What is Your Average Case Settlement?
I’ve been working with Cheryl Leone of Catalyst Group and one of the metrics that she harps on is the average case settlement. After being an injury lawyer for a period of time, I’ve noticed that if I divide the cases into smaller, medium and more substantial cases that they tend to follow the same pattern.
For example, I know any case over $100,000 will require filing suit and conducting discovery. The only way a larger case will settle early is if we clearly have a $250,000 case with only $100,000 insurance coverage. On the sizeale cases, we know that we’ll have to do our work.
Before, I had grouped cases into various categories to determine projected settlement dates and cash flow. So I wondered why the average case settlement was important. When I thought about it, it became obvious.
Let’s say your firm resolves 100 cases in a year. Will you do better if you resolve 100 cases with an average of $7,500 a case, or if you average $50,000 a case?
Yes, I know. It’s crass to boil things down to money. But, you have to. You spend a lot of time and effort in becoming a lawyer, in hiring staff, in buying office equipment and having a fully functional office. Shouldn’t you help the people that need your help the most? Shouldn’t you be helping people with more significant injuries if you can?
Case selectivity sounds ugly, but it isn’t. Clarence Darrow didn’t spend his career resolving traffic tickets and if he did, we would never have heard his name.
By tracking your average case settlement, you should be able to watch it go up and know that you are helping people that are moe significantly injured and being more profitable at the same time.
I appreciate your point although I think median is actually a better number to look at that mean. In personal injury work, the larger cases really do distort the values to the point where the numbers are so random. I think our average is 4 times our median.
The problem is the client gets weak and takes the deal!
I would love to see more details to illustrate the conclusion.
Helpful.
More, more, more.
"By tracking your average case settlement, you should be able to watch it go up and know that you are helping people that are moe significantly injured and being more profitable at the same time." Good Point.
Interesting. However, in addition to case selection and average settlement, I think there is an additional aspect to this analysis: the secondary effect of caseload predicting future referrals. What do I mean? I mean this: Obviously some cases will never be profitable and many can be recognized from the start. These should never be taken or should be dropped as soon as practicable. However, a very significant aspect to projecting future gross receivables is gross client retention, and a significant aspect of client retention comes from referrals from existing clients. How many 6 figure settlement clients have ever referred to you another 6 figure client? Probably not many. In fact, unless developed from an advertisement (the easiest, but worst form of marketing) I'd hazard a guess that the vast majority of your big cases come from clients who had a case not worth nearly as much as their referral. Merely looking at caseload and average settlement does not accurately predict future trends because it ignores the significance of where your future files actually come from. Sure, organize your files into tiers, but in the same respect think of your caseload as a spider web. You may never expand the web if you don't first cross nodes A and B, and if A & B aren't there because you discharged the file it is not only unlikely, but impossible. Weed the bad ones out, but if you help those who you can, those people will give it back with interest in the form of referrals. I guess in a perfect world a solo would have only 1 client but that client pays 7 figures. If you have enough contacts cycling through maybe that's possible, but it's unpredictable and the firm will never grow. On the other hand, although average settlement value may not increase in proportion to case load, intelligent case load expansion gives you the benefit of economy of scale. In other words, yeah, I get to keep the big ones because they're fun, but I might as well pay associates/staff to work the others and make that money, too.
Anyone know the national median settlement value of a PI case?
