Ep 216: From Job to Asset: Transform Your Business Mindset

This is episode number 216 of the weekly wealth podcast, and we are talking to the business owners today.

I recently had the opportunity to speak to our local downtown merchant association about some of the financial issues that business owners deal with, and I'm going to share some of those thoughts with you today.

So if you're not a business owner, make sure to pass this episode along to your business owner friends.

All right, here we go.

Hope that you enjoy this episode.

Welcome to the weekly wealth podcast.

I am certified financial planner David Chudick.

This podcast and my wealth management practice are both designed to help the mass affluent to live better lives by how they handle their money.

We talk about financial strategies, prosperous mindsets, and simply how to build true wealth.

So come on and let's enjoy this journey together.

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All right, so let's get into this episode.

I was asked about a month ago to put together a presentation and talk to our local downtown business merchants association about just some of the financial solutions and financial issues that small business owners deal with.

So, as you know, I am a small business owner.

I love small business owners.

Small business owners take risks.

Small business owners sometimes have great rewards.

Sometimes they don't have great or any rewards.

And you.

Yeah, they can be totally overwhelmed and they have to know a lot of things over and above their trade.

So I love working with business owners, and today we're gonna talk about some of the things that they worry about and some possible solutions for them.

Now, let's start off with my core belief, and this is something that you'll hear me talk about literally every podcast episode, and that's that I believe that how we handle our money should positively impact our lives and the lives of those around us.

Now, if we take that to the next step with business owners, I believe that our businesses should be tools and vehicles to help us and those around us to live great, great lives.

Now, part of living a great life involves financial freedom, right?

Because many things in life cost money.

But then there's also freedom of time, there's freedom of decision making.

So your business should provide a lot of freedom for You.

Now, if you're not purposeful with your business, and if you don't have processes and procedures, and if you let things happen by default, the business can actually be the opposite, and it can literally take all of your freedom away.

Okay, so core belief.

I believe that how we handle our money should positively impact our lives and our lives of those around us.

And then secondarily, for the business owners, our businesses should be tools.

Our businesses should be vehicles that take us and everybody that we care about towards an amazing.

Now, if you're a business owner, tell me if this might describe some of your days.

So some days are really fun.

They're really awesome.

For me, there are some times where extra revenue hits the bank.

There are things that I love doing.

Like, I really, really enjoy podcasting.

It's something that I've.

I've given myself the freedom to do.

I put a lot of work into it, but it gives me fulfillment and joy.

I enjoy when a client, they get in a better position because they take my advice and I can see, like, the tangible results.

I love working with my team, and I even love seeing when my team gets bigger paychecks.

That's something that really gets me going.

So those are some of the fun days that I have as a business owner now, some of the not so fun days, because in a lot of ways, a small business doesn't really have a help desk, right?

Some days you just end up fixing problem after problem.

And when your name's on the sign, you're kind of the last resort.

You may have a customer complaint.

There may be times where cash flow is tight.

There may be times that, you know, there are some bills coming up and maybe your accounts receivable is a little bit behind and there's a little bit of financial stress.

I mean, what happens if the toilet gets clogged?

Who fixes that?

Who do you call?

Who's a good plumber?

Do you have to figure it out yourself?

You know, we don't have a facilities department at our office, so we have to deal with if there is any mechanical.

If there are any mechanical issues.

And then, you know, people, problems.

We're dealing with people in our businesses, our team, our customers.

And people, even at their best, can be mysterious.

Communication at its best is very imperfect.

So have you ever sent maybe an email or a teams message to somebody or received an email or a text or a teams message and you totally misunderstood it?

You're thinking, man, this person just is being sarcastic or they're being blunt or anything like that, and it's really just the fact that it's written word and it's, it's not you.

You didn't see any of the non verbal communications.

So communication can be a challenge in small business.

So those are some of the things that business owners deal with.

And in addition to that, business owners have to deal with their personal financial issues.

So with regard to personal financial issues, business owners need to deal with the same thing that non business owners do.

And I can summarize those as the basics.

And I've talked about these before on the podcast, but let's run through them pretty quickly.

So business owners have to deal with B for basics, and that's budget, or you can call it a spending plan or whatever term that you like better.

