Get Ready! with Tony Steuer

Get Ready with Bill Heestand: How a Smart Employee Can Buy Out the Boss

February 29, 2020 Tony Steuer Episode 14
Get Ready! with Tony Steuer
Get Ready with Bill Heestand: How a Smart Employee Can Buy Out the Boss
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Get Ready! with Tony Steuer
Get Ready with Bill Heestand: How a Smart Employee Can Buy Out the Boss
Feb 29, 2020 Episode 14
Tony Steuer

“Your ownership in the business, the way that you finance your exit, allows you to help that person finance the sale and is an annuity for you.” - Bill Heestand

In this episode, I spoke with Bill Heestand, author of the Ownership Ladder  about how to set up a successful internal business transfer & sale including setting a reasonable valuation. We also discussed how to succeed in the financial services industry and build a successful business.

Please subscribe to the GET READY! With Tony Steuer podcast. 

Bio: 

Bill is an author, entrepreneur and small business expert. During his thirty-two years as a business owner, Bill grew a company specializing in highly customized retirement, health and welfare benefits and business planning for client companies and their employees.  In 2017 Bill retired and relocated to Texas after closing the internal Ownership Ladder sale of his company. Following more than a year of taking stock, reflection, and fun, Bill created Ownership Ladder to share the mindset and life expertise to help potential intrapreneurs to the life they have been dreaming about. 

Show Notes Transcript

“Your ownership in the business, the way that you finance your exit, allows you to help that person finance the sale and is an annuity for you.” - Bill Heestand

In this episode, I spoke with Bill Heestand, author of the Ownership Ladder  about how to set up a successful internal business transfer & sale including setting a reasonable valuation. We also discussed how to succeed in the financial services industry and build a successful business.

Please subscribe to the GET READY! With Tony Steuer podcast. 

Bio: 

Bill is an author, entrepreneur and small business expert. During his thirty-two years as a business owner, Bill grew a company specializing in highly customized retirement, health and welfare benefits and business planning for client companies and their employees.  In 2017 Bill retired and relocated to Texas after closing the internal Ownership Ladder sale of his company. Following more than a year of taking stock, reflection, and fun, Bill created Ownership Ladder to share the mindset and life expertise to help potential intrapreneurs to the life they have been dreaming about. 

Speaker 1:

Welcome to the get ready podcast in partnership with a church nerds today, I'm pleased to be joined by bill Houston. In this episode,

Speaker 2:

We'll be discussing how to set up a successful internal business transfer and sale along with succeeding in the financial services industry. Bill's an author, entrepreneur and small business expert during his 32 years as a business owner, bill grew a company specializing in highly customized retirement health and welfare benefits and business planning for client companies and their employees in 2017, bill retired and relocated to Texas after closing the internal ownership ladder sale. This company following more than a year of taking stock reflection and fun. Bill created ownership ladder to share the mindset in life treaties to help potential intrepreneurs to the life they've been dreaming about. Bill has been a frequent speaker at financial services conference on topics such as building your practice retirement income and using technology. Bill also served as a member of the committee for the fiduciary standard. Good morning and welcome bill .

Speaker 3:

All right , again. Good morning. How are you?

Speaker 2:

I'm doing well. Thank you for joining me. Uh, looking forward to this episode. Fantastic. Well, let's , uh, talk a little bit about who you are. What do you do?

Speaker 3:

Great. Well, I am, I continue to be happily retired, although I am fully engaged at the same time and promoting my book, which is my current life passion. I'm a member of two Toastmasters clubs. I have a middle school girl and a high school girl, and that , uh , transportation activity keeps me quite busy. And so I have a full life. My wife is out in the other room trying to keep the dogs under control so they don't try to come and lick us while we're a product podcasting today.

Speaker 2:

Well, special guests, right.

Speaker 3:

Actually.

Speaker 2:

So fantastic. Uh , well, glad that you've turned the page to a new career. Um, so, you know, let's, let's go back to the start just to, so people can find out who you are. Um, how did you get started in the insurance business?

