Many folks have wondered how I ended up in bankruptcy after building two million dollar businesses and how I was able to rebuild so quickly after the bankruptcy (I filed two years ago and today there are 4 businesses bringing my work out into the world bigger and better than ever before).
I’m writing a book about the whole experience. I finally sat down to write about the very beginning of the financial crisis (that led to total financial liberation) and here’s that story:
When I really consider the root of the debt that led me into bankruptcy, it starts as far back as 2008, when I sold my law practice.
I had a million dollar a year law practice full of happy clients and a kick ass team. And, I made a major mistake by selling it to a man who had never run a million dollar law practice before. I seriously underestimated how important that one factor was.
You see, it takes something far different to run a million dollar law practice than it does to run a $100,000 law practice. That something is not something that comes easily, it must be grown into. And Art, the guy I sold my practice to, didn’t have time to grow into it — it was thrust upon him in June of 2008, when we agreed he would buy me out of the practice over time, using the revenues from the firm to keep it going.
I thought it was a sure deal. I had the marketing systems in place, hired him a marketing coordinator who was amazing, we had a great team to run the machine that served the clients, and, well, what else could he need?
Within two months of taking over, he slashed and burned costs because what it really takes to run a million dollar business is a willingness to write checks for expenses in the neighborhood of $500,000 to $750,000.
Art didn’t have back up capital and he wasn’t used to writing big checks, so he started cutting expenses. First, he cut the marketing coordinator. Then, the marketing costs.
By the end of 2008, Art was out of money and the new client flow had all but slowed to a trickle. On December 31, 2008, Art called me into the office and said “Alexis, I’m out of money and I can’t continue to run the firm. You can either take it back or close it down. I’m out.”
I couldn’t take it back because I had already moved on. There was no way I could put my energy back into seeing clients on a one to one basis or manage the day to day operations of the business.
My second business, educating families and their lawyers about how to plan for their whole family wealth, had taken off. I had a best-selling book on the market. I was appearing on television all over the Country. And, I couldn’t go back.
At the same time, I couldn’t just close it down. I had clients and team members who were counting on me. I had chosen Art to buy my practice because I believed he would treat them right. I was wrong and I couldn’t let them suffer the consequences.
I’d have to eat it myself.
So, I took back the firm and ran it out of my credit and savings for 6 months while I transitioned the clients to lawyers I had already trained on my systems throughout the Los Angeles area and I supported my team members to find new jobs.
That was a $250,000 hit. And, it was the right thing to do.
To make matters worse, that hit came directly on the heels of having made a $100,000 commitment (with $87,000 put on credit) to join Ali Brown’s Diamond Mastermind program. Had I known Art was going to give me back the firm, I never would have joined the Mastermind.
So it’s really a great thing that events happened in the order they did. Joining that Mastermind was one of the best decisions I ever made. But, it was an investment I thought I would easily repay with Art’s payments to me. As we now know, those payments never came.
And, that was just the beginning. By the time I filed bankruptcy, I would clear $500,000 of debt. Most of it used for very good purposes (yes, there were some frivolous purchases as well) and all of it being repaid back many times over as I use what I learned from each of those investments to participate in creating a world that works for everyone.
Stay tuned for the rest of the story, including where the rest of the debt came from and how I was able to rebuild so quickly and easily. My books “Financial Liberation” and “You Are Not Your Credit Score” will be out next year. In the meantime, I’ll post snippets here.