Jonathan Hawkins: [00:00:00] You know, there are lawyers out there trying to innovate, but then you bump into the case law, the ethics rules that you mentioned the judges. And so how do you attack that?
M. David Johnson: Boy, it is tough. I think this is one of the hardest things I’ve ever had to do, is really to try and make change happen in law. I think what you do is you start a conversation, this is my strategy, is start a conversation as broadly as you possibly can with the lawyers themselves.
Forget about the regulators, forget about the seven justices sitting up in their, you know, ivory tower. Go to the lawyers and say, look what is happening to you because your practice, you can’t sell it. You can’t sell it to anybody else who’s not a lawyer, and you’re gonna get pennies on the dollar for that.
So why would you invest in anything as a law firm owner because you can’t protect it. And so you go to the people and you say, look, if you got rid of Rule [00:01:00] 5.4, that limits ownership of a law firm to lawyers, and you had the option to sell that to not just other lawyers, but accountants or whatever it might be or your own team.
If you’re big enough to sell it to your own team, then you gonna invest and you’re gonna increase the value and you’re gonna stick around, you know, and then you’re gonna be able to retire with something.
Welcome to the Founding Partner Podcast. Join your host, Jonathan Hawkins, as we explore the fascinating stories of successful law firm founders. We’ll uncover their beginnings, triumph over challenges, and practice growth. Whether you aspire to launch your own firm, have an entrepreneurial spirit, or are just curious about the legal business, you’re in the right place.
Let’s dive in.
Jonathan Hawkins: Welcome to Founding Partner podcast. I’m your host, Jonathan Hawkins. This is a podcast where I get to interview law firm founders and leaders and [00:02:00] hear about some of the cool stuff they’re doing, and I’m really excited about today’s episode. This is someone I’ve been hoping to get on here for quite a while.
He finally said, yes, let’s do it. So, excited to welcome David Johnson to the podcast. He is the owner, CEO leader of Modern Family Law, which is pretty big family law firm. It spans, I think you may have more now, but at least 12 locations across four states. And I know that that is growing by the year, so we can talk about that too.
So welcome to the show, Dave.
M. David Johnson: Oh, thanks for having me, Jonathan. I appreciate the invite.
Jonathan Hawkins: All right, so let’s talk. Sort of give us the stats of your firm so we can sort of get the lay of the land. You know, I think I got that right, 12 offices, four states, but tell me how many attorneys and, and all of that.
M. David Johnson: Eh, yeah. So, modern Family Law started in about 2017. [00:03:00] We have 165 employees as of my last count, about 63 lawyers. As I think I saw, 63 64 lawyers as I saw today. We do have 12 locations, but we are busy opening three new locations in Georgia. Right across the street from one of ’em is right across the street from your office in Atlanta.
Beautiful new space there that I think will go live November one. And then another location in Savannah and another location in Alpharetta. Busy. In fact, I think my ops director flies out there on Tuesday to look at those spaces. Let’s see, what else can I tell you about it? We had gro we’re projected to have gross revenues of about 28 million, 29 million this year.
Next year we project about 44. We are on a three year strategic plan and that should get us to about 90 million at the end of the strategic plan. And about I would guess about four 50 to 500 employees at that point. Growth is [00:04:00] great. We are a, a very tech heavy firm. We do family law. We’re based out of Colorado.
I live in San Francisco. My license is in Colorado. And I practiced, I think 30 years at this point. More than 30 years family law cases. And yeah, so now I just focus on running the firm. What else can I say about that? Our practice is mostly remote. I, I would consider it hybrid, but we certainly don’t have any requirements to be in the office.
We build really nice space at each location to try and pull people in to enjoy the space instead of mandating that they come in. So that’s modern family law. You know, busy, busy spot.
Jonathan Hawkins: Man, that’s a lot to unpack, but first of all, congrats man, that that is tremendous growth. I mean, it’s, so 2017, so we’re at, we’re at about eight years. I mean, that, that is tremendous growth. I’m curious if I plotted it on a graph is it, [00:05:00] is it hockey stick? Does it look like a hockey stick or is it more linear steady, you know, growth?
M. David Johnson: Yeah, it’s depends. I mean, if you, if you just took the, the gross revenue, it’s kind of linear. It’s not, it’s not exponential growth. But, you know, we, this year it’ll be about 63% growth, so it’s very healthy. But 63% is really hard to pull off. And so next year we’re projecting, I think we’re projecting 53% next year.
But yeah, it’s substantial growth and it is the biggest challenge in the business is managing that growth, bringing in the people and, you know, creating systems and processes that are scalable and sustainable.
Jonathan Hawkins: Yes. So I don’t even know if we’re gonna have time to dig into all of this, but there’s so much there that I want to talk about. So let, but let’s, let’s sort of, before we dig into all that, let’s, let’s sort of go back. So I guess some of the baseline questions, you know, what led you to the law, first of all, and then what sort of led you to family law?
M. David Johnson: Well, my undergraduate degree is philosophy and [00:06:00] my family you know, you had to be a professional of some sort growing up. And so my doctor or my brother’s a doctor and I got to be a lawyer. And so it was just kind of the expectation. My passion is a little kid and high school and all that kind of stuff was computers.
Man, I tried everything I could to get into every computer lab I possibly could get into. And, but know, pressure from the parents to get into law school and luckily, you know, I kind of had the freedom to embrace technology throughout my career.
Started my own firm right outta law school. Went over to a different firm as a partner about three years after starting, and then broke back off and did my own thing for a long time. And it’s basically been, you know, an evolution from that point forward. But what got me into law, really, like I said, it was my parents, but family law in particular, my family, my parents did, you know, went through the worst divorce you can imagine, did everything wrong.
And the lawyers were absolutely no help. In fact, they did what they could to aggravate the situation. And [00:07:00] I watched what happened in their divorce, kind of destroyed the family as a whole. I was 13 I think, when they got divorced, and I went to, I think it was five different schools in four years. Just from moving around a lot.
And you know, and so that that’s why I, I. Do this is I have deep personal experience with, with divorce
Jonathan Hawkins: And does that shape thank, thank you for sharing that. Does that shape how, sort of the approach that your firm takes in divorce, you know, like you said, those, the, the attorneys exacerbated or made it worse. And I guess you guys try to do the opposite.
