John Barnes: Why Tax Advice Is Not Financial Advice for Business Owners

Full Episode Page: John Barnes: Why Tax Advice Is Not Financial Advice for Business Owners

John Barnes is a Certified Financial Planner and the co-founder and CEO of Pendleton Street Business Advisors, an outsourced CFO firm built for entrepreneurs.

In this episode, John and host Nick Berry dig into financial planning for business owners: how growth can quietly build you an expensive prison, what to actually do with your business profit, and why the CPA who keeps your taxes low is not the same person who's protecting your future. John explains how personal and business plans lock together like a zipper, why emergency and exit planning come down to two sheets of paper, and the sharp difference between a "correct" answer and the "right" one. This one gets practical, and a little uncomfortable in the best way.

You'll hear:
-How financial success can quietly turn a good business into an expensive prison
-What to do with profit: whether to pay yourself, pay debt, or reinvest
-How to link business and personal financial plans so both win
-Whether you've done the emergency and exit planning that protects your family
-Why tax advice is not financial advice, and how that trap costs owners later
-Why we're drowning in "correct" answers but starving for the "right" ones

Where to Find John:
-Pendleton Street Business Advisor
-John Barnes on LinkedIn

Chapters
00:00 Outgrowing Early Success
01:39 Vanity Metrics vs Real Business Profit
04:02 Outsourced CFO: Business and Personal Financial Planning
08:39 Business Profit: Pay Yourself, Pay Debt, or Reinvest
13:09 Excavation and Spouse Alignment
15:50 Escaping Urgency Mode
21:20 Two Year Financial Planning
24:37 Emergency and Succession Planning
29:34 Correct vs Right Financial Advice
35:59 Why Tax Advice Is Not Financial Planning

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Transcript

Episode Transcript for: John Barnes: Why Tax Advice Is Not Financial Advice for Business Owners

00:00 Outgrowing Early Success
01:39 Vanity Metrics vs Real Business Profit
04:02 Outsourced CFO: Business and Personal Financial Planning
08:39 Business Profit: Pay Yourself, Pay Debt, or Reinvest
13:09 Excavation and Spouse Alignment
15:50 Escaping Urgency Mode
21:20 Two Year Financial Planning
24:37 Emergency and Succession Planning
29:34 Correct vs Right Financial Advice
35:59 Why Tax Advice Is Not Financial Planning

[00:00:00] John Barnes: what got you to two million's not gonna get you to five million. that's everything from mindset to process to sort of what is important to you in your financial dashboard. And that financial success, a lot of business owners sort of suffer from nostalgia, if you will. They remember back when they were smaller, back when it was simpler, back when they knew all the people that worked for them, if you will.

[00:00:23] John Barnes: And I mean personally. [00:00:25] They may know everyone's name, but they don't know them like they did when they did all the hiring. And so that nostalgia sort of keeps them locked in the past, locked in old patterns, uh, locked in what's comfortable and familiar. And if business is anything, it's about taking you places you never thought you would go, um, faster than you thought you could get there, in a way that no one would have imagined.

[00:00:47] 

[00:01:00] Business Owners Journey - John Barnes Intro Monologue Mastered Audio: John Barnes is a CFP and the founder of Pendleton Street Business Advisors. He's been working with entrepreneurs for more than twenty-five years. Today, John and I discuss the differences between those businesses that look successful on the outside and those that actually make you money. [00:01:15] Expect to learn how financial success actually destroys good businesses, how to know when to pay yourself, when to pay debt, when to reinvest, how to link your personal and business financial plans, whether you've actually done the emergency planning that's going to protect your family, John's take on why tax advice is not financial advice

[00:01:33] Buisiness Owners Journey - John Barnes Intro Monologue Mastered Audio: The best ways to plan past the urgent and much, much more. Enjoy today's episode

[00:01:39] John Barnes: [00:01:40] financial success, especially in some of those external measureables like take revenue, for instance. Um, you know, growth in revenue is generally thought of as a good thing. But I think what a lot of business owners have experienced is after they kinda get out of that, sort of launch period, let's say you're getting up into one to two million dollars of revenue, the way that your business looks and functions for say the next two million, so say going to four to five million dollars of revenue, [00:02:05] what got you to two million's not gonna get you to five million. Um, that's everything from mindset to process to sort of what is important to you in your financial dashboard. And that financial success, a lot of business owners sort of suffer from nostalgia, if you will. They remember back when they were smaller, back when it was simpler, back when they knew all the people that worked for [00:02:30] them, if you will.

[00:02:30] John Barnes: And I mean personally. They may know everyone's name, but they don't know them like they did when they did all the hiring. And so that nostalgia sort of keeps them locked in the past, locked in old patterns, uh, locked in what's comfortable and familiar. And if business is anything, it's about taking you places you never thought you would go, um, faster than you thought you could get there, in a way that no one would have imagined.

