How to Prevent my Business from Closing

Welcome, everyone, to the Refresh youh Wealth podcast with Matt Sorenson and Mark Kohler. Oh, there he is, the cowboy. You can't even pretend, but hey, you're listening to the audio version of this. Mark just threw on a cowboy hat.

I'm wearing flannel.

Wearing flannel.

He's looking.

It's Patagonia flannel, though, I can see. So really count. That's a little. That's a little bitty cowboy.

It's urban cowboy.

Urban cowboy. Okay.

Yeah. Hey, this is. This is Kevin Costner, Yellowstone Cowboy, where I don't get my. I don't get my hands dirty, you know.

Okay. All right.

Anyway, that was for your audio. I'm sorry. That was for your visual. YouTube viewer. For our audio, folks. Maybe get over to YouTube. This is simulcast on YouTube, so.

Yeah, baby, go ahead.

Continue introduction.

Sorry, my. Okay. Yeah, Mark, you know, he threw me off there with his glorious entrance or grand entrance. Wasn't glorious. It was grand, though. All right. We're talking about how to prevent my business from closing today. And it's a tough topic. We know a lot of clients out there, our clients that are small business owners, us, ourselves in the trenches, our friends and family who have all been reaching out to and talking over the years, that are business owners. We know it's a big topic. People are struggling with the stimulus packages, and we've got tons of materials on that. But just from a business standpoint, forget about stimulus package. We're going to note some things there. What do we do? What are my options? Mark and I have got some categories on how we want to break that down today and hopefully give some tips and information, help you kind of think through that and how to be successful in getting through this.

Yeah. And I do need to apologize for trying to be a little comical on my entrance for those watching on YouTube. But our partners.

People need a laugh right now. It's okay.

They do. They need a laugh at my expense right now. But no, we do. We are so sensitive and it is so delicate and difficult topic to talk about. My business possibly having to shut down. We were talking about what topic to cover this week in our podcast. And rather than another round of stimulus package stuff, we really needed to address those business owners and talk to them about maybe the stimulus package isn't enough and what to do. And not very many people are talking about this because it is very difficult. So even though I try to be a little funny at the beginning, I will say this throughout the show today. We do want to try to keep it light because it is hard enough as it is. So don't take that humor as insensitivity or insensitivity or callousness. Our heart does go out to you, but we want to keep it real. Try to keep it. And I gotta say, Matt, both of us, we've had failed businesses before.

We have, yeah, we've shut some down. We'll give some notes on some of those and some that have been successful over times, but they kind of ran their course. We're kind of the typical serial entrepreneurs helping our clients in our law firm. But we've always had our entrepreneurial pursuits, which we still do to this day and love them so. But there's going to be no tax and legal tip. For those of you that are used to the show, we're just going to dive into the topic at hand. There's a lot to discuss there. If you're new to the show, we usually give a tax and legal tip off topic to try and just give you a little quick tax or legal tip on how to be better in your business. But we're going to forego that today and just dive right into the topic. So, Mark, do you want to intro the topic here on the options and we can just.

Yeah, I think there's a lot here. We've struggled with how to organize this topic, but I think we came up with something that gives us a little framework. And for those on YouTube, again, you saw me adjusting my hat hair.

Cowboy hat.

Does a little bit different, you know, job on your hair compared to a trucker hat. So I think I'm okay now.

I'll take your word for that.

I'm trying. For those that don't know, Matt broadcasts out of sunny Phoenix. Look at that amazing view behind his office. That's legit. That's.

That's not like a fake zoom background. That's the real deal. I didn't just, like, pick the cool Phoenix office. Zoom background. That's the real deal.

Yeah, that's the real deal. And this is my den at home. Those are real books, some of which I've read. And if I could point you out this way. We've got 15,000 acres of potato fields, and I can see literally in the distance right now, a tractor planting. And I like it. It gets my mojo back to be in the farm country. I grew up in the farm country of Washington state. My wife grew up in Idaho, and we spent years in Salt Lake City and Orange County, California. And in the last three years, I said, I got to get back to my roots. I still travel a lot, but I'm already high risk for a heart attack as it is. And so if I can slow down in the evenings and drive a four wheeler around and shoot a gun, keeps me sane. All right, now, big topic. Here's our categories of what we wanted to kind of talk about. We are not talking about shutting down your business. That's actually going to be our next week's podcast. We've already started to come up with some conversations about how do I shut down my business. But for those of you that are like, I've got to retool this somehow, we've got four possible categories. Number one, move full steam ahead. Same old structure, design, product mix, people, whatever. Number two, a pause. We're going to call it the pause. What do we do? We don't completely shut down. We don't go full steam ahead. What does that mean? What are my options in the pause category? Number three is reorganize. We've got a. We were playing around with the word retool, reorganize, restructure. Lots of options there.

Yeah.

And then number four, the comeback tour, where we put things on longer than a pause, but we keep some sort of plan in place for maybe later in the year or next year. So those are our four categories. And obviously raising money could be a part of all four of those. And so we're gonna maybe bring up raising money. But, Matt, do you think first just kind of like what are.

Yeah, let's just get on the table. Cause raising money could play into a reorganization. It could play into full steam ahead. Probably not in the pause or comeback, but. So there's a few options there. There's the stimulus package. Let's just say that of course there's ppp, paycheck protection program, which is the big one going on right now. There's a second round of funding. You've heard plenty of that. There's prior podcasts, prior YouTube videos, prior articles of Mark and I, you can read up on it. We're going to still be putting more out on it as we get to the next wave of it and getting that forgiven. For those of you that have got ppp. So that's. That's a big topic, but we're not good. We can talk hours on that. But remember, that's a loan you can get. That's forgivable. It's government stimulus. If you use it for payroll, for yourself or your employees, it's a great option. A lot of businesses have taken Advantage of it from the LA Lakers to Ruth Chris Steakhouse. You know, the typical small businesses out there that have now been shamed and they've actually given it back. But yes, yeah, some, that's right. I think like Ruth Chris has kept their money, but so we've got the government stimulus, but then you've got the traditional things you can do of taking a regular loan, selling some stock, getting some, you know, some selling equity in your business essentially. But remember, those things come at a cost.

