0:02 Who are you? And where are you going? What do you want? [Music] Hello and welcome to Trust and Estates Weekly. I'm your host, Kevin Bemmel, and I'm here every Monday at 10:00 a.m. Pacific time to talk about estate planning and trust and estate administration for professionals like me. I'm a professional fiduciary and like my guest Derek Keller. Um, but also for your own
0:38 information so that you can communicate uh better with the the various advisors with whom you're dealing when it when you're planning doing your estate plan and or administrating an estate. So, without further ado, I I want to get right to my guest, Derek Keller. Uh Derek is a a um veteran buddy of mine. You can you can see the the flag behind his head and and uh um the various veteran paraphernalia that is that is so see you can see the same thing. I got my my Navy logo right there. And um Dererick and I are part of a a
1:14 group of of businessmen uh all of whom are military veterans who work together uh to help each other. And and Derek is very involved with um with businesses, especially with uh helping business owners figure out what they're going to do with the business. uh um you know either when they want to retire or you know god forbid when they die. So he's going to talk to us about exit planning for businesses and I think this is a
1:49 topic that unfortunately gets overlooked too often in estate planning and and so you know somebody passes away and now this business is kind of hanging out there and you know a lot of times the heirs have no knowledge of the business no interest in being involved in it. So now what's going to happen? So, so Derek, so happy to have you on the show and and sharing your expertise with us.
2:14 >> No, yeah, I appreciate you having me. It's uh it's always exciting to to meet up with, you know, other veterans like we do every Tuesday. Every every what first or third Tuesday? I can't remember.
2:25 >> First Tuesday. Yeah.
2:26 >> Yeah. Every first Tuesday of the of the month. But then also, you know, uh I feel like we always speak the same language anyway, just just being veterans and and operating in a certain way. I always love to do business and and speak with veterans outside of here as well. So, it's it's great. Um,
2:45 >> so before we get into the actual topic of the show, you know, a lot of people um are are are curious and and well, first of all, we're so we're so lucky to have been able to serve at a time when our fellow citizens were so supportive of the military and just just so so for the folks who are watching and interested, just share just a little bit about your military background so that you know, where did you serve, what did you do, that kind of thing, just so they can get a flavor of it and then see they they'll be able contrast that with what you're doing now and how you know many veterans go on to success in civilian life.
3:20 >> Yeah, it's so like in I I served in the Marine Corps from 1999 to the end of 2003. So inside of that we had um gosh, we had a lot of different things happen in Afghanistan. We had the the 911 thing happened. We had uh we went over to Iraq. It was it it was a it was pretty intense time to serve but also a great time to serve like you said with
3:50 >> the um with the support that we did have. Um there was a lot of a lot of support, but there was also some some uh not so supportive people, right? Uh we had people, you know, protesting um uh funerals and things like that, but
4:10 >> the nowhere near the extent of death, destruction, and and and people that that were uh against the war as Vietnam and and World Wars and things like that. So, um it it was pretty cool um to to serve at that time, but I I was in the infantry. I I was when I first got out into the fleet, I was with 38 CAT platoon, which is a combined anti-armour platoon.
4:40 >> So, we're part of a weapons company that would go out and we'd be on Humvees, right? Um, I ended up dislocating my shoulder when we were getting ready to deploy. And
4:51 >> um, the the surgeon wouldn't let me get on the plane, fear of blood clots, all that. So, I ended up staying back. And by staying back, they ended up moving me over to another platoon over with scouts.
5:04 >> So, um, that's who I ended up deploying to Iraq with. Um, we led the charge from bottom to top. There was nobody in front of us. So, it was it was kind of crazy to to think about. You know, we we used to joke around while we were over there. This a little military humor. So, so be offended, but it's uh we were worm on a hook, right? We felt like we were bait because we're in thin skinned Humvees, right? And we're we're going out there and we're miles ahead of the tanks and and and forward reconnaissance. And um
5:40 it seemed like, you know, we'd get in these big firefights and then the tanks had come up and and it was it was crazy. Uh there was there was a point in time where we got in a big firefight that was uh us against a bunch of armored vehicles and it was just us. We we'd outran our supply lines. We didn't have any uh any any extra really anything. So, we fought off this little uh platoon of BMPs and and old T-55 and T62s uh tanks.
6:09 >> Wow.
6:10 >> So, it was it was a little little different experience. Um but, uh ultimately I ended up, you know, growing and and and learning from that and carrying a lot of them lessons with me um into coaching businesses, right, and business myself. The three big things that I brought with me from the military into coaching and into running businesses is decision velocity. Uh that's that's number one, decision velocity. And and where you get that is is from Rex, right? Um they they say that uh the definition of luck is
6:46 opportunity meets preparation, right? Mhm.
6:49 >> Well, I I look at luck as as as as that plus, you know, the it the I guess the opportunity meets preparation is is all of your reps that you have, all the things that you've done to prepare yourself for the situation to be able to recognize and and operate in a certain way. Um, so I remember, you know, in boot camp sitting staring at a at a wall with my M16 and dryfiring a rifle into the wall for uh I think it was a week and a half, almost two weeks before we were ever allowed to put ammo in it. Right. And and
7:24 >> it was great because guys that had never shot a day in their life stepped down onto the rifle range and were putting bullets on on paper at 500 yards.
