Episode Transcript
[00:00:00] Speaker A: Sam.
Foreign.
[00:00:31] Speaker B: Welcome to yet another episode of Pivotal Change. I'm your host, Ryan Kahn from CS Business Consulting, and I'm going to take you on a wonderful procedure through how we can best take care of ourselves and others at the end of the year. Now, tonight's episode is just like every other episode. It's about helping you as a leader, as a business owner, executive, or a person that has or wants to grow their influence and helping you find those one or two things that can be your pivotal change down your path to success. I hope, like every night you're watching with your notes out, pen and paper, whatever it is, that you can retain the information that you get.
This is the time of the year where we're entering this whole holiday season.
For a lot of us, we're thinking about gifts, both giving and receiving. We're thinking about family time together. And not just family time of sitting on the couch next to each other, but quality family time. Good, better prepared and cooked together meals, maybe funny meals where you go out to, I don't know, an Asian restaurant after Christmas Eve or something like that. You're going to watch your favorite movies all over again. You're going to play games, some of them standard, some of them goofy games because of the holiday ones. You're going to be hiding little things around the house and blaming it on you know who. And there's a little bit of magic in the air. What we're doing in this time is we're genuinely showing care to our families, our best friends, our loved ones. So on a more structured sense, I want us to make sure that we're also being diligent and being purposeful in showing care to those in our businesses, to those in our leadership circles or that might be subordinate underneath us in a structured kind of way.
One of the things that you may have picked up on a theme is that care starts with presence.
It starts with consistency. And it also is a border of making sure that you're not just swooping in and rescuing or taking over from people. And so what I mean by this is people will know that you care for them if you show up, if you listen, don't just hear what they say, but listen and comprehend and give feedback if appropriate. And then you also care for people when you actually follow through with your commitments or what you say you're going to do. There's some pretty easy ways to be successful in life, and there's some that say show up on time with a positive attitude and do what you committed to doing and you'll be successful. Leadership and showing care is very similar. Show up for the people, have that positive, humble attitude that's one of the pillars, and then do what you said you were going to do. Doing that builds something that is one of the ultimate cornerstones of success, and that is trust.
So you want to make sure that you're building trust and trust produces care.
And what you do is you have to make sure as a good leader, there's always the risk of underdoing it and people don't feel valued or overdoing it and creating dependency. So as we show care, we want to make sure that we're balancing both sides.
You also want to show care by setting up people in a way that they can win. That's providing resources that's doing all kinds of things for them, right? Or with them. Not for them as far as the completion sense, but for them in the motivation, encouragement, and the provisional sense that I'm going to give you the fastest computer that I can afford so that you can have lightning speed in doing your work. I'm going to keep the machines well maintained so that they stop seizing up and freezing up on the job site or the factory floor. So doing those things for your people is not doing the job. The responsibilities for the people. Another thing that you want to do is you want to be able to not shield them from discomfort. Discomfort is a fantastic way to grow. Think about the fitness realm. You got to get uncomfortable on that treadmill. You got to get uncomfortable underneath that, that load of weights in order to grow, to get the physical form, the muscles, the features that you want. It's the same in business. You got to try working with that bigger, more complex client. You got to try getting not just 15 widgets made, but shooting for 18 and 20 widgets, getting ready. You have to make yourself uncomfortable introducing your responsibilities and challenges. That requires appropriate pressure, right? Everyone says pressure makes diamonds. I said, no, it doesn't. Some pressure just squashes and breaks and destroys the proper pressure for the proper period of time, produces diamonds. And you do that through holding people to standards. And you can build a system of metrics and evals and measuring systems, and that's a great way to do it. But ultimately you default back to the presence, the consistency, the listening. And then you're able to give feedback, receptive feedback that is delivered from a position of respect.
So if you can do this for your people, they're going to feel cared for. That's the number one desirable trait that a follower wants from the leader, is that they know they genuinely care, and these are some of the ways to do that. So leaders should absolutely care. If you don't care and you're just feigning, you're faking it, that can maybe work for a short period of time, but it's going to be discovered. People can pick up the forced attributes, they can pick up the fakeness in something that you're doing. So you have to actually care about your people.
Now you don't care to your people so much so that it costs the expense of the mission. You don't, you don't give up on the mission, Right? So there are sometimes people that just don't fit or work. Maybe they have a life structure that does not jive with your business, your industry, and ultimately the mission. And you're going to try to help, you're going to try to, to get some mutual conformance. You want to try to adapt to them and their, their special uniqueness as a person. But you can't do it if it destroys your systems, your operations, your workflow, your other staff members. So you want to get them ultimately to comply to the workflow, the vision, and ultimately the mission.
When the mission suffers, everyone eventually pays for it. And that is not a very good way to show that you care is by failing to accomplish the mission as a team, as a unit, as a agency, firm, or even in totality of your company. You want to be able to hit those KPIs, those, those key performance indicators are those umbrella terms for your company to show that we achieved this together, this is where we're going, together. And showing you care doesn't mean one incompatible person is going to weigh down the whole ship. Showing you care means that you have to actually remove thorns, get rid of toxicity, and grow together.
