Heritage Business Advisors Claimed

Justin Goodbread, Heritage Business Advisors and Financially Simple, https://financiallysimple.com

Heritage (HI & HBA) is a comprehensive financial and business advisory firm that strives to maximize the networth of small business owners. By combining holistic personal financial planning, with business value growth planning, exit planning, and strategic planning, our clients experience an in-depth process specifically designed for today’s business owners by business owners with decades of knowledge and experience.

Elizabeth: Hi, I’m Elizabeth Gearhart. I’m here with Justin Goodbread, one of the top 100 financial advisors in the country. Justin has a goal for business owners. Justin, what is it?

Justin: Elizabeth, I want to see business owners double their net worth every three to five years. That’s my goal.

Elizabeth: And how do they do that?

Justin: Oh man, and that’s the complicated part of it, what we do. The way we simplify it down for business owners to understand how they can accomplish this, is we start off by first asking, where are we at today? Where is our net worth today? You know, business owners, we are the economic engine of the United States. We push so many people products into employment, into existence, but yet many times we don’t take care of ourselves. We focus our time, our resources into our customers our employees, our clients. Yet whenever we hit 60-70 years of age, 80% of our net worth is often our business and we can’t sell it. In fact, only about 14% of businesses actually sell.

So we first started off, to answer your question with, where’s the business owner at today? And once we know where they’re at today, then where do they want to be? And then we orchestrate, I like that word because you’re orchestrating, you’re conducting a myriad of professionals. Those from CPAs, to attorneys, to value growth experts, to insurance agents, investment people, real estate, whoever, whatever the mix is for that particular client. So if you can coordinate and get everybody facing the same direction…it’s kinda like a football team. You’ve gotta have everybody facing the same direction. If that can work then you can actually see that type of result.

Elizabeth: So Fireside is in its infancy, but I will ask you these questions from the perspective of my husband’s law firm. So he’s had his law firm for almost 15 years and he does have a succession plan for when he leaves it. The question he always asks is, can I increase my net worth without having to grow substantially?

Justin: The answer to that is, potentially yes. And it depends on the other asset mixes that you guys have acquired or that he has acquired over his career. So there are ways that you can increase margin within a business without having to increase work. You know, there’s an illustration that I teach and often, and I’m going to try and keep it super simple for business owners. We hear that our business is worth X, and the way we come up with our business is worth X is we receive X number of revenue in a law firm. X number of revenue and therefore there’s a multiple applied to that revenue.

So let’s say for example, the law firm is one time trailing 12-month revenue collections. That may be what they could potentially sell it for. What we often do to try to grow our net worth of the business, which is your question, is we go out and try to produce more revenue. The problem with that is it makes us tired. It feels like we’re pushing into the wind. What if we could change the multiple? What if we can get our company to go from a one-time multiple to a two times multiple. Again, the same 100,000 times two is now worth twice as much revenue.

So the way you do that is you have two different types of assets within a business. You have tangible assets. Those are the cash in the bank, the chair at that law firm, the law firm table, and then you have intangible assets, things which we really can’t see, but we know they’re there. There’s four basic intangible assets that we utilize. One is called customer capital. We want to make sure there’s broad diversification amongst the customers. Many times there’ll be a customer concentration issue, which you can’t sell that. We also go into structural capital. Can the law firm operate without your husband present? Is there a director of operations who can be there or is there junior law associates who can work in his stead? Maybe not at the same billable rate, but that can provide additional structure, that provides some depth to the company. That’s the structural capital.

We have social capital. That’s the third one. And that is how in the world is the company perceived externally from outside of that particular business. Right? So if we can make the company appear more favorable within its local marketplace, then it may have a higher name, thus bringing up our intangible asset. And then finally, what we deal with is we deal with our human capital. I mentioned this a little bit, but how strong is that team? How strong is that team around you? So structural, customer, human, and social capital. If you can focus on those, then you can actually drive the multiple up versus having to go out and produce more revenue.

