TRP 335: [Legal] Law Firms of the Future with Tim Keith

[00:00:10] You're listening to The Rainmaking Podcast, hosted by legal dealmaker, author, and professional speaker, Scott Love. You're listening to The Rainmaking Podcast, and my name is Scott Love. Thank you for joining me on the show. This is going to be an interesting topic because we're going to hear about what the future is going to be like for law firms. Our topic title is Law Firms of the Future, and our special guest is Tim Keith.

[00:00:40] Tim is the CEO and founder of Prepense AI. His AI-driven platform analyzes historical data and market signals. It provides firms with the insights they need to anticipate their client needs before they arise by enabling firms to serve with precision. They help their clients strengthen their client relationships, enhance trust, and ultimately create greater value for everyone involved.

[00:01:08] If you're interested in learning more, connect directly with Tim. All of his contact information and his LinkedIn link is on the show notes, and you can connect with him directly. Here's a special announcement. On Thursday, August 19th at 1 p.m. Eastern Time, I'm hosting a complimentary half-hour webinar on Zoom. It's just for transactional partners of law firms. If you're a corporate finance or real estate partner and you want to learn how to maximize

[00:01:36] deal flow, our special guest is Ryan Grelecki, who's a global consultant with the Bunnell Idea Group. He's a business development coach for lawyers. So I'm going to start doing these programs maybe every other month, maybe more frequently. I'm not sure yet. But nonetheless, if you want to get access to that recording, go to this link. And if you want to attend, go to this link. And I promise your email isn't going to be given or sold to anybody or put on a funnel or anything like that. I got this link. You can just go here directly and register.

[00:02:06] Rainmakingseminars.com. As always, this podcast is sponsored by SurePoint Legal Insights, formerly known as Leopard Solutions, turning legal intelligence into opportunity. The show is also sponsored by The Rainmaking Magazine. Now it's entirely complimentary. No paid subscription required. This is for intellectually driven, results-focused professionals that want to be the number one professional services provider in their niche. Grow your knowledge of rainmaking. Visit therainmakingmagazine.com today. Thank you for listening.

[00:02:36] I hope you get some great ideas from my conversation with Tim Keith today. Hey, this is Scott Love with The Rainmaking Podcast. Our guest today is Tim Keith, and we're talking about law firms of the future. Tim, thank you for joining me on the show. Thanks for having me, Scott. Really appreciate being here. You bet. And it was nice meeting you at the Lasso Conference, the legal sales and service organization Rain Dance. It was just an exciting event, and I'm glad to hear of your story and your history with them. But let's get right into it.

[00:03:05] Law firms of the future, Tim. This is going to be an interesting conversation. Absolutely. I think this is a conversation top of mind because there's just so much change going on across the board in legal accounting and professional services. Everyone's trying to figure out what the, trying to be Notre Dame's and trying to figure out what the future looks like. So I think I have a very strong opinion on it. So I'm happy to share my thoughts and what I've been hearing myself. Yeah, great. Let's dig in.

[00:03:35] I think that when we look at law firms, I think technology, artificial intelligence, that's got to be an easy place to start and other things like that. What do you think are the more obvious places of change where law firms will change in the

[00:04:20] future? I believe private equity is going to be a big stake into legal very soon. I know that their eyes and they can see what this is happening in the accounting market and the structure is going to change. And as soon as that structure changes, the kind of approach of law firms are going to change. Right. This is going to be mass consolidation of a lot of firms that are going to basically come together as one. Right. And then really, and they're going to really try to focus on this middle market and they're going to be looking at being a holistic solution for the middle market companies and kind of

[00:04:50] the large companies as well. So I think the big, the first big change that I think will happen in the next five years will be, you'll see law firms, some of the top law firms surprisingly merge together. You'll see a big influx of private equity and then kind of the structuring process and the way that the partnership model become less and less. And that will kind of feed down into the rest of the firms and how they approach the market. I think you're right. Let me, let me talk more about this.

[00:05:18] I think this is going to put pressure on more traditional firms. And I think we're starting to see that reflected in it. Not, I wouldn't say decline in revenue, but some big firms that I would categorize as upper middle market, they didn't have the 20% growth that others did. So I think some firms are going to start getting squeezed out of opportunities. And part of it might be, like you mentioned, the structural component with that. And one thing I've even seen, just because I've done law firm mergers, I do law firm

[00:05:45] mergers in addition to partner recruiting for corporate and finance partners. But even being active in the deal space, so I've actually had investment banking companies come to me to find opportunities to put deals together in that space. And it's interesting where it used to be slip and fall plaintiffs, personal injury. Now they're coming to more traditional corporate, full service firms that want to grow and firms that want to get investment for various reasons, not just getting founders getting paid leave,

[00:06:14] but really true investment. And I think you're interesting, Tim. Do you think that in terms of the structure of firms, do you think that could ever change in terms of non-lawyers owning equity in firms? Or do you think the ADA is just kind of set on keeping things the way they've always been, just because they've always been that way? What do you think about that? No, I'm absolutely bullish that the entire structure will change, right? A trade really happened, right?

