Profitable Painter Podcast
Profitable Painter Podcast is a rich resource for anyone interested in starting, running, and scaling a professional painting business, offering valuable insights, strategies, and interviews with industry leaders. Through case studies and in-depth discussions, we deliver a vivid picture of the painting industry, with a disclaimer that any financial or tax information is general and not a substitute for professional advice.
Profitable Painter Podcast
The BUTT Framework: Building a Sellable, Protected Painting Business
Worried about protecting the wealth you've built in your painting business?
In this episode of the Profitable Painter Podcast, Daniel Honan (CPA, former painting business owner) and Richard Dunton (Enrolled Agent) reveal the exact framework to shield your assets, slash your tax bill, and secure your legacy.
You'll learn the "Cover Your B.U.T.T." framework to defend your business and family wealth:
- Built to Sell: Discover how to calculate your business's true value (even if you never plan to sell!) and the #1 risk that slashes your valuation by 3x.
- Untouchable Assets: Learn legal strategies to protect your assets from lawsuits, creditors, and bad actors. Are your personal assets on the line?
- Tax Planning: The IRS is your biggest expense. Uncover 12 powerful tax strategies used by profitable painting businesses to keep more of what you earn.
- Transfer Wealth Wisely: Ensure your estate passes to your family efficiently and avoid the bureaucracy of probate. It's not just for the ultra-wealthy!
If you're growing successfully but worried about becoming a target, or if the thought of a complex tax or legal situation keeps you up at night, this episode is your essential guide to peace of mind.
FREE BOOK & LIVE WEBINAR INVITE!
This episode is a sneak peek into Daniel's new book, "Profitable Painter," which is releasing on September 8th.
You can get a FREE copy of the book + a valuation calculator + exclusive resources by joining our LIVE Book Launch Webinar!
Date: September 9th
Time: 9:00 AM Pacific / 12:00 PM Eastern
Where: ZOOM
Register here NOW: https://profitablepaintercpa.com/webinar
At the live event, we'll dive DEEPER into building untouchable assets and strategic tax planning. You'll get the book for free and other special gifts. Don't miss it!
Subscribe to The Profitable Painter Podcast for more weekly strategies on mastering your numbers, boosting profits, and building a business that works for you.
Welcome to the Profitable Painter Podcast. The mission of this podcast is simple to help you navigate the financial and tax aspects of starting, running and scaling a professional painting business, from the brushes and ladders to the spreadsheets and balance sheets. We've got you covered. But before we dive in, a quick word of caution. While we strive to provide accurate and up-to-date financial and tax information, nothing you hear on this podcast should be considered as financial advice specifically and tax information. Nothing you hear on this podcast should be considered as financial advice specifically for you or your business. We're here to share general knowledge and experiences, not to replace the tailored advice you get from a professional financial advisor or tax consultant. We strongly recommend you seeking individualized advice before making any significant financial decision. Welcome to the Profitable Painter Podcast. I'm your host, daniel Honan, cpa and former painting business owner, and your guide to mastering the numbers that drive success. I'm super excited to be joined today by Richard Dunton, enrolled agent. Welcome to the podcast, richard.
Speaker 2:Oh well, thank you, daniel. I'm always happy to be here no-transcript about a framework.
Speaker 1:It's called Cover your Butt. B-u-t-t is a backronym. It stands for B for built to sell, u for untouchable assets, t for tax planning and then the other T is for transferring wealth wisely. And this is out of my book, profitable Painter, which is releasing on Amazon on September 8. And we have a book launch on September 9 at 12pm Eastern, 9am Pacific, which you can register to attend the book launch. If you attend the book launch you will get a copy of Profitable Painter, the paperback, and also a whole bunch of resources. So if you go to profitablepaintercpacom slash webinar, you can register for this event. I'm super excited about it.
Speaker 1:But today's topic we're going to be diving into one of the three frameworks out of the book which I just mentioned at the top, which is the B-U-T-T framework, and this one, like Richard mentioned, it's actually more in his expertise than mine, but a lot of the ideas I stole from Richard, so I'm glad he's here to talk about it with me. But the first one is built to sell. So this is just understanding how much your business is worth. And I think it feels like it's kind of the Wild West when people try to understand like, how much is my business worth? And you can pretty much use a calculator to determine this especially private equity firms They'll use essentially a calculator to determine how especially private equity firms they'll use essentially a calculator to determine how much a business is worth.
Speaker 1:Now, on the private side, you can probably sell.
Speaker 1:You can sell a business for any amount of money, just like you can sell anything for any amount of money.
Speaker 1:But when it comes to things like private equity, they do have certain methods to value a business, and so in the book we actually cover, you know how you can calculate the value of your business, like a private equity firm would do, and so it's really helpful to understand this, because even if you don't want to sell maybe you don't even want to sell I'm going to keep this business for the rest of my life, which I totally get because I'm the same way I'm not going to sell my business.