Speaker 3:

Well, it was a circuitous route. I didn't aim for the insurance business for our financial services or even for business itself. I was as a teenager recruited to work in a speed shop because the owners knew my parents and they said, Hey, bill is pills kind of handy. And he puts them in for us and they taught me how to, how to put bikes together one summer and kept me on. And so I spent quite a few years in the ski business advantage to ski shop, came back, got a job at another ski shop, met my first wife and she said, Hey, I know about , uh , some friends in Hawaii, we're going to start a health food store. Let's go home . So we ended up going to the big Island of Hawaii, the very Southern most community in the USA called Leighton and start at the Southern most health food store in the USA in 1979. And after cleaning refrigerators and sweeping the floor for a couple of years, I realized that was not all that, just not all that at all. We gotta go, we gotta go back to the main land . So back we came and my brother said, so what are you going to do? Then ? I said, I don't know. And he said, well, what'd you get a job as a bank teller? You can count, catch it . I said, yeah, I could count. So I got a job as a bank teller and , and they found me to be interesting enough that they put me on management training pretty soon. And then I was old enough to ask this question and my dad and we went skiing one day. And when I got into banking suddenly, and I could start actually conversing having interesting conversations before he was a capitalist pig and I was not. And whatever he was doing well, then I'd grown up enough. And we went skiing one day and I said, Hey dad, what is it you do exactly. And he spent the day regaling me with stories, sell agreements and employee benefits. And there's new fangled thing. It was 1984. He had just been to the million dollar round table. And this was his third career. He owned a lumber. He owned a short haul truck line. He sold it and retired for a little while. And then a friend said, Hey, come take over my dad's pension business. And , uh, so we spent that day learning , uh, him teaching me about this new fangled thing called a 401k plan, which you just heard Tim Dennis speak of at the table. He was teaching, you know , unveil, unveiling it to the world. A few people like fidelity this new mutual fund company back then and , uh , started to get some traction with it. And we started to do that business together after I said at the end of that day. Wow. That is so cool. What you're doing? Can I join? You heard of question in the family really that the least likely person to go join and his business was me . So, so that's how I got involved in the insurance business. It was much more interesting than banking and here I am.

Speaker 2:

Wow. Yeah. Well, you know, I'm still waiting for that first person to tell me that , that they grew up. Oh , I'm getting a little bit of an echo ,

Speaker 3:

Um, from my side or from you ,

Speaker 2:

Uh, for me, I think it's gone away. Uh , uh, let me make a quick note of the time so we can have this edited out. Sure. Let's see. Where are we in the video time?

Speaker 3:

Technology is great until it's a pain.

Speaker 2:

Yeah, let's see. We're about seven minutes in the water here . Yeah. I'm still getting a little bit of the echo. Um, I'm gonna just mute and unmute real quick. Okay.

Speaker 3:

Yeah .

Speaker 2:

Okay. Let me see. Okay. It seems to have gone away if it, if it comes back, I'll just get rid of the headset. Um, so anyway, so let's , uh , punch back in. Um, so I'm , I'm still waiting to meet that first person who says that that was their big dream growing up to come into the insurance business pretty much. I'm sure. You know, you've been doing this for awhile . I came into the industry about when you did is pretty much everybody I've talked to just sort of fell into the insurance business in some way or another. Um ,

Speaker 3:

Politically right before I got into the got hired by the thing I applied to this company called Phoenix mutual and they gave me their tests and I said, no, you're totally unsuited for this business go away.

Speaker 2:

Oh, I remember those old tests that they had at the arts agencies. They weren't very good at predicting anything, but people really believed in giving them. So anyway, you mentioned , um, the million dollar round table, and I think that's, you know, maybe , um , a lot of our lists nearshore and their property and casualty industry , uh , the million dollar round tables , uh, uh, uh, organization on the life insurance side that you qualify for by , uh, placing a lot of business. And it's a huge honor to qualify and bill you've qualified for both the core to the table and the top of the table, which is a very exclusive number of people. Uh, the qualify for that. What is your secret to success? What , um, got you up to the quarter table and top of the table,

Speaker 3:

You know , it was interesting that I just worked the business. It wasn't really a strategic plan of mine to get the core to the table or top of the table. It was more my plan to grow the business

Speaker 4:

And do what we were doing in a better way each and every year. And by doing that, just working that idea and that kind of, from that kind of thinking it happened. And , and I, a lot of million dollar round table folks are probably shrugging at this point. You know , I had to strategize and decide how to do it and get there. And that just wasn't really my plan. My plan was to work the business that I had purchased from my dad and grow it and make it really more significant.

Speaker 2:

Well , that's great. And I think that's an important lesson for our listeners is , um , getting the feedback again, I'm going to just pause the recording for a second. All right. So yeah, I , I think that's a great point that you make that it's really not about concentrating on , uh, focusing on the end result, but on serving your clients and on growing your business and working your business is, you know, if you keep an eye on your business is, you know, good things will follow if you do what you're supposed to do. Um, you know, so in addition to the sales success , um, you served as a member of the committee for the fiduciary standard. Um, how did you decide to get involved with it?

