these decisions because you just aren't, aren't fat and happy in the bank. It takes something else to get you out of bed. It takes that purpose and passion. The incentives aren't aligned anymore. What happens is instead of a client, they're turned into a customer, they're turned into a widget, a thing. You hear about this in the legal space. When people talk about, instead of the clients, they talk about the inventory. It's very common in the mass tort space. Guess who was in mass tort space first?
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Pe.
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They flooded all this money in there. And then the definitions in the nomenclature started to change. It started to change into inventory. These are humans. They have bad injuries, they have cancer, they have all these situations. That's what we're talking about. Founder led is a value prop because the purpose and the passion, the motivation is there. That's what the name of the game, that's what's wrong about pe. They don't have it. Everything's an expense item. Cut expenses, you know, decrease expenses, increase profit margins. That's what they're looking for. So how do you recognize if PE's acquired the business that you're working with? When things go wrong, here's some of the things that start to happen. First of all, actions take longer. There's more bureaucracy. The owner can't just go make these decisions himself. He has to go check in with the manager, with the big authorities to make these decisions. They can't just automatically give refunds and contracts change from month to month where there's easy outs to long term contracts and then you're penalized. You know all the red lines that you lawyers love to do in your contracts, those are not approved, right? Where the founder. I'm like, okay, we'll make a small adjustment here, right? The PE and their legal teams, they no longer allow it. You're going to get somebody that hasn't been in the game. They're going to have a resume. They'll be from McKinsey or Bain or KKR. They come in and these are fly in CEOs. They're going to fly in, fix you up. It reminds me of the movie Pretty Woman. Richard Gere, right? You buy this building and you break it apart and sell the pieces, right? That's kind of what's happening here. It's like, break up all the things that don't make money. Let's throw them to the side. But here's the thing. Some of those things provide value. And it makes me think of the story about Pizza Hut. Many of us, you know, that grew up, you know, I was born in 82, you know, to give my age here. When we went to Pizza Hut, I got these memories of you sat down. It's this nice environment. They got the arcade machine, they got the nice lights above. Is this experience you could smell at the salad bar. This is amazing experience. Everyone, when I'm telling you the story that's been to a pizza, has the feels, the hot pizza comes out, you get. You're asking for more quarters, you come back to the table, and it's this nice family experience. Now look at the Pizza Huts. It's just a box. There's no personality. Everything's the bottom line, you know, you can't. I don't think anybody really goes into Pizza Hut anymore. It's all delivery and the feelings and the association. Look at it. It's. It's went down big time in terms of. Of the experience, right? Yes. That. I don't know their profit. I don't know their profit margin. Their profit margins are probably better because they cut out all those things. I don't have to buy the arcade machines and the cool environment and worry about the big buildings. They can just do a little box store. But it's not as good. We all know that it's not as good. The same things happen in health care. The same things happen in dental with the DSOs. That's the issue when you start to cut these things that are. When you look at them from an expense perspective instead of a value or experience perspective. That's what really changes in the relationship with PE versus founder led another. And I got to be careful here, but I'm not really going to be careful for my audience here. But look, if those of you that worked with Scorpion in the past, and I'm gonna throw some shade here, and let's be real, Scorpion around, I'm gonna say 2018, 2019, maybe 2021, I don't know, anywhere from 2018 to 2021. Back in the day, they were a great agency. They had extreme client service, amazing reputation. I remember their websites were the standard that people strive to build. From a website design perspective, when PE came in and they sold, whether it was investors, the first thing they did is they cut staff significantly. So their account managers went from a small book of business to 200 plus. They added all this automation. One of the things that they bought, rankings, dot AI, which pisses me off, right? Rankings IO that I didn't have that domain. They bought that for their AI automation. Right. We all know it sucks. It's not good, right? But it kind of works. And instead of me having to hire, you know, a thousand SEO specialists, I can instead take those funds and build a 200, 300 person salesforce.
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Right?
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When you've got that amount of labor on the front end, you're going to get new clients. But I. But go look at the reviews. They lost amazing talent. It just lost its soul. And that's what I'm talking about. Now. Is there a place for Scorpion for some businesses?
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Yes.