[00:06:40] In Arizona, they passed some legislation where they allow non-lawyers to acquire firms. And that has happened. Actually, one of our clients, an accounting firm, acquired a law firm, and they're not law firms. They're not lawyers, right? So that's just the beginning. And the main reason I believe that's going to happen, I'm very bullish on that, is just the wealth transfer, right? There's just so much money in the market, right? And if you look at accounting, right, it's just as soon as the first couple of firms

[00:07:09] that happened with, because the same thing was previously in accounting, it just happened very, very quickly, a lot clearer than you thought it would. So I have no doubt that legal structure will change. And honestly, a lot of these firms do need the capital to keep up with the times, right? And it's not just about getting the check as, hey, like, as the founders leave and the partners leave, and obviously that's a great wealth transfer opportunity. But it's more about AI consolidation and efficiency, right?

[00:07:37] Like, AI is really changing the game in the sense that it's no longer the black box when you're doing with law work or legal work or professional services work, right? With ChatGPT, it's just really opening up the transparency. So the firms that are going to win have to go more into kind of the trusted advisor space to the more of the complexity of the deals and be more efficient across the board. So I have no doubt the structure will change, and I think it will happen a lot sooner than people anticipate. That's interesting.

[00:08:06] And that's something I don't think a lot of people predicted. And you're right, because you've seen that arc in the accounting world. What has that pattern been? Where are you getting this thesis from, from what you've seen in accounting? I mean, it was like a tinderbox, right? In a sense, it was like four years ago, I think three or four and a half years ago or three and a half years ago, it was the first deal. And everyone was so surprised. Everyone was against it. Probably record we can't be doing professional services. And all of a sudden, now there's 40 deals that went down, right?

[00:08:34] And most of the firms in the top 70 have taken a private equity stake, right? And it just happens very, very quickly. And what we've seen is the capital, right, is helping the firms. And there's kind of a weird waiting period in a sense, because when the private equity money came in, everyone thought they would just start to spend more money on technology, more efficiency, and grow tremendously. But I think one of the things that the private equity firms didn't account for was the seller

[00:09:04] doer model and how client centric this business is. So I think the first couple of years was really figuring that out. They were trying to be efficient for efficiency stake. And now they're basically saying, like, now, how do we get to the next level? Because as we know in private equity cycles, they typically tried to flip within five years into the next buyer, right? So they have their own kind of pedigree. But I think the one thing that always was part of the profession, like the legal and law and

[00:09:30] accounting firms, was the structure of the partnership model was always a holistic decision making process, right? So oftentimes, like, that's why they say law firms are slow to adopt technology. I think we proved that wrong the last couple of years with the way AI is going and kind of the efficiency side. But private equity will change kind of the decision hierarchy, the decision the way things are made, right, for firms. And that will change the entire way the firm is going to market, the entire way firms support

[00:09:59] their client base and the entire way we look at the industry within this period. You're making a lot of people uncomfortable right now, Tim. You think so? I don't know. I think I'm more of a realist, right? Because I've been in and I saw it. I saw it. And it's not necessarily negative. It's just with new capital, there'll be new technology. There'll be a lot of different new opportunities, right? You'll be able to move a lot quicker, right? Also, there's a big wealth transfer as well. So there's just a lot of good things that happen from it.

[00:10:26] But I'd rather, if you're going to be in this lane, because accounting is the same thing where I really get this information from. If you're trying to be in an independent firm, you also have to do the same things, right? Even if you don't take the private equity capital, I'm talking the future in legal because obviously there are certain legal changes that have to happen before that's even possible. But even if you're an independent firm gearing up for this and you don't want to consolidate, you don't want to merge, you have to be very, very focused on organic growth, right?

[00:10:54] You have to be very, very focused on taking every single client, looking at that data holistically so you can use as much organic growth as possible to control your own destiny. And I think either way, it's going to affect you, right? If you don't do or you don't, right? You're still in the same lane, right? You're still going up to the same goals. It's just a different set of cards. Yeah, that's great. That's a great way to put that.

