Hello everyone, it’s Joel Davis, and welcome to “The Best Million Dollar Business. The purpose of this website and YouTube channel, unlike my other channels, is to really do a deep-dive evaluation on a host of businesses to provide more targeted information so you can make a more well-informed decision on the best business investments for you. What are the best businesses for you to invest your time, money, and effort, so you can further expand your portfolio and make more money.
I’ve been procrastinating for a very long time in putting this video together. The reason why is because I know I can go off on a tangent. This video can go a million different ways in a minute. In a moment we’re going to go to the whiteboard and I'm going to diagram strategies. I'm going to break strategies down for you, so again, I need to be very careful because I can go off on tangents, especially when I get excited about a specific topic. My goal is to make this video as short as I can while still covering all the important topics to the best of my ability.
Understand, I can't give everybody everything. A lot of freebie experts are out there and we must be weary of the freebie experts. They are forever trying to “knock off” my information and resources. Whether it's my ebook, online content, or other, they do it.
One company is literally charging $9,000 to help unsuspecting entrepreneurs start a non-emergency medical transportation (NEMT) business. Much of their content, where'd it come from? Whose content did they rob and steal? Mine!
In fact, they actually offer people market analysis with their $9,000 package and who do they use to develop those market analysis? Our team!
What’s scary, though, is in their material they literally include a transcribed copy of an interview I did in 2008! That’s not a misprint! They actually provide a transcribed copy of an interview I did in 2008 – 12 years ago! They didn't even attempt to change any part of the content. I have copies because some of their clients have reached out to me to ask “What did I pay for?” It’s sad.
I'm telling you the industry has changed in so many ways.
Bottom line, be very weary of the information you digest and then you put into action. Because of such people, I have to be careful in what I share. The freebie experts, man, they're aggressive! They are aggressive little rascals.
We have a lot to discuss and the motivation for starting or putting this video together is liability. A client-provider of mine, many of you met him at the “Round Table Gathering” in Atlanta, he had a $5,000,000 wrongful death lawsuit brought against him. Now already you know it’s a joke because there's no way you pursue only $5,000,000 for a wrongful death. You don't go for just $5,000,000, but that’s what this lady did.
Why so little? Because they knew they had nothing. She was just wanting a quick cash grab. She wanted her 30 pieces of silver. When the underwriter offered her a $1,000,000 settlement to go away, she was quick to take it. Now again, you don't do a $5,000,000 million wrongful death lawsuit and then except only $1,000,000. That proves they had nothing, but she got her 30 pieces of silver. That's what they wanted.
Although laughable, how much stress did that situation put on my client-provider? Just going through the process of being served notice and the associated rebuttal process, it put a lot of stress on him.
Another client-provider I have, his background was in the lawn care - the landscaping industry. He would mow lawns and do landscaping throughout the spring, summer and the fall. In the winter months he would do snow removal. They had a $1,000,000 lawsuit brought against them for someone who slipped on a sidewalk, a driveway or parking lot - something they had plowed or shoveled.
A $1,000,000 million lawsuit was brought against them, and their insurance policy was only for $100,000. Sadly, this lawsuit ended up bankrupting the business. Did the plaintiff get their money? No, they didn't get everything for sure, but regardless, how much of a life changing event was this situation for my client? It was a life-changer. He has since transitioned to starting a medical transportation business, but that entire ordeal was a lot of stress for him and his family.
Consider, he wasn't even there when the supposed accident occurred. You can be doing well, working hard, making money, and then all of a sudden one incident and everything is jeopardized. You're not even directly involved in it incident!
Sometimes its not even something that you, an employee, or your business is specifically involved in.
Case in point, many years ago, one of my sisters was walking across the street with one of her daughters and boom, she gets hit by a 19-year-old kid who was on a cell phone and ran a red light. She gets plowed, her daughter gets plowed. From what I understand from eyewitnesses, my sister, went airborne 40 something feet.
She had many, many surgeries. At one point in time, doctors weren't sure if she would walk again. Fortunately, she was able to walk and then, after many years, return to work as a nurse, but she had many, many surgeries thereafter.