Speaker 4:

That was , uh , an interesting transition. I was , uh, we had, we had a significant amount of pension business as well as 401k business, which is kind of a , an odd thing since pensions are a fading reality except in the public sector. And I, one time I got fired and why did I get fired? Because a guy came in and they made a pitch that was totally based on fiduciary concepts and a fee-based , uh , fee structure, as opposed to a commission-based structure. We came up in the trends business. So we were commission oriented, and this was a large enough plan that I stood the , the insurance company that had , that kept the business. Since they didn't have to pay commission, they could pay whatever fee, whatever. I started working with the wholesaler, and I said , what gifts? And he said, well, you got to convert to a fee-based business. That's where it's going. And I said, okay, that's what we're doing. And in order to charge a fee, you have to take not, not just the insurance test and not just a securities brokers test , you have to take an investment advisors test and get certified as a registered investment advisor. Then you can declare yourself. And it desperate fiduciary on the , uh , on the investment side, which is now the norm in retirement plans, nearly everybody who is, who is a significant player in retirement plans is an investment fiduciary. And so, and just as part of that, I started , uh , becoming it's a joke. So hopefully nobody will take it the wrong way, but I became a fiduciary Nazi kind of like a suit Nazi on Seinfeld. You know, if you , if you weren't that you just

Speaker 2:

Shoot , I'm not having a good morning here on the recording. Sorry about that.

Speaker 4:

Okay. Well we're all back. Is that like water all over the floor or coffee?

Speaker 2:

Yeah , no, it was , uh , a water bottle. I was trying to adjust my lighting. Um , sorry

Speaker 4:

About that.

Speaker 2:

All right . Let's , uh, pick up. Um,

Speaker 4:

So I became, I became like the soup Nazi on Seinfeld, where if you weren't a fiduciary, you really weren't seeking the best interest of the client on the retirement plan. And that was probably halfway into my career. It was, it was probably now 20 years ago. And as I gradually migrated our business from an investment commission-based business to a advisory fee-based business, where we were a fiduciary on everything to take on that kind of liability, that the lawyers who, who teach on the subject at the retirement plan meetings say, well, you are liable right down to your cuff links. Since I don't wear cuff links, I couldn't afford to lose them, began to educate myself. And the committee for the fiduciary standard is, was, is one of the advocacy groups that simply says, if you're doing retirement plan business, you shouldn't be doing it unless you are accepting the liabilities that go along with the advice you're giving.

Speaker 2:

Definitely what , you know, it's, it's something I, you know, I wrote an article in 1995 , um, Fran bestie , you know, stating that, you know, my thought and this was with another , uh, insurance consultant that the days of commissions were numbered in the insurance industry. And , uh , that day has not come yet. Um, but you know, the work that is done by the committee on the fiduciary standard was amazing. Um, but you know, it , it seems like it's kind of faded into the background. I mean, given the current regulatory climate, do you think it's going to make a comeback that whole thought pattern of moving to more fee-based products and advice?

Speaker 4:

You know, the distinction between an insurance commission and an investment advisory fee is quite different pricing . When you look at the pricing formulas for an insurance product, if you charge a fee or if it, if they amortize a commission and the numbers don't change that dramatically, but in an investment in the investment world, they do change dramatically because everything is real time in the future, 5% upfront mutual fund commission that comes right out of the consumer's pocket. If you charge 0.2, 5% over time, that comes out of the consumer's pocket too, but it's an amortization on the advisor's part . And it demands a definite service package that is explicit, that is understood by all parties. And it's an accountability function, how to translate that into the insurance world. I think it's probably easier to do though. I don't know that much about PNC pricing, but it's possibly easier to do there than it is on the life and annuity side there, because the one, a auto policy for example, is a one-year transaction, w the broker and I have to decide, well, is that the right company to stay with for next year? Usually it is, but if some other pricing comes in, there's really no cash value. There's no future value. There's no surrender charge to take into account. So it's a much more , uh , fluid kind of situation, similar to investments. That's where that's the parallel I see is that if I don't like mutual fund a, but I want to be in the category that it's covering international large companies, just as an example, a fire them. And I hire somebody else and overnight the money isn't the new deal and the pricing is different and the philosophy is different, but I'm still in the category. Similar auto insurance will fire them. And overnight I'm with a new company, I still have coverage. I can drive and not be exposed to, you know , unlimited liabilities if I didn't have insurance. So kind of the parallel I'm drawing with life insurance, the longevity is of the policy might be 50 years, the amortization of a commission over a 50 year period of time. It irons out to be a relatively tiny number. And you really wouldn't want to charge a fee to a, to a consumer that is equal to the fee or the commission that is paid on a life product or an, or a long-term care long-term disability. That kind of thing.

