Why the Billable Hour Breaks With AI

Collin McKee

Welcome back to the Endeavors AI Podcast. I'm your host, Collin McKee, founder of Endeavors AI, where we talk about the intersection of artificial intelligence, law, business, and the new economy being built around all of it. Most law firms still sell time. My guest today sells outcomes, and he says AI makes that model a lot easier to run. Andrew Legrand is founder of Spera Law Group, a flat-fee firm built around subscription general counsel for business owners. He runs it as the only lawyer with a team of five, and his clients stay for years on a month-to-month contract. If you've ever wondered whether you can keep clients without locking them in, this one's for you. Andrew, welcome to the show.

Andrew Legrand

Thanks for having me, Collin. Happy to be here.

Collin McKee

So taking you back to New Orleans, where does the story start for you?

Andrew Legrand

I was an undergrad at the University of Florida when Katrina hit. Born and raised here. I was a sophomore there and graduated in 2008, and said, hey, I want to move back home. It was still before the financial crisis, when going to law school was an easy money path, I think, back then. So I started law school at Loyola in New Orleans in 2008. The financial crisis hit. It was very hard to find jobs, and combine that with wanting to help rebuild. A lot of my friends were in construction or otherwise helping to rebuild the city. I thought, what can you do with a law degree to help rebuild? So I said, I want to go and help business owners, and I decided to start a solo practice right out of law school. I worked with some older attorneys as mentors. I decided to work for myself, partially because it was hard to find a job, and partially because, at the time, I had done some clerkships and felt like a lot of law firms were just behind on technology. It was still an age where Dropbox and SugarSync and file sharing were newfangled things. I see a lot of similarities between how people are treating AI now and the cloud back then. So for about 15 years, I've had a general business practice. I like to explain that we help most business owners with the vast majority of their day-to-day legal needs. We're not specialists. I'm not the bet-the-company litigator. I'm not the insurance defense person when there's a big sexual harassment claim that's going to trial. I'm not going to take a deep dive. But buying and selling a business, we can handle the vast majority of those things, and we bring on experts with subject-matter expertise when we need it.

Collin McKee

At what point in your practice did you decide to do away with the billable hour?

Andrew Legrand

My first subscription, we sold in 2013. It was about 300 bucks a month for a limousine company, and I mostly wound up taking care of traffic tickets for them. I think the original pitch was probably a little selfish, looking for recurring revenue. But from a business perspective, there were a couple of problems it solved. The first one was my own problem: every month I was trying to chase new money, trying to go get new work. The second thing I started to see is that a lot of business clients don't hire a lawyer, and I heard one of your other guests mention this too, until it's too late. There could be many reasons for that. There could be an obvious legal pitfall, obvious to me as an experienced business lawyer, that the business owner might not see. For instance, one of our clients right now is a very big, established HVAC company, and they have on-call employees. I didn't know that, and they've been a client for years. They said, "Well, we have these on-call people." We started looking at their policy, and they're violating a bunch of HR and labor law provisions. It's never been an issue, right? But it was a simple conversation: "Oh, you have on-call employees. What's your policy?" "Oh, we don't have a policy. This is how we do it." Okay, there are some problems there that we should fix before you wind up in a wage lawsuit that you're spending a lot more money to defend. So the monthly fee fixes those two problems. For the business, it creates sustainable revenue. It switches my incentives from just billing time to delivering results. My financial incentive is to keep the client, and we deliver results. The clients want, frankly, better answers faster, which is where the AI comes into play. That's what keeps them around, as opposed to, "This client asked this question, I need to research it to hell, bill them eight hours, and tell them the answer is no." Where the rubber meets the road is that it aligns incentives. Business owners want better answers faster. They want to be able to budget. And my incentive now is to give them that.

Collin McKee

So what does Spera Law Group look like today? You've got a team of five, and you do a mix of subscription and project work. How is the business model working out now?

