Andrew Taylor and Kyle Torrington are the first to admit that it took them too long to pivot their business. “We believe in the lean start-up methodology,” says Andrew. “And if you believe in it, you need to live it.”
In fact, it took just six months for the co-founders to change their business model and rebrand the company from LexNove to Legal Legends. In the world of lean start-ups though, six months is too long.
Implementing lean start-up methods
“When we first launched, we completed the Ignitor Accelerator Programme,” says Kyle. “It was an invaluable experience, and it introduced us to lean start-up methodology and how to implement lean start-up principles in your business. It’s not just about the launch, it’s about the years that follow. It’s a set of principles that keep your business relevant and sustainable, but it also requires you to fail fast and adjust your model continuously in a ‘build-measure-learn’ feedback loop. The problem was that even though we understood and believed in the theory, executing pivots in a business is easier said than done.”
“We’d even recognised friction points and underlying assumptions we had around our business and target market that were proving incorrect,” agrees Andrew, “and it still took us a few months to act.”
Why? What prevented two smart entrepreneurs who understood their business, target market and what they needed to do, from acting immediately? It’s a dilemma that business owners will find all too familiar, and it starts with the original idea, and is compounded by industry experts falling in love with your innovative solutions — even though you’re struggling to monetise the business. Here’s how they pivoted their business and achieved 50% month on month growth as a result.
1. Recognise The gap between vision and reality
“The idea behind LexNove was to make legal services more accessible and affordable for SMEs,” explains Kyle. As lawyers, they were exposed to the reasons why legal services were daunting, and often unaffordable for start-ups and SMEs, and they believed there was a way to address those gaps.
They started by researching what was available globally, and discovered that in the US and UK, similar online reverse bidding sites existed that connected SMEs in need of legal services with law firms who bid for the business. In theory, this would create a more competitive environment and more affordable prices for SMEs. It would also take the uncertainty out of legal billings, which traditionally charged by the hour, and give a project a flat rate.
“There was nothing like it in South Africa, but the idea had already been tested and proven in other markets,” says Andrew. The co-founders contracted outside developers, resigned in late 2014, and launched LexNove in June 2015.
Be innovative, on-point and address a real market need
Experts and the media lauded it as the future of legal services. But it was proving very difficult to monetise.
“Our beachhead market was SMEs. We’d identified a disconnect between entrepreneurs and traditional legal services, but what we’d failed to really consider was the fact that start-ups and SMEs are very careful with their cash. If the choice is between legal services and survival, understandably they’ll choose survival,” says Kyle.
“Ask almost any established business owner what they wish they’d done differently in their start-up days though, and they almost always say they wish they’d had the right contracts, agreements and intellectual property protection in place. It’s far more expensive to fix later. But when you’re in that space, other costs take precedence.”
Developing a strong user base
Nevertheless, Kyle and Andrew managed to build a strong user base on the site — they’d contacted firms via LinkedIn and their networks to get the law firms on their site, and used Facebook and online advertising to bring users to the site. They categorised and collated bids and chased the legal firms to ensure they bid on contracts. But, getting users to convert was difficult, and it was only at this stage that LexNove received its percentage of the business. Up until that point, everything they did was free.
It was turning out to be a lot of effort for very small rewards. “Another problem was that deals that did convert introduced a business to a legal firm, and they did future business directly with each other — there was big platform leakage as the SME didn’t come back to the site. The legal world is a high-touch, high-trust environment — people want to know and trust their lawyers, and so even though we had provided a ‘matching’ service, once the match was made we were no longer the ‘go to’ legal provider for the SME,” explains Kyle.
“We thought people would keep coming back to the site. The reality was quite different.”
Most importantly, the site was failing to do what Andrew and Kyle had intended in the first place — it wasn’t bringing down legal fees. Because the site used outside legal practitioners and couldn’t control or even influence their fee setting, the price point remained aligned with more traditional firms instead of reducing to levels start-ups could afford.