A best way of doing this is like setting up your expectations. You hear me talk a lot about boundaries and expectations.
Expectations are actually an act of care. When a person has clarity on what it is they're supposed to be doing and how far they can go and achieve and how much initiative they can take. Those expectations empower a person and they instill them with some extra courage and some extra desire to shoulder the responsibility and move forward, it's ambiguity and lack of clarification that really creates anxiety. And if you are allowing anxiety into your workplace, into your teams, you're really failing to act out in the way that you care for people.
So think about going into the holiday season and nobody has any communication on when the holiday parties are, when are we doing the Christmas Eve events? Are we opening a Christmas present? Not opening Christmas? When are we supposed to buy things for each other? Is there a price limit for when we exchange gifts? What's going on here? Am I supposed to bring food?
[00:07:53] Speaker A: Are we ordering food?
[00:07:53] Speaker B: Are you making food that you're trying to show you care by having a great holiday weekend, but the lack of communication, the lack of expectations and boundaries is making everyone really anxious. And see if that's ever been a source of frustration with you and your families around special times of year.
Also, you got to cut out excuses, okay? I have a fun saying. I like to tell people all the time, excuses are like armpits. Everyone's got a couple and they all stink, right? So don't allow excuses for poor performance.
I will always be the first one to tell you there are exceptions to pretty much every rule. I'm not saying laws, and I'm not saying morals and ethics. I'm saying rules, okay? And there's a lot of times where, hey, somebody shows up late to work. Well, guess what? There was a train that's never been there in the last 20 years. I've come to work, and this train made me sit at the intersection. There's 127 cars. I watched them pass by. Can that person be seven minutes late that one time? Of course, there's a major backup on the highway, and I got trapped on the highway and there's a fatality accident, and we sat there for an hour. Can that person be late? And there's a medical incident. So there's exceptions to when people can show up late. There's exceptions when something happens. But if you allow exceptions to continue, that is now the new rule. And then people try to get really upset when that rule applies for one person and not the other. Where you try to reel back those exceptions because they became norms, and now you're trying to take them away. That's difficult leadership and that's lack of care to hold people accountable and allow excuses to prevail.
Another one is that if you are just clear and you have to be redundant, you have to be repetitive in your clarity.
Just had a conversation this morning in our team meeting about communicating with clients, especially during a busy time of year, that the average person needs to hear or be told something three times before it registers into their memory and they can say, oh, yeah, Ryan told me that three times. I have to say it. If you add any stress or any friction or any, you know, this inability to pay attention and there's distractions, then you have to say it up to seven times. And a good example is like when a cop is worried about something that's going on here and they say, hey, show me your hands. Show me your hands. Show me your hands. And you watch these police TV shows and these cops are just yelling, show me your hands over and over. That's because it takes about seven times for the person to raise their hands and say, whoa, I'm supposed to show my hands. So when they're stressed, you have to increase clarity through increased communications in simpler forms of it as well. Don't send an email with 13 paragraphs on it. Send bullet points and send it again and remind them, and then thank them for remembering to do X, Y, and Z. So that clarity removes all three of these things, which is ambiguity, anxiousness, frustration, and it helps eliminate excuses. So what you want to do is you want to have compassion, but you can't have compassion without boundaries because that produces the last potential negative entitlement. People lose their gratitude because you just have compassion upon compassion. See, there's a difference is that givers ultimately have limits. They can ultimately give all that they have, but takers have no limits. And they'll take and take until the source is dry and they'll move on to another source. So if you find somebody that's a taker, you almost, almost always have to have clearly defined compassion limits with those people. You don't want entitlement, and you don't want to defeat the gratitude. So boundaries with compassion, those create growth, they create respect, and they create maturity. So go out this season in a time of caring and make sure that you're caring for your people, but you're doing it in the right way and you're not accidentally causing this negative mishaps. We're going to take a break right here. We're going to come back with the next segment. We're going to be talking about the leaders and how they can show some character themselves. So stay tuned. We're right back here in just a moment with It'll Change.
Welcome back to Pivotal Change. If you want more of what you're watching, then all you have to do is stay connected to Pivotal Change through the Now Media TV website. You can get all your favorite shows there. This is a bilingual network in both English and Spanish, and you can get all of that on demand anytime you like. The cool part is that you're going to get culture, you're going to get lifestyle, you're going to get business, you're going to get breaking news. All of that is on Now Media TV, and you can even get it on Roku iOS. So go ahead and download the app. You can get the podcast version of it if you can't watch in person from the website. And you're going to be able to keep in touch anytime, anywhere you want, or you can basically get wi fi and Internet access. So knowing that, I want to keep showing how you can care for yourself as a business owner. You can care by keeping up on things like the show, and you can care on doing things like keeping up with your people, your systems, and ultimately the business.
So you guys pay attention to what I'm going to say here because I'm going to transition to coming over and getting us from caring for your people to caring for yourself. So we talked about ways to do that by caring with your people and going into these systems and these ways to do that, but not being overextended, not getting yourself in a rough spot.