Andrew Legrand

It's very predictable, in a good way. We have moved up the value chain. We don't do a whole lot of, at least recently, "somebody contacted us, we're going to file your LLC." We will file your LLC, but we're going to be very expensive to file your LLC, and we tell people that up front. We'll advise you, but if you want to file your LLC, I've got a YouTube video with thirty thousand views. You can go file your LLC. Now, if you have business partners and want an operating agreement, or you're about to hire people, or you're signing leases, now we can be engaged. We found a good mix with our repeat, bigger corporate clients. I wouldn't necessarily call them small businesses. They're on the high end of small business, and a lot of them are medium-sized, closely held companies. A lot of people say startups. I describe them more as the non-sexy, successful businesses all around town: engineering firms, architects, the HVAC company. They're not the new startup getting money from venture capital. They're successful businesses owned by a first or second generation owner, doing really well, with a lot of contracts and a lot going on, and they value proactive advice. On the project side, projects come in that don't fit. For a while we were doing subscription only, and when people came in with projects, we would sell them a subscription to do the project. That was a square peg in a round hole. So we moved to a model where somebody comes in with a project, we give them three scopes of work: bronze, silver, gold packages, here's the pricing, here's what that means. You choose your own adventure. Do you want bronze service or gold service?

Collin McKee

You said something on our first call I wanted to repeat. It's a pretty cool phrase. You said you can't bill hourly for advice that boils down to "that's a stupid idea, don't do it." Unpack that for me.

Andrew Legrand

The example I give: for the first few years, I wasn't charging for initial consultations. That's common with lawyers, especially personal injury lawyers, who don't get paid until the end of the case anyway. They want the case to come in. I think the world is used to free consultations from lawyers, because personal injury lawyers spend the most on advertising to consumers. Of course, that's what I was doing. I was a young lawyer, willing to talk to anybody, with time and not a lot of money. I talked to somebody who owned a business and wanted to make a long-term employee his business partner. To me, as a lawyer, this is good: I'll do an operating agreement, this could be a good fee, I'll help them through this whole partnership. We met, sat down, drafted a proposal, and I think I recommended a book or two about business partnerships, just trying to give them some value and point them to resources. A few weeks went by. Never heard back. Eventually I got in touch with the business owner, and he said, "You know what? You gave me those books. I read those books. I gave them to my long-term employee. He never bothered to read them. So I don't think he's going to be a good business partner. Thank you so much for the advice." That was, man, you just thanked me for the advice, but you haven't paid me anything at all. In the world of business partnerships, I've set up partnerships, I've done partnership divorces, and I've talked people out of partnerships. Ironically, I think I've talked more people out of partnerships than partnerships I've set up, and I've probably done more partnership divorces than either. So what is the value of telling somebody how complicated a partnership is, putting the cards on the table so they can see what they didn't know, and they look at it and say, "That's actually not what I want to do"? Sometimes the best advice, especially in the world of AI, where people go to the AI agent and say "here's what I want to do" and it sends them on a long goose chase of legal stuff they need to do, is: no, just do this. It's a lot easier than what AI is recommending, because AI is not considering the cost of doing that thing. Being paid a monthly fee means that saying "no" or "don't do that" is less of my time, and I'm not worried that it's only six minutes, a point-one, and I'm going to get paid twenty bucks for this very valuable thing. Or on the free consultation, the best advice I can give is to not hire me to do additional work, because you're going down the wrong path.

Collin McKee

Sometimes the best advice is the fastest advice. "Don't," or "think again."

Andrew Legrand

That's unique to business lawyers. Most people go to a family lawyer after they've made the decision to get the divorce. If you're going to the bankruptcy lawyer, you're probably up to your ears in debt. Personal injury, nobody's healthy on a random Tuesday saying, "I'm going to hang out with my friendly neighborhood personal injury lawyer." Business law is unique in that people have their expectations of what they should do, and then once an experienced professional looks at their business and situation and makes a recommendation, that recommendation often diverges from what they want to do.

Collin McKee

So under the flat fee, you're incentivized to use AI. You can make better use of your time. Under the hourly model, AI pretty much takes money out of your pocket. Is that a fair comparison?

Andrew Legrand

I think so. I haven't billed hourly since before ChatGPT was released. I think ChatGPT's release is the start of AI, if you will. I realize there was AI before that, but that was the mass-market moment, at least in my experience. I don't understand how the hourly rate is going to survive. Do you bill your clients at a three-thousand-dollar-an-hour rate? We regularly use AI to great effect to get clients very good deliverables, and we're consistently getting good reports from clients. We disclose in our engagement letter that we're using AI. We pay for our AI. We have security policies and other things in place, so I think we're completely above board with it.

