Jason Watson, CPA, sits down with Bud Rainsberger of RWA Partners in Colorado Springs to discuss the importance of having a well-defined plan for your business investments.
In this first segment about Business Financial Planning, Jason Watson, CPA, sits down with Bud Rainsberger of RWA Partners in Colorado Springs to discuss the importance of having a well-defined plan for your business investments. Topics covered include; when to sell or not sell your business, how much cash are you taking out of the business, and how personal interests can compete with business interests. Special thanks go to Axe and the Oak Distillery for graciously hosting our Bourbon and Business podcast series!
This material is based on content from our website and our book, Taxpayer’s Comprehensive Guide to LLCs and S Corps.
https://wcginc.com/kb/operating-agree...
Thank you!
Warm Regards,
WCG Inc. (formerly Watson CPA Group)
2393 Flying Horse Club Drive
Colorado Springs, CO 80921
719-387-9800 phone
719-345-2100 text message
855-345-9700 fax
https://wcginc.com/
Facebook - https://wcginc.com/facebook
LinkedIn- https://wcginc.com/linkedin
Twitter - https://wcginc.com/twitter
YouTube - https://wcginc.com/youtube
00;00;14;06 [Jason]: Well welcome. My name is Jason Watson with WCG
Incorporated, we're a local tax and accounting firm here in Colorado
Springs. Paired up with Bud Rainsberger, right? Is that your last
00;00;23;29 [Bud]: Correct.
00;00;24;12 [Jason]: Yeah, it's a tough one, I had to practice it. Bud, you are
with RWA Partners.
00;00;30;27 [Bud]: Right.
00;00;31;06 [Jason]: And they are what? An RA, a registered investment advisor
firm.
00;00;34;09 [Bud]: We are RA with the SEC.
00;00;36;06 [Jason]: Yep.
00;00;36;15 [Bud]: Have been since 1990.
00;00;38;06 [Jason]: Great.
00;00;38;19 [Bud]: Yeah.
00;00;39;08 [Jason]: And we are here on our Bourbon and Business tour, if you
will, our podcast tour at Axe and the Oak. Maggie and her
wonderful staff have been gracious to host us here and we thank
you for that. We also thank you for the bourbon on the rocks.
00;00;54;07 It will not be Bourbon and Business without some bourbon. Bud, tell
us a little bit about who you are and what RWA does and you know,
from a business perspective.
00;01;06;12 [Bud]: Sure. Well, we kind of got started, again in 1990s when I
started my firm. I go back to the early eighties, you know, the old
traditional stockbroker kind of guy, young guy, stocks and bonds,
real estate.
00;01;20;20 [Jason]: Making cold calls on the phone.
00;01;21;27 [Bud]: I did actually, I got paid $800 a month for three months. And
then they gave me a desk and a phone and said, you know, good
luck. So I worked hard at that and you know, kind of made a good,
a good living and, and kind of honed my craft for about 7 or 8 years
with a couple of
00;01;38;04 good firms.
00;01;38;23 [Bud]: And then, really with my accounting background, I was really
fascinated with financial planning and portfolio management. So I,
when I started my firm, we went fee only. We really wanted to be
aligned with the client.
00;01;52;13 So no commissions, no sales gimmicks
00;01;55;10 [Jason]: Right.
00;01;55;13 [Bud]: Or anything like that. You know, strictly finding solutions. And
we really started with legal pad financial planning early, you know,
early eighties. It's been awhile.
00;02;06;18 [Jason]: Right.
00;02;07;00 [Bud]: And, and just really kind of grew that side of our practice. So
everything we do today is planning based. It starts out with the plan
and then it helps us figure out how we can help them, whether it's
investment management and some of the other things that
00;02;22;12 we do.
00;02;22;26 [Jason]: Talk about that for a little bit because I believe that's where
most people fail, is failed to plan. Right?
00;02;30;21 [Bud]: Right, plan to fail, fail to plan.
00;02;31;17 [Jason]: Yeah, exactly. And you know, people will tell me, "Hey, I'm
a maxing out my 401K." Right? And I'm like, that's great. What's the
objective? And they're like, what do you mean, "What's the
objective?". I'm like, what's, what's the plan?