Right.

If I go get a loan that's going to come at a cost, I got to pay it back. Plus I got interest. If I sell stock that comes at a cost, I'm giving up future profits in my business.

Yeah. And a lot of times we as tax attorneys and accountants, we call it really a debt versus equity decision. It really just boils down to that, am I going to take out a loan from someone or something and we're going to brainstorm some options for you there. Or number two, do I give up some of the actual equity in my company? And there's pros and cons to both in a big way and one's not right and one's not wrong. It depends on your situation, how much money you need, what you need it for. Sometimes it's going to be dictated by the person or entity or structure you're taking money from.

Yeah,

let's.

Now I have one other comment on the money part.

Oh yeah, I want to stay there too. Go ahead.

Okay. The other item, you know, of course I'm going to bring this up is retirement accounts. So. And there you have your traditional things you can do. Like you could have someone's self directed retirement account, their self directed IRA or solo K, let's say invest in your company, buy some stock, loan you money. We've been having lots of that happen with our clients here@directed ira directed ira.com where they are investing in other small businesses, friends of theirs or businesses in their community with loans or buying stock in them. And we've processed a number of those transactions already here. But there's also from the stimulus package, there's ways you can better access your retirement accounts. But you can take out up to 100 grand with no early withdrawal penalty right now under the stimulus bill and stuff to pay tax on it. It's traditional, but there's no early withdrawal penalties. You get three years to pay the tax and you can put it back in over three years. There's a lot of cool parts to it. Also the 401k loan, which you can usually get 50 grand, you can take up to 100,000 max now. So there's been some loosening of the restrictions on retirement accounts because that's where all the money is for many Americans. So there's access to those funds which can help support you personally and your business through this as well. And that's kind of in the raising money category there. But remember retirement accounts, my favorite topic? That's where all the money is.

Yeah. And I'm going to argue with you on this for a point. And I think you'll agree whether you're going full steam ahead, you're pausing, you're reorganizing, or it's a comeback tour.

Yeah.

Getting money from someone could apply in all of those or something.

Right, True. If you close or shut down, your income's gone. I mean, it's may have already been out the door last month. So accessing some of this money or figuring that out, I mean, that's just for your personal life. That's a, that's the thing.

Okay, now I want to be very specific for everybody here. If you're going to get money in any of those four stages, we're going to go through those four stages, if you will. Or I'm going to say four options of moving forward. Okay, Those are four options of moving forward. Now, under any of those options, you might need to access money. So that's a separate topic because you might have a different type of money you need based on the option you choose and vice versa. So let's stay with money for a minute. Let's go loan or equity and let's stick with retirement accounts for a moment. And we're gonna, I'm gonna make a list of all this and I'm working on an article for this that many of you will see linked in the near future to this podcast or YouTube. Or YouTube. If you go loan with retirement accounts, you can borrow from your own 401k up to $100,000 for your business and pay back your 401k with a tax deduction on the interest you're paying to yourself. And those are going to have to be monthly to quarterly payments, at least quarterly over a five year period. Prime plus two. That could work. Now that's only 100 grand, but you could borrow from a solo 401k, an old 401k from work or even your spouse or your current self. 401k at a day job, any 401k for yourself, you can borrow, but the limit's going to be 100 grand. Now, if you're married, you could borrow up to 200 grand under two different 401ks. Okay?

Yep.

And you could also borrow from any member family members, 401k or IRA or IT. Well, if. No, let's back up. We're going to have a prohibited transaction problem in a minute. So let's just, let's just say you could borrow from any, you could borrow any amount from a legitimate arm's length third party.

Okay.

I'm going to put someone else's 401k or IRA you could borrow from. And I want to take a moment, in a moment, talk about the note procedure for that. But when it comes to equity. Now, Matt, I'm just laying this out here and I know you'll fill it and fill in the gaps here. So I can borrow from my own 401k. My spouse and I can borrow from both of our 401ks. I can borrow from any arm's length person, any amount from an IRA or 401k if they're ARM's length. And when it comes to Equity, though, your 401k and IRA cannot take equity from your business. That would be a prohibited transaction. But if it's an arm's length third party, they could actually take equity in your business instead of a loan. Now, you don't have debt service, but you have given up 20% of your company, let's say. So, Matt, what do you think of that? That's a lot I put on the table.

Yeah, I mean, we could do a whole podcast episode on just that. But the point is there's a lot of options within the retirement accounts from tapping your own under the distribution or loan that we just talked about, from tapping other people's to invest in yours because as an investment from theirs, whether it's them loaning your company money or are buying stock using a self directed IRA or retirement account. So lots of options there to consider. That's probably the one most overlooked, quite honestly. But that's there more likely than any other option. You know, people, I think it's so crazy. They'll be like, well, go out and raise capital from other investors and go, you know, okay, how about the three people I know that I go talk to and ask them for 50 grand? None of them have 50 grand in a savings account to put in my business. But oh, they got 300 grand in a IRA somewhere. It's like, let's get practical about how this is why these, the self directed accounts in particular become so popular.

Yeah. And I want to reiterate this. This is important, everybody. Matt Sorenson helped organize and I was a co host with him, but it was his show. Two weeks ago we did the Self Directed IRA Summit, 5th Annual 99 Bucks. It's almost 10 hours of content. You can get over to sdira handbook.com

sdrasummit.com sdirasummit.com it's just on the summit's website itself, actually.

