Van Carlson – Risk, Wealth, the Entrepreneur’s Edge: Protecting What You Build

I have so many write offs. We'll be able to write ourselves

right out of business. Yes, and I mean they make a

dollar, they spend $1.10. I mean, it's just the mentality

of. That's the American Dream,

right? Yeah, exactly.

Make your business decisions as business decisions.

Take advantage of every write off you can, but you never make

a business decision because of the write off.

You write off things that were wise business decisions.

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MacArthur code.com Hey there and welcome to From

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So today I'm excited. I have a special guest, Van

Carlson. This is a little bit of a

deviation from our normal format.

Van is a bit of a more white collar a worker, but he's got a

entrepreneurial streak in there as well.

And I think he has some great information that will be very

beneficial to those of us that work in the trades and in non

traditional career paths. Van works with many blue collar

companies to mitigate insurance risks.

Van is the founder and CEO of SRA 831-B.

He has more than 25 years experience working in the

insurance industry and is going to help us better understand the

risks that we face and how we can mitigate them.

So, Van, thanks for joining the show.

Yeah. Thanks for having me on your

show, Eric. Appreciate the opportunity.

Awesome. Well, I'm sure our listeners are

anxious to dive into the advice you have for us, but we like to

start every show getting to know you a little bit and connect in

a little bit. So can you tell me a little bit

about where you grew up and what your childhood was like?

Yeah, you bet. Grew up in Central Valley of

California. Farm kid did that for many years

and then my folks, like in the early 80s decided to sell

everything and move to Idaho. And from there, my dad bought a

couple small businesses. I ran a local convenience stores

and pretty much worked my, you know, wasn't running a tractor.

We were working at one of the grocery stores my dad owns.

So pretty much that was just what you did as a kid back in

the 80s. And I like being the farm kid

mostly. It was a great experience for

me. I, I worked at a lot of farmers

markets on the weekends and that's kind of where I learned

how to sell. I mean, I, I remember my dad

would say, Hey, let's sell everything at the end of the day

when clothes, when the farmers market was getting ready to shut

down and I think I was selling watermelons three $4.00 just so

we didn't have to bring them home.

So, but I remember yelling that out as a little kid when I was,

I don't know, 7 or 8 years old, been doing it ever since been

yelling it out ever since. That's kind of what I like is I

guess this were kind of started being the entrepreneur so.

Yeah, yeah, it sounds like that entrepreneurial streak runs

pretty deep. So what did education look like

for you? You know, education wasn't that

important to me. Like most kids, I guess.

Played a lot of sports, went to a very small school, got a

scholarship to play football that kind of went South.

And I end up joined the Coast Guard for four years.

And after four years of that, I came back and actually had my GI

Bill and finished out here at Boise State University and with

a political science degree. I was going to become a lawyer.

I go to law school and I'm glad that didn't happen.

I'm not a fan of lawyers in any level, and I couldn't imagine

being ones. But no, I got in the risk

management right about that time, started PNC Agency.

And as they say, the rest is history.

But you know, it's been almost 30 years.

Well, we'll be. Yeah, it was 96.

So, yeah. Is that 30 years?

OK, that is Yeah, right. At 30 years, you got to get

ready for a reunion this spring. Yeah, I guess.

Oh, man, So political science background now working as an

entrepreneur and specifically in the insurance space, Yeah.

Do you utilize your education much in your current career?

I would say not. I think what the biggest thing,

you know, college is getting kind of a knock right now, which

justifiable in my opinion, a lot of ways, but I do think it, it

does create the narrow path to critical thinking.

Hopefully that's what it did for me, honestly, was to be more of

a critical thinker and my decision making.

And that's, you know, I would, I would attribute that more than

anything as far as any kind of degree out there.

I, I was never going to be a, you know, the doctor.

I mean, I never specifically would have focused in on anyone.

There's a liberal arts degree at the end of the day, political

science was but, but I liked it. I loved history actually.

I saw myself as a honestly, I was going to become a teacher

originally, but then when I found out they got rid of

corporal punishment somehow along the line in those four

years of me being being away, I'm like, I don't because I went

to a class one time and I the guy, black kids were back

talking. I was observing a junior high

class for one of my college credits, and I'm like, hey,

these kids are kind of talking, and they broke for recess

forever. I asked the teacher.

I said, hey, I noticed these kids are kind of.

It was hour after spring break. And I said, he's pretty active

right now. They're, you know, talking back.

They're interrupting you. I go, why don't you have a

paddle on the wall? And he looked at me like, what?

And I said, yeah, that's what my teachers did.

That's what I plan to do. And he's like, oh, no, man, you

can't do that anymore. I'm like, well, I'm out.

Literally at that point I said all you got is carrots.

I can't do business with people and just have carrots.

So that's why I want a different route very quickly after that.

I had no interest in being a public school teacher at that

point anyway. Oh man, that's great.

That's funny. As long as you can smack kids

around, you're good to go. But.

Well, you know, at least at least the at least the threat of

it, right? I mean, for Hell's sakes, I

mean, oh. Yeah, there's no way I could

make it as a teacher in today's world.

I've got some friends and relatives that are teachers and

the things they put up with the the way that they have to go

about running their classroom, it'd just be untenable for me.

Yeah, super patient. Yeah, super.

Yeah. Oh, man, great.

Teachers are few and far between and they don't get paid enough

so. No, that's for sure.

Oh man. Well, it sounds like you came

from an entrepreneurial background, kind of a, a blue

collar childhood and growing up. Can you tell us a little bit

about, you mentioned a few jobs there and a transition through

your career, but can we dive into that a little bit deeper?

How do you get from a a political science degree to

founding SRA? Yeah, I was.

I was actually working at FedEx going, so I worked my way

through school. You worked at UPS, FedEx here in

Boise. And I was going to go to the

FedEx route. And honestly, I, I trained under

the corporate management program during college.

And back then you had to have a college degree and all these

other things, become a manager for FedEx.

And I was, I remember hopping on planes, flying to Memphis and

then from there I'd fly to other parts of the country applying

for management positions. I applied out of station down

the Florida for a couple years. So I went down to Fort

Lauderdale, I was interviewing for a, a job there as a manager

and I would have to uproot at that point.

I had my, I had my oldest son and then my daughter was just

born. And I thought to myself, I'd

have to uproot my family, move to a place.

Florida's a great place been back then even there was a lot

of issues back in late night. He's around that part of the

world. But you know, I just thought,

man, this is not what I want for my family.

And so, you know, I took the risk, I, I went to, I started as

a Farmers insurance agent actually.

And you know, the scratch agency and he literally, I remember

back then they didn't have caller ID.

So telemarketing, local phone calls, I, I bought mortgage

leads. I started my own insurance

agency literally from scratch. And within eight months, nine

months, I was a pretty, pretty, I was a top producer at that

point relative to my peers in the area.

And I was offered an agency and I took it and, and that was in a

town, a little, little town called Meridian ID, which is now

when I took, when I started with 24,000 people.

I think now it has about 100 and well, about 125,000 now.

So it's a, you know, that's it's grown by that far.

But no, it's literally how it started.

I mean, I just, I really, I just wanted the lifestyle for my

family living in Idaho. And I know working for, you

know, working, you know, I called a job, you know, the, you

know, just over broke kind of stands for you know, you know,

it's hard to make it a really strong living in Idaho.

I kind of recognize that early on pay scales are not the

greatest, but but you got the quality of life and you know,

sometimes they'll still go online, but if you start a

business, you got the opportunity to do both.

And that's kind of the way I saw that.

And that's what we did. So right now for many years came

a top one producer and all that good stuff, right, You know, all

the accolades of that. And then I started dabbing in

everything's. But honestly, you know, my

clients were were subcontractors.

I love plumbing. Actually, I owned a plumbing

business with my brother. I own four of the businesses now

at this point, I own a construction company that does

nothing but industrial refrigeration businesses around

the really were licensed in five states.

That's that's I started that company with my brother-in-law.

That company's Sir has been awesome to watch grow over the

last several years and it's become a really great business.

And I, and I do love, I'll be honest with you, of all the

businesses I've worked with and been involved with, I do like

the service industry with some of the construction side of

things. And that's kind of got my

interest right now piqued more than anything.

My son, my son runs this company now and my daughter's involved

as the controller. She worked for Deloitte for a

couple years and she's ACPA and she came to work for me a couple

years ago. And then my youngest son

actually works in that company, Sir and Sir stands for Superior

Industrial Refrigeration. And I love that business.

I love the cool storage space. It's very unique, very nichy

still in the construction world. Yeah.

And we've done well there, you know it.

And I own some, they call them Rave Laundromats.

They started laundromats with my business partner probably about

eight years ago here in the Valley.

There was really needed and that business has been great.

So, yeah, I think, I think for the most part, what's afforded

me to be able to grow my business so is really what we

do, what I predominately do is risk management and how do I

position dollars more effectively and efficiently for

business owners, entrepreneur such as myself.

That really takes advantages of the downturns and the unforeseen

incidences that happened all the time now.

And in the world we're in when it comes to risk, it's got much

more complex. So oh man, Joby, there was 08.

Honestly, yeah. OK, man, that's interesting.

I, I wasn't aware of all those other businesses.

I think you, you probably fit our, our traditional guest

profile a lot more closely than I expected.

I thought insurance was kind of your focus, but you've you've

been all over the map and got your fingers in almost

everything. Yeah, I, I, I do love it.

I, I see when I see an opportunity, I can't say no to

it. It's kind of a disease, I think

maybe. I don't know, I, I do drive my

staff nuts with it because I do come up with all sorts of

different things and there's just a ton of opportunities out

there right now. I, I know a couple right now

that I'd love to, But I mean, I'm getting to the point where I

don't, I don't know if I want to do it honestly.

I'm, you know, I'm 58 now. I've got starting to have

grandkids and so things start to pivot on that end.

So, you know, it does eventually calm down a little bit.

You don't want to. I think it starts to calm down

anyway. I hope it does.

But anyway. Yeah, that's awesome.

I think that's probably a trait of a lot of entrepreneurs is

they see opportunity everywhere they turn and and it's hard not

to take advantage of it. I think that's probably maybe

more so than skill or intelligence or education.

That's probably one of the determining factors with

entrepreneurs is, is the ability to see opportunity and the risk

I guess the the lack of being risk adverse to to go after it

when you see it so. I couldn't agree more.

And, and it's really the risk tolerance you got to have.

I mean, and, and being fearless when it comes to doing something

nobody's ever done before or any of that kind of stuff.

And you got to have a chip on your shoulder to do it right,

honestly. That's, I think that's true as

well. And yeah, that was the word I

was looking for, risk tolerance. It wasn't coming to me this

morning. So awesome.

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Well, do you want to tell us a little bit about, I guess you

have lots of businesses, but specifically SRA?

At what point did you decide to step away from farmers and start

your own thing? Well, ironically enough, my wife

came to work for me. Our kids were starting to

getting old enough. She came to work for me and she

actually I sold my agency to her when O 8, you know, the Great

Recession. You know, I had a lot of client.

I mean, so so we're growing, right.

I mean, Meridian is growing, you know, it's building home

subdivisions. I mean it was just pouring into

the valley here and all those guys were clients of mine.

I mean this the this sheetrock guys, the plumbers to

electricians, general contractors, landscape, I mean,

you name it. And you know, and I, you know,

looking back, I mean, you know, I love those guys.

I mean they all became friends eventually.

I mean you bit you work with them long enough, people become

friends in that in that relationship.

And especially if you're like minded of of business.

