Austin Peterson: How to Build a Transferable Business That Runs Without You

Full Episode Page: How to Build a Transferable Business That Runs Without You

Austin Peterson is a Comprehensive Financial Planner and Co-Founder of Backbone Planning Partners.

In this episode, he shows owners how to build a truly transferable business that can outlive you, fund your lifestyle, and still fetch a premium price when you’re ready to step back. Expect straight talk on exit timelines, Profit First cash‑flow discipline, and why an annual valuation keeps everyone honest. 

You’ll Hear:

• What truly creates transferable business value beyond owner involvement.
• When business owners should start planning their exit strategy.
• How to simplify cash flow management to eliminate financial stress.
• Whether you're making critical mistakes in valuing your business.
• Best practices to turn your profits into lasting personal wealth.

Where to Find Austin:

• Backbone Planning Partners
• Tycoons of Small Biz Podcast
• Austin on LinkedIn
• Austin on X

Chapters:

03:32 The Importance of Succession Planning
06:08 Building a Transferable Business
09:13 Understanding Cash Flow Management
12:00 Client Engagement Process
15:08 Financial Independence vs. Retirement
18:00 Adapting to Different Business Environments
20:16 Challenges in Business Management
22:56 Valuing a Business Correctly
25:03 Accurate Business Valuations
28:40 Engagement and Exit PlanningTimeline
30:30 Defining Legacy and Future Goals
35:31 Reinvestment Strategies for Business Growth
40:47 Characteristics of Successful Business Owners

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The Business Owner's Journey podcast is where entrepreneurs, leaders, and innovators join host and entrepreneur Nick Berry to share their personal stories, challenges, and strategies from their journeys as business owners.

🟢 Official: NickBerry.info. tBOJ is hosted by Nick Berry, produced by Nick Berry, Kelly Berry & FCG.
🟢 Sponsors: SEOContentSurge, FR, Entrepreneur's Edge, Redesigned.Business

Transcript

03:32 The Importance of Succession Planning
06:08 Building a Transferable Business
09:13 Understanding Cash Flow Management
12:00 Client Engagement Process
15:08 Financial Independence vs. Retirement
18:00 Adapting to Different Business Environments
20:16 Challenges in Business Management
22:56 Valuing a Business Correctly
25:03 Accurate Business Valuations
28:40 Engagement and Exit Planning Timeline
30:30 Defining Legacy and Future Goals
35:31 Reinvestment Strategies for Business Growth
40:47 Characteristics of Successful Business Owners
 
Austin Peterson (00:00)
got to put a plan in place. You got to tweak that plan along the way. you're going to build a business with these systems, processes, management level, et cetera, et cetera in place. But we tell our clients, you're going to build this so that it's extremely valuable to sell to somebody else. But the hope is that it's so valuable and it's creating such a good income for you from a passive standpoint that you'll never want to sell it.

The Business Owner's Journey Podcast Intro

Host: American entrepreneur Nick Berry (00:43)
Austin Peterson is a certified financial planner and one of the co-founders of Backbone Planning Partners. What does it really take to build a business that funds your freedom instead of chaining you to your desk? Is it the sky high valuation or flawless cash flow, or is it a plan that protects your family no matter what? Austin and I talk about the owner's end game and how to get there without sacrificing your sanity.

Expect to learn what the hidden cost of skipping personal wealth planning really is. Whether your family succession will implode or flourish. How to turn profit first buckets into true financial independence. What makes a business genuinely transferable and what kills value the fastest. His take on the three to 10 year runway every owner needs before an exit. How to decide when to reinvest versus pulling profits. What a realistic valuation looks like minus the ego premium. How to fix cashflow chaos before it sinks the deal, the best and worst ways to protect your personal wealth before a sale, and much, much more. Enjoy this episode with Austin Peterson.

Austin Peterson (01:41)
what I see most often is there are lot of businesses that are built and owned and you would consider them, you know, family businesses, right? So for example, let's say that one of the businesses that you owned in the past, you thought my kids are going to take this over at some point, right? And so that's, that's just how it'll work. And I'll pass it on to them and you build it the whole time for them, but you neglect to do your own  personal planning because essentially you're gifting the business to the kids at that point, right? Or maybe in the back of your mind, you're thinking, I can still continue to draw profits off of this while I'm alive and then the kids will take it, right? But you don't ever build it to a point to where it can handle what you've become accustomed to live on as well as what your kids need to be able to kind of live on as they build the business for themselves.

