Limit Business Exposure to Liability & Financial Loss Part 2

Hello everyone, it's Joel Davis with "The Best Million Dollar Business." Our goal, our vision, our purpose is to do a deep-dive in evaluating a host of businesses so you can better evaluate prospective opportunities to determine viable investments and acquisitions.   If you can't grow it, can't scale it, we're not interested! 

Thank you all for your great emails/questions in response to my previous video.   If you didn't watch that, make sure you do (Click here to watch video).  I did a deep dive breaking things down and many of you appreciate it.  Thank you, I welcome all your feedback.  I took some of those emails and consolidated them so I can answer them as follow-up questions.  Great questions.  Great compliments.  I know many of you were enthusiastic.  I love and appreciate it.  

The first question I'm going to combine.  It's actually from Anthony Cherry.  Many of you know, "Cherry Berry."  I first met him back in 2014 or 2015 in Virginia.   Then last year at the "Round Table Gathering," many of you met him and his partner, "Chuck D."  

Anthony said and I quote, "This is absolute genius."  He had a question about who's claiming the depreciation if you're deploying your own finance company.  

I also want to combine that with a question one from "Richie Rich" who  asked about the vehicles when you go to sell your non-emergency medical transportation business and your vehicles are in your finance company?  Great questions! 

Let me answer by addressing the finance company.

The core concept is, let's say you have $20,000.  Invest that money as equity into your finance company.  The finance company then purchases and owns the used vehicle which, in turn, leases it to the transportation company.   Let's say you lease the vehicle for $500 a month for five years. That means your non-emergency medical transportation company is going to pay your finance company $30,000.  Your finance company is going to profit $10,000.

Trust me, I know, $10,000 doesn't set the world on fire, but play with those numbers.  Let's say you increased the lease payments to $600 per month, $700 per month, etc.  Play with the numbers.   Maybe it's a six-year term. Maybe it's indefinitely.  It doesn't matter.  What is important is that you see how you're reducing exposure to liability and taxation.

Play with the numbers.  You can see this type of strategy gives you great flexibility, limits liability, and gives you the opportunity to have two sources of revenue reimbursing your management company.

Here is another very important point that is genius about this strategy.  Let's talk specifically about the Covid-19 pandemic and how many businesses in all industries either shut down or significantly slowed down.  

If you're financing with banks or traditional lenders, you still have to make vehicle payments despite those vehicles not generating revenue.  However, when you own the finance company, and there is such a pandemic, who cares?  You own everything and don't have to make payment! It doesn't matter.  Again, a huge flexibility.  In addition to keeping and making more money, you are empowering yourself.

Wayne and Kathy out of the great state of Florida.  They said their medical transportation business is down about 30%, but they're still "crushing it" with dialysis transports.  The best part about all their dialysis - they have zero Medicaid clients!  

They get solicited 24-7 by MTM and LogistiCare to join their networks, but they refuse to join.  Wayne and Kathy partner directly with the facilities, not with Medicaid.  You want to talk about getting increased rates of reimbursement, regular payment, financial empowerment?  That's it. That's called making real money, empowers themselves, and gives them choices. 

Let me get to their question.   Wayne said last year they were thinking about doing something similar.  They talked to their attorney who suggested deploying a holding company. The core concept is very similar, but the reason why my accountant and I avoided the holding company strategy, where an overarching umbrella entity owns other entities, the problem is there's a direct correlation and ownership connection between entities.  One company owns another company which owns another company.  One company is a subsidiary of another. 

Contrast that strategy to our structure.  If study what I diagrammed on the board, there is a complete separation between entities.   

Remember where I discussed "piercing the corporate veil" - limiting your exposure to liability by having barriers.  The weakness of a holding company strategy is the ability to "pierce that corporate veil" because of the direct correlation between entities.  Using the strategy I discussed, there is a legitimate separation.   There is no direct ownership relationship between entities, rather, they simply rely on agreements between entities - making it harder to "penetrate the corporate veil" between multiple entities.

Wayne said to me, "I love it, in your video when you said 'Hey, if you've got an accountant, an attorney who doesn't do it, fire him!'  That's exactly what my attorney said - 'You don't need to do that, you have enough protection, you're properly formed here, you've got insurance."

Regina - going to sign up for one-on-one coaching.  She got inspired, but she's not sure where to start.  Not a problem.   We're going to take care of it.   Regina is intimidated because of her humble beginnings and has uncertainty.  I can appreciate her trepidation, but it all starts with the first step. 

One person you're going to meet in Orlando is Mohammed.   Again. I use nicknames, so his stage name is "Mojo."   Many of you are going to meet him in Orlando. I actually coached Mojo in high school.   He was one of my best high school football players.   He went off to college, joined the army, went overseas, got out of the military, lives in Tennessee, hustling, and working hard building his businesses.

Mojo contacted me and said "Coach D, I just need to learn.   I want to make money."   Love it.  The reason I share all this with you is because when Mojo was in high school, I used to mentor all my players, but with Mojo I used to teach them a lot about business.  I used to own a lot of rental properties and would literally have Mojo help me with some of my rental properties.  I taught him a lot of things. 

One day, Mojo and I were driving down the street where I grew up and I said, "Mojo, what do you think of that house right there on the corners corner?"  Mojo said "That's rundown - that's a piece of crap."

I said, "I know, I agree. You know what's funny about that house, Mojo?"   He said, "What's that, Coach?"   I said "That's the house I grew up in."   You could instantly tell Mojo didn't know what to say.   He felt like a fool.   He tried to recover and said "Well, it's not that bad, Coach."   I said "No, no, no, Mojo.   It is that bad.   The reason I'm showing you it is because that's where Coach Davis started, but that's not where I'm at and certainly not where I'm going to finish.   

