End-of-Year Strategies to Maximize Your Tax Savings with Mitchell Sharpe

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About this Episode



Are you an HVAC business owner looking for ways to maximize your tax savings before the end of the year? In our latest podcast episode, we have the pleasure of chatting with Mitchell Sharpe, Founding Partner of SKC & Co. CPAs, LLC, and expert in all things taxes.

With over 40 years of experience as a trusted advisor, mentor, and coach for entrepreneurs, Mitchell knows a thing or two about helping business owners achieve their financial goals. He takes a holistic approach, evaluating both personal and professional goals and developing strategies to achieve them in the short and long term. And as the Founding Partner of SKC & Co. CPAs, he practices what he preaches by ensuring the company is always ahead of the curve and planning for the future.

Not only is Mitchell a Certified Public Accountant and member of the American Institute of Certified Public Accountants and the New Jersey Society of Certified Public Accountants, but he also received his MBA in Accounting and BA in Economics from Rutgers State University. He’s even spent time as a Senior Accountant at Gikow, Bierman, and Talesnick and a Staff Accountant at Price Waterhouse Coopers.

So, if you want to save on taxes for your HVAC business before the year is up, make sure to tune in to our podcast with Mitchell Sharpe. He’ll share expert tips and tricks to help you outsmart the tax man and reach your financial goals. And in his spare time, he coaches AAU basketball, mentors his players for college, and enjoys fishing, hiking, and reading – so you know he’s a well-rounded and exciting guy. Don’t miss out on this opportunity to get valuable insights from Mitchell – join us for our latest episode of HVAC Financial Freedom!


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🌐 Learn more about how you can benefit from saving taxes at: http://www.skcandco.com/

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Sponsored by: Polianna.net

Audio Transcript

Welcome to the H Vac Financial freedom podcast, a show where we talk about H Vac business ownership and financial freedom by sharing stories and advice of experts who can help you get there. Now your host, john victoria Good morning and welcome to the H Vac Financial freedom podcast. My name is john victoria host and today we have a fun topic as we are moving to the end of 303. And so I’m here with Mitchell Sharp and we’re talking a lot of things um one of them being end of your strategies to maximize your tax savings for 2022.

Um and before we hop into Mitchell’s Baio just wanted to share that. Today’s show is sponsored by Pollyanna, a digital marketing company specializing in S. C. O. For the traits and so with that you just wanna hop quickly into an introduction to Mitchell Mitchell Sharp who is here with us live today, he is the founding partner of S. K. C. And Co C. P A. S. He has been a trusted advisor, mentor and coach for hundreds of entrepreneurs over the last 40 years. And what makes them different is that he has a holistic approach to approaching or supporting the specific needs of business owners, um evaluating their goals, both personal and professional and achieving the objectives in the short and the long term.

And so, you know, for a lot of us that is growth profitability but also life events such as preparing for college or estate planning And this is all throughout the different shifts in the market we know 2022 has been an interesting market for all of us and the challenging conditions that we all may face. And so the other reason why I want to bring Mitchell on is that he is different than the typical cps that I run into and he truly does practice what he preaches with his company.

Um There’s a very deep focus on culture, his people technology and quality control. And I share with him the similar philosophy of being a visionary and I love that he is a visionary leader. And so aside from that in his spare time he coaches au basketball, mentors, players for college, enjoys fishing, hiking, reading lots of outdoorsy things and him and his wife and three Children reside in Kinnelon, New Jersey. Hopefully I got that. Right, so welcome to the show mitch awesome. So very excited. So I think just to kick things off, I’m always curious about the passion and the inspiration of how people hopped into what they’re doing today.

So I was just curious if you could start off with your inspiration behind becoming a certified public accountant and also in specializing in helping entrepreneurs with their finances. Okay, well I think it goes back to high school college days where you know, I noticed a few things. One is, my dad had a small pharmacy and I also worked through high school and college for an army Navy store and I noticed that my my father got no support at all from a C. P. A. And you know so he’s a pharmacist without business background.