M. David Johnson: Yeah. It completely shapes it. Yeah. I mean, why am I, why, why would I do this to anybody else after having gone through it myself? And so yeah, I, I pay very close attention to that. And we do our best to make sure that we provide, you know, the best service possible, drive conflict down. If you look at our website, you know, modernfamilylaw.com, you will see pictures of smiley, happy people.
[00:08:00] Smiley, happy people everywhere all the time. Because it’s aspirational, right? You want to get to that point again in your life. And and it’s very successful marketing that way because people do want hope. They, they do want to, to get through this with something intact. And so, you know, yeah, it that experience completely shapes how I have built the firm and, and how we present ourselves and the work that we do and our focus.
So, yeah, I, I never understood that sharks, sharks circling the boat advertising or people sitting on the edge of the bed crying. I’m like, who wants that? You know? It’s, it’s not something that makes you pick up the phone and call.
Jonathan Hawkins: You know, I remember, I think I may have mentioned this to you before, but I, I remember sort of in the wake of the great financial crisis, there’s a firm who I won’t name that had an ad on the radio divorce firm. And this you know, basically the, the ad was your assets have gone way down in value.
Now’s the time to get divorced. [00:09:00] It’s
M. David Johnson: Oh my. Yeah,
Jonathan Hawkins: what kind of ad is, what kind of ad is that?
M. David Johnson: right. I mean, they, they still do that, right? They’re like, you know, your, your retirement is at the peak. This is the perfect time to get divorced. I’m like, oh, geez. You know? Yeah. I, I don’t understand that. And I don’t understand creating fear in people. Obviously, you know, father’s rights is a fear-based movement to intended to scare men in the, into, you know, acting a certain way or, or engaging a particular firm.
And yeah, try and steer clear of any sort of fear-based marketing or, or anything like that needs to be aspirational. I, I think so.
Jonathan Hawkins: So let’s talk. So you are, I guess, is it CEO, is that your title? And, and you don’t do any legal work anymore. You’re strategic and, and leader and all that. When did you start to take a step back from actually doing, doing the legal work?
M. David Johnson: Gosh, it was probably 2019. I remember walking [00:10:00] outta the courthouse in Douglas County, Colorado, thinking this is the last case. This is the last time I will be, you know, at the podium. And so far that’s been right. I haven’t handled the case since then. But yeah, everything, everything after 2019 ha has been administrative.
I still consider myself practicing law. I don’t think, I don’t know what that phrase means. Practice law. Does that mean you have to stand at a podium, you know, as well as I do? No, it doesn’t, you know, you don’t have to be a litigator to be a lawyer. And, and you could be in-house counsel, right? And, and you have one client kind of even, I don’t even know if that’s an employer.
I don’t know if it’s even a client. So, you know, I, I, I consider myself still practicing law, but just not handling cases.
Jonathan Hawkins: And so how, how was that process for you? You know, I know some lawyers, it’s, it’s sort of a hard you know, their vision or, or a view of themselves. It’s hard to get away from that and others, it’s very easy. So that’s part of it. But then the other part is, you know, just, you know, brass tacks.
It’s, it’s how do you get out of the production and how do you start to get everybody else to do it. What was [00:11:00] your process like?
M. David Johnson: I mean, it’s, it’s tough because financially, you know, that that’s a hit on the firm to suddenly start paying a, a salary instead and, and not have any revenue directly generated from that chair. So you have to be at a position financially where you can. Just live on a salary. And I don’t remember what my salary was when I started, but it wasn’t much.
I was definitely not the highest paid person in the firm. And you know, you do have to be willing to, to take that hit initially. And then just over time as the firm increases, make more room for, for income. But emotionally, yeah, it’s, it was a challenge. I, I, it was, it felt really weird to think this was the last time I would be standing at the podium.
But. It’s, it’s been a rewarding and just a fantastic transition to move on. I have freedom to do a lot of different things, whether it’s marketing or finance or HR or, you know, whatever it might [00:12:00] be. You, you get to kind of branch out and do new things. So, I know that it’s a financial hit to just focus on management, but man, that, that’s, that’s the key, right?
Trying to run a firm in the margins before bedtime, after you fed the kids is not a productive time to run a or run a firm. You have to have it, you know, dedicated resources to management of the firm.
Jonathan Hawkins: So true. It, it is really hard to do both production and, you know, the, I guess, leadership strategy. It’s just really hard. Especially, I mean, maybe that’s how you’ve grown so big in such a short time. I mean, that’s really, really, really impressive growth. So, I want to ask on that topic you started in Colorado.
What was the first sort of state you expanded to? And then what was that like? You know, it’s one thing to add an office, okay. To California. So it’s one thing to add an office in the same state, same jurisdiction, same rules, blah, blah, blah. To do it in another state. It’s just. Challenging. I mean, you gotta, you [00:13:00] gotta find lawyers.
It’s, you gotta manage from, you know, more than one location. How, how was that for you? Was it easy?
M. David Johnson: Oh, it was terrible. I mean, you don’t know which, I mean, and it’s not easy to do it in the same state. I remember when we decided to open up in Colorado Springs from Denver, I, I considered that to be an experiment to see whether we could actually manage remotely. And it took a long time to get that, like stood up and but doing it in another state is a whole level of, of trouble that, you know, you, you don’t anticipate the, the travel back and forth and the expense of the travel back and forth and the, the rules and the, you know, the, the environment. I mean, that you’re in Colorado. I knew my competitors, I knew the lawyers.
I knew the judges. You walk into the floor into California, I’m like, who are these people? What, I don’t know who the players are. I don’t know how they all work together. So yeah, it’s, it’s totally blind coming into a new state. At least for us that first, you know, venture into California did not know what we were [00:14:00] doing.
Made mistake, more mistakes than anything else. I think and sloppy launch, but over time you get better at it and better at it. And now I can drop into a city and basically start challenging the biggest player in that city within a year. And that, you know, that’s be, that’s just the refined process of how many days to, you know, get from meeting with the realtor, to opening the office, to having your design, to setting up the bank accounts.
