It Pays More to be an Expertpays Law Firm Than it Does to be a…Law Firm
Date: 12.06.2020 Time to read: 4 min
"Without wisdom, gold is quickly lost by those who have it, but with wisdom, gold can be secured by those who have it not." — George S. Clason
This post is for people who are less concerned about the virtue fintech mission of Expertpays, the panache of our POV, or our expert witness philosophy.
This post is for the bottom line crew. And we are here to state that Expertpays is more than just try a case here or there. Expertpays should be the new arm of your law firm, the new way you do business. But, to this, the most common reservations from lawyers --- ever the skeptical breed, speaking as one of them --- about Expertpays are economic:
- I already fund my own experts
- I don’t need experts for most of my cases/pre-lit/low dollar, etc.
- This sounds too good to be true
We can dispense with (3) first: while it is too good, it is also too true. Done. But explaining (3) also assuages (1) and (2). Expertpays is too good and too true because of the time value of money.
Law firms have a good sense of expert report value in high dollar amount cases. And because the fees can add up, law firms understand the value in avoiding the capital outlays. However, smaller cases are ripe for the Expertpays picking too.
This product is meant for the big and small time. We will discuss two scenarios --- one where you hire an expert with your own money and another where the limits are so low you forgo the expert.
The time value of money and the internal rate of return.
The time value of money is the value of having money now rather than later. Money now has earning potential; the same money later lacks that earning potential (because you’re getting it later).
Related is an investment’s internal rate of return or IRR. Return on investment is a familiar concept but it can only show profit on your investment. You spend $1 to get 5$ from project A in a year versus $5 in five years from project B. The ROI on both projects is equal, but we know that the investment value differs between these two projects. Enter internal rate of return. An internal rate of return is the annualized return on investment. From our CFO:
“IRR can be used to compare the returns of any two investments, even if one is repaid little by little over 30 years and another is paid back in a lump sum at the end of 5 years. Both have an IRR: a single annualized return percentage that is comparable to the other’s. It’s an apples to apples metric.”
Let’s say we have an attorney pay $4,000 to an associate to handle a case. He also pays $4,000 for an expert, which constitutes all his case costs. Let’s assume a 33% contingent fee. The case takes a year to settle with policy limits of $100,000. Let’s use Section 35 of the Restatement (Third) of the Law Governing Lawyers guideline that attorneys shave case costs off the top of any settlement before getting a fee.
Here are two examples using the numbers from above. We very conservatively assume that EP offers zero benefit to the settlement amount (it most certainly does). And we assume that the presence of an expert report speeds up the settlement process by just three months (3/4 the time).
Before we get into these cases, just know that you can go here to plug the values in for yourself! Unless you want to do algebra. Case (1), where both firms decide to retain an expert:
Here the victory goes to Expertpays by a wide margin. So, if you are funding your own experts with your own money --- you are less profitable than the EP firm. If you are funding your experts with a credit line, you are doing even worse relative to an EP firm, because with Expertpays there is zero interest and zero risk.
Next, let’s look at case (2) where your firm decides to forgo the expert altogether. Like many plaintiffs’ firms, you can simply take the actual medical expenses and use a multiplier to guesstimate the damages --- and after a year, it works:
Again, Expertpays still beats out “going it sans expert.” By a lot.
The assumptions here are conservative; having a crystallized damages report of any kind during the early stages of a claim gives the defense little negotiating room. Even the slightest benefit from having expert reports earlier and at all makes Expertpays the superior choice for all claims and litigation. Bet on us like we bet on you and the money will follow.
Get started with us!
Join the 5,000+ subscribers who receive our news emails