Yeah, and there's a link at SDRA Handbook too. But just get over there. 99 bucks. And we talk in depth on all the options and ways to access retirement accounts, yours and other people's. But I just want to reiterate one point before we move on to your next idea of raising money is keep in mind your retirement account or a close family member's retirement account is not going to be able to take equity in your business to save it. But there may be a borrowing option. So I want to be clear about that. You may be able to borrow from a 401k, a family member be able to borrow from their 401k to loan to you or vice versa, all sorts of loan variations. But when it comes to equity, you can only sell a part of your company to an arm's length third party's retirement account. And keep that in mind as you approach this. And a couple specifics. Whenever you borrow from someone, make sure that there's a written note that's very clear and reviewed by an attorney, even if it's just for half an hour. And anybody that wants to use a retirement account to loan to you or to invest in your business, they're going to need a custodian or a trust company. Directra.com is our trust company of choice and we can walk you through those steps. So lot there again to say. Matt, your thoughts?

Yeah, no, I just put an amen to that. And again, we're hitting this raising money as the overarching part to some of this is a lot of these things take money. But many of these things which we're going to talk about as you get into these strategies, they don't take money, they take effort. And some of you have already shifted gears in your business, whether it's laying off employees or stop buying inventory or product. You know, you've already kind of done the immediate financial triage to conserve as much cash as possible and only use the money, you know, spend the money that you have to. And so I want to start talking about other things though and hit these Four categories. But I want to say too, a lot of the things are effort, you know, and for those of you that are solo entrepreneurs in particular, that the only payroll is really you. You know, I mean, you're just self employed. What we're talking about now is just effort. And whether you're full steam ahead effort, you're pausing and thinking of, you know, a new. You're just pausing to come back at a later date and maybe you're thinking of things to improve when you bounce back, you revisiting, you're looking at your strategic plan. You know, you're going to reopen partially and put all your effort into that, or you're going to think of the next business idea and do your comeback tour and just close down. Now, those are effort things, I think, and I'll say this right now, there's so much. People are so depressed right now. Let's be real. That's probably, that's the fair word. And having something to do to be excited about, just to at least have a plan for your business is really good. It's healthy. You stay engaged, you can stay positive, you have something to work towards.

And I don't want to go off money entirely yet before we get into these four options.

But I wanted, I did, but you don't have to.

But I want to also reiterate what Matt said in a big way. And I want to give all of you a challenge. And I didn't expect to say this, but Matt, I think your comment is awesome, is that I want to challenge all of you. And if it's necessary, listen to this, this podcast or watch this video two or three times if you need to. I'm going to challenge all of you to have a written plan of what you want to do when you put pen to paper. Provides a lot of clarity. I know it's easy to drive down the road and go, oh, okay, Mark and Matt, that's a good idea. I should do that. But when you sit down and actually write it up, it's a very different action. And part two of our challenge is that I want you to share it with your board of advisors. Now, we've been talking about having a board of advisors for years. This is, no, this is like the best time to get three or four people around you and go, hey, I watched this podcast with Mark and Matt. Mark made some great points. Matt's were okay. But here's what I want to present to you people. I want you to hear what my plan is and bounce it off someone and Write it down. And that emotional vomiting, really. And getting people to give you their feedback could be a really, really big shot in the arm.

Yeah, I love it. I totally agree. That's. And it is emotional. Yeah, it's an opportune time to do that. Lot of people, particularly other people you may know that have been successful business owners, they're wanting to help. A lot of people are finding themselves to have time. They see what's going on in the small business world. They're wanting to help other entrepreneurs and small business owners. So tap into that. I mean, it's kind of their way to serve. So tap into that and find some good people that could be a resource. I've. I've learned sometimes ask for favors for people who can really help you, you know, just the connection itself. And you'll be surprised how many of them are really, truly willing to help if you're willing to do something. But here's the other thing. Don't waste people's time. If you're going to take someone to be on your board of advisors, that's a little stretched. They're busy as it is. Don't waste their time. Be serious about it. Follow through on the advice they give you and the things you say you're going to do.

Oh, my gosh, this is so good. And I want to get back to money, but I'm going to. Matt keeps opening these doors that are freaking awesome. I want to run in them. Is. Don't beat yourself up. This has been an external circumstance that no one could have predicted, and it is just something you can't take personal, you know? And I think a lot of times a business failure can be traced back to some poor decision making. But in this situation, when you have to shut down your business cold for several months potentially at a time, and lose employees that pursue other options and avenues, it's completely out of your control. So try to stay positive. Know that we're in it with you. It's hard. It's difficult. And you'll, you know, don't, don't, you know, suicide rates have gone up, and it's just sad. And I don't. I just got to say that from my heart that the more you can collaborate with others and engage in podcasts like this and workshops and online webinars so that you don't feel like you're alone is so important.

Yeah.

Okay.

Money, Matt.

Okay. We can borrow money from retirement accounts, other people's retirement accounts. We could maybe go find money with a PPP and. But let's just talk about a few other ways where people could maybe get some money. I've got ideas. What do you think? You have something? I got some.

Okay, yeah, go. Go for it. What do you got?

Okay, I just got a text this morning from a client that said I need to go tap into my home equity. All right. Now lending has tightened up. It's no, no surprise.

Rates are low though. Rates are low though. If you got a good amount of equity.

Yep, rates are low. You might be able to get an equipment loan, you might be able to get a title loan, you might be able to get home equity cash. The SBA loans procedure is probably overwhelmed right now in dealing with the stimulus package. I don't think you're going to get any love there. You might have to tap into some credit cards. The more short term the loan is and the more interest to be paid or higher interest rate, the scarier it can be. You better have a frickin awesome plan if you're gonna go down those paths. But it's not uncommon. People will, no matter what we say, don't throw it on a credit card. Be careful.

