Changing The Industry Podcast

David Roman [00:00:00]:
That was not very demure.

Lucas Underwood [00:00:02]:
Demure?

David Roman [00:00:09]:
The. This lady from Connecticut made a whole video using Gen Z lingo. So a Sigma.

Lucas Underwood [00:00:19]:
That is awesome.

Derick Van Ness [00:00:22]:
I've watched a couple of those. They're pretty funny.

Lucas Underwood [00:00:26]:
I just don't have it in me. Derek.

Derick Van Ness [00:00:29]:
Yes, sir.

Lucas Underwood [00:00:30]:
What is going to happen to the economy?

David Roman [00:00:34]:
No, you need a better introduction. I don't think you introduced Scott Hicks either.

Lucas Underwood [00:00:41]:
You know what I think to do, Andrew? I've got this strategy, okay? And this really cool strategy. I'm not going to introduce anybody, and I'm going to make David start doing voiceovers, introducing our guests.

David Roman [00:00:52]:
No, I don't. I don't want to do that again. We're not doing that again. That's more work. You're gonna hit the camera. I haven't looked at the video either. Me kicking the camera the entire show.

Lucas Underwood [00:01:05]:
We were at a show a while back, and, like, dude just keeps, like, kicking it over and over again. I'm like, what are you doing?

David Roman [00:01:09]:
I was just fidgeting, and I kept smacking the camera. And the camera's doing this all the time. It's fine.

Lucas Underwood [00:01:16]:
Okay. He didn't like my introduction. Derek, introduce yourself, brother.

Derick Van Ness [00:01:21]:
Derek Van Ness with Big Life Financial. We do tax and financial strategy for shop owners and help people to keep more of the money they make and be smarter with it. Nice. In a nutshell, very cool.

David Roman [00:01:34]:
You don't just tell everybody to pay their fair share, send more money to the government.

Derick Van Ness [00:01:39]:
No, no. I feel like shop owners do a lot better with their own money than the government does. Just me.

Lucas Underwood [00:01:46]:
David, do you do a lot better with your own money than the government?

David Roman [00:01:48]:
You know what Bill Gates said?

Lucas Underwood [00:01:49]:
What?

David Roman [00:01:50]:
He said, if he was in charge of taxes, he would have paid more.

Lucas Underwood [00:01:57]:
You know what one Warren Buffett says, right? It's like, I don't like paying taxes. It's just part of the game. But my job is to make sure I pay as little as I possibly can because my shareholders appreciate that.

David Roman [00:02:09]:
I don't think he realizes you can just write a check to the government if you want to. Just send them money.

Lucas Underwood [00:02:16]:
Hey, I'm going to tell you something about that. If you accidentally overpay them, they don't even say thank you, and they definitely don't give it back.

David Roman [00:02:25]:
That's what the refund is, Overpaying.

Lucas Underwood [00:02:28]:
Yeah, but if it's like, something else, you accidentally overpay on sales tax. Yeah, I mean, like, it's a. It's a thing.

David Roman [00:02:35]:
No, they don't. They don't say anything. You. It is jumping through hoops to get them to refund you. Yeah, I know there's companies open yourself.

Derick Van Ness [00:02:45]:
Up that do that. Like sales. Sales tax audits, where they come in on your behalf and they audit your stuff and make sure if you've been overpaying that you get that money back.

Lucas Underwood [00:02:55]:
Really.

Derick Van Ness [00:02:56]:
But it's.

David Roman [00:02:57]:
Does that happen a lot, do you think?

Derick Van Ness [00:03:00]:
You know, it's not something we really focus on for a lot of our folks, but they have said that they pretty consistently are able to find decent chunks of money for people.

David Roman [00:03:09]:
It has to be a very specific kind of industry.

Derick Van Ness [00:03:12]:
Yeah.

David Roman [00:03:12]:
That they're like, there's rounding errors here that we can dig into, and there's enough transactions that we're going to be able to find some money.

Lucas Underwood [00:03:19]:
You know, there's our accountant, when we started going through this stuff with the family business, he said. And he's actually on the board of directors for that business. And he said, I'm 50. 50 on whether we hire a forensic accountant to come back and start looking for the numbers. And so he has a. He has a friend who is a forensic accountant. And we interviewed and talked with him, and it was really neat because I just started asking questions. And he said.

Lucas Underwood [00:03:48]:
He said, for instance, Belt Corporation, he said, we went to work for them and said that they had a situation where they had overpaid things. He said, we went to them, we had an agreement. I just want 50% of whatever I get back. And he said, we made for and a half million dollars. And I'm like, do what? You can accidentally overpay $4 million in something. $8 million.

David Roman [00:04:12]:
Right.

Lucas Underwood [00:04:12]:
Like, holy.

David Roman [00:04:13]:
You're doing 200 million a year?

Lucas Underwood [00:04:15]:
Like, yeah, just a couple mills missing.

David Roman [00:04:18]:
A couple mills here and there.

Derick Van Ness [00:04:20]:
Well, that's the thing. I mean, people don't always realize. It's. It's. Everyone's looking for the silver bullet, right. Like that one huge thing. But it's usually a bunch of small things, right. Like tax strategy.

Derick Van Ness [00:04:31]:
It's a bunch of 5,000 here, 10,000 there. It adds up to 50, $100,000 a year, whatever, depending on the size of the shop and what people are paying. Investments. It's the same thing. It's not losing quite as much. It's growing a little more. It's keeping it a little safer. It's tax efficiency, you know, optimizing your taxes.

Derick Van Ness [00:04:51]:
And over time, enough money runs through a shop owner's hands that if you can just shave off pieces of that over and over and over and put them in your pocket it adds a lot to the.

Lucas Underwood [00:05:02]:
I could see that.

Derick Van Ness [00:05:03]:
Yeah, like that's a, that's a big part of our game is just identifying all those little things that add up.

Lucas Underwood [00:05:08]:
So, so like you come into the shop and tell me about like what that looks like. What's the strategy when you come into a shop?

Derick Van Ness [00:05:15]:
It kind of depends on the person. Right. I don't want to come in like bull in a china shop. If they love their financial guy, if they love their tax person, if they love their insurance people or their, their business coach or whatever. We want to work with the people that are working for them. But we also want to look at, is it working right? Sometimes it's like, hey, this is my buddy, he was a roommate from college. And then they have to kind of decide what they want to do. But we usually start with taxes because it's like the low hanging fruit.

Derick Van Ness [00:05:44]:
We can come in. We do like a three year tax audit for them. We go back through, we look at like, what are some of the things you could have done and what didn't you do and how much more could you have saved? And we can't see everything. Like could they have bought some different equipment? Could they. But based on what they did, file, did they miss some things? And usually there's, there's a bunch of little things that consistently get missed that are, that are worth some, some good pennies.

Lucas Underwood [00:06:10]:
I'm feeling a little self conscious now. I've never made enough money that I had to worry about it.

Derick Van Ness [00:06:16]:
Yeah.

David Roman [00:06:16]:
I don't know who you talking to?

Lucas Underwood [00:06:19]:
What in the world?

Derick Van Ness [00:06:21]:
Well, there's a lot of shop owners out there who make 300,000 to a million.

Lucas Underwood [00:06:29]:
Yeah.

Derick Van Ness [00:06:30]:
You know, and so we're really profit and profit. Yeah, yeah. Like taxable income. Even after their Mike deduction and everything.

Lucas Underwood [00:06:39]:
Mike Allen's pretty much just come back, man.

David Roman [00:06:42]:
They need to start sharing some of that.