Speaker 2:

Definitely what I'm sure we can cover a whole episode, Justin , with that . Those are some great points in it . And you know, that probably answers the question of why, at least in the life insurance side, we haven't seen those types of products succeed. A number of companies have launched different, no load and low load concepts, and they just haven't caught on. Um, so let's , uh, transition into what you're doing now. Um, you know, I , I, I'd like to go back to 30 years ago where you purchase a business from your father, cause you know, to talk a little bit about what that process was like and how that led into what you're doing now.

Speaker 4:

Yeah. Love to , he proposed to me a couple of years in, we just, we were having this amazingly good father, son, mentor, protege kind of relationship. And he's an , and I am a , I'm a learning spot. It's just my nature. I don't, I don't care much. I never cared much for the educational mode of doing it, but when it's, because I want to do it , um , just, I just eat it up and he could tell I was eating up everything we were doing. And he said to me, a couple of years in, you know, you can , you should buy this company from, he was mid , early sixties at the time. I said, Whoa, what do you mean going to come from ? Literally, I was just scared to death. My, my wife and I had just scrapped it , scraped together. Some money with her sisters helped to put a down payment on a little house and putting, you know, $20 a month in 401k plan was like a mind blowing experience. It was just my level of sophistication wasn't high at that time. And he said, well, just relax. It's okay. There's plenty of time. Don't worry about it. So some time went by and he groomed me and we he's , uh , he consciously walked through the succession conversation with other clients and me and , and me with them and invited me to participate in that kind of conversation with other clients. So it became about other people and how to other people solve it . And that taught me one of the principles that he really preached when it got serious. And that is, he said to me, look, don't worry about it . The business will by itself. What do you mean? He says the cashflow is going to be there the day after I retire. Just like it's going to be there the day before I checked . Where's the cashflow going today, going in my pockets , going in your pocket the day after I retire, that'd be more going in your pocket. I said , huh , like that. Right? And you're going to take some of what was going into my pocket and keep paying me and I'm not going to work. And I said, Oh, he says, that's how the business buys itself. Every business buys itself, me and sold his lumber brokerage. And that's where he started learning this lesson. He had sold his truck and that's already learned this lesson. Almost every business is tight actually. And very few businesses are that market. And once you get clear on that idea that the whole media frenzy over IPOs and venture capital and all of that stuff, that's a very, very small part of the business. You can reverse most businesses these days, especially are not built around machinery and big plants and big real estate holdings. Those companies are in a different universe than most of the business universe. Most businesses I learned over the process of writing this book, average 10 employees wow. And their intellectual property businesses. So they're not really a role , even a roll up opportunity. In most cases. Now there's some exceptions, but for the most part, they're not. So this is the principle of him teaching me the business buys itself, the business to do that has to have continuity. The owner who is leaving has to, has to be careful enough that they get enough money. That it's good for them on the back end , but not take so much that it collapses the business does if it does, if it's so much for the buyer that it's really not worth it to hassle with the virus , then what is the former owner have nothing. Now what most advisors tell a lot of small businesses to do? These are the CPAs , the lawyers, the valuation guys just liquidate . Well, if you've got some stuff to real estate, I mean, it's a retail store and you have some product on the shelves. You have a blowout sale store closing. And so off all the furniture and all this stuff off the shelves and, you know, put up a hundred or 200,000 or something in your pocket, pay off the trade receivables or payables. You have a little money left. That's, that's common advice for small business continuity, which is what that taught me is much better . So I took that , uh , took that lesson to heart. It gave him 15 years of, of additional retirement security. It gave me a lifetime career and it built the idea in me that we could do this again. That's how I got started on the , on the writing the book.