Speaker 1:But the reason why it's still helpful to understand how much your business is worth is because when it's more valuable, when a business is more valuable to other people, it's also more valuable to you. So if you understand what makes it valuable, what are the things that are healthy about it, and then what are the things that are making it unhealthy or risky, then you can make changes to increase the value which will bring more wealth to yourself and your family. So, even if you don't want to sell, it's definitely something to have a good understanding of so you can grow your wealth for yourself and for your family.
Speaker 2:Yeah, I like that you use the word built to sell. Built implies action, something intentional, and that's really true when it comes to having a valuable business. It's not something that just happens overnight. Even if we've been in business for a long time, we think, oh, one day I'm just gonna sell this thing for millions of dollars. But actually it requires some planning. I usually tell folks if you are looking to exit your business either by selling it or maybe just like exiting from the day-to-day operations this is a two to three-year process that you want to start planning for. There's things that need to happen, there's positions that need to be filled, there's constraints that need to be overcome so that your business is going to be the most attractive and command the highest price to potential buyers. So if you're looking to exit, give yourself some runway, because we don't want to throw your business out there and have a cheap price. Right, it's not priced to sell. It's built to sell and command the highest price possible.
Speaker 1:Yeah, and actually in the book launch event I'll be giving out the calculator as part of all the gifts that we'll be giving out to the attendees of the webinar. If you go to profitablepaynercpacom slash webinar, you can register for the book launch and get a free copy of the book, but also all the resources that come with it, which one of them is a valuation calculator so you can value how much your business is worth. And there's certain factors that buyers will look at that make things more attractive. One is EBITDA, which is a fancy way of just saying net operating income. Basically the bottom line how much money is the business generating after paying for all expenses? The higher that is, the more valuable your business is going to be. And then, usually based off of the EBITDA or the net operating income, you're assigned a multiple, and if you're under a million dollars, your multiple is one, meaning that you multiply one times the net profit to determine as a baseline for how much your business is worth.
Speaker 1:Now, from there, you add on to the multiples depending on other health metrics and risk factors. So, for example, a health metric would be how fast is your business growing? If it's growing over 30% per year, year over year, then that would be an additional half multiplier. So instead of one, a multiplier of one, you have a multiplier of 1.5. Multiplier so instead of one, a multiplier of one, you have a multiplier of 1.5. And then another health metric would be what your net profit margin is, so your EBITDA margin, what's the actual percentage of what's left over? So if it's 30% margin or higher, that's another 0.5 multiple. So there's several of these health metrics. That kind of you can look at your financials and see do you know to calculate what your, your multiple would be?
Speaker 1:Now, on the other side of this, there's risk factors, there's things that make your business less attractive for a buyer, and the top one, the number one, is key man risk, meaning that if you were to leave your business for two weeks, three weeks, with no contact with your team, would your business continue to grow without you? So this requires basically that you're not in any kind of key role. You're not the salesperson, you're not the production manager, you're not doing the office work, you're not painting the homes, of course. So you have to kind of be out of all those key roles for you to not have that key man risk. And because that key man risk is a big hit. It's a minus three multiplier. So this is the biggest risk that you have to get rid of to really unlock the value of your company. Cool, so that is the bill to sell.
Speaker 1:There's a lot more details that go into that, obviously, but if you want to hear more about this topic, definitely go to profitablepaintercpacom slash webinar and register for the book launch to hear the full scoop on that. Plus, you'll get the book and a bunch of resources to include a valuation calculator. All right, so the next topic is untouchable assets. All right, so the next topic is untouchable assets. So as you grow in your painting business, as you become more wealthy and your business becomes bigger, you become more of a target for bad actors, for creditors, for disgruntled employees, and so you got to start thinking about how can I be less of a target? What can I do to to do that? So you want to. You want to talk about this.
Speaker 2:Richard, I can see you just really wanting to say something Well, yeah, I mean it's. It's unfortunate we do. We live in a very litigious world and when you start to have success, you do kind of put a target on your back. So we want to structure our business legally in a way that we have those untouchable assets. So most of us have an LLC in place, which is awesome because that's going to be like your first line of defense. But we're going to want to possibly consider having additional LLCs once we start building up assets, whether that's real estate or equipment.
Speaker 2:We might have multiple companies involved where we are renting or leasing equipment to another company, so that we're creating silos. So if one of our silos is attacked, like, for example, let's say, somebody slips and falls on our property and they file a lawsuit against us, we want that lawsuit contained to a specific silo. We don't want them to be able to come after our business operations or our personal assets. So we're using legal frameworks, llcs. We might be forming these LLCs in states that have charging order protection entities, where it makes it harder for folks to come after us. We might be using grantor trusts, revocable living trusts, for privacy measures. It's a lot of just kind of getting your ducks in a row and dotting your I's and crossing your T's, not using your personal name and address if we can avoid it, taking advantage of things like registered agent services so that official mailings are not coming to our personal home.
