Ep. 2 - Lifetime Paycheck: Turning Business Success into Income with Craig Jamison

Waiting until you are forced to step away from your company means leaving your hard earned equity entirely up to chance. For many business owners, the reality of transitioning out of active operations hits suddenly, turning a lifetime of hard work into a stressful scramble for liquidity. We sit down with Craig Jamison, a financial advisor and certified exit planner from Edward Jones, to break down the mechanics of turning business equity into reliable, long term personal wealth.

We get into the tactical side of structuring a successful departure long before a buyer ever arrives at the negotiating table. Craig shares insights on how to properly evaluate recurring income needs post sale, the strategic utility of utilizing seller financing to manage your tax burdens, and why 80% of an owner's net worth is frequently trapped inside their operations like a mosquito locked in amber. We also discuss how to build a unified advisory team featuring CPAs, business brokers, and attorneys to ensure your financial plan matches your true timeline.

Roughly half of all exits are completely unplanned, driven by sudden health issues, partnership disputes, or unexpected burnout. When you are forced to move with pace under duress, you lose critical leverage, compromise on multiples, and make less optimal decisions that directly harm your bottom line. Viewers will walk away with a concrete framework for derisking their operations today, ensuring they maintain control over their valuation and avoid the identity crises that leads to post transaction regret.

Transcript

SPEAKER_01 0:00

This podcast is for informational purposes only and does not constitute legal, tax, or financial advice. Always consult with your professional advisors before making any business or investment decisions. The host of this podcast and Edward Jones have an existing business relationship. This event is not a testimonial of the services provided by Edward Jones financial advisor Craig Jameson. If you're thinking about what's next for your business, remember the best outcomes are built well before a deal ever happens. Okay, everybody. Welcome to the podcast. This is Owner to Owner, the podcast where Northwest Arkansas business owners learn how to build value, prepare for transition, and understand how deals actually get done. This podcast is sponsored always in part by TransWorld Business Advisors of Northwest Arkansas. Your business may be worth more than you think. At TransWorld, we help you prepare, value, and sell your business the right way. You can visit us at tworld.com forward slash NWArkansas. I am your podcast host. My name is Cam Geiger. I am the co-owner with my wife Amber of the Transworld Business Advisors of Northwest Arkansas. We are business brokers and we are here to support Northwest Arkansas and the community. So our first episode was with Craig. Craig's with us for the second half of our time together. Thanks for sticking around. I'll do the introduction again for those of you who may not have listened to the first one so you know who Craig is and what we're talking about. So Craig is a financial advisor for Edward Jones, a leading financial services firm which operates throughout North America, in the U.S. and in Canada. Craig works closely with individuals, family, and business owners to build personalized strategies for retirement, legacy planning, and other long-term financial goals. He helps business owners turn business success into lifetime income. So we were having a really rich discussion, which is kind of how we had to break these in. But we'll continue kind of where we left off. We've been talking about exit planning. We've been talking about portfolio de-risking, life de-risking, a lot of those things that you should really be thinking about as a business owner, no matter whether you're in a lifestyle business or one that you've literally built to be a financial machine. So I guess my next question for you is what happens financially if a business owner is forced to exit earlier than expected? And this kind of feeds into the conversation we were having before about if you've got all your eggs in one basket and you're all of a sudden you you have a spate of poor health or injury or something. Kind of talk us through this. Yeah.

SPEAKER_00 2:41

And you probably know this statistic from the world that you live in, which is very complimentary and right beside the world that I live in. Um 50% of all exits are unplanned. Yeah. Because of sickness or divorce, or um strife between owners, or you name it, 50% half the time. Um here's what that means to answer your question: less leverage, less value, more stress. Um all of those put you in a position where you're off balance trying to navigate divesting yourself of a business. Yeah. Um, have you ever tried to sell a house when there's a downturn in the market because a job or career took you elsewhere? Um, some of the listeners are resonating with I've never gone through that, but I've got had friends that had to fire sell their house because the circumstances of their life dictated it has to happen now. For the business owner, it's the exact same way. Um, if it's under some level of duress, they're off balance, and sometimes they can't control the outcomes like they could. If it's a proactive on their timing when they're ready, as the business is ready, um always affects the bottom line. Here, here's some things that I see most often: health issues, partnership disputes, economic changes, just a shift in the economy.

SPEAKER_01 4:08

Let me add one to that, and that is burnout, because that's the other one we see so commonly is um it could be something totally unexpected, but it could be that you wake up the next day and you're like, you know what, I don't want to do this anymore, or I bit off more than I can chew, and I've got to do something. That urge, whatever is causing it, puts you in this situation.