Elizabeth: That sounds excellent. Like a great idea. And I think with the human capital, one way a law firm could do that is they could charge premium rates for special services. So they’re still working with the same client base, but they’re charging a higher rate. The other thing is to grow. So can any business do that or are some businesses just based on their tangible assets?

Justin: No, we have, to answer your question, any business can do this. When we look at business, there’s two types of business. You have what’s called a lifestyle practice or a lifestyle business. And that is the individual who, I call them ‘Chuck in a truck,’ right. I grew up in the South and we have these guys that like to run around and throw grass down for sod, or they have a little push mower of the back, chuck in the truck. So chuck in the truck is just how they’re trying to make money so he can go fishing on the weekends, right? That’s his thing. Not everybody’s that way. There are some that want to create enterprise businesses. Those where you almost create the golden goose. So that business can operate without the owner or the practitioner involved within that company.

So yeah, any company can move themselves from that chuck in the truck type of personality who just wants to go fishing on the weekends, right? I mean, there’s nothing wrong with that. I like [inaudible 05:41] a line, but you may also want to go out and create a company that can operate. And so there are principles. Business is business is applicable across multiple different facets. It’s just a matter of how much foresight, what’s the direction. Again, we know where you’re at, where do you want to be? And do you want to actually create the golden goose for yourself, and for your family, and for the employees in the company?

Elizabeth: Excellent. So what size businesses do you work with typically?

Justin: I like the service industry. Typically we are dealing with law firms, dental practices, medical facilities. We even have a lot of service industry in the construction field, pool builders, those who are doing underground placements, we have auto manufacturers. So those in service, not really retail and not really manufacturing, okay. We’re mostly service industries. And the ones that we see, that we’re able to provide the greatest impact, that typically are between about a million dollars in revenue to about $5 million in annual sales, annual revenue. Typically between about five employees to about 25 to 35 employees. That individual who’s really chasing their tail, that business owner who wakes up in the morning, they have a plan. And then by like about eight o’clock it’s out the door, right? That’s the business owner we can come in and try to add some valuable impact to their business and their lives.

Elizabeth: Oh, that would be Gearhart Law, my husband’s firm. Yes. So I guess I would ask you, let’s say that we were to become your client, and obviously I’ll show this to my husband and see what he thinks, but what would be one of the first things that you would do with the person who owns the practice, Richard, my husband.

Justin: Yeah, no problem. So whenever…not too many years ago, my wife, who’s a stay at home, who homeschools our kids. So she has the hard job, right? I mean, I wouldn’t want to do that. She has the hard job. I remember not too long ago, probably 10-15 years ago, she was stressed. She was stressed because she didn’t understand the business that I operated. And I would go to work, come home, you know, tired, worn out, but she could never see the bigger picture. And she would ask me lots of questions. And many times she would be up all night worried about something that she couldn’t control. So the one thing we want to start off with, the very first thing is to make sure the home front is taken care of. How does that work?

Business owners often focus on their business to the detriment of their home life. We take profits and we see the ability to go out. And I say, we charge hell with a water pistol. We see opportunities to go out and create more money. And so we take the revenue, we throw it back in the business. We take our time, we throw it back in the business only to leave the spouse or significant other who’s not involved in the business, destitute.

So the first thing we want to do is figure out how to provide ‘pillow money’ is what my wife calls it. That little bit of thing in the back of her head, that she can go to sleep at night and not worry about what’s happening in the company. So the way you do that is, step one, we do this with every client, no matter if they’re multi eight figures of income or just getting started in their business, we want to make sure they have a personal roadmap in their life. We want to make sure that the personal side of their finances is secure.