So what I want you to do is I want you to start re establishing yourself, especially at the time of year where we're showing care. We're all in the mood, the holiday spirit. You also have this new year coming along where you can basically not wipe the clay sling, but get a fresh start, get some fresh New Year's resolutions and things like that. So leaders tend to not just change overnight in a negative or positive direction. They tend to drift.
And drifting is usually a moment that we feel is out of control, drifting away at sea, drifting in your car because there's ice or something like that. And drifting occurs when expectations are assumed instead of written and clarified and stated implicitly.
Reestablishing leadership is great at the end of the year because you're pumping yourself up with a yearly recap and you're getting yourself to go set new KPIs, new resolutions, new goals with your people. And you want to basically come up with a way to clearly define what does good look like and that we can figure out what does it good look like in our sales, our services, our production, our communication, then we need to articulate that and you can go an extra layer and say, hey, what does great look like? And possibly even reward the teams or people for getting to a level of great. But starting with good, the super important way for your metrics to be readily measuring progress. When I say readily, it can be checked on possibly daily, possibly hourly, but most likely weekly and definitely monthly. You need to be measuring those metrics. Metrics are not about control. Ultimately, they're about clarity and growth.
So when you want to show Some care for your business. You need to measure your business. You cannot plan for and direct what you cannot measure. And metrics are one of the single best way to do that. Metrics, again, are the more individualized measuring tools. Hey, I want us all to make 20 sales calls a day, and they make 23. Check the box. They're good, right? We want to make sure that we know what it goes. Hey, I want us to deliver eight advisory meetings a week. Oh, we got nine.
[00:15:27] Speaker A: Check.
[00:15:28] Speaker B: That's what good looks like. And so that continues to clarify what growth and productivity looks like. If your performance cannot be measured, how do you also ever attempt to coach on it or improve it? So you have to measure these things. And that can be everything from timeliness to accuracy of reports to timekeeping to client communications, how well they respond to complaints, and friction mold.
There's a lot that you can do with that.
Another thing is that you have a great time to do that KPI review, which I kind of just hinted at a moment ago. Those key performance indicators should be used as mirrors more than anything. They're mirrors. They're not weapons. They're not ways to browbeat people. And remember, KPIs are the larger scale things. So if the company did not meet its KPI on the negative side, it would be everybody's fault. But most specifically, the leaders. The leaders, the ones are supposed to drive towards those. And the goal is for us to learn. So, like, hey, we set four big goals this year. We met three of our goals, but why did we miss goal four? And then you get to do an examination, you get learning. You're like, what the heck did we not do right? What did we do well? And how do we apply both the negative answers to what to avoid in the future and the positive answers of what to replicate in the future? So if you can ask those three questions, what went well?
What didn't go well? Or some people say, what needs to change, but what didn't go well? And how do the answers to those two questions apply apply to the future, both other scenarios and the same scenario in the future. And that's where you get the application of wisdom. Wisdom is taking intellective knowledge and applying it to the real world. Wisdom is taking the ability to identify right and wrong and putting it into practice. That's true wisdom. That's true discernment. And so asking those three questions can get you that way. So again, write this down. What went well?
What didn't go well, or needs to change? And how do those two answers apply? To similar and or different situations in the future and literally write them down in team meetings, write them down in those KPI reviews and you're going to have a lot of success.
Now the other thing that you can do really well is you can get a year end review as a leadership reset. So now you can say, hey, I've gone to some training, I've watched some YouTube videos, some shows, I've gone to a conference, I've hired a coach or mentor and I'm going to look at myself and ask those three questions. What worked, what didn't work? And what needs to change Based on those two answers, what do I have to improve in myself? What do I have to improve in my systems? So we have a really great opportunity to do the self reflection at the end of the year and then stand in front of our people and say, hey, I realized I failed or fell short in this category and I could grow here. I realized that I was doing these performances and it was really motivating people. So I'm going to keep repeating that guys, so you can expect to see more of it and you can tell that to your people. And if you coincide this with a leadership philosophy, which is something that I've talked about and worked on before, and I help people build their leadership philosophies, if you can get that and coincide every year an annual review of your KPIs, your own personally set metrics, and asking those three questions, my goodness, are you going to transform yourself as a person?
So I really urge you to take the time to look in your mirror and then you have to put the mirror of the company up there with the KPIs. How did we do and what can we do to achieve all our KPIs, or maybe blow them out of the water.
After that you get into the hard conversations. I normally name this as crucial conversations. And leaders, just like everyone else, they get nervous. They don't like having these hard or difficult conversations, these crucial conversations. But guess what? They do.
They do them anyway. They take courage. They swallow that lump in their throat and they go have the meeting.
So the first step is you got to schedule them, right? Just put them on the calendar, get the person to come into the meeting, to come into the room and prepare for that talk.