And he was really on his own. And at times there were things that happened that we probably wish we could have avoided. And then working for the Army Navy store. That accountant was on site at least once a month as I remember. And the owner of the store really had a relationship with with the account. So I used to talk to the account name blue once in a while and I just got a sense that I remember the owner of the store said to me uh that his relationship with lou was important to him.

I don’t remember any details but that made an impression on me because I noticed that he had a relationship a meaningful relationship with his accountant and my father did not. I think that made an impression on me at that point that at least got my attention and as I went through college not really knowing what I was going to do by the time I decided to go ahead and become a C. P. A. That was always in the back of my mind. So that was that seed was planted.

I got out of college and graduate school. I went to work for Pricewaterhouse and that didn’t really last too long for me because it really wasn’t really wasn’t what I was passionate about. I ended up going to work for leaving Pricewaterhouse and going to work for the accountant of the Army Navy store. So that was a big change from working on IBM all of a sudden I’m working on the local doctor, local drugstore, things like that, but that really did resonate with me. Um and what had happened was lou had gotten sick and needed help.

That was my opportunity to get some experience there. And then it wasn’t too long after that. I was about 26 when I started my own firm. I gotta kind of laugh when I say started my own firm. It was essentially me and a desk and a phone and I had enough work to keep me busy about a day a month, but that’s how it starts. I love that, you know, it’s I mean great things always start with with humble beginnings and you know, I love that, you know, it started with, you know, just some of these realizations with, you know working at that army Navy store.

Um and then that kind of spurring um a lot from there and that’s kind of cool as well. I I didn’t, I didn’t know, so background Navy dad was Navy. Um so I have a little bit connection there. I attended school over at the United States Naval Academy down in Annapolis and so small small world, I love that. Um and so so from there, so you said about 26 when you started the business um I guess what, you know, some people, you know, they never make the leap to business ownership and there’s a few people who might be listening right now where they’re working for a company, they’re an employee, they might have some ideas how to make things better for you.

Like what I guess what clicked in your mind to want you to make that leap versus like continuing to work, you know, in an established system? Um I guess what, what was that motivation and what would you say to someone who is on that fence at the moment? Okay. You know, I guess I probably on some level, I was never on the fence in effect. Um I was probably in high school when my mother said to me, you know what, you’re just like your father, you better not end up working for anybody else, just like, so that might have planted a seed or else I already on some level knew that myself.

So even when I was at Price Waterhouse, I had, you know that in the back of my mind, so I think I knew that pretty early, just my personality or whatever, like, you know, I gotta, I gotta be on my own. Um so that was there early on and then, you know, when that opportunity came, you know, one of the things that made me do it was I had gotten engaged and I said I’d better take my shot. Now I better go out and take this shot while I can, you know, I was remember living very affordably at the time.

I think that I think what happened was I was out in a small apartment and then when I started the firm, I think I actually moved back home for a year before we got married. And you know, that was definitely listen, I just starting up, I had no income, so I had to limit my expenses. And I think that’s you know, listen, that is not easy. How do you make that move? How do you make that decision? So that’s how I managed it. I said if I’m going to be married in the year, I better take my shot now and move back home.

And then I after that hustled my butt off, even though I didn’t have much of an idea what to actually do, but I just winged it just to get that, you know, that just to get the thing moving where there there was a critical mass, I guess is the word I’m looking for so that I could at least pay some bills. Uh and that was that was a little nerve wracking at that point, I will say. So, you know, I can definitely empathize with people getting ready to make that move.

But uh but I do remember looking back now for me, I had to do it. It was compulsive. I had to do it, wanted to do it, No, not doing it. Um So I think, you know, call it passion? Call it compulsion. Whatever was a in a way that was that was a good thing because it was, you know, you’re taking your shot, you got really no safety net. Mhm. I relate so much, you know, I think the age that you started as well, right, there’s not as many obligations, you know, maybe you have some peers, you’re like, oh they’re doing this, they’re doing that.