You know, got a phone call from our banker yesterday to set up the, the bank and the Atlanta. You know, all of those things that you’ve done before. If you just make a, you know, a project on, you know, some sort of project management software, you can do it again and again and again and make it better and, and more productive.
And so, yeah, that first one sucked. That was, that was a nightmare. Really?
Jonathan Hawkins: And I’ll say very aggressive to go to California first. The home of the most regulations uh,[00:15:00]
M. David Johnson: Oh, I’m in
Jonathan Hawkins: you didn’t even know existed. Right?
M. David Johnson: Shoot. It is the, it is a tough market.
Jonathan Hawkins: It, it’s all downhill from there you know, expanding in other states,
M. David Johnson: Yeah, I mean I don’t wanna beat up on California too much ’cause I love it here and it’s been very good to us and you know, but yeah, it is a tough place to do business
Jonathan Hawkins: Well, it’s interesting. So, so yeah. So you’re in four, and now you’re about to be in five in Georgia, and you said you’re opening three locations, basically, simultaneously, it sounds like,
M. David Johnson: kind of. Yeah.
Jonathan Hawkins: and you don’t have to, you know, give secret sauce or anything, but what’s your thinking behind three versus just, Hey, let’s try one first.
Why go
M. David Johnson: Yeah. One’s in, one’s unstable. You bring in a team of three people into one location and they all leave, what do you got? You know, or you, you, you know, I mean, it is just a very unstable effort to put one into a, a, a state. Two didn’t feel very secure either. You know, because it’s, what I’ve discovered is it’s really hard to keep [00:16:00] all of them open, all of them running, all of them successful at once.
And having three, you create a synergy between the three where the managing attorneys can cover for each other. If one leaves, you’ve got backup. The teams aren’t so isolated. They know each other. They, they know the managing attorneys. You can cover more of the state there. Like there’s overlapping counties between Alpharetta and Atlanta, right?
And so you can handle things back and forth between the locations. Three is a good number to start with, in my opinion. And it’s a very manageable number operationally. Seems to be the magic, the magic number to, to make it work. But one, you know, I, I have a friend who’s starting, and he’s probably gonna see this, so I don’t wanna call him out, but I have one, a friend who’s starting one location in one other state, and I’m just like, oh my God.
You know, you are gonna, that’s gonna be your full-time job.
Jonathan Hawkins: That, that’s really interesting and counterintuitive. I gotta say, you know, most people would say, I’m gonna go to another state. It’s safer to do one. And you’re saying no, it’s safer [00:17:00] to do three. The other
M. David Johnson: I would say it’s safer to do three.
Jonathan Hawkins: now it takes more capital to do three versus one. I imagine as well, I mean, you’re assigned at three different leases, so, you gotta be in a place that you can do it.
M. David Johnson: But I mean, you, you’ve, you’ve done a lease, I think, not very far from our building in Atlanta. You know how they work. You get, you have to lay out some cash, but they’ll give you, you know, free rent. You know, they’ll build out the space. You can keep your overhead, your startup cost with regard to rent.
Pretty manageable. The, the startup costs that, you know, kick my butt when I’d go in the marketing costs and the, the payroll, because they’re, you know, when we open up in Atlanta, we’re not gonna have one client. Right. And I still gotta pay all these people and I gotta keep attracting people. And so, you know, I gotta advertise like a fiend to, to get some cases in there to start generating revenue.
But yeah, it’s not the rent that gets you, it’s the, it’s the payroll and the marketing.
Jonathan Hawkins: So let me ask so, you know, I’ve heard, you know, historically many law firms, they bill once per month. I [00:18:00] know a lot of family law firms will do twice a month, some do every week. Do, do you, where do, where do you fall on that? And I guess if you do it weekly, that, that helps with cash flow versus every
M. David Johnson: We do, yeah, we do twice a month. I know there the, our biggest competitor does once a week kind of the same structure that we have. But I, I found that twice a month is just fine for cash flow and also, you know, I mean, it’s not, it gets, it gets center billing gets center stage, you know, when, when it’s that day?
Yesterday? No, today, today’s our billing day. Right. And so the, the team in the morning gets, you know, has to do all that, the review the bills and, and then get them out and that kind of thing. And that’s a big, big, huge project. I think we have almost 1300 clients. And so, that is, you know, that’s quite a project twice a month.
Jonathan Hawkins: And so the billing, you know, I, I would imagine marketing, billing, a lot of the operations is centralized, so it truly is sort of a, [00:19:00] a, a scaling type, you know, activity for you. When you go to a to a firm, you’ve got Yeah. you know, you got sort of the back office already taken care of. So that’s way, you know, I, it’s okay, I’m starting to hear it.
M. David Johnson: Yeah. I mean the,
Jonathan Hawkins: three, three
M. David Johnson: scalable, right? You know? Yeah. I mean, it’s it doesn’t create twice the work. It, it really is, you know, we just, you know, yeah. I, I’ve got an ops team that has to go get the space and fill it up and that kind of thing. Marketing, we already have the programs.
We already have the pay-per-click stuff, and they’re already doing SEO, and so, you know, I mean, it’s not, it’s not that much more for the internal teams to handle once it gets once it gets open.
Jonathan Hawkins: Okay, I got it. So, okay. So we’ve, we’ve talked a little bit about one, one of your, one piece of advice is, one is too few and three, it feels like the right number. What other advice would you give for somebody who’s thinking about going across cross border to open up a new office?
M. David Johnson: Well, you know, I think [00:20:00] the answer, the key has gotta be technology, has gotta be your systems and processes. Standardizing those over and over and over again. Always look for pain points. You know, for example, when you add like, we’ll add a hundred people next year, can you imagine setting up a hundred computers right?
And shipping those out. And training them. I mean, if you don’t have a system and a process, you will never ever be able to do that. And so spend time on your processes. And, and that will really make it, it doesn’t, if you have the right process, it’s not gonna matter whether it’s down the street or across the country.
Jonathan Hawkins: Do you guys have some sort of internal like training university, for lack of a better word, that you’ve developed for your internal people.
M. David Johnson: Yeah. Amy Larson is our, our, is our director of development and she’s a former judge outta Texas and she’s got a team, I think her team is like five people now, and they do all the onboarding and all the, the CLE training. And they, they just basically [00:21:00] handle professional development for the firm. You know, the, the, and she’s fantastic at it.