[00:02:54] John Barnes: And [00:02:55] so that nostalgia, It, it'll get you 

[00:02:58] Nick Berry: It absolutely will. what got you here won't get you there statement is one that, I feel like we have to use a lot,

[00:03:05] John Barnes: Yeah. there's a reason that gets said a lot. I mean, it is generally true, you know? And, and we sort of hate those things and, and we, we don't love cliches, but I'll tell you, cliches are a thing for a reason, you know? I mean, they're [00:03:20] generally true, and when you find yourself being the subject of one, that usually never feels good.

[00:03:26] John Barnes: Um, but it is kind of a, what, what our language has developed, if you will, to help people remember things 

[00:03:31] Nick Berry: Absolutely. So let's talk about the, that epiphany that someone has when they're hitting that threshold, that first one where it's like the things that got me here that, that used to work, like I'm do- still doing the same things. it's not [00:03:45] working as well. They're not working at all. you know, what's changed?

[00:03:48] Nick Berry: There, there's an epiphany there, and it's, it doesn't come easily to everybody, right? So tell me about how do you handle that? What does it look like from, from your side of things, and how do you help entrepreneurs navigate through it?

[00:04:02] John Barnes: Well, I think the first way that, that, you know, as an, as an advisor, i-i-in our firm we're sort of outsourced CFOs alongside with [00:04:10] CFPs, so certified financial planners, and we blend business, um, financial planning with personal financial planning because that business owner sits in the middle of both of those things.

[00:04:19] John Barnes: Think about two sides of a zipper that get kinda put together. Uh, that's what makes a zipper work and it's functional, is they have to kinda lock in at some point. I think the realization that business owners come to, let's go back to that growth scenario where they're growing revenue. [00:04:35] Again, what most people understand is as you, as you grow revenue, as you make those new hires, as you, as you take on sort of bigger and badder projects or more complex customers, all of that is, is, is good.

[00:04:48] John Barnes: And then the owner, um, wakes up one day, if you will, or they're having a conversation with their spouse and it's something like, "Hey, why aren't we benefiting from this [00:05:00] personally?" You know, our income hasn't changed. Uh, my car is now 14 years old, and it was 13 years old last year. You know, um, hey, our children are getting older.

[00:05:11] John Barnes: What are we gonna do about college? You know, I hear that the business is doing well. Or the owner might be saying, "Hey, I feel like I'm doing all the right things. I'm in a peer group where everyone's high-fiving me and, just thinking that things are going great from the outside with sort of these vanity [00:05:25] metrics, but I feel awful inside.

[00:05:28] John Barnes: Uh, I feel like I've just bought myself or created an expensive, but comfortable prison for myself. Um,

[00:05:36] Nick Berry: You're gonna call it a job.

[00:05:37] John Barnes: it feels like the job I left when I was in, in my corporate days. Um, except now I'm totally responsible, uh, I'm, I'm totally in charge, and I'm totally [00:05:50] overwhelmed with this, what people are calling success."

[00:05:53] Nick Berry: Yeah. you sit and stare at it for a minute, like it, it is a job, right? You-- they built themselves a job instead of a business, uh, with more, with more burden. They don't get to just leave in the afternoon and then come back the next morning

[00:06:06] John Barnes: Yeah, and a lot of people, especially if they're starting a business, they are coming from probably some kind of vocational background. Like, they, they did something for someone else, [00:06:15] and they really enjoyed that type of work. It was meaningful and fulfilling. They just didn't wanna do it there anymore, so they wanted to kinda create a business around their work.

[00:06:24] John Barnes: And a lot of businesses do start that way, as kinda creating a job for yourself, and then you kinda get beyond that. So I get how easy it is for that to happen, but it's being aware that it's happening and sort of bouncing that against like, [00:06:40] well, well, why did you do this in the first place? Like, it had to have been for more reason than just a job, although that definitely is a reason 

[00:06:47] Nick Berry: Okay, so then the, what does their, their journey beyond that point look like, you know, as they, they are working alongside you guys?

[00:06:55] John Barnes: Yeah. So when, when we're working with these clients, what we're doing is we're helping them, understand what they are trying to achieve for themselves and, [00:07:05] and if they have a family, for, for their families financially. Because let's face it, this is, this is America. Everything costs money.

[00:07:10] John Barnes: It takes money to run our lives. Money is certainly not everything, but it is a wonderful, wonderful tool, uh, that makes things easier, uh, and, and more efficient, if you will. So we are trying to understand, hey, what are you trying to achieve? That's everything from, hey, we, we wanna have a vacation house, or we wanna give our kids a college education that's debt-free, [00:07:30] or, you know, we wanna take care of loved ones, you know, who, who are maybe unable to take care of themselves.

[00:07:35] John Barnes: Anyway, there's always something that they're trying to do that requires money. On the other hand, there's a business over there that everyone's heard of having a business plan, understanding how you make money, profitability, things like that. A lot of business plans, if you will, take-- do not take the owner into consideration, okay?