Think about the 19-year-old and the life of his family. Their lives changed on a dime, so it's not even related to business. It's not even related to employees. His father, if I recall correctly, was an attorney or doctor or something like that from New York City. Think about how much the father’s life changed because his son is up here, a SUNY Binghamton college student, he runs a red light, and plows into my sister and niece. Think how much the lives of the father and family changed, so liability issues are not just business related.
The initial motivation for putting this video together was liability. Now with all of this Coronavirus pandemic and everyone's business being adversely affected, my additional motivation for putting this video together is to teach you how to build infrastructure to help insulate your business in the future.
How do you protect yourself? In addition, how do you insulate yourself? When we go to the whiteboard, I’m going to demonstrate that it is a process. It takes time, but you've got to sow the seeds every single day to build sustainability and insulations from adverse condition and unpredictable situations.
Like the current pandemic, I'm sure there’s going to be something down the road, maybe many years down the road, but still a realistic possibility. Who knows - no one predicted this?
Every single day you have to sow the seeds of success - investing in your future and protection to limit your exposure to undo liability and vulnerabilities.
I'm going to share with you how I started my business, but through the wisdom of a very smart accountant who kind of took me under his wing and guided me when I didn't understand everything but definitely trusted in his wisdom and grew and diversified.
The core structure of what we put in place was ingenious. It’s really very simple, but 99% of the people don't know and/or won’t deploy these strategies. You're not going to find these strategies anywhere else online. All those people who are regurgitating, reusing my content, they don't know this stuff, so they can't teach it. They're not deploying it.
Again, what was the initial motivation for this? Liability.
Now, with the current pandemic, motivation also became security and insulating yourself from all this financial chaos.
We're going start by focusing on non-emergency medical transportation because chances are very good many of you have experience in that industry. If not, maybe your primary business is home care. Maybe it's a courier business. Maybe it's your broker business.
Regardless of the type of business, from your main business you draw a salary. It's common sense. You work, build your business because you want to make money, and associated benefits.
You draw a salary, maybe pullout money once a week, once every other week. I suspect you have other perks and other benefits. The business might pay for your vehicle, your vehicle insurance, maybe some medical insurance, your cell phone, gas account, some vacations, and other benefits.
Your salary and all of the perks and benefits are SDE – Seller Discretionary Earnings.
For those of you who haven't studied my DVD series, make sure you do because I break down specifically Seller Discretionary Earnings regarding the NEMT industry.
When most people think of buying or selling a business they think of EBITDA. I would argue that typically a business $3,000,000 and below is definitely a small business. You could even argue a $4-5,000,000 business, depending on the industry, is a small business, so typically these smaller businesses, we care more about the SDE than we do EBIDTA.
When I'm working with a buyer or seller, we want to determine the overall Seller Discretionary Earning (SDE).
Let's say the business is bringing in $1 million and we can say that the Seller's Discretionary Earning with salaries, benefits, vehicle, insurance, gas, whatever, maybe it's $250,000. That, the SDE, is really what we want to focus in on in valuing the small business.
Again, what’s the ultimate goal of your main business? We want to make money for sure, but we also need to be looking for a future sale - no question. We need to be building your business for a future sale.
Now, are we wrong with this simplistic business model – structuring everything under a single business entity and drawing a salary and benefits? No, of course not. It’s common sense. This is what 99% of you do. That is what I was doing before my accountant said “Hey, that’s what poor people do. You need to be rich. This is what vulnerable people do. You need to insulate yourself from vulnerabilities.”
What did he tell me to do? Again, I had enough trust and faith in him to do deploy his suggestions, but I really didn't understand it when we first advised me and set up this business model.
Needless to say, over the years, as my business continued to grow and expand, I really started to appreciate the strategy and designs for asset protection and the ability to “make” more money by reducing my exposure to taxation.
In my videos and resources, I frequently talk about “the easiest way to make money is to save money.” That's actually a play on words because many times when I say that most of you are thinking of pinching pennies. Don’t get me wrong, I'm all for that. For those of you who have worked with doing one-on-one, you know I'm all about protecting the capital investment.
Protect the cashflow. But when I talk about “making money,” the easiest way to make money is to save money. The way you save money is by keeping as much money in “your system.”