Yeah. And I think if you've already been doing that, if you've already started to put all your personal expenses onto credit cards that you know you're not gonna be able to pay off now at the end of the month because you don't have cash flow in your business that you used to have, quickly shift to looking at a home equity line of credit. You do not want to be doing this two or three months down the road when all your credit cards are bumped up. You're not looking as nice as a borrower at the bank anymore, even for a home equity line of credit. So if you've already done that, that's a great idea. Tap into a home equity line of credit. And I'll say this, many of you business owners right now, if you didn't have lines of credit set up, it's a, it's a nice thing to just have a line of credit at a bank in your business, you know, and sometimes you have to draw on it somewhat. You're going through growth or, you know, have a tricky month. And, and right now it's a nice time to be able to rely on that for those of you do have a line of credit at a reasonable rate, not credit card rates already at a bank. So lesson learned. It might be a little harder to get right now, just that, you know, straight business line of credit, but the home equity one's a Great one.

And I'll say this because we have to be careful. We have a lot of strategic partners. If you want to email any of our attorneys or accountants that you may be working with in our law firm or accounting firm and say, can you send me some resources for corporate credit, home equity lines or anything like that, email and in the subject line say, help. I need credit resources. Let's say that I need credit resources. If you put that in the subject line, Matt, let's make sure we let all of our staff know that we've got a signature with three or four or five different resources. We don't make money on that, but we can send them to you privately that you can do your due diligence and reach out to. And since this is a podcast, as people may listen to two or three years from now, be patient. But I'm going to put that subject line, send me your credit resources. And let's, let's make sure we have that available, Matt. Okay, now let's. And we've actually done some podcasts on raising capital. We call it other people's money opm. But we could spend the rest of the show on just finding money and how to document it and do it carefully. But let's get in these four options and I've got an insight on this Full steam. But I'll let you go first, Matt. Full steam ahead. That's. Let's say we're going to just go freaking full steam ahead. What do you think? What are your thoughts on that?

If you're full steam ahead, I presume you're in a business that hasn't been affected really yet, or you're in a business that partially affected. Well, yeah, you could, you could be partially affected. Yeah, but. But you feel like you can the same capacity you normally have, whether it's people or the amount of money you spend, whatever it is, it's like I can still maintain my budgets and I can just keep going full steam ahead doing the exact same products and services that I do. That's the full steam ahead. And there are businesses out there that have been a little affected here or there, but it's maybe 5% or so. And they can otherwise kind of operate full steam ahead so that when they're through this, they're back to normal, they've got their same team and services in place that they had. They don't need to interrupt them.

Now, I'm going to again, take a little different approach.

Okay, that's fair. You don't have to agree with me.

Yeah, no, but I usually do because you're freaking awesome. But full steam ahead may involve a little bit of shifting. It's not a full on reorganize like number three. Number one, I'm going to go out on a limb here and I'm going to say that's us in our law firm. We have been affected. But guys, I like how Matt said about 15 minutes ago or so about the concept of effort. I'm a little emotional saying this. Matt and I have been working our butts off the last four weeks. It has not been easy. We are scared, we're nervous, and I would say our sales are off. But we've been able to keep the doors open. And what we've done is we've shifted. We're not setting up as many entities for new business owners that are excited, but we're doing a lot more consults, helping people through the stimulus package. We're going to be doing consults for the next three months regarding forgiveness of the ppp. We're going to be helping clients shut down businesses and open new businesses. There's new opportunities have arisen. But what Matt and I have done is said all hands on deck. We have had. We just had a staff meeting earlier today where we reminded all of our staff, do not let up. We are working harder than we've worked in a long time and I'm worn out. But wouldn't you say, Matt, that's full steam ahead. That's what it means.

Yeah. Yep.

Yep.

That's full steam ahead. You're keeping your team in place. Yeah. You may be shifting some of the things that you do to weather the storm, so to speak, that, you know, you're not going to be doing six months from now. You know, think of the restaurant. They might not be going full steam ahead, but they've shifted to takeout. And are they going to always be doing so much takeout? No, they'd rather open up their doors and have you come sit in and take and eat there, you know, and you would rather do that many of the customers, but they're putting their effort into that. So full steam ahead. I think the biggest thing to think about this, to differentiate it from is it's not a pause, because in the pause, you're going to step back, Right. You're just like, it ain't worth it. It's not worth my time, it's not worth my money. It's not worth my effort right now. I know the business can be successful, but I need to pause. It's Not a reorg or anything like that. It's using your existing resources and maybe just shifting a little bit, pivoting a little bit for the time being. Still full steam ahead. I don't know.

Yeah, no, I like it. And I'll say this. When Matt and I talked about option three, which we'll come to in a moment, we put it as option three because the reorg might be something that takes place over several months and may come back after a short pause. The comeback tour is I'm going to completely reinvent my business and concept and idea and come back next year and we're going to talk. But I think really there's this fork in the road. It's either I'm going to work my A off and it's full steam ahead, or option two, I may go collect unemployment for three months. I'm just going to pause. I maybe am not going to take the ppp. I'm just going to sit back. I'm not going to borrow money from anyone immediately. I'm just going to reevaluate. But I know I'm going to come back in a couple months, maybe two to three months. That's the pause. Would you agree, Matt?

Yep. And I'll give a good example of the pause. I had a client that owns a salon, was consulting about doing ppp, had maybe one other employee other than herself that was a actually W2, all the other stylists or you know, hairdressers, whatever, are 1099. And so it was like, well, don't do PPP. You can't open up in your state anyways. In California they're not going to be opening up salons anytime soon. I know Georgia's all full steam ahead and so it's like you're the pause. Okay. Her business is the pause. You can't open up and operate legally anyways. Even when you're able to, it's going to be at a certain reduced rate. PPP didn't make sense to go get a loan to put yourself or employees back on payroll because you can't really do anything right now. And it might have been. There's some people in that, in the salons. We've had some clients in that category that have still gotten ppp. But so I thought that was a good choice for her to basically pause. She can go get unemployment. Her other employee is kind of an office person, front desk person, could go get unemployment. The other 1099 stylists, you know, or their all independent. That kind of work in the Salon itself can. Could get unemployment. They could possibly even get PPP themselves since they're technically sole proprietors themselves. So that's a good example. I think of a pause is the circumstances you're dealt, the hand that you're dealt. The best. The best you can make out of it is a pause. I think for some people.