[00:07:53] John Barnes: They don't take the owner's [00:07:55] personal finances into consideration. Uh, and that's not just about, hey, what do I do with the profit? I mean owner's financial considerations in, personal guarantees for debt. You know, taking on, you know, credit to use, um, as a lever in your business. Well, that requires a personal promise, a personal guarantee, a personal financial statement that a bank is also gonna use to underwrite you as a, credit customer [00:08:20] alongside with your, your business results.

[00:08:22] John Barnes: And so, you know, again, it's not just about, hey, when are we gonna buy the sailboat? It's like, hey, how are we gonna fund and pay for all this growth in the business that then in turn feeds the personal financial plan? So as they work with us, What we develop for them is that personal plan and the business plan, and we show how they are linked. Then we help them answer three questions that every business owner has to answer when they have [00:08:45] profit in their business. Uh, and what I mean is like real cash profit, so, so net operating profit. We think they can do three things with that. They can pay themselves, number one. Number two, they can pay down debt in their business or perhaps personally.

[00:09:01] John Barnes: And the third thing that they can do with that profit is reinvest it, uh, back into the business. Most business owners have their personal favorite [00:09:10] of those three. Uh, they tend to overweight on whatever that one is. For some people it is they pull all the, all the cash out of the business, and they use it for themselves.

[00:09:18] John Barnes: Nothing wrong with that. Some people, you know, really hate debt, and they use every scrap of cash to just pay down debt as fast as possible. Some people are always doubling down, doubling down, doubling down on the business, and the profit never goes home and, and maybe debt, um, [00:09:35] goes, goes unaddressed. In our work, after we kind of put together two sides of the zipper, the personal plan and, and the business plan, we are then meeting with them to say, "Okay, which of these questions are we gonna do right now, and how do we further the business plan and, or the personal plan by answering pay yourself, pay the bank, or reinvest?"

[00:09:56] Nick Berry: and you're helping them figure out how to answer, like if they're not [00:10:00] necessarily sure, well, which, which of those should I choose right now? You're gonna help them, you know, use some discernment as to like in your situation that, or what you've said is important, it would align more with making this choice,

[00:10:12] John Barnes: Yeah. The, the answer of, to a how question, especially when you're dealing with finances, is so easy to answer when you know the what. Uh, not the why, but the [00:10:25] what. In other words, what's important now? What am I trying to achieve? What do I want to do? When a client can really articulate that clearly, and a lot of times those things don't roll off the tongue, it takes a lot of work and a lot of, um, time spent with them to understand that.

[00:10:42] John Barnes: We help them organize those thoughts. Then, when we come back to a decision point on pay yourself, uh, pay down debt, or reinvest, [00:10:50] we pull out that what sheet, like, uh, what they're trying to achieve, goals, objectives, whatever you wanna call them, and say, "Okay, which of these line up, which of these choices line up with the list?"

[00:11:01] John Barnes: and like any good list, uh, things can change, objectives can change. You can change your mind. You're free to do all that, but we want that to be a rolling and running conversation with the client so that we're most up to date, and we actually use their [00:11:15] information as the filter. We, we're not, "Hey, what would some business guru do?

[00:11:22] John Barnes: What did Jim Collins say about this?" No respect, disrespect to Jim. We're not trying to win an industry award. We're trying to win the game that they have designed for themselves, what they want to achieve personally, and what's the business capable of, how do you do both and live to tell about it? That's [00:11:40] what we're trying to do with our clients

[00:11:42] Nick Berry: Yeah, I love that. I, I, I've always used the questions, like they're really trying to answer, how do I know if or how do I know when? those are really simple questions when you get it to that point. But that's a lot of the work is getting it simplified down to that because it's so tangled up and they're like, they're in the weeds and all of that is running in your…

[00:12:02] Nick Berry: You called it a storm earlier, right?

[00:12:04] John Barnes: and I'm [00:12:05] glad that y- you said that… used the word when, as in timing, because that is, that is equally important to the what question. Because you can't do everything at once, and sequencing is very important when you're trying to achieve even short or medium-term financial goals, be it for the business or, or personally.

[00:12:24] John Barnes: So we always say, "Hey, your business needs to do something for you at a specific point in time." [00:12:30] And we're trying to define the what and also the when, because timing can also influence sequencing. Timing can influence how we answer those three questions about paying yourself, paying debt, or reinvestment.

[00:12:44] John Barnes: Um, so I'm glad, I'm glad you brought that up, that, that timing is equally important

[00:12:49] Nick Berry: Mm-hmm, it is. And so you're not building their plan as a, as a blueprint off [00:12:55] of someone else's. It has to be the answers to those questions, or really the rest of those questions are determined by that individual's situation.

[00:13:03] Nick Berry: So you're having to get into do- doing some pretty deep work with them then to, to excavate that information, right?

[00:13:09] John Barnes: Yes, it, it, uh, excavation is, is probably the right word. Um, a lot of times we're, we're plowing new ground with that client that really no one's ever asked him. And, and by the way, most of our [00:13:20] clients have a quote unquote, "Financial advisor." They certainly have a, a CPA. They have an, an attorney or three.