And we’ve got software we use, I forget the name of the, it’s an LMS Learning Management System where you create the content, you put it up there, you organize it, and you refresh it when you need to. But yeah, so she’s got training programs for people that come in as law students, people who come in as you know, lawyers who’ve been around for three years that need to learn our process.
She’s got training programs for managing attorneys when they become managing attorney. We have three managing attorneys in that program right now. So, yeah. And Amy’s up working on our our leadership retreat in December right now too. So, yeah, we, you know, we’ve got a team that’s dedicated to, to development.
Jonathan Hawkins: So you’re a computer guy, you like computers. Do you guys have any proprietary software that you’ve developed or do you take sort of off the shelf and I guess customize it?
M. David Johnson: Everything is customized. We developed Al develop almost everything. We use Salesforce as the background or the, the, the scaffolding, if you will, the skeleton. And then we attach things to it. And so, when [00:22:00] somebody says, well, what platform are you on? I really can’t answer that very clearly because I don’t know what you mean.
You know, are we on billing? Okay, we use Time Solve. What about document storage? We use Net Docs. Do. What about, you know, onboarding, you know, I forget the name of the, the software we use for onboarding, but you know, we’ve got all these different packages that we customize, that we use APIs to tie in to Salesforce. And then we have, you know, customized client portal, which is consuming a lot of time too. But yeah, I mean, I try and stay away from the off the shelf project management stuff. I feel like you are working for them at a certain point and your practice is really regulated by how they decide you should practice.
So we like to do it our own.
Jonathan Hawkins: Great, great point. You know, for, you know, some people say, well, you’re, you’re big, you can afford to do that, but you know, you’re, you’re a computer guy, so maybe you were doing that in the beginning.
M. David Johnson: Yeah, you gotta do it from the beginning. You gotta stay away from that, you know, it’s almost like a drug, [00:23:00] you know, where you get lazy and you say you buy, I don’t wanna, you know, I don’t want to denigrate any. Project or case management package, but pick one. And it’s easy. You know, you pay your user licensing fee once a year or once a month or whatever it might be, and you don’t have to think about it.
And, but they do all the thinking for you when it comes to management and you will practice how they tell you to practice forever.
Jonathan Hawkins: Yeah. Well, let’s talk about innovation a little bit. You’re on, I think you’re on some innovation committee. You can tell me about that. And, and when I say innovation, it is, you know, technology, ai, that’s part of it, but also perhaps softening of, of some of the traditional rules. So I guess, first of all, tell me what, what you’re involved in and sort of what, what you’re seeing.
M. David Johnson: Yeah. So I’m on the executive committee of the Colorado Bar Association, and they decided to form a task force on artificial intelligence and innovation. And I told the, the president of the Bar Association that this is why [00:24:00] I would go on the executive committee was ’cause I wanted to work on modernizing the business of law.
And so he put me in charge of it. Okay. And it has been a wild ride. Basically the, the what we are looking at is how do you advance the adoption of artificial intelligence in the legal community? How do you get people to use it? How do you teach people how to use artificial intelligence in their practice to help their clients?
And then how do we modify the rules? So that lawyers are motivated to learn artificial intelligence and to innovate in their practice because right now there’s no motivation whatsoever to be more efficient or productive. Right? If I can take a five hour task and turn it into a 20 minute task, I lose a ton of money, right?
So why would I ever invest in technology or innovation or productivity if it’s gonna cost me more money than, you know, I, I’d be, I’ll be bankrupt. So the rules themselves, and I I, [00:25:00] this, this is huge point of argument going on here or here in, in Colorado right now on this committee and this task force, and within the executive committee itself is the rules themselves have locked lawyers into places we don’t wanna be, right?
We, we always complain about the billable hour and how we’re tied to this wheel that just sends us in circles. That’s because a rule 1.5, which says value equals time. My argument is value is elemental. It doesn’t equal anything. Value is value, right? There’s no combination of anything that adds up to value.
And so get rid of this, by the hour metric so that lawyers don’t, so that lawyers are actually motivated and incentivized to go be more productive and be more efficient and to open up their services. And I, I had a discussion with somebody who’s not on the committee but is on the bench in Colorado, and, his argument. He, [00:26:00] he, he said you know, you have 1.5 value to the, to the, how are you gonna stop people from, you know, taking advantage of clients. and he pointed me toward New York and New York and he said, look at what New York has done on Rule 1.5. And I went and looked at it and basically their rule is that if you can do a task that normally would’ve taken five hours by pushing a button, you can still only charge for the time that it took you to push the button.
And I said, that’s absolutely absurd. That is absolutely absurd. And if you guys do that in Colorado, I will be the first one at the podium to say, this is wrong. This is on you, regulators, not on lawyers. And if you want access to justice, if you want us to go out into the public. And reach into the communities who either don’t have enough money to pay lawyers as they are now, or who don’t have access to lawyers ’cause they live so far away from a metro area, then you have to let this rule go because [00:27:00] it, I can’t, I, it’s not financially feasible for me to serve these people out there in the remote areas or who can’t afford the average cost of a divorce, about 15,000 bucks. We will never be able to reach into those communities until you detach value from time. So that’s one of the, the big focuses of innovation is just letting lawyers innovate. I mean, we could talk about it, you and I could talk about it till we’re blue in the face, but if you, we don’t have a motivation to go out and do it, we’re never gonna do it.
Jonathan Hawkins: Yeah, just on that point, just for a minute. So, you know, there, you know, there are, for example, family law firms that do this sort of staged flat fee billing. There are, you know, cont cont contingency firms, obviously. I recently met a lawyer that does really pure subscription style family law work which is interesting to me.
But, but yes, you know, you, you go to, let’s say you have a fee petition in a court. All the judges, it’s all about your time. It’s what your rate and how much [00:28:00] time. And if you go in there with something different, they’ll say, no, you’re not getting it. When, when I’m with you now, I’ve heard stories where somebody’s, you know, they write a letter and get the client, you know, a million dollars.
