In this Q&A session, LegalZoom CTO Eddie Hartman advises entrepreneurs on how to negotiate legal fees, emphasizing alternative fee arrangements such as flat fees, success fees, collars, and aggressive discount anchoring. He explains that lawyers often lack pricing expertise, so clients should come prepared with business savvy to secure better terms. Hartman discusses the use of templated legal documents and low‑cost review services like LegalZoom, warning of pitfalls when customizing contracts. He describes LegalZoom’s disruptive impact on traditional law firms, highlighting how its low‑price LLC filings have forced price compression in the market. The conversation also covers LegalZoom’s international partnerships (UK, France, Germany, Australia) and its encouragement for entrepreneurs to replicate the model abroad. Finally, Hartman touches on the company’s social mission to make legal services affordable, clarifies that LegalZoom is a C‑corp rather than a B‑corp, and notes its focus on building long‑term client relationships rather than transactional interactions.
Chapters
Which leads to my, you know, one more thing that I want to talk about. Think about asking for a flat fee arrangement. It makes a lot of sense if you can get a flat fee or if you can give them a success fee. I'll pay you this amount, but I'll pay you this additional amount if and only if you can get this thing done for me in this period of time. Believe it or not, lawyers are more and more open to that. Use the term alternative fee arrangement and ask for it. Ask for a discount. Ask for an alternative fee arrangement. What's the alternative fee? Ask for collars. What's a collar? Collar is, hey, I'm only going to pay you this range. I'm not going to pay you any more than that.
So how much discount I should propose?
You know the old adage is anchor high, right? Ask for 50%. They won't give you anything like 50%. But if you ask for 20%, you're not going to get 20%. You'll wind up with 5%. So start off asking for more of a discount than they could possibly give you. And then get to the point where— lawyers are not great at setting discounts, so be smart.
So lawyers are supposed to help you with law, right? But then there's no one helping you with lawyers and how to bill your hours. Is there any service or anywhere we can go to that can kind of give you the advice that you can go to an accountant?
No, I don't know of one. The good news, if you want to know though, is that lawyers are are, generally speaking, really good, smart people. And they don't really know how to set prices very well. I actually help more and more of them set prices and try to help them get more realistic. But the fact is lawyers generally don't. So if you come in with a little bit of business savvy— they're probably not that business savvy— you can work something out. The problem that people have is they go in without trying to bargain at all. And they just say, oh, well, the rack rate is the rack rate. And oftentimes they say, I can't afford that. So they walk away and they don't get legal help. And boy, does that cost you down the road. That's like driving without insurance. That's like having no health insurance. If you don't ask for legal help, believe me, you're going to wish that you had. All I'm telling you is don't pay the rack rate. Look for an alternative fee arrangement. Look for a flat fee way to work with them, or look for a discount. Any other questions on this?
It's not on this, but like most of us I was running digital startups and have similar problems. We used templated documents early on. What are some of the things we can get away with templates if we're smart enough to customize them based on our things? And what are the things just straight up no templates, go get help?
Because it is kind of gray area today. Yeah. I would love to tell you that you can template a lot of things. LegalZoom has a whole bunch of forms. You know, and they're like $10 apiece or something, not expensive. I think many of them are now free or included. There are places to get free forms out there on the internet, as I'm sure you know and you've seen. The problem is that every time that I've told people like, well, a promissory note, that's a simple thing, just change the names and the terms, you'll be fine, I hear horror stories about, oh, but I didn't specify the currency, and one was in Australian dollars and the other was in US dollars, and I wound up owing, you know, a million bucks. So I would love to say, hey, there's plenty of forms that you can use. But I would say be careful. There are a lot of services that you can use. LegalZoom is one, but there are others where if you just give them a contract that you've written, they'll review it for you for free or for part of some monthly cost. Like LegalZoom is $30 a month. By the way, I'm not here to shill for LegalZoom, really. But we have 1 million customers. 1 million and 1 would be great, but it's not that big a deal. But find a service like LegalZoom where they're willing to review contracts for you for free, or relatively for free, or as part of an included monthly cost of like— you shouldn't be paying more than $30 or $40 a month. And then just ask them to change the form, and then say, hey, would you look this over for me?
I'd like to ask 2 questions, first about LegalZoom and about your work on inclusion.
Sure.
Firstly, you mentioned that when you started LegalZoom, For wanting to do the documents for customers. So what I gather is you were more working with consumers, business consumer type mentality. Did you consider other law firms as competitors or partners, or did you just not think about them at all?
We thought of them as competitors, and they thought of us as irrelevant. They couldn't care— originally, they couldn't care less about LegalSim. We were totally a blip as far as they were concerned. Now, when 1 in 4, 1 in 3, 1 in 2, whatever it is today, LLCs in California comes to LegalZoom and not to a lawyer. And lawyers, by the way, I met a lawyer who used to charge about $450 an hour and would spend 4 hours on an LLC and collect $1,800. And then would go play golf, and that was his day. Like every day he'd just do an LLC, right? Can't do that now, not when LegalZoom has a $99 rate on LLCs. So there's been a lot of downward price pressure, but the big law firms still don't care. Like the places that you— that most law school grads want to go work at, that's big law, and they really don't care. By the way, LegalZoom did absolutely start with a focus on small business owners and family, and we still have that today. I will say that more and more, it's just a function of having incorporated so many people. Umami Burger started at LegalZoom. LivingSocial started at LegalZoom. Lots of people started at LegalZoom. So over time, some of our customers are bigger and bigger, but not that big a thing. By the way, I am known now because we have tried to move everybody from a transactional, like, hey, here's your will, thank you for the money, go away, to a relationship. Here's your will, we want to be here for you, we want to support you, make sure that it's updated appropriately. I am now known in legal circles as the man who turned divorce into a subscription. Does LegalZoom work overseas? LegalZoom has partnerships with a lot of companies that work overseas. So we've got a very large presence in the UK. So we do— we are in the UK. We also have a company called— a law firm called Beaumont, 270-year-old British law firm. By the way, If you want to see some British people really unhappy, go over and say, hi, I know you've been in business for 270 years. I'm from California, and we now own you. Not a pleasant afternoon on either part. But they're great now. So there's a lot of LegalZoom presence in the UK. Companies like France and Germany, we have strong partnerships with businesses there. Australia as well, Lawpath. So yes, it depends upon the country you're interested in. By the way, if you're from a country that's not— where LegalZoom doesn't have a presence yet, and you're thinking, that sounds like an interesting business model, I should do that, I should rip that off and do that, I encourage you to do that. I'm telling you right now, steal this business model and take it into your home market. LegalZoom is probably not going to go there, but if you do well, we'll try to acquire you. So absolutely, get out— if you're like, hey, I'm from Turkey and I'd love to Absolutely, go nuts. I'll give you secret help, you know, and yeah, do well, we'll buy you. Can I start there? Yeah, for sure, for sure. No, because part of what we're doing is a social mission. Like, we really believe that legal fees are out of whack. Normal people need help in business or in life. You need legal help, and you can't afford it, and it's not fair. It's fundamentally not fair. LegalZoom does downward pressure on prices. And if you guys want to go to your own countries and create downward pressure on legal prices, fantastic. We encourage that. We can't do it ourselves because we don't know the local market. But if you can do that, awesome. We'd be super happy.
So are you a B business?
Sorry?
Are you a B corp?
No, we're a C corporation. We have real investors. Yeah, can't be. I mean, Patagonia does it. But remember, that started in Maryland in about 6 years after LegalZoom got started. So yeah, we couldn't be.