[00:11:19] I think the discomfort comes in terms of someone's reliance on precedent to guide their lives. And I think that's not bad. However, when there's a change, then you need to adapt and you can no longer look at we've never done it that way before as your fallback. You have to be innovative. You have to be creative. And as we know, law firms just aren't really known for their innovation. So some firms are, and I know this for a fact, just having had recent conversations with several law firm chairmen, some firms are embracing this.

[00:11:48] They're looking at this as a game-changing opportunity where now they can get an edge over their competition that's going to be less nimble, less dependent upon being flexible and less opportunistic about how to adjust and how to make adjustments in their strategy where they're going. What do you think would be the biggest impediment for a firm to really capitalize on trends?

[00:12:13] What have you seen are the biggest reasons that a firm just isn't going to adapt or make any sort of change? What's your general answer to that question, Tim? I think it really comes down to change behavior, right? I think why legal firms and law firms and accounting firms in the same kind of degree to a different viewpoint always struggle with change is because the way that the firm is always structured

[00:12:38] and the beauty of legal, the beauty of big law is I have my book of business, right? I bring in my clients, I support the firm, I support the brand, but I do have autonomy, right? If I'm bringing in my clients and I'm going, and then as we have multiple books of businesses, the business gets stronger, right? So when you're trying to do holistic change across organization with that type of model, you're taking away from the independence, right?

[00:13:05] You're taking away from the agency where this industry thrived, right? That's really what part of the soul of the industry, right? Having an agency as a lawyer, right? I work for this firm, this is my brand, and I am a, and let's say a Pappense man, right? Let's say Prepense was a law firm, but it's my book of business. It's my clients. I support my clients. As long as I'm doing the right things by the brand of the firm, I always have agency in the way I approach it, right?

[00:13:34] As long as you're bringing the numbers. So when you're trying to make holistic change, right? And you have different pockets that handle a different way, and you kind of empower that because that's the way that the firms worked historically, right? It's very, very difficult because it's basically like a holding company, right? And there's all these different pods within it. And when I don't want to shake the boat too much, I know we need to do certain things. And that's why strong leadership is really important for these type of times, because

[00:14:03] it's very, very difficult to tell somebody that did something one way or their way for decades that they need to do it a new way. But I think the eye-popping moment why this is such a unique spot is, like I said before, the change is here, right? AI is not going away, right? Consolidation is not going away. The way that these native AI companies are not going away, it's just so much more transparent in the market. It's only going to accelerate.

[00:14:32] So I think that the biggest thing, the biggest fear is not doing anything, right? You have to have conviction in one lane or another. Like, we're going to be an independent firm. We're going to do this better than everybody else. And that's going to be our differentiator. We're going to embrace this money coming in. We're going to innovate. We're going to take this private equity money. We're going to take this consolidation. And we're going to be this. Like, I think the danger and the most dangerous thing is to do, hey, this is just the way it is. It's always been.

[00:14:59] And honestly, law firms and accounting firms, that's always how it's been because, like, the money always came, right? But I think, like, now it's different money. It's different psychology. And it's a different approach just because things are moving so fast. Yeah. One thing I like what you mentioned was the word client. That if we keep the client in mind, what's in the client's best interest? How do I need to change my structure so it helps my client? I don't think you can ever go wrong with that.

[00:15:26] What I do think where people are going to go wrong, just like you mentioned, I think that fear of change, I think the way most law firms work, they look at, hey, what's that other firm doing? That's their strategy. And I think there's so many headlines now. You see bizarre stories you never would have predicted before, such as, here is a highly credentialed elite partner with a very elite firm that actually left to go start an AI-based law firm on its own. Who would have ever thought about reading that?

[00:15:53] I think that just the movement, and I think what's interesting, if you look at the strata of firms, the elite firms, they're actually seeing other firms poaching their partners. Never happened before. Now they're seeing that. I think they're realizing we need to adapt. We can't just rely on our brand equity and the fact that we've always done it this way. I think their clients are reading the same headlines too. And so I think that you're absolutely right, Tim. People need to adapt.

[00:16:19] They need to be able to embrace certain opportunities and at least have a plan for that. And I liked how we started our conversation with structurally. What are some other things besides the structure of firms that you think the law firm of the future might tend to make changes towards? I wanted to start with structure because I think the epitomem of the change was the structure previously, right? Like you can only do so much in friction against that, right? That's the way I see it.

[00:16:48] I think when you're making big change, you need one decision up top, right? Without the less amount of friction in between that. That's why we started with structure. So one of the things is like, I think firms have always talked about this, but they've done a very poor job about this. Every single firm, independent, a large firm will have to focus on the one firm mentality. Now, it's not even a choice, right? There really isn't a choice. I know firms have already tried to market this way.