Yeah. And our attorneys have been helping clients evaluate what would I get under unemployment versus taking stimulus money and would I even be able to operate. And a pause is okay. It does again. Doesn't mean you're a failure. It's a time to reevaluate, which comes back in this reorg topic or option number three. And what's interesting in the pot just aside. I was just thinking of this, Matt. Kind of funny. Back in the 20s when, you know, there was prohibition and alcohol was illegal, you had speak easy, you know.

Yeah.

I had to sneak in and under the table, gambling and drinking and prostitution, all that. I wonder if there's gonna be salons that are like little cut easies, you know, where I'll hook you up. I'm gonna cut your hair, you know, under the table.

Yeah, yeah. You know, it's gonna be. It's gonna be a black market for haircuts coming soon. I need one for those of you watching video. It's been a long time. So on the sides especially.

Yeah. It's not pretty. Yeah. So it's a big deal. There's ladies that go to get their hair done for therapy and they're like bouncing off the walls. That's true.

Yeah, that's very true. I know. I need it for therapy. I like it going. I like going myself. Let's be honest.

Now I'm going to give another example that I think is a good transitionary example from pause to a reorg. And I think in that process, there's going to be a reevaluation that once the pause is over. What can I learn from this? It's a great time to peel away the onion. Look at your financials. And so here's an example. When I was in undergrad college. I don't know if undergrad means anything

else than undergrad college, but thanks for clarifying.

I had a janitorial business and many of you that maybe followed us for years. I have quite a few stories of being a janitor for seven years. We had carpet cleaning trucks, window cleaning, floor restoration. I mean, we had 25 employees. It was hard work. And we'd work at night cleaning toilets and buildings and restaurants and grocery stores, propane Buffers the whole nine yards. Okay. So anyway, at one point in the process, I had a TGI Friday cleaning account. They would use outside janitors that would come in about 11pm midnight, as soon as the bark portion closed down. And we clean until about 8 or 9am I thought it was a big deal. We cleaned TGI Fridays. And it had a big. It was a big monthly concert.

Everyone looks forward to Fridays. I mean, it's kind of a big deal.

That's right. And so I thought it was a nice thing on my resume. You know, where our cleaning company did TGI Fridays and yada yada. My wife, to her credit, was always like, this is such a disaster. I mean, there's no time off if. I mean, that restaurant has to be clean. And if they. In Janet janitors. And that type of employee demographic is very, very difficult. It's graveyard. And it would be very common. Someone would call in sick and I'd have to go clean it. And then I'd go to classes the next day at 8 or 9am So I pulled 24 hours. And it was hard, but I was always like, oh, it's gravy. It's a big deal. It's awesome. And finally my wife would say, you need to run the numbers on it. I don't think so. And I'm like, no way. I put her off for months. And finally I was like, all right. It was one of those nights where I just worked 24 hours and I'm like, I'm just going to analyze it. And when I finally crunched the numbers and again, bless her heart and give her full credit for this, I was like, what the hell? We're only making a few hundred bucks a month on this thing. It is not worth it. And within days, if not a week, I was like, we're out of here. And I helped him transition to a new janitorial company. And I tried to renegotiate. They were like, hell no, you know, big corporations type stuff. But I. It was a really good wake up call. And lesson learned for I've reapplied in my life many, many times over is don't look at your business too emotionally. Be willing to tear it down to the numbers. You may think one of your product lines or service lines and this, you know, using the salon example, you may think colors are just awesome. Where your real money might be in men's haircuts or in nails or acrylics or something. And so you got to be able to sit objectively back at your business. During this pause time and say, what's really making me the money? And it may not be the sexiest product or service in your business, but it's the one that will allow you to reopen sooner and faster and more effective.

Yeah, yeah. And I think in the pause, it's a good time because the pause is really like money's not flying out the door anymore unless you're stuck into stuff you have to pay. You're letting go of employees or other contractors you may have, if you have them, you're probably getting on unemployment. You know, if you, if you can qualify and a lot, most self employed people now qualify for it. But you're not sitting on your hands and doing nothing. You're readdressing your strategic plan. You're ready to, you're going to come back, you know that your business was successful two months ago. You know, and so that's why it's a pause. We know that when we're through this that you're gonna be able to open back up. It's not like, it's not like you were struggling two months ago and you've established success. And so that's the pause because you're gonna come right back into what you did after doing some refining, as Mark said, just to take the time to just kind of refine, reflect, build on your strategic plan, get to the things in your business that you always put off that you knew were important. So just kind of take advantage of the time. Because like we said in the beginning of this whole thing, I said at least is your time is going to be spent, you know, and whether you make an investment with that time over, over all this nonsense, this whole pandemic, or you wasted away on Netflix, I mean, you're going to spend it one way or other. Might as well make it an investment.

Yeah. Now on this, before we get to the comeback tour, which is okay, I

do want to hit reorgan. I got a couple on reorgang.

Yeah, I'm still, I'm still in this.

Okay.