What I see happen most often is you'll see a business owner that runs a business for 30 years, thinks they're about ready to exit. They have no financial independence plan outside of the business. They want to give it to the kids. The kids either come in and they can't afford for all of them to be there or the kids have no interest and the business isn't ready to be sold to somebody else. And so then they end up, you know, eventually literally dying at their desk right, or in their truck or, you know, whatever the case may be. It's very, very common, right? We tell clients all the time, as morbid as it sounds, you're gonna exit your business at some point, regardless. And you can choose whether it's horizontal or vertical, right? You may be carried out on a stretcher because you passed away at work because you didn't make any other plans for your wealth or for your business.

Nick Berry (03:07)
Yeah.

Yeah. So then they miss out on that, that final chapter outside of business and they left a mess for somebody else to have to deal with. Right. Because the family, Yeah. There's like the, the strategy behind, succession, But then there's also the, the family dynamic in the, in those scenarios, which I guess you probably, you can run into the lack poor communication or the expectations or whatever, that could happen. It doesn't have to be a family member, right? It could be, that could happen with anybody.

Austin Peterson (04:07)
Yeah. Yeah.

It just, really comes down to honestly, business owners running the entire business or keeping the entire business up in their head. Right. And so it's, it's never to a point where it's ready to be transferred to another owner, whoever that is. Right. And so if you're not putting systems in place, you're not putting processes in place, you're not putting any of that.

Nick Berry (04:18)
Mm-hmm.

Austin Peterson (04:32)
kind of stuff, a management layer in place, you know, all of that, then really your business doesn't become valuable to anybody else, right? It's really hard to sell that kind of a business. And so that's typically where we start with business owners.

Nick Berry (04:43)
Yeah. So you're of the mindset, I believe of like you build it to sell as if you're going to sell it all the way through, right? Like that's the way you build a business.

Austin Peterson (05:02)
Yeah, so there's a couple things that kind of come to mind as you mentioned that. So first thing that I think of, and we talk about this a lot, is I'm sure you've read Seven Habits, right? The Stephen Covey book. He talks a lot about begin with the end in mind, right? Now, it would be naive for us to think that any business owner, when they set out, that they're literally beginning with, I'm going to sell this in 10 years and I'm gonna sell it for $20 million.

Nick Berry (05:13)
Mm-hmm. Mm-hmm.

Austin Peterson (05:32)
right? Like that doesn't happen. There might be some tech businesses where they think I've got this really cool technology and I'm planning to exit this in five years and it's going to be a unicorn and I'm going to sell it for a billion dollars. Like they may write that down, but in my mind that's really just, that's not really planning. It's that's my hope, right? And so

Nick Berry (05:57)
Mm-hmm. Yeah.

Austin Peterson (05:58)
you know, the reality is everybody should start with some sort of end in mind and understand that it's likely going to be tweaked along the way, right? But, you know, on top of that, the other thing that we say is, you you've got to build this business to be a transferable business. I've actually given multiple talks to large audiences of business owners around the country.

Nick Berry (06:08)
Mm-hmm.

Austin Peterson (06:24)
via webinar, et cetera. And we basically titled the presentation, How to Create a Transferable Business. Right? Because the reality is statistics are not in any business owner that's listening to this. It's not in your favor that you will sell your business. Right? Like many, many businesses, most businesses never transact, ever. And so if you don't build it the right way, you're just ultimately not going to get there. Right? So

Nick Berry (06:32)
it.

Austin Peterson (06:54)
You got to put a plan in place. You got to tweak that plan along the way. But like I mentioned a little earlier, it's, you're going to build a business with these systems, processes, management level, et cetera, et cetera in place. But we tell our clients, you're going to build this so that it's extremely valuable to sell to somebody else. But the hope is that it's so valuable and it's creating such a good income for you from a passive standpoint that you'll never want to sell it.

Like we believe that that's the ideal situation for a business owner is that it's generating gobs and gobs of cash. You're basically just the visionary. You're not dedicating a whole lot of your time day in and day out to run that business. It's kind of running on its own because you set it up to do so.

Why would you sell it, right? Like even if you can sell it for three times, six times, 10 times, well, it's just three, six or 10 times what you're taking from it on an annual basis and likely growing. So you may not ever want to sell it. That's in my mind, that's kismet. That is the absolute best case scenario.

Nick Berry (08:08)
Mm-hmm.

Yeah. Well, how often, I mean, best estimate, how often does that happen?