Lucas Underwood [00:06:44]:
Just pass the wealth around.

David Roman [00:06:47]:
If I could just force or have the government do it for me, just make them force him to give me some of that money, that'd be great.

Derick Van Ness [00:06:55]:
Yeah. They have a system for that.

Lucas Underwood [00:06:57]:
Yeah, I know, right?

David Roman [00:06:59]:
They're working on it. We'll see what happens.

Lucas Underwood [00:07:05]:
Well, I mean, so tax evaluation is step one.

Derick Van Ness [00:07:10]:
Yeah, yeah.

Lucas Underwood [00:07:11]:
And make sure there's nothing missing. Like what's the biggest thing that gets missed most often?

Derick Van Ness [00:07:18]:
Probably the single biggest thing. There's two things consistently. For a lot of years we've been doing research and development credits for shop owners. And so most of them miss those. I just got one back an Assessment for a good sized shop, you know, but he's going to get 32 grand back for that particular year. That's a big one.

David Roman [00:07:37]:
How are you writing off R and.

Derick Van Ness [00:07:39]:
D stuff like so the easy way to say it is, it's not a write off, it's a credit. So R and D, anytime you're bringing in new systems or new ways to do diagnostics or upgrading what you're doing for your, for your shop to get better results, then the wages you're paying your people and all the time and figuring it out. And sometimes you try something, I mean we've all tried a piece of software, right. And it doesn't work and it blows up and it takes two months and finally we do something else or a new piece of equipment, new way of going about something. It takes a while to kind of get it figured out and optimized. But all the man hours that go into figuring out should we get this new piece of equipment, once we get it, how do we use it, how do we make it efficient, how do we get the best results for our clients to make sure that it's working well and accurate, all those hours, do.

Lucas Underwood [00:08:30]:
They have to track that?

Derick Van Ness [00:08:32]:
No, not, not really.

David Roman [00:08:35]:
Yeah, I guess you could get Lucy Goosey on that. But my question would be what, what stops the IRS from coming back and going, no, this is normal business operation.

Derick Van Ness [00:08:48]:
Right. Well, anytime you're. So here's the rule. It's called the four part test. Right. So there's four categories. So are you looking to improve a product or process? Right. So shops are a service business, so it's usually a process.

Derick Van Ness [00:09:03]:
Not very many of them are making products. Right. Is it a, is it based in science? So specifically they define science as physical science, chemistry, engineering or biology. So a lot of this is for shops. Is like engineering or computer science related? Right. Is there a process of experimentation? Right. Like is this something that you don't already know works? Like if you buy a widget and then resell a widget, there's no real risk there, so that doesn't really matter. And the fourth one is escaping me for the moment.

Derick Van Ness [00:09:45]:
That's the one I always forget it's really related to. Is it a product or process? But essentially you're doing new things and they're based in science. You're probably accruing credits because the government knows when you try new stuff, it doesn't always work out.

David Roman [00:10:00]:
No.

Derick Van Ness [00:10:00]:
And so they don't want people to stop trying new stuff. And let's. It's not like they're giving you dollar for dollar credits back. You're getting like a couple of percentage points on those dollars.

David Roman [00:10:10]:
Sure.

Derick Van Ness [00:10:11]:
But most of the wages you're paying your guys to figure out new stuff or the owners paying themselves to go out and research and figure it out, because, you know, as an owner, you're always looking at tons of new stuff.

Lucas Underwood [00:10:19]:
Yeah, yeah.

Derick Van Ness [00:10:20]:
Like even with this podcast, you guys are like, oh, should we get new microphones? Should we try different camera setups? What about lighting? How do we make all this work? We got to do marketing and all these things. Right. And some of those are going to check the boxes and you'll get some credits for some of those. And when you have enough money running through a shop, and I would say this starts to apply for shops that are maybe 5, 600,000 of revenue and above, then there's enough money there that it starts to become 5, 6, $7,000 plus per year for shops that are continuing to try new stuff.

David Roman [00:10:52]:
Right.

Derick Van Ness [00:10:53]:
A guy and his son in the shop, in a garage, not doing anything new. Probably not.

David Roman [00:10:57]:
Yeah.

Derick Van Ness [00:10:58]:
But a lot of the shops, especially shops that come to events, right, they're learning new stuff. They're learning how to work on electric vehicles, they're learning new approaches, different ways to streamline all the software and tie it all together like it's, it's a business. Right. So those, those accrue credits for them. And so we do the. To answer your question, how do you, how do you keep them from coming back? So we fill out a questionnaire that is all the different projects they did. And we check out, you know, this is how this checks the boxes for this project. And then ultimately our, our CPA is the one that signs off on it and kind of determines what really counts and what doesn't.

David Roman [00:11:36]:
Yeah, makes sense.

Lucas Underwood [00:11:38]:
Yeah, for sure. And, and so what's the next biggest thing? Because you said there are a couple.

Derick Van Ness [00:11:43]:
Yeah. Another one that a lot of people missed last year is if you're in a state that has sales tax, there's something called, they call it the SALT tax, but it stands for state and local tax. And if you paid your state tax before the end of the year, then it becomes a write off for your federal taxes.

David Roman [00:11:59]:
So they're trying to take that away.

Derick Van Ness [00:12:01]:
Yeah, I think they're trying to put limitations on it because these huge companies, especially in California, New York, they're paying tens of millions of dollars in state taxes and that becomes a federal write off. But like for, for a regular guy, he's in a state that has 5% tax. And he, you know, he makes 500,000 bucks taxable or whatever, he's going to pay 25 grand in state tax. But that if, if he makes that much money federally, he's in, you know, 35% tax bracket. So it might save him 6, 7, $8,000 in federal taxes to be able to write that off. And that really, two years ago, some of the states did it. But last year was the first year all the states had that effective.

Lucas Underwood [00:12:44]:
So smile and wave for the camera.

David Roman [00:12:52]:
Yeah, it's video, dingus.

Lucas Underwood [00:12:54]:
Yeah, see, it'll be okay. You're a dingus.

David Roman [00:13:02]:
So I understand using it. I have an objection to the salt thing.

Lucas Underwood [00:13:06]:
Why do you have an objection to the salt thing?

David Roman [00:13:08]:
Because you're subsidizing states that barely have any sales tax or no sales tax. Like what do you do in Tennessee? Not Tennessee. Tennessee is like what, 1% or 2%?

Derick Van Ness [00:13:17]:
No, I don't go. They don't have sales tax there. Or Texas. Or Florida.

David Roman [00:13:21]:
Or Florida.

Derick Van Ness [00:13:22]:
Yeah, yeah. That's part of why a lot of businesses are going there.

David Roman [00:13:26]:
They don't have any taxes. And so because they're giving people in New York or California the write off, they're sort of subsidizing with extra steps those people in those states so that the state can keep jacking up the taxes on their locals. That's all it is. It's a kickback farm. See, he agrees with me. He's like, yeah, it is. No.

Lucas Underwood [00:13:59]:
You know, I probably should have warned Derek how you feel about paying taxes.

David Roman [00:14:04]:
You gotta make money to pay tax. Extent. I don't make any money. I lost money last year. I told you that. I was in the red last year.

Derick Van Ness [00:14:11]:
Wow.

Lucas Underwood [00:14:12]:
He worked very hard to accomplish that. He spent months.

Derick Van Ness [00:14:17]:
Spent months spending all that money.

David Roman [00:14:19]:
Yeah, spent months. Then all the money's legit. Like, you know, you just, you gotta be. I wasn't trying to lose money. I wasn't trying to make it either. Yeah. Shook out, however it did.

