In episode 60 of The Kitchen Table, Ken Baden interviews Wayne Zell, an attorney and a CPA, to discuss the importance of trust and estate planning for business owners. Wayne shares valuable insights on setting up a solid foundation for your business, including the significance of choosing the right business entity, building a management succession plan, and preparing for a successful exit strategy.
Tune in to gain valuable knowledge on structuring your business for success.
TIMESTAMPS
[00:02:19] Trusts and Estates Explained.
[00:07:39] Family Business Exit Planning Advice.
[00:12:24] Setting Up Business Entities.
[00:14:20] Special Tax Relief for Businesses.
[00:20:32] Independent Contractor Classification.
[00:22:40] Compliance for New Business Entities.
[00:26:40] Independent Contractors vs. Employees.
[00:30:00] Planning for the Unexpected.
[00:34:45] Life After Business Exit.
[00:35:38] Partnerships and Legal Agreements.
[00:40:18] Entrepreneurial Exit Planning.
[00:43:23] Succession Planning for Family Business.
[00:45:34] Management Succession Plan.
In this episode, Ken Baden and Wayne Zell emphasize the need for a management succession plan to designate who will run the business in unforeseen circumstances. Wayne shares a cautionary tale of a client's CFO misappropriating funds during the owner's absence, highlighting the importance of oversight and governance structures within a business. Thus stressing the value of seeking professional advice from attorneys and CPAs to navigate complex legal and financial matters effectively.
Overall, the episode underscores the importance of proactive planning, legal compliance, and strategic decision-making for business owners to achieve long-term success and financial security.
QUOTES
SOCIAL MEDIA LINKS
Ken Baden
Instagram: https://www.instagram.com/officialkenbaden/
Facebook: https://www.facebook.com/TheKenBaden
Wayne Zell
Instagram: https://www.instagram.com/zelllaw/
Facebook: https://www.facebook.com/wayne.zell
LinkedIn: https://www.linkedin.com/in/wayne-zell-5aa1147/
WEBSITES:
The Kitchen Table Podcast: https://thekitchentablepodcast.net/
Blue Collar Ballers Union: https://bluecollarballersunion.com/
Wayne Zell: https://www.waynezell.com/
Zell Law: https://www.zelllaw.com/
Blueprint for Wealth: https://www.blueprintforwealth.org/
Aspire to Exit: https://www.aspiretoexit.com/
Welcome to the Kitchen Table, a podcast about where business is done. So pull up a chair and join your host, Ken Baden.
Intro/Outro
All right, welcome back to another episode of the Kitchen Table podcast, where business is done. I'm your host, Ken Baden, and I have got a I say this now every single time, and I say the exact same thing every time. I say, oh, I've got a very special guest. And I do, every single episode. But I've gotten a little redundant where I say, like, I say this every time, so it's probably annoying now. But I do, because I have our attorney. He's many people's attorney. Wayne Zell, the attorney to the stars, right? Ryan, myself, I mean, I wish I was a star, but in all seriousness, Wayne is a very accomplished attorney and author, podcast host. So I'm really super excited to have Wayne on today. Wayne, how are you doing today, brother?
Ken Baden
Ken, thank you so much for having me. I'm humbled to be included in your list of exquisite guests.
Wayne Zell
Yeah, yeah, we've had some awesome ones. Really, I'm excited to unleash the barrage of A-listers we have coming up. And we've been doing something really cool too. And I think I just told you where we, you know, we have a Facebook group and I just literally made a post and said, look, who wants to come on? You know, I wanted to give some folks a shot that you'd never hear from otherwise. And we've had some really cool guests, had a kid drive out. three plus hours from West Virginia to come and wanted to be in the podcast studio just to sit and talk shop and was a landscaper, but he had a really cool story. And, you know, as entrepreneurs, we can learn from any other entrepreneur and there's always something, you know, someone has accomplished as yourself or somebody, you know, kind of just getting going like that young man, there's always something to learn. So I thought that was really, really cool. But having you on, we have a very unique I guess, what's the word? I don't want to say this. We have a very unique situation in that I can show folks something that I'm currently experiencing or go through something that I'm currently experiencing that I think is super, super important, especially given like today's day and age. So, you know, first and foremost, you are a trust and estates attorney. You want to explain kind of like what that even is for those that don't understand like, My wife would say those are the PhDs of the attorneys. They're the smart ones. But would you like to expand on that?