Collin McKee

So how do you have month-to-month contracts and customers who stick with you for years? What's sticky about your service?

Andrew Legrand

Part of it is speed. With month-to-month, if you're paying me the same fee every month, my financial incentive, and what's going to keep you, is speed. When we're talking about legal services, it's very hard to distinguish the actual service. Contract review, for instance: it's hard to do a good, better, best contract review. Yes, an experienced lawyer is going to do a better job than a baby lawyer, so that's not entirely accurate, but generally there aren't many different ways to do a contract review or a transaction. So one way lawyers can distinguish themselves is how fast they get the job done. There is no one in the business world who says, "Yes, I want to send this contract to legal and wait two weeks for a response." But that's what happens. We've had people come to us complaining, "This lawyer doesn't have time for me anymore." Well, the lawyer doesn't have time for you because you come to them twice a year and want three hours of work, and that lawyer can't drop everything else. That lawyer needs more work than the three hours you bring each year, and you're getting upset that the lawyer says, "I'll get to that in two to three weeks." The monthly fee changes that. You're paying us monthly, you're ensuring we have funds to pay our own bills, and so now I'm going to be speedy about that. And then building systems. We built what we call Legal Radar, a tool that scans a business. It scans all the files we have on them, all the emails, and we've programmed in our business logic of potential issues. For instance: do you have on-call employees? Do you have an on-call employee policy? It's an AI-based issue spotter looking for opportunities for us to help their business. If I'm billing somebody by the hour, who do I bill for that? It's a complete cost to me. Because clients are paying me monthly, that adds value to them. They might not be paying for it directly, but because they're paying us, I can afford to invest in tools like that and say, "Here's something you're getting from us: proactive, AI-based issue spotting based on your entire client file." You go to another firm, and they're just going to say, "My rate is 450, call me when something comes up."

Collin McKee

So it's partially being the only one offering the service, and the other part is adding value. Which part, in your opinion, is more important?

Andrew Legrand

From my perspective, it's the one I control. I can't control the fact that I'm the only one using this model. In my market, I'm licensed in Louisiana and Texas. We've had clients in other states engage us on this model, with UPL and other rules in mind, but we have clients in Texas and Louisiana that have engaged us on that front. Right now I think we're still the market. There aren't many other lawyers offering this monthly fee where we don't track it by hours. If I say it's three thousand dollars a month for ten hours, that's just three hundred dollars an hour. That's just hourly with lipstick, is what I call that. Whereas, hey, it's three thousand dollars a month, and we handle everything excluding litigation and complex equity transactions. That usually works for most people, maybe not that price point, but that idea of that scope. So what we've been trying to focus on is the latter: how do we add value? How do we respond quickly? How do we make sure responses are good? Another add-value thing is deadlines. Some of the big deadlines we track for people: when does your lease expire, or when does the renewal window for your lease open and close? We've had clients get kicked out of their space, or have their rent double or triple, because their lease renewal window opened and closed and nobody was tracking it. That's a small thing to track. How does a law firm do that hourly? Once a month, a point-one, check your lease renewal deadline? You can't really do things like that. But clearly it's very valuable to say, "Collin, did you know your lease is up for renewal next month, and if you don't give notice within thirty days, you lose the right to renew?" That's incredibly valuable to a business owner. Same thing with contracts that terminate. We don't track every contract termination, but the significant ones we will, and trademark registrations. We've had former clients, still in our system, who moved on to other lawyers for one reason or another, and they've missed trademark deadlines. Hourly doesn't work for monitoring a trademark deadline. To build the software, to build the process to monitor it, and then to monitor it, you can't bill hourly for that, so there's no financial incentive for a firm to do it. For us, it's, "Your trademark needs to be renewed, the window opens on this date and closes on this date, we're going to monitor it, and if you're a member, we're going to take care of it for you." It's a small thing, but it adds value. Those little things are what we're really focusing on, because I can't stop other lawyers from adopting this model.

Collin McKee

Well said. Let's talk about your technology stack and how you're using AI. You built your own stack. Can you walk us through what it looks like?