Speaker 2:

Oh, fantastic. Yeah. And I think that translates so well to , uh , as you know, the insurance industry, because, you know, there's so many small operations, you know, be it a direct sale agent to a broker MGA, whatever title you want to use. Um, there, there's so many small operations that are operated by one or two people, and that's always, you know, the question how, you know, at some point, how do I separate myself from the business, but also continue , uh, the business for next generation to continue to service the clients. And I think, you know , that's where, you know, solutions you offer with the ownership ladder come into play. And you know, so how did you , uh, evolve the idea to where you were able to sell your business and develop the concept of the ownership ladder?

Speaker 4:

Well, it took a mere 30 years next success musician. Who's got gray hair suddenly. They're no . And right. So I hired somebody 10 years before I ultimately sold her. And my reality was, as I mentioned, my two kids, we adopted two girls from China were late bloomers. I was 50. My wife was 49. They're now in middle school and high school, our son who was 12, when I married, my wife is just not a business guy and no interest in it. Never showed any interest, never mentioned any interest . And so a family succession was simply impractical. My girls harassed me today. Hey God , how come you didn't keep the business? So you could hand it down. I said, well, you know, I'd be, I'd be a geezer by the time it would behave in near ready and the business might not exist in. So in my fifties, I started to realize that this preaching, we had always done with our clientele. And I, even though I had pension business, 401k business health and welfare benefits, I always , uh , continued because our clientele was small business, continued to talk about succession planning and buy sell, and that sort of thing with our clients and ensure that those needs. So as my protege, Mary started to grow in the business. It started to become clear that she had definitely longterm commitment to this as a career. This was not something she was doing for a job career to her. And she took it seriously and she worked very hard and she contributed a lot. And so it becomes, and I think this is for your list, who are the owners? If I waited until I'm 64 and about a month, if I waited until now to say, I didn't get it, I didn't get a retirement thing going on here . Social security is coming next year. Maybe, maybe a couple of years from now, I should think about no the time that they need to think about it. At the time I started thinking about it was in my fifties. And I started realizing that there were some roll-up opportunities and I explored one. And did the , did the math on it? Well , I don't want anything to do with that . You know, one of the things that's interesting about, I think a lot of us, small business entrepreneurs, if we become unemployable, because we're used to doing it our way. And that's the problem with a lot of M and a situations is that the new owner you're now their employee. They said , well, you're going to be a consultant. We need you to stick around for a couple of years. You're their employee. That's just really a difficult position to be in. So I began to work with Barry and bring it up to her. When I get ready to retire, let's figure out how to transfer options to you. She was in. And so we had created this whole fancy complicated ownership transition program where she was going to do an earn it. And I was going to do a workout and I would work until I was 70. Well, about the time that was all happening, we literally had signed papers . It was all ready to go. The loitering was done. We went and called on a new prospect, pretty significant , uh, international company and pitched them on their us 401k operations. And they said, yeah, you're hired. Awesome. So we're meeting with the HR people in early in the relationship to talk about how we implement our system. And we send , by the way, we can do your forum or your health and welfare benefits. They should know. So well , yeah, we do that. They said, no, you'll never do that. We'll never do that. Right. Roger and candy do that. And they'll do that for us. So let's talk about four . Oh , by the way, he's not getting any younger. Maybe you should talk to him. I had, I had a lot of work where there aren't that many huge cities in the U S Portland, Oregon is not a huge city, so everybody knows everybody. So I had known Kim . And so I called him . I said, let's have much. And I said, have you ever thought about, you know , retiring? He said, yeah, actually I have, I just don't quite know how I'm going to go about it, but I have candy. And she's, she's the one I've told her all along someday, you're going to own this. And I said, well, how bet if we figure out how to do that? And he says, yeah, I'd love that. So I came back to the office and I said to Barry , this was not on the plan , but it's how serendipitous life is sometimes. Right. I said, you know, there's this opportunity for us to merge with this other practice. And , and so fitting into the ten-year plan we got going on. That could be really good, but if you hate her, this is not going to work at all. So why don't you go take her to coffee and just talk and see if you guys like each other? Well, not only did they like each other, they were just this train that suddenly was loaded and rocketing down the tracks because they could both see she had candy, had had promises made Mary and a deal, both see that the opportunity was to put this together and have a really significant business. So we literally, within months had merged the businesses. And, and as I went through the process of that, I realized, you know, the math doesn't work for me to be a principal in the benefits business. The math works for me to sell them my benefits business and let them buy his benefits business. Then Barry and I will keep working the retirement business. And so that's, that was the starting point rather than occupying, Oh , the air time . I'm going to let you pose a question here.