00;02;43;00 [Bud]: Right.
00;02;43;11 [Jason]: You know? So, so tell us a little bit about the basics there
and why that's the most critical first step.
00;02;50;04 [Bud]: You, you know, we, we kind of evolved and I think what you
really want to do is get a client to say, "Where do you want to be?"
Right? Where do you want to be today, tomorrow, 10 years at some
point in time? And then what do we had to work with to figure out,
are you there yet?
00;03;04;14 [Jason]: Budget?
00;03;04;25 [Bud]: And you know, so it can help solve for X, Y, Z, and W, right?
How much should I be saving in my retirement plan? Hey, I'm
putting all this money away in a 401K. Well, is it too not, too much
or not enough?
00;03;15;25 [Jason]: Right.
00;03;16;12 [Bud]: You know. Are you a, do you have really big tax issues or
should you take advantage of the Roth when you're young?
00;03;20;25 [Jason]: Right.
00;03;22;01 [Bud]: And then, you know, it helps also start to develop how
aggressive should my investment portfolio be?
00;03;28;17 [Jason]: Right.
00;03;28;29 [Bud]: What tax brackets am I at? You know. Just, it all starts
coming into play. It's as complex as a tax return or as simple as a
tax return.
00;03;36;24 [Jason]: Yep.
00;03;37;09 [Bud]: So for us it really starts learning more about that individual,
which is how we kind of got into more some of that business
planning that you're talking about. And, and, just learning the craft
and how to create solutions.
00;03;50;11 [Jason]: Yeah. And I see that all time too. When I talked to, to
people and say, "Hey, you got to go talk to Bud and his team and
get, get the plan going.". They look at me like, what you mean the
plan? I'm like, well, we're going to, not we, Bud and his team you're
going to
00;04;03;10 develop this plan, this projection. They're going to analyze what you
need, where you are, where you want to be and all that. And if
everybody signs off on it, if I sign off on it as your CPA, Bud signs
off on as your advisor, you, your family sign off on it, then it
becomes the measuring stick.
00;04;20;10 [Jason]: Then we tape that to the refrigerator and say, have we met
our goals? Have we met our objectives? Yes or no? Because just to
throw some cash into a retirement account, boy it's dangerous
because you could either, like you said end up with not enough,
now you're living under a bridge in a box. Right? Or you're 85 years
old with 5 million bucks in a bank and you don't have
00;04;38;10 enough time to spend it, or enjoy, or do with it what you wanted.
00;04;42;14 [Bud]: Well that's kind of, you know, exactly. So in our planning, you
know, process, when we sit down with clients, we're really helping
clients decide, should I renovate the home? Should I remodel the
kitchen? How does that impact? Because typically one of the
clients, the prospects, or whatever we're
00;04;59;16 talking to, is a saver and another's a spender, right? You've never
been there before.
00;05;04;07 [Jason]: Sure.
00;05;04;17 [Bud]: You know, it's like the sardine and the potato chip. But. [both
laugh] But the reality is is you're trying to help them make good
decisions. And so many times like, the one goes, well, if I do the
remodeling, it'll cost 30K or whatever the number is and now we're
not saving enough for
00;05;21;13 money and this causes this friction in the family. So we go, well,
wait a minute, let's see. You're saving X and you're going to go
spend this money and we can show them on the plan it doesn't
change the date of their retirement. Right?
00;05;32;24 And so now we can kind of help them navigate.
00;05;35;02 [Bud]: Oh, so if I finance this for six months at 1.9% and paid off the
remodeling and kept my saving in place because I have cash flow
to do the other, I haven't really changed my financial life very much.
00;05;48;24 [Jason]: And I agree 100% with that. I tell folks all the time, the
worst thing is to have 50 80, 100 Grand in the bank and have no
idea what it's for.
00;05;58;16 [Bud]: Right.
00;05;58;21 [Jason]: It for taxes? Is it for retirement? Can you go do that kitchen
renovation? You know, and, and to have somebody have anxiety,
let's say I do have a 100,000 in the bank, which has a lot of money
and they're afraid of writing
00;06;12;20 a $30,000 check for some new cabinets, they might actually be
right. They can't afford those cabinets, but they might also be able
to afford $50,000 in cabinets, right? So now, we have this anxiety
because of the unknown, right?