Um but it sounds like frugality at that time was a key value just to, you know, increase, you know, your run rate, how how long you can go. Um And and yeah, I love what you said, it’s just at the start, it’s just a lot about figuring things out, getting to critical mass. Um and as they say with entrepreneurs, a lot of us, you know, we don’t come from a background of business. Um but with entrepreneurs, hey, if you’re jumping out an airplane there, they’re building the the parachute on the way on the way down.

So I think a lot of us relate, I relate very closely to your story. Yeah, so I, you know, that’s a while, that’s a while ago, but the thing that really sticks with me is how, you know, that idea of passion and compulsion that um having to do it, it gives you that sort of you want to call it courage to take the leap because again, I can see how anybody on the precipice is like okay, ready? Are we ready to jump off? You know, take a deep breath.

But I was more like I have to do this, you know, just the way I’m wired, I think. Mhm. Agreed. Yeah. And that’s that’s a beautiful thing that that seed was planted in you early to, you know, think about, hey this is this is a path um you know, to take in life. Um It might be a bit more risky, but hey, it’s potentially a better path control of my own destiny. Um And so I guess from that. Um So you’ve been, you know, working in the field for over 40 years with different entrepreneurs, helping them yes.

With their finances, their taxes, but really also from what we talked about in the past, like it’s it’s much it’s much bigger than that. And so I was wondering if you could speak to the holistic approach that you take and your firm takes when you’re working with clients, like what you know, what does that look like and how there’s lots of pieces that are moving right earlier, we talked about the professional, the personal goals, the short and the long term. How how did I guess how do we begin to think about the holistic approach?

Okay, well I think that as I mentioned before, I was observing what you know, was going on between uh the owner of the army navy store and his C. P. A. And following away in my head and I said, you know, uh, his name was Howie, the owner, Howie really relies on, I think I would like to be part of a relationship like that, you know? Um, so when I started my own practice, I would meet people and when I worked with, listen, I’m 26 years old, my first clients were, as I always say gas stations and pizza powers and people would say, oh well, you know, what does that mean?

How, how much help do they need? You know what? They could use a lot of help because the guy who’s running a gas station, he’s fixing cars and pumping gas. What does he know about taxes? What does he know about cash flow? What does he know about profit and losses? So I would go out on site every month to the gas stations and the funniest side is some of them where I had to work, they didn’t have heat. So in the winter they put a, When I was electric heaters by the table so my feet were burning and my, you know above the waist, I was freezing.

So I remember those days, so I don’t take for granted today when I’m sitting in a place that’s 70°, I think that’s a wonderful thing because I was in all kinds of different environments and, but I would be on site every month and I would talk to them about these things. I’d say. You know, listen a gas station, they live on volume, but they also live on what they call pool margin, which is essentially the gross profit on the gas. So we would have discussions about that. We have discussions about on the repair base, you know, what’s the efficiency, if you’re able to build out certain amount per hour for a mechanic, what’s our realization rate?

And they were very receptive to having those conversations and what happened from there was, they told their friends about it so early on, A big part of my practice was gas stations, transmission shops, auto body shops because that’s how it happened. They all told their friends. But the, but the idea was that I really engaged with them and when you, when you do that and you see sometimes the light bulb go on and you see them take action and then you see the numbers reflect it. What I’ll say is that’s kind of what gets me up in the morning.

It’s not, you know, filling out 1040s. And by the way back then, as you might guess all the way back then we were doing by hand. But you know, that said the 303s, you know, were integral part of what we did. But that’s really not what got me up in the morning. What the exciting part related to tax was the planning where, you know, we were doing some tax planning during the year and by the time I was doing the return, we all knew what the tax return was going to say.