Austin Peterson (08:17)
Very little. I mean, if you look at the marketplace overall, it happens very little. It's a very minute percentage of businesses that are ever able to get to that point. But, you know, we've got plenty of businesses that we're working with today that are working towards that, right? We have a couple that I would say are like on the cusp of that, but many of them are still several years away. We tell our prospective clients that you should be engaging us three to 10 years before you're even contemplating exit because it takes that much time to truly get the business ready to be exited or to be in that perfect scenario like I mentioned before that it's running so well and you're generating a bunch of profit from it and you have no desire to sell.

Nick Berry (09:05)
Yeah. Well, I kind of chuckle when you said three years because you know, like for the majority, like most small business owners, three years is like, I can't make a commitment to that. I got to figure out what I'm going to do next week. But yeah, I totally understand. do you think, again, kind of best estimate, what's the ingredient that the ones who reach that like kismet, that ideal scenario versus the ones who don't, what's the...

Austin Peterson (09:13)
You

Nick Berry (09:33)
the thread, it's the thing that they have that they're able to push it over the finish line.

Austin Peterson (09:38)
Yeah, I think they have an understanding of what they're working towards and they stay laser focused on that, right? Because here's the deal, like businesses may be in business for a long period of time, maybe generating tens of millions of dollars in revenue. Most businesses are still struggling from a cashflow standpoint every single day, right? And so that creates

crazy amounts of stress on the business owner. And it really just comes down to them not managing the cash flow of the business appropriately, right? Not understanding what's going on with their cash flow, not understanding when their money's coming in, when it's going out, where it's all going. And if you don't have an understanding of that and a plan, then it just creates additional stress. And so you get mired in things day to day, trying to make sure that you've got the money for payroll you're drawing on the line of credit to cover payroll. All those types of things cause a business owner to get way too focused on what's going on day to day and never able to step back and work on the business itself, right? Which are these things that I'm talking about. That's working on the business as opposed to in the business.

Nick Berry (10:54)
So when they come to you with ideally three to 10 years, but at whatever point they, on average, the typical client comes to you, what's your process like?

Austin Peterson (11:03)
Yeah, so we always start with an assessment, right? So we have a data gathering meeting with them that lasts about 90 minutes and we'll basically just ask a lot of questions, right? We'll ask questions about the business, we'll ask questions about their personal finances, their family, all the things that are kind of going on that can affect their day to day, right? Because we're not robots that kind of walk into the business and forget about everything that's going on at our house, right? Whether it's a special needs child or you're worried about kids in college or you've got kids that are struggling with mental illness, like you've got all these types of things that weigh on you day to day. And we need to know about that, right? Parents who were reliant on you for some of your income because they either had a tragedy in their lives or they didn't appropriately plan, inheritances that may be coming from those parents siblings that need help because they've got addiction problems, all that kind of stuff factors into the whole person, right? And that helps us to know, how do we help this person? What do we see that's going on in their lives that's causing problems? What do we see that they're just completely missing and unaware of that's going on inside of their personal financial lives or their business financial lives? And we kind of gather all that information in about 90 minutes. And then we follow that up with. Here's kind of what we heard from you, here are the things that we need you to send us before our next meeting. And so they will send us stuff like, know, tax returns, investment statements, profit and loss statements, cash flow statements, balance sheets, all the types of things that you would assume that we would need from a financial standpoint, as well as, know, hey, give us, just give us a couple more paragraphs about what's really going on with your parents or with, you know, whatever, so that we have something to kind of build on. And then we'll schedule a meeting usually about two weeks after that to give them time to get us the information and then for us to compile everything. And at that point we schedule another meeting that's 60 to 75 minutes that we call our engagement proposal meeting. And at that point we really lay out like, here's what we heard from you. Here's where we can help you. Here are some of the things that that are gaps in what's going on in your business and your personal financial life. we have plans where we can help you kind of close those gaps or fill those gaps. And here's our fee to engage us.

Nick Berry (13:37)
Okay. And then, so they say, let's go forward. What does that look like?

Austin Peterson (13:42)
Yeah, so after that, it depends on the specific situation, but that fee that they pay us is for the next 12 months of work, right? So whatever we have to do to help them with things that we said that we could and would help them with during that 12 months is already paid for. And so sometimes that's a series of six meetings. Sometimes it's a series of 12 meetings. Sometimes it's a series of 20 meetings, right?

And we're just, at that point, we're starting to dig in and solve the situation. And so it could vary from, you gosh, you have zero savings outside of your business. You have a business that is struggling from a cashflow standpoint. So let's simultaneously fix the cashflow issues and build a plan for how you're using every dollar that's coming in, right? First help you understand where every dollar is going then build a plan for controlling that cashflow. And then part of that is we've got to take some of that business balance sheet and start to move it to your personal balance sheet to protect you and your family in case something happens and you're not able to continue in the business, whether it's economically something shifts and you're in trouble or the technology shifts and your business is completely obsolete.

