There is no better time than the present, unless of course this present is taking place against the backdrop of a global pandemic. Nonetheless, Tomu Johnson decided to open his new two-lawyer law firm, The Broad Axe, in June, confident that more than a year of working from home has adequately prepared clients for a virtual, business-based model. on a subscription.
The Utah-based company will focus on privacy and data management, topics Johnson became well versed with when he was an attorney at Parsons Behle & Latimer and CEO of the company’s technology subsidiary, Parsons Behle Lab. As to why he wanted to open a new law firm amid the pandemic, the answer is twofold: Johnson, who is part African-American, wanted to add another African-American firm to the landscape.
He also believes the disruptions caused by the pandemic – particularly the widespread shift to a remote work setup – have created an opportunity to “rethink traditional business models”. Example: The Broad Ax will operate with a subscription payment model as opposed to the more common billable hour.
Below, Johnson discusses how technology has lowered the entry bar for startups and the opportunities offered by Utah’s regulatory sandbox initiative. The following conversation has been edited for length and clarity.
Why was it the right time to leave Parsons, Behle & Latimer?
Over the past year and a half, what I’ve discovered is that many of the assumptions I had about customers didn’t necessarily hold up, at least from my perspective. [of view]. My clients are a bit tech savvy so when I deal with my clients they don’t care if I have a big law firm or if I have a big space. … They didn’t need all the equipment of a law firm to do business with me. …
What you have is changing customer attitudes that don’t necessarily care if you work from home, don’t care if you don’t have a big office downtown. And they’re getting used to the concept of doing business with you digitally and electronically. There were no cultural barriers to entry [as a new firm] that existed maybe 15 years ago, and I think the pandemic has really forced us all to go back and adjust the cultural expectations of law firms [and] lawyers.
If not, how has the pandemic influenced how you have structured your business to take advantage of these opportunities?
One of the most important things when thinking about starting a business was trying to reduce overhead. … When I left, even though I’m working from home, even though I’m telecommuting right now, it’s good because I have a workspace. I have access to conference rooms when needed, and can get it for pennies instead of being in a big building. And that big building is one of the biggest expenses law firms face. I mean, that’s a pretty big amount of overhead. …
And then there’s a lot of software to help a lawyer get started in a way that would have been prohibitively expensive even five [or] 10 years ago. … For example, there is software to meet all your accounting needs. And not just like QuickBooks. Teams of professional accountants work to [that software provider] who can look into things for you. You don’t need to hire a controller for your law firm. They will take care of your books for you, provide monthly income statements, things like that. There are [also] lots of great software to be able to track time and generate invoices.
Why did you decide to go with a subscription pricing model? Does privacy and data management work lend itself to this type of fee structure?
I think it lends itself to this type of structure. There are certainly companies that charge on an hourly rate, but I think a lot of confidentiality work is transactional, which means we can get an idea – after meeting with clients – of the type of work that they have to do on what kind of timeline. …And it lets clients know what the budget for the project will be.
At the start of the pandemic — April or May [of] last year – if we were to present confidentiality work on an hourly basis at a time when [clients] were trying to figure out how to save as much money as possible…it’s a tough sell. It’s hard to say, “Hey, I understand you’re tightening your belt everywhere, but when it comes to law, you not only have to pay my high rate but you also have to give me an unlimited budget to do the job. I’m going to do. It wasn’t going to fly.
Do you plan to take advantage of Utah’s regulatory sandbox? If so, how?
I thought about it. I didn’t take any of the Parsons Behle Lab IPs with me. It all stayed with the company. So I don’t plan to do anything in this space in the short term. … Going forward, of course, I’m open to that, because I’d like to see not only innovation in the law, but I’d also like to take advantage of some of the more relaxed rules in Utah, not just in the sandbox, but in how we can market and use, the same as any other business, an executive suite that’s not necessarily just lawyers, right ? And it would be interesting to see how that would affect a law firm.
We try to save money, we try to grow. But also, the hard part is that I think for a law firm to participate in the sandbox, we need discretionary research and development funds.