Speaker 2:I know I'm throwing a lot of jargon around here, but it's working with someone who has business knowledge and a little bit of legal knowledge as well, to know how we can protect ourselves and maintain our privacy and also set things up where, when it does come time to sell, we are able to sell off the assets that we want to sell and retain the assets that we want to retain.
Speaker 2:So, for example, if you have a painting business and you own the property that your business works out of which is a wonderful strategy, by the way there's some awesome financial and tax benefits to owning real estate when it comes time to sell that business, do you also want to sell the real estate? Or would it be better for you to sell the business, keep the real estate and perhaps become the landlord to the new owner? If you want to do that, we need to set it up correctly from the start, or we need to kind of do some cleanup work to get everything where it needs to be so that, when it does come time to sell, you can get the maximum price. Let go of the assets you're willing to transfer and retain the ones that you want to keep.
Speaker 1:Yep, cool. So the next topic is T for tax planning. So we talked about built to sell untouchable assets and now T for tax planning, and so this really is about protecting your wealth from the IRS. The biggest expense you're going to have in your business career is going to be all the money you have to pay to the IRS. But fortunately, you do have control over how much you pay to the IRS, and so in the book we cover 12 key tax strategies that we use for painting businesses, and there's also a bonus 13th one that we see a lot that helps, so we'll go into more detail at the book launch on September 9th at noon Eastern, 9 am Pacific time. You can register at ProfitablePainterCPAcom slash webinar to get the full details on those 12 tax strategies, and also you'll get a copy of the book as well as a bunch of other resources. So definitely recommend you join us then.
Speaker 1:And then the last T in the framework is transfer wealth wisely. So this is all about how do you actually, when you pass on, what can you do to make sure your estate goes to your family in a way that is tax efficient but also not caught up in bureaucracy? So there's things like probate that you want to avoid like you don't want. It's already hard for your, your loved ones, to deal with that situation. You don't also want to stack on top of that a bunch of paperwork and annoying things to deal with the government and the courts. So that's something that you'll need to think about as you grow your. Your painting business and your wealth is about how to transfer this to your, to your family, after you pass away.
Speaker 2:Yeah, that we. We typically call that sort of thing estate planning, which is kind of a fancy term, but you know it's hard it's. You know it's like insurance. You know you don't, nobody ever wants to think about it, but when it comes time to use it, you are darn glad that you have it. When you're in your 20s, 30s, even 40s, you don't want to think about estate planning and passing wealth on to the next generation, but that is the perfect time to get these things in order.
Speaker 2:So often we see this happen all the time. People have an idea of what they want, but they don't ever commit it to writing and they don't do the legal work to make it actually happen. And then they're at the mercy of state laws, probate judges, relatives that come out of the woodwork when they hear that you pass away. We don't want that to happen. You've worked hard to build your wealth. You have ideas of how you want that to be spent, whether it goes to your children or to your favorite charity or just. You know you want to have some control over what you built and you can do that while you're. You should do that while you're still young, and that's where your will comes in your revocable living trust. We're talking about durable healthcare powers of attorney, so that your medical wishes are known and that there's you, there's the legal work in place so that they're going to be actually carried out.
Speaker 2:My wife and I we've done our estate plan and we obviously want our son to inherit the majority of our wealth. But right now he's 10 years old and he wouldn't know what to do with it. So we have tranches set up where he inherits certain chunks of money at different ages I think it's like 21, 25, and 30. There's provisions in there where he can get money early for college or to buy a house or to start a business. It's like having that control from the grave. I can still parent him and irritate him even after I'm gone, and that makes me kind of happy.
Speaker 2:No, but it's really cool what you can do with an estate plan, and it sounds intimidating. It's not. It doesn't take that long to set up, it doesn't cost that much money to do it right, and we recommend reviewing these at least once every five years to make sure that your wishes haven't changed and that you don't need to make any updates. But it should be a part of anybody's life, whether you have kids or not, especially if you don't have kids, then you might have charities or nieces and nephews, but anyway, I guess my point is it's not just for the ultra wealthy, it's for everybody and it's accessible to everybody. So give it some consideration while you're still young.
Speaker 1:Yeah, so that is the cover your butt framework, and this, this framework is really about protecting what you've built and thinking about exiting either exiting the business or you know your final exit uh, pass away. So you know that that's what this framework is about, and we work with a lot of folks to help them with this part of their business that are kind of, you know, in the this is more of later stages of business. So if you're interested in learning more about this topic, this framework, definitely sign up for the book launch on September 9th at 12 noon. Sign up for the book launch on September 9th at 12 noon, 9 am Pacific time. You go to profitablepaintercpacom slash webinar to register For attendees. You'll get a free copy of the book, but also a bunch of special gifts as well that are going to be super useful for growing your business and also covering your butt. So, with that, we will see you at the book launch on September 9th, hopefully.
Speaker 2:Yeah, it's going to be a wonderful event and I hope everybody listening gets a chance to sign up, because it is a really great book that you've written, daniel, and some of these freebies are going to be pretty exciting.