So, you know, that’s kind of early on the methodology, the mindset, how it started and you know it is, can’t believe that it’s 40 years later, but you know, the mindset for me is really the same as, you know, the clients might have changed. A lot of my clients are, You know, maybe they have 50 people in their software companies and distributorships, but the mindset for me is the same and that mindset really resonates and the reason I say that is The firm is about 30 people now and it’s not because I was out there actively marketing, I didn’t do any marketing, it was all word of mouth and that’s what I mean by that, it resonates and I always say what we do and how we do, it may not be for everybody, but if people want that connectivity that input one couple of times to say, you should not say you’re my accountant, you’re the guy that lets me sleep at night, that’s been said a few times, you know, so that’s the differentiation and that really is the basics around the mindset and the approach of that, Yeah, that’s and that’s a, that’s a huge distinction, it’s not, oh you’re my tax guy, it’s your the guy that helps me sleep at night, that’s a huge thing.

And and the numbers they translate to real world realities, right? You know things are down. It’s it’s our people are we gonna make payroll I mean are we gonna be able to our team afford groceries and things like that or you know are things great? Um The P. And L. Is the result of human behavior. So when we look at what the numbers say, it’s like what’s the story behind those numbers? What’s causality, causality and human behavior part comes to, you know if if the managers aren’t managing or they’re not managing properly strategically appropriately.

The numbers will reflect it. Um So that if I was looking at a number or a trend in numbers and we see and it can be a positive trend or a negative trend because there’s a negative trend, you want to dig in and look at what do we have to change what’s going on? So you know, you may be looking at something like gross profit. Why is the trend and gross profit negative. But the thing that I love to talk about also, oh gee why is the trend and gross profit positive?

And here’s why that’s important because manager’s managed leaders lead to try things if you have a positive trend. What’s really interesting to me is again, causality because you know what happens in small businesses, we institute some new procedure, we do it for three months and then we forget about it. But if we catch something where there’s a positive trend. Uh We want to understand causality and then institutionalize it in that business and that can be huge. And that’s something most people don’t talk about. So we’re always watching you know, friends and it’s not over the complex.

We just do some basic trend analysis and say, hey how come the last two or three months? This department has really done so well. And then we go and talk to people and say well we did this. So we say, okay from now on you never stop doing that. And then we also want to talk to the other departments about this. So that’s a great uh you know that’s a great strategy in terms of just watch the basic trends and whether the negative trends, look at causality, make the appropriate adjustments, the positive trends institutionalize them and then keep following it long term to make sure it doesn’t go away because I can’t tell you how many times over the years when I saw positive trends and we identified the cause and then everybody forgot about it.

I forgot about that. That’s a trend. Looking at both the positive and negative and that’s that’s a key distinction institutionalizing what what were those boots on the ground activities that resulted in that positive trend in the P. And L. Yeah. And you know what here’s the thing that I like to throw out there. Um anybody who’s in business knows this I think you know what sometimes they don’t know it uh Inherently sometimes I got to tell them, listen, they asked me questions and say, you know I’m just a trucker.

You know what if you’re running a successful business, you’re not just a trucker. Your you’ve got to have a lot of positive attributes. You gotta be smart, you have to have persistence because you know, keeping a small business going for the long term, it ain’t easy. So I’m forever telling clients that are you know contractors, truckers. I work with a lot of so called blue collar type of businesses. I’m always talking to them about man, you really got it now you’re doing great because look at these numbers, look at the consistency, look at the performance.

Um But you know my job is to help them asked some of the right questions, follow some of the kpi key performance indicators and talk about it. And when you do that it can open up a whole new world to a business owner because you think about it, you know, it’s it’s an H. B. I. C. Contractor who’s talking to the owner and or management about those issues. You know when you’re talking about closely held company where it’s the owner uh and maybe there’s two owners. Uh and then there’s a manager or two and then you know 20 guys in the field who’s talking to that business owner and or management about these issues.