2. Choose a new direction
It’s not always easy to let go of an idea that you’ve nurtured and worked on for so long, particularly when you’re lauded for it. But if you can’t monetise your idea, then it’s not a viable business. Andrew and Kyle could have continued to plug away. Perhaps if they’d waited long enough, the local market would have caught up to US and European standards, where the business model did work.
Instead, they took a step back, critically reviewed the business, and started implementing the methods they’d learnt around the principles of the lean start-up methodology.
First, they needed to understand why their target market wasn’t responding to the service they were offering. They were addressing a real need, so what was the problem?
“The idea of online legal services in South Africa was new, but ecommerce isn’t,” says Kyle. “The problem is that users were expecting instant gratification. Instead, it took 48 hours to process bids. SME owners arrived on the site, and there were no prices, so you were still unsure what you’d get quoted. We realised that uncertainty around prices is a problem for a target market that isn’t well versed in legal services.”
“Even if the uncertainty had been cleared up, there was a secondary problem,” adds Andrew. “What an SME owner is willing to pay for certain legal services versus what law firms charge is miles apart. Services were just seen as too expensive.”
“Our key driver was still to make the law affordable for SMEs,” says Kyle. “We want to capture the 90% of the SME market that can’t afford traditional legal services by revolutionising the way law is done, while still offering quality legal services. LexNove wasn’t achieving this goal. We needed a new solution.”
This understanding, coupled with the challenges they were facing, led to one key question: What did they need from their target market? The answer was clear — they needed to capture and hold the full value of each client using their service, and they needed to offer that service at a price point SMEs could afford.
3. Shift the business model
The co-founders started by addressing their name. “We’d read somewhere that two syllable names were easier to remember, which was where LexNove (based on LexNova, which means new law), came from. But we’d fallen into an old trap. We chose a Latin name for a business that was supposed to be democratising legal services,” says Andrew.
“We needed a new name that was memorable, made sense, and told our customers exactly what we do.”
Legal Legends was born from a skunkworks project inside LexNove. Andrew and Kyle kept LexNove operational, and let existing customers and partners know they were trying out a new product on the side. A skunkworks project is developed primarily for the sake of radical innovation, so it allowed the co-founders to test their theories and the lessons they had learnt with LexNove without immediately shifting their business model.
Today, the tagline on the site reads, ‘Fixed priced legendary legal services for entrepreneurs’, immediately followed by a ‘shop now’ button that takes you to a fixed-price menu.
How to achieve your start-up goals
So, how did Andrew and Kyle achieve their goal? True to lean start-up principles, they did it with a lot of hard work, testing, measuring, adjusting and implementing. Working with outside developers meant long lead times, so Kyle learnt to code. They also paid careful attention to how their customers responded to their offerings. Once the business had pivoted as a result of lessons learnt from LexNove, it began to experience 50% monthly growth.
“Our goal was to achieve the creation of intelligent automated contracts, which are automatically curated based on user preferences,” says Kyle. “Our biggest challenge was how to bring our prices down and find an annuity income model.” The answer was automation and instalment payment plans.
In its new format, Legal Legends is actually a far more unique offering than LexNove was, but it’s also a familiar ecommerce platform that South Africans are more familiar with, and therefore more comfortable using. “We realised we were asking people to spend R10 000 on a reverse bidding site, with no credibility or track record,” explains Andrew.
“The new site has a menu with prices. There are no hidden costs or surprises. We started with 50 of our most common services, and listed them as products, the way you would see books listed on Amazon, or products on Takealot. We then advertised our products through online and other means. A user can purchase a product in under one minute, and then they fill out a digitised questionnaire. This information gives us the details we need to customise the agreement they have bought.”
