Law Practice Management Asked and Answered Blog
Category: Crunch
May 06, 2015
Law Firm Contingency Fee Practice – Surviving the Cash Crunch
Question:
Our firm is a six attorney personal injury plaintiff located in Kansas City. We have been in practice for 20 years and the firm has been very successful. However, in the last few years the cases are getting larger, more complex, and really putting a drain on our cash flow. We are always into our credit Line. You thoughts would be appreciated.
Response:
Cash flow has always been a challenge for contingency fee practices. However, times are getting harder. For personal injury plaintiff firms insurance companies are refusing to settle cases, stretching out timelines for settling cases that they do settle, paying less, and becoming even harder to deal with. Other contingency fee practices are also facing similar challenges and everyone is finding it harder to find adequate lines of credit. Many firms that were once 100% contingency fee practices are looking for ways to improve cash flow implementing different fee arrangements or by adding non-contingency fee practice areas.
I suggest that you evaluate ways that you might re-balance your case portfolio to say 60% contingency/time-bill mix. You might consider:
- Billing and collecting up front for all client costs even if the fee is contingent.
- Flat fee paid up front for a certain segment or phase of work – then contingency fees for the rest of the work.
- Actively marketing and targeting certain small business firms, establishing relationship, and seeking out defense employment work billed on a time-bill basis.
- Adding a different practice area that would not be billed on a contingency fee basis.
- Bring in a another attorney with a book of business in a complimentary non-contingency fee practice area.
Review your case pipeline report and your work habits to insure that you are putting the right effort and mix into the cases that you have so that when your time bill matters come up for billing at the end of the month – all can be billed.
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John W. Olmstead, MBA, Ph.D, CMC
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