That’s kind of where I love to jump in and try to be of value. I’m back. And so another interesting thing is that we are, as of this recording, we have about two weeks until the end of this year. And now I know on my end, you know, I’ve been thinking through like what are some ways to reduce our tax liability for this upcoming year. And I was just curious if you have any advice or maybe some key things to look at for an eight track business owner or someone in the trades who is looking to, you know, save some money, not donate as much to Uncle Sam this year.

You know what, There’s so many things I’d like to just touch on a few. Okay. Some of them, I’m sure a lot of the folks have heard about some of them, maybe not so much, but this is where the close interaction with your professional advisors is important to have these conversations so that you can look at each one of them in some depth, but let’s just, you know, touch on a few. The first one is making sure you have the appropriate retirement plan. I’m working now with a small business, They have two employees only, but they’ve been very profitable for the last few years and we are talking about what’s called the cash balance plan in essence, what that is, is that in some situations cash balance plan makes it possible for, uh, the owners to put away a substantial amount of money in a tax deferred basis multiples of a 401k.

Okay, Now that doesn’t always fit for everybody, but this, this individual, it’s only him and one other person to cover that other person is a relative. So all the money put into this plan goes to family. So instead of putting away $60,000 a year, we’re talking about putting away between 152 100,303 year. Okay. And this is not a big company, this is a company that’s in a groove and has just done very well for the last few years. Um, so that’s, so have the right plan, whether it’s 401k, whether it’s, it is a cash balance plan attached to that, that’s important to understand that and fund and fund that along the way.

By the way, the best way I know to fund retirement plans is throughout the year. Not one shot because not to get too far out into the weeds, but by funding it, you know, monthly or quarterly, you’re doing two things. One is your smoothing cash flow, but the other thing you’re doing is you’re dollar cost averaging into your investments, which that’s a risk management tool. Um, so retirement plan. The other thing is to look at special depreciation rules. I think a lot of people are familiar with that, but you can in essence buy a piece of equipment, I have a client who’s buying $100,000 piece of equipment at year end and and he’s financing it, but we’ll be able to take $100,000 reduction this year under section 1 79.

So buying equipment, a lot of clients, H. V. A. C. Guys, they got a fleet, we make sure that we, you know, updated the fleet that needs to be done before the end of the year because you’re looking at a van. Vans today are ridiculously expensive. I know that we now used to be not that long ago, $35,000 to replace the van. Now if you’re going new wii fit out, it’s $1003,000 but that’s $60,000 can be written off a miracle. Um So that’s something to keep in mind, especially in the H. V. A. C. Industry equipment advance can be written off 100%.

If you buy them in december, you can write off 100% in that year even if you’re financing it. So that’s that’s critical. Um Another thing I want to mention that a lot of people may not be familiar with is the research and development credit. What I can tell you is that generally speaking the R. And D. Credit for H. A. C. Contractors is a slam dunk. Uh and people say wait a minute, I don’t do research and development. But by the I. R. S. Definition if you’re an H. D. A. C. Contractor, you do research and development.

And just briefly to address that if you’re on a job and that job entails a little bit of design. And or even if it was designed by somebody else you get to the job and you’ve got to reconfigure part of it to make the ductwork fit or anything like that. You’re doing research and development. And uh you know my clients that are in H. V. A. C. Anywhere from 10 guys to 50 guys that sort of thing and their credits are between 30 and $80,203 per year. So there’s a lot so any H. V. A. C. Contractor needs to look into research and development credits.

Like I say it’s essentially a slam dunk. Um So that one is that’s one of the ones that many people don’t know about. So I always like to bring that up. So there’s a couple, let’s see. You know the there’s a lot of stuff that I guess I would call deeper stuff that you can do in planning in terms of deferrals and the form that you’re doing business. You know if you are a company of a certain size and you are reporting as an L. L. C. You might want to look at becoming an escort because there’s something called Q. B. I. And Q. B. I. Is what that says is whatever your net income is if you do your accounting right.