And you know, I love the fourth quarter.

I mean, the fourth quarter was good for me because, you know,

these guys would call up and say, hey, I met with my CPA, I

got a tax liability, I'm buying two more trucks and a skid

steer. What's it going to cost to

insure? And, you know, everything,

everybody's making more money, you know, you know, looking

back, I mean, all he kept doing is betting every year was going

to be better, better than previous year.

You know, I mean, they take advantage of accelerated

depreciation and then finance the equipment and then afford a

new boat or the bigger house and all those things, right?

And, you know, I made the joke and it's true.

I mean, they make a dollar, they spend $1.10.

I mean, it's just the mentality of.

That's the American dream. Yeah, exactly.

And you know, here comes O eight O 9, you know that.

And unfortunately I was witness to a lot of those.

I lost a lot of those clients that, you know, the loans and

you know, covenants and loans started to mean things and

leverage was, you know, you don't want to be leveraged over

leverage because there was a sudden halt.

It was like a slow stop. It was like a, you know, it was

like hit the wall, you know. So then I you know, I was kind

of exposed to the idea of managing self insured risk

through a tax code called 831 B. At the time, I wasn't that

interested in it quite honestly didn't seem to make sense for my

business owners. I didn't really see the lines,

you know, and I thought traditional insurance was doing

a good job and honestly was pretty cheap.

And so to this idea of, you know, and then here it comes O

8. And then you realize the

financial risk business owners take and betting every year, you

know, the you know, my clients were good, hard working people.

Maybe not the high sophistication of business, but

knew their trades really well, cared about their employees,

sponsored the baseball teams, I mean, all of that, right?

And then boom, they're out of business.

Yeah, that's the quintessential blue collar businessman.

Is they starting to trade? They get really good at it.

They see opportunity, they take a risk, and they're really great

plumber, a really great electrician, a really great

whatever, and they learn business along the way instead

of coming at it from the other angle.

So they need experts in their corner to help educate them on

those things. Absolutely.

And, and unfortunately their Cpas aren't, you know, you know,

they're, they're a good trusted advisor, but they don't, I can

tell you some nightmare stories. I saw what's happened to some

business owners dealing with Cpas that weren't paying

attention to them, guys that grew really fast and didn't know

the back end exposure they had to taxes.

And anyway, so you get all this out there going and in the

financial risk business owners take every year to do what they

do. And, and that's really what I

thought, man, there's got to be a smart and better way of doing

business. And I was exposed at that same

time of RV manufacturer here. If you ever go up, down through

Hwy. 84, which is, you know, all the way from really from Salt

Lake coming up through Portland, OR through the Columbia Gorge

and all that, there's a lot of RV manufacturers through that

corridor. And I knew the gentleman that

was running one of those and he had seven of these 831 B plans

set aside over the years that he was using tax deferred expenses.

So basically, let's talk about 831 B real quick on a high

level, sure, 831 B is no different than when you fear a

four O 1K. It's just where you find in the

tax code, right? The federal tax code, which is,

I don't know, 3 or 4 inches thick, you know, so that's just

a tax code, but it what it is, is designed and it was

introduced in 1986. Shockley enough.

I was just I was still in high school in 1986, but in 1986 they

passed a law called A31B tax code for a tax incentive.

If people want to self insure risk, we want to use pre tax

dollars to do that with right versus after tax.

So that that was the incentive. And what was happening back in

1986, very similar to the market today where this, you know, more

exclusions, pay more, pay more premium, getting less in

coverage, very similar to what's going on today.

And I would say actually today it's worse than it was back in

the 80s. The farmers are also using

losing their crop insurance. So private sector was getting

out of it and became too volatile.

It wasn't profitable business. And that of course it's, you

know, it's backed by the federal government, no different than

FEMA or terrorism coverage and all that kind of stuff is today.

But back then that wasn't the case.

So they created an incentive. So basically you're going to

expense it out of your operating company level, no different than

if you bought a general liability policy or work comp or

any other expenses when it comes to your operation of your

business. But then it was going to dump

into a AN-831-B plan that has to look and feel like an insurance

company. The premium going into you don't

pay taxes on it. And so where we kind of fit with

our clients is very similar to a four O 1K administrator, right?

You're not going to participate in a four O 1K plan without a,

you know, a person in the middle, a Chinese you know, that

forms the guard. Somebody willing to read that 3

inch thick tax code? Exactly and keep you out of

trouble, make sure the dollar state tax deferred, you got your

risk of rules, you got all sorts of regulations AT4O1K if you're

going to participate. It's no different than A31B, but

it is for small to middle market business owners that are self

ensuring risk. And you know, that was 1986.

You know, now you Fast forward to well, 2026, the world's

gotten much more complicated. I mean, there wasn't even a

thing about, you know, back in 96, nobody I thought about cyber

risk, right? Cyber wasn't even a thought.

So you started seeing supply chain, you started seeing more

of a global economy and all that stuff develop.

But again, it wasn't really, you know, a long term thought

process to what what's the ramifications for all that?

And then you Fast forward up to O8 and then and in the course,

the big one would be COVID. You know, that's when a lot of

business owners took a you know, and and so one of the things

that we do and, and is this, you know, hey, visit Mr. Business

owner, you know, we run through their underwriting.

We look at their policies on again, we come through and back

and say, Hey, listen, you got this coverage, you yourself

insuring this, this and this. And a lot of times these

business owners already know what they're self insuring for

and we just come down to. So do you want to use pre tax

dollars or after tax dollars? If you want to use after tax

dollars, just keep doing what you're doing, rely on your lines

of credit, your savings or your operating capital of your

business or take some of the tax liability you pay, defer it and

put it into an 831 B plan. And when these things arise,

you're going to use pre tax dollars to handle that, handle

that self insured loss in your business versus after tax

dollars. And it very similar to the four

O 1K. You just have a lot more dollars

to invest over here to work out, no different than the four O 1K.

You're deferring your taxes on that as well.

That's for you, your retirement and for your employees

retirement, but you just got a lot more dollars to invest.

Well, in this case, you got a lot more dollars to handle the

risk and, and now in today's world, you're seeing a lot more

first dollar losses, Eric, when it comes to traditional

insurances. And I can dive into that if you

want, especially when it comes to different trades and, and

what we're seeing out there in the world of exclusions,

unfortunately. And it's it's, you know, it's

one of those things where I I would say that if you talk to

the business owner, they've been in business long enough,

they're, they're going to not, they're going to have a

nightmare story. Honestly.

It happened to them that they thought they were covered for

and they weren't. Yeah, you know, and how did they

handle it? And, and that's really what I'm

just here to position money for them to make it more effective

for them. And, and honestly, I think, you

know, a good way example to get your listeners to under think of

this as like an HSA for business.

Perfect. All we're doing.

Does that make sense when I say that to you as far as how the HS

leads work? Yeah.

Cool. Yeah, that's awesome.

So sorry, I was making a few notes there.

My mind's just racing with questions.

This is this is kind of my first exposure to the 831 as well.

I've been in a family business for 40 some years and and

running it for 12 and everything you're saying clicks right with

all that I know and I wasn't aware this was even an option.

So I got all kinds of questions here.

Before we really dive into the mechanics of the 831, I was

curious, does your wife still have the agency that you sold to

her? No, we sold it.

We sold it in 2014. I was very fortunate to get this

business up and running and still our cash flow in the

backroom. And my wife, you know, she never

dreamed of becoming an insurance agent.

Yeah. So she, she took one for the

team on that and she was happy to see it sold.

But yeah, she ran it for another, I don't know, four or

five years after that. She did a great job with it,

actually. But no, it was, it was time to

move on. And but it, you know, it took a

while for this business to grow too, honestly.

I mean, the concepts, the, the grind that, you know, I mean,

you just trying to get people's head around this.

Well, why, why the hell do I want an own insurance company?

You know, it's like, and so and then too, it took the economy to

get better too, quite honestly. I mean, that was a you know, you

look pretty young. So I don't know how much you got

hit on the O 8 bill or not, but somebody just said, I couldn't

believe how long that's been. It's coming up on 20 years.

That blows my mind. But yeah, yeah, time flies.

Yeah, it's just it's it's and also, you know, it's funny too.

I, I, I say this a lot and I speak all over the country on

this, but it's with especially with entrepreneurs.

We got to have short term memory, right.

I mean, I kind of joke, if we remembered all the all the

headaches, all the mistakes, all the losing money and all of

those things, we'd be in a fetal position and never get out of

our bed, right? I mean, it's just we have

amnesia like nobody else's, nobody else's business.

I mean, we forget real quick. We don't even remember the good

stuff. We like to flush the old stuff

pretty quick but hopefully learn from it.

Yeah, nobody would ever stick with it if you remembered all

the bad things. Running a business can be tough.

You would. You would.

Yeah, Yeah, you would. And, and so, yeah, I think

that's the, you know, like I said, I was very fortunate to

keep that agency during that time to be able to grow this

agents, this business because, you know, it's, it's not easy,

you know, I mean, you still got expenses at home, you still got

a family to provide. And meanwhile you're trying to

start another business. And and we're very fortunate to

have that cash flow sitting there still to manage that, to

make that bridge work, you know. Yeah, that's awesome.

It sounds like you've made that jump a few times.

You got your fingers in two different insurance agencies and

plumbing and refrigeration, a few different trades, and oh

man, I don't think I have the bandwidth to take all of that on

you. You must be doing something

right there. So you know what I would say no

micromanaging and really, really good people.

And I'm, I'm all about giving part ownership in the business

to some of my key employees. I mean there's some, there's

some agreements they got to sign basically 10 year investment,

but I'm all about that, especially up front.

I mean, I, I want a good EBITDA for these, you know, I want to,

you know, either we sell or we or they get another retirement

on top of it. I just think if you're going to

dabble in multiple businesses then you better have some.

The people need to buy in and they need some ownership

upfront, in my opinion, to make it work.

Yeah, that's great. That's some good advice.

And yeah, oh man, I'm making more notes here.

I'm learning all kinds. OK, well, you, you kind of got

us going on the the 8:31. I got some more questions kind

of for you and your leadership. But while we were on it, I want

to dive in here. So I like the analogy of the the

four O 1K or the HSA with the 831.

Is that money investable when you have it set aside like an

HSA or a four O 1K or does it have to sit in cash?

What? What kind of regulations are

around where that money sits? There's some of it does, meaning

that you know, because it's obviously there to pay claims,

but because you got to remember the box looks and feels like an

insurance company. So absolutely, I mean, you can

invest that money, it becomes surplus.

So these policies are now no different than the HSA, right?

Every year you get the ability to put more money into it every

year. You may not have used it last

year, hopefully, but now you have more money into it.

Now you're able to build it. And it's very similar to this

program to those dollars become surplus.

They're it could be either self-directed or you can have

your financial planner manage it.

Again, we're, we are as a company, we are an

administrator. So if you ask me, what's that

source? Core competency is we manage

over 800 insurance companies for private health companies.

So we do the, we do everything from taxes to financials to

underwriting the risk, issuing the policies, adjudicating the

claims. We run their insurance company

for them on their behalf. We don't, we're not here to

complicate business owners by no means.

I think we're a compliment to what they're doing.

One of the things that we say here, Eric, because we, we

emboldened business owners. So innovation or risk management

and, and we've seen it and we've lived it clients that have been

with us for a number of years knowing what they've done in the

backroom, it does give a propensity go take on more risk

quite honestly. And I love that because some of

these people are really good smart business owners.

And when they start to become risk adverse, that could be a

problem for us. Yeah, yeah.

