The lawyers, who have generally worked at bargain-basement rates, haven't had much incentive to convince customers to stay. Their goal is to see as many people as possible in the hopes that one of their customers (or a customer's friend or relative) will be struck by a heavy object and initiate a lucrative personal-injury suit.
Because legal plans are so low cost (read: low commission), direct selling is simply too expensive. Still, no other plan has caught on with insurance brokers before. But, says IMS president Ron Roesener, "this one is much simpler. It's very understandable for the brokers." Nolan is counting on the IMS insurance brokers to bring in at least two-thirds of Landmark's sales.
With beefed-up services and the credibility of the broker behind it, Nolan believes Landmark can attract a different class of consumers than do the multilevel marketers or the direct mailers. The brokers' slick marketing presentations will aim squarely at the middle-class and upper-middle-class clientele Nolan is seeking -- litigious enough to need a plan, wealthy enough to afford one. Some people, he figures, will snap up a Landmark plan because, say, they have just run over a cat; unlike an insurer, Landmark covers those preexisting conditions for which a lawyer hasn't already been hired. Even the higher price, he says, will serve as a competitive advantage. "People figure, 'What kind of lawyer am I going to get for 100 bucks?' " Nolan says. "In lawyers, people want quality.'
Eventually, Nolan also plans to sell through financial planners and business consultants. An experienced speaker, he hopes next spring to start leading seminars on issues that will attract entrepreneurs. He expects more than 60% of Landmark's customers to consist of companies buying group business plans for their employees through the same agent that sells them group health plans. "It's cheaper than a raise," notes Nolan, "and the perceived value is very high.'
To encourage plan holders to renew, Landmark will churn out newsletters and other literature to remind them to use their plans. But what Nolan is really counting on to keep plan holders coming back are the attorneys. His approach to motivating them is about as subtle as a gavel to the cranium. "Let's face it," he says, "money does talk." For each individual plan they service, the access attorneys will receive $3 per month the first year; $4 the second year; and $5 the third year. The scale for business plans runs from $6 to $10 to $14. That doesn't sound like much, Nolan concedes, except when the volume is turned up.
The idea is for the plan to be profitable whether or not that big personal-injury case happens to limp in. Richard Hughes, a senior partner at the law firm that serves as one of Landmark's access firms in Denver, contends that "three dollars per month per plan can be profitable by itself. You just have to be efficient." Hughes estimates, for instance, that it takes his firm only about 30 minutes to execute a will, often by mail. Besides, he adds, the firm saves the marketing costs of bringing in new clients.
Nolan hopes the incentive pay will prompt access attorneys, 50% of whom will also be servicing other plans, to "honor my plan first." By contract, access firms must answer all calls within 24 hours. They are also required to send out welcoming letters to each new plan member.
As for referral attorneys, Nolan contends that $68 an hour enables most to make a profit of $10 or more an hour. He arrived at that figure after discovering that big insurance companies pay attorneys $65 an hour for volume business. To qualify with Landmark, referral attorneys must own at least $300,000 in malpractice insurance, show areas of expertise, be in good standing with the local bar, and have been practicing law for at least five years.
In June 1987, Nolan sold his house in suburban Michigan, raising about $25,000 to put into the business. He knew that wouldn't cover the legal and accounting expenses, so he accepted a lucrative consulting contract -- $10,000 a month for six months -- in Dallas. Nolan put aside what he could to live on, originally thinking he might launch the company in the Lone Star State. Upon further study, he decided to head for Colorado, where the regulations concerning legal plans are as thin as the mountain air.
Between December 1987 and March '88, he ran through most of the money he had saved. He had to draw up contracts with access and referral attorneys and with insurance brokers, at a cost of about $20,000. Accounting fees for the pro forma ran to more than $3,000. Printing brochures and letterhead stationery cost another $12,000. He saved money by working from what he called "the executive dining room' -- his house. Last January, when Nolan began thinking about hiring, he decided he would have to move to improve his credibility. The problem became apparent when he interviewed Randolph Orr, now vice-president of marketing. Orr plopped down on Nolan's couch and said, "I just want to know: exactly what kind of scam are you running here?" In March, Nolan began occupying space in the Colorado Club Building, which offered him a no-rent deal as long as he agreed to rent offices once Landmark was up and running.
By then, Nolan was exhausted, and so were his funds. Looking for more, Nolan has made the rounds of venture capitalists but says "they want too much of the company." What he'd really like is somebody who will put in $250,000 without demanding a controlling interest.
Nolan estimates that Landmark will need about $300,000 to keep both the Arizona and Colorado offices running for the next year. But that also assumes that the offices will bring in no sales all year; in truth, Nolan expects to see about $30,000 a month from each office by the end of the fall.
If that happens, then he can spend the $300,000 just the way he wants: opening as many as four more branch offices this year. The start-up costs of each office will run to only about $25,000, most of that for a computer with a modem and terminal. Nolan plans to lease the furniture and space. Once an office is set up, it will cost about $17,000 a month to operate a branch.