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Are there some situations like, oh, Arnold Itkin. I'm sure that Arnold Itkin is getting a different level of service than the standard person. They use him on all the case studies. Right. It's just not the same. That's an actual case study of the legal space of when PE comes in and the outcome. We all know that after PE comes in, you're added to the platform. That's a telltale language too. You're no longer, you're part of the platform, right? That you're getting traded in three, four years, you're gonna have a new boss, somebody else is coming in, and then they're gonna try to integrate and shove you up into their big enterprise company with a thousand other businesses. And you're the small fry there. You can't tell me this is a better situation. I don't care how you kind of, you know, church it up Joe Dirt style. It's not better for the client. One of the common questions is why should you choose founder led versus PE backed? The biggest thing that comes to mind for me is institutional knowledge. The founder has been here from the very beginning. They've worked with, especially in the legal vertical. I've worked with hundreds of law firms. I've seen the good, bad and the ugly. I've been in this space.
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That's all.
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That's. My entire focus has been on legal, learning how to serve legal, going to the conference, reading the books, listen to the podcast. And I think the institutional knowledge is lost when PE comes in. Sure they'll bring in a business professional, right? Someone like I said, From KKR, McKinsey, Bain, all these different. They'll fly them in, right. It could be even a former agency owner, but the likelihood that they have the industry expertise is very low. And it makes me think of And I'm not the biggest Malcolm Gladwell fan of the 2000 hours because he wasn't an operator non operator written books that tell a business owner how they should run a business and they were never in a business side rant but the whole 2000 hours like you got the guy that flies in and they drop you in the CEO seat They don't have any institutional knowledge about legal and the nuances of legal it's now we've got generalized intelligence on an LLM. Why is someone from McKinsey is good look I'll use ChatGPT. It's better from a generalized business perspective. I have access to that. It's the relationships, it's the industry knowledge those nuances that really give the extreme advantage to founder led versus pe. One of the questions is why does rankings operate on month to month contracts with most agencies don't they'll try to lock you into 12 months or 24 months. There's many reasons why I like the the month to month contracts. One from a legal liability, let's just put it out there perspective. I like having the ability for you to exit and not having the liability of a big contract and all this cash and having to litigate and all these things like look, if you don't want to work with us, see you later. Right. 30 days notice. Many times we don't even have to honor the full if you give us, you know mid month we're going to give you allow you out by the end of the month. We're not going to handcuff you. Okay so that's. That's number one. Number two it is we eat what we kill. It forces us to be better when we have month to month contracts because if we don't deliver results, you can leave. There's no handcuffs, there's no golden handcuffs. So that means when the money's tight and you have other shiny objects that are constantly around the corner, we still have to have the goods we still have to be able to deliver. The other thing too is it forces discipline. It forces you to think in manners of providing value more quickly. So we'll talk about activation points. Right? The most important activation point is what's the period of time where the client receives their first case from our services. Incredibly important, right? Because that's where we can start to generate an ROI return on their investment. Those are the things that factor into month to month engagements. Now the negative, there's a big negative, right. Retention is harder.
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Right.
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You're not in a 12, 24 month contract. Right. So when we're looking at there's also something called a context window. Right. So a context. Let me explain this. When you have a month to month contract, I have to convince you, client, you, law firm owner, to work with us 12 times a year, every single month. 12 times a year. Right. Cause every month you could be out. If I have a year long contract, I only have to convince you once a year or 24 months, once every two years. So you know there are times. We all know this. We're marketing ebbs and flows. You have a great couple months, then you're down. Right. It just forces us to be better. We have to eat what we kill. I prefer month to month contracts because I'm very competitive. I want to just fix whatever issue it is. If a client leaves, it angers me when they leave because I just want to fix it. I want to make sure that we're delivering value. That's why we do month to month instead of handcuff our clients to 12 and 24 month contracts.
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Stop trusting your firm's growth to a
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PE backed conglomerate that views you as a a data point on an expense report.
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When you hire a founder led agency,
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you get the agility, the deeply rooted
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legal industry knowledge and a team that actually has the fire to win. Created a partner with a founder led marketing team that shares your exact competitive drive. A team that eats what it kills and earns your business every single month.
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Then we need to talk.
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Head on over to Rankings IO. We'll identify exactly where you're leaving cases on the table and build a strategy to dominate your market. I'm Chris Schreier and this has been Personal Injury Mastermind. Catch you next time.