It took ’em two hours to write the letter, let’s say to write it, send it. How much is that worth? You know, how much is that worth? It’s worth a million dollars at least to the client. And if you’re doing it, just time, you know, it’s not really capturing the value delivered. And so I’m with you. You know, there are lawyers out there trying to innovate, but then you bump into the case law, the ethics rules that you mentioned, the judges.
And so how do you attack that?
M. David Johnson: Boy, it is tough. I one of the hardest things I’ve ever had to do, is really to try and make change happen in law. I think what you do is you start a conversation, this is my strategy, is start a conversation as broadly as you possibly can with the lawyers themselves.
Forget about the regulators, forget about the seven [00:29:00] justices sitting up in their, you know, ivory tower. Go to the lawyers and say, look what is happening to you because your practice, you can’t sell it. You can’t sell it to anybody else who’s not a lawyer, and you’re gonna get pennies on the dollar for that.
So why would you invest in anything as a law firm owner because you can’t protect it. And so you go to the people and you say, look, if you got rid of Rule 5.4, that limits ownership of a law firm to lawyers, and you had the option to sell that to not just other lawyers, but accountants or whatever it might be or your own team.
If you’re big enough to sell it to your own team, then you gonna invest and you’re gonna increase the value and you’re gonna stick around, you know, and then you’re gonna be able to retire with something. But right now it’s a, it’s a zero value, $0 exit, right? You, you, your plan is to get the hell outta there owing no money, but really not having any [00:30:00] money either except for what you made in fees and no other business to operates.
That way. So I think you go to the lawyers and you explain in how, why it’s in their self-interest to change these rules and the innovation that the lawyers will engage in and that the technology they will adopt, serves the clients, serves the public, right? So yeah, you’re talking about that letter that made a million bucks.
How many lawyers would start the bidding process to write that letter? Right? Do you write it for 300,000? Well, the next lawyer comes along and says, well, I’ll write it for you for 200,000. Next lawyer comes along and says, I’ll write it for you for 50,000. And then you create somewhere is equilibrium, right?
The value now becomes identifiable. So, you know, as far as creating change, I have argued this with you know, judges up and down that that bench that the right way to do this change is to start with the lawyers, you know, and, and change their minds about their own profession.
Real quick, if [00:31:00] you haven’t gotten a copy yet, please check out my book, the Law Firm Lifecycle. It’s written for law firm owners and those who plan to be owners. In the book, I discuss various issues that come up as a law firm progresses through the stages of its growth from just before starting a firm to when it comes to an end.
The law firm lifecycle is available on Amazon. Now, back to the show.
Jonathan Hawkins: All right, so I want to get to non-lawyer ownership, but I, before we get there, I, one last question about sort of rule 1.5 and hourly type fees. You know, the scenario you mentioned where, you know what used to take five hours, you can hit a button, it takes 20 minutes or maybe less. What ideas do you have for replacing sort of the traditional billable hour?
You know, is it that we just let lawyers go out and try a lot of different things to see what works? Or do you have some ideas of, of
M. David Johnson: Well, I think I, I, I, I don’t think you, you replace the billable hour because I think there are clients and cases where the billable hour makes sense, right. Jeff Bezos divorce would not be a flat fee [00:32:00] that, that, that is an hourly situation. So I think first of all, you look at mixed fee agreements, mixed arrangements with clients.
You do subscription models. For people who don’t need much help at all. And none of this is permitted by rule at the moment. So, you know, I don’t, if you do a subscription model now, you still have to substantiate your subscription fee with a affidavit that says, I worked so many hours, right? So it’s still, time is value, value is time.
But true subscription model you know, I think works great in a family law setting and I, I really wish the courts would let us switch to a true subscription model for, for that 75% of the economic spectrum that isn’t being served by the lawyers right now because it’s, they don’t consider it to be worth it. A big chunk of that could probably just be a subscription model. And what’s the motivation for the client if they have to think about how long do they wanna fight? Right. The longer they fight, the more it costs them. And so their motivation is to keep it short. [00:33:00] I think that’s great. I think that that is a wonderful motivation for people ’cause they will pick and choose their fights more tightly if they know that that fight is gonna, you know, extend the life of their case and they’re gonna continue to pay.
So subscription is one way. Flat fee is another. You know, they have this unbundled legal services in Colorado and I think that it’s a, it’s probably scattered across the country unbundled legal services where you can partition, you know, I’m gonna do this, this paperwork for you for blank amount of money, but I’m not gonna go to court with you.
I’m not gonna do mediation. I’m not gonna sign an entry of appearance. Instead I’m just gonna prepare the documents for you. You know, that is a, a flat fee model that I think is fantastic and would help serve that other 75%. Again, you can’t do it because if you do it as an automated document assembly, which is really the only economic way of doing it, you can only charge for pushing the.
Jonathan Hawkins: Yeah. Lot, lots, lots there we all need to think about. [00:34:00] And I’m with you. I mean, I’m with you. And, and AI is just gonna, I mean, automation, document automation sort of pushed a little bit, but the AI stuff’s really, really gonna push it. And it’s, you know, I, I think through you’ve got the, the courts and the rules sort of.
Like a dam right now. But you think back to, you know, sort of the blockbuster Netflix you know, blockbuster could not really change its own model. It’s sort of halfheartedly tried, it’s gonna take people coming out from outside, from a grassroots level to sort of swarm, I suspect. But, but let’s move to non-lawyer ownership real quick.
Loaded, loaded topic. I’m sure you’ve I’m sure you’ve experienced. And it’s interesting, you know, when anybody thinks about it, obviously everybody looks at Arizona and they think private equity and, and institutional money. That’s, that’s what they think and sure that that could happen, maybe even technology companies.
But you know, even from a more fundamental level, one question I have is, why would [00:35:00] anybody be against letting a law firm owner give or cut in some of their own employees into equity in their firm? It aligns interests, it allows employees to perhaps have growth along with the firm. Maybe incentivizes them a little bit.
Maybe it’s sort of golden handcuff type things. There’s all sorts of reasons why, if nothing else, let a law, law firm owner let its employees have equity. I don’t know. Let’s start there. What do you think about that?