You know, we've got to have these contingency plans so that your family is taken care of, regardless of what happens with the business. And then we're simultaneously trying to improve that business so that it can become a business that's truly transferable for a number that's beneficial to the family. But in a perfect world, what we're building in that plan, and it truly is like this perfect crossover between personal financial planning and business financial planning.

bordering on business consulting because we're literally getting in there and helping them consult on their business. But in a perfect world, we're building their financial independence. And I use financial independence rather than retirement because most business owners can't even fathom themselves retiring, right? Right, exactly. That's the way I would go nuts if I didn't have something to do, all that kind of stuff, right? So financial independence is working because you

Nick Berry (15:51)
That can wait

Austin Peterson (16:04)
want to or doing something because you want to not because you need the income from it, right? So we're building a plan to get them to complete financial independence at a specific timeframe based on what they want to do. And then we say, you know, it's either feasible or not feasible, or this is what it's going to take to get there. And then if and when we sell the business, that's, that's the icing on the cake.

Nick Berry (16:09)
Mm-hmm. Yeah

Austin Peterson (16:30)
Right? That's, that's additional. Your financial independence is taken care of regardless. We sell the business for another 10 million. Well, then all of a sudden you're going on four more vacations per year with the entire family because you've got that additional money.

Nick Berry (16:45)
So it sounds like you get pretty immersed in their business to be able to do that.

Austin Peterson (16:49)
Yeah, we know our clients' businesses pretty well. Yeah.

Nick Berry (16:54)
Yeah. What, what type of preparation or skillset do you have, do you, you guys have to be able to walk into a range of environments and work your magic?

Austin Peterson (17:03)
Yeah, I would say on the surface, we definitely have a broad level of experience between my partner and I, know, Landon's backgrounds. We definitely spend more time in service-based businesses or, you know, like Blue Collar or the trades. We definitely spend more time there. And part of that probably just comes from the fact that that's what I grew up doing that was my family's business. dad was a stucco contractor. My uncle was a stucco contractor. My brother, my brother's an HVAC contractor. You know, like there's, that's just kind of the, the background that I grew up with. And then my partner grew up on, and then I also grew up on a farm. So there's kind of this, this whole, like, I understand what it's like to work hard and get your hands dirty and you know, that sort of thing. And, and we're pretty,
casual, right? Like a lot of financial planners, right? Which is what we are at our core, but I would say that we're quite a bit different than most financial planning firms and that, you know, we do that business consulting side. But they're going to show up in, you know, maybe a three-piece suit. Maybe they're not wearing a tie anymore after COVID, but they're still going to show up in a nice suit, cufflinks, nice shoes, you know, all that kind of stuff.

I'm literally wearing a pair of checkered bands right now, right? And some golf joggers and then this quarter zip. Like this is a typical outfit for me because it fits with most of our clients, right? And granted, I'm to a point in my career where I can say if they're gonna judge me based on what I showed up wearing for their meeting, that's probably not a client I wanna work with anyway, right?

Nick Berry (18:53)
Mm-hmm.

Austin Peterson (18:53)
But I will follow that up with, also have, you know, companies that are working in the, in the biotech space, right? Like stem cell treatment and stuff like that. So we do cover the gamut. I say a lot. Business is business is business, right? Like I don't have to know the ins and outs of how everything works inside of a restaurant or inside of a, HVAC company or a stem cell treatment company. I don't need to know all of the ins and outs.

The way that the actual business works and the financials of the business work, it's the same across the board, right? They may have to explain a certain line item to me, but it's literally the same and you're building those principles exactly the same regardless of what their business line is.

Nick Berry (19:31)
Mm-hmm.

So I'm making some assumptions, but I'm assuming that you probably, when you go into a situation, so you were talking about like cash management earlier. And so you go into a situation and it's just, it's messy and disorganized, but you can, if you know what you're doing and what you're looking at, you can kind of like see where to fix it, reorganize it and like, okay, this thing's going to work. You ever go into any situations where you're.

You'd go through that process and you're like, Hey, I don't think you're going to have anything here. I don't think this is going to work no matter how I organize it.

Austin Peterson (20:16)
Yeah.

There are definitely some where it's on the border, right? And honestly, the sad thing is the reason that that's typically the case is that the owner is either taking too much money out of the business or they're running too many personal items through the business, hampering that business's ability to have a healthy cash flow.

Nick Berry (20:42)
Yeah. Just turned everything into a gray area.