You're going to want to do a couple of things on the first couple of times you do these and all of them. But the first couple of times you really want to emphasize something called ppf. Okay? Those are personal, professional and financial goals. So again, if you go back to the earliest part. I was talking about caring for your people. Don't you think if you cared about them, you want to know what their goals were? Like, do they want to buy a new house in the next year? Do they have a personal goal of, you know, proposing to their, their, to their girlfriend and making them a fiance and getting married? Do they have a professional goal like hey, I want to reach this salary level or I want to make this much in sales or hey, I want to be a project manager and I want to rise. So oh, if I know this person wants that, can I now steer their career, show some extra care? Can I not prepare in position for somebody to help out when they're going on their honeymoon? So there's things that you can do with the ppfs, and if you can do that, you can introduce those into crucial conversations later on once you know what the goals are. So somebody starts to maybe underperform, maybe the data showing a slip or drift, you can come in and first ask them, hey, is everything all right? That should be a couple of first touch points. Hey, how's everything going? I know you've been late a couple times. Just want to make sure everything's okay. Maybe they got a sick family member at home. Maybe the mother in law that's on hospice care moved in with them and he's sleeping three hours a night. There could be some legitimate reasons that we want to work with this person.
The other thing is if their performance is slipping because they're burnt out or they're losing out on their ability to perform and stay active in the company, you're going to find toxic retired on duty people well, well before they do something negative or they just up and quit on you. So these crucial conversations have to go in there and you have to dig out the stuff preemptively. Right. So part of a good sales pitch is proactively answering the objections before they happen. So you're removing the objections before the person ever speaks to them. That's a really good way to sell. If you know your product, you know your industry, you can eliminate those questions. Well, if you know your people, you can eliminate the friction before it happens. You'll have less of these critical or crucial conversations about the performance need to improve. You need to watch your behavior here. You need to do X, Y and Z. Hey, you didn't hit your training metrics. Why don't you get your certified hours, all these kinds of things. You can get them ahead of time with the expectations, the boundaries and knowing their Goals, check with them throughout the time. Have your leaders check with them throughout the various times of the year. And then you can really get this. And now the conversation can ultimately come down to a couple of things. I have to say something negative. This person show that I care. But the idea is to motivate them to accomplish the mission. Can't sacrifice the mission. Okay, so we go out there and I don't have to use emotion, I use their PPFs. Right? Well, you said you wanted this professional goal and this financial goal and you wanted to get more time off, but you're not completing your projects in a timely way. You're not showing on to the job sites when you're supposed to and you're taking long lunches. We need to nip this in the bud right now.
You used to perform at 15 projects a week and now you're down to 12 and everybody's gonna have a bad week or two. But you've had six bad weeks. You have a performance decline. You use data, unbiased, unemotional, and it's based on metrics, KPI achievements and their own set goals. So not to just challenge people and become a friction based employer, but you can say, hey, you're not achieving the goals you set for yourself.
And it's hard to blame that on anyone else. They'll try, they'll try to blame it on other people. But that's what the metrics come down to is that you can say, well, this person is doing their job, this person's doing their job. We're not here to talk about them. Your metrics are not being accomplished. So I just want to give you a chance to do some self care, some self reflection, do some KPIs. You have a kind of clean slate area where you can say, hey guys, I've learned some new information. It's time to do a new year. I'm very inspired to do these things. You set the discipline in order. You get the KPIs, the metrics laid out, you have some crucial conversations, you learn the PPFs about people and you go forward and you conquer and you take on the world. So we're going to cut to another commercial break that we're going to bring a very near and dear guest on the show with me right after this break. Because remember, you're only halfway done with pivotal change and we've got a lot of wisdom to shoot you away right after this commercial break.
[00:23:49] Speaker A: Foreign.
[00:24:12] Speaker B: You've made it to the halfway point. We're getting ready to expand this conversation with, with a very dear guest of mine, one of my favorite people on planet Earth. But we'll get to him in just a moment. First, I want to recap what we did. We covered how to show care to your employees. This is a holiday season time of year. We're showing care, we're giving gifts and you were reminded how to care for yourself in the best way possible or care for others in the best way possible. And then the second segment we're talking about as a business owner, how do you care for yourself? How do you reset your leadership, make sure that you are being able to accomplish the mission through your people and do that? So we had a double self care and now we're going to keep talking about the end of the year and then the start of the year. But we're going to do it from the perspective of a business owner and what do they need to be thinking about at the end of the year? So I want to welcome a very special guest, Wayne Shelton of Shelton Associate CPA, my father in law and an over 50 year expert in taxes and tax planning. So Wayne, welcome back to the show.
[00:25:08] Speaker A: Thank you. Thanks for having me.
[00:25:10] Speaker B: It's my pleasure. So what I want to do is we're always up against the time window. So I want to jump into the questions with you and I want to ask you from the perspective, you know, you're a cpa, you're an advisor, you do planning and strategy for people. What should business owners be thinking about right now? This is before the year officially closes. How much? What should they thinking about other than just like how much tax am I going to owe?