[00:13:26] John Barnes: Um, they have advisors in their life that are kinda looking down their, their stovepipe, but there's no one in their life that is helping them to take their largest investment, which is their business, and, and really analyze and look at how that impacts their personal financial [00:13:45] life. we probably spend, I mean, Nick, probably dozens of hours upfront in interviews with our client.

[00:13:53] John Barnes: Um, in some cases it kinda drives them a little crazy, and a lot of times in an interview we'll ask a lot of questions that they don't necessarily have an answer to. They've gotta go back and think about it. I mean, we are, we are breaking new ground mentally with them, trying to provide a space and a place for them to be able to articulate [00:14:10] those answers, but it doesn't always happen in the first conversation.

[00:14:13] John Barnes: So a lot of times we have conversations, they're gonna think about it, um, and kinda come back. And I'll also add kind of a house rule for our firm is if, if a client is married, we insist that their spouse take part in all those conversations because we wanna hear both sides of that story. Um, we're not marriage counselors, but, uh, we've certainly heard, uh, or [00:14:35] seen spouses be surprised at one another's answers to some of those questions because again, it's not something that they've really ever sat down and had a meaningful discussion.

[00:14:43] John Barnes: So sometimes we have to kinda… It's like Homer Simpson backing into the bushes, you know? We have to try to let them have their, their moment, uh, together. Um, but I tell you, that, that is where good plans, I think, have to start. You, you have to be willing to [00:15:00] stay in those conversations and do that exc- excavation work so that the details emerge that you be- can begin to sequence and that you can begin to document.

[00:15:11] John Barnes: and then, I mean, I hate to put it this way, but it, it sort of becomes easy at that point. It… The hard is very front-loaded, um, in, in a lot of, um, I think good advisory work 

[00:15:22] Nick Berry: I think that, that makes sense. [00:15:25] It's easier to understand once you've been through the process,

[00:15:27] John Barnes: Yeah

[00:15:28] Nick Berry: but it is hard, kind of hard to fathom, like, there's something harder than me going back to day-to-day and grinding without knowing what my endpoint is or how to actually measure me getting…

[00:15:37] Nick Berry: Yes, there actually, something a little bit tougher. But once you make that investment in that front end, uh, it starts to pay off immediately and indefinitely. it gives you purpose to [00:15:50] follow

[00:15:50] John Barnes: Yes, and I think one of the things that makes that hard is business owners get conditioned pretty early to be really, really good at the urgent. You know, um, they are exceptional at, say, emergency care in their own businesses because that's… At, at the, at the beginning, almost everything's an emergency, and you condition yourself to being at the center of every decision.

[00:16:12] John Barnes: the, the faster the decision, [00:16:15] the better. Speed, speed, speed. Go, go, go. And, and I think we all understand that, those of us that have, that have started businesses. that leaves a big imprint, if you will, in, in how you start to do everything and look at it, and then sort of seven or eight years later, you're a couple of million dollars down the road, and you're still in that almost survival mode

[00:16:34] Nick Berry: Playing a short game

[00:16:36] John Barnes: Yeah.

[00:16:37] John Barnes: You- you- you've been playing the short game, like literally [00:16:40] in two-week increments for eight years. Not good. It,

[00:16:44] Nick Berry: Yep.

[00:16:45] John Barnes: it got you somewhere, and people are patting you on the back and congratulating you, but you know how it feels on the inside, and more importantly, the people that you love the most, again, if you're married, if you then have children, they really know it

[00:16:59] Nick Berry: Yeah, they do. And I will say, as bad as that sounds, if you've made it to that point, [00:17:05] like just wait until you move beyond playing the short game. Like, you've done that well, and you've just been doing it in the two-week chunks like that, or… I mean, I get it. I've been there. once you're able to like pull your eyes up and start playing a longer game, It, it's a different life that you will live,

[00:17:23] John Barnes: Yeah, that's a great way to put it. It, it literally is a different life. I've heard people say, "It feels like magic. Um, I [00:17:30] feel like a different person. Uh, I have a- have had this like 25 ton weight lifted off my shoulders." Um, I had one guy say, "I think I've grown three inches." You know, like, "I literally am taller, um, because I feel like this has been, has been lifted."

[00:17:45] John Barnes: the great part is like they were part of their own solution. You know, I, I'm not gonna say that Pendleton Street is the one that architects everything that happens in [00:17:55] our client's life. I think what we're doing is we're providing a process and a framework for them to work through to, to be a part of their own solution.

[00:18:04] John Barnes: I mean, it's why we're all business owner- We're, we're all problem-solvers at, at our heart, you know? And, and we're just providing a way and a means for them to, to get there. We're providing technical expertise, financial expertise, all the things that you would expect to sort of, sort of [00:18:20] pay for, if you will.

[00:18:21] John Barnes: But, um, I love how business owners, um, that we work with, they, they really get to be part of their own transformation, if you will. Um, and that, that's just cool to kind of see from the, from the sidelines.