Derick Van Ness [00:14:35]:
Listen, man, as long as you're having fun.

Lucas Underwood [00:14:37]:
That's right.

Derick Van Ness [00:14:38]:
That's the key. Usually it takes some money to have some fun, but if you can do it without it, I'll be honest. You're beating the system.

Lucas Underwood [00:14:43]:
If David ever had fun, I think the world would just unravel right there. That would be the day that hell froze over. David. David doesn't do fun.

Derick Van Ness [00:14:51]:
Yeah, you're the.

David Roman [00:14:52]:
We do. We go to a lot of conferences. So that's a lot of our travel is conferences and then we Got to do this podcast and we got to go to the events, and there's a lot of event expenses, a lot of conference travel expenses. You know, it adds up. And then at the end of the year, you're like, huh, I don't have any money. And don't pay yourself a lot either. You know, my wife makes pretty good money, so that helps. But, you know, I told her, I said, you can quit your job.

David Roman [00:15:26]:
You know, we'll have to cut back on some of the expenses, but be fine. And she's like, yeah, I don't trust you. It's okay.

Lucas Underwood [00:15:34]:
Yeah. I mean, like, I mean, if I were in her shoes, I wouldn't either. I'm just saying.

David Roman [00:15:40]:
What are you talking about?

Lucas Underwood [00:15:41]:
I mean, on this, the reliability scale, she, She.

David Roman [00:15:47]:
I can understand. She is. She's probably more hesitant because she's like, I want to make sure that bill gets paid. I'm like, it'll get paid on time sometimes. Depends how the months go in. Some months, yes, some months, no. But, you know, the certain things you have to pay, like you gotta pay the rent or the mortgage, right?

Derick Van Ness [00:16:09]:
Yeah.

David Roman [00:16:09]:
Mortgage has gotta get paid. So that comes first. Everything else, like, you don't let your insurance lapse because then you may not get insurance again. So don't make sure that gets paid before they shut it off. But everything else, you know the electricity, when it turns on. Yeah. You just turn it back off. Well, yeah, so they shut my.

Derick Van Ness [00:16:31]:
I had a thing in 08 where. So I was a house flipper at the time, and I had like 16 flips going, right? When all of a sudden the bank just couldn't lend anymore, so I couldn't sell them. Right. So I got crushed, lost a couple million bucks and went upside down. And definitely remember coming home and the power was off. And I called the power company and they said, first, we can't do it until Monday. So I had to explain to my significant other at the time that we were camping for the weekend. She didn't love that.

Derick Van Ness [00:17:02]:
And then they said, hey, because your power got turned off, we want a pretty big deposit. I think it was like a thousand bucks. And when you're broke, like I was at the moment, 1,000 bucks as a deposit really was a lot to swallow. So it can get messy. I get where you're coming from. And it's funny, you almost sound like you have the opposite problem that a lot of people have, which is they are like, more, more and more. I can't have, you know, I can't be happy Unless I have more.

Lucas Underwood [00:17:32]:
Yeah.

Derick Van Ness [00:17:33]:
You're like, yeah, just enough to get by. But they both have their struggles, Right. One, you're a little worried, like, well, if I can't quite pay the bills, that's. For me, that's a pretty scary thing. I wake up at five in the morning and I'm like, huh, this isn't great.

Lucas Underwood [00:17:50]:
Yeah, see, that's me. David's like, I don't really care. I mean, like, if it burns down, cool, whatever.

David Roman [00:17:54]:
I mean, it's not that. Do I worry about that? Yes. I want to maintain the opportunity to get it back. You see what I'm saying? So it's not. I don't have enough money to pay the bills. It's like, can I float that another three days? Because I think by that third day I'll have the money. And so that little glimmer of hope is enough for me. Like, I'll float on that.

Derick Van Ness [00:18:17]:
Yeah.

David Roman [00:18:17]:
I don't worry. Like, will it get paid? Yes. Will you let me have that extra time? And so, you know, you don't. I push it with the state sometimes they don't like it.

Derick Van Ness [00:18:30]:
Yeah.

David Roman [00:18:31]:
But as long as they keep me open, I'm good. Now. I would freak out if they came and shut me down at that point. It's like, okay, well, I can't even conduct business any longer. Like, how am I supposed to pay this Now I gotta think of something. That's what I would worry about is getting shut down or, you know, something happens where I don't have enough insurance and that the building goes up in flames. And then I was like, okay, well, I can't make any more money. This insurance payout better help me out here.

Derick Van Ness [00:18:59]:
Yeah. They're not in a rush to write those checks either.

David Roman [00:19:02]:
No, no, they're not. So that's where I get a little concerned. And, you know, I probably should have more cash in the bank, but I do have good friends that will lend me maybe two or three thousand dollars for the month. You never know.

Lucas Underwood [00:19:16]:
Yeah, I don't agree.

David Roman [00:19:18]:
I was just patting you on the back. I was talking about Dutch. I'd call Dutch up.

Lucas Underwood [00:19:22]:
Yeah, I don't have. I mean, like, if I give you two or $3,000, that means I have two or $3,000. In between the two of us, we got $4,000. We gonna have to balance this bad boy.

David Roman [00:19:33]:
That's okay. I'd give you if I only had a few. Few thousand to you.

Lucas Underwood [00:19:37]:
Yeah, likewise. I don't care. You can have it all.

David Roman [00:19:39]:
And I always have the GoFundMe. I will throw that GoFundMe up so quick. Sad kids crying in the front, the whole nine. See what happens.

Derick Van Ness [00:19:48]:
You just got the template already made.

Lucas Underwood [00:19:49]:
Hey, listen, that's my insurance. That's why I keep contributing so much money to all these GoFundMe pages. Because, like, one day I'm gonna. I'm gonna, like, stroke.

David Roman [00:19:56]:
Yeah.

Lucas Underwood [00:19:57]:
Like, hey, guys, I'm gonna need your help.

David Roman [00:19:58]:
Yeah. Like, I'm throwing this out into the universe. And hopefully, hopefully I won't need it. But if I do, it'll come back. But if I don't, I always got the oaf. I'll throw that off. So that will be hole in the Internet. We're good to go.

Derick Van Ness [00:20:13]:
I do a lot of that, too. Good karma. What?

Lucas Underwood [00:20:17]:
Onlyfans.

Derick Van Ness [00:20:20]:
Not a lot of that. A lot of good karma.

Lucas Underwood [00:20:25]:
Oh, man. You go.

David Roman [00:20:30]:
I'm just telling you that one day old guy shows b hole on the.

Lucas Underwood [00:20:34]:
Internet is gonna be. But I mean, do you, like, how would you feel knowing that Jeff's the one watching your only fan account?

David Roman [00:20:43]:
As long as he pays, man, I don't care.

Derick Van Ness [00:20:47]:
I like his attitude. A lot of freedom there.

David Roman [00:20:51]:
A lot of freedom.

Lucas Underwood [00:20:52]:
Yeah.

David Roman [00:20:54]:
Keeps it loosey goosey.

Lucas Underwood [00:20:58]:
I mean, like, seriously, like, it would seem that. That some in this world have a competitive advantage when it comes to platforms like that. I mean, they really do. But I'm just pointing out that, like, who would look up David Roman on only fans?

Derick Van Ness [00:21:16]:
I mean, I don't know. I'm pretty sure I'm not on that list.

Lucas Underwood [00:21:22]:
No, I'm not on that list. I'm damn sure not paying for it.

David Roman [00:21:33]:
That's so messed up.