The strategy I’m going to reveal to you, we're going to call it “A System.” The more money you keep into your “System” to reduce and limit your exposure to taxation, the more money you save. Hence, “The easiest way to make money is to save money.” That's why when people talk about rich people not paying taxes it’s because they put themselves in a position where they limit their exposure to taxes.
Everything I’m going to show you is 100% legal. Is there a little bit more administrative work involved in the process? Yes. But guess what? It definitely protects your liability. It definitely helps you keep more money in your “System” which means you make more money.
With all that being said, what’s the solution? What are you telling me, Joel?
The client-provider who I mentioned with the $5,000,000 wrongful death lawsuit, he was exposed. His main business, his salary, his SDE, his entire financial “system” was vulnerable.
My client-provider who, back in the day, owned a lawn care business and had to go bankrupt, his main business, landscaping, was exposed. The minute a lawsuit was brought against him, his entire financial existence was jeopardized - his salary, vehicle, cell phone – everything was exposed.
What's the solution? We want as many barriers as we can possibly have because even though he had a legitimate LLC or S Corp, you’re still not completely protected. Does the actual business legal structure provide protection, yes, of course. However, there exists what is called “Piercing the corporate veil.”
Let's say it wasn't a $5,000,000 wrongful death lawsuit. Let's say it was $50,000,000. At that point, the plaintiff is going to do everything they possibly can to “pierce the corporate veil” - sue well beyond the barriers of the legal structure of the business in pursuit of additional money which includes your personal assets, your salary, your house, and all available resources.
Is that a challenge, “piercing the corporate veil?” Yes, it’s definitely a challenge, but it remains a viable possibility none-the-less, especially if they see any type of mismanagement to include the commingling or mismanagement of funds. That's why it's critical you don't commingle funds between your business and your personal assets.
The solution is, in addition to you operating your main business, you should always have, as a minimum, a second business. We’ll call this your “personal company” or “management company.” This entity also needs to be either an LLC or an S Corp. You never want a DBA.
This is a business that only you own. The purpose of your management company is to provide management services to the main business.
You ask, “Joel, why would I do that? I'm already drawing a salary from my main business.”
That's the wrong way to go about it. Your main business is high risk. Let's say you're you've got five vehicles, 10 vehicles, 20 vehicles in your non-emergency medical transportation business. The more vehicles you've got, the more exposure you’ve got to potential liability issues.
If you're a home care agency, the more caregivers you employ, the more exposure to liability.
It doesn't matter what business you’re in, construction, real estate, restaurant, whatever, it’s your high-risk entity.
Your personal management company, because you’re strictly a management company, a “paper-pushing” administrative company, that entity will always remain low-risk. For this reason, your management company is key to serving as a protective shelter.
Between your businesses, you’re going to have an agreement, one or two pages, I don't care, but you're literally going to be signing both sides of the agreement that indicates your management company will be serving as a consulting service to your main business.
Let's say you're pulling out a salary of $10,000 a month from your main business. With this new strategy, you no longer do that. As per your agreement, in exchange for management consulting and administrative assistance, your main business, in turn, reimburses your management company. Money is being transferred from your main business, your high-risk entity, to your management company, your low-risk entity.
Now, rather than you pull your salary out of your main business, your high-risk business, you draw your salary from your management company, your low-risk business.
In shifting your salary from one entity to the other, how does that affect your SDE? It doesn't, not at all.
If I'm working with a buyer or seller, at the end of the day, we're still going to look at this business and see that there's $10,000 a month going to your management company, so it's not going to affect your SDE. If anything, I'm going to say to my buyer, “This is a smart seller!
He knows his stuff, so chances are good he's running his business very well.”
Now, with two businesses, you have options and discretion, but you need to be prudent.
Rather than drawing a salary out of your main business, you’re drawing it from your management company, but you can still have your cell phone and other benefits paid for by the other business. With all honesty, I suggest keeping your vehicle and associated insurance in your high-risk entity.
DISCLAIMER: I'm not an accountant. I'm not an attorney. I don't play one on TV! Understand I'm not giving you legal advice. I'm just explaining to you what I've done and how it's paid off immeasurably in my business.