00;06;27;01 [Bud]: Right. You know, I'm validating a lot of the things we're trying
to do in life, whether it's the second home, you know, can we really
afford that? And I go, or, you know, should I pay off my mortgage? I
probably, you know, we get that 10 times a week.
00;06;39;28 [Jason]: Sure.
00;06;40;10 [Bud]: And, and we basically say, well, I can give you a lot of
financial reasons why you should or shouldn't. But if that's your
number one goal in life is to be debt free, let's do that.
00;06;49;29 [Jason]: Sure.
00;06;50;05 [Bud]: Let's figure out how to do that and then we can figure out the
rest of it that comes to play.
00;06;53;21 [Jason]: Sure. No, I agree 100% because if you look at it, you know,
just simply, you know, if your rate of return is higher than your cost
of debt, you should never pay off debt, right?
00;07;01;27 [Bud]: Right.
00;07;02;00 [Jason]: That's an oversimplification. But if it makes you feel good, if
it reduces your therapy bills, you know, if it allows you to get a good
night's rest, you can't have a dollar sign on that, you know?
00;07;14;12 [Bud]: Right, right. And you know, the nice thing is we have a
software available that we use today that can actually show the
clients, those who of us who our number, you know, geared
towards the numbers, right?
00;07;23;11 [Jason]: Right.
00;07;23;24 [Bud]: We can go, okay, here's one scenario where you paid off the
debt and then you took some of that in car, that cash flow that you
were using to pay off the debt and you started saving it.
00;07;34;01 [Jason]: Right.
00;07;34;05 [Bud]: And this is what looked like, or what if you kept the date and
saved a little less and then it was paid off in seven years. We can
see the actual number and impact.
00;07;41;14 [Jason]: So you can use scenario A, B, and C, which one do you
like the best?
00;07;45;07 [Bud]: Right.
00;07;45;11 [Jason]: You know, you throw some risk at us, some Monte Carlo
analysis.
00;07;48;06 [Bud]: Bingo.
00;07;48;13 [Jason]: Yeah and then figure it out. So, that's basic financial
planning and all of that that everybody on the planet should do.
00;07;57;20 [Bud]: Right.
00;07;58;04 [Jason]: Tell us how it changes or, or maybe expands or whatever
when it comes to a business owner. This is our Bourbon and
Business tour
00;08;08;07 [Bud]: Right.
00;08;08;12 [Jason]: If you will. So tell me how like, hey Bud that sounds great
and all but what does that mean for me, the business owner?
00;08;15;08 [Bud]: Sure well you know, you always try to separate personal
from business and we know that just never happens, right? So you
know, you might set a truce when you come home at night and
agree not to talk about business, but that doesn't really happen very
often.
00;08;28;03 [Jason]: Do you work with your wife?
00;08;29;00 [Bud]: Oh no. Fortunately.
00;08;30;12 [Jason]: Yeah.
00;08;30;17 [Bud]: But.
00;08;31;02 [Jason]: It's impossible for Tina and I.
00;08;32;08 [Bud]: She has her business, I have my business, we share things,
but not a lot at home at night, that's family time. But, when you sit
down and do a financial plan and you're talking with a business
owner and their spouse, right, it becomes jumbled.
00;08;45;28 It's not easy to separate business and personal.
00;08;48;23 [Jason]: Okay.
00;08;49;12 [Bud]: So really when you're trying to figure out what are my
personal goals, a lot of it is hinging on what happens in the
business. How do I distribute cash and, and, and what happens
over the years as we see a lot of things happening on the business
side because planning means
00;09;03;16 gathering information.
00;09;04;27 [Jason]: Right.
00;09;05;10 [Bud]: And we go, Oh, that's pretty inefficient. Or you know, maybe
have you thought about doing this? You know. So you start going
from arm chair advice to real advice.
00;09;14;03 [Jason]: Okay.
