Why We Raised Some of Our Fees

Things are going well here at JPG Legal, objectively. We will close out the year at about $1,000,000 in gross revenue, up from $709,000 in 2018 and $227,000 in 2017. Originally just my solo practice until September 2018, JPG Legal is now a team of four that includes me, two associate attorneys, and one paralegal. The firm that started in my basement apartment in Washington, DC now has its own beautiful 1400 square foot loft space in DUMBO, Brooklyn with a view of the Manhattan Bridge.

Unfortunately, something is wrong with our business model. The numbers haven’t been adding up. Though the firm has been growing, we haven’t been making a profit. As high as our gross revenue is, the majority of it goes toward government filing fees and advertising costs. On top of that, we’re struggling to keep up with our workload. I don’t believe in making salaried employees, even lawyers, work more than 40 hours a week (ideally 30 a week), yet the number of clients we have is not currently manageable under that standard.

I myself have been working about 75 hours a week, and have not been able to take a real vacation in about three years. I also find myself spending all of my time on day-to-day legal matters, with almost no time left over to focus on adding new service offerings to our website or spending less money on client acquisition. Overall, I love the direction my life has taken, but I’m not sleeping well or exercising enough, and I don’t think this workload is sustainable for me for much longer.

To further explain the changes to our fees that we implemented last week, below is the transcript of an email I sent to JPG Legal’s employees three weeks ago on September 26, 2019:

Folks,

I’m strongly leaning toward raising the fees of our Basic and Value packages by $100 each, as well as the prices of a few other things. Our margins are too low at this point; we have more clients and perform more labor than we should for what we’re earning. In other words, we basically have enough work coming in for five or six people, but we’re stuck splitting it among four people.

Part of this is because we spend way too much money on Google Ads (over $500 per new client these days), which is something I will work on by taking advantage of email marketing [and other marketing tactics], but haven’t had much time to work on because we have too much work right now.

I’m leaning toward implementing all of the following, at the same time:
Raising the Basic package from $299 to $399.
Raising the Value package from $499 to $599.
Keeping the Safe package at the same price [of $799].
Raising the expedited filing fees from $80 and $160 to $100 and $200 respectively.
Raising the fees for additional trademark classes from $275 to $325 [covering government filing fee plus a small fee for labor].

Ideally these price raises will lead to fewer clients and the same or more gross profit, which has happened each time we’ve raised our prices before. If that does happen, hopefully I’ll have more time to work on email marketing and develop more sources of passive income for the firm. And hopefully raising the Basic and Value prices will drive more people to our Safe package, which has an excellent margin for us.

If you look at two of our most successful and prolific law firm competitors, Gerben Law ($950 for the equivalent of our Value package) and Erik Pelton and Associates ($1375 for the equivalent of our Safe package), we could probably charge literally twice what we currently charge and still do pretty well. Gerben Law used to file around 600 applications a year until a couple of years ago, and Erik Pelton filed 334 applications last year, almost half the number we filed at twice our price, and with virtually no spending on paid ads (he’s an extremely prolific blogger and vlogger and has been around much longer than we have).

Feel free to let me know what you think of these proposed changes, and suggest any proposed changes of your own. I probably won’t implement them until several days from now. I may send a newsletter out warning clients of the planned change as well (it would be our first newsletter ever, even though we have 1250 people on our mailing list now!).

[Employee] suggested raising the expedited fees today and it makes sense to me, as the expedited packages are so popular that they’ve become something that I have to spend a lot of time on every day or two, so we might as well raise the cost to thin the workload out a bit.

Here are some rough numbers for how many of each package people have been ordering in 2019 if you’re curious. Keep in mind that these data are very limited and rough; they don’t include logo add-ons, refunds, multiple classes, repeat clients, etc. Nor do they mention how many people purchasing each package are paying for trademark document bundles and expedited filing. [Because our $275 filing fee for the first class usually includes a $50 margin for us before payment processing fees, I’ve factored that into the gross profit of each package.]

Rough data for 2019 so far [as of September 26, 2019]:

Basic: 265 orders (estimated $92485 in basic gross profit from $349 each)

Value: 205 orders (estimated $112545 in basic gross profit from $549 each)

Safe: 151 orders (estimated $128199 in basic gross profit from $849 each)

Search-Only: 9 orders (estimated $2691 in basic gross profit from $299 each)

Trademark document bundle: 160 orders ($12,000 gross profit from $75 each)

Expedited Basic or Search-Only: 75 orders (estimated $6000 gross profit from $80 each)

Expedited Value or Safe (implemented in early June): 30 orders (estimated $4800 gross profit from $160 each)

Let me know what you think!

Jeremy

All of the fee changes mentioned in the above letter have been implemented. Hopefully they will have the intended effect of allowing us to improve our customer service while also honing our business model.