Andrew Legrand

One thing I noticed early on, people ask, "Do you use Claude? Do you use OpenAI? Do you use Perplexity? What are you actually using?" I found open-source software called LibreChat. There are a lot of competitors, but basically it's a front end, a chat window, and by itself there's no AI. You add different API keys to it. I'm a fairly techie user. I've programmed a lot of stuff, but I'm not good enough that I'd ever want to leave the practice of law and sell my programming services. I've written HTML back in the day. The setup we have is definitely beyond my skills without AI. But using AI to say, "I want to set up this software, how do I do it," we now rent a US-based cloud server that hosts our LibreChat instance. We've connected different MCPs that are useful for us, like CourtListener and our Google Drive, and we've built our own software stack that says, "You're the Spera Law agent, and this is how Spera Law works. These are the systems we use. I want you to connect to this." That's what's driving our results. Instead of renting someone else's sandbox and playing in it, we built our own sandbox, and we're able to continually iterate and improve it to give us the results we want. Part of the reason we did that is I use AI a lot, and I want my team to use it, but they don't necessarily know how to use it or want to use it yet. When I was looking at software, there were all these high monthly fees. I don't want to pay two hundred dollars a month for one of my users to use AI when they're not going to use it. What's cool about the APIs is I can use it as much as I want, my team can use it as much or as little as they want, it doesn't cost extra to add them, and I give them access to the tool. So we're constantly shifting our stack around, iterating on it, trying to make it work a little better.

Collin McKee

So why own your own server, renting one, instead of buying something off the shelf, Clio, Westlaw, whatever? Why did you decide to do your own?

Andrew Legrand

One, it's more fun. It's a hobby too, to some extent. I like building my own thing. Another reason is we have software vendors that have locked us in. We have a few pieces of software we're clearly locked into. They raise the price fifty percent, I look at it, and well, I can move, but the cost of moving far exceeds the increase. They've got us by the neck, and I didn't like that. And then we're able to build something custom. We have a legal assistant agent that knows all the projects are managed in Accelo, which we've been on for a few years. It's our project management, it's our CRM, it's our deals, it's where all our work starts. We're able to build our legal assistant agent and say, "The client files are in Google Drive. Here's the folder." We've been able to build it custom to us. It's that sandbox idea. When I've bought software off the shelf, I get a lot of use out of it, but sometimes it becomes the tail wagging the dog. I have to change my business process to be in line with whatever the software allows me to do, rather than saying, "I just want to do this." Building our own, I'm able to say, "I want to do this, this is how I want to do it, and AI, help me figure out how to do it the way I want."

Collin McKee

For those in the audience who aren't as technically savvy as Mr. Legrand here, and still want to implement AI, what advice would you give them? Where could they start that's not as involved as building a stack?

Andrew Legrand

That's a good question. Obviously you're probably more stuck with off-the-shelf software, which is going to work for a lot of people. I'm sure there's a whole world of consultants out there becoming AI consultants. I know a couple, and I've seen them start to pop up. No different than there were consultants who helped you adopt NetDocuments or Microsoft. Those more traditional consultants have been around a long time, and I'm sure a lot of them are pivoting to AI. I haven't seen companies really spin up in this space yet. There are the IT companies, but I feel like they're still stuck on users and passwords and security and phishing testing. I haven't yet seen, but I'm sure it exists, a firm that would help you develop your infrastructure on that front. It largely depends on where somebody is. I firmly believe that lawyers who use AI are going to replace lawyers who don't. So if you're a lawyer who doesn't use AI, either start looking at AI or hope you're close to retirement, because in the next few years, I'm getting more and more consumers and clients saying, "Hey, I've used AI." I don't think we're far from people saying, "I can hire a lawyer for thousands of dollars, or I can hire the AI to do it, and it's going to be a lot cheaper, and it may or may not work." That's its own conversation. But when people say, "My lawyer is using AI," which means they're trying to do things quickly and effectively, that's going to be valuable. But pay for the AI. If you're using free AI, you're doing something wrong as a professional.

Collin McKee

AI readiness is one of the services we offer. Even before that, you need to make sure your processes are well established.

Andrew Legrand

Or somebody like Collin who can come in and assess.

Collin McKee

Shameless plug. So, talking about processes, what's one thing a business owner should do before there's a dispute? What's a good first step for a business owner to fix something before they get into trouble?