Whatever your net income is we’re going to give you 20% of your net income tax free. So that’s something that some people may be taking advantage of. But the key there is not just to let it be random. The key is to do the planning so that you’re maximizing it and sometimes that has to do with your form of business. So that’s just a handful of things to talk about. We could go on a long time. I think hopefully that’s at least some things that people may be familiar with and some that they may not be familiar with of that and just for a few of them.

So um for the R. And D. Tax credit if anyone wants to check it out, we have a previous episode from robert Curtis on the R. And D. Tax credit if you want to do a deeper dive. Um And then maybe one thing to highlight as well for the cash balance plan this um So I think it’s it’s interesting because um I think some people like myself in the past I’ve had a step you know but you’re limited you know depending on from my understanding your limited based off your income and things like that to you know depending on age and things but it can be limited.

Yes but then with the cash balance plan like you said it’s instead of being able to put this small chunk, maybe it’s 2030 40 k, you’re able to put hundreds of thousands of dollars into this retirement plan. And I think that’s a very, you know, the tax savings on that is, is huge. And so I definitely wanted to underscore that if, if it works for someone specific business, the size, if it makes sense, then that that’s potentially huge tax savings, um, for you. The other thing that I’ll just mention in passing for guys who are further along in their career, if they are a business owner or any other business owner, if they’re contemplating sale.

Uh, the one thing that, you know, there’s certainly things to talk about, but the one thing that you need to talk about, even if you’re looking out, you know, two years from now, four years from now, you know, looks like a sail something called an opportunity zone, opportunities on fund. It is an amazing opportunity for tax savings in the event of a sale of a business. So I just wanted to mention that because that doesn’t seem to be out there much. It’s starting to become more well known.

But uh, when I’m bringing it up to people that I meet, most of them are saying, I’ve never heard of that and that is potentially very, very significant. Mm And so this, it sounds like it’s only relevant in the time of business sale. Is there other, I guess some other things to consider because I do know that there’s a number of listeners who have spoken to me about, hey, you know, I’d love to be able to hit, you know, these certain things in my P. And L. And then I’d love to sell.

There’s a lot of private equity companies in the H. V. A. C. Space looking to buy up. And so I think it’s very timely. So how does you know the, I guess the opportunity zone work in case someone was interested? Well, first of all, people are looking to sell, uh, just, you know, there’s a whole methodology to that, that maybe it’s not the time to get into now. But there’s a whole methodology, whole methodology. So, and as far as the opportunities on fund, here’s what happens with that.

I saw my company today. And let’s say, you know, we can pick any round number I sell for a million dollars and say that I have a million dollar capital gain. Well, here’s what happens if I sell that business and I have a million dollar capital gain, I’m going to pay state and federal combined 30 to 40% Probably closer to 30 tax. It’s a long term capital gain on that million. So, you know, $300,000 write that check tomorrow kind of thing. Opportunity Zone fund, you can take some or all and invested into the fund and the fund itself is your investing in real estate, but you’re investing in institutional managed real estate.

So the risk is not as high as you or I went out and just a local, a local building. So, and it’s set up as a mutual fund type of scenario. And here’s what happens if I put that million dollars into the Opportunity Zone fund, I don’t pay any tax for four years in four years, especially. And for the guys who are selling in four years, not only is it great to defer tax for four years, but I very well may be in a lower tax bracket four years.

So that’s a win win, but that’s not the big one. The big win is if you leave the money in the fund for 10 years Projections generally show that your $2013 million $2 million. The real Big Bang is the growth for the 10 years, that $1 million dollars of growth, you get a tax free, that’s the big bang. You know, that’s the big bang. So that’s why people should know about that. And what’s happening now, is that something that I think relatively new and they’re starting to put bells and whistles around it so that they’re doing things like, okay, you go into the opportunity Zone fund, we’re going to refinance the building four years out and give you tax free money out of the fund to pay the taxes.