Austin Peterson (20:48)
Yeah. Yeah. And I mean, most of the time to fix it when it's really that bad, most of the time it's, well, you've either got to cut several employees or you got to stop running some of this stuff through the business, or you've got to, you know, to use a trades example, you've got to get back out there and get your hands dirty and do the day-to-day work until this is kind of turned around and we can reinvest back in the business and grow smartly from here.

That's more often the case versus, this isn't gonna work, sorry, you should shut it down.

Nick Berry (21:23)
So when you put that, give someone that type of feedback, do they typically respond well? Or are they like, yeah, I think I'll find somebody who'll let me do it my way.

Austin Peterson (21:32)
Yeah, so I mean, we definitely get some pushback, right? And it's really more, it's not that they don't, maybe this is my sense and my naivety, but it's not that they're pushing back because they disagree with what I'm saying. It's more, ooh, I'm not sure I wanna go back and do the day-to-day work. Or even more importantly, these people have families. I don't wanna lay them off, right? Like I'm letting them down. This is my failure. And so we do get the pushback from that aspect. It's typically not an ego driven thing to where, you're wrong and I'm gonna go find somebody else that will kind of do it my way, right? Cause honestly, as a business owner, if you're just looking for a yes men or women, we're not the firm for you anyway, for sure.

If you're trying to operate your business that way, you're going to have a tough time being successful because we don't know what we don't know.

Nick Berry (22:36)
Yeah. Right. And so I love that saying. say, you know, we don't know, we don't know. And that's okay. Like, cause that's true of everybody. Right. The, the big factor is like, are you somebody who's going to just disregard that and like hide from it? Or are you somebody who's going to embrace it and like lean into it?

One of the things, you said something to me earlier and I know I won't restate it perfectly, but when you were talking about, most of the time a planner ask a business owner for the value of a business and they just take the business owner's word for it. Right? I mean, from Mike's like, I know how that would go. I have a pretty good idea how that would go. But that's also somewhere else that you guys are a little bit different in that you're not.

You're not going to take it at that answer at face value. You're going to get in there and figure it out on your own, right? How does that fit in with everything? where do you go? When does the business value become part of the conversation in your engagement?

Austin Peterson (23:39)
Yeah, so we actually look at a client's business value every single year. It's part of the engagement that they have with us. So we will actually do a full valuation of their business. We use a software program that we've been accustomed to using for a long time that takes the information from the tax returns and other information that we enter in, whether it's that they've got, you know, a specific type of...

intellectual property or different things like that, that adds additional value. But for the most part, it's the information that's on the tax returns and the other financials of the business that will dictate the value of the business, right? In addition to what management team do they have and so forth, which does, you know, comes in from the financials too, whether you know it or not, that's something that's on your financials because it's showing executive compensation, et cetera.

it gives us a pretty good idea of what it's worth. But really to answer your question, there's danger involved in just accepting what the business owner says their business is worth. Because nine times out of 10 or probably even 10 times out of 10, they're wrong. And the reality is most of the time they're over inflating what their business is worth. And so if you put yourself in the...

you know, in the shoes of a traditional financial planner and you build this entire financial plan around selling the business for a specific number in a specific year. And that's what it's going to take to get them to, you know, where they need to be in terms of generating income for the rest of their lives. And they were wrong. Even by 10%, it blows up the entire plan. But most of the time they're wrong by at least 25%.

and many more than that, right? Or maybe it's not sellable at all and the business owner doesn't realize that, the financial planner doesn't know enough to know whether or not it's being sold. I'm not talking badly about financial planners, right? It's just that that's not the experience that they have. And so if they don't have an experience in valuing businesses or helping businesses build towards an eventual exit and sale.

we can't expect them to know whether or not the number that they're receiving is correct. And so it just becomes dangerous, right? And we tell clients all the time, like if you've got a really good financial planner or an investment advisor, right? They're doing good with your investments. You don't have to change your investments to work with us. Now, most of the clients do because they see everything else that we do and see how we operate as a firm, but you don't have to.

And so if you want to leave that out there, we're completely agnostic. That's why we charge a fee upfront. makes us completely unbiased in the advice that we're giving you regardless, because we're not trying to sell you a particular product or make money off of your investments. So you don't have to change that, right? But again, most do because they see everything under one umbrella to where we're truly seeing them as a whole person, right?

If you think about it, most business owners, 80 % and a really good percentage anyway, 90 % of their net worth is in their business. Right? And so if an investment advisor is not including that as part of their investments, or worse yet, if a business owner is not viewing their business as a part of their overall investment portfolio, something's missing. Right? I mean, the lion's share of your net worth's over here. So...