SPEAKER_00 4:28

And I see that often with a business owner that is in the first five years of their business and they just kept thinking that they're gonna finally climb and sum it, and and and then they just reach the next, you know, peak off in the distance. Um, and then I also see that for the business owners that have been doing it for a long time. Yeah. And they're just tired. Yeah. And rightly so, they've done it for a lifetime. Yeah. Um, you come to that burnout point and you're ready to just get rid of it. Yep. Um, you know, we talked in in the first episode um about it has to taste good to the investor. Yeah. Can't be sour or scary, you know, buying that business. Well, also for the business owner that already owns that business, if they burn out, that business becomes burdensome, starts to taste bad. Yeah. And they're just ready to divest it. And it'll affect the amount that they could possibly get as a multiple on their business.

SPEAKER_01 5:21

You'll also fixate what we see is anybody that has interest in your business, all of a sudden you are over-eager to negotiate and compromise on things that you wouldn't other compromise for because you now you have this sense of urgency that you just need to get out. Yes. And that getting out makes you make less optimal decisions. It does.

SPEAKER_00 5:40

Yeah. Without a business plan, an exit plan, and a financial plan. Um, you can be forced to sell at the wrong time or under the wrong multiple.

SPEAKER_01 5:51

So here's another one that we've quite often um end up steering our uh our clients back to their financial advisor for because when they do come to us, sometimes they haven't been planning three years out. Sometimes they've had this unexpected um issue happen and all of a sudden they want to move with pace. Uh how should owners evaluate recurring income needs post-sale? So often what we find is our clients haven't thought about post-sale.

SPEAKER_00 6:22

Um there's a statement that you read in my bio that comes from my LinkedIn profile. I help successful business owners turn their business into a lifetime income or a lifetime paycheck. Um most often you know, the question is is not what did I sell my business for? The question is what does my money need to do next for me? Do I have another act in me professionally? Am I ready to be done? And what is the lifestyle that I want? Is it the same lifestyle I had in my business? And will I continue to be able to generate post-business after the sale, along with anything else that I have in um revenue generating um streams of income, you know, real estate or another business or, you know, my investment portfolio, can I keep the lifestyle that I had before? Umers need to understand all of those factors. What do I want my next act, if that's retirement, to look like when I'm done? That's right. And that is not just a financial conversation to have. It's a quality of life. It's a quality of life. It's an emotional conversation. Yeah, it really is. You know, so I want to retire and I want to golf every day. After weeks and weeks of golfing every day, is that still fulfilling in the same way?

SPEAKER_01 7:46

Yes. Yeah. That's we and we often find we used to find this in in corporate America as well, that somebody thought that they could get up every morning and go play golf. And there's a point where they actually wake up and say, I don't ever want to see another golf ball again. Uh, or they they want to fill their life with something else or something else that's come up as well. And so kind of planning that out and really having some realistic conversations with yourself and your loved ones is kind of important. Yeah.

SPEAKER_00 8:12

You know, I recommend that the people that are important in their world and know them the best might be part of that conversation. I know that's a weird or awkward conversation. Yeah. You've been the business owner and the driver and the boss and the, you know, the leader for all of those years to have people come in that are, you know, meaningful and valuable in your life and you know, maybe help you think through some things you hadn't thought through before. You know, along with that, not just what I'm going to do when I retire, but, you know, um, what is inflation going to do? Yeah. Um, how are taxes going to eat away at this thing that I don't that doesn't happen by chance. That's something you have to plan for proactively.

SPEAKER_01 8:48

And there's a lot of options. If you, if you've got the right people around you, not only is it a quality of life conversation, but it is a uh strategic planning conversation. Uh, you know, do you want to offer seller financing in your deal? Okay, it gives you a recurring stream of income, perhaps. It also allows you to spread your tax burden over multiple years. There's all sorts of different things that you can do if you've got the right people around you that you can cover your both your personal and your financial goals. Yes.

SPEAKER_00 9:18

Yeah. Yeah. Um, when I'm talking to the business owner, me, you know, I explain long-term confidence comes from matching capital. What did I get from my business? What do I have outside of my business in investments or or or in other asset-based um things and match that to the realistic income expectations and the time horizon? How long do I need that lifetime paycheck to last? Right. Um, I have funny conversations with clients sometimes where they're like, well, I don't plan to live very long. We can't plan for not live very long. We have to plan for what if you do live long? Because we we need to get you to the to the position where that lifetime paycheck is legitimately for the lifetime.