7:37 >> So it's it's with open iron sights, right? It it's all in the muscle memory, all in the reps, all in preparation,
7:46 >> right? So I always talk to a lot of my clients about what are you doing to prepare to make these decisions to be able to operate and make these decisions and and making decisions fast is huge in business.
7:58 >> You have to be able to capture the moment. We have to be able to move. We have to be able to operate and then it's not always the right decision just like in combat. Right.
8:06 >> Right.
8:07 >> So the the idea is from there is to own your decision and make course corrections. Right. So we're in combat it's you don't have time to blame anybody or point any fingers because you shot off, right?
8:22 >> So but in in business it's very similar, right? When when you start blaming and pointing fingers, that's you're on the road down. You're on the road to to hurting yourself, hurting your credibility, hurting your business's credibility, and and destroying the culture of your business. So own own and and and then course correct. So own the decision. Own own own hey I made this decision. Okay right
8:48 >> here's here's to where we are. There's nothing I could do to change that. Let's move forward. Let's start start to operate in a different way. Let's let's move let's make another decision and start to start to make different moves. And then like I said that affects culture which is the third thing right. So third thing inside of the military is is culture and values. Right. The reason why I was attracted to the Marine Corps is because of who they are, the the way that they operate, the the the the reputation that they have.
9:18 >> And when you think about the the culture and the way that it is in the Marine Corps, the where this comes up a lot for me is in recruiting. Uh I have a lot of them a lot of businesses out there who go out and try to uh say that they're recruiting, but they they jump on Indeed, right? and they jump on uh whatever other Zip Recruiter or whatever, right? They're going out and trying to find these people and and do these things through through all this this slop of applications of people who are either disgruntled employees, been fired
9:53 employees, like like every once in a while you can reach into some pig slop and pull out an apple, but I mean ultimately it's it's mostly slop. So when I think of recruiting, I think of recruiting like the Marine Corps. I think of building this this uh culture and this and having these values that attract the right people
10:16 >> first of all. And then where are you going to get people? You're going to the places where you want the people, right? Like, hey, this is my ideal employee. This is who I want. Where does that person hang out? What does that person do? Marine Corps goes to colleges, high schools. uh you you know different different uh recruit or uh um uh hiring events, all these different things, but they're going to the place where their ideal people are going to be and then standing out in the crowd, presenting themselves as, you know, usually they're in some sort of a dress uniform in them type and and really looking sharp and
10:53 buttoned up and they're going to attract the people who want that for themselves.
10:58 >> Right. Right.
10:58 >> Right.
10:59 >> For sure. For sure. I I used to go to my daughter's um high school career day. Um and I I I usually went as either as a representative of the Navy or my current guys, you know, as a professional fiduciary. And the and when I would do the ones with the military, the the Marine Corps representative, he was always there dress uniform, looking sharp, standing tall. And I mean e even compared to me and I I consider myself to be a pretty you know squared away guy when it comes to military stuff but
11:36 cannot hold a candle to the Marine Corps and it was interesting to watch the students because most of them asked questions from the Marine Corps representative even if they were interested in other service branches right and this was Beverly Hills High School this very you know high you know high school and a very wealthy community, right? So, you know, the the the the the the students who were there who
12:04 >> were interested in potentially considering a military career, you know, they were in that room because they were seriously considering a military career and then they see that Marine Corps guy and they say, "I'm serious about the military. I want to be serious about the guy who's serious about the military."
12:23 >> Yeah. It's it's crazy how how people will push culture and say that it's this big hoax and this big thing that just doesn't doesn't really do anything. You just got to you just got to push on your people and this that and the other thing. And and they don't realize that that culture is what builds these these companies from the these giant companies, these big conglomerates that they want to be like. They had a culture at some point that that built them to where they are.
12:54 >> Yeah, for sure. For sure. So, you know, not not to be, you know, cavalier, but, you know, your ability as a young Marine to get out of that firefight alive, right? Shows that that you really know something about exit strategies, right? you know, I don't think any I don't think exiting any business is quite as tough as as, you know, getting out of that firefight. But so let's let's because there's so much we can talk about, right?
13:23 >> And, you know, in in in businesses and and making them work and thrive, etc. Let's let's focus now on, you know, business exit strategizing. you know h when you you know when you approach a client and you see that that's a need you know how how you know how do you address it what are the what are the issues that you bring to the attention of the owners you know h how do how do you approach that because I can imagine for I know for myself if
13:58 someone came to me right now and said so have you planned for how to exit your business I'm like not ready for that yet right I'm just I'm you know, I'm getting my practice started. Can't even wrap my head around, you know, thinking about how do I get out of this? I'm too busy, you know, being in it. So,
14:15 >> right,
14:15 >> talk about some of those those issues so that, you know, the people watching can get a sense of, you know, what do I do in this arena?