[00:25:32] Speaker A: You know, it's getting pretty late to be thinking about that. That you know, the ideal is to work with that throughout the whole year and know where you are. Well, one of the problems we see with a lot of people is they do not know where they are. Their books are not any good. They're always wrong. So they really don't know where they are. And one of the big things we work with clients this time of the year about is have you taken advantage of all the fringe benefits that you possibly could, you know, have? We do we have you in the right type of entity to minimize your tax.
So while minimizing your tax is not the only thing they need to think about how much do I owe? But what can I do if I do owe, you know, what can I do to do? What can I do to fix that? And what we see a lot of times is people just don't even have A clue. Did they make money? Did they lose money? And that goes back to the book thing. And they've got to have good books. And I think one of our biggest problems is we see, particularly when we have new clients come in, is they do not have good books. They don't know what they're doing. And there's lots of things that can be done, even here at the last of the year. You know, maybe we need to do a bonus to pay in some more taxes. You know, maybe we need to take advantage of some fringe benefits that we can still do.
Maybe we need to set up a pension plan or a SEP plan or something where you can put a substantial amount of money into a, into a retirement plan.
So it depends on what their, their goals and everything are. And, but, but we see, what we see, I think, is that people just don't know really what to do unless they've been through the process. And that's what we try to streamline, make it easy for them and kind of help them focus in, on, on what's really important at this time of year.
[00:27:14] Speaker B: Gotcha. So I like that a lot. So at the end of the year, a lot of people like, well, how much am I going to owe during tax season? And your number one answer is, well, it's a little late to be talking about that. There's only so much we can do with two weeks to the end of the year. But there are some things that can be done right. And the number one thing they need to be thinking about is how to get on a plan with a tax advisor. That should be the number one thing they're thinking about. And maybe you can catch some, some of these things here. And you mentioned some of the retirement plans and things like that. Maybe there's some depreciation opportunities or whatever. But at the end of the year, I heard you say you need to have clean books. So you need these people to get their books clean so they know their actual tax position, not just for 1231, but they know it so that they can run their businesses with a perpetually clean set of books and have real financial data to drive their business in the right direction. So it sounds like those two things, getting on a plan with clean books so that you can make the changes necessary to defeat this question come next year. Is that right?
[00:28:11] Speaker A: That is correct. Absolutely right.
[00:28:13] Speaker B: So if we want to get on a plan, you know, there's going to be some missed opportunities. If somebody's coming to us on 1217 saying, hey, Wayne, how much am I Going to owe. Can you help me out?
There's going to be some missed strategies throughout the year. So can you tell me a little bit about what are some of the missed opportunities they had, you know, by coming at the end of the year and maybe you could get them flipped into that or maybe there's a couple of strategies left. Can you tell us about missed opportunities and what might still be on the table?
[00:28:39] Speaker A: You know, one of the things that we see is people a lot of times have their children working in business, and if they legitimately work for the business and are under 17 years old, they can basically pay only Social Security and Medicare and pay no income tax tax. That's got to be legitimate work. But there are legitimate things that people under 17 years old can do, you know, so we see that missed a lot. And that's a, it's a little bit late to be doing something like that. You know, I mean, if either they worked or they didn't work, can't cram.
[00:29:08] Speaker B: $13,000 in the last two. Two. Right.
[00:29:11] Speaker A: Well, another missed opportunity is if they decide to do a set plan. And that's one of the pension plans options set plan. You can put up to $60,000 in your retirement plan plan, but you've got to set that plan up before the end of the year. Matter of fact, if you went to a broker right now and said, please set me up a plan, I'm not sure they could get it done. But it has to be done by December 31st. Unlike an IRA that is not due, you don't have to even do all that until the due date of your return. A SEP is a different thing. So there's a lot of things like that. You know, one thing you did mention is depreciation. And we have a ton of people ask us, say, hey, I'm getting ready to buy a car, you know, in probably February or March anyway. Do I need to go ahead and do that now? If they've got a tax problem or a situation going on, we tell them absolutely. You know, we, we always tell them if you have something you're going to be buying in the first quarter of next year, maybe even the first half of the year is equipment. And you really need that equipment. Go ahead, buy now, get the tax deduction now. Because one of the goals is to kick taxes down the road. You know, that's the way depreciation works. And we have a. Because the new Trump tax law, we've got some substantial changes in law that, that are going to affect a lot of Things this year.
[00:30:22] Speaker B: Gotcha. So what is a way that a business owner could then assess something like an entity structure change, which this would be pretty much too late towards the end of the year to get that done. How would they evaluate it? Or would they use maybe an expert to evaluate their entity structure or situation so that they know which one's going to best serve their productivity and their tax line?
[00:30:41] Speaker A: Yeah, I think they're going to have to. They're going to have to find a professional to help them with that because that can get very complex. There's so many rules about changing entities, entities, but if everything aligns perfectly and they've already got an LLC set up, for example, that was done as a Schedule C. You know, we can make a late election and make. Turn that into an S corporation and potentially even, you know, get reasonable compensation. There's so many things to be considered in all of this. Reasonable compensation, you know, things like that. But it's. You can still do that and do it retroactively if you already have an LLC set up. If you don't have one set up, it's probably not. There's not anything in that realm you can probably do.