Andrew Legrand

That's going to vary by the business, so I'll change the question a little. The number one issue I see with business owners is they'll start the conversation with me: "I want you to look at this. I've never had any problems." That mindset, "I've never had any legal problems," and what they're implying is, therefore I will never have any legal problems in the future, is the biggest fallacy. It's a red flag, danger zone. Do not go there as a business owner with that in your head. If that's in your head, start to change it from "I've never had any legal problems" to "one legal problem can cost you the business." I've seen that happen over and over again. It's like saying, "I'm a human and I haven't died yet, so I'm going to keep smoking or eating junk food." If you're running a business and you don't have legal problems, either you're burying your head in the sand or you're running more of a hobby or a side gig than an actual business. Our Legal Radar product is still in development. Some people may go look for it and not find it yet. We're trying to launch it by the end of the year. Right now we call it the risk assessment, and we're moving platforms. But if your business says you don't have legal problems, that just means you're not aware of them. There's almost always something that can be done and planned for. What that is and how much you want to spend will vary by the business. But if you own a business, you have legal problems whether you know it or not. You might not have any dumpster fires, sure, but that just means you don't have any dumpster fires today.

Collin McKee

Yep. You can say you don't have any yet, but you have plenty of potential legal problems. Those are discussions you can have with Andrew. So what's one thing a business owner should do before buying another AI tool? We touched on it, but is it taking a look at the process, having a consultation to discuss what problems there might be?

Andrew Legrand

What's interesting about AI is it's getting baked into everything. I think California is the most recent state I've seen requiring people filing pleadings with the courts to make a statement that AI was used in the preparation of the document. It's so broad. I'm not in California, and I don't think you are either, but we probably both know what Prop 65 is. It's such a broad statement that it becomes ubiquitous and nobody pays attention to it anymore. If I'm a lawyer drafting a brief, I see a concept I'm not familiar with, I go to Google, and Google shows an AI result, did I just use AI to write the brief? Using AI is getting baked into a lot of things. It's like the cloud. At a certain point, it's going to be harder not to use it than to use it. Maybe you're using Canva, or Gmail, or some other service that isn't inherently AI-based. They're going to bake it in. So, to your point, I think talking with your users, your employees, and saying, "What are you using? How are you using it?" The risk a business faces is that your workers are going to be using AI. They're going to want to use it. It's going to give them shortcuts, make their lives easier, they're curious, they're hearing about it all the time. By way of example, we have one client, a hotel management chain, and they said, "We want an AI policy." My response was, okay, we can do that. What is your policy? Is your policy don't use AI? Is your policy, if you're going to use AI, we've set up Microsoft Copilot for you? Looping back to the LibreChat stack, part of building it was: staff, this is the AI you're authorized to use. If you find yourself going to another AI, stop, tell me why, and you're probably doing it for a good reason, so we can bake that into our stack. Just don't use outside AI. So, give your team good direction, find out how they want to use AI, and then give them the tools to do that in a safe, efficient, effective way that you're paying for. They're going to use it one way or another. If you say no AI, that just means they're not going to pay for AI. They're going to upload your business documents into models that use your documents out in the world. If you don't give people the tools, they're going to find their own tools.

Collin McKee

That's actually the title of a previous episode. I'm probably going to get it wrong, but it's: not using it is not a policy. You need to have a policy in place and guide them, and even before that, have the discussion. What are you going to use it for? Where are the benefits and the detriments? Andrew, awesome. We're pretty much out of time, so I want to wrap here. Where can people find out more about your firm and your work, and get a free consultation?

Andrew Legrand

Well, they might not get a free consultation. On LinkedIn, you can find me, Andrew Legrand, or just our website, speralaw.com. You can go over there and see what we're doing. We actually list our prices and our services and all that sort of thing on our website.

Collin McKee

Great. And if anyone has questions about AI readiness and wants to have a discussion around that, that's what we're here for at Endeavors AI. Find us at endeavorsai.com. For the listening audience, this was a great conversation. Thank you, Andrew. I really appreciate it. I'm Collin McKee, founder of Endeavors AI, and we will see you on the next one.

Andrew Legrand

Thank you, Collin. Take care.