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   Nov/Dec 2001


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[Online Competitions]
THE AUCTION BLOCK
By Ann Lee Gibson

Internet matchmakers aim to broker lawyer-client relationships in tactics RANGING from lawyer listings to Web-accessible RFPs. A new breed ENCOURAGES LAWYERS AND FIRMS TO BID FOR LEGAL WORK. What do you need to know to compete?

10 questions.


Law firms seeking third-party sites to obtain legal work? Although some find the concept odd, there are close to 100 Web sites that aim to match lawyers with clients online. The range of involvement by lawyer, client and vendor, however, varies widely— from simple registrations to full-scale, real-time auctions.

Some sites, like martindale.com, are long-standing lawyer directories where prospective clients simply search listings for lawyers. Newer sites, like legalmatch.com and Martindale’s lawyers.com, let potential clients input a description of their legal needs and have it forwarded to listed lawyers who seem to be good matches. Vendors like firmseek.com and elawforum.com play a more active role in brokering relationships by helping corporate clients issue requests for proposals, or even crafting RFPs and running competitions. For these first three types of sites, the model is generally a simple one: register more lawyers to list on the site and drive more client traffic to the site, with the goal of putting lawyers together with clients.

Now, enter a fourth type of site: Exemplified by the vendor freemarkets .com, these sites don’t enlist lawyer or law firm registrants or promote site traffic. Instead, they run online competitions that focus greatly on price. Their proprietary technology permits multiple lawyers or firms to bid anonymously in real-time on the work defined by the client, who pays the vendor’s service fee. All bidders can see all bids on-screen as they are posted. Can you make this work for you?

Top 10 Questions to Ask about Online Competitions

Whether you or your firm should participate in online competitions or auctions to win legal work will depend on numerous factors. To determine if it’s a viable way to win legal work, answer these questions about the specific competition.

1. Is low pricing the client’s primary consideration in holding the competition or auction? If so, you must know precisely how little you can charge for the work while still making the slimmest of profits. It is critical that you determine your lowest possible price before the auction begins, because that’s how low the bidding will probably go. Otherwise, you may come to your senses just as the auction ends. You’ll realize that you’ve suffered from a desire to win at any price—and won at a very bad price indeed.

2. Would winning this work be a strategic move for you and your firm? Pursue work that furthers your long-term goals, particularly if it will lead to other work you can do for this client, or others the client can refer to you. If, however, you will be handling a small matter for a client you will likely never represent again, consider more productive marketing avenues.

3. Is it possible other firms will recognize your firm’s bids? If you don’t want your competitors to know what you charge for your services, think twice about entering a competition where all bids will be broadcast via the Internet onto your competitors’ computer screens. Even if bids are posted anonymously, it may be possible for competing firms to recognize other firms’ bids. Also, consider how low you want to go in public.

4. Will this be a "musical chairs" competition with repetitive bidding? Will there be repetitive rounds of bidding, involving fewer and fewer contestants until only one is left standing? If so, you should run for the nearest exit. You may elect to utter a pleasant excuse as you leave. If you stay until the bitter end, you will feel exhausted, irritated and demeaned, even (or perhaps especially) if you are the last one standing.

5. Is the work you are trying to win significant enough to warrant your marketing costs and efforts? Your out-of-pocket marketing costs in any competition should not exceed 5 percent of the potential prize. This includes any fees you pay to participate in the competition, such as registration or listing fees, travel expenses, fee sharing, hiring of outside consultants and the like. Also, remember that the longer a competition goes on, the more it is likely to cost in real money and energy.

6. If you win this work, will you be working at significantly lower rates than you charge other clients? It’s bad business to charge some clients less than you charge others for the same services. Sooner or later, those who pay full freight will find out they’re subsidizing other clients’ services. So, unless there’s some truly irresistible benefit to discounting rates for a few clients, take pains to avoid this potential for embarrassment.

7. Why is the client holding this competition at this time? Don’t assume that every competition is about price (or qualifications or speed or value). Don’t assume anything. Ask enough "why" questions to understand the client’s motivation to seek new outside counsel now. If you do learn that the client is seeking to reduce outside counsel fees, find out what services are most important and least important to the client. Then design a service plan and pricing plan that give you the flexibility to meet the client’s needs but that don’t waste your resources.

8. Which online bidding and reverse auction sites should you avoid? If your firm focuses on corporate work, don’t bother with sites that focus on the needs of small businesses and consumers, and vice versa. Sites that crow about how much money their clients have saved in legal fees are probably running competitions and reverse auctions for low-end, commodity legal services, so proceed accordingly. Also avoid sites that look stale or display copyright dates earlier than 2001. They’re likely to be gone soon. In addition, be leery of paying long-term registration fees to vendors that won’t show you their financials. Your annual registration fee could wind up financing their pink-slip party.

9. How can you predict whether registering at a specific site will generate new business? Go to the sites you’re considering joining and find other lawyers or firms in other states (not your direct competitors) who are registered at that site. Contact them to learn about their experiences with the site. You can learn, at least anecdotally, whether hanging out at this site is worth your effort.

10. What if an online competition that looked like a good idea at the start goes bad? Pull out of the competition as gracefully as possible—before you find yourself stuck in a relationship you don’t want.

Ann Lee Gibson, Ph.D. (agibson@newmex.com) is principal of Ann Lee Gibson Consulting in Taos, NM. Her article, "50 Tips to Help You Win Client Competitions," appeared in the September 2001 issue of Law Practice Management.