All right. Because I think the pause and the reorg are highly connected because either you're pausing for a few weeks and then coming back with the reorg, or you're going full steam and reorgang at the same time. Here's a couple other major points. We went straight to finding money. I'm gonna borrow money, or I'm gonna sell part of my company. We needed to also bring up, and this is probably the best time to say I need to be also looking at the yin and the Yang, what are ways I could increase revenue right away and maybe reevaluate my revenue streams immediately? And also, where can I cut costs immediately and think of just a simple $1,000 swing on each item, for example. I'll give another example. And I used this in a podcast a few weeks ago. I told Matt about it down the just downtown here in this little Main Street America, very similar to thousands of little Main streets in America, There's a little soup and sandwich shop. And when this hit, they didn't shut their doors. They called up Cisco, which if you're in the restaurant industry, is the supplier of most of the food items for a restaurant. And they said, we want all your bulk items right now. And they just ordered a ton of crap on bulk, pushed out all the tables and chairs, put a banner on the door and said, we're selling bulk food if you need it. And in this little town, the closest Costco is an hour away. And that they've been swamped. People are in there buying in bulk. And I was like, that is so smart. So they went full steam ahead. But they did. They said, how can we make revenue? Because they still had to pay rent. So they thought, how could I change my revenue stream? And then also on a cost cutting measure, where can you cut costs everywhere? Is it calling up your landlord on rent, getting a forbearance for a little bit? Is it cutting costs here, here or there, keeping some employees but not others? And if you could swing revenue a couple grand and cut costs a couple grand, there's a $4,000 swing. And that could be the difference between closing and staying open.

Yeah, that's a great example. Good example. Let's talk about on reorg and we talked, Mark, about finding your most profitable items in your business too. And the bulk item there is a good shift example. But also finding just within what you're doing to the most profitable items that you already sell. You know, the TGI Fridays being the one that maybe actually what you think is the most profitable is not. So you can refocus on that, analyze that to see what's your most profitable thing and then just double down on that. Scrap out all the other stuff that are not your most profitable things. Focus on what you're doing. If any of you have read the book good to great, what's his name? I think Collins, forget his name. But it's a famous business book. There's the hedgehog concept of just like just be good at one thing. And for many business owners, we've added Services, we've done many things and sure, you know, those things may be profitable in a normal economy, but right now, when you got to hunker down, focus on the one thing you're good at that really differentiates yourself, that people are really willing to pay you money for and just be really good at that and get rid of the rest right now. Kind of trim the fat, so to speak. The other stuff that's not, that's non essential since that word's so popular now. Also think of new opportunities. You know, what are the opportunities that I can to still serve my customers. I want to keep my customers connected to my business so that when we're back to normal, they're going to be using our products. Whether that's selling more online, reaching out to your customers through social media more just, you know, reorganizing. And I'm not saying you're necessarily selling as much and that's okay, but you're staying connected with your customer base. You're not shutting off the marketing. They're going to remember who you are when you open back up. You're finding ways maybe to get them products or services now, whether it's video conferencing or you know, the doctors are, you know, are common now or you know, they're doing that on video conference now and they're still finding ways to connect with their typical customers too.

And I think, I love what you're saying. Matt too is like being creative. And I'm just doing this off the cuff. If I was a salon owner and I couldn't give haircuts in the salon and there was a social distancing problem, maybe you call your clients and go, hey, let's do a little YouTube or a FaceTime and I'll give you some basics on how you could cut your own hair. You know, just kind of do some walkthroughs on things. I don't know, maybe you try, you don't want to lose your customer and teach them how to do what you do.

Maybe give them some styling tips, you know, or some products that you're, that you have in your store. Maybe some of you sold products in your store that it's like, hey, do you need some of this? You know, reach out to them. I, we're gonna, I can ship you some product, you can buy it on my website, you know, and maybe that's something you've want always wanted to do in your business. It's the perfect time right now to get that set up so that those customers that usually Would walk in and buy. Can now just order from you direct on your site.

And you know, and I'll use our firms as an example here. We're making sure all of our attorneys who normally are talking about setting up and getting a business up and going within days. We're now training our attorneys that are a little younger than Matt and I on how do you shut down a business in days and what are the issues and how do you. We're always reading the operating agreement and bylaws, how to raise money. Now we're talking about how do we get rid of debtors and credit, sorry debtors and creditors and accounts receivable, accounts payable. And what are some ways to approach that? Also on cuts, there's nothing wrong with going to employees and saying will you take a pay cut? And you may say, I'm not going to pay myself this month. And I asked all the employees if you want to go claim unemployment, you're furloughed or do you want to stay, you know, and would you be willing to take a pay cut? Call the utility companies. I heard recently a client that had called utility companies and they were doing a two or three month forbearance to help cut down on utilities. Call your cell phone, call everybody. It doesn't hurt to ask. And you never know where you could cut costs.

Yeah. Another idea on the reorganization is Mark and I, we started a title company back in 2007. Investor quality title. It's great heyday. Back then, real estate was great. We were helping lots of real estate clients. We did hundreds of millions in closings for customers in southern Utah and in Salt Lake City. And then the real estate like right as we were ramping up and about to hire more escrow officers, the real estate market goes in the crapper. And we were worried about just the people that we had hired at that time, you know, not to mention know our future growth. Well, what we immediately did is we realized our typical client, our real estate client, was shifting to buying on short sell. They were going and they were, they were starting to make a killing on short sells. So we became experts on closings for short sells. And it was amazing for three or four months because the big title companies like a First American title or a Fidelity Title, they did not want to touch a short sell. They were a pain in the butt. They didn't want to do them. But you know what? In three or four months, those are the only closings you could do. And so then they learned quickly to start become our competitor. That strategy didn't work forever, but that was a good reorganization of how we're going to approach things, what we're going to focus on, what we're going to be experts on, what we're going to provide, our services. Still doing the same thing, but just going after something that's more available in the market as an expert. So that's a hopefully helpful idea.

Yeah. And again, if we're throwing enough mud at the wall, something's going to stick here.

That's what I'm trying.