But that simply means that the business owner has to spend on their personal side less than what they're bringing in.

They have to spend the appropriate amount of money on stuff for their financial reality.

Now what complicates this is oftentimes their income coming from the business can be uneven.

So if you have a job with a salary, you know how much money is coming into your personal life every two weeks.

If you're a business owner, it may not be that simple.

So you have to coordinate the two.

So within the basics, we have A, which is for allocation, and that's where should the business owner's money be invested?

Should they own stocks and bonds and real estate and cryptocurrency and all those things?

And these can be really complicated scenarios.

But the business owner needs to deal with this on their personal side.

Now the business owner also needs financial systems.

Those could be anything from paying down debt periodically to having a weekly meeting with your spouse about money issues and things like that.

But we are all just really a compilation of our habits.

So business owners, just like individuals, need to put together wise financial habits.

Now the I in basics is insurance.

And really insurance simply protects your money, nothing more, nothing less.

So you have to ask yourself, where does it make sense to transfer risk, which means buy an insurance policy?

And where does it make sense to retain risk, which means pay for things yourself?

And that's where you need a good relationship with a local insurance agency.

The C in basics is caring.

You hear me talk about caring and making the world a better place all the time.

So how are we, how are you making the world a better place?

By how you use your money?

And then finally the S in Basics is support.

So what sort of support do you need?

Is that simply an accountability partner?

Is it working closely with your, with Your family?

Is it cpa?

Is it a financial advisor like myself?

Is it listening to podcasts as an attorney?

But what sort of support do you need?

So business owners have the same personal financial considerations as anybody else, but then they also have to make financial decisions for their business.

Now, one of the financial decisions that business owners need to make is are they going to implement a group retirement plan?

Now, there are several reasons that you might consider implementing a group retirement plan, one of which would make it just easy to systematically save for yourself and your own retirement.

The other one would be that it helps you to retain and attract good talent.

So if you're interested in some more of these 30,000 foot details on different types of retirement plans, email me davidarallelfinancial.com but I'm going to talk just about some of the common types of retirement plans from a very, very high level.

So the simplest of all of them is called a simple plan.

And this is a savings incentive match plans for employees.

Basically, you would help your employees to open up simple IRA accounts and then they would have deductions from their paycheck and you would be obligated to either make a 2% blanket contribution of their paycheck or match up to 3% of their paycheck.

So the simple is relatively inexpensive and there's relatively low amount of administrative and paperwork burden.

Now, you could also consider a SEP ira, and that's a simplified employee pension.

But then you have to put in the same percentage of money for everybody.

So if the owner says, hey, we had a great year, I'm going to contribute 15% of my annual pay to my SEP IRA, well then they'd have to put 15% into everybody's accounts.

So that could get costly.

It's a great deal if you can get it on the employee side, but it certainly can get expensive on the employer side.

Now, after that you have 401k plans.

Now, these are more flexible.

There are a lot of different ways that these can be structured to benefit different classes of employees, but they do have additional costs.

So you're typically having to get a third party administrator involved.

And there also is some ERISA reporting.

So There's a Form 5500 that needs to be filed every year.

And that's something that you probably don't want to do yourself.

And then if you're a solo practitioner, you might consider a solo 401k.

Now, as a solo practitioner, you wear two hats.

You wear the hat of the employee and you wear the hat of the employer.

So the 401k allows you the solo 401k allows you to make contributions on both end on your own behalf as an employee and then on behalf of the company as far as a contribution there.

Now, one thing that a lot of business owners might be smart to consider is to work with a peo.

And a PEO is a professional employer organization and it's a co employment model.

So the PEO handles hr, payroll, benefits, things like that.

And these are honestly things that most of your local Main street business owners are not experts at.

Right, because they don't have a human resources department.

But if you're working with a peo, then you by default will have a human resource department.

Now, peos, they pool their resources and they pull the law of large numbers and they can typically access better rates for insurance and benefits.

So if you're interested and wanted to learn more about the PEO model, I do have an introduction or two that I can make for you.

But peos are a way for small business owners to have some of the resources that large corporations might have.