My point, Regina, it's not about where you start, it's not about your humble beginnings, it's about taking the first step.   I'm glad you're going to be doing one-on-one coaching.   That's awesome. There's nothing to be intimidated about based upon your background. 

I'm not gonna share with everyone your background, but you're obviously a hard worker, have great skill, and we're going to leverage the heck out of your experience and your education.   We're going to hook you up, make you make sure that your business looks top shelf, so don't be intimidated.   It all starts the first step. 

When I diagrammed those strategies on the board and talked about where I am, it all goes way back to the house where I grew up.   Like Mojo said, "That's a piece of crap," but guess what? That's where I started, but not where I'm at, not where I'm headed, and the same thing holds true for you, Regina. 

Many of you had questions about my "honeypot."  I'm not going to go in excessive depth discussing my actual investments, but I will confirm I'm heavily invested in tech.   Tech has been phenomenal.   

Even during the current pandemic and the markets have been contracting, the DOW is already rebounding upwards of 25,000.  The markets are definitely coming back and the economy is even open!   Look at many of the equities that continue to do well - tech!

My "honeypot" is heavily invested in equities.   Why would I not be?   I've made so much money there.   Take Amazon for example.   I love Amazon stock.   It was bounding well over $2,200 today.   People thought I was crazy when I was still buying it years ago at $600 per share.   Think how much money I've made just off Amazon. 

Look at Netflix right now.   Netflix is hitting all time highs.   Everyone is staying home due to the current pandemic.  I've owned Netflix for years and made a lot of money.   

Don't get me wrong, I'm not a genius.   I was so close, the width of a hair, of baling on Tesla.  I almost ditched on it completely last year and look at it today.   Today, it's still hitting record highs.  It's phenomenal. 

I could go off on a tangent discussing equities and investments, but I don't want to go crazy.  If I see you at one of my live events, if you want to ask me questions, I'll share, but again, I don't want to go crazy discussing equities at this time.

Regardless, you must become an investor.   That's how you build your infrastructure in your "honeypot."   Build your infrastructure.   Think about it.   The markets went down 32% and they're already back up 16%.  You should be making money!  You need to have a good team to help you.  Leverage them. 

There's so much money to be made, just run some numbers.  If you have $100,000 making 10% -that's $10,000.   That's your money working for you. That's how you build your "honeypot."  You build your own infrastructure. 

As an investor, your non-emergency medical transportation business, it's an investment for you, but it's really a means to an end.   Your home care agency, it too is an investment for you, but it's still a means to an end.  Likewise your broker business, your courier business, etc.  They are all a means to an end.

The ultimate goal is to fund your "honeypot."  That's your true investment. 

If something were to happen to one of your businesses, if you were to lose everything, just as I diagrammed, if business goes down, you retire, you sell, whatever the circumstances, your "honeypot" is the infrastructure that continues to make you money.

Build your "honeypot" and your "honeypot" will make money for you.   As Albert Einstein said, "The single best man-made invention is compounding interest."  It's so true.   Compounding interest is what allows your money to multiply and work for you. 

Christina, you said "Your content is as a great awakening - not going to find this type of content anywhere else."  I agree. I love it! 

I'm not going to read your entire email because of its length, but I loved it.   You've been to the other events.   Christina names the conference that she went to last fall, but I'm not going to give kudos to them by mentioning their name.   Christina went there last year.  She endured all the upsells from what I call the "barking seals."   

Christina said "I'm starting to ask myself what you're not sharing."   This is after she said that my stuff was "The great awakening."  That's great.   She says "I'm starting to ask myself what you're not sharing and then eager to learn." 

I love it, Christina.  Kudos for you for going to the other conference and realizing it's just an upsell.   You're right, you're not going to learn stuff like this at those events charging $9,000 to teach people how to build a non-emergency medical transportation - and sharing my content from 12 years ago!   Needless to say, this industry has changed in 12 years.  Heck, it's changed over the last month!   

Of course, there are strategies and tactics I can't share publicly and online.  The freebie experts are rascally little rabbits!  There are certain things that need to be proprietary, protected for the people who I work with directly. 

You also have to consider the old saying, "People don't like to be told the truth, the truth has to be revealed."   Not everyone is ready to learn everything.   

Consider everything that I diagrammed in that video versus the person just starting out. That's very intimidating.  I understand and appreciate that.  Take Regina for example, she wants to do one-on one training, but from her email I can tell she's intimidated by the process, so of course, not everyone is ready to digest and implement everything that I shared and diagrammed.

Consider "Cherry Berry" and Wayne.  They've been with me for years.  This is the first time they're seeing some of these strategies because, again, it's a progression of time and preparedness.  Not everyone is ready. 

Additionally, there are things that I can't readily share on my websites and in videos because I need to protect them from all those "slappy pappies" and freebie experts who are always trying to steal my content.  

But here's the great point, Christina, you're eager to learn - that's what's most important.  I love it, and especially because you've gone to those conferences, you've "seen the other side."  

I have to.  I've been there, I've been invited to speak at them [conferences], and I politely declined because it's not in alignment with my philosophy and beliefs.   I love talking to people, but the core concept, the business model of those conferences, it doesn't serve the people in the manner I espouse and believe you should be served.   I found my calling. This is the way I answer my calling. 

Joel Davis is author of the best-selling ebook, "How to Build a Million Dollar Medical Transportation Company," and founder of the United Medical Transportation Providers Group.