Kabbage helps Haefner Law Office bring flat-rate pricing to more families
Deanna Haefner was managing a family law firm in Kansas City when a divorce put her in the same position as the firm’s clients. It was an eye-opening experience: stressful, expensive and not family-friendly. “I knew I wanted to get involved in advocating for kids through the divorce process and to be sensitive to families’ needs,” she says.
After her divorce, Deanna met Mark, an attorney at her previous firm. After marrying and moving to St. Louis, Mo., the Haefners came up with the idea of offering flat-rate family law and divorce services and started their own law firm, Haefner Law Office, a departure from the standard hourly billing approach.
“A lot of family law and divorce cases can cost up to $15,000,” Deanna says. “The lack of transparency around costs is hard on everyone. We felt there had to be a way to do it better.” That’s why Deanna and Mark started Haefner Law Office in 2008 with Deanna as director of operations and Mark as managing partner. The firm offers transparent price packages for services such as divorces, child custody cases and preparation of wills. The Haefners now have two offices in St. Louis with eight employees.
Uncertain legal outcomes affect the firm’s cash flow
“The idea with the flat-rate services was to be transparent with our clients about costs, as well as offer services at extremely good prices,” Deanna says. But as with any legal process, outcomes are uncertain, and some cases take months to resolve.
“One client might say to us, ‘We just need you to draft the documents,’ and 60 days later we’re still working the case,” she says. “With another client, their ex may not agree with our side – and it goes from a simple filing with agreed-on documents to several court hearings.”
The longer the case goes on, the longer it takes for clients to have access to their portion of the marital funds. “I know the money is there, but it takes longer for our clients to access it and pay us,” Deanna says. “That’s usually no reason to abandon a client, but it does impact my ability to keep the firm current on our expenses.”
Cases that run longer than anticipated can hurt the firm’s cash flow, as could delays in payment. In some cases, clients can’t pay their fees until their judge settles the case. “We thought about trying to offer financing to our clients – the same way dentists connect patients to financing for dental work,” Deanna says, but she didn’t find workable options.
Deanna and Mark learned about Kabbage from “Shark Tank” entrepreneur Lori Greiner. “We realized we could get the financing ourselves instead of offering it to clients,” Deanna says. “It was incredibly simple to apply for a line of credit.”
Breathing room to invest in expansion
Deanna and Mark use their Kabbage line of credit to cover business expenses such as payroll while waiting for clients to pay their legal bills. Because their focus is on being as economically efficient as possible in divorce cases, it takes more clients to bring in the same amount of money as a traditional firm would charge.
“I would rather charge 10 clients $1,000 each rather than charge one client $10,000,” says Mark. “It’s better for the client, and better for the business long term. When you’re able to accomplish their goals for a fraction of the price, they’re much more likely to refer you to their friends and family, which leads to a dramatic increase in business.”
The problem, however, is getting those 10 clients in the door to start with. “You can have the best deal in the world, but it gets you nowhere if your potential clients don’t know about it,” Mark says. “That’s where the need for marketing dollars, and the help from Kabbage, comes into play. I like that I’m able to invest in my marketing without having to worry if we’ll be able to make payroll.”
Being able to get the word out has dramatically increased both knowledge of their firm in the area, and overall business revenue. In fact, it’s allowed Mark and Deanna to expand to the Kansas City market in the very near future, with additional cities to follow. “We feel like we have the flexibility to grow now that Kabbage gives us some breathing room,” Deanna says.
Deanna and Mark are considering opening additional offices throughout the Midwest in the future with the same flat-fee approach to family law. “We’re a bit of an altruistic small business with heart,” she says. “We’re always working on how we can do better by our clients.”