SPEAKER_01 10:05

Right. Yeah. You know, um, one of the things I'll just say for for the benefit of both of us, uh, both Craig and I have very specific roles that we play in this whole ecosystem of small business ownership and transactions and deals. Um Craig is a financial advisor, he's also a certified exit planner. Um, I'm a business broker, and so quarterbacking the entire transaction is something that we really understand. But we're both very careful to say if you want tax advice, go talk to your CPA. That's exactly you want legal advice, go talk to your lawyer. And and we very much encourage people from the very beginning to make sure those voices are heard and you're incorporating them as the small business owner in the entire process. That includes your love for us. And so we, we, we, we say at the outset, look, if there's somebody else that's going to influence this decision, let's know who they are. Let's get that out there, and then let's make sure that's incorporated all along the way. That's also in the whole vein that we talked about last time about no surprises at the end. You don't want any surprises of the seller any more than the buyer does. Yeah, that's right. Yeah, that's right.

SPEAKER_00 11:12

It is so important that you have a team of people that are skilled and experts in their lane, and they all come together. So, as the financial planner, so often I serve as the quarterback of um, you know, the CPA and the attorneys, multiple types of attorneys, and the business breaker and the exit planning specialist and the value advisor to help increase the value within the business years before you're ready to sell this thing. They all come together and build a master plan. Yep. How do we create the most money right now in the business years before we sell it? The cash flow, how do we maximize on that and put it over into different buckets so we have a diversified portfolio of just the business? Episode one, we were talking about 80% of the business owners' net worth is so often locked inside of that business. It's like a mosquito inside the amber. You know, unless you break the amber open, you don't have a mosquito, you know, there's nothing there. I don't know why you would want the mosquito out of the amber. That's another story. Maybe it's a some other gem. Yeah, yeah. But it's important you bring those experts together because the goal is ultimately that they're satisfied after they sell their business and that they have a lifetime paycheck or income.

SPEAKER_01 12:27

So uh before we get to our last question, I I wanted to reiterate on this point um uh another analogy you used in in the first episode, and that was uh around uh, you know, when is the best time to plant a tree 20 years ago, right? Um anytime three years or earlier than that, really is the way we think of it. Yeah. Um, but what's the other best day? It's today. And so there may be many people that are listening to this podcast are thinking, okay, well, great guys. That's the, you know, having a master plan sounds awesome, but I'm burned out today, or I didn't do that, and I still want to know what my business is worth. Um, and I want to make sure I've got an exit plan. Uh, the the advice I would give you, and I think you would agree with this, is go talk to your financial advisor, talk to a business broker. Um, business brokers have it in their vested interest to talk to you about these things to make sure that you're ready because your success is their success. Same thing for the financial advisor. We're not in this for our own personal gain alone. We have no personal gain if you're not really successful in thinking about this and there's no day too late. Contact them today. That's exactly right. Yeah. Yeah. Start today. So, what is one thing every business owner should do this year to improve their long-term financial position?

SPEAKER_00 13:48

Get clarity. Okay. And let me break it down. Yeah. Um, it's not just clarity in what do I want after I sell my business, but clarity on your numbers right now. We talked about in the first episode that the your profit and loss statement, um, you know, the statement of cash flows. What story does it tell? Is it is it a true, believable story that makes sense? Okay. Get clarity on your numbers. Get clarity on your risks. The best way to increase the value of your business is de-risking it so that you don't have weak points. No, let me restate that so you know how to account for the weak spots because you can't mitigate them completely. They won't go away. Right. You know, you can't avoid sickness or death. You at least need to be aware of all of them are. Be aware of them and say, what can I do about this? De-risk that situation, review contracts. Um, you know, what do you have with your team in place? All of those factors get clarity on your risks within your business. Um and then get clarity on your personal why. Deals break down so often in the sell of a business because it becomes emotional. Right. Mr. Business Owner says, My business is worth this much. The market says it's worth this much. The buyer may say it's worth this much. That's right. You know, almost always. Yeah. Oh, okay. And you would know that even with the meat. Yeah.

SPEAKER_01 15:14

Um get clarity on your why. And by the way, the buyers will ask you that question. Buyers always want to know, well, why are you selling? Because they want to know, is it, you know, did you run it into the crowd? Not that you're going to say that, but they're they're looking. They're going to want to understand what what's your motivation for selling. And they want to have a plausible, believable story on the other side of it. Absolutely, because they need to know that there's a consistent um business that they're buying. They're they're buying consistency. They want to know that what they're going to have is going to be that they'll get a return on the investment.

SPEAKER_00 15:47

There, there's a statistic that says 75% of business owners at the one-year mark post-selling their business have some form of recurrent. I would say a good majority of that is because they have not thought about what their next act was going to look like in retirement. Can't golf every day and be happy. That's right. You can't just sit around every day and watch TV and be happy. You know, when you were the doer and the go-getter and the business was all about what you made happen in it, um, and it was your baby, and then all of a sudden you've divested of it and you no longer have that identity, not knowing what that next act post-business looks like.