Nick Berry (27:09)
Mm-hmm.

Mm-hmm.

Austin Peterson (27:25)
If you don't have somebody who's helping advise you on your largest investment, you probably have the wrong financial advisor or the wrong investment advisor.

Nick Berry (27:34)
you want that annual evaluation to one, that's what you're using to build the plan around and two, just to make sure that you're tracking each year toward the goal that you set with the client, right?

Austin Peterson (27:49)
Correct.

Nick Berry (27:50)
Yeah, I bet that is, I bet you've had some enlightening conversations.

Austin Peterson (27:57)
Yeah, it's tough to deliver, you know, that conversation. I we typically do ask the client what they think it's worth, but then we kind of turn it around on them to try to get them to soften that a little bit even before we run the official valuation, because we'll turn it around and say, if you had to write a check to purchase your business from yourself, how much would you write the check for, right?

Nick Berry (28:17)
You

Mm-hmm.

Austin Peterson (28:23)
And usually

that check is considerably less because in their mind they're going, well, why would I pay somebody for the business that I built? I could actually just go out and start it again anyway. So it's really only worth, you know what I'm saying? Like that's the thought process that they go through.

Nick Berry (28:33)
you

Yeah. Yeah, that's good.

when there's an engagement with you, is it always centered around the exit?

Austin Peterson (28:44)
would say that most of the time it's at least part of the conversation, but there's not always a set timeline, right? So remember, I said three to 10 years is an ideal timeframe for building towards an exit, right? But we have clients who are in their 30s and don't plan on exiting their business for 20 years, right? So there's not a too early...

to engage, right? Because exit planning is not a transaction. Exit planning is a process, right? And so building toward that process can take multiple years. And you may say, well, I've really got 20 years. I couldn't see myself stepping away from the business until I'm in my late 50s anyway. So do I need you? And our response will be, well, you probably don't.

need us today if you're just worried about the exit. But if you really want to kind of build this and take it to the best possible outcome that you could take it to, and then along the way, make sure that all of your personal stuff is handled. And maybe you set a target of selling the business for 8 million, but over 20 years, if we could help you build it to be worth 25 million.

Would paying our fee be worthwhile on an annual basis and having somebody to hold you accountable as a business owner to certain things to get you to that point? that be something that would be valuable today? Is it something that you would want to put off? The typical answer there is no.

Nick Berry (30:26)
Mm hmm. Yeah. Yeah. It's kind of an obvious choice when it's framed like that.

You mentioned legacy to me earlier and like where I believe that probably comes up when you start talking about the exit. You're asking like, where do you want this to go? What's the end game here? Right. I know from my experience, how difficult it can be to try to bring a vision of the future into focus, especially,

the further away that we're talking about, the harder it's going to be. How do you go about helping somebody figure out or bring clarity to something that they may just be like, I don't know. I don't know what we need to do with this. I don't know what the end game is. I know how to go do what I do.

Austin Peterson (31:09)
Yeah, yeah, I mean, the best answer to that is more questions, right? Because it's eventually going to lead them to that clarity. So it's really asking them a question about, you know, where do you spend most of your time? Or if you didn't have to work today, where would you want to spend your time? Right? And what's really important to you? Do you care deeply about a specific cause? Do you care deeply about

your church, do you care deeply about a specific charity? Is it all just about family for you? know, right? Like, do you have kids that you think are gonna have grandkids, you know, for you guys pretty soon? Is that really where you'd want to spend your time? And are your kids spread around the country? Like, it helps to kind of bring that clarity, right? Because really what we're trying to lead to is what's this all for, right? Like, why are you Yeah, why are you building this business?

Nick Berry (32:02)
Right. What's important?

Austin Peterson (32:07)
Right? Cause a lot of times we're talking to business owners and we're like, if you went back to your 15 year old self and you told them that when you reached age 40, call it, that you'd be making a million dollars a year and working 20 hours a week running this business, you would have thought you were crazy. Right? Like you in your wildest dreams outside of, know, I'm going to be an MBA player or I'm going to be, you know, whatever.

outside of those types of dreams, in your wildest dreams, most people did not think that they would be making a million or a half a million or even a quarter million in income, right, in their lifetimes. And so you're already in a good spot. So what are we doing this for, right? Why are you continuing to charge? Why are you continuing to grow the business? Why are you continuing to invest here? Why, know, why? Why does it matter to you?

Is it just about your ego because you can continue to grow it? And if that's the case, okay, that's fine. Like we can build a plan based on you wanting to sell this business for a hundred million dollars or a billion dollars, right? Like fine. If that's it, great. That's what we will roll with. But most of the time, that's not it. Ego definitely comes into play, right? Like most business owners are type A personalities. They're very competitive. They want to build.