Ken Baden
I'm a tax attorney, really. I'm a tax attorney. So I do trusts and estates, and I do corporate stuff. So half of my practice is representing small businesses, growing them, helping them prepare for their exit. And then on the trusts and estates side, we also help them with their family stuff. So making sure that they're preparing for the exit for their family. And so trusts are really important part of an estate plan for a business owner. And the reason I say that is because if you have a trust and you put your business ownership in your trust, then you're going to avoid court. on your death. So, and that's known as probate. And so we want to keep everybody out of the court system if possible, because all that does is it makes the, it makes the attorneys richer and it makes the, you know, the courts richer because the courts charge you for the privilege of running your assets, including your business assets through the court system. And that also applies during your lifetime. So if you, let's say you became incapacitated And even if you have a power of attorney, it may not be effective. To take care of the business the way you want it to. So you put it in your trust and then we deal with all of the management of the business through the trust. And we also will advise you on getting a management succession plan for your business. Even if you're just small, you know, you're starting out, you're building a, a roofing conglomerate. It's going to be a very successful over time. And you're surrounding yourself with really good people to help advise you to get to that exit. My process is let's make sure that we've taken care of the unexpected events. Like you suffer a disability or you become incapacitated. What do we do about that? Well, we have a trust that governs your ownership of your business. And then we have a management succession plan that says who's going to run the business and who's going to oversee them. Uh, during that time period, if you're incapacitated or if God forbid you pass away. So that's one of the things that, that we do a lot of, and, uh, we're doing more and more of it because of the silver tsunami. Have you heard of that? No, I haven't. Please silver tsunami. So I'm one of them. I'm silver. You know, I got a lot of silver in my face, nothing left on my head, but the, the silver tsunami is the, is what's going on in small business today where all the baby boomers. who are over the age of 60, essentially, um, are retiring or looking to transition out of their business or looking to sell their business or move it to the next generation down, you know, family generation, generational wealth transfer, or to their managers. How do we do that? And so there's a massive number, it's like 83% of all small businesses are currently owned by the silver generation, the baby boomers, and they need a way of exiting their business. So this is actually a really good time to come in as a buyer. If you're a young entrepreneur and you want to get into a business and One that's established and already operating. You might think about acquiring a business. And so I'm working with some folks, uh, on the side of, you know, trying to help buyers exit, uh, by people who are exiting businesses. So I mostly represent sellers.
Wayne Zell
Do you feel that you, but you do have folks that you know, that are in what I guess they would call mergers and acquisitions. Is that correct? Or.
Yeah. I mean, I do merger and acquisition work. I've, I've sold over 160 companies.
I know you sell, I guess. Yeah. Okay.
So the other flip side buyers. Yeah. I mean, it's everything from finding a business broker to finding a, an investment banker for a larger transaction, you know, 20 million and up, I would typically say you got to use an investment banker. Or, and there's a new paradigm I've come across through my podcasting travels of a company called Acquira, which actually is building a marketplace for buyers to go out and find people like you, but maybe smaller businesses. That are looking to exit HVAC companies, electric electricians, electrical contractors, roofers, plumbers, a lot of small family owned businesses. They have nowhere to turn. This is a actually, they're actually building a marketplace for people to go to, uh, to, uh, sell their businesses, but the buyers are the ones that they're representing. And so I'm representing a lot of the sellers and we're marrying up these, these, uh, ideas. There's also, I ran into this private equity firm out of Florida, I believe they are called Trivest and Trivest is a, uh, uh, a firm that has raised capital from investors. I'm a trustee of several trusts and we put some money into this private equity fund and the private equity fund seeks out family owned businesses that are looking for investment as well as exit planning advice. And so the, the trivest of the world, and there's, there are a few of them out there have built a marketplace so that they can help the family business exit properly and successfully. And they're not trying to, I mean, they're obviously going to make money on, on the, on the sale, on the purchase of the business, because they're going to go out and find people to run it, build it up and resell it. I mean, that's, that's the model in the private equity world, but you know, there's, there's a whole new model. That is focusing in on family owned small businesses that are being run by families or entrepreneurs. And I think it's a great, it's a great time to look to buy as well as to sell.
I think that's an awesome point. I mean, you just came out right out of the gate, throwing hooks, just to kind of reverse and unwrap some of that for some of the me's out there. So don't worry. If you're listening to this like, what? Don't worry. I'm going to break that down.
Break it down, Ken. Break it down. I can break it down with you.