If you're thinking potentially about terminating an employee, a PEO will provide guidance to help you to make sure that you're minimizing your chance of litigation and those sorts of things.

So peo, professional employer organization can be a great option for you.

And I could potentially point you in the right direction for one of those.

Now, as a business owner, I would love for you to not think about your business as a job.

I would like for you to think about your business as an asset, okay.

And think about growing your asset and making it more attractive to a buyer.

Now, you might not be wanting to sell your business at this point, but that's okay.

But we want to be building a business that ultimately can be sellable.

And a sellable business is a more profitable business.

So did you know that there are eight drivers of business value?

And if we get these moving in the right direction, our businesses can become easier to operate and more profitable.

So a couple of the drivers of value is recurring revenue.

So think about this.

I bet if you looked at your credit card statement and your debit card statement, there may be some recurring charges, maybe Netflix, maybe a car wash, maybe a gym.

And every month you are paying that company a fee.

So what does that do for the company?

It gives them the ability to have a predictable source of revenue.

Okay, so let's think about, are there some ways that your business can potentially add in a recurring revenue model?

We do have an ebook called the Subscription Economy.

Nine subscription models that any business can adopt and you can get your free copy of it by going to www.weeklywealthpodcast.com subscription economy so go to www.weeklywealthpodcast.Com subscription economy and get your copy of the subscription of the Subscription Economy.

Nine Subscription Models that Any Business Can Adopt so subscription models aren't just for tech giants or trendy startups.

From carpet cleaners that make life easier for busy homeowners to artists revolutionizing education with on demand tutorials, subscription models are reshaping industries.

So that's one of the eight drivers of business value.

Be on the lookout for an upcoming webinar that we're going to dive deeper into how you can potentially make your business more subscription based, which can give you some more predictable, predictable and larger amounts of revenue.

Now there are some other of the eight drivers of value.

We'll touch on those in other podcasts.

One of them is the Hub and spoke and that basically talks about how involved is the business owner in all aspects of the business.

Does a business owner have to have his or her hand in everything?

And if so, that simply lowers the value of the business because the business owner is just one person.

And also if I'm buying your business, I don't want to buy a business where customers were constantly just speaking with you.

I want to buy a business where you were not needed essentially for day to day operations because if customers were relying on the owner and then once the owner leaves, those customers may not be coming back.

Alright, so be on the lookout for some webinars we have coming up.

We really want to provide some value to the business owners of the world and help them to make their businesses more sellable and honestly just make them a little bit more stress free.

But we do want to have a mindset shift and stop referring to your business as a job or stop referring to your business as I'm going to work today.

And let's start thinking about you are the owner of an asset and the asset is the business and how are you going to maximize that asset?

All right, so would be really interested to know what are some of your challenges on the financial end as a business owner?

Do you find it difficult to navigate uneven cash flows?

Do you find it difficult to provide the right compensation structure for your team?

Do you find it difficult just to simply manage two sets of finances, your own personal finances and your business finances?

I'm here to help, so email me davidarallelfinancial.com and if you ever wanted to set a 30 minute appointment.

We can talk about some of your issues and we can point you in the right direction.

So that being said, love this podcast.

I love our audience.

Please share it with your business owner friends and until next episode, I wish everybody a blessed week.

Thanks everybody.

Oh and hey, before I forget, if you've been watching the stock markets, you've seen the ups, you've seen the downs, you've seen the volatility.

If any of this is really concerning to you, email me davidarallelfinancial.com and let's set a time and let's talk about it.

Let's make sure that you are taking the right amount of risk for your personal financial situation.

We don't want you taking too much risk, but we also don't want you taking not enough risk.

And we can also see if you have your monies divided up in different buckets in a way that is appropriate for you.

So davidarallelfinancial.com or you can even just go to my calendly link www.calendly.com davidpf and the PF is for parallel Financial.

Alright, that'll do it.

See you next time.

Investment Advice Offered through Parallel Financial An SEC registered investment advisor able to conduct advisory business in states where it is registered or exempt or excluded from registration contents contained herein or for informational purposes only and should not be construed as an offer or solicitation for investment advice or for the purchase or sale of any security, insurance or other investment product.