[00:31:23] Speaker B: I got you. So they need to have an analysis done. It's kind of. Absolutely. Without saying it.
[00:31:28] Speaker A: Yeah.
[00:31:28] Speaker B: Wayne.
[00:31:28] Speaker A: What?
[00:31:28] Speaker B: A little side tangent here. What if I was like, you know, a business owner and I'm making 250, $500,000 a year and I say, hey, I don't know what type of entity I'm going to be. I keep seeing these YouTube and Instagram videos. I'm supposed to do something. I'm supposed to have a better tax position. I'm just going to go to Chat GTP and let it tell me how to change my tax situation. You ever seen that? And what was the result?
[00:31:49] Speaker A: Yeah, I have seen that. And Chat GPT can be an awesome thing, but it can also give you bad information because I have people come in all the time and say, hey, I looked on Chat GPT and it said ought to do X, Y and Z. Well, it didn't have the whole story. You know, Chad, GPT is kind of one of those garbage in, garbage out, you know?
[00:32:09] Speaker B: Yeah.
[00:32:09] Speaker A: If you, if you know what to ask it, it'll answer it. But if you don't know what the question is, it's. It's like a lot of things, if somebody comes into me, I have to know what the questions are. Typically they're not going to know what to ask me. Same thing with Chat GPT. So While it can be a good crutch sometimes, do not use it for your main tax planning because it will, it'll definitely get you messed up.
[00:32:30] Speaker B: I think that's such a. You, you. I'm going to re. Emphasize the point. You said Chat GTP is literally the perfect example of garbage and garbage out. If you don't know how to properly have a conversation and prompt it and use the correct language definitions and jargon, it's going to assume what you're making and it's going to tell you to make tax changes and pivot your business in ways that sound legit and there is a real tax code for it, but it doesn't apply to you. Right. And so we've, we've had clients that come out here and say hey, I need to be doing this. And we're like, well two of those are a good idea but the other four will get you in pr, you know. And so you know, it's, it's, it can't pass the CPA exam. That's for sure. It's the only credentialed exam that AI cannot do the CPA exam. All legal medical graduate level plans can't pass the CPA exam. So I always, I thought that was a great statement you just made about garbage and garbage out. Of course you put expertise in and you're going to get expertise out, which is, which is really fun. And so yeah, if I could expand.
[00:33:25] Speaker A: On that a little bit, we actually have a special GPT. It's not chat GPT but it is one with our tax program that is designed specifically to go with the tax code and it's got all of the tax cases and all the court cases and all that stuff. So it digs much, much deeper than Chad GPT.
[00:33:46] Speaker B: Yeah, it's an open language learning model that utilizes law and tax code specific to tax advice. Of course it costs a pretty penny but it also not cheap, serves the clients well. So using that stuff is really fun. So I'm kind of getting to, we' of get into like a moral of the story from, from what you've kind of been leading us to is that business owners really need tax planning. There's year end tax planning is not supposed to happen at year end. Right. So how does tax planning in general help people with growth and stability, maybe eventually exiting and their succession plan, but possibly even short term savings. You know, give us about a 30, 40 second answer on how it dials into that.
[00:34:22] Speaker A: Well, you know the key to it, once again you've got to have Clean books. Because if you don't know where you are, you do not know where you're going to be going, you know, so that is the main thing, having the good books. But the other thing is to meet at least three or four times during the year. And we typically try to meet at least three times, usually not after the first quarter because it's so early in the year, but mid year, you know, into September, in this November, December. It's very important to do those things because sometimes things take, take a little while to implement. You know, for example, that set program that we were talking about, if you don't start that in like November, you're not going to get it done. And there are a lot of things like that. If say, say we had a wrong type of entity and somebody was, was making $200,000 on Schedule C, we actually just had that recently and they were paying like $25,000 in self employment tax. They could have, they could have probably had a different entity choice and done much better at that, that. But let me jump LLC earlier.
[00:35:22] Speaker B: So you're saying with the analysis with tax planning, the client's going to realize both immediate short term gains, like you said, re entity classification, boom, disappearing tax and then they're going to get the long term plans and they're going to be able to save money along the way and structure out their goals better.
[00:35:36] Speaker A: Absolutely.
[00:35:37] Speaker B: That's perfect. Well, because let me stick a pin in the conversation right here. We're going to talk about more of this stuff when we come back and Wayne's going to help us enter the new year in the right way. Sit tight. We'll be back with more pivotal Change.
[00:36:11] Speaker A: Foreign.