I know you can. I know. Because you talk to me enough times to where like, OK, let me explain this to you in a way that makes sense. Let me explain it as if we were a five-year-old. But in all seriousness, one, my wife's also an attorney, so she always talks about the importance and I didn't know what the hell probate was but like you said keeping out of courts but like think about you know a family member dies and there's a house that's in that that needs to be sold how many times that we had that if that's not in a trust what happens it goes to the courts it gets to be a total mess but if it's in a trust it's just taken care of it gets dispersed it's pre-arranged you don't have to deal with any of that that for me is like the easiest way to just kind of conceptualize that because I've dealt with it personally within my family. And it's like, man, if that was just in a trust, we wouldn't have had to do any of this. It wouldn't have been this huge, ugly rift, right? And so think about that for your business. Like that's really, so Wayne set me up with all of that. We just got done doing, and look, it's uncomfortable. It's weird because you're young, but you don't know. And like for me, I never planned on living this long anyhow. So I'm playing with house money. So it's not, As weird, but at the same token, like I want to set things up. The way I look at it is, is I'm having people invest in my company. I want them to see, I look at that as a leverage point to say, Hey, this is why you might want to come here because I've already set these things up. Uh, do the other places that you're proposing to work at, do they have a management succession plan? Like what happens if something happens to that individual? Is that just a lifestyle company? What are you investing in? And of course we've also set stuff up and Wayne's done all of this for me and I can't. I suppose you can do it one of two ways. You can go and you build your business. And if you're listening to this podcast, you're either a prospective business owner, you're in sales, or you're somebody who may entertain that, or you've done it. But waiting, you could certainly do that, but then there's always the what if factor. But for me, I'm already, in my head, this is already what's going to happen. We're exiting at this time. That's what's happening. There is no other plan B. So why not get all of that stuff situated first? So now all that's left is to hit the goals. I'm relieved, uh, that it's all set up that way already. But when I say set up that way, that's, I remembered when I wanted to mention, by the way, main Wayne, which was a lot of folks don't even understand. It's such a popular thing to talk about entrepreneurs like, Oh yeah, you know, you know, I'm set up with a holding and this, they don't know. I didn't know. Right. Like what the real. what a real good setup is to minimize risk, because that's the idea, right? And we've all heard the term holding company and management company, and you get to talking to other peers and you get ideas. But I didn't really know what all of that was. And Wayne has set us up that way. And I suppose he may be willing to talk a little bit on that. He also has a book, by the way, that we'll talk about a little longer, excuse me, a little later in the show. The guy knows what he's talking about, right? You're multimillion dollar exit. He's written a book on doing this. So like, for me, I want to sell my business. And if you're listening to this show and I think, and Wayne, I'd love to hear your opinion on this, but like the way things seem to be trending, especially within my business, private equity is just looking, looking, looking, where can we invest? And of course they trend as to where they look. And currently our market is a good one. But like, if you're not building a business to build, scale, and sell, and you don't have to sell, but if you build it to sell, you're in a great position. Right. So, and then you have folks like Wayne who are attorneys to help you prep for all of that and, uh, and kind of do your due diligence. But. I guess without going into too many things at once, Wayne, firstly, just kind of explaining in language terms, like, Hey, here's a real basic setup that you might want to consider when you hear folks talking about holding companies in LLCs, why they might do that. And just a real generalized broad strokes, but it gets tossed around a lot within the, the, you know, the inner webs of entrepreneurship, but no one really gets it. I think that would be a huge help to just kind of clear up. Hey, here's a good base setup here.
So the first thing you want to do before you even start up the business is to figure out what kind of business entity you're going to use. Right. So, you know, nine times out of 10 today, people are picking limited liability companies, LLCs. Why? I'll tell you why it's very simple to set it up. Number one, number two, it's really flexible and LLC can be treated for tax purposes as any number of different types of entities. So believe it or not, an LLC can elect to be treated as a regular C corporation. It can elect to be treated as an. S corporation, a pass-through entity, an LLC can be part of a, can be structured as a partnership if there are two or more owners. And if there's just one person owning the LLC, it can just be disregarded and it doesn't affect the real main benefit of the LLC. What's the main benefit limited liability. You're trying to make sure that whatever you're doing in your business, particularly if there's a lot of liability associated with it. That your creditors in the business can't go through the LLC pierce through it and go after you individually in your individual assets that you've taken out of it and you've accumulated and are putting elsewhere. So that's one thing to think about the choice of entity. You might start out as an LLC. Most people do. We have, we have clients that are building technology, software, software as a service, cloud-based services that qualify for special tax relief under the internal revenue code, which I'm not going to get into too much detail, but the bottom line is only C corporations qualify for that. Not S-corps, not partnerships, not disregarded entities. So again, if you want to know how to do that, you'll talk to your tax advisor. You're going to talk to your CPA. I'm a CPA and a lawyer. You're going to talk to your CPA, your lawyer, and make sure that the initial choice that you make for running your business is the right choice of entity. Okay. So that's number one. Number two, you mentioned holding companies. Holding companies are really popular because if you have more than one business and you're going to be doing more than one thing, or you're going to be doing it in more than one state, or you're going to be doing, you know, different types of customers you're going to be servicing. You might set up subsidiary entities that are LLCs or corporations that are owned by your holding company. You also might put your real estate in the holding company. Why? Not your personal residence. There's a reason not to. But why you would put your investment real estate into a holding company is because, again, you can have it all under one structure. That's a centralized way of owning all your properties and managing all your businesses and all your properties. And then you can do some fancy estate planning using the holding company. but it also gives you centralized management over all the different entities that you've got, which is really cool. You can have one person running the whole show through the holding company, and that might be you, Ken, which it is in our structure. But you've got other things going on besides your roofing company, so you put those other things as you accumulate them, as you grow them, as you build them under the holding company in separate entities. so that you isolate the liabilities of each entity inside that entity and also the assets inside that entity from any liabilities of another entity or another activity that you're engaged in. So I think the first and most important thing is structure from the beginning. Think about what you're going to be doing in three, four, five, six years, and then try to plan accordingly. If you can't, you know, I have clients come to me all the time. They say, well, I just want to get started. So go online and set up your own LLC. It's easy to do. The question is, how are you going to tax it? Are you going to hire employees? Are you going to have independent contractors? How are you going to have contracts entered into? Are you going to be leasing property? All of these things matter when you're structuring the entity. And, you know, that's what we're here for is to help people sort of make those decisions and plan around it, but it's real easy to set up. It's just the question of now, what do I do? How do I operate this thing going forward? And how do I protect myself personally, individually, and my family from liability that, uh, in the business that I'm conducting.