These are really, I say this humbly and not egotistically. I think a lot of these are great ideas. It's just some of them don't work for everyone and some may be a huge benefit to some of you. There's a golden nugget in here somewhere. Another one I wanted to bring up was getting into the numbers. Let me be very specific on that. And in my new workbook called Eight steps to start or grow your business, in the third section, I go through analyzing fixed costs versus variable costs. And I use the example of a churro store that opened up a little restaurant and they started selling churros. And how do you determine what the variable cost is and how many churros you need to sell to cover your fixed costs? Now that sounds really simply stated, but it can be actually kind of a little laborious to go through it. And some of you that are scared of numbers or not comfortable with can be a little overwhelming. And you're tight right now, so you can't call your accountant and they're busy doing tax returns and you're trying to get your tax return done. So I'll make it. You know, I sell that thing for 99 bucks. And right now I'm doing a quarantine special on the marcjkoler.com site and it includes the eight steps workbook in digital format. So very, very affordable right now if you wanted to grab it. But let me just say what this means a little bit. What you want to do is take a piece of paper and draw a line down the center and say, what are my fixed costs? What can I not get out of? Maybe it's rent, some utilities, maybe you've got a lease on something, you've got some equipment payments, maybe a long term loan, an sba, who knows? What are those fixed costs that even if I shut the doors tomorrow, fired everybody. What are those costs that I cannot get rid of? Those are fixed costs. And then come over here and go, okay, now if I keep the doors open or the website on what are my variable costs to produce a certain product, sell a service? Maybe it's going to involve some employees. It can involve some services of some sort of those are called variable costs. And you want to kind of look at this, your business of going, alright, if I do come back through this reorg and choose certain products or services that I'm going to still sell, what is my gross margin on one service? And one last example might be landscaping. Your truck payment would be fixed. But hiring an employee to go out and mow a lawn is a variable cost. And then you'd say, okay, to hire an employee all day long is going to cost me X but how many lawns could this person cut? And there's my gross margin right there in a nutshell. And then you have to say, how many days or lawns do I have to cut to cover my fixed costs? Well, anyway, the point is, I know as an accountant I might lose some of you there, but if you can do some of that analysis and really get into the numbers, it can really help you understand where you can trim costs and where you need to focus your revenue. And that's the nuts and bolts. And there's just no way of saying it that you've got to get into those details to really understand where you can reopen, where you need to close.

Yeah, the numbers, I mean, at the end of the day it's, you know, the numbers are what matters and whether your checks are going to clear or not or whether there's going to be money for you to take home sometimes. I know some business owners are the last thing they want to do, but right now it's really the first thing you need to be doing because it's going to inform you on the decisions to make and the hard decisions, but also the fun decisions about which way to go and what direction to take. And it gives you some comfort too into knowing that information. Sometimes a lot of the stress I think a lot of people have out there is they just don't know and what's going on even internally in their own business or, or how things are going to shake out. We'll investigate those numbers a little bit more. Like Mark talked about, it'll give you some more certainty so you can make better decisions and also have more comfort. Okay, you want to hit, let's hit the shutdown and possible comeback.

Yeah. And we want to be careful about saying shut down and taking that too lightly because we are going to focus next week's podcast on that. And that involves quite a Bit. But I think an important perspective is, remember, your entity is different from your business. I mean, let's say hypothetically, I shut down Matt and I decide we're going to shut down the law firm.

Alright.

Does that mean I'm going to shut down Marc J. Kohler Inc? No, I'm going to keep my entity. I want to keep it in good standing. I'm going to probably keep the bank account open, but the next business I do, I'm still going to need that entity. Many of you are entrepreneurs for life and you know that. It's just what business am I going to launch 12 months from now or six months from now? And so keep in mind, shutting down a stream of revenue or a business is very different than shutting down an entity. And I wouldn't take that, I wouldn't do that haphazardly because it's even.

Another thought on your entity is you can amend the name of your entity if you're like, well, but my name is very specific to the business I'm doing now and I'm closing down that business. Yeah. I've got an idea maybe to come back with something else, but it's totally different.

That's okay.

You can actually keep the same company and amend the name, which could be, you know, a more efficient way to do it too. And you, there's other reasons you may want to start a new company entirely and we could consult with you of course on that. But don't feel like to shut down your business, so to speak, like Mark said, requires closing out your entity.

Yeah. Now also, Matt, tell me what you think about this. Is the difference between a pause and a comeback tour to me is really the length of time between the two. And it also has to do with your branding. I think a pause, you're just coming back with the same brand and business name, but maybe a different product mix or a different service mix.

Yeah, I think, I think the pause is more like a more refined approach to what you're already doing. The pause is like my business was great before this. I know it's successful in a normal economy and normal market when I can open back up, you know, in a couple months or next month or weeks, whenever this is. I know there's going to be the economy sluggish maybe when I come back, but I, but I know that business is successful. That's the pause, I think.

Yeah. At its core it's not something that's maybe become obsolete in a way. Now to me, the comeback tour, and this is interesting, we see this all the time. Think of a non compete. A lot of times a business owner will sell their business and sign a three year non compete and they're sitting back there going after three years I'm going to come back and they come back to compete against maybe the person they sold to and they do that legally after this three year non compete. But I think what's neat about a comeback tour, it's, it's after you maybe settle some debts, get out of the rent or lease agreement, you've turned off the fixed costs, you know, okay, yeah, I come back. How many of you would maybe start your business differently if you could do it all over again? I think all of us would. And so that's what the comeback tour is about. This experience has made you a better entrepreneur. In a year from now you're going to be like bam, okay, I'm going to come back with this location, I'm going to come back with a different brand. I'm going to start with a service mix like this or a product mix like that and you're going to come back ever stronger and better but maybe with a different name or brand. And I think. And that's okay.