[00:36:18] Speaker B: Welcome back to the big finish. We're at our final segment of the night on this episode of Pivotal Change and we are still talking with Wayne Shelton, the tax expert in planning and strategy. And he's telling us how to close out our year, how to get into the strategy game so that we're not in a panic every year. What do I do with my taxes? But you can capture the things that you may still have left on the table in the last two weeks of the year. But you can really get yourself in gear for the next year and the future years. We just started talking about strategic plans and how you need a CPA that's going to look at one, three and five years. So we're going to enter that conversation. But before we do that, I want to give you guys a reminder watching the show that you can actually get this show 24 7, anytime you want, you can stream anywhere that you can get data or wi fi and it comes in a lot of great places. It's on the NOW Media TV website where you can get the podcast version too. Having the podcast is great because you get to hear my lovely voice without having to see my terrible face. You can just listen to it, drive down the road, download it on an airplane, do whatever you want. And then you also get the whole bilingual network. You don't just get pivotal change. You get all of the leadership shows, the business shows, the culture, the lifestyle, the network and the breaking news. So go to NowMedia TV, Roku, iOS, wherever you are, whenever you are, and join that family and keep your life elevated through the NOW Media TV Network.
[00:37:34] Speaker A: Network.
[00:37:35] Speaker B: So we're going to keep talking about elevation. Wayne, let's talk about what a CB owner should be looking for in their new year. Like specific strategy conversations. Like what should their, their advisor be talking about? What are these conversations going to entail?
[00:37:52] Speaker A: You know, and that is assuming that they already know how they're going to come out. Their books were clean. We did a tax planner on them. We say, okay, here's how you come out. At the end of the year, do you want to do a bonus check, you know, to pay whatever taxes, you know, or wherever? So if those conversations have been had and are in good shape, then we can really start drilling down to where are we going in this next year? And that's what we really, that's, that's our ideal. If we can get somebody to do it like that, then we sit down again and say, okay, we hear what your goals were a year ago. Have those changed? You know, tell me where you are on making progress with this goal or this goal. And then you kind of flesh that out again and kind of restart the process to find out where they want to go and has anything changed? Are they thinking about getting out of the business or thinking about increasing the business, buying new business, all those different type things, then you can have those conversations. You know, the last year has been put to bed. You already know how you're coming out, so everything's great.
[00:38:47] Speaker B: I like that a lot. So you should have a goals conversation. And that's what we do first onboard our clients. And usually like once a year, sometimes twice a year, like we even do with these maintenance meetings. We're like, hey, are you changing your goals? Like, did you do a big sale or a big purchase that's going to realign something that you're working on so that that's a really smart conversation. A lot of people's conversations with their accountants, because we get them, is that they say, well, we're just talking taxes. We're just, you know, they're sprinkling some advice on like, hey, I should do A and B, right? And then life will be better next year. But they're not having conversations. Your accountant should be asking, what age would you like to retire? Who have you pegged for your succession plan? How much money is going to be in your nest egg? Where are you? You put in your finances and who's doing your wealth management and, you know, what's your ebitda? And all of these different things that you can check on. And if you're not having these conversations that then lead into, well, let's get your entity structure right. Let's get your reasonable compensation right. Let's get your children working for the company because they're already doing the job anyway. Let's make sure they get credit for it. Let's do your corporate travel, let's do your xyz. There's tons of things that can be worked on. They're not having that conversation. They don't have an advisor. Do they want.
[00:39:53] Speaker A: They are not. And, you know, most the ones that we, which is what we used to be, a tax factory, you know, they just don't have time to do that. That is a different model, and it's not designed to do what we do. And what we want to do is we want to work with our clients. We don't want to have everybody in town. We want to work with people that are very interested in their business, that want to grow their business, that want to know where they are. That's the type of clients that we're looking for.
[00:40:20] Speaker B: Perfect. I like that a lot. So.
So business owners should be aligning their tax strategy directly to their vision. Like, if a business owner has these KPIs, these key performance indicators, I want to make this much money, this much in sales, I want to hire this many employees. I want to do those things. Their tax strategy should mirror that effort.
So you got these growth plans. Some people have their personal life goals and stuff like that. So we don't want to take such aggressive tax action or we don't want to be so loose in the game. They can't. They can't accomplish their goals.
Have you ever had a negative side of things where a client came in and said, hey, I want to save on taxes as much as the law will allow, but they had goals that were separate from that. Any stories about that?
[00:41:03] Speaker A: Yeah, we. We have that regularly. And what. We try to avoid that. But what will happen is if somebody is very aggressive on tax. And I'm not talking about cheating, I'm talking about doing stuff that is legitimate but maximizes your tax benefits. Okay. Then that person will may also in the same conversation, say, hey, you know, one of my goals this year is to buy a $500,000 house.
Okay, that's a whole different conversation because now your banker is going to want to see maybe not the least amount of tax. He's going to want to see that you're making money and that you can pay him back when he loans you 500,000 or four or whatever the number is. We have that conversation all the time. So it's very important for us to know everything that's going on in somebody's life. And that's why having that conversation at the first year is so important.