00;09;14;19 [Bud]: And that's how we've gotten to be more of an expert and, on
business. And of course, you know, being a business owner, and
actually having a number of businesses, I have a construction
company with my son Chris.
00;09;27;00 [Jason]: Okay.
00;09;27;11 [Bud]: In Steamboat Springs. And so I know that side of the
business.
00;09;30;17 [Jason]: Well give him a plug. What's his name?
00;09;31;14 [Bud]: His name is Chris Rainsberger.
00;09;32;22 [Jason]: Okay.
00;09;33;05 [Bud]: It's Eagle Mountain Builders.
00;09;34;07 [Jason]: Eagle mountain Builders. Alright.
00;09;35;27 [Bud]: And I really enjoyed that part. And of course, you know, when
you're responsible for paying the bills and you know, hiring and
firing employees and things, you kind of have a different aspect that
I think a lot of advisors who work for a national
00;09;51;04 firm don't get any exposure to that.
00;09;53;25 [Jason]: I agree. I believe, yeah, I would say that being relatable to
the business owner because as a business owner, you come
running to me and you say, Hey Jason, I need that $10 so I can
invest it wisely for you.
00;10;07;05 And I'm like, Bud I need this $10 to build inventory.
00;10;10;29 [Bud]: Right.
00;10;11;03 [Jason]: You know? And most financial advisors will be like, okay, I,
I don't understand your inventory concern. I do understand that
your retirement concerns aren't being met. We need that $10 for,
you know, for your retirement account. A guy like you will come in
and go, Oh, let's look at your ROI, your return
00;10;29;09 on investment on that inventory.
00;10;31;06 [Bud]: Right.
00;10;31;11 [Jason]: Yeah. You know that, and you know, sometimes I would
say you probably have to sacrifice a little bit of longterm goals for
the immediate so then you can meet longterm goals.
00;10;41;17 [Bud]: Right. I mean, many times the best rate of return is on their
investment, right? So I, I can't match that in a 2% interest rate world
today, right?
00;10;50;11 [Bud]: It's just, it's so hard.
00;10;51;13 [Jason]: Yeah, the best rates on their businesses you're saying.
00;10;53;07 [Bud]: Yeah, I mean, you know, so we go why would we take money
out of the business when it's growing at 20 or 30% a year or more,
and do something like, you know, building a tax free bond. Portfolio.
But then by the same token, we can go, Hey, all your risk is over
here in your business. Maybe we need to deleverage the risk over
on your personal side because
00;11;11;18 you're running that thing at 90 miles an hour too.
00;11;14;05 [Jason]: Right.
00;11;14;24 [Bud]: And the two shouldn't be, you know, running at the same
speed. We need to figure out how to kind of put that back in
balance.
00;11;23;00 [Jason]: Yeah, that makes a lot of sense.
00;11;23;09 [Bud]: Because that's really important.
00;11;24;03 [Jason]: I like that because you know, if you're taking everything out
of the business to, to pay for your lifestyle and you're not supporting
your lifestyle with other income producing assets, you are too
leveraged.
00;11;36;00 [Bud]: Yeah. We were talking
00;11;36;27 [Jason]: Or potentially too leveraged.
00;11;37;22 [Bud]: We were talking earlier about some of our Kansas heritage,
right? And so I remember driving in liberal Kansas back in the day
and seeing a bumper stick, that sticker that still, you know, rings to
me, which it says, "Please Lord, let the oil patch come back one
more time. I promise
00;11;53;00 not to piss it off."
00;11;54;01 [Jason]: Right. Right.
00;11;54;13 [Bud]: You know, cause we, you know, sometimes we take all the
money, it's like, you know, doubling down in Vegas, right?
00;11;59;12 [Jason]: Right.
00;11;59;21 [Bud]: But let's take some of that and figure out what we can do
with it over here that has less risk that I can turn to and use when
things maybe aren't so good.
00;12;08;23 [Jason]: No, I agree. Another concern that I have for, for business
owners, and I see this in myself, I'm 47 years old, you know. I'm not
there yet, but exit, I mean nobody gets out of this thing alive, right?
And so we're thinking about exit and you know, on my balance
sheet,
00;12;26;10 personal balance sheet, my biggest asset is my business. And for
most business owners
00;12;30;29 [Bud]: Mine too.