I don't know if this is your world or not. Um, you've seen the, I'm sure, and maybe you haven't, but the legislation that, that goes into effect, I think in April, it might've already, but with the, where they're, they're clearly they being the current administration and the IRS looking at construction and like, who's a 10 99, who is it? Becca says they basically did away with the way you Becca, my wife used to get used to be. And there are like nine points, I believe that dictate whether you are a W2 or you're not. And some at the last, the last way things reviewed, some had more power versus now they don't, but.
So it starts with the department of labor. Um, the department of labor is the one that came out with all these rules on who is an independent contractor and who's an employee. And why is the department of labor concerned? Cause they, they also run and govern all qualified plans, like 401k plans and profit sharing plans, cash balance plans, as well as all the labor rules that apply federally. So a lot of. People were trying to get around these rules. I'll give you a quick story back in the 1980s. Uh, I was with a big four now accounting firm price water houses. It was at the time. And I was in their national tax office. And one of the projects that I was handling was from Microsoft and Microsoft was. They had 20,000 independent contractors, 20,000 people as independent contractors. And these independent contractors were only working for Microsoft. I can tell you that. And so we ended up getting into a negotiation on the tax issues because. Are we required to withhold on these people? Are we required to get unemployment insurance on these people and how is it going to affect the massive number of people that are employees of Microsoft in terms of their qualified retirement plan? So we ended up negotiating a settlement with the IRS on behalf of these 20,000 independent contractors and Microsoft, but it's a much smaller issue today too. I mean, if you've got a small business, it's much easier to just say, okay, everybody's an independent contractor, but. Even if you want to call them an independent contractor, they may be employees, which may impact your employment law issues, but also your tax issues. And that's what people are starting to, oh my gosh, the Department of Labor came out with these final rules. Well, they've been talking about it for a long time. It's just now they're acting on it. Now, who knows what will happen to these rules, by the way? What happened last time with the administration was when Obama left office and Trump was elected, came in, a lot of regulations that were put on the table through the Obama administration that were scheduled to come into being or were already enacted were repealed during the Trump administration because, of course, they're anti-regulation. You never know what's going to happen, but you have to start complying with these rules. Another example, this is a good one. When you set up an entity today, an LLC, a corporation, you're now subject to something called the Corporate Transparency Act, which became effective on January 1st of this year. Under the Corporate Transparency Act, every business owner, every business owner has to register the business with the US treasury department. It's known as FinCEN. It's the financial enforcement network. And you go online and you register the business and you also register who the beneficial owners of the business are, which may include. People who are not actually owners of the business, people who are officers of the business and they all have to be registered online. There's no paper filing online with the department of treasury. Guess what? There's a case that came out last week in an Alabama district court that ruled the corporate transparency act as being unconstitutional. So everybody's saying, Hey, I left a file. No, first of all, it only applies to the plaintiffs that sued the government in that particular case. Number one, number two, it's in Alabama. And so if there are other cases coming through, where do you live and what circuit court governs your behavior? That's the fourth circuit, Maryland and Virginia. Are you going to have the same result? And is this, is this going to be something that goes up to the U S Supreme court, or is it something that's just going to get knocked down? And what kind of ongoing compliance do you have? Guess what? If you had an entity in existence before January 1st. You have to file with FinCEN this year before the end of the year. And I don't expect the Supreme court to rule on anything relating to the constitutionality of the statute and the S and the penalties are brutal for noncompliance. So there's a lot of compliance stuff that we have to be aware of as business owners and all of us are subject to it, including me. So.
I'm texting the CPA currently. I don't know if he already did or if you do that or what, but you got me scared enough to where I'm like, Hey, just checking to see.
But, uh, anyhow, I mean, you're a new entity, by the way, you have 90 days from the date of formation to file with Vincent. So my associates going to be notifying you about that shortly.
Okay. Uh, well. Yeah, we'll make sure that, but anyhow, that's, I don't want to take up.
It's just a pain in the butt. That's all.
Well, we want to make sure we're compliant. That's my point. Right. So like, uh, because, because a lot of our listeners root for solar, right? Like that, what models are they running? Well, we've got a couple of W2s and then 1099s across the board. And, you know, I spoke to some attorneys, uh, Wayne, a few, maybe a month ago, I don't know. There's these local guys and they run this like, oh, they're very niched, right? They're like, we're the home improvement guys, right? And you probably know the law firm. I think I might even have asked you already, like, yeah, yeah, I know who they are. And I don't know, it's so hard to know if it's like, okay, because like, we know what we got Wayne and we trust Wayne and we know Wayne's area of expertise. It's like going to my wife and saying, hey, can you help me with anything law related? She's like, honey, that's not what I do, right? And so like, in this case, They're like, well, that is what I do arguing things like this. That's what scared me enough to say, Hey, what do you think specifically about this 10 99? They're like, well, there are three ways you could get your guys set up. One is a w two. Of course, the other is the independent contractor structure, which if you're going to do that, then you have to have. What we already know, which is you got to meet the nine tests, pal.