Nick Berry (33:22)
Mm-hmm.

Austin Peterson (33:29)
biggest, the best, that, you know, whatever. So that certainly does come into play, but it's not usually about that. It's about, you know, it's something else, whether it's just for their family because they want to have their family to have options in the future or, you know, every once in a while you'll hear from a business owner, well, you know, I don't want my kids to choose a career path for themselves because of how much money it makes.

Nick Berry (33:37)
Mm-hmm.

Austin Peterson (33:55)
because they've grown up the way that they've grown up and they have access to this and they go on nice vacations and they do that. And so in order to still have that in their lives, they choose a career path that they're gonna be miserable in. I don't want that to be the case. And so at that point, we can say, great, let's build a plan for that, right? Like if one of your kids wants to be a teacher, which by the way, teachers are completely underpaid, right?

So I think we can all agree on that. But if they wanna be a teacher because they're passionate about helping kids and they're only gonna make $40,000 a year, well, could we build into your trust that if they become a teacher and continue to work in that, that you'll double what they make in their teacher's salary to make it better for them financially and they can still do some of the things that they've grown accustomed to and like doing? Yes, absolutely, you can build a plan for that.

That's where it's how do we get to what really, really matters and then we will build a plan.

Nick Berry (34:57)
Yeah, what I'm hearing you say is like, it's, you're trying to find out what's important to them and taking it outside of the business itself, right? Because I think it's everybody, there's something that is important to everybody. So it's in there. You're not having to come up with it for them. You're just having to help them poke around a little bit and, and elicit, right? Let's figure out what is really important to you.

another thing that you'd mentioned earlier was about reinvesting in the business, well, how do know when? How do know how much? How do I know?

What's your guidance on reinvestment in the business?

Austin Peterson (35:31)
Yeah. So every, every situation literally is different, right? But so let me just back up a little bit. So we kind of talked about the legacy side of things, which is extremely important, but there there's really kind of three areas that we, try to break the engagement down into, right? One is the reinvestment that you're talking about. How much, when, how long, all those sorts of things. The second is the legacy, like what's all this for? And then the last one is the exit, right? So

That is timeline, amount, strategy, know, leave it to kids, sell it to kids, sell it to management team, sell it to an outside party, sell it to a private equity group. Like all of that kind of comes into play, but those are really kind of the main three areas, right? Reinvestment, legacy, exit. So on the reinvestment side, the first thing that I would recommend for any business owner that's listening to this that has not already done this, and maybe you should go back and

and do it again, read the book, Profit First by Mike Michalowicz right? That will give you a pretty darn good explanation of how you should be looking at this because I see it on both ends of the spectrum. see business owners that reinvest everything and don't do anything outside for their own personal finances, right? Because they're just build, build, build, build, build. And then I see those who,

extract all of the profits from the business, right? Now, hopefully if they're extracting all of the profits, they're using that to build their own personal wealth in some way, shape or form. But more times than not, I see them spending every dollar that they're extracting out of the business because they think it's a never-ending cash register that's just going to continue to produce that cash, right? And so it can be bad on both sides, but really what Profit First

teaches is to build buckets and some business owners will Go as far as setting up an actual separate account for each of these buckets, right? But that's really what it's about is take you know, if your profit margin should be or currently is 7 % great 7 % goes into profits if your taxes should be at 25 % 25 % goes into taxes

If insurance should be, you know, 2%, great. 2 % goes into taxes. Like you're just sectioning all of that out into different buckets so that when the big bill comes due, it's not a surprise and the cash flows there. Right? So exactly. So, you know, I think as it, at its core, that's where it should be. And I meet business owners all the time that have read Profit First.

Nick Berry (38:12)
You go break that piggy bank open and you can pay it.

Austin Peterson (38:25)
but didn't go any further than that, right? Like they just, they think about the profit side and they're like, great. Yeah, I've got to, you know, and they'll set up a profit account, but they don't set up any of the other accounts. And so you missed the mark there. You didn't cover all of the other bases of your cashflow so that you don't find yourself in a cashflow crunch when it comes time, right? And one other bucket that I didn't mention that I should is that rainy day fund or that emergency fund.

or that reinvestment fund, right? Like, man, could actually, the way that we are doing things right now and the number of leads that we have coming in, like we could double our profits next year if I invested in buying this other machine and hiring four more people to run that particular crew, right? Like if you have that money set aside, then you can go and do that. And then you replenish that reinvestment or that emergency fund.

you always have to be extremely diligent about your cash flow.

