Practice Interruption, Exit Planning

and Contingency Recommendations

This article is authored by two Litigation Forensics Board members who have also created a survey to help practitioners with the process of exit planning.

Have you thought about what will happen when you exit your current position or consider selling your practice? Here are some questions to ask yourself: https://www.surveymonkey.com/r/LFBSurvey.

Now that awareness has been created, let’s discuss what you need to begin the process.

Considerations

• Cost: depends on what you need and supply yourself.
• Case file records: all documentation and access to records, computers, etc., and all details so you can continue business to contact clients meaningfully.
• Practice management tools: practice management tools that enable contingency are computers, office, files, and all necessary tangible things for continuing the business.

Business Exit Strategy

You need to create an actionable strategy for exiting, which will help avoid costly mistakes and frustrations. You will also need a smooth hand off in place. Look at employees or contractors as second in command, find others like you, and look at your competitors.

• Determine your timing and strategy: who will take over operations, complete asset sale, merge, acquisition, dissolving, and finding an estate attorney.
• Do business clean-up: (1) legal—questions of ownership, update all licenses, review contracts, pending lawsuits, serious complaints from vendors or employees; (2) financial—health financials, organize and update financial statements, collect on current receivables, take steps to improve cash flow; (3) marketing—be able to tell the story why top dollar, address any negative reviews, update website, attend industry events before sale, spread by word of mouth to potential buyers; and (4) any other loose ends to make the business more valuable. Take care of any issues and determine if the business can succeed when you are not running it. Start nurturing client relationships, documenting organization processes and procedures, and ensuring vendor contracts and that they can be transferred.
• Have a business valuation done: have a starting point.
• Have document(s) drawn up for sale of business: buy sell agreement.
• Determine if you are using a business broker or investment banker; which could cost about 10% of the sale price. They can post online and on various platforms.
• Decide how you are selling and if you are staying on during the transition: orderly retirement. Also, determine whether you will require compensation during the transition period.
• Determine how you will notify clients and lay the foundation for a smooth transition for the new owner; coordinate timing and messaging with the new owner, employees, and anyone else who will ask questions; update long-term customers first and address all concerns; focus on the positive when addressing the transition in e-mails and make information available about transition concerns.
• Consult a tax consultant: be sure 401k and other benefits transfer; know your tax liability.
• Create a plan for you and staff to be around during transition and everyone’s roles.

Succession Plan

• A way to provide continuity of services and operations due to death, disability, or incapacity of key members: business overhead policy; personal disability policy.
• Have all the steps that an investment advisor and associated persons will take in the event of a death, disability, and incapacity of key members that would compromise the ability of the company to provide its level of service to its clients without prompt action.
• Prepare list of clients, client contact information, other client information (telephone number, address, investment objectives, financial information, and suitability), and contract information.
• Contact information for all vendors, wholesales, centers of influence, and any other contact information which would be necessary for someone to run the business.
• Contact information for all accounting, legal, marketing, successors, creditors, associated persons, and regulators.
• Prepare a type of disaster recovery plan of information which is maintained in a separate location, including how to access client information, CRMs, Microsoft 365, google docs, or other cloud source, passwords, and how any information would be accessed.
• Have a plan to communicate with clients for the change and succession plan to take care of them.
• The successor or executor would contact the attorney and determine if the entity can continue in the same manner and registration continues, contact all vendors, creditors, etc., and be sure they are aware of the change.

Resources

Following are some resources that will assist the sole practitioner in this process:

• The International Exit Planning Association (IEPA) https://theiepa.com/
• American Bar Association Real Property, Trust, and Estate Law Section https://www.americanbar.org/groups/real_property_trust_estate/

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Michele M. Laws, CDFA, CVA, MAFF, has been in the financial industry for over 20 years. She owns and operates Divorce Dollars & Sense and Turning Point Financial Group. Her passion to help people become a better version of themselves. She specializes in matrimonial litigation, financial forensics, business valuation, divorce financial analysis, and financial planning.

Ms. Laws can be contacted at (618) 416-6200 or by e-mail to mlaws@divdollars.com.

Gauri Prakash-Canjels, PhD, CVA, CLP, is owner and Managing Principle of Litigation and Economics Solutions, LLC. Dr. Prakash-Canjels has more than 20 years of economic consulting experience in intellectual property damages, antitrust, environmental injury, business valuation, personal injury, and breach of contract damages. She has also conducted surveys for various consulting projects and provided expert witness testimony for litigation and arbitration purposes. She was recently included in Marquis Who’s Who.

Dr. Prakash-Canjels can be contacted at (718) 902-4486.