[00:18:33] Nick Berry: from what I know of what you do, you're equipping them with some skills that are g- they're gonna keep that with them. They're gonna understand more about how this should work moving forward. So, like they are… [00:18:45] I mean, it's transformative in that way

[00:18:47] John Barnes: Yes, they will… Those skills, and I'm glad you put it that way, those skills will get hard-coded into their, their business DNA, and they are not, once they get a taste of, of life like that, they are not going back to, to the old way

[00:19:03] Nick Berry: Yeah. Yeah, and now that, that's kind of the inverse of that, the, the feeling that we had talking about playing the [00:19:10] short game for a really long time, and you're like, "Ugh." But what you just described is, you're swimming with the current now for the first time in…

[00:19:18] Nick Berry: And you can swim that way, you know, from now on because you've learned how to do that, how to identify it.

[00:19:23] John Barnes: Yep.

[00:19:24] Nick Berry: Yeah.

[00:19:25] John Barnes: And I'll even say, and this is again, when you, when you've experienced it, they will say, "It feels easier."

[00:19:32] Nick Berry: Mm-hmm. But it is still hard, [00:19:35] right?

[00:19:35] John Barnes: Yeah, it's like it feels easier. Part of that is because you got stronger and you got better, but part of it also is I think that alignment. 'Cause in the back of e- every business owner's mind, they're thinking, "Okay, I know that this is good for my business.

[00:19:49] John Barnes: Is it good for us?" And, and that us can be just them as an individual, it, it can be them and their family. Um, there are a lot of financial fights, [00:20:00] if you will, that the business owner sits in the middle of, and on one hand he's got maybe a general manager in their business saying, "Hey, we need those new forklifts, and, and you know we need them and here's why."

[00:20:10] John Barnes: And then at home it's like, "Well, the kids are starting to drive and we've gotta buy cars," or, "My, my dear spouse has been driving the same vehicle since before we started our business, and, you know, I want to do something [00:20:25] nice for them, but I can't do both."

[00:20:27] John Barnes: And it's such a, a horrible feeling of helplessness because you know that if you choose one, you're leaving the other out, and they're both very important to you, and they both kind of feed on each other to power your life. And so I like, I like how our work kind of helps pull our clients out of those jams, pulls them out of the…

[00:20:47] John Barnes: It releases those headlocks, if you will, and, [00:20:50] and helps them, sequence and prioritize those things so that they can have it almost all. I'll say it like

[00:20:56] Nick Berry: Almost all. Yeah. Yeah. what I'm hearing is you figure out what the end goal is for them, uh, put together a plan that's gonna help them reach that end goal, but then also, enjoy the road to reaching the end goal so they're not having to give, give up [00:21:15] everything just for that end goal.

[00:21:16] Nick Berry: It's like you can enjoy the journey as well

[00:21:19] John Barnes: Yeah. Uh, and I would say, like, you know, those goals, a lot of times we, we sort of think the right way to think about goals are these really lofty and, and kind of long-term. I, I think anything beyond 10 years is an extremely long-term goal. But we've sort of taught ourselves, if you will, that that's the right way to think about these things.

[00:21:37] John Barnes: Well, if you're thinking about a 10 or even a [00:21:40] 20-year plan from where you are today, what I think that looks like is probably 14 to 16 two-year plans that are all strung together and you're like, "Well, wait a minute, if I multiply that out, that's more than 10 and definitely more than 20." And you're right, um, you, you've got third-grade math skills.

[00:21:59] John Barnes: Um, but you're gonna have a two-year period where it doesn't work, you [00:22:05] know? Uh, even the best laid plans, the best advising, um, you're gonna have an industry change, you're gonna have a, a rule or regulatory change, you're gonna have… I don't know if anyone still remembers that thing, uh, what was it a few years ago?

[00:22:19] John Barnes: Um, it was COVID, you know? 

[00:22:22] Nick Berry: one of those going on

[00:22:23] John Barnes: event that you can't control, that you can't help, that you can't manage, and it's gonna impact [00:22:30] your business, it's gonna impact your life. And that's what I mean is we try to break these plans for our clients into no more than two-year sort of tactical plans because that's about all…

[00:22:41] John Barnes: I've been doing this for 18 years, and I think that's about as far as you can look into the future and still kind of keep a straight face, is about 24 months from right now. So you string together these two-year tactical plans and after a while, that's how you [00:22:55] get to the 10-year goal or the 20-year goal.

[00:22:57] John Barnes: And so, uh, when you're thinking about those long-term timeframes, there's always tomorrow. You can get to it later. It's not urgent, it's just too important. And like I said, most, most business owners, um, have, have really conditioned themselves to focus solely on the urgent,

[00:23:15] Nick Berry: Yeah.

[00:23:16] John Barnes: it's killing them

[00:23:18] Nick Berry: that's a really painful [00:23:20] thing to have to acknowledge that it, uh, it is killing you. It is, like, the clock's ticking, and I'm not necessarily talking about mortality e-exclusively, at least. But like, the clock is ticking on the two-year plan, the 10-year plan, the 20-year plan, whatever.