14:26 >> So, the funny thing is, Kevin, is I'm glad that you said what you said because you're just like everyone else, right? I'm not ready for exit. I don't even know what exit looks like. I couldn't even imagine exiting my business at this point. Um, and and in reality, we don't always have control over that, right? There's there's there's death, there's dysfunction, there's uh disease, there's uh uh divorce, right? There's all these different things that could could happen to our business and to us, right? Especially when we're the
15:01 the sole decision maker or the sole operator like there has to be we have to think of this as a standpoint of exit planning is just good business planning right so so as you operate your business you need to look at it from that lens of like all exit plan planning is is having a good business plan having a good structure having the right um operating agreements right so having the right insuranceances in place to make sure that that if something did happen that you don't end up in in business with with an ex-wife or a
15:38 somebody who's you know a current wife or a current husband that you don't even agree with that you don't you've never even maybe met um or some children that you you that I we don't we don't want to run our business like they used to run you know the the old kingdoms in the past where you had a a 10-year-old that was king like the way you want to operate, right? So, we want to look at our business from from the structure, right? So, I mean, one of the first things that we do is we come in and and we want to identify like, hey, what are what are like the pinch points? What are the possible scenarios that things could
16:15 come up, right? And then as soon as we identify them things, the first thing we want to do is protect, right? So, we want to set up a protection to where, hey, we're not going to have any backslide or any kind of craziness that's going to happen once we have these things identified,
16:30 >> right? And then we're looking at the the the different I'm sorry, I've got I've got this written on the wall over here, and
16:38 >> I should just put it up here. I've got it on my uh keyboard as well, but I protect uh build,
16:47 >> harvest, and manage. So identify, protect, build, harvest, and manage is is is the five is the five steps, right? So under the identify and protect, so we're looking to protect, solidify, really make sure that we have the right structure, the right operating agreements, the right things in place, right?
17:04 >> And then we're going to look at, okay, well, where can we build from? What's the next steps in building? How do we really build this thing? Because a lot of times in in business, we're just kind of playing half-hazardly and we're playing to the market and playing to what's coming at us and and we we don't want to operate that way. We want to operate proactive. We want to be ahead of the game.
17:25 >> We want to be moving in ways that um that that our competition isn't frankly, right? Like we want to look at
17:33 >> where are the different avenues that we can look and build and where can we shore up some things and and really optimize some different things. We automate, optimize, really, really bring the right structure to the business. Hey, who's who's in this who's in maybe a seat inside of our organization that that's really at their ceiling that they can't grow anymore? Maybe a as I've as I've grown a lot of these companies that I've worked with, a lot of times you you run into like inside of the seauite where you have a CFO that's only grown to a $20 million company. He's only only
18:10 has that type of experience and and we're already banging up against 50 million and and he's just he doesn't know the different nuances and the ways of operating to to even push past that 50 million. He's doing everything he can to just maintain, right? Same with right like we we have these different operators that come in that, hey, you know what? Um, if we could just take this operator who who we started with, he he helped us, found the company, he be he started with us and we're real loyal to him because he's our friend, but ultimately he could be the
18:46 roadblock. And how could we how could we elevate him to maybe a board seat or something like that and put put an operator in there that really truly knows how to operate a hundred million dollar company and see these different
18:59 >> different ways of moving and and different things that we can plug in. So many times our problems inside of our business and growing and structuring is is the people aspect, right? One of my good friends uh always always uses this statement which uh it's it's it's the best statement that that I've ever heard inside of business is is that business doesn't have problems. Business has people and its problems. Okay. So, it's
19:30 >> it's it's absolutely the case. I'm I'm administrating an estate right now. I' I've been doing so for about a year and a half now. And one of the assets of the estate is a uh real estate services company basically. And the the the company generated a lot of income, but it was all almost not all but almost all dependent on the owner of the company who then died.
20:01 >> And and now the company was left completely rudderless. it was left without its rain maker, but also it left behind a whole bunch of clients um who you know could not get the kind of service that they wanted because now he was gone and you know it fell to me to figure out okay how are we going to how am I going to keep this company alive I couldn't shut it down because among other things it was managing all the property owned by the estate right and and so It w it it it was a it was
20:36 the biggest challenge in this estate was figuring out, okay, how are we going to do this? Now, fortunately, the other people who were doing the day-to-day work happened to be outstanding. And so, what what they really needed was someone who could come in and and basically say to them, look, you've got this. You know, you you can weather through and then help make the decisions on, you know, what clients needed to go, what what could stay, etc., etc. But the the the the company was perfectly fine. It was the it was the the the people in the company were either the problem or the
21:12 solution is really what it came down to,
21:15 >> right? Absolutely. And and I mean that's hitting on another thing which is which is the estate, right? The estate of the business and how how and and the different things that this this business is managing. So many people look at their business and they tangle so many things up inside of it and and they don't realize how how damaging that can be to, you know, if it ends up in probate or if it ends up in in these different lawsuits or different different scenarios where where different things come up and it it really creates some some chaos that that
21:51 they don't really need. Right? So, right.
21:53 >> So, when we're looking at exit planning, we're looking at things from all of them different angles and trying to see and and make sure that they get introduced to an estate planner like yourself so that they can they can make sure and and build out the right structure. Right. Some of the
22:10 >> Can I have you hold that thought? We're going to do a sponsor break real quickly and then I want to pick back up on this.
