Foulston: Profit margins under great pressure
The former chief executive of RBG Holdings, the listed group which owns law firms Rosenblatt and Memery Crystal, has taken a majority stake in a platform which uses artificial intelligence to help law firms price their work.
Nicola Foulston said Velocity Venture Capital, one of her family office companies, had made the investment in Virtual Pricing Director (VPD) to allow the business to scale up and meet “unbelievably strong” demand, particularly from larger law firms.
Ms Foulston said the amount invested in VPD, which has not been disclosed, was not “set in stone” and would be flexible over a period of time. It would involve her company acquiring what was “only just” a majority of the shares.
She will also become chairman of VPD, probably before Christmas; she is already advising the company on how to scale the business and overcome challenges.
A non-lawyer who was a long-standing client of Rosenblatt as the chief executive of Brands Hatch Leisure Group before joining it in 2016, Ms Foulston led the firm onto AIM two years later. She was sacked at the start of 2023 after the board lost confidence in her and the two sides reached a £500,000 settlement of her departure last October.
Ms Foulston said the first thing she noticed when she entered the legal services sector eight years ago was that pricing was unsatisfactory.
“Partners were putting their fingers in the air to work out pricing. It was not scientific and it made it very hard to get a good profit margin.”
She first met Richard Burcher eight years ago, when she was chief executive of Rosenblatt and he was training staff through his specialist costs training company Validatum. Mr Burcher, who formerly practiced in New Zealand, launched VPD two years later.
When they met again last year, she was “very impressed” with the improvements he had made to VPD and could see that earlier problems had been solved.
Ms Foulston said firms’ profit margins were under “great pressure”. This came originally from clients and led to a move, in most areas outside litigation, towards fixed fees.
Added to this in recent years were “huge inflationary pressures” from salary rises and large increases in indemnity insurance premiums, combined with other legal and professional costs.
Whereas, in the “old days”, a profit margin might be a third of turnover, now it could be only 5-10%, which she said was “too low”.
Instead of a chief finance officer looking at pricing across a department, VPD software could “give you greater granularity down to every single job, and let you look at it live”.
Ms Foulston said the software gave law firms “visibility and control” over pricing that case management or accounting systems did not provide.
“In 10 years’ time, everyone will be using it and it will become second nature in the industry”.
Ms Foulston described the pipeline of clients wanting to work with VPD as “unbelievably strong”, with demand coming “predominantly” from major firms with turnovers exceeding £100m.
“There is no question that they all see the benefit of this. Pricing teams in the bigger firms have become far more specialist.”
As well as working with law firms, VPD also works with accountancy firms and she believed the software could be used across the professional services sector.
Ms Foulston predicted that VPD’s existing team of six, based virtually, would need to expand by four in the course of the next year to cope with demand. She said VPD was not looking for any other external investment.
Mr Burcher commented: “Nicky’s decision to invest and eventually join us as chairman aligns perfectly with our vision to scale up. Her extensive experience and deep understanding of the legal sector will be invaluable as we expand our reach.”
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