[00:23:34] Nick Berry: You're gonna look up, and it's gonna be, been in-- doing this for 20 years, 25 years, and you hope to be, you, you want to be much closer [00:23:45] to the goal at that point than, than where you are right now. But you don't get-- it's not gonna happen by accident. Uh, there are-- there's ways to get there, and there are people that can help you get there.

[00:23:56] Nick Berry: And if you're not careful, you can, you can look up after any point in time. It doesn't have to be a long time. You can look up and be like, "Oh, I've been sitting here chasing my tail for however long," and that sucks. Even if it was just a little while, it sucks. [00:24:10] I just think it's important to be able to channel some of that, like, entrepreneurial action bias into the long game and, and make sure that you could-- you're aware of, like, how much of this is due to urgency, like right now, and how much of this is, is aligned-- of what I'm doing is aligned with where I'm trying to get longer term. you can just look up and have empty [00:24:35] hands at the end of a long period of time. I've heard you talk a little bit about the story where you got into your business where there was a tragedy, right? So I mean, that's not even someone chasing their tail.

[00:24:45] Nick Berry: Like, something very unforeseen happened,

[00:24:48] John Barnes: Yes. so the predecessor firm to Pendleton Street, um, I, I started my career in banking, worked, worked in banking for about seven or eight years, and then I transitioned to becoming a financial advisor to business owners, doing [00:25:00] essentially what we're doing now. And the owner of that firm, uh, died in an accident.

[00:25:04] John Barnes: Certainly not planned, certainly not expected. and we also didn't have a buy-sell agreement or any kind of, kind of emergency succession plan for that old firm. And that just started, uh, just a major storm, not only in my life, but in his family's life and, and in all the other families that were, that were working in the business.

[00:25:24] John Barnes: [00:25:25] Um, took about eighteen months to, to work through all that. It was extremely expensive financially. It was extremely expensive emotionally. Um, it was a lot of wasted time and a lot of wasted money for a lack of two sheets of paper with his signature on it could have cleared the whole thing up. so no one's perfect.

[00:25:42] John Barnes: Uh, no one expects to have to do those things. But I'm, I'm very pointed with business owners when they haven't done that type of emergency [00:25:50] planning. that's just… it's borderline criminal to me because you hope you never have to use it. But if it's not there, it is absolutely catastrophic to everything that you've built in that business.

[00:26:03] John Barnes: And probably, again, if you have other people, loved ones who are dependent on that income, on that provision from the business, it's catastrophic for them too. And, um, it's so easy to take care [00:26:15] of. it's easy to plan for the catastrophes and a lot of those emergencies, believe it or not. Um, a couple of sheets of, of paper, if you will, with, with some legal language, maybe some, some, um, inexpensive life insurance, and you've totally inoculated yourself.

[00:26:29] John Barnes: Then you can go back to dealing with the whirlwind and the urgent and, and more fun things to think about. Um, but you'd be amazed at the number of people that are walking around sort of uncovered with, [00:26:40] with just those normal things, and they, they literally happen every day

[00:26:43] Nick Berry: Yeah. I mean, I'm, as you're talking about it, I'm thinking like it's on, on par with the, what a will is for you personally but your same statement hold, hold true about people and their wills also. Like- Yeah … it's crazy the people who are, don't have something like that in place, and the problems that it, could potentially avoid.

[00:27:03] Nick Berry: You know, for me, we had done [00:27:05] pretty well taking care of those things, but weren't perfect, but then we had, uh, our daughter, and so that's what it took to be like, okay, now, there are a few more T's and I's that, uh, T's to cross and I's to dot to make sure that she doesn't have to deal with what something equivalent to what you described 

[00:27:23] John Barnes: yeah, everyone wants to maintain agency and choice, and you can do or not do certain things [00:27:30] as a business owner where all that agency and choice can be just taken away from you or people you care about. And those are definitely, items that you need to cover. That's again, part of when, when we're working with clients, we're checking for all those things and, and we're, we're annoying about it.

[00:27:45] Nick Berry: I think that's great.

[00:27:47] John Barnes: tell them my own story and, and a lot of people have become more familiar with, I've been more open with, with that over, over the years. It kind of took a long time to wanna [00:27:55] talk about it. 'Cause frankly, it's embarrassing. It's embarrassing for me, you know, um, much less the, the people that were, that were directly affected by it.

[00:28:02] John Barnes: And so I've, I've been more open about that on purpose over the years because I know that it can happen. It, it, it happened to me

[00:28:12] Nick Berry: Yeah. Well, I think that that's great that you're willing to do that because it, it is so important. And I would say that there are probably… I know a lot of the [00:28:20] clients that you work with are fast-growing. I know you work with quite a few that have been recognized. There are, like, Inc.

[00:28:25] John Barnes: Yes

[00:28:25] Nick Berry: 5000 companies. And so the, the stakes are going up, the…

[00:28:29] Nick Berry: and they're gonna have a lot of things tugging at their attention. They need someone who's willing to be noisy about, like, these are the things that are important for you to take care of

[00:28:40] John Barnes: Yeah. And the thing that really helps, because just being, um, [00:28:45] being a squeaky wheel a lot of times is, is not a good thing. You just change the tire, you know? It doesn't get the oil, you just change the tire, you know? Um, but it's when we do that excavation work up front to uncover what, what is important to them and when do, when would they like for that to happen.