M. David Johnson: Oh, I, I, I, I’m, I’m completely with you, right? I mean, out here in San Francisco, you know, the employees, the, the key employees get an ownership interest, right? In these startups and, and they go off and make zero or they make $20 million, you know? So, I, I, I think bringing on your employees, you can attract more talent that way.
You can attract more experienced talent that way. Like you said, you can kind of, it builds loyalty to the [00:36:00] company if they have ownership mentality. So, giving or allowing your team to buy in is I, I think is great. And it, it only works to the benefit of the company. Why, why will regulators not let you do that?
Great question. Because they fear that lawyers would be told. By a, you know, a majority owner to, do something in a case that is not in the client’s interest or is contrary to the rules of professionalism. And so they, they basically, you know, that, that, that’s their fear is that the judgment of the lawyer is replaced by the non-lawyer.
And that is something that can be worked around with creation of, you know, like, compliance counsel. To make sure that the independent judgment of the lawyer remains intact can also be handled with a, never letting non-lawyers have more than a non-majority interest. Right? [00:37:00] You can buy up to 49%, but that’s as far as you can go.
But they won’t even try it. They won’t even try it. A Arizona tried it with their a BS program. You know, it’s done in England, it’s done in Australia. But the US regulators won’t even try it. Because I, I feel like they enjoy this monopoly. They, you know, we get to charge a lot of money. We, we have good lifestyles, you know, and opening it up to non-lawyers, you know, you’re letting, you know the riffraff in.
Jonathan Hawkins: Well, it’s, you know, there’s a, there’s a whole pool of really, really great talent that law firms can’t really tap into. I mean, you’re in the heart of the technology, you know. Spot in America. You know, part of it is, is the way you recruit the really, really good people is you gotta give ’em equity. And you know, you get, you get a really strong non-lawyer operations, technology type person and, and they say, wait, what?
I don’t, I don’t get any upside. They’re, they’re not coming. And it just really, I think [00:38:00] from, from an innovation standpoint, holds law firms back.
M. David Johnson: Yeah. No, I, I, I agree. I mean, imagine if I could offer a tech person here equity to come in and develop AI solutions for clients, really in the interest of the client, right. To have, to have that sort of automation, that independence, that, you know, efficiency, but can’t do it. I, I, I, there’s no way I can compete with open AI or Salesforce here in this city.
I can’t do it.
Jonathan Hawkins: So I do have this theory, I, I’ll run it by you people who have probably heard me say this before, but so, I’ll pick on the boomers a little bit. But you know, boomers have basically, as they’ve grown through their life, they bend society to their will when they’re young. They get whatever they want, and now that they’re getting older, you know, they’re gonna get what they want.
And a lot of these lawyers who are at the end of their, their career, they’re realizing, Hey, I got nobody to sell it to. [00:39:00] So maybe as a generation, they’re come together and they’re gonna say, all right, it’s time to change the rules. What do you think?
M. David Johnson: I, yeah, I think you could be right. I, I think this is the moment to, to change these things. AI is, is a complete game changer. I don’t even know where to start talking about that, but the value of your practice. Right. I have a family member here in town who works in equity and you know, he works deals all over the country, all over the world.
And so we were at a kid’s birthday party and we were talking about each other’s weeks and he said, I gotta fly off to Zurich or something to close on this deal next week. And I said, oh, well how big is it? And he goes, well, the revenue is only 23 million a year, but they’re gonna pay $500 million for this company.
What? That’s like 20 x. How, what, what, what is this? What is this? And, and he goes, well, you just sprinkle a little technology on it. Suddenly it’s worth half a billion [00:40:00] dollars. I’m like, you know, lawyers. T you know, these are numbers that you can reach if you allow innovation, if you allow you know, non-lawyer ownership, if you allow the sale of these things, your practice will have value if you invest and do it in technology.
But you know, the rule, like I said, the rules have locked us into place, into stagnation, and we’re gonna become dinosaurs.
Jonathan Hawkins: Well, I, I like that sprinkle on some technology that’s given me some thoughts and hopefully people out there listening, you know, figure out ways to you know, implement technology, hopefully proprietary technology that maybe can add some value to your firm. But let’s talk about, let’s talk about AI real quick.
Like I said, there’s no way we’re gonna get through everything I wanted to talk to you about, but I do. I am curious, what source of things are you and your firm using ai? How are you implementing that at your firm?
M. David Johnson: Oh, gosh, A lot of ways. [00:41:00] So, you know, I use it every day. I used it this morning, I don’t even remember what I was talking about. I, I think it was a rule change or something that I wanted to ask about. So I use it as a resource for information to help really answer questions that I’m kind of too afraid to anybody ask anybody else about.
Because lawyers, we always think we know the answer and we’re afraid to say we don’t. So AI gives us the anonymity to ask questions that we don’t know the answers to. But as far as operationally, what do we do? We actually have an agent that is part of our onboarding, part of our development that, works with objections, evidence, e evidentiary objections, hearsay. And so we have these new lawyers that come in who don’t know evidence, and they talk to this agent that makes objections and, and, you know, responds to that. We have we call it Billy Bot. Billy Bot Thornton. And that is an agent that we’ve created that reviews billing entries, right?
So if you’re a new lawyer and you’re afraid that you’re not doing this entry right, you keep Billy Bot open here, you copy your entry, put it over there and ask Billy bot what he [00:42:00] thinks about this entry. He will give you three options for how to. How to change it. And that’s an agent that one of our staff members created all on their own.
We use, it’s called Second Nature which is a a, a piece of software that we use and have trained up to work on how to, how to close a sale, how to make sure that when you’re talking to this client in a consultation, that you have a higher conversion rate. And, and so this, this AI agent gives feedback to the new lawyer about, you know, you should have said this, you said too much of that.
You did this many ums, you talked for this amount of time while the agent only talked for this amount of time. So, so we’ve got AI everywhere. In all of our operations and hr, we uploaded all of our DOC or all our manuals and policies and procedures so that, you know, people can talk. We it, we keep an IT support channel open.
For everybody so that they can say, you know, the dog ate my laptop, what do I do? And, and so the agent [00:43:00] actually has taken the entire database of previous requests and we’ve uploaded that and the agent knows how to respond. So, you, you know, you just have to, you just have to use it, get used to it and, you know, start, start.