22:15 >> Yeah.
22:19 >> Uh oh. Well, that's weird. Sorry about that. The video didn't launch. That That was That was strange. So,
22:30 >> yeah, we'll just have to go back and edit it back in. We'll
22:33 >> Yeah. There we go. So, you know, going back to our topic and and and this is Trust and Estates Weekly. I'm the host, Kevin Bemel, and my guest is Derek Keller, who works with businesses to see that they really reach their full potential. And we're we're talking about um exit strategies for business, exit planning for businesses. So um Derek was just saying that um he's he looks for the key vulnerabilities in the business, I think, to just to sort of interpret what we've been talking about um the the last
23:09 several minutes. and and then you and then from there you take it to the professionals who can develop the kind of plans that are necessary to maintain business continuity etc. So talk with us now. Yeah. Talk with us some more about that.
23:25 >> Yeah. So basically the way that we want to come in is the the the time that you have somebody come in and say that they know everything is the time that you need to cut and run and go find somebody else. Right? So the the way that we operate as exit planners is we want to bring the expert in for every single aspect of the exit or or in just running and scaling your business and putting the right structure in place. Mhm.
23:53 >> Um, so what we were getting at was was the fact that like you do trusts and estates and and bringing in somebody who does trust and estates and and building and I've seen people I've seen multiple people that have their trust set up in the wrong way and really it's not protecting their business at all. And somebody told them they could just do a quick claim deed on their house and never report it to the to the state and they would be okay. Well, the quick claim deed didn't mean anything because you never got it notorized. You never got it turned in. It didn't really do it. It has no trust protection.
24:29 >> And then they end up sued or or all these different scenarios, right? Like you know probably know ton more scenarios than I do. But but I I'm just saying that there's so many of these fly by night guys that they they look at the the Trump estate and the the Clinton estate and all these all these different people that that they say, "Okay, well, we can come in and we're going to set up a um irrevocable trust for you and and we're going to have your trust own your business and your business it's going to
25:05 own your business and a uh a a nonprofit and if we can set this up right, you're only going to end up having to donate 3% every year and never have to pay another tax in your life. And oh yeah, that sounds great. I can take my taxes from 30% down to 3%. That that's incredible,
25:26 >> right?
25:27 >> Let's do it. Right? So then they pay this guy to come in and set up this trust that that is so convoluted and like you don't even and then they tell you that you can't even talk to the IRS about it. You have to talk to some other guy about it and it's just this nightmare, right? And that's the craziness of the internet right now is that there's so many different so-called experts out there that are operating and doing things just by because because they can just grab your attention, right? They're they're good marketers. They're not good business people.
26:02 >> And something that we like to do different with our business is everyone inside of our business has owned a business, right? So, we've in the owner seat,
26:12 >> whereas, you know, a lot of these other programs out there, you can just go grab a grab a book and and and buy the franchise or buy the the the the certification. And then guess what? I'm a business coach and I've never really even ran a business and I'm just going to read out of this binder and tell you what to do. And I believe that it's it's imperative that somebody has sat in that seat and then like people like me who have bought, owned, and scaled and sold a business. I've sat in your seat all the way through. And I know all the mistakes that I made when I was exiting
26:48 my business. And that's one of the big reasons why I even became exit planner certified in the first place is because I wanted to know what I didn't know and I wanted to bring I wanted to be able to bring that to other people. So So when you look at it from the standpoint of like hey I can't I I don't know everything. No, nobody knows everything.
27:12 >> And and and and really hiring a coach gives you that opportunity to see things that that maybe you don't see, to be able to see around corners, to be able to move a little faster because we've been there. We've done that. We've we've made the mistakes, right? like a parent figure almost when when you look at the
27:33 >> your parents are always trying to instill all the things that they that they did that screwed up on and they they don't want you to to go through the same mistakes, right? And and that's essentially what we want for our clients is we want them to to not go through the same mistakes, but also be able to build and and and put the right things in place to where that where them mistakes never even come up.
27:58 >> So, I mean, again, you know, you're you're it's it's so interesting because your experience as a scout marine, right? you're out there, you know, way ahead of of the troops and and you're taking the flack. You're taking the initial hits, right? And then you're able to essentially communicate to the, you know, to the troops behind you. Hey, here's what's going on up front. Prepare yourself for it. Mhm.
28:26 >> Um and and and now you can enter the fight in a much better position than you would otherwise be able to if you didn't have, you know, the scout marines in front of you. And I think the same is is true in in businesses. So, um, um, a few weeks ago, um, I had a I had a a guest on one of my other shows who he's he's a, you know, fellow of my vintage, mid60s, started, you know, lots of businesses over his career, sold them, you know, kind of like kind of like what you were saying, you know, been through
29:01 the whole process. And his his number one message was, you need to have mentors if you want to be successful, right? Because they've been through it. they've done it and they can help you identify the pitfalls so you don't fall into them, but you can make plans to avoid them.
29:23 >> And and I think what's what's so critical about exit planning when we're talking about a probate situation is that um at this point, somebody key to the business is now dead.
29:38 >> Right.