[00:29:01] John Barnes: And of course, we know that the business, the output from the business is, is the most likely thing to, to be the provision for that. [00:29:10] All we have to do is show them what's important to them and remind them of that, and a lot of times that is what helps to do those kinda tasky type things that, that are easy to put off.

[00:29:19] John Barnes: It's like, "Hey, look, it's not me as a business advisor, this is you saying this to yourself." I mean, you can disagree with that, but like I'm, I'm not even wagging my finger. This is like you wagging your own finger at yourself, and that, that should be pretty motivating. And, [00:29:35] One of the, I think, keys of being a great advisor is you can say the correct thing, uh, nearly 99% of the time.

[00:29:45] John Barnes: Correct doesn't really matter to most people. What matters is the right answer, okay? And I differentiate correct and right in this way, you know? Correct can be calculated. Correct, you can go to a law or a [00:30:00] rule and read a bright line test or something like that, that's correct. But right takes into account context, right takes into account circumstances, right takes into account even goals and other objectives, and combines that with correct to arrive at the right answer.

[00:30:17] John Barnes: And I think that's the part of being a professional advisor that as a we have to kinda fight for, fight for [00:30:25] the right answers for this client, not just correct. Um, we got all kinds of tools, out there, you know, and, and, and I won't say those two letters together. But even before that, you could go to Google, you could go to, you know, all kinds of resources to get the correct answer we are drowning in correctness.

[00:30:44] John Barnes: I mean, really. dr- there's correct all around us. But [00:30:50] why in the world do advisors exist? Well, I think we still exist, uh, because, uh, people need to get the right answers. It's just like every dwelling in America has a kitchen, the ability to, to use heat to transform raw ingredients into food, the ability to refrigerate those agreements, uh, ingredients so we don't get sick when we, when we do eat them.

[00:31:10] John Barnes: But why do restaurants exist? We all have the [00:31:15] ability to cook. Sometimes you wanna go to a restaurant.

[00:31:18] Nick Berry: Mm-hmm

[00:31:19] John Barnes: sometimes you want a different experience. You, you want to pay money. Uh, sometimes you just want the convenience. You're out and about. You don't have time to run home and, and, and prepare a meal.

[00:31:27] John Barnes: You gotta go through the drive-through so you can get to the, to the game or something like that. Um, so there's room for all those things. Um, but we are, we're, we're drowning in correct. Uh, but we have to get to the right [00:31:40] answers

[00:31:40] Nick Berry: I, I love that. I have not heard it said like that, but I totally agree. I, I'm making notes here, and I think it really aligns, uh, so you crack me up with the, the two letters that you won't say together. It took me a second, but, um, the one of the topics that, things that I've been talking about a lot is, like, the for advisors, does no good to be, like, a, a [00:32:05] presenter of facts anymore, right?

[00:32:07] Nick Berry: Everybody has access to information. What you have to be able to provide is insight, and that's what, when you're talking about what, what's right, like, insight is kind of the tailored for that situation. It's like, what does this mean to them through their eyes and depending on what's important to them.

[00:32:23] Nick Berry: it really clicks with, with a, top of mind, topic that I've been working on and talk- just been in a lot of conversations [00:32:30] lately. those two, uh, letters are making the im- you know, a relayer of information, you're obsolete. Like, that's gone. there's no market for you there.

[00:32:39] John Barnes: there's not much, that, that's for sure. Um, like I said, uh, we're, we're drowning in correct. Um, we, we need to get to the right answers. And, and I still think that, um… and again, I'm, I'm not a Luddite, I'm not anti-AI. I mean, we're [00:32:55] using that actively in our firm as a lever and a tool for some of the delivery of our work.

[00:33:00] John Barnes: But at the same time, it is those hours of conversation. It is that time spent. Um, even our clients that are in other states, you know, we've got clients now in 16 states. Um, it is that time spent, it is understanding them, it is understanding the business. It is literally embedding ourselves in both sides of that, [00:33:20] of that life so that we can get to right.

[00:33:24] John Barnes: Because they can call up correct in a number of ways, um, faster than, than I can send an email to them, that's for sure. but there's, there's just something about getting it right that's different

[00:33:35] Nick Berry: Makes a big difference. Yeah. it's not irrelevant that, like, Natasha

[00:33:40] John Barnes: Yeah

[00:33:41] Nick Berry: " You know what? John would be a good guest. You, you guys, you need to meet John," [00:33:45] and introduced us because she, you know, she knew the things that you talk about, the way that your firm operates, the values that, you know, she's gotten to know you and gotten to know me and, just felt like it'd be a good fit,

[00:33:57] John Barnes: Yeah, I, I really

[00:33:57] Nick Berry: that's insight

[00:33:59] John Barnes: introducing. She's an advisor to our firm. we write extensively on LinkedIn, and we've kinda chosen that as our social media channel, if you will, to kinda let the world know what we're doing and who we're [00:34:10] doing it for. And Natasha has been a huge help, uh, to me, uh, but by extension to our firm of just helping us, you know, be more seen and, and more heard by, by the right people.