You got to meet the new, new tests. If you don't meet the new tests, even if you call them an independent contractor, they may be an employee.
Yeah. Yeah. So, and it's, it's, if they fail any of the nine, which I don't think, I mean, our guys, even Bruce was like, you know what? I really think that maybe they're actually 10 99, but we don't tell them what to do or any of that stuff. I mean, yeah. point being is looking at that. And, uh, he mentioned, and you might know this, that there was a tax code for 10 99s. That's basically, uh, where they, where they treat these sales people, 10 99s, like direct salespeople. And you get a little bit more control and it's a little bit more, uh, he thinks that's the most favorable way.
I didn't know if you're familiar with, if you had real estate though, it doesn't apply to everybody.
Real well, and that's what I thought. I was like, isn't that how they pay real estate folks? And he was like, yeah, that's how you should have your guys set up.
So, I mean, it doesn't, there's a statutory exclusion under the internal revenue code that applies to real estate professionals. And there's another one that applies to insurance agents. But to my knowledge there, you know, I had this issue come up by the way, on a, Uh, on a salon company that, uh, had 950 salons and we were, uh, getting ready to sell the company. And then we discovered that there was no withholding on their tips for the salon, uh, people. And, um, guess what? There was no exemption under the federal code. There was an exemption for real estate guys, exemption for insurance guys, um, but not for salon people. And so, uh, we had a problem in defining that for the buyer. The buyers was like, well, you're going to have to indemnify me from any loss that ever gets incurred in the future. If the IRS ever comes in and audits us and it's going to be a lot of money. So you have to, you have to be aware of all these little rules that apply, but, uh, Rather than giving advice on specific things on a zoom call, let's, let's keep talking.
Yeah, I, uh, I know that's a real popular got brought up last night, but that you could talk about that until the end of time, you should get yourself or set up with an attorney. That actually was my point, by the way, they were discussing what to do. And it made me cringe because not none of them were attorneys. And so like my point being is if you're really worried about it, get set up with an attorney and, and, and make sure that you were doing it the right way. Don't just take. And the person who was talking about it, brother, he is so accomplished, but he's not an attorney. So I'd still say, just talk to your attorney, you know, or your CPA.
Sales reps can be independent contractors, but the key for them is. They're representing more than just you. So if you're relying on the sales rep to represent only you, that's when they, the sales rep is not really going to be a sales rep, an independent sales rep. They're going to be more like an employee. And that's what, that's one of the nine tests. And if you fail one of the tests, that doesn't mean you're automatically an employee, but you know, again, the regulations that they just came out with, you got to read them. You got to get somebody to apply to your situation. Make sure that you see somebody and, and if hell give Wayne a shout, if, if, uh, if you're looking to, uh, give Bruce or somebody else a shout, you know, I don't like dealing with all that minuscule stuff, but if I have to, you're my client, I'm going to deal with it. That's okay. All right.
Bruce, Bruce, we'll, we'll look out for Bruce Bruce here in Maryland, but there's a couple, I mean, there's listeners all over bottom line. Don't take advice from other business. And that's my biggest point. I would caution against taking advice from other business owners that aren't attorneys. That's really it. That's all I wanted to my whole bugaboo with that was yes, I get that's a big issue for all of us right now. That's probably the issue that everybody's talking about. I understand that, but like to take those pieces of advice from another business owner and just run with it is dangerous as hell. Uh, and I probably wouldn't feel that way if I didn't have my wife now, that's actually funny. So, um, who is an attorney, so protect yourself. So Wayne has a book that's set up and predicated and he's been, he's been involved in selling multiple companies. So for me, Wayne was perfect. Um, he's got, you hold that up again, Wayne. So he's got the multimillion dollar exit. I've got a signed copy. It's a great book. And really, again, we're talking about what's the purpose of being an entrepreneur? Build, scale, sell, right? Or build to sell. As Wayne would say, you're putting yourself in a wonderful position. Should you do that? And if you don't, well, then what are you really doing? What's the plan? Do you have one? Now, I would encourage you, one, read the book, and two, If you're truly looking to set yourself up for that, get yourself hooked up with someone like a Wayne because, well, I'll let Wayne, why don't you tell us the value of that, the preemptive value of getting someone set up and prepped for this in advance and what that could do for somebody.