So you said it's it's structured, it has to be

structured to look like almost a separate insurance company.

So how does that roll down to the company's balance sheet or

are those assets still kind of shown on the balance sheet?

Well, it depends, right. So this, these are C corps, the

8:30 OV plans are formed as AC corps.

So they're shareholders. So shareholders can be the

operating company. A lot of times it could be the

owners of the operating company is typically why we structure

those. So it really depends on what the

what they want to do for the long term.

This is an outside asset. It can know if it's in your,

it'd be no different than on your personal balance sheet at

that point. As far as you know, if you're a

shareholder of that 831 B plan, I could do it.

Our typical clients are husband and wife and they own this thing

5050 in their name and their operating companies, their

operating company and our two. If I got multiple partners and a

company, we we structure it a little differently or we may

just have the operating company own it, which is perfectly fine.

That's when we kind of rely on, we would advise on how to own

it. There's some legalities to how

you have to own it. So obviously that's where we

stay within that bandwidth. But you know, we, we rely on

their other trusted advisors. That's when the CPA ought to be

advising them or their attorneys or whatever is going on out

there. Advice on how will the ownership

should look. But it really is AC Corp.

It can either land on there as another, you know, no different

than owning a building in a way, right, from a business

standpoint or, or you can own it individually in the husband and

wife's name and all that kind of stuff.

So are the two partners names or whatever going on there?

But that's really the way it looks.

OK. I, I would just, I'm trying to

get my head wrapped around it. Like I said, I'm this is new to

me as well as probably many of our listeners.

And I just thinking, you know, if we, if you set that cash

aside to self insure versus putting it in an 831, there's

the obvious tax advantage. But if you know, if you have

that in an account, it could be collateralized for future

financing or things like that. And you know, is this still

going to be held as an asset in that regard?

Yeah, it's definitely going to add to your balance sheet,

either your company's balance sheet or your personal balance

sheet, both the banks are going to want so.

Yeah, Everybody thinks that they can keep liabilities limited to

their business. At least what I've found is in

the real world, that's not the case.

You're you're responsible for all your company's assets and

liabilities. Yeah, they all the, you know,

these banks want to wrap you up the best they can when it comes

to protecting downside of their risk.

Yeah, yeah, I'm sure if I read them all, some of the documents

I've signed as a business owner would be a bit terrifying that

the trick is you just got to sign it without reading, right?

Yeah. Press hard, you know, sign hard,

sign here and press hard. Then I would say that the the

personal guarantees definitely become a a burdensome for you

and and you know, and you know, it's funny.

I'm literally going through this right now.

If Sir Sir is buying, we're buying the building in order

right now. Plus it has two more buildings

on the campus, plus another 2 acres that we're going to, we're

going to develop into a drop yard for our materials.

I'm trying to avoid the PG right now and I think I'm going to,

but you know, honestly not not Yeah, but not to only toot my

own horn here. I just think, you know, you got

to get to a certain level financially and then they just,

yeah, OK, we're good and we're buying the buildings, right?

And I think that helps with, I mean, we're going to have a lot

of equity into them from day one.

Yeah, when you when you spend 30 years building multiple

businesses, you finally build up the assets where you can do

that. So that's great.

Yeah, I still though. Yeah, it is what it is.

I, you know, I'm not because I own a lot of commercial

buildings too. And at the time, you know, you

think these are all really good ideas.

And then it has become, you know, somebody said to me, well,

actually a financial planner, I recently came on board as one of

his clients. He said, you have complexity

creep. And I'm like, what?

And he goes, yeah, you have complexity creep.

And it's just again, getting back to that entrepreneurial

thing. You don't really, you know, I

drive my daughter nuts because, you know, she'll call this, do

you have a new LLC formed that I didn't know about, but that's

getting better. It's all getting better.

I'm, I'm calming down. But I would say five years ago,

man, I was, I was not afraid. All I looked around was

opportunity, opportunity. And but now I'm kind of kind of

calming down. OK, so sorry this is a a

sidetrack. I'll, I'll get back to the

mechanics at the 831, but you know, you, you've been in

business running a business for 30 years.

You've been in a lot of industries.

You've run a lot of different businesses.

The, the people that say the, the American dream is, is dead.

There just isn't opportunity out there like there used to be.

Do you agree with that, or do you still see opportunity for

someone to do what you've done? I see opportunity.

I mean, I, I think it's going to be more opportunity going

forward, quite honestly, if you're in the right mindset, you

know, if you're not in the right mindset and you want to play

victim or, you know, what was me or, hey, not everything.

And if you're looking for the right time does not exist, you

know, and, and so, you know, it comes down to having faith in

yourself. And, you know, honestly, I, I,

maybe it's fear, but you know, I kind of ran scared for a while.

I mean, I had a young family. I, I had my first son when I was

20 and my, my wife was 18, you know what I mean?

So, you know, you kind of run kind of scared at that point.

So you're like, damn, I got to get going here.

And so I, you know, all of that stuff plays in your mindset,

right? And then you got to have faith

in yourself. And then you honestly, you got

to have people around you too, right, That aren't trying to,

you want to tell a cautious tale, but at the same time, you

don't want to discourage from somebody to want to take a risk

either. We don't live in a we look for

comfort all the time. And I'm always trying to

consciously be aware of trying to look for discomfort.

Being trying to be comfortable all the time is a trap.

And I mean, that's, you know, because you start making enough

money at your existing job. So you don't want to leave.

You don't want to take the chance of going out and starting

a business for yourself because or you got too much debt on the

backside because you know, things were good and you you

know, there's all a lot of things that go into it, but

sometimes you just you don't need to check out deep.

The pool is you just got to dive.

You know, it's like, you know, it's all of those things.

You know, it's just, but yeah, I, I, I think the, the American

dream is alive and well. I, I think that's why honestly,

I was just sitting in a class and going through scenario, such

scenario planning. But that was, that was an

interesting day. It was said to, it was said in

that meeting this, this gentleman's from South Africa

and he said America is unique because of entrepreneurship.

It does not exist anywhere else in the world.

The mentality to think that you can start at your own business

does not exist. And I've travelled now since my

kids have gotten older and started having kids, my wife and

I do travel. I see it all the time when I go

to other foreign countries and especially Europe.

I look around, I'm like, you know, there's, there's not a lot

of small, there's small businesses, but as far as like

true entrepreneurship, I mean, it looks like they just got a

highly paid job that they have all the risks for, right?

I mean, that's basically what their business is.

And so I just find that really unique to us still.

And I'm so appreciative of that, that especially people from

around the world recognize that. I mean, that's why a lot of

people want to, I mean, think about who, who, who's, you know,

whether illegal or illegal immigrant, what are they?

First thing they do, they look to start a small business.

And you know, there are other parts of the world that's not

possible. And that's crazy, right?

That's super foreign to us. Yeah, I, I, I agree 100%.

I think the opportunity is there and I think comfort is, is the,

the detriment of I think there's been a couple generations here.

They got pulled aside by that comfort.

I, I saw this morning, Michael Easter just came out with a new

book. It reminded me of his book a

couple years ago, the comfort crisis.

I, I loved that book And I, I think and hope that this next

generation kind of coming behind me sees that and and is willing

to take that risk because I think the opportunity is still

there. What we're lacking is the people

that have the the grit, the determination and the optimism

to really go for it to take a risk and and dive in like you're

talking about. So yeah, I think this next

generation we're going to really see a divergent between the the

people that want to be comfortable and work a job and

the ones that are willing to take that risk like we haven't

seen in a few generations. So.

Yeah. And I and I, you know, we're

talking, we have a huge disruption on the horizon and

it's called artificial diligence.

And I'm encouraged by what I'm seeing.

To your point about the Gen. Z years that they are, they seem

to be a little bit more entrepreneur from what I'm

seeing. And then maybe it comes back to

that risk, right? And that they're not afraid to

take risks. They believe in what they're

doing or they believe in themselves enough to want to

take the risk. I think the millennials kind of

got, you know, screwed over a little bit, you know, just based

on their experiences getting back to the O 8 crisis.

But yeah, I'm encouraged really on the Gen.

Z here is quite honestly. I mean, we're seeing it here.

We're seeing younger business owners calling us, you know, and

you know, where we're seeing it mostly is agricultural,

honestly. Oh yeah.

The family ran farms and ranches that these kids that go to

college and you know what they do want to stick, you know, we

see more of them trying to go back to where, you know, instead

of trying to get that corporate job, they want to go back and

and work the farm and dairies and all that stuff with mom and

dad. And that's been kind of

couraging to see because very, very business oriented honestly.

I mean this is totally not your normal farmer kind of mentality.

Which, yeah, yeah, there's a lot of family farms turning into big

corporate organizations right now, and they're doing well.

Yeah. It's exciting stuff.

Yeah. I'm excited to watch and excited

to be a part of it. And I have, I have high hopes

for parts of our culture. But like you said, I think that

victim mentality, you can look at the disruption in our economy

and AI and you know, oh, whoa, it's me, my job's going away.

Or you can go, wow, look at this tool and what can I do with it?

And the people that see opportunity in that disruption

are going to boom. And, and I, yeah, I'm excited to

see what happens. So.

You know, there's been a, you know, anytime there's been a

major disruption, you know, Internet, well, cell phones,

Internet, personal computers, at least in our lifetime, right?

I mean, you know, major interruption would have been the

first time you saw a car driving down the road back, you know,

100 years ago, right? I mean, that would have been a

major interruption, right? And what's been interesting is

every time there's been a major interruption in our country, you

know, in the back, in the back jobs were more jobs were created

because of it. What will be interesting to see

is how AI plays out in that, because honestly, you know, when

you look at everything that's that's been like those big

disruptors, there was a lot of job.

Now they got rid of jobs in the front, but they created a lot of

jobs in the background, more so than what was lost, right?

And so it will be interesting to see how that plays out because

you know, on the, you know, I don't know, but I do think that

there's an opportunity for a lot of small businesses to, you

know, fill in the gaps. And then, you know, you talk

about, you know, they talk about human experiences and all the

other stuff that's going on out there that people are going to

have time to do. I think homesteading is going to

be. Big honestly, I think you know

that that's my that's got my attention.

I mean I'm I'm literally I'm I'll be home setting in two to

three years when my kids are taking this company over.

That's really my goal, honestly, get back to be a farmer.

You know, nothing like what we were doing, but enough to

support my family. But I'd love to know where all

my food came from. That's literally my goal.

But I think there's people are going to have time for all that

stuff. So it's going to be it's going

to be interesting. It's going to be an interesting

time. I, I hope there's more optimism

and then pessimism when it comes to this, but I do think it'll be

a big disruption, bigger than I think we understand on.

I agree 100% and I, I think that opportunity is there because,

yeah, like you said that, you know, pre industrial revolution,

it, it took everybody's full time attention to grow the food

that they needed for that day, that year.

And there's so many industries that had not been born yet

simply because we didn't have the the labor capital bandwidth

in our society and in our culture.

And so, yeah, farm equipment comes on the scene, takes over

all those farm jobs, but it frees up that human capital to

do so many other things. And you know, computers, the

same thing. We got rid of all the people

just keeping records, copying things, computers did, it all,

freed them up to go elsewhere. And so, you know, you talk to

most small business owners right now, and their biggest struggle

is human capital. They don't have the labor.

They don't have people. There's twice as many open job

positions as there are job seekers right now.

What we need is technology that's going to take over a few

jobs to free people up to do other things.

Yeah. Yeah.

And I and I think you better be a critical thinker too.

You better be proactive and not reactive.