Jonathan Hawkins: So, so let’s ask about that. So, ’cause it could be overwhelming, so, you know, and you’ve, you’ve got probably more resources at than many firms, but, you know, do you have somebody on staff that is in charge of ai or is it just sort of a, anybody can do anything? How, how do you go about that?
M. David Johnson: Yeah, I’ve seen these firms that have, well, not firms, but businesses that have AI directors or, or whatever interesting idea. I don’t know enough about it yet. I’m not ready to do anything like that. Instead, we do we have an IT department. That’s broken into two, two areas. One is support and one is development.
And the development team uses AI a lot. We use AI on our client portal. And so they kind of [00:44:00] oversee the implementation of ai. But with that said AI is such a new technology. No one is trained on ai. No one, you know, went to school or got their degree. Anybody who says they got their degree in ai, I would really like What?
’cause it’s like too new. So we give everybody a license. Yeah. I mean it really is. Get out there and use it. Get out there and use it and, and so I give everybody on our team, all 160 employees, if they want a license to get a license to ChatGPT. And, you know, and I encourage people to use it. Like, you know, and I think that once you kind of have a casual conversation with it, you know, and, and you ask it about the news or you say, what do I do with a, you know, something that’s not professional professionally related that you get a little easier, you get a little more comfortable using it.
and then you begin to think about, gee, I could probably do this. Well, well what about this project? What about this person? What about this research? You know? And so you decide to check with [00:45:00] ChatGPT and you just get more used to it and work it in. I.
Jonathan Hawkins: So one question I have, so, you know, for me just me as an individual I can implement ai, I can use it, I can do a lot of things, but then as you start to roll it out to a bigger organization, it seems to me that, that it could get, do you have a bunch of individuals using it? You know. Various different ways, or do you have a way to, you know, if you create an agent that it can be rolled out to everybody and everybody’s sort of using the same thing.
How do you manage that across a big organization?
M. David Johnson: Yeah, I mean, the, the development team kind of oversees the, the, the development of agents if people need that help. But like my, my chief of staff, she, she, she designed Billy bot without ever even talking to the, the development team learned how to use it and did it. And so I mean, it’s I don’t want to create too much structure around it because I think that’s limiting.
I don’t know what I don’t know. And so I just let the, you know, the team members go do their thing. [00:46:00] Everybody’s so worried about, you know, the hall hallucinations that come when you draft a document and case sites and things like that. We just don’t use it for that. You know, and when I ask it a question about something substantive, I always double check it.
So, you know, it’s I, I think it’s pretty low risk to give people access to ai and to, to, you know, build their own agents if they can figure out how to do it.
Jonathan Hawkins: So for people out there that maybe are dabbling or maybe haven’t really taken the the plunge yet, what, what advice would you give to start using AI in your practice?
M. David Johnson: I would say start with something small and reasonable. Put your HR documents in there. Put some body of information that you have accumulated and move that into AI and ask it to analyze it, ask it to give you thoughts on it, you know? I don’t know what that might be. We’ve got, you know, I, I think I said 50,000 pages of billing [00:47:00] that we put into Billy Bot, but I don’t know that that’s the, the case, but, you know, you have a reservoir of information that you could begin to work with, and you, you don’t have to set out to design the, the, you know, the killer app.
You just, just try it.
Jonathan Hawkins: Do you have an AI that you prefer? ChatGPT, Claw Gemini. Do you use them all?
M. David Johnson: Yeah, well, no, I, I only use ChatGPT and open ai. In my opinion there, thi this is Highlander, right? There can be only one and, and it will be ChatGPT. It will be open ai. So I don’t, I don’t really spend too much time looking at other stuff. I know that they have specialized agents.
Most of the time the backbone is OP OpenAI. They don’t tell you that, but they’re actually using OpenAI. But yeah, I that’s where we invest and I, you know, the, they’re right over the hill here. Nothing like going downtown San [00:48:00] Francisco to the dog patch and seeing the, the IT people running around there.
Absolutely amazing.
Jonathan Hawkins: So, like I said, you’re, you’re right in the center of it. So, I can’t imagine what sort of conversations you’re having with the tech people. So what sorts of things, I’m just curious if you know, or what, what you’re hearing, what, what’s coming that we haven’t seen yet? I mean, how
M. David Johnson: I mean,
Jonathan Hawkins: stuff gonna get?
M. David Johnson: have you tried SOA two yet?
Jonathan Hawkins: I have not
M. David Johnson: Okay,
Jonathan Hawkins: gotta go, gotta go try that.
M. David Johnson: yeah. SOA two, it’s gonna be the end of evidence. I don’t know what to say. The court’s gonna have to figure something out, but it’s the end of evidence. And yeah, I mean, I
Jonathan Hawkins: What do you mean by that? Tell me. Tell me what do you mean by
M. David Johnson: It can manufacture anything and everything and make it look a hundred percent video will look, you know, a hundred percent authentic.
You will not be able to distinguish a video that’s created on SOA two from the real thing. All of that is, and, you know, you imagine the courtroom, it’s gonna spend a week trying to authenticate a 15 second video from an ATM machine, [00:49:00] right? It can’t work that way because every, everything, the authenticity of everything is gonna be challenged.
And that’s what I mean by it’s the end of evidence. ‘Cause functionally we can’t spend all that time trying to authenticate an exhibit. What are we gonna do? You know, so I, I don’t know what is coming for law on that front, but SOA A or SOA two is a, is a big thing coming open. AI’s new chatbot will be released next year, which just is mind blowing for that they’re able to do this that quickly.
I mean, what else is coming? There’s just a million agents out there that are coming our way. I don’t know. It, it’s,
Jonathan Hawkins: So let me ask this
M. David Johnson: gonna move so fast.
Jonathan Hawkins: So one of the things that we’re starting to see I’ve been, people have been telling me it’s the 75% of the folks that can’t afford lawyers are now drafting their own pleadings with ChatGPT filing these things in the courts. I imagine we are entering an age where there will be [00:50:00] voluminous motions and filings and all sorts of stuff that just overwhelm the courts.
Are you seeing this and do you have any thoughts of them?
