Firm uses "smart" leverage to grow from $3 million to $8 million in revenues
When this law firm first became our client, it was involved almost exclusively in the prosecution of claims resulting from injuries sustained in motor vehicle accidents. At the time, it handled a portfolio of approximately 800 cases, most involving soft tissue injuries, generating less than $3 million in annual revenues.
The firm drew the full $225,000 line of credit provided and invested the majority of the funds into its already large advertising budget. This incremental investment enabled it to increase its inventory to 1,200 cases. The new volume of fast-moving cases created an immediate leap in revenues.
The increased revenues qualified the firm for larger credit lines, which grew rapidly over two years, eventually reaching $1 million. Revenues continued to rise rapidly, despite falling per-case settlement values due to the efforts of the tort reform movement. In fact, had the firm not continued to add to its case inventory by utilizing its credit line, its revenue would have fallen.
Time to diversify
In response to the shifting environment for plaintiff's attorneys, the firm then moved to diversify. It merged with another firm that specialized in more serious injuries and more sophisticated cases, which are very expensive to prosecute and take much longer to process. The combined revenue stream qualified the newly merged firm for a credit line of $1.25 million. The increased liquidity was the key incentive for the merger.
The firm used the funding from the fast-moving motor vehicle cases to cover cash flow, while aggressively promoting its experience in more complex litigation. As a result of the strategy, the firm's inventory of larger, more severe cases more than doubled. And, by using its credit line to pay for experts and demonstrative evidence, it was able to process these larger cases more quickly.
Entering the mass tort arena
With revenues continuing to rise in both types of cases, the firm's credit line was increased to $1.5 million - which enabled it to enter the mass tort arena. By drawing down its credit line, it was able to aggressively advertise for Fen-Phen cases, and brought in more than 400 of them.
The nationwide settlement agreement enabled the firm to borrow against a portion of its Fen-Phen cases through our Fee Acceleration product. Eventually, the firm's total financing reached $3.6 million. This enabled it to further diversify its advertising efforts, now focusing on asbestos-related cases. They quickly built a portfolio of more than 400 of such cases.
The bottom line:
By utilizing "smart" leverage, our client was able to grow from a firm specializing in motor vehicle accident cases generating under $3 million in annual revenues into a well diversified practice with over $8 million in annual revenues.