And that's, that's part of the problem too, though, right?

I mean, you know, is education come that way?

You know, I don't know. Yeah, Yeah.

Well, sorry, we're getting a long ways away from insurance

here, but great, great conversation.

So the the 831 plans, it's money set aside in a separate C Corp.

It can be invested and then I would assume that when that

money gets used to cover actual costs or risks, is it then taxed

when it gets used or is it tax free on both ends?

It depends. It depends, right?

So depends if it's a business interruption protecting your

income of your business or there's a physical loss on the

property where you just be made whole, right.

So anytime you have a traditional claim through

traditional insurances, it depends on what what the

coverage was and what it's covering you for.

If you had a fire and you had to pay out $50,000 in deductible

and we took $50,000 out of your phone, that that would be an

expense, right? So you wouldn't pick it up as

income, but if it protected your loss of income, very similar to

PPP was right. Like, hey, I was just forced to

shut down for two weeks or whatever.

It disrupted my cash flow. I lost money, you know, and

that's where you, that's where you could put a claim in as well

for those types of issues. So it really depends how it

comes in. Now as far as tax free, so these

dollars that stay in the 831 B plan, the premium is tax

deferred, OK, And realized investment gains would be taxed

at the corporate rate. So that OK.

So like let's say you put your money money in a money market

account, kept it really simple, right?

You're getting let's say 5%, you would get taxed on that 5% every

year, right? But the premium that was sitting

there would not. Now as a shareholder, you say,

hey, I'm going to take a dividend out.

No different than if Coca-Cola declares the dividend, right,

then I would pay long term capital gains out, which is all,

which is lower, which is the same as capital gains rate,

which I think right now depend on your tax brackets, anywhere

from 15 to 20% with the feds. But so that's how that works.

So it does get taxed. It's when it's taken out of the

C Corp in the form of a dividend or let's say, hey, I've sold the

business. I, you know, I no longer need

this thing. I'm going to go ahead and shut

it down, then I'll pay a long term.

You know, I'm basically selling the stock or reclaiming the

stock back, shutting the C Corp down and I'm paying long term.

It's like selling a building at that point.

I'm going to pay long term capital gains as a shareholder.

Yeah, so. That's how it works.

I mean, best case scenario, you invest in this for a long time,

you don't end up using it and you have to liquidate it.

You're going to have a tax event.

But really converted ordinary income to a long term capital

gains. You you still stave on taxes

even at the end of the story if you don't use it.

Yeah. And and think of this as AHSA

plan too, right. HSA works the same way.

If you don't use it eventually turns into another retirement

plan. It's very similar to the four O

1K though the four O 1K gets taxes ordinary come time you

take it out, right. So those are the, those are the

nuances internally on that. And OK, that's how that yeah.

So I'm glad you picked up on that.

But yeah, that's exactly right. Yeah, sorry, I'm probably boring

all the people that are not spreadsheet nerds or rolling

their eyes right now, but no, I dive right into that so.

No, that's great. Well, my my next question I had

about that is, so you're essentially running your own

insurance company over there and I'm guessing this is part of

where you really come in and helping administrate the plan.

Do you have to underwrite specific risks that you're

covering ahead of time? Or you know what?

What things are you allowed to use that money for?

What? When do you get to cash that in?

Oh, OK. So yeah, we, we, we're the

administrator, right. So we're going to underwrite and

recognize self insured risks. We're going to run through your

policies, we're going to show you the exclusions.

We're going to wrap endorsements or policies around those

exclusions or you have a first dollar loss.

We're seeing a lot of coinsurance clauses now come in

very similar to healthcare where, you know, I had a

deductible, but now I got a wind damage or I got a hell damage

and I got a separate Co insurance on top of that where I

got to come in 20% on top of my my deductible.

So we're seeing. So we'll start to build a policy

around that first dollar loss and start to fund for that,

right. God forbid if it happens.

And again, you know, most businesses aren't they don't

have like a sinking fund where they where the case this

happens. I'm going to take, you know,

after tax dollar and put it in this account.

And you know, nobody's really doing that right.

This kind of forces that to recognize that that first and

foremost, so that that gets back to that.

You start to sleep a little better at night knowing you've

done this thing right. Because now you're not relying

on lines of credit, operating capital or your own personal

savings that you take you made out of the company.

But now you'd have to loan it right back in because now it's

got a huge expense that was not an operating capital, right?

So those are just great strategies.

Honestly, those are, you know, I tell clients that son, you know,

if you have a good year to take a little bit off the top, park

it off to the side. It's not only good risk

management, it's just good business.

And you know, it's like, it's like I get back into that O 8

conversation. You're still taking the

deduction as if you bought the the equipment, but you still

have the money. Yeah, that's a big difference.

And I'm all about people buying equipment when they need it,

right. But you know, that's where the

tax tail wags the dog kind of thing.

And to say spend a dollar to save $0.40 never somehow will

make sense of it. I'm I'm guilty of it when I was

in my younger days. So I'm, I'm not saying I wasn't,

but you know, there's not a lot. If you need it, you need it.

But and you know, a sad thing what I witnessed back in O8

look, thinking about O 8 when people were doing that right

buying more stuff. Well, yeah, they, they they'd

eventually said, well, that's eating at me.

I that's gets here. Can't be we got to put that

thing to work. Well, what let's go bid more

work lower our margin down to get it to get the job and then

and then we'll go we'll have more work.

And I, I have literally sat and I have never forget great guy

that owned a plumbing business had like 20 employees and he

looked at me and we were talking one day on his renewal and rates

were going up of course and coverages and had some losses

and all that great conversations you have with your business

owner. All that he said to me, because,

you know, I literally think I made more money and with very

little when I had eight guys with eight trucks and I had very

little headache relative to this.

And I, I'm making less money, take home money now that I got

20 guys with 20 trucks. And, and the way he got there

was he'd have a good year and he'd buy more stuff and then

he'd admire more employees. And that's literally a hamster

wheel at that point, right? And he just keeps getting faster

and faster. And that's what I don't want

business owners to get themselves into.

I want it to be strategic growth, not tax, you know, not

avoidance of taxes because I got to go, you know, and and that's,

you know, it's very safe from a Cpas perspective for you to go

buy more stuff. Yeah, they're not the ones that

are on the hook when. Business.

Yeah, they're not, they're not gonna lose sleep over, you know,

like, oh, you're doing some kind of really rude tax scheme here.

You know, no, it's pretty black and white.

And, you know, they just put it back in the big beautiful bill.

I think they accelerate the appreciation up to 1,000,000

bucks. And I want people to be

strategic on growth, not, not let the tax toll bag the dog.

But again, these guys are, I mean, they're good people.

I mean, hey, they don't want to pay anymore.

They get they get upset about paying taxes more than more than

anybody else. And they're like, yeah, you

know, I want to grow my business.

So they go out and buy a piece of equipment or they go out and

buy a truck and, you know, if they're, they're going to put it

to work, you know, they're not something to sit in the, in the,

in the bone that one of my the the backyards and just sit there

and there in the bullpens and not, not put it to work, you

know. And so, you know, but hey, for

more work, we got a bit more work.

We got to, you know, now we start to lower our margins,

which is crazy, but it happens all the time, all the time.

You just nailed a couple of my pet peeves.

There is I got some advice early on in business, I repeated all

the time is make your business decisions as business decisions.

And at the end of the year when it's time to pay your taxes,

take advantage of every write off you can.

But you never make a business decision because of the write

off. You write off things that were

wise business decisions. And I think you mentioned, you

know, talking to Cpas and them as advisors.

I've, I've come to the opinion that right now you brought up AI

and everybody talks about, well, AI is only as useful as the

input. You have to ask the right

questions. You have to have the right

input. And I think the CPA, it's the

same way. If you ask, can I pay less taxes

by buying equipment, the answer's yes.

That's exactly what it does. If you ask will I have more

money this year and next year if I buy new equipment, the answer

might be no. Yeah, well, you took out more

risk no matter what for the next year, you know.

Yeah. You know, it's funny about write

offs. I, I'll never forget it.

So I had a business partner and the insurance agency and he

didn't last very long, but it was all good.

But I, I, I I never forget what he there was one office, he was

the next office. And somebody came into my office

to talk to me about advertising on a, on a poster for the local

football team. And they said, oh, it's a great

write off. You know, you can write it all

off, blah, blah, blah. And they get up and they walk

out and I heard Phil, he he spoke, Hey, man, I got great

news. I'm like, oh, what?

What? Phil, he goes, we'll have so

many write offs. We'll be able to write ourselves

right out of business. Yes.

And that always stuck in my head when I hear somebody tell me

their sales pitches. Oh, you can write it off.

Again, like you said, you spend a dollar to save $0.30 like

yeah. Oh great.

Yeah, yeah. OK, well, we'll, we'll get back

on track here. I, I assume that most of the 831

plans are in addition to kind of the, your standard insurances

that most businesses carry liability insurance and, and

property casualty auto. Is, is that accurate?

It this is usually in addition to that instead of a replacement

of that. No, you're spot on.

You're, you know, when I took clients, I'm not here to

increase or decrease the risk you have.

I'm here to recognize risk that you're self insuring for.

And how do we position dollar dollars more effectively to

handle that? I think traditional insurance

does a great job honestly. Now it goes get to a point in

time and we do this as well when we're having a client, a big AG

operation with a lot of employees may say, hey, I got,

I'm paying north of 500,000. I got good loss runs, I got lost

controls, all those things. We will start to build out that

we will start to replace those insurances as well.

We have another company called Insure Edge, those are called

macro captives where these are large, you know, large

construction companies. Anybody paying north of $500,000

in traditional insurance. I got, I got some dairymen here

in Idaho that pay a lot more than that and they're a great

resource to have their own captive, meaning we'll start to

put their own traditional insurances in that.

But it's very, very niche and technical.

But at honestly, if you're paying, you know, typically it's

$0.40 on the dollar. So if you so if you're, if

you're operating an insurance company like traditional, you're

buying insurance company from Allstate travelers and you know

whoever $0.40 on the dollar of every dollar you pay them in

premium just goes towards operations.

Yeah, really the $0.60 left is paid claims.

So when they tell you you're unprofitable, you know, you paid

$5000 but you had a $4000 claim that year to them you're

unprofitable. And so, you know, so those are

what we do is when you get big enough though, and you're, let's

say you're paying, paying $1,000,000 in traditional

premiums, that's $400,000 now. Well, now we can put $400,000 in

your own cat, still take the 600 and go buy reinsurance carriers

in case you have a large loss. But you know, you're now you're,

you're betting on yourself, you're taking the profit and

you're running a lot more efficient than some, some big

insurance companies run it right.

So that's how that works. So if people are used to hearing

that, we do that very well. I would say one of the persons,

one of the people that works in that division for me and my

company, Stephanie Forbes is probably no better educated

person when it comes to do that kind of a program.

And she's, she's great. But that's very, very specific

and it's there's just not a lot of clients like that out there

that have pay those big premiums.

But yeah, most of them, most of them already know about it or

they've looked at it, or if they haven't, then they absolutely

should be looking at something like that for sure.

OK. And so for you know a lot of our

listeners are are young business people or or new business people

like we said tradesmen that they'd eventually end up running

a business and are educating themselves.

What are some of the the common things that maybe people don't

expect that it would be wise to plan for and self insure through

that maybe people just don't think about?

You know, one of the things, quite honestly, Eric, was, you

know, did you rely on PPP or the ERC programs?

And if you did, what are you doing differently today?