Yeah, yeah. And it could be a totally different industry too. It could be within where you are known and have an expertise but a different approach and brand like Mark said, it could be a totally new industry too because for those that are serial entrepreneurs, I mean you can take like you know Jeff Bezos of course who's like Amazon is probably the one company benefiting in every way from their shipping of products to Amazon Prime. Everybody's watching stuff at home and buying stuff. I mean, oh my gosh, they are

like I think he embedded the coronavirus

because I know it is like if they weren't already like taking over the world. So but you know, he had so many like he had what like 10 businesses fail before he finally hit on Amazon. And he bounced around from different, different things and he had success in the business world, you know, before he started being an entrepreneur. But, but just keep that in mind that I think the comeback of where to make the decision there is, of the shutting down and we'll get to the legal particulars is the business wasn't so great coming into this. But even before the pandemic I wasn't so certain this was great. I think that the pandemic and the coronavirus right now, if it's washed you out and it's caused your business to really cease and you can look back and say I Didn't love that business anyways. It wasn't really doing for me what I wanted. It wasn't going in the right direction I was hoping it to be. This could be the good time to close that business or stop that business and look to come back with something else.

Yeah. Keep the entity, but come back now. Here. I got the best analogy.

Okay. All right.

This is senior in high school to freshman in college. You're like, all right, ready for the comeback tour. You're going to go off the grid. You're gonna go off the grid, and you're gonna come back. New haircut, new clothes, new style. How many of us reinvented ourselves even from junior to senior year? You're like, this summer, I'm gonna freaking reinvent myself. I'm gonna get working out. I'm gonna get style. I'm gonna do this. And the best time was from high school to college. You're like, it's the new me. And you came back better, stronger. You know, us guys, we're looking to upgrade to another layer of level of girls that we couldn't really touch before, but now we're playing in a whole new realm, if you will, or a new league. We went from the triple A league to the majors, and we were able to do it because we reinvented ourselves. Matt. I mean, yeah, that's a good. Yeah.

You know, appreciate that analogy. I wasn't clear what you meant by this on this concept, but now I do. I get it. Finally.

I brought it together then. Yeah.

Yeah. Because you want your business to be more appetizing and get to attract a better customer. I mean, it's all about the law of attraction, right? So

it is true. Before the show, I was like, we got the comeback tour. And he's like, what are you talking about? I think this is it.

You're like, I understand where you were going now.

Yeah. The shutdown could be the. And I'm not saying this facetiously or jokingly for those that don't know that word, but this. The coronavirus and the shutdown and I. This may sound really callous to say, but I am honest on this. It could be the best thing that happened to your business. Seriously. This could be maybe. How many of you had maybe lost your mojo a little bit. Bit. It's going to hurt. And you may have to shut down your business, but you're going to come back on fire a year from now, bigger, better than ever before with this experience that's made you a better business owner. Now. Gosh, that's so hard to say when you're in the crucible of the affliction, but this could be a good thing. Yeah, that's glass for you, baby.

I know.

Yeah.

Mark's always glass half full. Whenever anything bad happens, he's always like, well, I'm like, here we go. On the bright side, you know,

which

is good, that's we need some positivity out there right now. And like I said, hopefully, I think for me and looking at these just for ourselves and is it just takes some of the uncertainty that's out there. It makes you more engaged and thinking through what to do in your business. So think about these categories and the things you can be doing. Hopefully it was helpful. I like what Mark said too, about writing it down. Once you've thought through these four things, do write it down and get with your board of advisors or your spouse, if you have one, or the partners in your business, you know, whatever your situation may be and start talking about it. Get it out there, get it communicated. It makes you accountable to it as well.

Okay, my last summary comment is as hard as this to say as well. Don't be married to that dream of the business. When you analyze this, be cold hearted and objective as possible. So if you are married, that's a perfect person to talk to because they'll tell you what a bonehead you are and then you can reevaluate. No, but seriously, this is the chance to really say and have a cold hearted look at your business and do it objectively and it's going to be painful. And I'm not kidding. Matt and I have had a lot of conversations the last four weeks going, okay, what modifications and adjustments do we need to make? It's full steam ahead, no vacations right now. Let's work our A's off. And that's what we're doing. We're full steam ahead with some modifications, I think that's fair to say. Matt. Right?

Yep. Yeah, very true.

Yeah.

And our different, our companies too. And, and we appreciate all of you, you know, who are listening here, also customers and clients of ours. We're grateful for that and, and hopefully the services we're providing are valuable to what you need right now. So. All right. Now if you haven't, make sure you're signed up for our newsletter. Okay. You can go to kqslawyers.com or markjclaw.com tacpas Matt Sorenson, sdrihammock.com, all of the websites are out there, but go Sign up for the newsletter because you'll get updates on upcoming shows. All of our new newsletter articles that are coming out. Keep in mind, I've got one coming out on PPP forgiveness, actually talking to one of the five directors.

If you ever ppped in the living room and didn't make it to the bathroom, how do you get forgiveness for that as a child?

Yeah. And adults, too. It's a little more difficult of a process, but there's a process.

I ppped in the front room. I couldn't make it. How do you get forgiveness for that? We're going to walk you through it.

Yeah, because that's the big thing. For those of you that have PPP, that have got it, we got to call it 3P. We've talked about. We just got 3P. We need to figure out a different. You know, the acronym is terrible, but forgiveness is next. If you haven't got it, go get in line right now to get the loan if you qualify for ppp. But we'll be getting updates on that. The ERTC tax credit, which has had some updates. That's not great for family members or business owners. It's good for your other employees. Lots of strategies that have been changing, so you've really got to stay engaged with respect to the stimulus stuff. We'll also try and bring out regular business and legal tips like we did today to try and help you formulate stimulus. Some of this to help weather the storm.

Gosh, what a summary. Matt, Good job. All right, we'll see all you little buckaroos next week.

Cowboy hat is on for those.

Yeah, Machacho.