Speaker 2:

Well, you know , um , you know, I'm curious, I , can you get into , um , this, this is fascinating because I know this is a huge issue for so many people in the financial services industry. Can you talk a bit about the mechanics of how it works? Uh , the ownership.

Speaker 4:

Yeah. So, as I mentioned with my dad, it really is a matter of the owner being rational about the financials. Okay. There aren't that many small businesses that are that liquid that just happen to have a key employees who have a spare, a hundred thousand bucks in their pocket, right. Just everybody is living well. Well, we live well and we do well. We still, from a certain perspective, live month to month monthly mortgage, we got monthly groceries. We got kids who have schools , situations, we've got new cars to buy insurance premiums to pay all of that stuff. Right? So that the owner has to start from the point of view of taking off the , um, the filter that says, I have to get all my money up front that's number one, you go at it with that point of view, you probably will have your business die, and then you will die and you will both be old and there will be nothing left. And you will have had to work in your business for 20 or 30 more years. So if you let that go, you can start looking at well. So how could we make this work in , in my dad's case? And in my case, I didn't require a down payment and required monthly payments. And I , you just have to do the spreadsheets and say, what's the, what's the predictable cash flows of the business. What is a good owner's compensation? Maybe not what you're taking out of the business, because if we're successful, we're taking out quite a lot. And we said, well, that's my just compensation, but really there's a lot of profit on top of the actual work based compensation that you're taking in most cases, because , you know , in the 401k and pension business, one of the things that was just part of the job of the consultant was to know what everybody got paid, why? Cause non-discrimination testing requires that as part of the form pillar . So I saw pet owners in almost every business make a lot of money. So you gotta, you gotta go from the point of view of, well, you know, 400 is my number two. Yeah. But the business can't pay me 400 and keep going with a new owner. What are they supposed to do live on 40,000 a year for 10 years while you get your 400, you know ? So you have to get over that. That's really part of the hurdle as a seller is what's it ? What works? Think about it as a what works situation. What is, what is the business need to keep functioning and running on all cylinders ? What does the new owner need to make it? So that screwing it up is way worse, way worse than the great situation of keeping going is they're in a good situation. They will never screw it up . Why would that , and then, then you figure out based on those two factors, how much can the business sustain and pay me? What's the value of the business? So therefore, how many years is it gonna take ? I don't , what did I do? I gave him 22 years. Why 22? Because that's how the math worked out well for everybody there , there they are already because they combined the two businesses and because of their, their young age and they're right, they were right at the peak influential point in their career, my two buyers. And so what have they done with the business? It's vastly bigger than I ever could have, did make it. And so my financial security is , um, um , a, I'm still a number significant to their formula, but I'm not pigging out on their revenue and their work in such a way that it's at all hard for them to continue to run the business and keep paying. Meanwhile, my family and I get to live a pretty comfortable life because of the combination of our other. I mean, that doesn't mean an owner doesn't have money in 401k and other investments do other planning. Can't thank you for your businesses , your whole retirement, but as a core , it's your major investment ? It's your major asset?

Speaker 2:

Well, I think actually that is an amazing point because, you know , as I was thinking about it is, you know, the way you describe it, it's almost an annuity for you.

Speaker 4:

It isn't, I love annuities by the way.

Speaker 2:

I , I think annuities, you know, have gotten a bad rap overall, you know , um, unfortunately some companies have twisted them and earned that reputation. But I think the concept, you know, especially in this , uh, type of scenario is, is a wonderful way. It works for everybody. But I think the core value that I'm hearing from you is that you can't be greedy. You need to be realistic and to share , um, you know, maybe that principle , you know, I don't know if you remember that, all , everything I need to know, I learned in kindergarten, you know,

Speaker 4:

Being stupid on either side of the equation, that's where it takes the spreadsheeting. You'll have to either hire yourself a spreadsheet or you'll have to train yourself to be a spreadsheet. Or maybe you are one, but that's the way you can just tinker with the numbers. And it's a lot of people want to make business transactions, you know, fancier than that. But really it's a matter of the build a spreadsheet. You see how the numbers flow and you watch it, you say, does this work on all sides of the equation? If it does. And it works well, then it's likelihood is it's going to keep working if you've , if you, so the other piece of this equation though, is it's, it's a really important part. It's mentoring the success. A lot of people think, well, I'm going to sell it . There'll be, you know , they're my kid . They'll try . I trust them. There'll be good. Okay. That might work. And then many cases it does, but in many cases, it doesn't. And it's really a matter of looking at that whole person and saying, are they really committed to the whole package here? Did the kind of business we're in to perpetuating this business. Do they have a vision for where it should go? Because a lot of us tend to think, well, I know that at all. No we don't. So when it's time to get out of the way, if they really have a passion, they that business, because it's this really nice platform we've built up over the years, I took the platform, my dad built and built it many times bigger. They are taking the platform that I built and the project bill and taking it way many times bigger than that. And ideally few years down the road, they'll either they will have grown it to the point where they really are an acquisition target at a certain scale. Businesses become acquisition targets, but they have to be of a significance that the buyer really sees a financial asset at that point, not just a, you know, that's one of the things I talk about in the business beyond the, that is really part of this mentoring equation. I think it is a mentality of an owner that is looking for an angel buyer, like , like the tech get angel investors and angel buyer is a fantasy for most businesses. Why? Because an angel buyer and a 10 person business, the owner has to work. Then an angel buyer never wants to work. They want to give you 500,000 bucks. And in five years they want 5 million back and they don't want to work. They want to walk in and say, what the hell are you doing? Do it better. And walk out and wait for their 5 million to come. So they can take that 5 million and buy five more businesses each where the million and do the same thing. That's their mentality. Most small businesses need a person that works. So as you're mentoring your person, that's really the equation to be looking at. Are they, are they a worker? A lot of people like to use the word I'm an entrepreneur. Well, you know, entrepreneurs, they startup mentality. After, after a couple of years of entrepreneurs, if you don't have going business concern, that is a business, then you are a business owner, but you really not. It's not a thing, right? Entrepreneurship is not really a thing in my book. Ownership is a thing. That's why I called it the ownership ladder, because that will, entrepreneur's a great buzz word. Everybody likes, especially press. They love that. They love to talk about it. Colleges like the teacher , entrepreneur classes as well . I think they should teach business owner classes because that's where most of the activity and the universe is

Speaker 2:

Definitely. Well, I think one thing is I'm not going to tell entrepreneur magazine about this interview. It may be highly disappointed.

Speaker 4:

They asked me to write an article or I get to, you know, I'm gonna , I'm gonna , I'm gonna spin it a bit different.

Speaker 2:

So, you know , um, have a couple wrap-up questions, but I, I think a big one is , um, a lot of people in the insurance nerds audience are younger in their careers . So how can they position themselves? You know, to be the type of person who could participate in an ownership ladder type situation, what advice would you give somebody who's young?

Speaker 4:

Yeah. Uh, I saw it often. I never, I never did it myself, but there are , um, there are people who are, and I've seen it in the securities business more than I've seen it in the insurance business, but a person with a book of business who is getting ready to retire and a young business owner who is building their business. If they think of an ownership ladder in the context of themselves, rolling up a business and saying, Oh well, there's agency down. The street is a good guy. He's got two or three people and obviously drive a nice car. And he lives in a nice part of town, probably successful. And he probably wants to retire at some point. And in the same token, as we've been talking, his opportunity to be rolled up, he may not be that big. You may not be that significant in a, in a, you know, you need to be there talking to your clientele on a one-on-one basis to keep the trust. This younger person can think of it in that, that they could acquire other books of business through understanding the ownership ladder and being, even if they don't work there or they don't work there for a long time, they could use the ideas here to position themselves with those business owners. The other thing that is important, I think for younger business, people to do is, is take every action in the business that is designed with a mentality that I am growing at business to be a longterm asset. I'm not getting next months , car payment, where this transaction I'm building my business. And as I build my business, I am making a marketable entity and a marketable organization. So what does that mean? I gotta have good records. I gotta maintain financials of the business that are completely separate from my own. I have to hire professionals to make sure that my , my legal, my accounting, my , uh , operational functions are really well-defined. So that over time as you build , because businesses gained value by having pro that's it because it's, it's a mental, I mean, it's mostly mental assets, so what's the proof. Well, you've got a track worker , you've got clients. If you have a great CRM that tracks all of your client relationships over time, those become part of your marketing package. And then as you grow older and you start to see yourself as a mentor role , your own personal Mary and candy and practice so that they can be com owners. And frankly, if you, it was true of me, I guess , a lot of frogs throughout the process of trying to find the succession part , kept doing it for quite quite a lot of years, bringing in people thinking , well, this will be a partner. Eventually they'll buy the out , uh, be ready to say, eh , you're out.