00;12;31;13 [Jason]: Yeah. For most business owners that is going to be true.
We can't have this burgeoning asset that doesn't have an exit
because then that $10 that you wanted that I said, "No, I need to
put that into
00;12;43;15 inventory to grow this asset", that asset's only valuable if it can be
sold
00;12;49;09 [Bud]: Right.
00;12;49;17 [Jason]: Or if it can be leveraged in some fashion
00;12;52;04 [Bud]: Right.
00;12;52;14 [Jason]: Away from you, you know, all that stuff. So that's a big risk
as well.
00;12;56;29 [Bud]: Absolutely. Yeah, and so when you're doing planning, you
know, on the personal side, somebody comes in and says, "Well,
I've got this dental practice and it's worth X.". And you look at it and
you go, well, it's probably about as inefficiently run practice as I've
seen. You can't really tell the client that. But you go, you know, you
really need to do some things to kind of get this
00;13;13;18 baby ready for sale.
00;13;15;16 [Jason]: Right.
00;13;15;19 [Bud]: You know, like we've talked about. Or you have to go, you
know, that million dollar valuation, let's discount that by pick a
number
00;13;23;13 [Jason]: Yeah.
00;13;23;22 [Bud]: 30, 40, 50%.
00;13;24;29 [Jason]: Yeah.
00;13;25;15 [Bud]: To make sure the numbers are right.
00;13;27;04 [Jason]: Especially if it is a Liquidation versus an orderly sale.
00;13;28;12 [Bud]: Absolutely. You know, and we've had, I've been around long
enough, I've had clients pass away in the middle of their, you know,
business careers and owning businesses and trying to untangle
those, you know, um, weaves, webs that they have a woven. So,
you know, it's, it's really trying to take common sense, which seems
to
00;13;47;01 be lacking a lot in part of the world today.
00;13;48;15 [Jason]: Sure.
00;13;48;29 [Bud]: But, and apply it to the things that we do every day.
00;13;51;10 [Jason]: Yeah. Yeah. No, that's, that's tough. So, so kind of shifting
a little bit, you know, you sent me some notes and talk about the
services that you can provide to, to a business owner and I, you
know, I think, I think, you know, financial advisor, planner, all that,
00;14;10;26 it's are very, very watered down terms.
00;14;13;05 [Bud]: Right.
00;14;13;15 [Jason]: Not everybody is the same. I think you're probably one of
the first ones I've met that focuses or has a strong focus on
business owners. So tell me how you go, let's say beyond the
normal, institutional financial
00;14;28;24 advisor and really help a business owner directly.
00;14;32;07 [Bud]: Right. Well I think we just laid a little bit of groundwork, you
know, about having, you know, some practical knowledge and
experience in the area.
00;14;40;17 [Jason]: Yeah.
00;14;40;29 [Bud]: So we, we start out with saying what, what are we trying to
do here? And, in that business, is there extra cashflow? Should we,
you know, do the demographic set themselves up for, you know,
some tweaking of our retirement plan design, so we can pull money
out on a
00;14;56;28 pre tax versus an after tax distribution, right?
00;15;00;02 [Jason]: Right.
00;15;02;02 [Bud]: Do we need to, you know, get the CPA in, in here? Cause a
lot of times when we're sitting down talking about the personal side,
they start sharing with us the fact that they do want to retire
someday, right?
00;15;15;05 [Jason]: Right.
00;15;15;21 [Bud]: When you're a business owner, you're not telling anybody
you're retiring, right? You don't want the word getting out. Because
my dad was 52 years in coaching and he used to say, Hey, when a
coach says he's going to retire in three years, you might as well just
retire cause you're done, right?
00;15;27;27 [Jason]: Right. You're kind of, kind of dead man walking, at that
point a little bit.
00;15;29;20 [Bud]: Yeah, exactly. So I think a lot of times it's the business
owners, once we kind of get into that mode a little bit, we, we
probably should pay attention to help them transition as quickly as
we can, and, and do as great a job as we can. So it's really trying to
figure out from, from our perspective how can help
00;15;47;04 them, leverage their time to take on some of these other tasks,
right? Because we sit there as a business owner and we're putting
out fires every day.
