Lawsuit funding: Home based franchise that does good in the world
Many of the people in the litigation funding business have been doing very well, and they wish that I wasn’t spilling the beans on this website. But oh well…it’s your gain.
My goal here is to teach you about litigation funding with the hopes that you will become interested in it as a business venture.
And that includes not just the pluses, but the minuses.
Just to be clear about my agenda: I am not selling anything here – just providing information. I have a client, Lawsuit Financial, and we are working to put a franchise together. Just so you know — I am biased towards this industry and this client in particular. But what I have to say will help you get into this business if you decide to, with or without my client.
First, something about me. I’m a marketing, sales and entrepreneurial guru. You can read more about me here. I have been involved in various businesses since I was 15. My wife is a lawyer who does a lot of litigation and in our 20 years of marriage, her work has been a constant source of interesting stories at the dinner table.
There are a lot of great things about litigation funding as a home based franchise. To me, the most important factors are these. I will explore each one in more depth.
The litigation funding trend is your friend
Something like 15 million lawsuits were filed in 2000, just in state court.
And more lawsuits are filed all the time. Long term the trend is generally up. I believe a lot in trends. I try to invest in trends and I try to find businesses that are growing with the trend.
And moreover, there are a bunch of small players doing litigation funding but the market is still wide open and plenty of room for someone else like yourself.
Potentially great returns for a financial services franchise
The guy I work with has done well over the past nine years. There are never any guarantees. But the risks are that you invest money and then the plaintiff loses the lawsuit, in which case you get nothing.
How great a risk is this? If you know what you are doing, it’s small.
Notice I said "if you know what you are doing." You must have an expert in this field at your elbow, guiding you. Even then there are risks. But if you have the help of a real expert, your chances are very good in this business.
And, you can always use OPM – other people’s money. So when you invest, you are using their money and not yours. If the lawsuit is lost, they lose, not you. Since the returns have been very good in this business for so long, there is no shortage of investors who want to fund lawsuits and split the winnings with you.
A long term business built on repeat relationships with lawyers
You do have to be aware of the difference between a fad, and a business. A fad is here today and gone tomorrow. A business builds up repeat customers.
In this business, who are your repeat customers? The lawyers. You will build up a stable of lawyers whom you work with repeatedly. Why do they want to work with you? Because you help their clients. You take the pressure off the clients. And the clients stop pressuring the lawyers. So the lawyers will turn to you again and again. They will refer your clients to you.
Let me make this a little more clear. Let's say someone offers Mary $50,000 to settle her injury case. The lawyer feels that if Mary can just wait a little bit, the next offer will be $100,000. But Mary needs to pay her rent so she says to the lawyer "I can't wait…let's just accept the $50,000."
Now, if the lawyer knows about lawsuit funding, he can connect you with Mary. You give Mary the money she needs to pay her rent. She and her lawyer can now wait. And six months later Mary gets a much higher share and everyone wins. Tha'ts a triple win in my book.
And that is why you can potentially build a real business here.
Do you think the lawyer will refer his next case to you? You betcha.
And that means repeat business…so this is no flash in the pan fad.
But there is a downside. As I see it, one of the downsides is that this is possibly…
A financial franchise free from excessive regulation
The business of advancing money for lawsuits is free from excessive regulation at this point.
In fact, the way that my client does things, there are no regulations. The important thing is that you treat people fairly and honestly. That way, the lawyers who refer to you will keep referring more clients to you. And you will build a nice base.
Fact is, I don’t think this business is likely to be heavily regulated in the future. But it if it is, I think that will be great. To some, it's a downside. To me, it would spell even greater opportunity.
If that day happens, if you are already in the business you will be thrilled. That's my prediction. Regulation will keep out the riffraff and help you as an established player do even better. That’s what regulation usually does.
I used to be a licensed contractor when I first started in my own business. My second business, actually. An alarm company. I was regulated by the California State Contractors Licensing Board, and the Bureau of Investigative Services, whatever that is. In the rare instances that a consumer complained, those regulators were my buddies. I didn't understand it at the time, but now I do. Regulators are in bed with the people they regulate.
Hey, the lawyers love their Bar Association. The Bar keeps too many people from becoming lawyers and messing up their business. Regulation would be GOOD for this business, I think.
The lawyers have a cozy deal going. They are regulated and licensed. In return, they have a nice monopoly on representing people in lawsuits. If this litigation funding business is ever regulated, it will be a great thing for those already in it.
But there is another very important thing you must know.