M. David Johnson: Oh, oh, yeah, yeah. I got an email, oh, I don’t know the last couple of days that was clearly drafted by you know, an AI agent and even still had the, you know, insert name here thing. So, yeah, I mean, clients are out there trying to find answers, trying to find ways because they’re not being provided. The legal profession is missing that 75% and we’re fiddlers on a roof right now trying to maintain our balance, trying to do practice of law. And unless we get in front of this and begin to find ways to service that 75%, they are going to figure out ways to do it without us, that will bleed into the 25% that we do service.
We will become obsolete if we don’t figure out a way to get in front of this and begin to service that 75% meet their needs. They won’t need to go to ChatGPT meet their needs for a [00:51:00] reasonable price.
Jonathan Hawkins: So, so I wanna get circle back. We’re, we’re getting close on time here. Back to your role in the innovative task force. And, and the the frustration that you’re encountering in Colorado are, are you talking to others in similar positions around the country and are you seeing any other, I mean, obviously Arizona opened it up.
Are there any other states that seem to be seriously considering maybe changing their rules that you know of?
M. David Johnson: I think the A BA has really, you know, put their foot down in a hard way to, to make sure nobody, nobody really engages in these serious discussions. Washington State, just their task force just released their report. I, I think it was within the last couple weeks. I could be wrong, I could be wrong by a year, but I just got their task force report and it was very good.
I think it’s a great place to start. They didn’t talk about rule changes. They did not talk about 1.5. The American [00:52:00] Institute for Legal Studies or aisles. I don’t remember what what that stands for, but they they’re doing a great job of, of trying to meet the needs and have talked about rule changes.
But yeah. Other than Arizona and, and Utah really those are the, those are the hotbeds. I would love to make Colorado one of those. And that’s my argument, and I’m gonna keep pitching it for the next two months. See how far it gets me.
Jonathan Hawkins: So do you got, are you guys issuing a report a couple months? Is that the.
M. David Johnson: Well, the preliminary report is due beginning of December. But there’s just no way I mean, I’m being called into meetings left and right, you know, and, i, I just dunno how we’re gonna, how we’re gonna be able to produce a recommendation that goes beyond, we need more time, you know, but, we’ll, we’ll, we’ll keep trying.
I think there, I, I think there’s consensus. I got a bunch of emails this morning of people talking about, you know, I really wanna work on 5.4. I really, you know, these are major players, big firms you [00:53:00] know, and, and I, my, well, I would love to get the CEOs from each of the major firms in Colorado to come in and talk about how they’re limited, what they would like to see happen.
Why would we not want to talk to these people?
Jonathan Hawkins: Well, I wanna see that report when you, when you issue it, please send me a copy.
M. David Johnson: Definitely.
Jonathan Hawkins: But so you, you’ve been very generous with your time. So I’m curious, we’ve talked about a lot there’s a lot we didn’t talk about, but is there anything that we didn’t talk about that you wanna make sure we do talk about?
M. David Johnson: Gosh, I don’t think so. I think you know, I can say that if you are starting out cover two bases really well. Cover your finances and cover your legal side. Get somebody to help you set up your, your legal documents, get somebody to help you with the finances. It’s expensive, but it’s the best money you’ll spend.
Jonathan Hawkins: And I’ll say, you know, you know, there are people like you out there across the country pushing on this innovation and I would say to the [00:54:00] younger lawyers and even not so young I think it’s gonna happen. It, it may not be tomorrow, but it’s gonna happen. So you need to plan accordingly and, and, and don’t stick your head in the sand
M. David Johnson: Oh God, no.
Jonathan Hawkins: say.
M. David Johnson: Yep. Be a dinosaur.
Jonathan Hawkins: so, last question. You’ve talked a little bit, you’ve got a pretty clear strategic plan it sounds like, for your firm. You’re opening in Georgia I assume you’ve got some other states you’re looking at to, to be rolling out in the future.
M. David Johnson: Yeah. I don’t want to tip people off to that yet, but you know, we do need more east coast presence, so that’s our focus.
Jonathan Hawkins: Well, it’s exciting to see. Well, Dave, thanks for coming on. So, appreciate all of this. I think it’s really important, the stuff you’re doing and really, really impressive the growth and the scale that you’ve achieved in eight years. I mean, that, that’s phenomenal. That really is. And so if there’s anybody out there that wants to reach out, find you, what’s the best way for them to get in touch with [00:55:00] you
M. David Johnson: Dave.Johnson@modernfamilylaw.com. That’s the, the best email to get in touch with me or LinkedIn. You know, I, I actually read those messages even if they’re advertisements, so Yeah,
Jonathan Hawkins: real quick? So, on LinkedIn, I know that you, you talk about these things about notal ownership, I’m sure you get some serious, serious pushback. Hey, maybe we’ll call it, Hey, some trolls. What do you wanna
M. David Johnson: yeah, yeah. I know it’s hate mail for sure. You know, but what I find, and this is encouraging to me, is some of those hate mailers are the, the people who are so adamantly opposed to it, they start coming around and then eventually they get there. Because it just makes sense if you just can get out of the, the gaslighting that.
That our profession is done to lawyers, then it just makes sense. And you begin to see I can get that 75%, why don’t I go for that 75%, you know, I don’t have to, I don’t have to focus on this 25 and kill myself, you know? So, yeah. I, the hate [00:56:00] mail, the, the, the haters on LinkedIn some of them have come around.
Jonathan Hawkins: but Dave, this is how we’ve, we’ve always done it, so we gotta keep doing it this way.
M. David Johnson: Right. Oh my God. They’ll be extinct in a couple of years.
Jonathan Hawkins: Yeah. Well, cool. Again, I, I really appreciate you coming on. It’s been fun.
M. David Johnson: Yeah. Thanks for having me. I, it, it has been fun.
OutroUpdatedWebsite-1: Thanks for listening to this episode of the founding partner podcast. Be sure to subscribe on Apple podcasts, Spotify, or wherever you get your podcasts to stay up to date on the latest episodes. You can also connect with Jonathan on LinkedIn and check out the show notes. With links to resources mentioned throughout our discussion by visiting www.lawfirmgc.com. We’ll see you next time for more origin stories and insights from successful law firm [00:57:00] founders.