Lucas Underwood [00:21:36]:
I bet you money I would put. I would put dollar bills on the first two people to sign up would be Jeff Compton would be number one, and he'd pay just to look. And Mike Allen would pay just to see if it was legit. Right. I'm just telling you.

Derick Van Ness [00:22:02]:
You didn't think this was going to.

Lucas Underwood [00:22:03]:
Be serious, did you? I just wanted.

David Roman [00:22:05]:
He changes the look.

Derick Van Ness [00:22:08]:
I. I did not anticipate this.

David Roman [00:22:11]:
Okay.

Derick Van Ness [00:22:11]:
But I didn't think it was going to be serious.

Lucas Underwood [00:22:13]:
Okay.

Derick Van Ness [00:22:15]:
Yeah. I went to a dark place.

David Roman [00:22:18]:
Yeah.

Lucas Underwood [00:22:18]:
Oh, this.

David Roman [00:22:19]:
You know, you get into some situation which backs up against the wall, you got to do what you got to do. That's all I'm saying.

Derick Van Ness [00:22:24]:
It's true. True.

David Roman [00:22:26]:
Anyway, so they're not taking R and D credit. What was the second thing?

Derick Van Ness [00:22:33]:
The salt tax.

David Roman [00:22:34]:
Oh, the salt tax.

Derick Van Ness [00:22:35]:
Yeah, yeah, yeah.

David Roman [00:22:36]:
Salt tax.

Derick Van Ness [00:22:37]:
Yeah.

David Roman [00:22:38]:
Is it that you're finding that these, these shop owners are not going to CPAs or that the CPAs are incompetent.

Derick Van Ness [00:22:47]:
Really, neither. So most people think their CPAs like tax guru, right? Oh, yeah. He's sitting at home, like reading tax code, looking for ways for me to save money. No, that guy's at his base, his kid's baseball game too, right?

David Roman [00:23:01]:
Yeah.

Derick Van Ness [00:23:02]:
And most shop owners forget, especially the people who earn a little bit more, who wear taxes, are a little more serious. Like they're a top 5% client for their CPA. Right. Most CPAs, most of their clients are W2 income earners. Very simple tax returns. Business owners. Maybe they got a small stable of business owners as clients, but a lot of those business owners make 50 to 100,000 bucks a year. 150,000 bucks a year.

Derick Van Ness [00:23:29]:
But, like, they're not into the game where taxes get crazy.

Lucas Underwood [00:23:33]:
Right.

Derick Van Ness [00:23:34]:
So that's where Most of those CPAs live. They're really just tax filers, Right. Tax preparers.

David Roman [00:23:40]:
Yeah.

Derick Van Ness [00:23:41]:
They're not trying to do strategy because the people we're talking about or that we mostly serve are like the top 3% of their clients. Well, if 97% of your clients fit this one mold and then there's this other 3% that you make about the same amount of money on, are you going to go and spend all your time on the 3%?

David Roman [00:23:59]:
Sure.

Derick Van Ness [00:24:00]:
Probably not. You're going to spend it on the 97%. So the extra 3% kind of get the same treatment in most cases. So they're not getting proactive advice. And, you know, if you go and talk to a cpa, they want to be proactive, they want to help you out. Just they're so damn busy working with their other 2000 clients that unless you raise your hand and say, hey, guys, can you look at this for me? What can I be doing then? Sometimes you'll get a little bit of advice, but even then, they're just so not used to doing it that it's just not their wheelhouse. Yeah, like, people think becoming a tax professional is what CPAs do, and it's not. They're mostly auditors and CFOs and those kind of things.

Derick Van Ness [00:24:40]:
A few choose to become tax guys, but it's not part of their training.

Lucas Underwood [00:24:43]:
You know, when we started working through the chart of accounts and explaining to my newest accountant why we do things the way we do in the chart of the accounts, it was a real wake up call for me because, like, they didn't understand even the basic business Principles of what we were doing. Right.

Derick Van Ness [00:25:05]:
Wow.

Lucas Underwood [00:25:05]:
And I'm not saying he didn't know the tax law. Right. He knows the tax law. It's not, that's not the problem. It's just, it didn't make sense to him why we were doing what we were doing.

Derick Van Ness [00:25:13]:
Right now.

Lucas Underwood [00:25:14]:
To me it makes perfect sense. But it was a, it was an eye opening moment because so many shop owners look at their CPA like, hey, I'm expecting you to tell me if there's something wrong with the business.

Derick Van Ness [00:25:24]:
Right.

Lucas Underwood [00:25:25]:
Bro, they don't know your business.

Derick Van Ness [00:25:27]:
A lot of them don't.

Lucas Underwood [00:25:29]:
I mean, it's very, very rare to find one that would know the financial requirements of an auto repair shop. Right.

Derick Van Ness [00:25:35]:
Yeah.

Lucas Underwood [00:25:35]:
I mean, parmelas you. I mean that's, that's the extent of those that are in this field that really know how the automotive business runs. Yeah. I would say 50% of shops, especially smaller shops, are depending on their accountant to be like, hey, you didn't make any money.

Derick Van Ness [00:25:52]:
Right.

Lucas Underwood [00:25:53]:
Most of them show up and they get on the show or you talk to them at a show and they're like, my accountant told me that I had made too much money and I needed to spend some of it.

Derick Van Ness [00:26:03]:
Yeah. Yeah. And that's like a big faux pas. Right. Like, even if you're in a big tax bracket, let's say you're paying 40 cents on the dollar.

Lucas Underwood [00:26:09]:
Yeah.

Derick Van Ness [00:26:10]:
To go spend a dollar to buy something, you don't need to save $0.40. Makes no sense. Now if it's like, well, we had a big year. We're going to buy this diagnostic equipment in November. December versus January, February. Okay, let's buy it this year so we can get the tax break. Totally makes sense because you're going to buy it anyway. But to go buy something, I've definitely had people who are like, yeah, I bought this extra car and I'm like, well, do you need one? And they're like, no, I never drive it.

Derick Van Ness [00:26:35]:
Like, that's just terrible.

Lucas Underwood [00:26:36]:
Yeah.

Derick Van Ness [00:26:36]:
Right. Like they just lost a bunch of money because they were trying to save taxes. So we have to be careful to not have the tax tail wag the dog. And sometimes people do that. So yeah, you're absolutely right that people take it into their own hands or they're talking to a CPA that maybe doesn't fully understand their business. Because taxes is one thing, but like forecasting and, and planning how to run a business and managing cash flow, it's a different skill set.

Lucas Underwood [00:27:03]:
Yeah, for sure.

Derick Van Ness [00:27:04]:
And I actually think most CPAs are more well equipped to do that, but they may not know automotive at all.

Lucas Underwood [00:27:10]:
Yeah, yeah, absolutely. What other tools or tricks do you recommend for repair shop owners? You know, because I know you work in investments in some other areas. Right. And you know, I think the majority of shop owners, I mean like David does some, but the majority of shop owners are probably not to a place that they're able to invest right now especially I would say the majority of our listenership is kind of like in the middle somewhere. Right.

Derick Van Ness [00:27:38]:
Yeah.

David Roman [00:27:39]:
What they should be investing all the time regardless.

Lucas Underwood [00:27:44]:
I'm just saying, like we have a lot of shops who listen who are either just starting out, they're text turned owners, they're just now kind of starting.

David Roman [00:27:51]:
To pull in the business investing.

Lucas Underwood [00:27:54]:
I don't disagree with.

David Roman [00:27:55]:
Okay, well then they're living on something. So scale that back.