You know, God forbid if it happened again, but I don't know

if we can expect or should we expect the government to do what

they did going forward. So that's one thing.

So that's that's kind of spun some folks up in their heads.

And then too, if they've been in business long enough, they know

they, you know, what one of the big gaps we see is warranties.

You know, they, they offer a lot of warranty service contracts.

You know, they sign a three or four year service contract and

you know, they're just going to keep betting every year they

sell enough of those to make up for the difference in other

areas, You know, because it's ongoing cash needs, because you

know, you know, hey, I sold 500 service contracts this year.

Great. You picked all that up his

income this year, but you just booked it out.

You just booked the liability for the next three years for

that guy to go on and check on the HVAC and AC twice a year.

And he's going to want to get paid when he goes out there.

And if he doesn't pick up another job while he's there,

you know, that's that's that's a loss leader in your business now

and all that. Only thing that's making that up

is you sell another service contracts that year.

But we all know if economy takes a hit, people first and

foremost, people are going to make sure you come out and check

their ACS and their HVACS and all that.

And the second one is they're less likely to renew or even

want to buy your service contracts.

So that's when we could take a portion of those proceeds and

put it into an 831 B. And as as those folks are going

out and doing that warranty deal, they could put a claim

back on those dollars and move them back into their operating

company. And again, this is the

sufficiencies of business. What what we're describing is

big business does this all the time.

Yeah, there and and and what we always wanted to do as a

business and especially having these clients that were clients

of mine in the traditional insurance company is I wanted to

price it and make it to where small to middle market business

owners can take advantage. Is not just the Fortune 500

companies are very large privately held companies.

They're the first ones to adopt to this.

You may not be aware of this, but auto dealers are are also a

big adopter. I mean, if they're trying to

sell you a service cont any warranty, it's being sold

through a dealership through a furniture store.

I mean, this guy all have these 831 B plans, you know, they're

taking those dollars out of their operating company and

they're putting it in their own 831-B plans.

And I can tell you what they're doing with those reserves and

surpluses in the backroom is they're they're expanding on

their ability to grow businesses in so many different ways.

Warren Buffett's epitome of insurance, right?

I mean, he owns more insurance companies than anything.

And if you ever got any education or even watched that

guy, I mean, he, he's the OPM guy.

Other people's money. I mean, he uses other people

money to invest in and not give you any interest while he has

it. And then he just gives it back

to you at the end of that period.

But meanwhile, he knows how to make money.

So I want business owners to do the same thing and that, and

that's really getting back to that level of sophistication a

business owners need to be and, and you know, not be afraid to

look at the types of tools like this and take advantage of all

the, all the things that you said earlier.

You should try to take advantage of all the all those tax

incentives that are out there for you, but be be diligent and

be smart about what you're doing.

Yeah. But this is just one more tool

in the toolbox for business owners.

But yeah, that's yeah, so. I love that my mind went right

there as you were talking about that.

I was like, for all the years that I've been paying insurance,

I didn't know it was the the 60-40, but I wondered how much

of that went to play paying claims, how much of it was

overhead. Not much of it was profit.

And then I thought, yeah, I own a little bit of Berkshire

Hathaway stock and it does pretty good every year.

It'd be nice to just keep that yourself instead of paying them

their overhead and, and profit. And, and now at this point, if

you can have that money invested and growing.

And when one of those big losses does come up, you get to use

your own money that has been invested earning an income for

you rather than borrowing and taking on another liability and

paying more interest. So at the time of that claim,

really you're kind of getting the double win and a tax

advantage along the way. You get to invest the

government's money. And it sounds like a win all the

way around. Oh yeah.

And you know, some of the things that we're talking and the other

thing is called, it's called the enterprise risk, which is now

now they got to worry about brand protection, right.

You know, we built, we try to build our brand and all, all of

our business, our reputations, everything when it comes to

Google reviews to, you know, podcast, I mean, what reputation

is everything? The second one be supply chain

risk. And then the other one is we're

seeing a cyber. And then the other one, the big

one is third party business interruption.

More and more people are dependent on their CRM systems,

more and more people, their files are held in the clouds,

They get compromised. I can't, I can't pull down my my

customer base any longer to be the market contact, which

happens. I mean, and then they get they

get held hostage on their fishing.

And meanwhile it's affecting your business.

There is no traditional insurance that's going to

trigger coverage for you on that business interruption side

either. And so, you know, again, the

complications of running a business and the amount of self

insured risk you're already doing, you just don't know about

it. It it's very good examples PPP

And you know, hey, the government's going to shut me

down, OK, My insurance is going to cover me.

No, no, no. And so that's why the government

had to do what they did. But at the same time, you know,

I just want that was just I can go into stories.

I get a lot of stuff down to Florida.

You know, they get it. They get a hurricane coming

their way. Hey, you got to shut down, shut.

They shut down for five days. Hurricane never hits well.

That's five days of operations. They weren't able to collect

revenues from their, you know what, sell their products or

whatever. And so there's, there's always

constant disruptions in business.

Today it's it's, we deal with it all the time.

Dallas with ice, I don't know. But you know, nobody's going to

get on the road. Nobody's going to come and see

you. Dentists aren't going to have,

you know, it's just a huge disruption in those parts of the

world and we have it on every year.

It seems like anytime there's a hell or excuse me, an ice storm

down there, we're having business interruption claims

come in because, you know, because some of these businesses

run on pretty thin margins. So, you know, they, they make up

a volume and if they can't have the, if they can't create the

volume because they have to close down for 5678 days in that

month, that could, that could be a big hit to them.

Oh, yeah. I mean, there's a lot of retail

stores that their net might be 5% or less.

You're shut down for a week. You know, one week might be that

up. Yeah, Yeah.

That's your whole year's profit. And it's not like your expenses

stopped. No, no, you still want the rent.

You still want the, you know, So yeah, the bank still wants to

get paid on their loans, you know?

Yeah, Yeah. And so I know when we first

started communicating, you said you had recently walked through

a pretty significant cyber claim within a construction company,

which yeah, I know I'm guilty of it too.

When my insurance agent started talking about cyber stuff, my

eyes kind of glass over because I'm a trade business.

We don't, we don't do cyber stuff.

We're not running things on the web, but in today's world where

everybody's using cloud and everybody even has just

sensitive files stored on their own servers, that can be a a

real liability. Could you tell us a little bit

more about that, that incident, what happened?

Yeah, he they had a policy as very low, very low limits.

Honestly, the cyber policies today are, are written in a way

to really protect you from the cost of the guidelines.

The guidelines are, hey, if you're compromised, you know, if

you're lost your client files or it became public or, and if

you're collecting Social Security numbers, date of births

and all that kind of stuff. And, and somehow you get that

those files get stolen from you, You got to notify, you got to

give them credit watch for the next two years, you know, kind

of like LifeLock or whatever and, and all that kind of stuff.

So that's very traditional type coverages inside those cyber

policies. What's never, what's never

really covered is a forensic. So meaning you got to hire a

forensic team to come in and how and how they how they penetrated

into your firewalls to get into your content or your third party

was disrupt and that you have a hold harmless on the third party

that you didn't create the cyber breach, but they did.

That happens a lot. And then too, sometimes you your

stuff is held in ransom. That happens all that are you

wire money to the wrong people. You got fished.

And that's really where that kind of comes into play today is

especially companies that you wire money and move money

around. It's crazy.

They got how sophisticated things have gotten in that

space. It's pretty scary.

Yeah. Because AI is being used now for

voice overreach. Even CEO calls up, acts like,

you know, that's why we're, we're recommending now, you

know, like keywords to be used when there's a request for a

wire. Never wire.

Somebody calls up and says, hey, I need to change my wire

instructions or they send you an e-mail with wire instructions.

You know, we always, you got to send a test wire today say, hey,

tell me what I did wired into your account.

You know, if it's $2.50, what is it?

I mean it's all of those things you need to be proactive on.

But unfortunately, every year, more times than not, we have

clients that because of they want to help and please the

client, are they we want to do things fast and and appropriate.

And you know, this is may not be our money or the client should

have even paid it or suppliers should already been given the

money. We need it in order to get the

product. I mean, all sorts of stuff,

right that we do in our haste. Things come up and you know, an

e-mail that was masked to look like your e-mail, you again in a

hurry, you don't pay attention. And now you wired money off, you

know, several $100,000 off to the wrong account, never to be

seen or heard from again. And banks will not reverse that.

You are, you're on your own. And so it's those types of

things that happen. And, and I do hope people get

training and protocols. We actually have great.

If you're a client of ours, you always have access to cyber

training. And most of it comes down to

about 90% employee mistakes, honestly, mostly wanting to

please the boss to make sure it gets done timely.

And, and they kind of, they, like I said, they, they, they

insert themselves at the right time on these emails And it's

very sophisticated stuff. It happens all the time.

I wish it didn't it. It's got to get better.

I hope AI kind of cleans that up somehow.

But it's it's, it's so rapid. It's mind blowing to me how bad

it is. I was just having that

conversation the other day. It blows my mind the the ACH

transfers in a world that, you know, I got to click a button on

my phone and receive a text and open a letter in the mail just

to sign into my e-mail. And yet I can send $100,000 via

ACH with a name, a routing number and an account number.

No password, no confirmation, no trigger word, nothing.

Like it's just there it is, and it's gone.

It blows my mind that there isn't more security there.

So yeah, it's a real thing. Yeah.

And they look for businesses that transact that way and they,

you know, they either compromise, somebody sends them

a link, Simpson, some kind of e-mail that looks attractive

enough to hit a link. And then they put their Trojans

in inside your, inside your deal.

And they just wait. And then they intersect that

e-mail. There's not a human eyes looking

at it. They, I'm sure they build

algorithms and stuff like that. They said, oh, wait a minute,

somebody's getting ready to wire some funds.

Let's intersect this, let's intersect this and put an e-mail

in there saying, Hey, we need, we changed it.

We changed our warrant. We changed our bank this year.

It's, it's this warrant. And it, it looks, feels like the

same person that you might have gotten talked to 2 days ago on

the phone. So it's all of those things

that, and then there's no insurance for that.

The insurance companies will not cover that.

That was they're going to deem not to be an oh, more of an

errors and admissions or an intentional act, right.

And I get where the insurance companies are at.

How, how do you, I mean, how much do we want to pay in

premiums to offer that kind of coverage to us?

You know what I mean? It wouldn't be cheap, it'd be a

lot of money if they covered you for everything, right?

Insurance companies are never going to.

They can't afford to offer you for everything, right?

Yeah, exactly. Do you want to tell us a little

bit about that specific claim, what happened and how you were

able to walk with them through that?

Yeah. So when he, when he did turn

around and had that situation happen where he wired money

mistakenly to the wrong counts, Yeah, we've submitted a claim.

We investigated the claim, found out to be a valid claim and

we're able to recapture, I shouldn't say we weren't able to

go out and get that money. Now, he did get some of that

money back actually, but he didn't get all of it back and

put a claim against his 831-B plan and was made whole that

year. You could just imagine if it hit

you at the wrong time, right? You know, cash flows, everything

and all of a sudden now you got this, you know, you just threw

money into a black hole unbeknownst to you or one of

your CFOs or, you know, controller or whatever,

bookkeeper or whatever. However you're operating your

company, you know, you as the owner, you know, you got to come

up with the the difference of that.

And sometimes that can be really painful.

And that's really where we kind of shine, honestly.

Because over the years you've been able to put money away that

when you were profitable and your things are good and you had

a tax liability, you know, you're able to save for those,

for those for these unexpected type of losses where, you know,

unfortunately, you know, if you're having a bad year, just

from a business standpoint, you know, which happens obviously,

and you take this hit on top of it.