[00:41:47] Speaker B: I like that. And that's a good point. We've even had one where we had some squeaky wheels come in here and said, hey, guys, I want to take every advantage in the letter of the law, right? So we're gonna say, hey, we're gonna. We're gonna use everything that's in the book that can help your situation. And they wanted to flip houses, and the bank extends them a line of credit so they can go skip houses. Like, hey, we can't get a line of critics. And to us, because we look broke, it's like, well, you're. You're using every point in the law which is available to you. Yeah, you look broke in the bank's eyes. Right? But really, your class, cash flow is strong. You're doing a lot for yourself. So they had to pay a little tax in order to accomplish their goals and start flipping houses. So that. Those are funny stories like that. I mean, it's funny in retrospect. It's definitely not funny to live through.
Okay, so let me ask this.
Decisions that get made in January, right at the beginning of the year, some of those have the biggest downstream tax and cash flow impact over the rest of the year. So what are some of those decisions that can affect the next 11 months?
[00:42:41] Speaker A: You know, some of the stuff that. That we try to look at pretty quickly after we sign up a client because they will have the biggest impact on taxes, is we want to make sure that a small business is taking advantage of fringe benefits.
I think the thing we see the most is that people don't know what their options are for fringe benefits. And as a result, they do not take advantage of them. Now, fringe benefits are the same for AT T as they are for us.
So, you know, those people have plenty of planning, people that take advantage of every possible fringe benefit. Most of small businesses do not. So that's where we come in. Want to make sure that that happens.
[00:43:21] Speaker B: Yeah, no, that's a good point. Because there really is such a strong ripple effect effect. And so many of the decisions that get made, not just in business in general, but the legal structure, the entity structure, the fringe benefit structures, those ripple for a long time. And some of them have rules about how often you can change or do things, you know?
[00:43:37] Speaker A: Absolutely.
[00:43:37] Speaker B: Yeah, I appreciate you mentioning that.
So one of the issues we have with some business owners, and one of them might be in the room, might be in the office right now, is their mindset shift, right? So they go from like a reactive tax compliant, hey, I gotta pay taxes. Everybody's gotta give Uncle Sam his due to being a person that's intentional in their tax strategy and understands that if I'm running a business, I should not be paying a dollar more than is legally necessary to Uncle Sam. And instead I should be investing in myself, my family and my community. And there's a larger impact than giving your dollars to old Uncle Sam.
So how can business owners learn to shift that mindset?
[00:44:18] Speaker A: You know, I think what they've got to do is kind of go through the process and seeing what the process can do for, for, you know, that a lot of times people really don't know. They don't know what to ask, you know, they don't know what to come in and say.
They don't, they don't know to ask about equipment, depreciation, tax rates. They just don't know about those things. That's why as a part of our service, we feel like that part of our business is to educate people as, to be more understanding of what the tax law and how it affects them.
What we hope they'll do is when they get ready to do some big major change or transaction, that they'll call us beforehand and say, hey, here's what I'm thinking about doing. Tell me the most efficient way to do it. Because we also have people that, that not so much anymore, but particularly in days past that would say, well, let me tell you what I did. Think you can fix this?
Sometimes you can, sometimes you can't, you know, so you just do the best you can.
[00:45:14] Speaker B: That's great. So that mindset shift is like, like, hey, we're Going to walk you through the process and the process will speak for itself. And then along we're going to echo along that process that hey, if you'll communicate, if you'll be proactive with us, we can continue to be proactive with your situation and a harmony will be created to where the business owner, the mate, they're running their business. But the major maneuvers that are going to have those ripple effect, just like we talked about in January, going to have their ripple effect. They're going to come to us first and say, hey, am I safe to make this move? They're going to be a taxable event right here. We what's I have to make this move? What's the damage going to be now we can brace for it and adjust goals and cash flow to meet the demand. So that's a good point. So let me do this. Let's go to last question of the night and we only got about 45 seconds to answer it. What's the ideal working relationship between a business owner and their tax advisor look like? What is the goal for like clarity and confidence and long term success?
[00:46:07] Speaker A: You know, I think the key is going to be regular meeting and them communicating with us, us communicating with them and us making sure that we are reviewing the books, that they've got somebody good that's working on their books so that they're clean. And you know, I can't stress that too much and I know I've probably hit on that more than I should have today. But that's the biggest problem we see is people have just terrible books. You know, sometimes they don't even have books. And you know, one of the things you're supposed to do is have a set of books, books. And so if, if we can work with people during the time, during, during the year to make sure all those things are happening, it makes it really easy.
[00:46:46] Speaker B: That's good, I love that. So Wayne, those are good points. Get regular communication, regular meeting and let them have their books clean for you. How can people find you, get a hold of you? Pick your brain or who knows, maybe even use your advisory services.
[00:46:58] Speaker A: Sure. Shelton and Associates. We have a website I'll give you myself. We gotta give you the office number. 270210. No, 270-442-6688. We're pretty easy to find and any way we can help anybody, we will look at their situation for free. That's what we typically do.
[00:47:16] Speaker B: You know, free analysis almost gave away the cell phone number. One of the leading tax experts in the country. That was almost cool.
So thank you so much for being on the show tonight. You guys have some great opportunities. Check out Wayne, his website, his company. And in the meantime, I want everyone to go out into the world, and I want you to see the change. Change and be the change. We'll catch you next time on pivotal change.