[00:17:17] Like it's not partner, it's the firm, right? And what I mean by that is when one client comes in, right, it's not like just doing one work, right? Or let's say we're doing a corporate governance job. It's basically looking at that client and understanding every single leg of the business, how we can help support those needs and having that collective approach to each client holistically from the beginning to the middle life cycle and the long cycle.

[00:17:45] The way I say that, because that's the only defense mechanism to this change, right? Keeping your clients happy. And just because the market's just so competitive from an AI, like you working with an AI firm or going to ChatGPG and finding out the answer myself or going to three different firms versus the one firm as, because what defended you before is like, no, I work for that firm. That's my brand. And that's the thing. That's not, that is me less and less during this time, right?

[00:18:12] Because it's just so easy to find all the other solutions. So I think the most important thing that like beyond the structure is having that one firm mentality from the lead generation to the first client cycle, to the mid cycle, to the late cycle. And that's one thing that I think every firm is thinking about, right? And it talked about in theory for the past 15 years, but did a very, very poor job of executing on that needs to change now. And the best firms are already doing it.

[00:18:41] The best firms already know it. And those are the firms that are going to separate between, hey, being eaten up by this change or riding this change to the next degree of excellence. So we've talked about structural changes, changes to client relationships. What about changes to the billing model? Do you think the hourly rate is going to go away, the hourly rate for client work? What do you think about that? I think a value-based pricing will definitely take place.

[00:19:08] I think like I still don't have a full theory on that. I think it'll be a hybrid model for some time, right? I think maybe the work that's very can become very commoditized or democratized will go straight to the value-based pricing pretty quickly, right? Basically, this is done. This is how much it would cost, right? Definitely. Like you're talking about like setting up a corporate structure, all the things that like you can do very, very quickly now already with all these AI products, right?

[00:19:36] They probably will go into the value-based pricing, which we learned from accounting that also is happening as well. I think the deep, deep strategic work, right? The deep why you want a trusted advisor, which is what the best law firms are, right? Like I'm not going to you to do this work. I'm going to you to give me advice. And like, so I'm secure in like my processes as my business changes. I don't know exactly how that would go into the value-based pricing. I think maybe it'll be a hybrid, right?

[00:20:05] And I think each firm will handle that a little bit different. I don't think there'll be a mass. This is how the legal firm will apply that. So I think there'll be two tiers of pricing. There'll be the value-based pricing for everything that's basically can be kind of bespoke and kind of specific and like can be commoditized pretty quickly. And in the latter half with every firm's trying to get there, that the deep trusted advisor work where it takes strategy and what you're really buying is they have my back will be more

[00:20:33] in kind of the billing cycle, typical billing cycle, maybe a hybrid with a value-based system. Yeah, that's right. I agree on that. I tend to think of looking at other models where we can draw some conclusions from. And I've always wondered if the lobbying slash policy world where they're charging monthly retainers, which is closely affiliated. And I've actually done some placements for firms that have policy shops and policy practices where it might be a separate entity or branded under the firm's name.

[00:21:01] Either way, they're charging 10 to 20K a month to a certain client and they might make one phone call during that time. And that's worth it for that client to have that because that's all it takes to get things unstuck. So I wonder sometimes if there might be monthly retainers where a certain amount of work is done. We'll just see. But I remember even when I entered the legal world years ago, people were talking about the end of the billable hours. So I just don't know. They've been talking about that for a while, right? I know. That's right. That's right. Yeah.

[00:21:29] What are some other changes that come top of mind, Keith, besides we talked about structure, client development, pricing, anything else that you think is interesting that we should pay attention to right now? I think there'll be more and more niche single practices popping up with the AI native, the way that's going, right? You already mentioned it already. Like a lot of partners already left that they would never think would leave and started their own kind of shops. But with the way that AI is basically helping firms basically get to zero to one and be a

[00:21:57] support mechanism, they no longer need that full infrastructure of the brand to especially develop their practice, especially ones that already have the network. So we'll see that a lot. And I think it's a good thing. Right. I think like you'll have more kind of like entrepreneurial nature within the law. Right. I think like it does take a special person to do that. Right. Because it's like the entrepreneurial journey, as you know, is it's not for the faint of heart. Right. Because it's a lot of a lot of that. So like some people would still embrace and having that kind of a support system.