00;15;57;22 We're, we're not working on the business, we're working in the
business.
00;16;01;10 [Jason]: Sure.
00;16;01;16 [Bud]: So being able to delegate some of these items to, to a
relationship that you have a lot of confidence in, I think is one of the
things that we bring to the table.
00;16;11;05 [Jason]: Yeah, I agree. I, somebody asked me the other day, you
know, how have I been able to get out of operations?
00;16;20;20 [Jason]: So full disclosure, I signed 45 tax returns last year.
00;16;25;00 [Bud]: Forty-five more than me.
00;16;25;24 [Jason]: Which is very, very poor, bad performance. I, I Tina should
fire me. If the only metric was how many new tax returns I signed,
but I'm working at 100 hours a week, right? So what am I doing,
right?
00;16;39;08 So I'm doing a lot of other things besides operations and
production. So people have asked me, how'd you do that? How did
you get out of operations? And I tell them, the very first thing you
have to do is give yourself permission.
00;16;50;14 [Bud]: Right.
00;16;51;02 [Jason]: You have to give yourself permission.
00;16;52;08 [Bud]: Dale Carnegie.
00;16;52;10 [Jason]: And say it's okay to do it. And, and I think, you know, your
expertise coming in to a, to a business owner setting and saying it's
okay to let, to pull back a little bit.
00;17;06;18 [Bud]: Right.
00;17;07;04 [Jason]: You know, and not have to touch everything that walks out
of the door. And help that transition, you know, away from the
business.
00;17;14;09 [Bud]: I think, you know, for me over time I've, I've learned and I
think gained enough experience to be able to talk with presidents
and CEOs and so forth in a common sensical, but this is what really
you should think about doing.
00;17;29;12 [Jason]: Yeah.
00;17;29;21 [Bud]: I think when you're younger in your career you don't have
enough information or knowledge. You don't upset the Apple cart,
right? The client's right all the time.
00;17;37;11 [Jason]: Right.
00;17;37;14 [Bud]: You know, it's like the King is not wearing any clothes but
everybody goes, Oh, that looks wonderful on you today, sir.
00;17;42;21 [Jason]: Right.
00;17;43;05 [Bud]: And yet at the same time, I think, you know, a lot of us in our
roles are looking for how do I have a relationship with somebody
who will tell me I think you should really do X, not Y.
00;17;52;04 [Jason]: Right.
00;17;52;09 [Bud]: Or have you thought about going at it this way or you know,
maybe we need to really focus in on hiring your replacement, right?
00;18;00;11 [Jason]: Yeah.
00;18;00;18 [Bud]: And so I have been able to do that in a number of instances
where we were, were able to help them not only prepare for their
own retirement, help the company get ready for sale because who
ever was going to acquire in, in this case, this business, they
wanted an experienced management team in place.
00;18;15;05 [Jason]: Sure.
00;18;15;13 [Bud]: To run it.
00;18;15;22 [Jason]: An assembled workforce.
00;18;17;01 [Bud]: Right. And if you don't have that, you're not going to get full
value.
00;18;20;05 [Jason]: No. Absolutely. I mean
00;18;21;08 [Bud]: So it's just kind of learning like you have, you spend your day
probably doing a lot of overlap to the things that we do.
00;18;26;20 [Jason]: Yeah. No. For sure. You know, that is what I tell business
owners all the time. The first thing to do is give yourself, you know,
authorization, permission to get out of operations, get out of your
own way, you know, get that assembled workforce
00;18;40;19 [Bud]: Right.
00;18;40;23 [Jason]: Into place. You know, I'm out of operations not because
we're looking to sell WCG anytime soon, but just because I have
other tasks.
00;18;50;06 [Bud]: Right.
00;18;50;15 [Jason]: And, and sitting down and people like yourself doing these
podcasts, helping our viewers and listeners learn about some of the
things that we can do beyond just normal tax returns.
00;18;58;04 [Bud]: Right.