So, pull your salary out of your low-risk management company to protect your liquid funds and keep your vehicle and anything considered high-risk in your management company.
You might ask, “Joel, are you ‘double dipping?’ You’re taking benefits out of both businesses?” Yes, you’re absolutely correct, but guess what, you STILL own both businesses so you can draw benefits from both.
Your business entities are legally formed and your agreements between the entities are 100% legal. There's nothing wrong with you owning multiple businesses, having agreement between them, etc.
This strategy becomes even more ingenious and pertinent if you have business partners. If you have a business partner, both of you need to form your own management companies - it keeps everything much more honest, transparent, and clear.
One business partner might be single. The second partner might be married with kids. One might bring “more baggage” to the table than the other. Who knows? The scenario and possibilities are endless, but if you both form separate management companies you can draw your own salaries, manage your own benefits, and more. The salary of someone who's married with kids and has more responsibilities, their salary most likely needs to be higher.
If you're 50/50 partners, you should be pulling out the same amount of money, but in deploying this type of strategy, each partner can manage their own money their own way. It helps keep things clean, transparent, helps with roles and expectations. This keeps everybody above board and honest.
Let’s say you and your partner are both pulling out $10,000 a month from your main business. One thing I encourage you to do is a max out your 401k. You definitely want to get with your financial advisor and set up your 401k and IRA. Max out those investments and write-offs.
Your 401k and IRA are going to be in your personal name. Understand, if someone sues your main business, they’re going to come after the assets of your main business. If you personally are being sued, they're going to do anything they possibly can to come after your personal assets to include your 401k and IRA.
If a plaintiff has an opening to “pierce that corporate veil,” they're going to do it. They're going to want us to sue you beyond your company and go after your personal assets, so understand pursuing your 401k and IRA are rather easy, but they are still a wise investment and personal tax benefit.
Now, your “honeypot,” those investments need to remain in the name of your management company, so in the event you are personally ever sued, the plaintiff will have great difficulty trying to pursue the assets in your company.
Also, let’s talk about the current Covid-19 crisis. When I talk about investing, I'm talking about having savings accounts, checking accounts in the company name in addition to literally investment accounts.
You've got to commit to becoming an investor. Investing is critical to build financial infrastructure. You must build financial and investment infrastructure within your management company. When I talk about your “honeypot,” I'm talking about the investments in your management company. Why? Because they are “safe.” They are in your low-risk business entity.
Now, let’s be clear. Your “honeypot,” you don't own it – the management company owns those assets and investments. Your 401k, your IRA, you own those. They are in your personal name. Your “honeypot” investments, those are in the company name.
I definitely encourage you to become an investor. In order to make all of this work, to build and grow your “honeypot” which will sustain you years down the road, you’ve got to be an investor. You’ve got to leverage time.
Even right now when the economy is going down, in fluctuation, if you have a strong financial advisor, you should still be making money. As a side note, an investor is not a day trader.
They are two totally different philosophies and strategies. Being an investor is a long-term position, being a day trader is a short-term position.
In addition to liability and asset protection, what is another critical variable to make all of this work? Time!
Time is the most important thing. Why do you need to make more money - so you have more time. When you have more money, you can buy yourself time. You don't have to do certain things because you can outsource it.
People talk about having six months of savings. That's “poor man” mentality. Yes, everyone should have easily accessible savings for unpredictable events and circumstances. Trust me, I get it, such savings is important.
Also understand, I'm not trying to belittle anyone with limited means. Some people don't have two nickels to rub together – especially as a result of layoffs, downsizing, and closings due to the coronavirus pandemic.
Ultimately, we want as many sources of revenue as possible driving income to your management company. You want as much money as possible in your management company so you can fund your “honeypot.”
You want your “honeypot” to grow to such a degree, to gain in size and net worth, that it becomes its own infrastructure. When that happens, should something happen to one of your main businesses, who cares? Is it an inconvenience? Sure. Does that mean you just give up on it? No. But guess what? With a strong “honeypot,” you're safe. You’re not dependent on the other businesses – your “honeypot” is of greater value than your individual businesses.