Well, I mean, I tell the book, I use the book to tell a lot of stories. So there's a lot of examples in the book and that's the benefit of it. It's like, Oh, that happened. Here's a, here, here's a good story. You know, things that you should be aware of as a business owner, even though you own a hundred percent of it and the business is not generating a hundred million dollars might be generating a million dollars of revenue a year. Okay. It's the same issue. I had this guy, uh, who is a very good client of mine. He runs an electrical contracting business. And, um, it's, it's generating about 40 million a year in revenue today. He was in a bad accident. He was in a motorcycle accident several years ago and, um, he had no plan in place. And, um, so he, he was in the accident, but he didn't die. He wasn't in a coma, but he was in really bad shape. So he told his CFO, dude, take over my business, run it. I trust you. I know you'll do the right thing. Have a good day. And then he went back into the hospital and tried to recuperate. You know, that's, that's a sound thing to do, except here's what happened. CFO was started siphoning cash out of the business for himself. Number one, number two, he got really, uh, entrepreneurial himself. And he said, you know what? I think I could set up another business on the side and funnel some of these customers over to me.
Uh,
So he did. And the business went from, I don't know, at the time it was around 30 million, went from 30 million down to like 20. I mean, a huge drop, 33% drop. And there was a million dollars missing when my guy got back to the business. Well, he discovered all this, obviously fired the guy. He was thinking about pressing criminal charges because that is crimp. That is a crime. It's a misappropriation crime. And you can go to jail for that for many, many years, but you know, the bottom line was, what could he have done differently? And what should he have done differently? Well, here's what you do. And here's what everybody should be doing. You have a plan to plan for the unexpected. So the book talks about this, but planning for the unexpected is building a management succession plan, which says, Hey, you know what? If I walk out the door and I get hit by a truck. Who's going to run my business because I don't want to just have it fold and disappear. Who's going to run the business and keep money coming in so that my family can be taken care of so that there's there's cashflow to pay the employees who have worked hard to help me build this business up. So the management succession plan is going to say, who does this? Who does that? Who is in charge of all these functions in the business. It also identifies. gaps in management where you may need to fill it to build your business to a successful exit. Number two, and more importantly, in connection with the CFO, uh, situation that I described, you've got to have somebody overseeing the people running the business because money creates greed and greed leads to damage and damage leads to hurt families, hurt feelings, hurt people. Why not have a board? A board of directors that is in charge of managing the operators. So you give the operators some kind of guarantee or assurance that they're going to be able to keep their job. They're going to be able to make their compensation, continue to make their bonuses and try to keep growing the company. You give the board incentive to watch over these people. And it may be family members that are on that board, but it may also be industry experts who are on the board. People who've successfully exited a business like yours, who are on the board, who will not donate their time, but give their time in exchange for something. Cause you're going to have to give them something. You may have to give them a piece of the equity of your business. You may have to give them cash comp. Whatever it is, you build a structure so that if you become incapacitated or you die, your family, your employees, and your customers are protected. So that's discussed in the book at length. We talk about valuation of a company. How do you value a company? And what do you think the value is and what do you need at the end of the day to support yourself and your family? If you're not in the business any longer, it also talks about preparing your business for transition. Whether you're going to transfer it to a family member, you're going to sell it to your managers, or you're going to sell it to an outside third party, which everybody wants to do. Cause you get the highest price usually when you do that. How do you do that? What's the best exit for you? And then chapter five of the book is preparing the business for sale to a third party. These are the things that you've got to do all the things that you need to consider to get ready to sell the business. And believe me, it's a lot of stuff. Should you be doing all that stuff? No, you can have professionals help you. And you want to assemble a team of professionals. You're going to be able to help you well. So you've already identified a lot of people that you're working with. You're working with me, you're working with Bruce, you're working with other people, you're working with a CPA, you're working with a financial advisor, you're working with an insurance agent. All of these people are part of your rockstar team. They're going to help you successfully exit your business. And then the last chapter of the book talks about, well, what do you do after you exit? A lot of people start up another business. Others basically retire, but retirement is for people who want to die. In my opinion, there's always ability to experience new things, learn new things. and grow as a human being and help others really contribute back to society. So we talk about all these things in the book. It's a long book, but it's, uh, you can pick and choose what, what is important to you when you're reading it.
You're an entrepreneur, man. I'm telling you that you really do need to grab this. It's just, to me, it's just such a. I don't know. I knew what I wanted to do when I started this business. It's been a part of a few startups. And for me, it was very clear, like, this is what I'm doing. So there really was like, I knew I didn't want to skip on two areas, CPAs and attorneys. And those were just two things I've seen take people down. And I wanted to make sure everything was set up perfectly in the beginning. And Wayne mentioned it, you know, there's just so many stories out there. Unfortunately, And I have my own, mind you, my own stories that I can tell you. I've learned and learned lots of lessons on, uh, partnerships. Never, you know, first of all, partnerships to me, my wife hates them, but I can tell you, I'm not a huge fan either, but if you are going to do them, you got to have paperwork. I don't care who it's with. I don't care who it's with clear, clear, clear, and get with your attorneys. Don't just have Johnny draw it up. Like.