29:38 >> Right. So you can't turn to that person and say, you know, hey founder, what do you think about this? Because if he answers you, you got much bigger problems than the fact that you know, you're taking over this business because evidently you're you're talking to ghosts. But you know, I say that tongue and cheek, but you know at at you know there's a certain amount of corporate knowledge lost. there's there's an there's an experience gap now and and all of that needs to be figured out and and this I think too goes back to what you were saying about recruiting. So,
30:14 right part of it and I I'd never really thought about this until you raised it. Part of effective um exit planning or even business continuity from a probate standpoint is making sure that the recruiting that's gone on beforehand includes people who can take the reigns and do what needs to be done according to the estate plan. And that's that's not necessarily everybody you know who's who's in your business. that's somebody who has a particular set of knowledge.
30:50 So, I'm I'm wondering kind what do you think about, you know, those those issues as I've sort of um am am I absorbing your lessons, you know, correctly or where have I gotten off base?
31:03 >> Yeah, absolutely. So, like when we're looking at, you know, key man, you're you're losing knowledge, right? So, uh what have we done to capture some of that knowledge knowledge base out of his head, right? What where's our documentation? what what are some of the the the key proprietary things that that maybe he only knew that we could that that we've captured to where we can continue to carry continuity through our business.
31:28 >> Um the the keyman insurance, right? So like thinking through through the process of like key man insurance, what what do we have in place to be able to buy out this this family in our operating agreement? what do we have in in place to to make sure that our business doesn't take a big hit by trying to to buy out family or buy out different things that are in our operating agreement? Um, how do we how do we continue to to um recruit and and keep the culture alive inside of our business? Our our culture can't just be
32:03 tied up in one person. It's got to be ti it's got to be the whole part of the community, right? And that community movement is what what attracts and repels the the people from and to our business.
32:15 >> So we we need to make sure that that we keep that continuity moving forward and and like you said in in in the different estates and things like that to to to be able to keep things moving in the right direction to say, "Hey, we need to exit because that we don't have the next man up to come be the CEO, but we've got all the operational pieces. We need that visionary, that CEO. We need somebody to come in and take over this organization. And they need to come in and see that this business still operates, right? That they just need that that visionary, that somebody who can see beyond the the
32:51 next step and see the next wall and the next next obstacle and the next corners and and really start to to process through and keep the business moving forward.
33:01 >> So that that helps with valuation, right? So like when we have these things in place, not only does it help us as an organization with continuity in the organization when you go on vacation, but it also helps with the um with the valuation of your business. This is the intangibles inside of your business, right? the the the human capital, the structural capital,
33:27 >> the I mean, you've got you've got all these different things in there that that will increase your multiples inside of your business where if you if everything's tied up with just you, Kevin, and and you're going to sell the business, it's worth nothing without you.
33:42 >> If you get tied up in these in these um earnouts where they sell you this vision, they bring in this salesperson that comes in, sells you the vision that, hey, you know what? we're going to give you a million upfront, but if we can do this, we're going to pay you this at the end. And and people don't realize that they just get sold on the vision. They don't realize that only one in four payouts actually happen.
34:08 >> The these people will will leverage their their entire life of of building this business for this potential earnout that they're never going to get. So my job is to come in and solidify and make sure that hey when when somebody comes in and they make you an offer, you're up and out then like you're you're not you're not sitting on an earnout. You're getting maximum value at the beginning and you're the one who's who's in control of that.
34:37 >> So we're going to take another commercial break here, another sponsor break, I should say, and we'll we'll be right back. Okay. So, I'm I'm Kevin Bemel. I'm the host of Trust and Estates Weekly and my guest is Derek Keller. And and Derek is a a a business coach and strategy expert. And we've been talking about how to plan an exit strategy for a business, especially for one that's going through
35:14 probate. We've talked about a number of issues. Derek, I want to go back to something you said a few minutes ago that really caught my attention. I I think you are the first person in, you know, six years of of doing these shows to have brought this up and I think it it's probably because of your Marine Corps background and and it is that, you know, we when we think about recruiting the right people into our business, whether it's for business continuity or for um you know,
35:49 being able to prepare the business for sale or whatever, we want to attract the right people for sure. Of course we do. Right. But you said something else right then that I think is fascinating and that is we also want to essentially push away the wrong people and and those two actually go handinand glove you know and the the tendency I think is the thing everybody is potentially the right fit for my business. No I don't think that's true. I think we actually probably most people are not the right fit for my
36:26 business. And so part of the recruitment process is essentially saying to the people who aren't the right fit, you're not the right fit. So, you know, please don't waste your time and mine by applying here. This is this is not where you need to be. go look for, you know, an opportunity that's that aligns with who you are and and and what you want. And I I'm I'm, you know, would you expand on that a little bit because again, you're the first person who's ever, I think, looked at recruiting in,
37:02 you know, in kind of a both of its facets.