Derick Van Ness [00:27:58]:
So the trick to what you're, what you're talking about is first off, I do think if you're a new shop owner and you're not making much money, your first and best investment is actually to get your income going.

Lucas Underwood [00:28:10]:
Yeah.

Derick Van Ness [00:28:10]:
Because if you're, if you're peeling off those extra couple of bucks to go put them in the stock market or something, you're going to do better in your shop.

Lucas Underwood [00:28:16]:
Yeah, right.

Derick Van Ness [00:28:17]:
Put it into marketing, put it into team, put it into training, put it into things that are going to make you more money because inside of your shop you have so much more knowledge, so much more control. You're going to make better decisions.

Lucas Underwood [00:28:28]:
Yeah.

Derick Van Ness [00:28:28]:
I don't love the stock market because I think it disempowers people.

Lucas Underwood [00:28:31]:
Yeah, right.

Derick Van Ness [00:28:32]:
And a lot of people do it out of default and it has its place. But when you're just sticking your life savings into something you have no control over, you don't understand, you can't get to it because it might be in a 401k or IRA. Like I feel like that's not great. But to your point, I do think as soon as you're making a reasonable income, let's call it 50 to $70,000 a year, you need to start setting aside money. And the way you do that is you automate it. Like people aren't good at going in and doing that themselves. But if you pay yourself a W, two of, you know, if you're paying yourself 4,000 bucks a month, right. Cause you're $50,000 or something, then just automate 10% of that gets every time you get paid like two days later, it just sweeps into a savings account and you're saving 400 bucks a month, and then as your income increases, you want to automate that.

Derick Van Ness [00:29:20]:
But automation is really the biggest thing because for, for most shop owners that I talk to that are successful, like if they just took a thousand or two thousand bucks at checkout, they'd never even notice it. Yeah, they make pretty good money. And at the end of the year, they've got 12 to $24,000 that's been set aside. Right. And then obviously you can invest from there. But I always joke that savings is the kind of the gateway drug to investing it. It teaches you how to do it. And if you don't put it or put that in place, you just, you never really get to where you've got 25 or 50 grand to go to work investment.

Derick Van Ness [00:29:57]:
So you got to, you got to start with the savings. I think 10%. Even if you're not sure you can afford it, just set it up. You can always go into your savings account, transfer it back if you need to.

Lucas Underwood [00:30:08]:
Yeah.

Derick Van Ness [00:30:08]:
But if you're like a lot of shop owners, you're working out of your checking account, you don't necessarily see that, or it goes over there and you're trying not to touch it. So you make a little better decisions and you adjust just a little bit. And so maybe you spend most of what's in your checking, but you do end up with, with money and savings. And it actually becomes a little bit addictive as you start to see it grow.

Lucas Underwood [00:30:27]:
You're like, yeah, for sure.

Derick Van Ness [00:30:28]:
I like this. I want to, I'll do a little more. And then you start to get things going. And then once you get a chunk of money going, then you can grow it. And there's lots of ways to do that, but it really is, it's just putting a system in place. Like we advocate for something we call a financial operating system, which is really treat it like your business. Well, what do you do with your business? You got systems, you got people, you've got things working in a way that's a protocol, Right. It's not just happenstance.

Derick Van Ness [00:30:55]:
I don't know, we'll just upcharge this much on that one. And these parts will just, I don't know, we'll shoot from the hip, right? Like that doesn't happen. You've got a system, right. Same thing in your finances. So we think a tax system, a cash flow and growth system, systems and automation. So this is like I was talking about automatic sweeps or automatically putting money aside for taxes and all that kind of stuff. And then a protection system because we're all going to get some kind of curveball at some point. A health thing, a relationship thing, a partnership thing, a whatever.

Derick Van Ness [00:31:26]:
And it could be the. Just that your parents go into an old folks home and don't have long term care. Yeah, right. Like you don't know what it's going to be. But, but it happens to everybody. So you got to have these protections in place to kind of blunt that and make sure that you don't lose everything when that weird stuff happens.

Lucas Underwood [00:31:41]:
Right.

Derick Van Ness [00:31:42]:
So, so those four things and then you got to have the team to help you execute it for sure.

Lucas Underwood [00:31:46]:
And let me ask you this, you talk about putting some money back. What type of percentages do you recommend for the shop owner that has nothing right now? What a what, what kind of money should we have put back, say by the time we're 40? Because that's a, that's something that keeps coming up. I saw something the other day that said, hey, by the time you're 65, you're going to need a million, million and a half to retire. Based on where we're at right now economically, what, what are your thoughts? How much should we have back and how much should we be consistently putting back as an owner to be preparing?

Derick Van Ness [00:32:20]:
Yeah. So the first thing is if somebody's not, not saving yet, it's hard to go balls to the wall.

David Roman [00:32:26]:
Right.

Derick Van Ness [00:32:26]:
So I would say start at 10% just because I think most people can do 10% and not feel it. Right. So just get used to that. And then it's like weights, you know, you don't start with the a hundred pound weights, you start with the 10 pound weights and you do that a little bit and then you go, okay, 15, 20, and you work your way up. Same thing with savings. Just build the muscle of doing it, build the habit. And then, so I'd start at 10%. If you're doing zero, I think eventually you want to try and get to of course as much as you can.

Derick Van Ness [00:32:53]:
But I would say 20%, 25%. And the way that I have people do that is we get to like a baseline of like, okay, you've got a house and you've got kids and you've got cars and life's okay.

Lucas Underwood [00:33:06]:
Yeah.

Derick Van Ness [00:33:07]:
We've got a baseline. From there we use what I call the extra dollars theory. So every extra dollar you make, you don't spend it dollar for dollar. Yeah, right. You say, you know what, we're going to spend 40 cents on this dollar, but the other 60 cents we're going to put away to start building other income for us. Right. To invest and grow. So as you make more, you can still live on more.

Derick Van Ness [00:33:27]:
But you don't do a dollar for dollar. Because we also know, like, every year is not going to be your best year.

Lucas Underwood [00:33:33]:
Right.

Derick Van Ness [00:33:33]:
You. You hope it would be, but. But it just never is. Like, you know, you always have those, those weird years where something goes on.

Lucas Underwood [00:33:40]:
Something slows down, something happens.

Derick Van Ness [00:33:42]:
Yeah, yeah. So if you've increased your standard of living a little bit because of that extra 40% over and above your baseline, now you've still got that 60% cushion, plus whatever you save to kind of get you through. And if you need to reel it in or whatever, get through a tough year. But it really makes a huge difference because now as you make more, you save more. But also as you make more, you still get to spend more. It's not like every extra dollar I'm busting my tail for. I don't get anything for. I still get to live better.

Derick Van Ness [00:34:07]:
But I. You get more aggressive about saving. And ideally, if you can get to 20, 25%, then you're putting away a pretty significant chunk of money and you can really make some nice headway. And then we like to take and take all the tax saving stuff, right? Yeah, we have. You save like you're going to pay all those taxes and then everything we can save for you instead of like going and buying a pool with it or a fancier car, then you take that money and put it to work and you start building these income streams outside the business. Because what a lot of shop, shop owners feel is the weight of, I got to make this thing crank every month, I got to pay the bills, I got to pay for my house, I got to do all that and it's all on me. There's no other help. But once you start getting these other investments, and in the beginning it's very slow.

Derick Van Ness [00:34:51]:
Right. Like you're not going to see a lot. But over the course of a couple of years now it's like, oh, we got an extra thousand, we got an extra two thousand, we got an extra three thousand. That starts to help lift that weight.