You know, sometimes there could be the difference between living

and dying, unfortunately. Yeah.

And, and I think that's really where, you know, you know, it's

one of those things you don't search these things out.

But one of the things that's was said to me early on in my career

doing this, and I knew I was on the right path at that point is

when the business owner said to me, you know, man, I just sleep

better at night knowing I've done this.

I jokingly say I I I still don't sleep that great to this day.

But it's nice to hear a business owner say that to you, though,

you know what I mean? That's it.

That's probably the biggest compliment you can get.

And, and risk management profession business that, you

know, hey, I just sleep better night knowing I did your

program. And, and you know, truthfully

too, Eric, you know, the traditional insurance and we

work with a lot of property casualty agents.

So I mean, guys that guys do what I used to do.

You know, they're looking to solve problems too for their

clients, right? They want to bring solutions

like this to the table. One of these.

I never really loved being a property casualty agent.

Man, I love you. You're a great guy.

I enjoy the fact you buy me lunch every year on the renewal.

But every time I see you cost me more money and and that was

never a great feeling, honestly. You know, I mean, you don't want

to. Yeah.

Anyway, but when this program came out and when I really

embraced it and saw the the advantages for small to middle

market business owners, you know, I save them money now and

and that's a good feeling. Yeah, that's great.

That's a joke I make a lot is my background is in a roofing

business and I said that the next business I run I want to

sell like 4 Wheelers or boats or something because nobody is ever

excited to write me a check. I might provide great services,

give them what they need, really help them, but they're never

happy to pay me, right? Right.

No, it's same thing. Same thing with insurance.

But yeah, no, roofing guys are great, man.

We do stuff for roofers. It's the, it's the, you know,

it's crazy back East, man. I can't believe how competitive

roofing is. Oh man, yeah, in some markets

especially, it gets it gets pretty cutthroat.

And they and they sell on the warranty.

I'm like warranty is coming down to the differentiator.

Who do you go with? And it's been interesting.

So we've actually enhanced some of these guys back east, their

program on making it more competitive on the warranty side

because now they're going to include labor, not just the

shingle or you know 25 year shingle, but also include the

labor if they got to come in there 10 years from now.

And it's been interesting. We've worked with some, we've

worked with some labor with some roofing guys back east,

especially at Michigan and the Minnesota area.

I mean, the older homes, obviously a lot of older homes

and older areas, any of those roofs replaced.

And yeah, anyway, it's been, it's been interesting from

seeing what goes on in the roofing industry.

You kind of covered this a little bit earlier, but I'll,

I'll switch directions, go to a question more about kind of your

your business rather than the product you provide.

Was there a particular impetus or something that caused you to

want to move into the 831 plans rather than your old agency?

Yeah, it was, it was definitely the O8I mean, there had to be a

smarter, better way to run business.

And, and, and that's really where when I saw the gentleman

that had four or five of these in place leading up to O8 and

what he was able to do with that money, those reserves and

surpluses over all those good years of selling RV's and

manufacturing RV's, he was the only one showing up at the

auctions when these other RV manufacturers were going out of

business. He was the only one that was

showing up to buy the raw materials.

I mean, he was literally buying raw materials for $0.10 on the

dollar. He's the only one that had the

money. The, the one thing that, you

know, going back to O8 and through that time, I mean, the

one that the one comment that always resonated, always heard,

man, if I only had the cash. I mean, banks were going to loan

you money, right? So, but I, I can't remember how

many times I heard that between real estate, buying a business,

going to the auction, buying raw materials or equipment or man,

if I only had the cash. And that's, and that's really

what flipped my trigger was like, yeah, this is what smart

businesses do. This is what smart money does.

You know, you don't go buy stock when it's an all time high,

right? And it's very similar to

business. And, and I think when, if you're

in a certain industry, roofing, if I'm being, if I'm making

money, my more likely my competitors are making money

too. It's when times get tough.

Can I still make money when my competitors aren't?

And that's the difference again, between living and dying or

growing your business or not growing your business.

And, and I think everybody makes money when everybody's either on

plateau or on a peak or, you know, you know, on a climb

mostly. And not as they're just bad

managers, right. But for the most part, as an

overall industry within your what you're doing, everybody's

making money in there, right? I mean, more likely they may not

be spending it wisely, but they're still making money.

But it's when those troughs happen, you know, when I when

things do go down the other way, when, when there's a peak and

now there's a down downward slope, and then you have this

through and then, you know, we all kind of come out of that.

I mean, it's just this is what this is what happens.

You don't make your money going down the through.

You make your money. You might make your money down

the bottom of it if you're, you know, really good manager and

frugal and have spent, you know, got the money, but it's really

the upper trajectory on that other side.

And that's really where you can grow your business because the

other businesses that you, the people you were competing with

are out of business or, or they're, they've been stifled so

much and so fearful of moving forward that they're not going

to move as fast as you can. Because you've got the, you've

got the war chest or the rainy day fund sitting in the back

room. Because as you were climbing,

you were putting some of that away as well, not just spending

it or you know, and you know that those are the, those are

things that the business owners need to be aware of and the

opportunities that sit there are significant.

Yeah, that, that's some incredible advice right there.

And even in my relatively short career, I've seen that I've

always been adverse to borrowing money.

I'm not a big fan of having payments.

I grew up in the construction industry and saw just what

you're saying. There's good years and bad years

and loans that you get on the good years are hard to pay on

the bad years. So and I've even gone further

than that and been run things pretty cash heavy.

And so just what you said, there's a couple years kind of

in the middle of my 10 year old owning the business that when

all my peers and colleagues were selling off equipment, I was

buying it because we had some cash and stuff was on sale.

Exactly. This sounds, you know, to me

that was smart business, but this is even a step above that.

You know, I was using taxed dollars that were sitting in the

savings account instead of invested.

And so if you can get tax deferred money and then earn

some returns and have it invested along the way, this

this is just a win all the way around.

It makes you so much stronger and nimble and it gives you so

many more options on the table. And the more options you have as

a business owner, the better decision you can make.

You're not, you're not being reactionary.

You can be proactive in a situation.

And this will and, and what I'm describing is, you know, our big

businesses, we got to compete with, you know, they're doing

these things and they're doing them because they're the

Deloitte, their CPA firm and they're not afraid of the IRS

and they'll tell clients like today, you got to do this all

day long. And then you got the small to

middle market CPA firm that, you know, you went to high school

with the guy, he's a good dude. And you know, you started as a

small business and now you're running a $20 million year

operation and you still kept him.

And meanwhile, he hasn't grown with you, but you've succeeded

over his ability to help you. But out of loyalty, we keep him.

I see it all the time and we outgrow Cpas all the time.

It's just out of loyalty. Who, who, who we are as a

person. We, we want to stay loyal to

these people that help to grow our business.

But at some point you do outgrow people and you got to recognize

that and make some tough decisions.

And so, you know, these are, you know, I should bring that up.

I mean, one of the things about this code is it's, it's been

abused shockingly. Imagine that, a government

program with a lot of bureaucracy and it hurts a lot

of people, and then a few people abuse it and take advantage.

No, I mean, you know, we're, we are, you know, it's part of that

innovation as Americans. I, you know, I work with Lloyd's

of London on some things. And the guy that my, my contact

over there, he always, he always, he says I love you

Americans. He said, he said, you guys go to

cocktail parties and you tell people how little taxes you

paid. He said, here in London, we go

to cocktail parties and we tell everybody how much we paid in

taxes. And I said, yeah, there's a the

Boston Tea Party's in breaded in our DNA.

There is no doubt about it. But it's just, you know, again,

it's just, you know, you pass something, wait a minute, I can

I can do this with it. And really what happened with

the code, it was hijacked for state tax planning.

And that's what really got the IRS hot and heavy on these

things. I think it's it's one of those

things, hey, get me once, don't get me twice.

And and somebody went for the bite of the apple twice.

And, you know, these are state tax attorneys that got really

creative under the code and it got the attention of the IRS.

And you know, it was it was masked to make it look like a

risk mitigation when it really was used for estate taxes.

I mean, that's what really has brought the pressure on this.

Today's conversations are so different today because business

owners know the risk they've taken to self insure and they

want to position it better for them to be able to survive.

God forbid if it happened right. So Oh.

Man. The abuses aren't out there like

they were. We still have some bad, bad

actors, but I don't care what industry you're going to have

bad actors, so. Yeah, yeah, this sounds like a

fantastic program. I wish I would have learned

about it earlier. When it comes to funding these

programs. I know you you mentioned or you

threw out the, the term principal payments and things

like that earlier. We've also been talking a lot

about good years and bad years are when you structure 831 plan,

is it set up with kind of regular fixed principal payments

or can you dump a little extra in there when you're having a

good year? You know what, great question.

So the premiums we're talking about, right, What premiums we

can put in, it's based on methodology pricing.

We always give our clients the ceiling.

So, so for example, you could put up to $2.9 million away in

this now, but when it first started as 1.2 and it got

changed a couple years ago and they increased how much you can

put into it. Congress did that was back in

2017 actually. That doesn't mean you get to.

So we look at your gross revenue.

We, we underwrite this no different than insurance carrier

would, right? Like what's your gross revenues

based on really how much premium we're going to pay.

The more gross revenue you have, theoretically the more risk you

have, the more premium you'd be able to pay.

So we come back in and we always tell our clients to ceiling.

So the other thing is not every year you have to fund because

getting back to, you know, I don't have a lot of tax

liability this year. I don't, you know, I did buy a

piece of equipment I needed. I don't have that exposure to

that or I just don't have the extra funds to do it with.

You know, it's not going to kill you.

I designed our program. There's, there's, there's annual

maintenance fees regardless because it is AC Corp.

So it has to have a tax return at Domicilos to get paid There's

from premium tax. They got to get paid and all

that. But we made it to where we do

recognize the ups and downs of business cycles.

Doesn't matter what you know, you know, you're, you're 1 entry

could be doing good and the other one could be doing bad.

You know, there's, it's not a cross sector industries that are

doing good all the same time. I mean, AG is a great example of

that, right? Cattlemen, cattlemen, you know,

cow calf operations great right now, but Barry's not that great.

I mean there's all adverse things going on there.

But so that's kind of, we recognize that when we built our

system out that you don't have to fund every year.

And and that's a differentiator in our space where our

competitors really they have fixed fees every year.

You got to pay them whether you fund or not.

And that never made any sense to me and blah, blah, blah.

But no, we definitely are, you know, we're bringing this into

the point where, and I really appreciate being on your show,

quite honestly, Eric, because we just want to bring awareness to

this. We want to bring awareness to

guys like you that are risk takers and say, hey, you know,

there is a better, smarter way to position dollars.

And here's what I know about. Here's what I've come to realize

being 58 years old. I used to be the, you know, I've

had the 6576 series financial licenses.

When I look at legacy type families or legacy wealth, it's

really how they position money over those years.

And by positioning those money, the money and whether it's tax

deferred or just where they position gives them the

opportunities to take advantage of certain things in the

marketplace. And that's what builds legacy.

It's not and and really building a solid business that you can

pass on to the next generation or you can get the, you know,

investment companies coming in wanting to buy your company and

creating a legacy for not just yourself, but also for your

family and your grandkids and all that stuff.

And if that's something you want to do and if that's something

that excites you and stuff, it isn't about positioning money.

It's not about spending money. It's about positioning.

You got to be strategic on spending the money, of course,

but how do you position dollars? I think is really the long term

plan. You got to be looking at all the

time. That's the long term game.