Once Andrew and Kyle had a clear understanding of their value proposition, the rest fell into place. In the legal world, costs are directly related to time. Lawyers charge by the hour, so to reduce costs, you need to reduce the time you spend on a service or contract. “We also understood that we needed to communicate a price point and what you get for it upfront — this was essential,” says Andrew.
4. Find a model that scales
To then deliver a quality product, the co-founders used the 8020 principle. “We determined 80% of a contract or agreement can be automated, and only 20% needs to be customised,” says Kyle. “We then designed questionnaires that would give us the information we needed to create the contracts, and developed customised software to automate the process.”
Legal Legends now uses in-house lawyers, contracting out to other lawyers when necessary. Through the questionnaires and automated process, the time taken to deliver a fully customised contract is made dramatically more efficient, and pricing is much lower. In many cases, customers are paying less than a third of traditional legal costs.
“We keep iterating by adhering to the ‘build-measure-learn’ feedback loop. Automation and the questionnaires take a lot of time upfront, but once they’re up, 90% of the work is done for each client who follows. It allows us to do the work in-house, charge less, and to earn annuity income, while maintaining the standard of service and expertise we’ve become known for.”
The result is far more repeat business, and a much higher level of comfort for first-time users arriving on the site.
Make it easier for businesses to work with you
A ‘build-measure-learn’ feedback loop has also meant that Kyle and Andrew are continuously looking for additional ways to make it even easier for SMEs to do business with them. One such solution is the introduction of interest-free instalment debits.
“The first instalment significantly de-risks our exposure and reduces our risk, but giving our clients the opportunity to pay for the service in regular debit orders also helps them carry a cost that they might otherwise forgo. We are now capturing the market we wanted in the first place,” says Kyle.
“We remain accessible, but we’ve automated as much as possible without sacrificing on quality, and offer skype meetings over meetings in person. We’re now the custodians of the relationships we build with users of the site, but have found ways to significantly reduce the amount of unnecessary time spent with each client, which has resulted in a completely new cost structure,” says Andrew.
“We wanted to be an Airbnb or Uber that connected the market with service providers. The high-touch, high-trust nature of law was an issue, and our solution didn’t reduce the price point of these services, which was the main focus of the business. To do that we needed to capture the full value of each client, and radically adjust how we do law. An automated free legal health check we’ve designed is a great tool to convert clients, and if we do convert them, we start with information in hand that reduces the time taken to develop the contracts or agreements they need.
“Plus, we can scale the business without increasing overheads — we’ve increased our own capacity and decreased time taken per transaction. That’s the definition of scale.”
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1. Nick D’Aloisio Wrote a Million Dollar App At Age 15
At the age of 15, Nick D’Aloisio wrote an app while sitting in his parent’s bedroom in the UK. At the age of 17, D’Aloisio sold his app Summly – a mobile news summarisation app to Yahoo for a staggering USD 30 million.
As one of the youngest millionaires, D’Aloisio is also the world’s youngest entrepreneur to be backed by venture capitalists – having secured seed funding from Sir Li Ka-Shing, Hong Kong’s billionaire, as well as raising USD 1.23 million from celebrity investors, including Yoko Ono and Ashton Kutcher.
“The number one thing I did that I think was wise was to get, through some of my advisers, was a Chairman; basically someone who was a very experienced business person, an industry veteran — Bart Swanson, who had been at Amazon and then Badoo. Then, myself and Bart really started finding people and growing the team.”
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1. Brendan Kennedy
- Company: Tilray
- Website: https://www.tilray.com/
Brendan Kennedy worked on job sites as a carpenter to pay his way through university, with his eyes set firmly on becoming an architect, until the allure of Silicon Valley changed the course of his direction. While working at technology start-ups Kennedy began thinking about the possibilities that medical marijuana provided.
“I was really sceptical of medical cannabis,” he says. “It took a year of having conversations with patients and physicians and hearing the same story, repackaged but essentially the same, over and over and over again, where my scepticism eroded and I became a believer.”