It's just don't take it off legal zoom. Don't take it off for legal zoom. I got to tell you, biggest mistake people make is, Oh, I don't have to pay an attorney, you know, thousands of dollars to help me with all this stuff. I can pay $125 and get an operating agreement on legal zoom. And it's, it's worth what you pay. It's worth 125 bucks. And therefore, if you do have a partner, you haven't thought through all these issues. And I can tell you, there ain't no online system yet. There may be in five to 10 years because of AI. And I'm looking for that. But, um, and, and that that's great. I think, you know, as an aside, I think artificial intelligence will change the way lawyers practice and CPAs practice, uh, going forward. And I welcome that, but there's nothing that can be substituted for experience. AI is not going to be able, they may be able to tell you here's the best provision for this particular situation, but is it? And is it best for you because there's nobody on the other side on the computer asking you questions about you and where your mind is at and reading your mind, the computer can't read your mind. So to be able to design something that works for you, you really have to have somebody experienced on the other side to talk to. Right.
And I. I want to preface this one more time with you get what you pay for because like literally I did the whole CPA that saves you some money and I was willing to, I don't know, do whatever he can do to try to find avenues right within the confines of the law, obviously. But, and I paid dearly, dearly, dearly, both literally with, with, with money like and time and stress. And it's just. I would advise you against, invest in those things and I don't think you'll go wrong, right? Attorneys and CPAs right off the bat. Get yourself set up with somebody you can trust. Don't do partnerships with anyone that you don't have any agreements set up with people that you trust like an attorney. These are the lessons I've learned really, really hard over the last few years. And I wish I had, but you know what? I know the value now. Wayne, you have a podcast too. When, when is that?
Yeah, it's called blueprint for wealth. It's right over my shoulder here. Um, we do blueprint for wealth, uh, once every couple of weeks, uh, we're booked out into August. I mean, in terms But often it's usually focusing on entrepreneurs who have a story to tell, um, whether it's success or not. And, uh, who are, who, you know, have an interesting story to tell, or it might be providers. You know, I've, I've interviewed financial advisors over the years. years, CPAs, insurance agents talking about some really cool techniques. We had a guy on a not too long ago, he was talking about private placement life insurance, which is really something only the uber wealthy think about. But, um, when you have a small business and it's growing and you all of a sudden become uber wealthy. These are the things that you're going to want to know about tax planning, you know, all the different types of things that sort of focus on my niche. But, uh, you know, we've had nonprofit executives on there's, there's lots of interesting people out there. I have a lot of team members that I also collaborate with marketing people, valuation people. financial advisory people, people who are sales experts that tell people how to build sales processes and things like that, technologists. There's so much going on in the world that we can't advise clients on everything. Part of my role is to make sure, and I use Blueprint for Wealth for this, is to team up with people who can help others. Provide them with specific guidance in their industry or on issues that are related to what they're looking at, where I can't do it myself. So, cause I can't do everything myself. I bring in experts.
I love it, man. I love that.
So that's blueprint for wealth.
And you guys got to check that out because one I'm on it, but I'm probably the least informative episode. But Hey, check it out anyhow, but make sure that you do. Uh, yeah, well, you know, that's my, that's my form of humor.
The reason you're on it is because the reason you're on it is because you're a true entrepreneur with an, you had an exit plan in mind when I met you, it's like, I'm out of here in a specific number of years, I'm building it to achieve this level of value and I need to do whatever it takes to get there. And I love that because you got to back plan from that, right? Every exit plan has to be back plan to the present. Where are we today? How do we get to 30, 50, a hundred million dollars of value? And what are the gaps that we need to fill in to get there? And who do I need to involve in helping me get there? And how do I grow this business exponentially? Because exponential organizations are the ones that get the highest multiples when it's time to sell. So yeah, you, I mean, that's why you're on it. Cause you're, you're a true entrepreneur with a real focus on your exit and that's what everybody should be doing.
I do appreciate that. And I do a little bit of self deprecating from time to time, but, you know, uh, but I will say that Wayne has been an integral part in this whole, this, this, where we're at currently, you know, we're what, two weeks away from spring. And I'm so pumped, man. We, we literally have essentially like one. And we've even got a guy locked in fractionally that I intend to bring on full time for the operations. But he's just such a perfect fit. And even the gentleman we hired to help staff these agrees. So for all intents and purposes, our hiring is done unless we need to bring this gentleman in outside of salespeople. So we have done a lot, Wayne, since Now we're just kind of revamping the EOS pieces and making sure that everybody understands how it all works.
Entrepreneurial operating system, Gino Wickman book traction, read it. Great book for entrepreneurs.
Do yourself a favor and read that because it tell you what, and I bring it up all the time on my show and they probably heard it before, but that's, this could be someone listening to it right now. He's absolutely right. That is. The reason why, when we bring all these folks in and they understand how we do all of that, and they understand EOS that we can just get down to scorecards, numbers, roles, responsibilities, and boom, boom, boom, boom, boom. And it's just, I'm really excited, man. We've got our first mass influx of salespeople coming in next week. We're doing those things. So I'm pumped, man. We've been spending money all winter. It's time to start making some money. So I'm excited. It is time. But I'm looking forward to this, man. We've got everything set up, everything set up with you.