Yeah, OK. And so are those premiums, can

they flex throughout the year? So I mean, if we're coming into

our fiscal year and I'm projecting a really great year

and then something happens and and the market falls apart, I

can slow that back and and not be obligated to that expense.

Yeah, we adjusted. I mean typically we're going

into our fourth quarters, our business time of year because

that's where clients are deciding what they're going to

fund. So they're really looking in the

rearview mirror for that year to take a deduction. 25 for

example, December 25, we were dealing with business owners

that are typically calendar and not not, they're not a cruel

county. We do have clients that are on

cruel, but you know, you got to be pretty large to get hit that

number today. But if you're on like if you're

on a calendar year cash basis, you know you're going to make it

decide do I want to take the deduction for 25 or not?

So then you write the premium check for that year, you took

the deduction, but you buy risk going into 26, right?

So now I got to make 26 years. So you kind of the nice thing

about property casualty insurances, you could prepaid

that expense. Like if I want to prepay my work

comp, I get to write that whatever month I wrote that

check on is the month I get to write that off, right?

Healthcare, you can't do that with, but property casualty

insurance premiums are absolutely recognized and that's

what this category falls under is property casualty insurance.

OK, awesome. Well, man, you have me all

excited and fired up. I, I wish I still owned my

business so I could open up an 831 and and get this going.

Is there anybody or a situation where it really doesn't make

sense? Is there somebody that you know

is, is there a size of business, a level of income that you kind

of have to be at for to make sense?

No, great question. I would say this to you.

I think it's, it's more of a mindset where you at the mindset

of your business. I love entrepreneurs.

Entrepreneurs typically have their floor to the pedal, you

know, their foot to the pedal and it's all the way to the

floor, right? Meaning this, that if you're

making every dollar you make to put back in your business and

you're going to grow, grow, grow, this is probably not for

you. There's some rules and

regulations to those reserves and surpluses so you can't

merely get access to them and all that kind of stuff.

So that's one thing. So I think it's more of a

mindset, not so much a gross revenue standpoint.

We try to target 2 million and above in gross revenues in a

business before it really starts to pencil for them.

And you know, I'm actually coming out with a book called

Weathering the Storm When, when, when winning is expected.

And we go into, I go into pretty stiff extensive detail in that

on, on when you should do this, when should you be looking at

it? Because what we're asking a

business owner to do is take money off the balance sheets and

not miss it. Yeah.

You know, so you know, a lot of lot, you know, I hope all

businesses eventually strive to that point, but not a lot of

them, you know, and, and it is what it is.

So there is some, there's more of a litmus test to, to whether

or not you should be doing this right.

What, what frame of mind you're in?

Where, where you at in the business?

Do you want to take the get, you know, the, you want to back the

foot off the pedal a little bit, stuff like that.

I think that's probably the bigger question is and you, are

you working on the business or in the business all the time?

And if you don't, if you find yourself always working in it

again, it's probably not, this is probably not the right time

for you. But if you're you're working on

it and you're looking for other tools like this, you know,

absolutely, you know, it's time to start looking.

I think awareness is no matter what you got to know this is out

in front of you. This, this ought to be one of

those things. We call it the CPA playbook.

This is a this one more chapter in the back of the book where

you would want to start to look at tools like this from a

business standpoint. Yeah, yeah, man.

Like I said, I I wish I'd known about this earlier.

That sounds like a great program and and you, you obviously know

a lot about it and have put a lot of into it building a

business around this 831 program.

Are there many other people doing what you're doing, or are

you kind of leading the charge here?

We're kind of leading the charge.

I, I, I think we're, we're probably the only, I would say

insurance professionals doing the management side.

I still see a lot of law firms trying to mimic what we do.

OK, but I don't, I would I really have competitors don't.

And and here's what I hope is I hope with time it does become

more competitive. I think we are we want to make

this synonymous with the four O 1 Ki mean business owners should

be should be aware of these types of tools.

Right now, these, you know, we're dealing with the IRS.

We've sued the IRS on some issues and I think our court

hearings coming up this month in the 5th District.

But, you know, they've been a little bit more aggressive on

this stuff because, well, they could.

They could in the previous lives be, you know, bureaucracies are

something we got to deal with as business owners.

And they've definitely gotten an overreach at this point.

But nevertheless, we think this is going to become a normal

business practice. Once you've achieved a certain

level of business, at some point you want to take the risk.

You want to take risk off the table.

Well, how do you do that? You know, do you have to sell

your business to take risk or bring a new partner in or this

is just one more way to take some risk off the table and

still have the money in the backroom to help keep the cash

flow of the business going? First and foremost, protect the

business that created the cash flow.

But also down the road, if everything works out, I can sell

my business or not sell my business.

There's ways we structure on, on ownership for key employees.

You know, if we want to make a transit transfer down to the

kids. I mean, there's all sorts of

things that we can bring to the table in the backroom on these

things, working with the other trusted advisors in their, in

their group and their surroundings.

That brings a lot of solutions to the table or they otherwise

wouldn't have it and you'd be at more more at the mercy of the

deal versus trying to make the deal.

Yeah, yeah. So again, you know, we've used

the analogy that HRA and the four O 1K, you know, I know now

the the tax law is always changing, that's why it's 3

inches thick. But currently there are some

exceptions and some ways to you know, pull money out of a four O

1K or something like that or or even just pay a penalty to pull

it out for non covered items. Is there something similar for

the 831? If you got in desperate straits

and needed to pull that money and didn't really qualify for a

risk payout, can you pull that money and pay a pay a penalty?

There's no penalties, you just pay your long term dividend

rates or. If you mentioned that already,

yeah, yeah, but. You can also bridge a loan out.

That's where it gets pretty sexy, honestly.

That's where I've seen a lot of AG guys use this as part of

their operating line. You know, once they've been in

at 4-5, six years and they got a lot of surplus, they've had good

loss, you know, minimal lost years and they were able to pull

on that from operating line standpoint.

Again, that's just good business.

I mean, yeah, insurance companies are the largest

lenders, honestly, outside of you can make an argument.

Insurance companies lend as much money as insurance as banks do.

Yeah, in the backroom. You just don't know about it.

So no, I, I love that you're, you're collateralized against

your shares of the corporation. So if you default, you're

defaulting on yourself. I mean, we're fully insulated

and collateralized on those types of loans.

I think it's great, great planning.

Auto dealers do it a lot. I mean, I see them borrowing

money all the time out of theirs, out of, you know, when

they sell a service contract to you for 2500 bucks, you know,

they're keeping 2000 an ad on their books and, and their own

831-B, they turn around and loan that money back to their

operating company for flooring, consumer financing.

I mean, all sorts of the efficiencies of business really

start to play in a lot of different areas here.

And it's just, you know, I just this, this is who you got to

compete against. These guys are doing this stuff

already. You know, if your listeners are

hearing this about the first time, you know, well, I always

buy service contracts. Well, did you know your, your,

your dealership kept the risk in the backroom and his own

insurance company? No, you didn't know that, you

know what I mean? You know, but but yeah, it's

great revenue. It's it's, it's why you get

asked all these warranties all the time.

I mean, it's, it's really good money in the backroom.

It's satisfying the customers needs to avoid that risk.

And you know, because if I that TV breaks, I want to return it

five years from now, like I'm going to remember I had it.

But you know, meanwhile, I paid 200 bucks out of that warranty,

right? So now they get to take that 200

bucks and they get to put it to work in the backroom.

And again, guys, this is just this is what goes on in big

business. I want to bring these concepts

and ideas down to this, down to the the people that are really

at risk honestly losing their businesses.

Oh yeah, when the when the big Fortune 500 companies have a a

big payout, they can cover it. But Bob the Plumber has a rough

year and then gets hit with a claim at the same time that puts

him out of business. Well, you know, you just got to

look at downturns of economy, who goes out of business more

likely it's not big business, it's small.

It's the small to middle market business owners that go out of

business. Yeah, it's really.

That's who I'm trying to protect going forward for sure.

Yeah. It's really levelling the

playing field too, because like you said, that's who you're

competing against. There's especially now we're

talking about trends in the economy and man, there's big

companies kind of rolling up small companies across the

country. And so some service industries

that were traditionally small businesses are now being backed

by big businesses. And this levels that playing

field a little bit. If you can bring some of the

efficiencies to the table that they are, the small business can

compete and have that small business touch and and really

puts a lot more power in their hands.

Couldn't agree more. I mean, those guys are clients

of ours too. The guys that go on by all these

HVAC's and plumbing. I have seen it from shore to

shore on what got what's going on over there.

I'm encouraged by it because I think some of these business

owners are getting multiples they would never got anywhere

else. But there's absolutely a

consolidation going on in that space.

They're going to keep the name the same, the employees the

same, and they're just buying for the cash flow, I mean.

Yeah. You know, yeah, I think it's

actually opening up a lot of opportunity for maybe the mid

sized businesses might get hit a little bit, but I think those

those really big more national or regional customers tend to

serve a different clientele than the small local business.

And so as some of those mid sized businesses get bought up

and rolled up into the big ones, it's opening the door for those

small businesses to take a little more market share.

I could not agree, 100% agree with that.

I think they're going to lose their personal touch, their

identity that a community is going to be lost.

And you know, people are going to want to do business with

people they know and trust. And so I couldn't agree more

with you. I, I do think it's going to that

that gets back to our conversations with the dingy or

when he started their own businesses as, as there's these

roll ups and consolidations and service to the customers thought

is more of an afterthought. I do think it's going to open

our to any opportunity for businesses to to spring up

around the different areas to take advantage of that, bring

that personal touchback. And we're going to crave for

that. And as is as a, as a human,

we're going to crave for that. So I'm encouraged by all that,

but I do there'll be a backlash eventually in my opinion on it.

It it would make sense to me that would happen.

Let's see. Awesome.

Well, you brought just a ton of knowledge and information to the

table here at the the 831 plans. But with all of your experience

and business acumen, I, I want to ask a few questions, tap into

that a little bit as well. You know, 30 years experience

running a number of businesses in different sectors.

Is there a a lesson that you've learned that you wish you would

have learned earlier? Man, take advice from people

who've been doing it longer than you, you know, and learn from

other people's mistakes. I mean, that's, that's the

cheapest way. If you know when somebody's

already got the will, don't try to duplicate the will.

Just just learn what they're doing.

And I do think being disciplined to the money, meaning that as

you grow, don't increase your lifestyle too quickly.

It's probably one of the things I've seen it, you know, one of

the big one of the, the one of the very successful.

My insurance agency guy told me early on, he said, OK, what are

you going to allocate for marketing and budget?

I and he said, I suggest you do 30%.

I'm like, man, that's a lot. He said, yeah, but do it.

So as my income grew, as my agency grew, I kept the 30%.

So, you know, if I got a, if I wrote a big commercial deal that

one month and all of a sudden I got a $20,000 Commission and I

would take 6000 of it and put it in the market.

I wouldn't, I wouldn't take the 20 home, right.

And that's what really that, that discipline kept my ability

to keep growing the business, but it wasn't like I was taking

it. It didn't feel like I was taking

a step back because of it. That makes sense.

Then they kept that discipline going.

So my marketing budgets got high and, and you know, but at the

same time though, it was already programmed into the business.

And so I never, as I made more money, it wasn't that I was

taking more money home. It was the fact I was kept

keeping my discipline and my percentages and growing my

business. And that's that's what's allowed

me to. That mindset helped me a lot.