The way I describe it from South Georgia, I grew up on the ocean. We want to make sure all the holes in the boat are plugged. We don’t want any water coming in the boat. Once we get all the holes in the boat plugged, then we jump over into the business. And at that point we do an assessment. We actually do an appraisal, reverse the appraisal and say, okay, here’s why you didn’t appraise as high as you should have in your opinion. Let’s go into the underlying, there’s 256 points, levers that we can pull. Let’s go into those areas and let’s start strengthening that business, those intangible assets so we can drive the value of that company up. And then that’s a cyclical process. Ultimately trying to what? Double the net worth every three to five years. We want to track that net worth. And the business is a huge asset for many business owners out there.

Elizabeth: I don’t think I’ve ever talked to anybody like you before. I can understand why you are one of the top hundred financial advisors in the country. Not trying to….

Justin: You haven’t heard me say it yet, but I hate Wall Street. And whenever I say that on any type of radio show or wherever else, they just look at me and say, wait a second you’re in finance. Yeah, we’re in finance, but Wall Street and the way that the average financial world is geared, it doesn’t fit me. I’ve been a business owner for over 25 years. I’ve already started and sold businesses.

When I was 18 years old, I went to one of these top name firms. We, my brother and I, are making more money than my mom and dad and they’re college educated. And we’re crushing it as teenagers. We went into this firm, the guy in the suit and tie, standing behind the, you know, the really picturesque, it’s almost like a law firm look, he’s standing behind there and he says, “Well son, when you learn to make more money, come back and see me and we’ll teach you how to be rich.”

And I’m going, fool. I was like, man, we make a quarter million dollars at 18 years of age, each of us. We’re making pretty good money. And you’re gonna tell me that I need to go… So at that point I was like, man forget Wall Street. They don’t have a clue what they’re doing. Not for me as a business owner, because I know I can make more return in my business. I can make more return in real estate, than I can by holding to the Wall Street machine.

Now, does that mean I’ve totally forsaken Wall Street? No, it has its place. There are some tax benefits if we know how to use it, the internal revenue code is unbelievable. So when I start talking like that, Elizabeth, I tell you, people look at me like I’m a Catholic in Newgate. They’re like, man, this guy he’s crazy. But no, it’s what I love. I love teaching business owners. Hey, I talk the language, let’s make this thing happen.

Elizabeth: So how many businesses have you sold?

Justin: Personally? I’ve sold three. We’ve helped clients, man, hunt… I wouldn’t know the number on how many clients we’ve helped sold their businesses. I’ve got three in process right now.

Elizabeth: And you’ve made a nice profit every time you’ve sold a business.

Justin: Me personally, yes.

Elizabeth: Yeah. So you’re the guy to talk to. So you get these business owners going. Do they understand what you’re selling after you introduce them to this for a while? Because it sounds like it’s a different concept than what you hear from a lot of other financial people.

Justin: The hardest thing for us to overcome in the business owner’s mind, is they think we’re just another financial person who’s going to try to sell them some insurance or some investment. The way we overcome that is we charge them a fee, not just sell them something. And so the hardest thing the business owner has to determine is, can this firm, can this group of individuals which we’ve created, do they have my best interest in mind? Do they really understand what we’re trying to accomplish as business owners? And can they get me to where I need to be?

And if all those answers are yes, and there’s an engagement, and we often put a money back guarantee. If the client doesn’t like our process or our results, we give the money back. I mean, I want to keep a good name in the community. So if we end up engaging somebody as a client and we’re on the same page, and we understand where they’re at, and we get crystal clear on where they want to be, that’s half the battle. That’s an old GI Joe commercial. That’s half the battle, you know, you gotta know where you want to go. Once you have that, then the rest is academic. The rest is just putting in all the pieces.

Elizabeth: So can you tell me about a success story, a business that you worked with? You don’t have to say their name unless you want to, but yeah.

Justin: One of my favorite success stories is one that’s real close to transacting right now. So this individual’s become a dear friend of mine over the last six year. He was referred to me by a mutual client, a client. And he said, Hey, so-and-so is stressed. This individual, he called me and he said, I’d love for you to come sit and ride in the car with me and see what I do. So I went up and to this particular rural part of the country. It’s not in a big city somewhere. This is our, by the way, most affluent client. The middle of nowhere, right. We’re sitting in the truck and he says, I want to sell my business. And I look, and I say, you have no business. There’s nothing here. All you have is a bunch of equipment. And I ain’t gonna pay you for a piece of equipment.