Lucas Underwood [00:35:02]:
Yeah.

Derick Van Ness [00:35:02]:
And you can take that and you can reinvest it, and you probably should. But now if things ever get a little tight or they get a little tough, it's not all on your shoulders at the start to do that.

Lucas Underwood [00:35:12]:
There's some residual.

Derick Van Ness [00:35:13]:
Yeah.

Lucas Underwood [00:35:13]:
So you say that you teach them to put the money back for taxes like they would be Saving it anyway. What, what are your recommendations? Saving wise for taxes? What? You go into any random shop and you say, hey, you know, you might end up paying these taxes. How much are you telling them to save out of their gross income for taxes?

Derick Van Ness [00:35:32]:
You know, an easy number. If someone's making less than say, 200,000 bucks, which is a lot of shop owners, I would say just set aside 25%. Now, some of that's going to end up as your savings, right? They won't end up probably at 25%, because if you're a married couple, you're in the 24% tax bracket plus taxes until like 390,000. So you're going to probably pay less than that. But I also know a lot of people, they're saving their 25% and then something happens. They got to dig into it a little bit. And some other things. Like, I do think a shop should try and have 30 to 60 days worth of working capital.

Derick Van Ness [00:36:10]:
So how much does it cost to run your shop for a month? I would say 45 to 60 days somewhere in there. So maybe two months worth. Have that buffer, then you've got your tax money. But, but if that buffer gets too tight, you can always pull a little bit from your taxes, but that builds in a little savings. But I'd rather people over save just a little bit than under save. Like if you're super tight, start at 20%, you know, if you're, if you're a newer shop owner. But yeah, and then as people make a little more, you can get more accurate. Like there's, there's a really good tool I like that's just a tax calculator on Smart Asset, that website, okay.

Derick Van Ness [00:36:51]:
You can put in your zip code, you can put in your income whether you're single, and you can put in things like 401ks, IRAs, a few things. But really it'll tell you how much you'll pay in taxes. And you can kind of use that as a number to say, okay, it's not 100% accurate, but if I'm putting that away, I'm going to be pretty close. And if you're paying yourself a W2, you're already getting some of the taxes paid out of that. And then you save the 25% on anything that's over and above your W2.

Lucas Underwood [00:37:20]:
Right.

Derick Van Ness [00:37:21]:
So what do you do?

Lucas Underwood [00:37:22]:
How much are you saving back?

David Roman [00:37:24]:
Some don't save anything back.

Lucas Underwood [00:37:28]:
I've got. I couldn't give you an exact number on, like, how many weeks. I keep four months of payments, Mortgage payments put back. Right.

Derick Van Ness [00:37:40]:
On the personal side.

Lucas Underwood [00:37:42]:
No, for the business.

Derick Van Ness [00:37:43]:
Oh, okay.

Lucas Underwood [00:37:43]:
Like, so when we talk about operating capital, I try to keep at least four months of the big payment, put back the other payment I have, it's. It's smaller, but I, like, have another account. And then I try and keep like 20, 25,000 in my savings account. So we typically keep, you know, 40,000 set aside that I don't just automatically touch. If it gets tighter, if it gets slow, I'll dig into that and then I'll put it back and move it back and forth as I need to.

David Roman [00:38:09]:
I have $40.

Lucas Underwood [00:38:12]:
I know better.

David Roman [00:38:14]:
400.

Lucas Underwood [00:38:15]:
I know better.

David Roman [00:38:17]:
I'll show you the bank accounts, dear.

Derick Van Ness [00:38:19]:
And I work with percentages because some guys have five shops and some people have, you know, a brand new shop. So it. It is kind of a ratio thing because you got a much bigger operation, you need more money set aside because, yeah, if something goes south, you got a lot more bills to pay.

Lucas Underwood [00:38:36]:
Right. Well, I mean, you want your. You want your staff to be able to sustain that. I've heard from my insurance people a couple of different times that they worry a little bit that maybe I'm overinsured for those protective measures in case something happens. Like, I've got disability and I've got income replacement and I've got the stuff like that. We were in a. We just happened to walk through and, like, shaking hands and kissing babies, as Mike calls it. You know, we're going around and talking to everybody at the event, and we walked into a classroom in the back and he was talking about the fact.

Lucas Underwood [00:39:08]:
He said, listen, he said, I do think it's important to talk to you about that you might potentially be insured too much. And somebody in the room said, well, what do you mean? He said, well, if you're. If you're too well insured and an attorney comes after you, that makes you an easier target for them because you are so aggressively insured. I said, I don't know about that, but he was, he was talking.

David Roman [00:39:31]:
I'm sure they're gonna come after you regardless if they.

Derick Van Ness [00:39:34]:
If they think you have some money.

Lucas Underwood [00:39:35]:
Yeah, yeah. He. Well, his point was, is that the predatory attorneys, the ones that have these billboards out on the side of the road that say hurt in an accident.

David Roman [00:39:45]:
Lawyers are all good people. I don't know what you're saying. See, so what you gotta do is not show up and I'm sorry. So what you gotta do is not show up in a jacket and Slacks. You need to look like a bum. Make sure everybody knows that, hey, I'm broke. Don't come after me for anything.

Derick Van Ness [00:40:05]:
Or at least say it on a podcast.

David Roman [00:40:07]:
I say it every time I can. Are you kidding me? These people.

Lucas Underwood [00:40:11]:
David's probably the wealthiest one among all of us. Everybody thinks it's Dutch that's got money. It's actually David.

David Roman [00:40:16]:
No, no, no, no, no, no. My house has gone up quite a bit in value, though, let me tell you. My rental house.

Derick Van Ness [00:40:26]:
Yeah.

David Roman [00:40:27]:
Has not zip code.

Derick Van Ness [00:40:30]:
Yeah.

David Roman [00:40:30]:
It's a thing.

Lucas Underwood [00:40:32]:
Do you. Do you advocate for four shop owners or for folks to invest in property?

Derick Van Ness [00:40:38]:
I think it depends on what you want to do. But overall, I really like real estate, like rental real estate as an asset, but it has two big weaknesses. One is no liquidity. Right. Like you, if you need money, the bank's not going to give it to you.

David Roman [00:40:51]:
Yeah.

Derick Van Ness [00:40:52]:
Right. So. So it's harder to get your cash. And the second one is it's a real asset. Like, if you're struggling and you don't like a stock and it's going down, you can just, like, sell it like that.

Lucas Underwood [00:41:03]:
Yeah.

Derick Van Ness [00:41:03]:
If you've got a property and it gets mold, like, you got to deal with it. You're dealing with real people, you're dealing with real stuff. So it's. It's a little more hands on. I mean, shop owners are used to being with the public and with people and some of that. A lot of people these days are like, hiding behind computers, right?

Lucas Underwood [00:41:21]:
Yeah.

Derick Van Ness [00:41:21]:
So if they want to be hands off, real estate is not the thing. But, you know, you can hire a management company and all those things, but you got to manage the manager, too. I've definitely had rental properties where, you know, the guy's telling you, oh, we need a new air conditioner, and it feels like he's charging you double. And amazingly, his buddy's the one selling air conditioners, you know, and it's like some. There's definitely that kind of stuff out there where you just need, like, anything else. You need a good team. Right. If you want to be hands off with real estate, you got to have a manager, but you do have to manage the manager.

