In this blog, we focus on how to avoid making the number one mistake when growing your law firm: sunk costs.

Sunk Costs: How Self-financing Hinders Growth

As a young, law firm owner, Kevin Danesh first funded his firm’s growth through a cash advance on his credit card. After tying up finances continually in case costs, he learned a harsh lesson. “Self-financing your own growth is, from a business perspective, the number one mistake you can make,” noted Kevin Danesh, managing partner at BD&J.

When your money is tied up in case costs, it becomes a sunk cost. The opportunity cost is the inability to grow your business through spending on ads, hiring staff, or building systems to improve productivity. For many contingency law firms just starting out, it may seem impossible to get out of the cycle of reinvesting case fees back into more case costs.

Overcoming Traditional Bank Limitations

Financing case costs can be both a boon for your law firm and your clients. Although it may seem simple to approach any bank to finance the growth of your law firm, the unique business model of contingency fee law firms is not understood nor valued by traditional banks.

“I told them I need more money and I need it now. And I’ll explain to you why,” recalled Kevin Danesh. “Look at these five cases. These are monsters. But then, you know, dealing with a traditional bank, they don’t know how to evaluate a case and what the future value of the fees related to those five cases were.”

Finding a Strategic Banking Partner for Case Cost Financing

Seeking a strategic banking partner that would understand his core business and inventory, Kevin Danesh sought out Esquire Bank. Leveraging case cost financing, BD&J invested heavily in advertising and experienced growth double or triple within one year*.

“The greatest challenges in fighting for justice is, unfortunately, that you know, there is a finance and business component to what you are doing,” stated Kevin Danesh. “That’s why you need someone in your corner fighting with you. That’s when we go to Esquire Bank.”

For more insights into how to avoid sunk costs when growing your law firm, click above to watch this video about BD&J’s success story, featuring Kevin Danesh.

For more on Esquire Bank’s expertise in providing tailored solutions for law firms, please visit Esquire Bank’s resources portal, Lawyer IQ, where you can learn about growing your business, financing for law firms, marketing strategy best practices, and more.