In 2013, Kennedy and his partners applied for a licence from Health Canada and launched Lafitte Ventures, which was later renamed Tilray. Today, the company is a global leader in medical cannabis research, cultivation, processing and distribution.
Scaleup Learnings From Our Top Clients – What The Most Successful Entrepreneurs Do Right
So, how do our successful clients move through these constraints to scaling up? We see four key drivers of success, and they are: people, strategy, flawless execution and finance.
You’re out of your start-up boots, staff is increasing, your client base is growing, revenue is up and you’ve proven your case to the market. Now it’s time to scale up. The challenges of this vital growth phase are different and it’s a time that demands different mindsets and different actions. In a world littered with small business failures, it helps to be well-prepared for scaling up using a proven methodology. At Outsourced CFO, we get an inside look at the success factors of our clients who are mastering the transition.
On the one hand, scaling up is a really exciting phase; this is what moves you into real job creation and making an impactful contribution to economic growth. On the other hand, it is really hard to scale up successfully. We see three major constraints that limit companies’ transition from start-up to scale-up:
The business has to have the leadership that can take it to the next level. When you start scaling up, especially rapidly, the founders can no longer do everything themselves. The team must grow and include new leadership talent that can take charge and execute so that the founders are working on the business instead of in the business.
The processes, procedures, networks, systems and workflows of the business all need to be scalable. This is imperative when it comes to your infrastructure for the financial management of your business. You’re only ready for growth when your infrastructure can seamlessly keep pace.
Scaling up demands more innovative marketing and storytelling so that you can more easily connect and engage with the new employees, clients, network partners, investors and mentors that need to come along with you on your scale-up journey.
Businesses that build a market conversation and a compelling brand narrative during their start-up phase are better positioned to have this kind of market access when they need to scale up.
It is critical to have the right people on your team. Our successful entrepreneurs have what it takes to attract, inspire and retain top talent. A strong team of smart, ambitious and purpose-driven people who love the company and want to see it succeed contribute greatly to a world class company culture. They are adept at communicating a compelling vision and establishing core values that people can take on. These entrepreneurs are tuned into the aspirations of their people and focus on developing leaders in their teams who can in turn develop more leaders.
It is planning that ensures that the right things are happening at the right times. At successful scale-ups strategies and action plans are devised to ensure that the most important thing always remains the most important thing.
Strategy includes input from all team members and setting of good priorities for the short, medium and long term. Goals are clear and everyone always knows what they are working towards. The needle is continuously moved because 90-day action plans are implemented each quarter to achieve targets and goals that are over and above people doing their daily jobs.
Top entrepreneurs are not just focused on what operations need to achieve, but how the business operates. They have the right procedures, processes and tools in place so that everyone can deliver along the line on the company’s brand promise. Frequent, quick successive meetings ensure the rapid flow of effective communication. Problems are solved without drama. There is no chaos in the office environment. Everyone is empowered to execute flawlessly to an array of consistently happy clients.
Everyone knows that growth burns cash. A rapidly scaling business faces the challenge of needing a scalable financial infrastructure to keep the company healthy. Our successful entrepreneurs pay close attention to finance as the heartbeat of the business, ensuring that everything else functions. They look at the tech they are using for financial management and for the ways that their financial systems can be automated so that they can be brought rapidly to scale. The capital to grow is another vital finance issue.
The best way to finance a business is through paying clients on the shortest possible cash flow cycle. However, when you are scaling up and making heavier investments in the resources you need for growth, it is likely that you will need a workable plan for raising capital. Our scale-up clients know the value of accessing innovative financial management that provides high level services to drive their business growth.
Navigating the scale-up journey of a growing private company is one of the hardest but most rewarding of careers to pursue. Having people in your corner who have been through this journey before helps take a lot of pain out of the process. No growth journey looks the same, but there are tried and tested methods that will – if applied diligently – lead to definite success. Happy scaling!
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