Derick Van Ness [00:41:50]:
So I think those are the main downsides. But real estate, you know, you get good depreciation. If you do it right, you'll get cash flow, you get interest rates, write offs, and it appreciates over time, which is pretty significant. So real estate, as a rule, kind of sucks for the first couple of years until you get that good tenant and You've had it maybe five years, and now the spread between the mortgage and the cash flow starts to get real nice from there forward, it's. It's pretty good because you can even not get the best rent. And I used to do this, like, charge a couple hundred bucks less than I needed to because then you got a thousand people to choose from. Everybody wants your place and you can get the best tenant, and that's worth it.

Lucas Underwood [00:42:31]:
I, you know, I think the tenant is the only thing that makes it work. Right.

Derick Van Ness [00:42:37]:
Yeah. It's the key. Yeah.

Lucas Underwood [00:42:38]:
We did. We did vacation rentals for a long time. And that was, that was horrid, right?

Derick Van Ness [00:42:46]:
Just all the time. Yeah.

Lucas Underwood [00:42:47]:
Yeah. Because, I mean, like 3am the remote control doesn't work.

Derick Van Ness [00:42:50]:
I know.

Lucas Underwood [00:42:51]:
You're like, 4:30 gas logs don't work. Right. Like, and it was always. They just didn't understand how it worked.

Derick Van Ness [00:42:56]:
Right.

Lucas Underwood [00:42:56]:
It was never. They didn't follow instructions and you couldn't tell.

David Roman [00:42:59]:
They called you.

Lucas Underwood [00:43:00]:
Oh, yeah, yeah.

Derick Van Ness [00:43:02]:
Mine seemed like it was all texting, but it was still. It's just all the time, you know, I was running like four of them in San Diego, and every day you got three or four people turning over three or four they need to get cleaned. And I had a great cleaning crew and it ran as smooth as it could, but it was just always there. Always there, always there. You never could. Like, you're out to dinner and the guy's like, I can't run the lockbox. How do I get in? Right. And you can't just ignore that.

Lucas Underwood [00:43:26]:
Exactly. You have to deal with it. And you have to deal with it right then that sounds awful.

David Roman [00:43:30]:
And pass.

Lucas Underwood [00:43:31]:
And then like, long term. I mean, some of the places that we saw got, like trashed. I mean, like, made massive messes of things and not. It was like people that you trusted and they would be good tenants, and out of nowhere they would flip. And all of a sudden they're not a good tenant anymore. Right. And so we saw some stuff like that that really sucked. And so my parents, before mom died, they liquidated the large majority of all of their property assets, except for the one big piece.

Lucas Underwood [00:44:03]:
There's some of them that they own. There's some of them that he still has that he's working his way out of. But I think the majority of the property assets are gone because it was so much to manage and it was so much to keep up with, and some of the people were just paying their ass. Now we're in an area that a two bedroom apartment is $3,000 a month. And so there's opportunity there. For me, if I wanted to do that, I just don't know that I could deal with the people.

Derick Van Ness [00:44:32]:
Well, that's the thing. I mean, you can make money so many different ways. It's not really about how can I make money. It's about what do I want to do with my life. And then within that corridor, like, these are the things I'm already going to do with my life. Like, you guys probably would do the podcast if you didn't make a dollar. Like, you. Like you enjoy it.

Derick Van Ness [00:44:54]:
Okay, do that. Get really good at it, and you can make money at it. Yeah, right. Like, I much more advocate for that type of life. Like, you can create your own freedom, which is doing things you love, whether you get paid or not, and you can create your own prison. I mean, I was talking to someone earlier and we were talking about, you know, why don't I have a podcast? Because I've had them in the past. And I was like, you know, I just need to find a format where I'm going to enjoy it. Because me doing certain types of interviews with certain types of people, like, I'd get bored or I'd get burned out.

Derick Van Ness [00:45:27]:
And let's. The worst case scenario is it's really successful and then you get doing it.

David Roman [00:45:32]:
Yeah, right.

Derick Van Ness [00:45:33]:
And it's like, I'm making money, but I want to jump off a bridge. Yeah, that's not a great trade. So for sure. So I think the bigger thing is, do I advocate for real estate? Yes. If somebody likes and is interested in real estate, absolutely. If someone's scared of it and not going to sleep well at night, if someone doesn't want to deal with it, no, there's plenty of other ways to make money. So I just, I really think that's a big part of it is understanding what works for you. And a lot of times you don't know until you do it.

Lucas Underwood [00:46:01]:
Right.

Derick Van Ness [00:46:02]:
Right. You start doing real estate. If you're like, oh, Robert Kiyosaki, oh, this sounds like the best thing ever. Passive income. And then you're like, oh, wait, this isn't quite so.

David Roman [00:46:10]:
Right.

Lucas Underwood [00:46:11]:
This isn't exactly what he explained he made.

David Roman [00:46:14]:
A stock market can be a little passive. You get some blue chip stocks, they pay a decent dividend, you know, not great, but some money comes in. You buy enough of those stocks, money can start coming in.

Derick Van Ness [00:46:27]:
So you bring up a good point with the stock market. You know, Lucas was saying, you know, you gotta have a thousand or A million dollars or whatever. Like just for people who don't know the reason. I. One of the reasons I don't like the stock market is when you get to retirement, it's not very efficient for distribution, like for taking income because of the volatility. Right. So the market goes up on average about 7% a year. So you would think in retirement I can take out 7%.

Derick Van Ness [00:46:55]:
And if it was the same every year, that would be true. But because of the ups and downs, when they run the math, it's between 3 and 4%. So a million dollars in the market only produces 30 to $40,000 of income, which isn't very much in today's world. And then you got to pay taxes on it. Right. So on the growth. So it's not a lot of money. Yeah, you know, so.

Derick Van Ness [00:47:17]:
So you really do need more. A lot of other things that are more consistent. You can get better cash flow out of. And once somebody becomes an accredited investor. So an accredited investor is someone who makes as a married couple, it's $300,000 a year, or single person, $200,000 a year. Or if you have a million dollar net worth, not including your house. Right. So people who do pretty well or have saved up some assets so that they aren't trying to do this with their last dime, they get access to alternative investments.

Derick Van Ness [00:47:45]:
And there's different kinds of funds and different kinds of investments out there that are a little bit more you're investing in like private real estate groups or private. You can give money to private equity or you can do oil and gas, or you can do some of these other things that, that are not the stock market and can give you a bit more consistent rate of return. I mean, there's still risk. You still gotta work with the professional, make sure it's the right thing for you. So I'm not giving investment advice here. I don't know who's listening. But they're a lot better for creating income for people in retirement. And that is one of the good things about real estate is it does create consistent income.

Derick Van Ness [00:48:23]:
If you get a good tenant, you kind of know what you can count on and that makes it a lot better. But a lot of people think the stock market's going to give them. I mean, Dave Ramsey just got reamed because he did a video where he was like, the S And P averages 11%. So you can pull 11% out of your.

David Roman [00:48:38]:
Did he really say that?

Derick Van Ness [00:48:39]:
He really did what? I'm like, go look it up. And so many people just like, nailed into the wild. Nailed into the wild on that. Because it's. That is just flat out.

David Roman [00:48:50]:
That's someone drinking their own juice for so long, like, they've completely know what reality is. Yeah. They've become completely disconnected from real reality. That's insane.

Derick Van Ness [00:48:59]:
But. But most people just don't know these things. They're kind of following the max out your 401k route. And, you know, if you're an employee and you're getting a match, like, that's a good benefit to put money in there. But now it's kind of trapped for shop owners. I just think there's a lot better things you can do.