00;18;58;15 [Jason]: Is a lot of my day. I see when people come to me and say,
Hey, I'm thinking about selling my business. You know, the very first
thing I say, you know, like, is it timing right? You know, I see far too
often business owners selling quickly, and they
00;19;16;18 want the quick buck. You know, they see this big check that it can
be dangled in front of them and they, it just, it just instant wealth in
their mind, right? But I'm like, but at your burn rate, at your, you
know, cash burn rate,
00;19;30;03 you're not gonna be able to survive very long.
00;19;32;04 [Bud]: Right.
00;19;33;28 [Jason]: And another thing with that is, I see a lot of business
owners kind of neglect how they can leverage their business.
00;19;39;22 [Bud]: Right.
00;19;40;12 [Jason]: You know, when you know times are hard, you can go work
a little harder, you can go close more deals, you know. Hey, you
bought that second home and now you know, you're kind of feeling
00;19;53;01 some cash crunch, you put in some longer hours, right? When you
sell your business there is no more longer hours.
00;20;00;00 [Bud]: Right.
00;20;00;04 [Jason]: You can't create the piggy bank or you can't make the
piggybank swell.
00;20;03;20 [Bud]: Right.
00;20;03;24 [Jason]: Do you see that as well?
00;20;04;17 [Bud]: Yeah, a, a lot. And we try to help them with kind of a "Come
to Jesus" type of environment where it's like, Hey, hey, Bud I got
this offer to sell my business for $2 million. Man, that's great, right?
What am I going to keep on an after tax basis?
00;20;18;11 [Bud]: Pick a number, 1,500,000 whatever, right?
00;20;20;13 [Jason]: Sure.
00;20;21;19 [Bud]: Okay, so we're going to invest that in a 2% world, right?
00;20;24;25 [Jason]: Sure.
00;20;25;07 [Bud]: So I can.
00;20;25;19 [Jason]: Low risk.
00;20;26;09 [Bud]: Get 2% in tax free bonds and I put half of that in bonds, and I
put some in stocks, and I buy some income producing real estate.
So I'm getting about a 4% return, income wise.
00;20;36;01 [Jason]: Yeah, 60 Grand a year.
00;20;37;23 [Bud]: On a 1.5, yeah 60 grand a year. And I go, what do you need?
And he goes, well I need 220 cause that's what I'm pulling out of
the business. And I go, you shouldn't sell that business cause you
can't afford to do that.
00;20;45;29 [Jason]: Right.
00;20;46;03 [Bud]: But you know, I'm tired and I don't have the passion or the
energy that I really need. And I go, well we need to hire somebody
to take a lot of the, you know, off your shoulders and
00;20;56;19 [Jason]: What's wrong with your, people talk about passive income
all the time. They talk about recurring revenues all the time. Your
business can still do that without you in operations.
00;21;08;23 [Bud]: Right.
00;21;09;00 [Jason]: Give yourself permission to leave operations, hire that
assembled workforce.
00;21;13;12 [Bud]: Right.
00;21;13;26 [Jason]: And now your business is your passive investment.
00;21;15;29 [Bud]: You know.
00;21;16;08 [Jason]: You don't need rentals now.
00;21;17;27 [Bud]: No, well you know
00;21;18;24 [Jason]: And you could but
00;21;20;10 [Bud]: It's nice to have some. I've always, you know, we tried to
start helping our clients build income producing portfolios in their
early fifties right? Because by the time they're ready for retirement,
you know, they've got a stream of income from their investments
that doesn't include the sale of their practice.
00;21;33;02 [Jason]: Right.
00;21;33;04 [Bud]: So we can, you know, it makes it a lot easier to transition
when you've got enough set aside to do it.
00;21;37;20 [Jason]: Yeah. No. For sure.
00;21;38;17 [Bud]: And it's a decision then based on when you're ready instead
of having to.
00;21;43;09 [Jason]: There is some challenges because certain businesses can
outgrow themselves to the point where they can't be sold very
easily.
00;21;51;04 [Bud]: Right.
00;21;51;22 [Jason]: Or your buyer pool is super tiny. And looking at CPA firms,
you know, the sweet spot is that 500,000 to $800,000 firm. You
started talking about it at 8, 9, $10 million firm, your only suitors
00;22;05;21 are firms in Denver.