I think, I mean, we're still, we've still got a few loose ends that we haven't signed and tied up, but we're close.
We've come a long way considering you're easy to work with.
Cause you say, okay, I'll just, whatever you say, you know, it's like, okay, well, I've learned to trust my attorneys.
I don't know a whole lot.
I don't know. You got to ask questions. Everybody has to ask questions, not just of their attorneys, but of themselves. You got to figure out, is this really best for me? Do I really want to do this? Yeah. For my family, for my employees, I always say, you got to consider your family, yourself, actually yourself first, your family next, and then your employees and your customers too. What's best for your customers.
It's a really good point because during the management succession plan, we were talking about like, and I'll just give you a small insight into like, you know, some of these decisions you have to make. It's like, well, who's going to help run the business? Oh, my father and my brother and my wife. Well, they don't know the first thing about running a roofing business. Right. And they really went after talking to him. They're like, no, I don't want to do that. What do you, you know what I mean? I hope I never have to, cause I hope nothing happens to you. But if it did, are my employees going to think, oh, great. You know, his brother's coming into to run this. Right. So who we got. Brandon is just, I mean, first of all, my folks all know him, so they trust him, right? They've met him. They know how successful he's been. And God forbid, man, look, I'm hoping this never comes to fruition, but it just makes way more sense. My wife's on board with it, but the way we set it up, we have somebody who's actually ran the business before a business, a roofing business, successfully exited the same things we want to do that would step in and help us do this. It's important to think about that.
I think that's really important. And I think you have to, you have to think about it. You know, you're going to go out and meet with your estate planning lawyer and he's going to draft a trust or will or a combination of the two for you. And you're going to get everything buttoned up there. And you're going to want to name your family as the people that are going to run your stuff after you're gone. If you're not able to run it yourself. The big question is, does your family really want to run your business? Right. And the answer is probably not. And are they capable of running the business? Probably not. The estate planner doesn't usually get into that level of detail. And that's why, because I do both, I'm into both sides of it. I want to make sure that you're, and you want to make sure I don't care about if you use me or somebody else, you just want to make sure that your estate plan is linked up. to your business plan and vice versa. So that whoever's running the company knows that they're accountable to the family and the fan family knows that they have other people helping them run the business. All these things are all linked up. And how do you do that? There's no cookie cutter approach. If you go onto my website, where the book is discussed, my author website, Wayne zell.com, you'll see an example of a management succession plan. And everybody's welcome to go there. It's free. Download it. Um, I did it mainly for the people that bought my audible version of the book, but the books available in paperback, audible and hardcover and Kindle on, uh, amazon.com. And if you read it and you like it, give us a good review. If you don't like it, don't give us a review.
Where else can they find you, Wayne?
I was just going to ask you like Amazon and then Zell law is our law firm, Z L L L a w it's over that shoulder.com. And lastly, my business exit planning firm. Which really specializes in helping people plan toward the exit is aspire to exit.com. We usually mix the two and Zell law and aspire to exit together, uh, just for ease of administration. But I, I have met, I've made several engagements separate from Zell law because it's just me and it's not. my associates or my paralegals, it's me doing the work. And then I'll bring in team members from the outside to help supplement whatever it is that we need to do to fill in the value gaps, to get you to your successful exit whenever that's going to be. But you got to have an exit date in mind. Very important. If you don't have one, You don't have exit planning covered, got to have an exit date in mind, and they got to back plan from that and figure out what do I need as an individual? What do I need for my family and how do I get there? And that's the roadmap that we try to build, which changes from client to client.
Yeah. That's the first thing you asked us, December 31st, 2026, or before God willing, check out Wayne zell.com. So law, we've got aspire to exit, which. All of that is really why you see the gentleman's book there. So make sure you check the book out. Honestly, that's the thing, man, really check that out. Check it out. Whether it's audible. I know a lot of you guys listen in the car so you can do the audible. Um, but check it out. It's a great book. Check out that examples management succession plan as well. Wayne, thank you so much for coming on guys. Check out the blueprint for wealth podcast too. Cause I'm telling you, I know all of you out there just like me, that is a podcast that if you listen to, you learn a lot. Like that's something that I'm, I'm trying to learn more and be more, uh, I don't know, educated in areas I know on weekend. So if you guys, if you're anything like me, if you're in sales and you know, you're either an entrepreneur, a salesperson, a go getter, these are things and stuff that we need to be listening to. So we can really step up our game. So check out the blueprint to wealth, uh, for wealth podcast as well. Wayne, thank you again, my brother. And I will talk to you very soon.
It's been a pleasure. Thanks a lot for having me on, on your kitchen table.
Yes, sir. Anytime, by the way. I can't wait to bring you back on. But thank you again, Wayne.
If you have specific topics, let me know. We'll get back on. We'll dig into it. I know we will. That's exactly what I was thinking.
And I won't spring them on you either, because that just popped up last night. But we'll flesh that out next time. But thank you so much, my brother. And we will get in specific topics next time and look forward to having you on in the future many more times. Talk to you soon.
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