David Roman [00:49:15]:
The oil thing's a little sketchy. I was in a deal with some oil, and they were pumping some oil and it was going really good. And then. And then it went really bad. The price of oil went down and that they stopped sending money out from all of the money they were making, pumping this oil out. And then they're like, hey, we're. We're gonna shut down operations and we're gonna taper off. And you're like, okay, well, there goes that money.

David Roman [00:49:46]:
It was nice for a while, though. They were. Make it bank.

Lucas Underwood [00:49:50]:
What. What other things do you think that shop owners should know or that shop owners frequently miss?

Derick Van Ness [00:49:59]:
So another big thing that we've really been on a little bit of a soapbox about is building their business so it's sellable. A lot of shop owners are in their 50s now, right. They're getting to the point where they're thinking about selling and their business isn't sellable because it's totally leaning on them.

Lucas Underwood [00:50:14]:
Yeah.

Derick Van Ness [00:50:15]:
Right. So you really need to build a business. And what a lot of people don't realize is they think it's about profits. And it is.

David Roman [00:50:21]:
Right.

Derick Van Ness [00:50:21]:
You guys know the term ebitda, right? And. And most people think, well, it's all about ebitda, and it kind of is. But your multiplier, which is how many times EBITDA you get two times, three times, five times, whatever comes down to what we call your intangible capitals. Right? So who's your team? What are your systems? Who's your customer base? Goodwill in the community or reputation or brand recognition, all these kinds of things that make it so that someone can come in and basically buy an income box. Right. That's what an investor or a buyer is looking for, whether it's private equity or another shop owner. The shop owner who's gonna pay the most is the guy who can buy something that Runs by itself. He just shows up, makes sure that everything kind of stays in line.

David Roman [00:51:09]:
And no shop owners buying a business like that, Trust me, that's a. That's a guy that made a lot of money doing something else. And he's like, I'm gonna buy a shop. And then they show up and they're like, run themselves.

Lucas Underwood [00:51:21]:
And I think the one you're thinking about moved out of the state they were in and went and did something else.

David Roman [00:51:26]:
This happens way more often than you would think.

Derick Van Ness [00:51:29]:
Definitely private equity guys, like they're out there.

David Roman [00:51:32]:
Yeah.

Derick Van Ness [00:51:33]:
Buying these things up. Not necessarily one at a time, but we do have some shop owners we work with who they've got two or three shops, They've got them pretty dialed in. And so they're looking at shops and we have them create an investment profile of what does a shop that we want to buy look like. And if they've got the key people and they've got the key things in place and it's like, well, we need to get a couple things sorted out here. A little bit like a fixer upper house. Right. Then that's great. They can go get a deal.

Derick Van Ness [00:52:01]:
But if it relies really heavily on the owner, they can't pay nearly as much as if he's got the right guy in there running the shop for him and the owner's just going to step away and it's much better. So when you're trying to set up your business to sell it, you want to set it up. So it's super appealing. Right. It's like a house on the beach, not a house. That's a fixer upper. You're going to get a lot more money for it, you know, so that's.

Lucas Underwood [00:52:27]:
You know, for me, I think that we should be doing that even if we don't plan to sell 100%. Because even if profitable. It is, it is. But even if something goes wrong and that you weren't expecting, you know what I'm saying? If, like things blew apart in the middle of the night, you got sick, you had a heart attack, you had a stroke, you couldn't work anymore. Like everything could be gone just like that.

Derick Van Ness [00:52:51]:
About 50% of business sales in general, it's that they call it the five Ds, right. Divorce, disability disease, a disagreement with a partner, like all those things happen and people are forced to sell and they're.

Lucas Underwood [00:53:06]:
Fire sales at that point.

Derick Van Ness [00:53:07]:
Yeah, because it's. It's not ready to sell and they have to sell fast. Right. So it's, it's not ideal. So, like, you're saying, Lucas, being prepared for that puts you in the best possible situation. I mean, those situations still suck.

Lucas Underwood [00:53:20]:
Yeah, for sure.

David Roman [00:53:21]:
I'm okay with the. The make sure that you're not integral to the business, but what. I mean, what do you say to someone? I would prefer sucking every little dime out of the business. I don't care what it shows. Screw ebitda.

Derick Van Ness [00:53:38]:
I don't care if you pull the money out. The business was profitable.

David Roman [00:53:43]:
Yeah, I guess.

Derick Van Ness [00:53:44]:
You know what I mean? From their perspective, they're still looking at what are you taking as a salary in all your distributions. That's part. Part of the profit.

David Roman [00:53:53]:
So ancillary benefits, though.

Derick Van Ness [00:53:58]:
What do you mean? Like how it's paying for your car or your cell phone?

David Roman [00:54:02]:
Yeah, like. Well, not personal expenses, but, you know, employee benefits. Let's say employee benefits become extremely. A very large part of your P and L now.

Derick Van Ness [00:54:18]:
Like health insurance.

David Roman [00:54:19]:
Yeah, health insurance. Maybe everybody gets a free car. Maybe everybody gets their gas paid. For example, my shop. Everybody gets their gas paid. All employees.

Derick Van Ness [00:54:30]:
Okay.

David Roman [00:54:31]:
I happen to be an employee.

Derick Van Ness [00:54:33]:
Yeah.

David Roman [00:54:35]:
That's not salary. Is that taxable?

Derick Van Ness [00:54:41]:
Not if it's for business purposes.

David Roman [00:54:44]:
It's all business purposes. Every mile. That's it.

Lucas Underwood [00:54:50]:
Well, if people wanted to get in touch with you and talk through this and begin to kind of navigate what's next for them.

Derick Van Ness [00:54:56]:
Yeah.

Lucas Underwood [00:54:57]:
How would they contact you?

Derick Van Ness [00:54:59]:
The easiest way is just Big Life financial dot com.

Lucas Underwood [00:55:02]:
Okay.

Derick Van Ness [00:55:03]:
Yeah, there's a button right there where you can download our textbook. Or up in the right hand corner, there's a thing that says work with us. A button. You can click that and it's an appointment. We'll talk through it.

Lucas Underwood [00:55:14]:
We do.

Derick Van Ness [00:55:15]:
We do consults all the time.

Lucas Underwood [00:55:16]:
I love it. Derek, thank you for being here, man.

Derick Van Ness [00:55:18]:
Yeah. Appreciate the jokes, guys.

Lucas Underwood [00:55:20]:
Yes, sir. Yes, sir.

David Roman [00:55:21]:
I was trying to say something. Hold on.

Derick Van Ness [00:55:24]:
Oh, yeah, my. My cohort here, Michael, is reminding me we do have a Facebook group for shop owners called the Shop Owners Wealth Lab, where we do free training.

David Roman [00:55:36]:
Cool.

Derick Van Ness [00:55:36]:
Yeah, we do free trainings every Thursday.

Lucas Underwood [00:55:39]:
I'll check that out.

David Roman [00:55:40]:
You guys need to do some, like, cross promotion with our Facebook group.

Lucas Underwood [00:55:43]:
Yeah, okay. We have a.

David Roman [00:55:45]:
Do that. Like, if you guys do a webinar or something like that. You guys should. We should cross.

Derick Van Ness [00:55:50]:
We do one every week. Yeah. Just to kind of be putting ideas out there, like, one little nugget at a time. Right. Trying to help shop owners just.

David Roman [00:55:57]:
Well, on the next one, make sure you send the information to dingus over here. And he'll we'll get it streaming on our Facebook page too, because stuff that they need to know.

Lucas Underwood [00:56:07]:
David may even share it on his only fan page.

David Roman [00:56:11]:
Jeff won't enjoy the content.