37:05 >> Yeah. I mean, it's it's I guess it does come from the Marine Corps, the few, the proud, right? like um there there's
37:13 >> when you step up and and see the the Marines standing there in their dress blues, there's certain people that are going to look at that and say, "There is no way there's no way I could have that level of discipline, right?" Or, you know, when when when you see the the people at Arlington Cemetery or at the at the what's that big wall? Gosh dang it, why am I drawing blank? the the Tomb of the Unknown or the the the
37:41 >> unknown soldier or
37:43 >> so like you've got them, you know, they're doing a certain amount of paces back and forth and and there's army marines, there's there's a little bit of everybody involved in that and it's but but that's like a huge honor to be a part of that and and when you go do them things like there there's a certain level of discipline, a certain level of operating that that you not any not not just everyone can do that and and not everyone's attracted to that and you know some somebody with ADHD that's that's all over the place and bouncing off the walls just can't can't find that
38:18 center to be able to stand and and and and be in a certain certain area right
38:25 >> um I remember being a young kid and I'd sit at the table and I'd I'd shake my leg right and um I still know a lot of people that do that and it's kind of a nervous tick or a nervous habit or or whatever. But um one of my drill instructors in boot camp had had come up to me and said, "That's a sign of weakness and and and a sign of uncertainty. You need to you need to stand in your certainty and and and and be, you know, just be here."
38:56 >> And it was like it was like this light switch went off in my head. And I I I rarely do it to this point. Like unless I'm extremely bored, there's nothing going on and then find my leg twitching. But like that's that's the level of of operation that you want. Like when when you look at your business, how what is the standard that you set? What is the the the the lowest bar that you're willing to accept?
39:21 >> Right? Because if if we're just accepting anybody, then we have zero culture. We we're and it's kind of contradict contradict I don't know what word I'm looking for but it's it's saying like a lot of times people say well we need to train we need to have our level of training to be to where even a 5-year-old could understand it and I find myself saying that and that it's great because we want to simplify and make it easy for people to understand but we also want to make sure that the right people understand because
39:57 We're not McDonald's, right? As much as we want a franchise and whatever, like even McDonald's has a certain standard of employee that they'll allow,
40:06 >> right? So, so like what's your standard? What's your level of employee that you're willing to to accept? What's the what's the what's the lowest bar? In the Marine Corps, we have an 80% bar, right? I think similar in the Navy. If you can't pass a test at 80% or better, it's anything less than 80% is failing,
40:27 >> right?
40:28 >> I wish that they had that in in like doctorates and things like that because I don't want the D surgeon working on me.
40:36 >> I I got to tell you a funny story because um Navy week uh happened uh not not too long ago here in LA, the end of the end of May. And um uh at as as as part of the um Beverly Hills Navy League um a a a colleague of mine and I went to you know sort of check it out and we're we were talking with another fellow and out of the corner of my eye I I I happened to notice a Marine kind of standing maybe about 10 feet from me and I and I walked over toward him and I saw he was a Marine Corps sergeant major.
41:13 Now if you know if the average marine is you know or I mean if the typical not the average marine but if a if a regular marine you know enlisted guy is you know 80% you know sergeant major is like you know 99% and above right and this he was just an an incredibly impressive individual so I talked with him for a little while and then I asked him if he would if he would you know come and I'd you know introduce him to my you know my friends that were there and you know typical sergeant- major. Yeah. Happy too kind of thing. And so we ended up talking with
41:49 him for probably about 45 minutes. And at one point in the conversation we got on um it was something about some kind of business development thing that we were talking and and and he he said you know he said I I really I really have to get more disciplined. I I I you know I really I I I find that you know as I because he was getting he was about a year and a half away from retirement. He says you know as I think about retiring and going into the civilian world I realize I'm I'm really going to have to buckle down and get disciplined. And my two friends who one
42:25 of them has has never served in the mil military. He's he's like it just blew the the the statement just blew his mind. I mean he's looking at perhaps the most squared away human being he's ever seen. Right. and and and the the sergeant major statement is I have to be more disciplined. This I will tell you no matter what he does in civilian life, right? An attitude like that, he's going to be successful. Right.
42:52 >> Well, right. But that's also one of the pitfalls that we have coming out of the Marine Corps is that we're too disciplined and and we we have this um this certain way of operating that we don't we don't accept the the below standard around us, right? So we're always trying to elevate the people around us. We're always trying to push the people to do more and some people don't like that,
43:18 >> right? So, we end up we end up in a in in a lot of scenarios where uh people are intimidated by us or that we're too squared away and and they they want a little bit of slob and they want a little bit a little bit of loosey goosey, right? But they they don't realize that we are. We just have our own way of doing it. So, so um for for the for the business owner and and go going back more more directly to the to the you know issues of of of exit
43:53 planning, you know, how how does a business owner start identifying the key vulnerabilities of his business so so he can start dealing with some of these issues? while there's, you know, still time to to deal with them, right? It I think the hardest thing is for us to look at ourselves appropriately critically, right? Not being too harsh, not being too too light on ourselves and and our businesses in many ways are extensions of ourselves.
44:28 So how how do we uh accurately or objectively identify those key vulnerabilities so that uh you know we we we can we can develop an exit plan that's actually going to or that has a very high you know chance that it's going to work.