[00:22:26] But I think we'll see that a lot. I think we'll underestimate the consolidation. We'll underestimate the mergers. We'll underestimate how quickly and how big that will be. And I think that will trickle down to everything. So I think what we'll see is a lot of large law firms, a lot of small, nimble shops. And we'll see the middle keep getting decreased, getting pulled from both sides. Right. Yeah, you're right. You're right. So you'll see a lot of big law, like we say big law now, but we'll see bigger law, like very, very quickly.

[00:22:54] And we'll see a lot of kind of smaller shops kind of pop up within that. And the middle market will kind of get swallowed up. That's what I believe will happen. I think you've got a lot of truth to what you're saying, Tim. Let me kind of wrap it up with three action steps. What are three action steps you'd suggest people take to really be ready for these changes? Yeah. I think from a firm level, right, depends where you're at the firm. Obviously, if you're a managing partner, you're you're I think you should start having

[00:23:20] more and more conversations about what has happened in the accounting landscape. I know they're already talking about consolidation. They're looking at M&A. They're looking at all these other things. I think just to make you aware at the individual firm level, I think you should start taking a deep, deep look at your client journey. Right. And looking at what differentiates you and what you can scale as a differentiator. Right. I'm not talking about kind of practice group, the nice things that you're great at.

[00:23:46] But basically, what what's one plus one that equals five within the firm? If you give us our perfect client, right, what are all the services they would do for us? And what is what makes us very special? And how do we market that? And how do we scale that? And how do we commoditize that? And also, the second thing that we're also saying, start to capture your voice as a firm. Right. As you can see, AI is going really, really well from a gen and I perspective doing the work. Right.

[00:24:14] But what it's not able to do is take the trusted advisor voice from firms and apply it yet. Right. So I would start figuring out a way to either record certain meetings or and building a kind of internal AI structure, because I think that will be your differentiator in the future. Your voice and how you serve your clients and your voice of how you do your internal work. That's the difference between like a TRA or TB because you guys think the firm thinks differently.

[00:24:41] And that can be leveraged, especially against the some of the things that AI is taking away, because you can leverage that at scale across your firm. That will also be helpful. That's great, Tim. Any other final thoughts? Any other final steps that you'd recommend? I think what I've seen a lot from firms is they're afraid to take the first move. Right. They're afraid they they're letting perfect get away from good. Right. But I think in this market, nobody really has the answers. Right. Nobody with AI is moving really quick. All these different things.

[00:25:10] These people like for me, like I'm saying all these things and I have a good I have a deep conviction in it, but I don't really know what will happen. Nobody really knows. So don't be afraid to take take bets, take experimental bets to understand more about how this works for you and your firm or individually for your practice, because we're in the experimental phase right now.

[00:25:34] Right. And the firms that take the more bets and understand this and have a better theory of what works for them sooner than later will be the firms that are in a better position to win. Right. I'm talking about spending some money on technology. I'm spending some money on certain certain practices. So I have some deep conversations about how do we get to that one client approach and put some structural changes and put some leadership behind that. So these things that you basically had in the back of your mind that you were like, oh, we'll do this at one point, which we all every firm has done that.

[00:26:03] Start swinging. Start swinging, because I think once you get those hits, you'll be in a better position to be prepared for this time. That's great, Tim. Thank you for being on the show. And tell us before we go, what is your company do? What offerings do you have that you'd like our listeners to know about? Yeah, absolutely. So I'm the founder and CEO of Prepense AI and what we are, AI driven cross selling enablement platform, particularly built for law firms.

[00:26:26] And what we really do is we help predict client needs across your client book so you can understand the potential money being left at the table, but more importantly, to accelerate the change management needed for that one client approach. Right. So we allow firms to basically look at any client and understand all the other practice areas that should be working with the client based on real data. I kind of describe ourselves like a Switzerland using all the different data points to understand these are all the similar clients.

[00:26:54] These are everything that we should do so you can accelerate that change needed to create that one client approach. And we're really we're really excited about this because I think this is the future and we're really geared up to help firms that really want to embrace those practice strategies and and give their clients that full experience. That's great, Tim. We're going to put all of your contact information on the show notes. So to everybody listening, go ahead and go to the show notes right now. Connect with Tim directly.

[00:27:20] We'll have his LinkedIn profile, also his company link, and you'll be able to reach out to him directly. Tim, thank you so much for joining me on the show. And I look forward to staying connected with you. Absolutely, Scott. This has been a pleasure. Thank you for having me. Thank you for listening to the Rainmaking Podcast. For more information about our recruiting services for international law firms, visit our website at attorneysearchgroup.com.

[00:27:45] To inquire about having Scott speak at your next convention, conference, sales meeting, or executive retreat, visit therainmakingpodcast.com.