Speaker 2:

Uh , I think that that's an important point is that it is about the fit. Um, and, and this is so interesting. There's , there's so much to explore here and that I , I think this is going to be extremely helpful to those in the industry. Um, you know, either own their small agency or brokerage, you know, whatever operation that they have and are looking, you know, a lot of us in the insurance industry are graying out and , uh, you know, it's time for a new generation. Uh, I think the insurance industry is kind of hitting a refresh point. I, you know, you share that view. Um, you know, the , the question I always like to wrap up with is do you know, getting your number one tip on being financially prepared, you know, what have you learned and what would be that one tip that you would leave, you know, either consumers or advisors with, about being financially prepared,

Speaker 4:

Put your money in your 401k too .

Speaker 2:

That is excellent because I think that's something I can't remember the statistics , how much, how many people don't take advantage of the 401k match. And that's something I could never understand walking away from that free money .

Speaker 4:

Exactly. Well, and if you're the owner of the business, you have to, you have to create a 401k and it costs you money to do it, but the longterm benefit of that to you and to everybody else, because you don't get to just cram in all you want without bringing your folks along. And that's just that that's the non-discrimination rules that are existing and they're fair. They're right. So build your plan so that it , it makes it possible for you to maximize it for yourself so that you have it's , it's one of your multiple assets that you can rely on for your monthly paychecks when it comes time.

Speaker 2:

Boy, that sounds really close to the concept of the ownership ladder.

Speaker 4:

The whole thing is really, really tied together. They, they, there are, you know, when you brought up annuities earlier, I'm just gonna refresh on that for a moment. Social security really isn't a new 401k, regardless of how you extract the money from it really isn't an annuity, your ownership in the business and the way you finance and help the person finance the exit is an annuity. But I can guarantee you, especially as an early retiree, because , uh, because health insurance costs continue family that costs of an old guy buying health insurance is ridiculously expensive. You need a pretty healthy annuity to , to go buy yourself some health insurance, if you're going to early retire. So, but my advice actually is to try to stick it out till you're 60. I mean, 65, excuse me. I was 60 when I exited and it was the right thing for my, my people, my buyers, I was in , I would have been in the way if I had stuck around and really distracted from and detracted from the success of the business. So I did, but from a financial point of view, if you can find somebody else to pay your health insurance, like Medicare, that's a good thing, putting a pitch for some of those politicians.

Speaker 2:

Well, I think, you know, it's unfortunate. I know, you know, in, in working with financial planners, you know, over the years and consulting for them, that health insurance is always one of the big topics for people is , you know, what do you do with that health insurance premiums in retirement? And, you know , pre-retirement , um , anyway , um, thank you so much for coming on today. Um, where can people learn more about you and the ownership?

Speaker 4:

So I'm going to grab a copy. So the book cover, which you see here is changing on amazon.com because Amazon's background is white. As I discovered after I published it and this book cover while beautiful, and I love this handshake, it's just, it's so significant, but it doesn't pop off of the page of Amazon. So the new book cover, don't be looking for this cover. When you go looking for the ownership ladder, you will still find the ownership ladder, but it will be mostly orange with a kind of a , a torn front icon to it. And , um, so you go to Amazon and buy the book. If you are an Amazon, a Kindle unlimited reader, you can read it for free. I have heavily discounted right now, so you can get a copy of it for a very low price. I would love to have people connect with me on LinkedIn. So bill he , Stan H E S T a N D LinkedIn slash bill. He stand connect with me. That's where I do a lot of communicating on part of a bunch of different groups. And I just enjoy participating in those groups on my website, the ownership ladder.com. You can join the mailing list. You can get a free copy of the summary version of this book, which is basically all of the, all of the section summaries. Each of the groups , there's four sections in the book. And so I presented each of them with a summary section. So if somebody wants a quick and easy overview of the book, join my mailing [email protected]

Speaker 3:

And you'll get emailed a PDF of that. You want to buy and go to amazon.com and buy and pay me money for it. But

Speaker 2:

Well, and for our listeners, all that, you know, in case you didn't have your pen out, or you're listening to the song to go is all the links will be in the show notes. So you can just , uh, you know , enter convenience , uh, check out the show notes and find out different ways to connect with bill and find out what he's up to. Uh, bill. Thank you so much for joining me today. It's been a real pleasure.

Speaker 3:

Oh yeah . I've really enjoyed it. Great conversation. Hopefully it's helping somebody.

Speaker 2:

I think it'll help a lot of the audience out there.