44:47 >> Yeah. I mean there's there's tons of research out there that you could always do um and do it yourself. Again it just takes longer. Um, I would say that the best thing to do is is to hire a coach and or or even just get do an assessment, right? We I have so many different assessments that I'll send people for free just to give them an initial look into their business and where they're at, right? There's there's different downturn assessments. There's different uh strength of your business assessments. There's exit assessments like, hey, am I even close to ready? like what here's the key questions and
45:23 and you know this is you know am I a one or am I am I a five right and and you just kind you grade yourself on that curve and and and really making sure honing in like being honest right the the first step is really being truthful with yourself because a lot of us a lot of us are really good liars to ourselves and we we really want to tell ourselves how awesome we are and and in reality we we've got some holes Right. So, so we have to be we have to be honest with ourselves and and and answer these these surveys or these assessments
46:00 in in an honest manner so that when we when when we go through and and really look at the different questions that are out there, we get exposed, right? The the best thing that you could do for yourself is expose yourself. And and that's that's probably the the best advice that I could give you is just be honest and and and expose yourself because it it just brings up all it is is opportunity, right? Like I sit in inside of these businesses a lot of times. I one of the businesses that uh I scaled from 3 to 12 million over in
46:37 in a year. We went in and we started talking about different things and and we realized very quickly that that he was just balancing his his entire business off of his checkbook. He was just looking at his his balance in his checkbook and okay, I can spend money this month, right? And and he couldn't figure out why he couldn't scale. And as we brought in a fractional CFO and and really got got honed into the numbers and got things cleaned up, he started to see things from a different angle and started to operate from from from that different different perspective. And you don't know what you don't know,
47:11 >> right? So, it's really that that the the assessments really drive a lot of clarity, but also the coaching the coach's perspective of reviewing that uh survey with you and asking you the challenging questions and pushing to make sure that hey, you do have somebody in this scenario to help you uh see things from a different angle because he he would have never known any better of of hey, you know what, this is this is I got a bookkeeper that I pay over here that gives me a P&L every quarter and um I've got my wife who
47:50 tells me what's in the checking account. You know, it's simple like it's and and for him to see things from these different angles and be able to operate and move and invest and and and know what what budget he's on has has given him uh the ability for us to to be able to scale to to 12 million. and we'll do 15 this year. So,
48:12 >> right.
48:13 >> It's
48:15 >> Yeah. So, okay. So, now let's let's let's sort of advance the process and and say, "Okay, now you know I've been through the assessment. I've found the vulnerabilities. We've we've, you know, we've kind of plugged them all or made plans for them and now and now I have my exit plan. Okay. you know, kind of now what I mean I I I put it on the shelf and okay, you know, task done, right? Or you know, or or you know, do I need a checkup every you know per whatever the
48:50 period of you know what what happens after that?
48:54 >> Yeah. So it's really you know we have in our process the way that we do is is at the end of every 90 days we're looking at okay are we keeping or selling? like are we keeping and continuing to grow or are we selling like are we set up to sell and that's that's all going to be based on you know your wealth gap there there's a wealth gap of like hey this is what I need to be able to to to retire and then your value gap right so there this is what our business is currently worth this is the valuation and and this is where we want to grow but I would say at least every year I would want to look
49:29 at you know the different nuances if there's different laws if there's new new uh uh with every administration, there's something new that comes up that's that could be a new benefit or something that kind of canceled out from from your other one, some protection that's no longer there that that we thought was there. Right. I mean, every administration has something that they bring to the table and there's good and bad in in every one of them. Right.
49:56 >> Right. Right. So I mean it just depends on who who who that who that uh candidate is is uh catering to or or or conform to, right? Like where did they come from? How did they operate? What did they
50:13 >> what what are the things that are going to help benefit me as as as a business owner? What's going to help you know the W2 employee? what's gonna it just depends on what what the administration's doing that
50:26 >> and and too state by state I mean you know here in California you know ev every year every six months sometimes you know there's something new happening that you know can can significantly affect a business and it's you know it's got to be dealt with. So, um, it it's it so it sounds like, you know, kind of, you know, do a at least a a basic review every year or andor when there's something very significant that is potentially impacting the business, it's probably time to go back to that plan, take a look at it and and potentially,
51:02 you know, engage with with your professionals in in taking a look if anything needs to be changed either in the business then or for the exit plan itself.
51:11 >> Yeah, absolutely. And and you know, a lot of things that come up are are um a lot of business owners think that they're just going to transfer off to one of their kids, right? And this is my legacy. I've been building this my whole life. It's my legacy and this is I want it to carry on. I want it to to keep going. And um a lot of these kids don't want it. They don't want the responsibility. They don't want the they don't want anything to do with it. Especially this this uh so not the newest. What's the youngest? Is it Z?
51:42 >> I think it's Z. Yeah.
51:44 >> So, the Z's are really wanting to get back into the entrepreneurial spirit. Um, Gen Xers are kind of, but the millennial generation for some reason really wants to push off responsibility, doesn't want um doesn't um like they have this fear of negotiation, of conflict. They have all these all these different fears that go that are built into them for some reason. I don't know why, but essentially you get a lot of these millennials that don't want to take over the business.