Let me share with you another phenomenal strategy that I learned from my accountant.
Most all of you start your medical transportation business by purchasing one vehicle after another, one at a time. It’s common sense, most everyone pursues such a strategy.
What I’m suggesting you do is build your own finance company. You read that correctly, you literally start your own finance company where you purchase vehicles and then lease them to your main business, your NEMT business.
So many of you resent me because I keep telling you don’t want to purchase the newest and greatest vehicles - high priced 40 and $50,000 brand new Ford Transits. That’s crazy - for many reasons.
What I’m suggesting is that you invest in used vehicles, purchased by your finance company, and then lease it to your medical transportation company. For example, let’s say you invest $20,000 as equity into your finance company to purchase a $20,000 vehicle. Purchase the vehicle outright via your finance company and then lease the vehicle to your NEMT business.
You will literally have a lease agreement between your two businesses.
Your finance company is another outlet that can literally reduce your exposure to taxation while driving more money to your management company and associated “honeypot.” You are keeping more money in your “system.”
Do the math. You can purchase a $20,000 used vehicle and lease it to your medical transportation business for $500, $600, or $700 per month for 60 months. These monthly lease payments will be 100% write-offs for your medical transportation business and depreciation and a profit center for your finance company.
This is why I tell everyone you should never lease a vehicle - unless you own the finance company! If you own the finance company, everything is a write off!
By all means, you don’t try and gouge your NEMT business, rather, our goal is to limit potential liability and exposure to undo taxes. We do want to show a degree of profitability when appropriate, but we really want to have a strong Seller Discretionary Earning (SDE).
Your finance company will show a profit, but you will also have a great deal of depreciation.
We’re also going to use your finances company to compensation your management company for consulting and management services – further allowing you to increase income to the management company and finance your “honeypot.”
Regardless of your business or industry – take real estate. Everyone loves that no money down real estate craze. Guess what, landlords get sued all the time! A tenant falls down the stairs. You and I both know it's a sham, but what you and I think doesn’t matter. When it comes to a lawsuit, there is no loyalty. Customers don’t care about you, your interest, and your needs. You need to be thinking protection, protection, protection.
Now, in order to make all this work, two important things.
First, we need to leverage time. This whole process takes time - but rich people do things a little different and they’re committed to leveraging time.
Is this process hard? No, it's not hard. Sure, it will cost a little bit more money with respect to administrative process and setup, but long-term, you're going to save and lot m more money because you’re going to be keeping more money in your “system.”
Second, you need to make REAL money – bottom line!
For all of you committed to investing all your time and effort in pursuit of the “low hanging fruit” such as Medicaid/broker work where your margins are nonsense, it’s very difficult for you to scale. You have no margins – no meat on the bones to invest in growth let alone expand and diversify your “system.”
To make REAL money, you have to have quality rates of reimbursement. Leave the Medicaid plantation. It’s low hanging fruit that enslaves you. Restructure your business. The Medicaid plantation makes you lazy! You lose your skills and initiative, and many of you know this to be true.
Now, I know what are all those freebie experts and online gurus are telling you. If you’re in the non-emergency medical transportation industry, they fill you full of feel-good fluff and tell you to “be the best non-emergency medical transportation provider you can be.” If you’re in the home care industry, they tell you to “be the best home care provider you can be,” and the list goes on and on.
Do I want you to serve your community and be the best you can? Sure. Of course I do, but I want you looking way beyond. I want you building your “system” – a business model that sustains you long-term, with a “honeypot” that has longevity and growing infrastructure that sustains you long-term.
Listen to closely. You can be the absolute best non-emergency medical transportation provider. You can be the absolute best business owner in whatever industry you’re in. You can have outstanding relationships with the people but have one accident and it can all be gone.
That woman who sued the NEMT provider for wrongful death lawsuit – my client-provider transported her son three days a week to and from dialysis. Do you think they weren't congenial, friendly, and had a good relationship? Of course they did, but guess what, when things hit the fan, what'd they do? All that mattered to them was money. There was no loyalty. There was no such things as friendship. It was about them getting their 30 pieces of silver. One incident, one lawsuit, it's all jeopardized.
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