[00:34:21] John Barnes: I'm really grateful for her work. And also the way that she does it, you know, kinda going from correct to right. I mean, how many courses out there can I pay $100 for, and I can watch some videos or even read people's content? she's a great [00:34:35] advisor

[00:34:35] Nick Berry: She really is. I agree. so if you're listening to this, uh, maybe one of the next episodes you need to listen to if you haven't listened to it is Natasha Balstra's interview because she is, she's an essential. but it's somebody that I trust, built that rapport with, and she knew enough about you, John, and, and was able to tell me, like, "I can pull up a, facts about you," right?

[00:34:55] Nick Berry: That's not, that wasn't gonna tell me,

[00:34:57] John Barnes: Yeah, I'm not hiding out there. I'm, I'm, I'm pretty, [00:35:00] I'm pretty out there on the social, so

[00:35:01] Nick Berry: Yeah. but John, this was great, man. I, I really appreciate you, uh, taking some time and joining and sharing the information. Um, is there anything else that, that we need to make sure that we get included? Anything, any other questions or topics? 

[00:35:16] John Barnes: You know, our website at pendletonstreetadvisors.com has a ton of resources. It has videos. Um, if you like to read, it has, it has, [00:35:25] um, you know, case studies on it, um, about the work that we do in, in kind of, um, 14 different areas that we help solve business headaches. You can check that out.

[00:35:35] John Barnes: I would say to business owners out there that might be feeling overwhelmed or that they've just been conditioned for this urgent stuff, if your business is your largest asset and it needs to do s- something specific for you in a certain time, [00:35:50] get some help with that, even if it's not at Pendleton Street or, or with me.

[00:35:53] John Barnes: It is, it is worth trying to find good advice to, help you get there. And, and I'll, I'll add this too, and, and this will be my grenade at the end. tax advice is not financial advice most business owners sort of start and end their financial planning, uh, for their business with what does my CPA say?

[00:36:13] John Barnes: CPAs are [00:36:15] vital. Our tax code is crazy. You need someone to help you navigate it. But starting and ending your financial planning in your business with which, which move gets me a lower tax bill is, is a way to have a really nasty surprise near the end of your career when you probably have to sell that business to fund the next phase

[00:36:37] Nick Berry: that's

[00:36:38] John Barnes: And maybe I'll tease that out.

[00:36:39] John Barnes: Maybe that's our [00:36:40] next episode.

[00:36:40] Nick Berry: I, I, I mean, yeah, that was, that is a good one. that's a great point, and it doesn't get… It's not said, uh, loudly enough, I think, um, to get the attention it deserves, but it, it's a great point. It's kind of like the, uh, your tax bill in the grand scheme of things, that's yet another tactic that should be part of the plan.

[00:37:01] Nick Berry: Yeah. That is not the plan

[00:37:02] John Barnes: Yeah, it's, it's, again, it's not unimportant. It, it [00:37:05] is important. Um, we have a wacky tax code. Um, and, and you've gotta have an advisor to help you navigate that to stay compliant and things of, of that nature. But I run into too many people that are kind of on the back end of their career, and they've made all those moves, and I'm going through their tax returns, and I'm going through their financials, and I'm just asking questions about, "Hey, did your tax advisor talk to you about X?"

[00:37:29] John Barnes: "No." [00:37:30] "Did they talk to you about Y?" "No." " Did they talk to you about how that's gonna affect, uh, when you sell your business one day?" "No." "Did they ever ask you if you were gonna sell your business one day?" "No." And I have to, you know, break some not so great news to them. A lot of it's fixable. Again, it just takes more time, takes a little bit of money, things like that.

[00:37:51] John Barnes: Um, so anyway, I'll just… Not to restart the conversation, but I'll just [00:37:55] kinda leave it, leave it there with, don't start and end your financial advice for your business with just, "How's this gonna affect my income taxes?"

[00:38:03] Nick Berry: You nailed it. John, you're the man. I appreciate you taking the time. Thank you for joining me.

[00:38:08] John Barnes: Yeah. Thank you for, uh, inviting me on the show. Um, thanks for your, for your questions and just giving, uh, me an opportunity to just kinda say these things. I really appreciate it, Nick. Thank you 

[00:38:17] Buisiness Owners Journey - John Barnes Outro Monologue Mastered Audio: If you enjoyed that episode, you should [00:38:20] check out the other episode on your screen right now where I interview Dr. Benjamin Hardy. It's the most watched episode that I've ever done. We get into why most founders end up being the thing that holds their business back and how to set proper goals so you can scale.

[00:38:33] Buisiness Owners Journey - John Barnes Outro Monologue Mastered Audio: You can find my writing on the stages of the business owner's journey, the five ceilings for expertise businesses, and my parallel process at nickberry.info. Have a great week [00:38:45]