Nick Berry (39:29)
Yeah. Yeah. And what happens most of the time is the money's not set aside. And so then you are taking from your theoretical profit bucket or one of your other tax bucket. That might be the worst one to take from. But yeah, think profit first is, it's such, mean, for that reason, like the way it changes the way that you think about cash, it should, it's a lifesaver. I'm glad you mentioned that.

Austin Peterson (39:44)
Yeah.

Yeah, yeah, it's great. Great book. I actually, I don't think we've mentioned this, but we have our own podcast that we've done for about five years called Tycoons of Small Biz. And we had Mike Mikalowicz on the podcast, probably four or four and a half years ago. And so it's, his philosophy is great. It's pretty darn basic, but that's the great thing about financial principles is most of them are pretty darn basic, but nobody lives them.

Nick Berry (40:10)
yeah?

Yeah.

Yeah. What did you think when you read Profit First? That you should have thought of it? Because it's simple, right? I mean,

Austin Peterson (40:32)
Yeah.

There's quite a few books that I've read and thought, man, I should have published this. I'd be making money off of publishing books in addition to everything else that I do. So that would have been awesome.

as you can tell, I think from from my voice and the way I get animated about everything, I'm pretty darn passionate about the SMB community. I mean, our financial planning practice and our business consulting practice is called backbone planning partners. And it's not by accident. Right. We believe that the backbone of the American economy is the small business owner.

Right. And so we build our whole practice around that. The podcast, of course, called Tycoon's a Small Biz and everybody uses a different definition of small business. Right. So I'm not talking about for the most part, you know, the one the one person businesses, right. They they still need help. Don't get me wrong.

but we're working with companies, typically it's five million or more. The average client that we work with does probably 18 to 20, 25 million in revenue. Those are the types of companies that are getting to that point where things are getting complicated and they're not quite sure how to take it to that next level. And that's kind of where we come in and say, okay, let's, you you've gotten it here, congratulations, you beat the odds, right? The reality is many.

well, most, a very large percentage of businesses will never even cross the $1 million revenue threshold, right? And so you've already beat the odds, but let's help you take this to the next level. Let's help you turn this into what you kind of think it can become now. And that's where we typically get in.

Nick Berry (42:21)
are some of the characteristics? Like you see a business or a business owner and you learn a little bit about them and you're like, we would be such a home run with you. what are the, the, the traits that, that like make somebody stand out that either that they're going to be a winner or they, that they just match up perfectly with what you guys do.

Austin Peterson (42:44)
Yeah, think honestly the best answer I could give to that is somebody who knows what they don't know is the biggest thing, right? Is somebody who understands that there is value in paying for advice to help you with things that you don't know about, right? Or even just an outside perspective to say, makes sense for me to bring somebody else in, like.

I feel pretty good about the way we run our business and we've got a great business and most of the time they do. We find issues every time. I mean, there has not been a single business where I've walked in and said, wow, you're doing awesome. You don't need our help, right? Now there have been times where I'll say, you just need a couple of tweaks. me give you a little bit of, you know, kind of free advice. Paying us for our fees is not worthwhile for you.

In the future, if you want to talk about getting ready for the actual exit, and we give you some advice on different strategies to go through, great, let's stay in touch. That has happened, but most of the time there's enough there to, know, enough meat on the bone, so to speak, to help them with. But it really comes down to being open and willing to have a conversation, to be vulnerable, and to understand that there are people who are really good at what they do, and that's not what you do.

And so hiring somebody to help you with those quote unquote blind spots or the areas that you need additional help, that's where we see the most value. But there are times where I look at a business and go, ⁓ man, man, this business is only doing 4 million. This business should be doing 15. Like let me help you with a few things to reinvest in this and to not take the additional profit here.

Nick Berry (44:15)
Mm-hmm.

Austin Peterson (44:33)
Just the small tweaks that could turn this into a $15 million a year revenue business compared to the four that you're doing now. But we do see that.

Nick Berry (44:42)
Yeah. I think those people, I would bet that the people who have that mindset that you're talking about where they know, they don't know what they don't know and they want somebody to help them see those blind spots, they expect you, it's not a failure at all for you to walk in and find something wrong. They probably wouldn't trust you as much if you tried to tell them that everything was great because they're looking for it, right? They know.

They know they've missed something.

Austin Peterson (45:11)
Yeah, for sure.

Nick Berry (45:13)
Austin, I appreciate it, man. This has been great.

Austin Peterson (45:15)
I appreciate the opportunity and you've been great.