52:17 >> And and even though they've grown up in the business and they know the business like the back of their hand, they're a part of the culture, all of a sudden it comes time to to take it over and they're like, "Nope, sell it." Right? and and a lot of the parents are like devastated because they're like, I've built this and da da da da. And
52:38 >> so looking at uh the different different options for exit planning, so many people look at um look at uh exiting as just a third party exit. I'm going to sell it
52:51 >> to some third party, right? There's there's so many different options out there anymore that with, you know, the private equity firms and the VC firms that'll come in and just buy a portion of the business and and bring in some management and and keep you on as an owner. And then there's, you know, the ESOPs, the the different uh employeeowned options. There's there's uh management buyout. There's there's so many different options. There's like seven different ways to exit your business and and people only think of one,
53:24 >> right? One or two. They only think of I'm going to transfer it to my kid or I'm going to sell it to somebody,
53:28 >> right?
53:29 >> So, like really educating and giving them the the the options that are out there so that they can see things from all angles and and make a decision that's best for not only them, but they a lot of these guys their their whole identity is tied up in this business and and who who who they are and and the legacy that's going to be passed on. They say that like it's some huge number. It's like 80 or 90% of people who exit their business regret it within the first year.
54:02 >> Right? Because they don't they don't have a plan. They don't have any any purpose after after the business. They don't have any identity after the business. Their whole identity is tied up in this thing. So, we want to look at things and and and prepare for that exit to where, hey, you know what? I have this big heart project that I'm working on, whether it's a, you know, I'm I'm going to go start a 501c3 or I'm going to I'm going to take some of the proceeds and and and get involved with um you know, Allied Forces Foundation or um the the Soda Foundation, the Special
54:38 Operations Transition Fund, or like all all these different um all these different things that that really tug on your heartstrings, right? things that that really really um give you purpose and and and make you want to continue to drive forward,
54:54 >> right?
54:55 >> And and that's that's one of the key things in in an exit is making sure that that you have an identity afterwards that that your your identity isn't that. And so, so there's that and then there's, you know, like I said, the the the people that are so tied to that legacy and tied to the business that they need they they need it to succeed after them. So, uh, you know, a lot of times the the best option for that is an ESOP or a management buyout to where that that culture stays and and continues to maintain and there's
55:31 option. So, like so many times people look at the the the management buyout option or the ESOP option, they're like, "My employees don't have the money to buy in or my my managers don't have the money to buy in." And that that's again where they don't know the nuances of of private equity and ESOPs and and trusts and trustees. Like when when you have an ESOP, you have the trust and the trustees that come in and and do that and and build that. So like again leaning back into you guys and and and your trust in estate, right? like you have to you have a fiduciary that's in
56:06 there that's that's that's that that's the the manager of the estate and and and helping with that ESOP and there there's so many different loans and SBAs and everything that that that we can work from so many different angles that you didn't even think were possible that that could get you out early or even get you a partial buyout and and get your people bought in like it crazy.
56:29 >> Yeah. Well, uh, we're we're coming up to the end of our time. So, but I mean, it's it's it's it's a fascinating discussion and like you said, there's there's so much in this arena. So, um, I'm going to make sure that your contact information is in the show notes. You you were uh, you know, kind enough to mention that you have some assessments that you you you'd be happy to send to people. So, so you know th this is the time when you know I I give the shameless plug for my guest because they're all too modest to do so. But but you you can see first of all you can you
57:05 can feel Derek's passion for what he does when he talks. Um, but you can also also see that he knows this subject in tremendous depth and and so I I can't encourage you strongly enough if you have questions about business exit planning, succession planning, what you're going to do with your business as part of your estate plan or what your more importantly maybe what your clients are going to do. get in touch with Derek and and he can help you, you know, he
57:42 can be a part of the estate planning team that can really, you know, take take an estate plan from here way up to here. Um I I I think I've noticed in my own practice too often people are content to well, I've got my estate plan. Um but but you know if they're well advised they can they can really kick it up several levels and then it will work much much better for all concerns. So So Derek first of all thank you so much for being being a guest on my show today. I really appreciate you
58:17 taking the time and it's it's it's always a treat even though I was a Navy chaplain. you know, my heart is is my first billet was with the Marine Corps. Always have a a special place in my heart for, you know, for Marine Corps veterans. And so, just on on on on that issue alone, it was great. It was great talking with you. So,
58:36 >> yeah, the being a Navy chaplain, man, that's uh that's that's huge because, you know, the Marine Corps, we there's two thing two big things we don't have and that's docks and and and Navy chaplain. So, or chaplain. So, right,
58:48 >> we get both of them from the Navy.
58:50 >> Yeah. Yeah. Exactly. So, um, I'll I'll I'll have you hang tight here for a minute. I do a quick quick wrap up. So, um, uh, tomorrow at 10:00 a.m. is my show, Business Lessons from the Military. That's 10 a.m. Pacific time. So, I hope you join me for that. And then on Wednesday, also at 10 a.m. Pacific time is my show, People Making Money. And and so, I hope you'll, you know, tune in again later in the week. And then of course a week from today um I'll be back for the next edition of
59:26 Trust and Estates Weekly. So So again u first of all Derek thank you so much for for being on the show for all of you watching. Thank you so much for watching and signing off as I always do. You know it's coming right Marie darling. You are my bell. Courage at all times my friends.