SPEAKER_01 16:24

That's right.

SPEAKER_00 16:25

You you can end up with some regret. It's a very important to give clarity on what that looks like.

SPEAKER_01 16:29

Yeah. Absolutely. Um Craig, this has been a ton of great information. Um Thanks for having me. Well, no, that's it, it's been been awesome. Uh, I would imagine that um at some point in the future, I'll probably have you back uh because we'll have um several other data points we'll be able to connect for folks and just kind of continue that conversation um as we go forward. But uh I think we've given folks a lot of things to think about. And again, if you're listening to this and you're wondering, oh my gosh, I didn't do half of those things. What do I do now? It's not too late to have those conversations. Uh, don't let the only voice in your head be yours. I think there's uh a lot of um uh really good experts you can surround yourself with, including a financial advisor, including a business broker, but your CPA, your attorney, your loved ones, um, and and and just start to think about what your exit would would look like. Okay, so we like to wrap up each each uh episode with some uh things that uh Northwest Arkansas business owners should know this week. So I've got a couple of other ones that I'll share, Craig, with our group here. The first one is around electricity demand. That's something that is rising nationally, driven in part by large-scale projects like the planned $6 billion data center in Little Rock. I think a lot of folks in Northwest Arkansas may not even know that that's happening. But while um some of the elements in Northwest Arkansas have made it very clear on the record that we're not interested in having a data center here in Northwest Arkansas, other areas of Arkansas are very open to the idea. And there is one that is planned, uh, a six billion, that's a six with a B. Um that's a huge investment for a data center, and that's that's going to take up a lot of electricity. Now, Northwest Arkansas still benefits from relatively low power costs today. Uh, we are actually below the national average. If you look at the uh electricity bills and overall energy consumption bills that we're paying in Northwest Arkansas, we're actually quite a bit below the national average. Um, so we benefit from that. Um, but the implication is forward-looking. Growing demand for power and infrastructure will likely put upward pressure on costs over time, unless, of course, we see this movement nationally actually pay fruition, that whoever's investing in the power structure that's going to be required for a data center actually ends up paying for it themselves. Because if they can do that, there is there's a scenario you can see in the future where um they could end up subsidizing our consumer um power consumption. Maybe not you as a small business owner, but there could be a benefit down the road. But this is an area to watch very closely. Interesting. Yeah. Second one is uh about portfolio rebalancing. So across Arkansas, national chains are closing underperforming locations as part of a broader portfolio optimization strategy. And this isn't new, companies do this all the time. Even Walmart closes underperforming stores over time as population changes. We're seeing that across uh uh the state right now. Um, but it's important to know that a lot of these decisions are made at the corporate level, um, not because local markets are necessarily failing, but maybe that corporate entity is not succeeding in that market. In Northwest Arkansas, that creates an opportunity because strong local operators often outperform national chains in high growth community-driven markets like ours. So if you're worried that the national chains are going to come in and take all the business from the local business owners, that's not necessarily the case. In fact, more often than not, um, it creates an opportunity for local business owners to thrive. And we've seen that over the decades, and it's proving true in Northwest Arkansas right now. Uh, the third and final one I'll leave you all with is uh across the state, large redevelopment projects are facing skepticism when timelines and business models don't align with operational reality. Um, we're seeing things like failing um strip malls uh that were great because they were in a population center five, 10, 15, 20 years from now ago, are now uh being looked at redevelopment. And some of the ideas that people are coming up with are incredibly innovative. But again, it's important for you as a local business owner or a local citizen to stay aware of what's going on in your backyard and make sure your voice is heard. We will always encourage you to do that. In Northwest Arkansas, um, redevelopment and infill are accelerating. All you have to do is drive down sunset in uh Springdale, and you're seeing all of these old strip malls being torn down. In most cases, they're being rebuilt, um, but they're being rebuilt at a much higher construction um standard, and you're seeing higher quality things being put in place of things that were looking run down. But what's important to remember is that um winning in business means you have to be able to execute and not just have a good plan and not just propose a good one. So um, as a small business owner, uh staying abreast of what's going on around you, super, super important. Cost pressures were building, national players are reallocating capital, high growth markets like Northwest Arkansas. Don't forget execution is what separates opportunity from outcome. Fantastic. So those are the big three. Um, we'll wrap up uh again our episode. Craig, again, thanks for joining us. Thanks for having um this is the business uh podcast called Owner to Owner. If you're thinking about what's next for your business, remember the best outcomes are built well before a deal ever happens. We will see you next time. And that's a wrap. for this episode. Thanks for listening to Owner to Owner. If you're thinking about what's next for your business, remember the best outcomes are built well before a deal ever happens.