00;22;08;03 [Bud]: Big 5.
00;22;08;19 [Jason]: Yeah. You know, and they might not want you, they might
not like your model or fit or feel like they, that you fit into their
portfolio of a revenue. So if you do have someone that comes
along, maybe it's five years too early, but someone does come
along and says, Hey, I want this whole thing.
00;22;23;13 Is it for sale? That's tough because
00;22;26;13 [Bud]: Well we went through that with a client in Illinois, you know,
Chicago. He has a, paper box company, you know, and
00;22;34;14 [Jason]: Good ole midwestern company.
00;22;35;04 [Bud]: And competition's getting. Yeah, you know, getting stiffer
and he's made some major investments and things are going really,
really well. And a company that is a keen competitor of his, came to
him and said, we want to buy you, you know.
00;22;46;15 And he goes, if I don't sell now, I could be out of business in five
years.
00;22;50;23 [Jason]: Sure.
00;22;51;07 [Bud]: You know, for a variety of reasons.
00;22;53;04 [Jason]: Yeah.
00;22;54;00 [Bud]: And he said, I'm probably not gonna like this, because I'm
going to have to go work for somebody else.
00;22;59;22 [Jason]: Yeah.
00;22;59;28 [Bud]: And he goes, my memory of that was not very good.
00;23;03;12 [Bud]: But in the end
00;23;04;23 [Jason]: Did he eventually sell?
00;23;05;01 [Bud]: He ended up selling.
00;23;06;03 [Jason]: Yeah.
00;23;06;15 [Bud]: You know, and we helped him, you know, negotiate I think
the best deal he could have gotten.
00;23;11;29 [Jason]: Yeah.
00;23;12;13 [Bud]: You know, making sure we, you know, had accounts
receivable including and who is going to make the payments on all
the real estate, you know, those kinds of things.
00;23;20;08 [Jason]: Yeah.
00;23;20;23 [Bud]: I think, you know, he could've gotten that from his accounting
or what a relationship, but he just didn't have that type of
relationship.
00;23;27;00 [Jason]: Yeah. No. It's great. I mean, guys like you and I have to
work together. I can tell you how the books look, I can tell you what
the discretionary cash is going to look like. I can tell you about all
the tax implications and all that. But you got to throw it at the
budget. You got to throw it at their lifestyle. You got to throw it at
their objectives.
00;23;41;27 [Bud]: Right.
00;23;42;02 [Jason]: You know, and it, and everyone's got different legacies.
Some people want their check to the mortician to bounce. Some
people want to leave a million bucks behind for their church,
whatever. Everyone runs the gamut on that.
00;23;52;27 [Bud]: Absolutely. And you know, we, we tried to accommodate, we
at least show them what that looks like if they did that.
00;23;58;15 [Jason]: Sure.
00;23;58;29 [Bud]: And, and sometimes the plan works and sometimes the plan
doesn't.
00;24;03;03 [Jason]: Right.
00;24;03;15 [Bud]: According to what they want. And so we go, well these are
the tweaks that you can make that will allow you to get there, right?
00;24;10;04 [Jason]: Right.
00;24;10;16 [Bud]: It could be spend a little less, save a little more.
00;24;13;13 [Bud]: It can be work a little longer. It could be, you know, you tithe
to the church at death instead of during the career to some extent.
There just a lot of different ways that you can kind of craft a plan
that will get them there that doesn't look like the path they're on
today.
00;24;28;01 [Jason]: Yeah. No. For sure. Well thank you for joining us. We're
going to be coming back here in a few minutes, in another video
and podcast on business selling, selling your business, what's that
mean, and
00;24;42;04 all that good stuff. My name is Jason Watson with WCG Inc a local
tax and accounting firm here in Colorado Springs here with Bud
Rainsberger of RWA Partners.
00;24;51;27 [Bud]: Thank you. We're hosted by Axe and the Oak. They've been
wonderful enough to open up their bar and give us some bourbon
for our Bourbon and Business tour for our, our podcasts and our
videos. So thank you. And we'll talk to you real soon.