In this blog, we discuss three ways contingency fee law firms can demonstrate the value of a strong case pipeline to lenders, featuring insights from Tim McKey, CEO of  Vista Consulting, who authored this article.

What’s the key to success for a plaintiff law firm? A strong, reliable case pipeline. But how can you present this in a way that highlights your firm’s potential and value?

A case pipeline is essentially your law firm’s inventory of current and potential future cases. It’s what lenders look at when they consider lending money to your firm. This inventory serves as collateral and provides insight into your firm’s financial health and its capacity for sustained growth and success.

Estimating Case Values and Timing

The first step is to assign estimated values and timing to your cases. This process may vary depending on your practice type and requires analyzing historical data to determine your average settlement, firm fee, and resolution time (often referred to as “time on desk”.) Apply these averages to your current case volume and extrapolate to estimate your future revenue.

For example, if you analyze case inventory and find there are 500 cases likely resolving in less than a year, and your practice continues at the same pace, you could potentially handle 1,500 cases over the next three years. Simply multiply that number by your average case fee.  This projection showcases your firm’s potential revenue stream and growth.

Highlighting Success Rates

Are you a quality trial lawyer with a proven track record? Do your cases consistently result in wins, boasting success rates of over 90-95%? If so, it’s time to step into the spotlight and let that success story shine.

It’s no secret that traditional banks can be wary when approached by contingency fee law firms with irregular cash flow. The specter of credit risk often looms large in their minds, casting a shadow over potential lending opportunities. But here’s where your success rate becomes your secret weapon, your ace in the hole.

Success isn’t just about winning – it’s about consistently delivering results. A high success rate is more than just a statistic. It’s a testament to your firm’s competence, reliability, and ability to navigate the complex landscape of law. It’s an indication that you’re not just playing the game, but you’re playing it well. Showcase your success rates to lenders to demonstrate your firm’s strong potential for returns.

Distinguishing Case Costs from Fees

A strong case pipeline presentation also involves separating your case costs from your fees. Remember, case costs come out of your client’s share of the settlement, not your firm’s revenue. This distinction can significantly impact your borrowing capabilities. If you can cover case costs without dipping into operating revenue, you look more attractive to lenders. This factor may also work in your favor when negotiating a loan. Lenders may be more open to financing your firm when they see that you can cover costs without any issues.

The Bottom Line

To present a strong case pipeline, you need to provide an accurate snapshot of your current and projected case inventory, case costs, and revenues over the next three years. This projection should be based on estimated case values, timing, success rates, and the impact of changes in referral sources.

Remember, a strong case pipeline doesn’t just represent your firm’s financial health; it also showcases your firm’s potential for growth and success. By presenting one, you demonstrate your firm’s stability, reliability, and bright future prospects, making your law firm an attractive proposition to potential lenders and clients alike.

Meet with Esquire Bank

Learn how your law firm can leverage case cost financing to free up capital that can be invested in marketing, technology, talent, operations, case acquisition, and scaling law firm growth. Schedule a no-obligation consultation with an Esquire Bank Business Development Officer today at a time convenient to your schedule.

SCHEDULE A MEETING

Looking to Learn More About Law Firm Growth Strategies?

Download the eBook now, “5 Bold Strategies to Grow Your Contingency Fee Law Firm,” to get your hands on our top strategies for achieving exponential growth.

DOWNLOAD EBOOK

The information provided in this blog is provided for general informational purposes only. Some of the information may not be applicable or appropriate for all law firms.