Oh man, that's awesome. Throughout your career in the

businesses you've run, what has been the the most difficult

challenge that you've faced? Employees, you know, you know,

you can't help but have these people become friends or

acquaintance? I mean, no more than you know,

so you maybe don't like make the right decisions at the right

time. It's more out of, you know,

we're we're small business and very loyal to people that help

build our business. I mean, sometimes to our dismay,

you know what I mean, Or you know, and you know, you know the

other thing too. And this is another piece of

advice I was given early on. I remember sitting at a meeting

and it was a Farmers Insurance meeting.

And one of the old timers, I was talking to him and it was a

crash from 19. It was the tech wreck of 99.

And I was worried about the stock market and everybody's

going to lose money. And you start, you know, you

start hearing all this like, oh, geez, you know, and I was just

new in the business. And he goes, van, get ready,

there's going to be a ton of business.

You're going to write, I'm like, what are you talking about?

He said, no, when people feel vulnerable, they're going to buy

more insurance. And I thought they'd buy less

insurance, right? They can't afford it.

He said, no, they're going to buy more.

And I thought, oh, man, that's great.

And that happened. And then the other guy, the same

guy told me one day he goes, I was hiring employees and I was

having problems with a particular employee.

And he said, man, just remember one thing on career day at

school, nobody stood up and said, one day I want to go work

for Van Carlson. That truly put it in perspective

for me is like, yeah, these people are not here because, you

know, like, how much do they owe me?

You know what I mean? It's like, you know, and it was

one of those moments in my head and stuck with me over the years

that I've always, you know, kind of put that in the backroom in

my head. It's like, yeah, nobody, nobody

planned to work for me, you know, I didn't plan to have this

business, you know what I mean? Nobody stood up and, you know,

so it's just a, you know, consequences of, you know, one

turn or the other turn, right is why we're here.

But no, but I, so I try to keep those two references in my head

when I'm dealing with employees, you know, but at the same time,

you know what you expect for something to happen doesn't

happen. And employees at the end of the

day or good people and hard workers, but at the end of the

day, they're not family. And sometimes you kind of,

again, we're very loyal to who've helped us grow our

business, sometimes to our mistakes.

Yeah, Yeah. You still have to grow a

business. So yeah.

Are there any strong opinions that you once held and have

changed your mind about? Well, yeah, a big one would be

culture. I never kind of like a old

football coach, right? You know, get up and walk it

off, you'll be fine kind of thing, right?

I mean, that's just that's my management style.

I'm not saying that's right, that that doesn't work today and

shouldn't. Maybe it should, maybe it

shouldn't work, right. I'm kind of coming more to that.

But also this create a culture inside your company.

I never gave much value to that, quite honestly, but I do I, I do

recognize the value of it today. And I'm glad I had a son that

came in and and really ran. He's the president of SRA, which

will he'll eventually be the CEO here in a couple years, if not

maybe a year. We'll see his.

Grandkids are tugging at your heart a little bit, yeah.

Yeah, for sure. Ready to spend some more time

with them? Yeah, Yeah.

It's been great that he saw, he saw the value that he instituted

that in our company and it's paid off drastically for us.

So company culture was definitely something I would not

have seen. Awesome, awesome.

Well, this is my my favorite question I ask of every guest.

Are you a person of a particular faith tradition?

And if so, how has that affected your business management or your

leadership? You know, definitely Christian

Methodist and born born Methodist, raised Methodist, you

know, it comes and goes. You know, when you're growing a

business and you're just putting your head down and getting after

it. I do think you kind of put

things kind of you do kind of, I guess lose your path a little

bit. You know, maybe you have, maybe

you just kind of lose, lose your lose.

I wouldn't say you lose faith, but you just lose your your

discipline to the faith. And but as you get older and you

start to have grandkids again, man, it comes back around and

you tenfold. I mean, it's just and then you

just you just feel blessed. I mean, honestly, with so many

things that have gone right and that could have gone wrong, you

know, you definitely I would say and and it's been good.

I mean, it's been good for me personally for that to come back

in the plane in my life. Yeah, there for a while.

I was definitely not, you know, who needed it kind of guy.

You know, I could do it all on my own.

I mean, you really start, and I say this a lot.

You got to be careful to believe you're on BS and we can start to

believe it pretty quickly. And that that can get you that

can get you in trouble. And you know, I, I, I got me and

I wasn't no St. by no means down the road.

I mean, it used to be pretty rough as a, as a leader of the,

I was pretty black and white. And but as time goes on and you

get more comfortable with your own skin and you get people

around you that trust you. And then mentors, mentors are a

big play in my life too. People that around me.

I surround myself with really good business people, but also a

lot of people with faith. OK, great, great.

And is there anybody that you'd like to see on this show,

somebody that has a, a really unique business, works in a

really unique industry, you might have an interesting story

to tell. Yeah, I do.

Actually. I I got a couple of folks in

minds if you're Yeah, love to one guy I know actually I'm

going to have I'm going to go meet with him this afternoon.

OK, we. Haven't seen each other for a

oh, probably a couple months, but he runs a he was and he's a

hired gun. So I like being around hiring,

but I mean by hired guns, he's a a CEO for a very large company,

but he's not the founder. I'm the founder of a business

and it I love to surround myself with guys that are running

businesses that didn't start them.

I learned a lot from him, much more so than people that are

found a business. I don't know why I belong to a

business group, ACEO peer group, and that's been really great for

me too, honestly. But yeah, yeah, absolutely.

You can definitely talk about that.

OK, Yeah, I'll shoot you an e-mail, see if maybe you'd be up

for making an introduction. Do you have any thoughts about

what makes the difference between kind of a hired gun

versus a founder? What?

What differences have you noticed?

Well, I can tell you the risk tolerance.

It's been really interesting sitting in meetings and

somebody's one of the somebody's deciding to buy another business

or make a decision to pivot their business or their company.

And founders are like, yeah, let's go, you know, let's do

this thing. But hired guns are very

strategic in their decision making, much more so than a

founder is. And it has to do with

entrepreneur. And I'm not saying it's the

hired guns, not an entrepreneur, but much more strategic in their

decision making. And they almost have to be you

hired them for that reason, you know, but that that's a big

difference in their mindsets. Both are good, both are at the

right time is it can make a big difference in your business.

Yeah, that's great. I think that's probably a a

transition that most business owners if, if they don't go

through that transition themselves, they suffer because

of it. When when you're starting out

and bootstrapping something, building it from scratch, it's

the the big play they go in with your gut taking risk.

That's what got you to where you are.

And then as you get established, as you have some chips to play

with, so to speak, the strategy has to change a little bit

because the strategy that got you to where you are doesn't

necessarily get you to the next level.

No. In fact, if most founders can

create create a lot of unnecessary disruption.

And if you, I've been guilty of this, if you get bored, you will

find something to create Chios with.

I've recognized that. And I've, I've been witness to

it outside of my company too, where we get bored.

I mean, entrepreneurs are great, but are you a builder or are you

a maintainer? And if you, if you built your

business up to a certain level to maintain it, you're going to

get bored. And if you get bored, you're

probably going to create some chaos internally that you

otherwise. So yeah, you're absolutely right

to make that pivot and make that recognition.

I'm just fortunate my son is completely opposite of me in a

lot of ways. You know, he's more operational

driven where I would. And I'm the guy that says why

can't that get done tomorrow? Why is it, why, why do we got

to, you know, what's this 90 day Sprint thing?

What why is it going to take 9 days for us to do this?

That sound, that didn't sound right, you know, stuff like

that, you know? We'll do.

We'll just stay up all night and work for three days straight and

it'll be done. That's what we used to do.

Exactly. Yeah, what's the problem?

Oh, that's great. Well my my last question to

either settle or fuel the debate.

I know it's a little bit outside of your expertise, but I'm sure

you've used plenty of them. If you have a job to do and

require a cordless tool, which brands do you prefer?

Milwaukee all day long. Milwaukee, OK, they're pulling

ahead. I think we're working on coming

up with an official tally. But DeWalt and Milwaukee were

kind of running head and head, and I think now Milwaukee's

pulling ahead so. Oh man, their impact tools are

nothing like them. I love them.

I can't get enough of it. I'll sit there and watch YouTube

videos on new Milwaukee tools coming out all the time.

I love it. It, it's amazing how fascinating

that can be. I'm a DeWalt guy, but I, I do

the same thing. Some of the new stuff that's

coming out from Milwaukee and a few other manufacturers, It's

like, sometimes I wonder, what problem were you trying to

solve? Who, who thought this tool up?

You know, I've never been sitting there going, man, I wish

I had one of those, but now that it.

Exists I see the concrete did you see the concrete float that

came out that you can actually sit in now and it floats on them

like man that'd be fun but yeah I love my I love my Milwaukee

grease gun though there is Oh my gosh for recent recent tractors

up there is nothing better that thing is yeah saves the forearm

a lot from. That Oh, yeah, the, the first

time I saw one of those, I laughed at it.

It was kind of really, you got to have a power grease gun.

You can't just squirt it a couple times.

And then I I worked on a farm working my way through college.

And so I spent a lot of time greasing tractors and yeah, I

got to be real good friends with that electric.

Grease gun? Yep.

Awesome. That's ready.

Well, Van, thank you very much. I really appreciate you taking

the time and chatting with us and I hope that I'm sure all our

listeners will get a lot out of that.

I love what you're doing. I love the program you've put

together and and taken advantage of that tax code that's already

there to save small and medium sized businesses some money,

really put their money to work for them.

I hope that a lot of our listeners reach out to you and

take advantage of your services for for those that want to do

that, what would be the best way to get a hold of you?

You know, we own 831 b.com website.

Honestly, I'm van AT-831-B VAN at ab.com if they want to e-mail

me, but excuse me. The biggest thing is you got to,

you know, go do your own due diligence, learn about this

thing. It's, you know, take some time,

go to our website. It's designed to be an

educational website. There's a lot of case studies in

there. You know, you can pick your own

industry out. There's typically a case study

on your industry. How would this apply to you?

How does it work? I didn't get then start thinking

about the timing of when, when I should be starting to look at

this type of thing as a real tool for my business and not

only to maintain the cash flow, but also eventually grow the

business as well. But yeah, that that's that's

where I would tell them to go. I mean, it's, it's especially if

you haven't heard about it. I mean, you got to do your own,

do your own homework, especially with AI today.

I mean, it's easy to do, right? But.

Oh man. But it But this is just another

tool in the toolbox and at the right time it's a hell of a

tool. Yeah, awesome.

And you mentioned you're coming out with a book.

When is that going to be available?

You know, we're hoping in May we're in the final edit right

now. OK, I'm really happy.

I'm really, I'll be honest with you, I'm pleasantly surprised.

Never wrote a book before and it's it's been a great

experience, actually awesome. But it's still having more of a

decision making versus a textbook.

It dives a little bit into the code, but really, where should

you be at in a business world when you start to look at tools

like this and make the right decision for your business and

your family? Yeah, and what was that title

again? I liked that when you rattled it

off, I forgot. Yeah, weather in a storm when

winning is expected. OK, that's good.

That's really good. That'll that'll be interesting.

Thanks. I mean, hey, as as business

owners we expect to win. We we have to win so.

Yeah, yeah. That's why we get started.

So, yeah, awesome. Well, again, thank you very

much. I really appreciate the time and

the knowledge, the expertise that you bring to the table.

And thank you guys for joining us here on From the Ground Up

Show. Again, make sure you follow us

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download button. We rely on you guys to get the

word out and help the show grow, and that's the best way you can

help us. So until next time, keep

grinding.