In a recent Litify Cast Live episode, hosts John Robinson (VP of Growth, Litify) and Dov Slansky (VP of Solution Engineering, Litify) joined Ari Kornhaber (EVP and co-founder, Esquire Bank) and Kyle Maichle (Head of Sales & Marketing, Esquire Bank) to discuss financial forecasting, case inventory valuation, and liquidity strategies for contingency fee law firms. 

With economic uncertainty impacting personal injury (PI) firms, particularly post-COVID-19, the episode outlined actionable steps to ensure financial resilience through data-driven forecasting and strategic financing. 

Current market trends

The legal market, particularly for PI firms, faces challenges from economic uncertainty and reduced case intakes due to the pandemic. While existing cases provide short-term revenue, a drop in new cases signals a future cash crunch in 6–18 months. 

Contingency fee firms, reliant on cases signed months or years ago, must forecast revenue gaps to avoid financial strain.

Why financial forecasting matters

Contingency fee firms operate on irregular cash flow cycles, making forecasting critical to:

• Predict revenue gaps before they impact operations.
• Support strategic decisions on staffing, marketing, and expansion.
• Secure financing on favorable terms by demonstrating case inventory value.

Many attorneys excel at law but lack business planning expertise. Esquire Bank bridges this gap with specialized tools and financing tailored for contingency fee firms.

Valuing case inventory

Accurate case inventory valuation is the foundation of financial forecasting. Firms must:

• Track key indicators: Continuously update data on liability, damages, and policy limits from intake through case resolution.
• Standardize data: Ensure consistent data collection to estimate case values accurately throughout the lifecycle.

This approach enables firms to assess their financial health and make informed strategic decisions.

Seven key data points for forecasting

Esquire Bank identifies seven critical fields for robust forecasting, many of which firms already collect:

1. Case name: Unique identifier for each case.
2. Case type: Categorizes cases (e.g., personal injury, medical malpractice).
3. Estimated close date: Projected resolution date.
4. Gross fee revenue: Estimated firm earnings.
5. Stage: Current workflow phase (e.g., intake, litigation).
6. Status: Case progress (e.g., open, settled).
7. Total case value: Likely settlement or verdict value.

Tracking these fields, ideally within a platform like Litify, enables firms to project revenue and identify high-value cases.

Esquire Insights: A free Litify add-on

Esquire Bank’s Esquire Insights app, a free integration with Litify, enhances forecasting and data management:

• Features:
  
  • Auto-ingests and maps the seven key fields.
  • Provides ~30 instant reports and dashboards (e.g., revenue by year, attorney, or case type).
  • Scores data quality, highlighting gaps and assigning tasks for remediation.
• Benefits:
  
  • Builds disciplined data habits.
  • Offers transparency into inventory value and cash flow projections.
  • Prepares firms for financing discussions by showcasing robust data.
• Privacy: Data remains private unless the firm seeks a loan from Esquire Bank.

The app installs directly into a firm’s Litify instance, delivering immediate insights without requiring developer expertise.

Data quality and remediation

Beyond reporting, Esquire Insights scores data completeness, enabling managers to:

• Identify missing or outdated fields (e.g., estimated close dates).
• Assign tasks to staff for data updates, fostering accountability.
• Improve forecasting accuracy through consistent data maintenance.

This proactive approach ensures reliable projections and strengthens firm operations.

Leveraging case inventory data

Accurate case inventory valuation supports critical business decisions:

• Firm strategy: Assess financial health for hiring, marketing, or expansion.
• Case management: Identify and prioritize high-value cases, dropping unproductive ones.
• Financing: Secure better loan terms by using case inventory as collateral, unlike traditional banks that rely on past tax returns or physical assets.
• Liquidity strategies: ‍
  
  • Lines of credit: Obtain favorable rates proactively, ensuring liquidity during cash flow gaps.‍
  • Case cost financing: Shift case expenses (e.g., expert fees, medical records) to credit lines, preserving working capital.‍
  • Marketing investment: Allocate funds to digital marketing to capture future cases, addressing projected revenue gaps.

Esquire Bank’s unique model

Esquire Bank specializes in asset-based lending for contingency fee firms, using case inventory as collateral. Key advantages:

• Tailored financing: Unlike traditional banks, Esquire evaluates future case value, offering competitive rates.
• Regulated expertise: As a top-ranked community bank, Esquire provides purpose-built financial products for law firms.
• Litify integration: Seamless data sharing between Litify and Esquire’s tools enhances forecasting and loan negotiations.

Case studies highlight success:

• BD&J: Increased marketing spend by 177% in 2020, achieving a 40% net income gain with Esquire’s financing.
• TorkLaw: Doubled case inventory value and grew revenue by 74% through Esquire’s liquidity solutions.

Actionable steps for contingency fee law firms

1. Standardize Data Collection: Require the seven key fields in your case management system (e.g., Litify).
2. Install Esquire Insights: Add the free app via litify.com/integrations/esquire-insights for instant dashboards.
3. Update Data Regularly: Prioritize estimated close dates and case values, using Esquire Insights to assign remediation tasks.
4. Review Dashboards: Analyze revenue pipelines, attorney performance, and data quality to inform strategy.
5. Leverage Forecasts: Use inventory valuation for staffing, marketing, or new practice areas, and to secure financing.

Conclusion

Financial forecasting and liquidity management are critical for contingency fee law firms facing economic uncertainty. By standardizing case inventory data, leveraging tools like Esquire Insights within Litify, and partnering with Esquire Bank for tailored financing, firms can predict revenue gaps, optimize operations, and seize growth opportunities. These strategies transform PI firms from reactive to proactive, ensuring resilience and bold success in a competitive market.