So long story short, this individual had about, at that time, about $600,000 of assets total in his mid-fifties, wanting to retire. You can’t retire when you’re used to spending six, seven, eight hundred thousand dollars a year on a couple hundred thousand dollars of assets, it doesn’t work. So we devised a plan. We ended up, restructuring his team. We ended up putting financial reporting into place. We ended up with a whole marketing department. We put operational efficiencies in place. We put leadership techniques in place. We put sales positions in place. We totally restructured the company and his life. We started actually not putting everything back into the company, actually diversifying his net worth.

Six years have passed. Economically he could retire today with the amount of money that he’s amassed outside of his business. And now he has two offers on his business that six years ago would have never sold for anything. So it’s going to be fun to watch this individual go from $600,000 to greater than $10 million in less than seven years’ time. That’s a fun, fun case to work on.

Elizabeth: Wow. That’s very powerful. So how do people find you if they want to work with you?

Justin: Sure. And that’s, that’s just one example. Obviously there’s other examples, not everybody has that same result. I’ve gotta be careful because of the regulators out there. Not everybody has the same results. Your results could vary. That’s all my disclaimers there. Talk to your professional advisor, all those fun things. Okay. So because we deal with the regulations, we have to say things like that, but you can find us at www.financiallysimple.com.

On Financially Simple you can hear our podcast. We have over 300 episodes of me teaching business. There are about 20-30 minute soundbites. Occasionally we have guests come on, you can download courses. We have two books. We have one book that was an Amazon bestseller called The Ultimate Sale, talking about how you can actually sell your company. It’s reference guide that you can jump in on Chapter 2 or jumping over to Chapter 36, whatever. And you can kind of figure out where you need to be.

We have our second book coming out called Your Baby is Ugly. And it’s talking about your business. Most of us think our businesses are pretty little babies, and they’re ugly little rats. And so we’re going to talk about how we can beautify our babies in that book. So you can find all this cool stuff on www.financiallysimple.com.

Elizabeth: Okay. Okay, great. Do you want to talk about another success story while we’re here?

Justin: You know, some of the most fun success stories though, are those who are young. These are the ones who never made the mistakes. They’re in their thirties maybe. They came out of college with some sort of a degree. Maybe it’s a law degree or medical degree, or maybe they just started their business like I did, just straight out of mom and dad’s backyard. And they’ve really never hit the school of hard knocks quite yet. And they’ve built this company that grows. And I have dozens, if not hundreds of these types of individuals I can share. But you start off with a negative net worth because they bought a practice, because they bought equipment because they bought something, a negative net worth. And they have student loans. They have student loans that they’ve got to deal with. And they have now babies that come along, and I’m with them as they buy their first house.

It’s just a lot of fun to see individuals who have negative net worth… And I’m meeting with an individual tonight, who’s been a client for over 12 years, -$600,000 net worth, tonight he’ll break $3 million in net worth, from a young individual. And it’s just fun to watch people, business owners drive success.

So whenever I say, we want to teach business owners how they can double their net worth over three to five years, it can be done. Now, is it always going to happen? No, life happens like this year, 2020. It’s going to kick us in the teeth occasionally, but you can with good principles and good comprehensive planning. That includes both your business and your person. Bringing it together as a business owner, you can actually double your net worth every three to five years.

Elizabeth: Excellent. And I do agree with you that you really do have to have your own psychological life, those ducks in a row, because if things are messed up in your life, it’s gonna carry over into your business. So, absolutely. Great, is there anything else we need to hear from you right now?

Justin: I think we covered everything.

Elizabeth: Great. Well, thank you. This is Justin Goodbread with Financially Simple and look him up online. You will be glad you did.

Justin: Thanks Elizabeth. I appreciate it.