So they’re starting to, you know, like I say, modify it so that they’re making it, that people again creative with it, I guess you would say so again, if you’re looking to sell, you know, whether it’s two years out, three years out the process of working with, you know, private equity people is great. Like I said, it’s all methodology attached to that. But then once you should be, if you’re seriously looking at that, you should be talking to your financial advisor about an opportunity zone front. If you were talking to them six months or a year ago, they probably would have all looked at you like what’s an opportunity Zone fund by now, Most of them should be starting to get familiar.

I love it. So there’s there’s a few. So just to recap, there’s multiple benefits. You don’t, I mean you still have to pay tax at some point on that initial money that you put in. But strategically you can time maybe I want to be in a lower tax bracket, but also it’s that growth. It’s, you know, tax free growth. You know, if it grows another million that’s in another 2 300,000 that you just saved right there. So, so here’s, you know, very, very basic math. Let’s say you don’t do the opportunity zone fund and day one, you pay $300,000 in tax and then you have the growth and then you pay another 300,40 and tax on the growth. Okay.

So you’re paying 600,000 and tax. What happens is You pay nothing for four years. So you can invest that money and make money on that for four years. You know, whereas you would have paid 300,230 tax, you got 230,230 more invested And then four years from now you pay, Let’s call it 2100,220, not 2201,14553 because you’re in a lower tax bracket, which you may or may not be, but usually the highest bracket you’re in is the year yourself. Um Okay, so you’re paying 21455 instead of 22022 then on the growth you’re paying zero.

So you’re paying 22023,000 instead of three plus three or 600,000. So 200 versus 600, you know, that’s some very basic math because there’s other little things that go into it, but I think that captures it well enough so that you can’t afford not to at least take a look at it. Yes, that’s three times three times the savings. It’s amazing. I’m sure a lot of people be excited to hear about that. Um for those who are unfamiliar. Um Great. So with that, I also wanted to talk through, I know you mentioned to me in a previous call about some success stories of different business owners that you worked with and I was wondering if you could talk through like maybe some of those examples or case studies of folks where you have this more holistic approach to their finances versus hey I’m just gonna complete, you know, their their tax forms which is you know a number of other, you know firms that might be out there. Okay.

I like to talk about two different Cases. one is a client that I’m working with for less than a year, about 15 or 201455 people in the company and one is a client I’ve been working with for about 30 years. There are up to 50 or 60 people I think at this point. So the client that H. A. C. Contract they’ve been working with for less than a year and is non union, primarily commercial, non union. And when I started working with the person, the owners, you know relatively new to it um did not was not a technical person.

Ah And so were we walked in and you know the essence was they were on quickbooks like many people just using quickbooks to pay their bills and you know, I think the the idea was that overall there was really no guidance in any way. So she was just trying her best to learn her way in. And so when I met with her, we looked and you know, we talked about things like well you know how are you managing your jobs? How do you hold people accountable? And I got that kind of sort of smile back like funny you should ask really don’t know.

Um So we started just talking about basic job costing and holding people accountable about the concept that you know what when you have a job there’s a couple of things that go into it. One is the estimator has to know what he or she is doing and then second and who’s ever managing the job has to you know actively managed to bring the job in you know on budget etcetera. So uh so anyone job has at least those two components. Right? And but how do we know how do we know how we’re doing?

So what we started doing is now we’re looking at jobs and we’re doing job costing in a way where it’s not super sophisticated at this point because we wanted to just introduce the concept and I wanted the owner to see the value first before we make any kind of investment. And what she has said to me is this changed my life and we’re now meeting with uh once a month with the management team and just going over these things and we’ve already seen a little bit of some, it’s early, it’s only a couple of months into the process but we’ve already seen movement and profitability already seen it.

Um So that’s an example and then you know once we have those kind of conversations and usually clients are saying to me what else what else what else? So you know we talk about um doing things in a tax advantaged way. So, I introduced the R. And D. Credit. You know, that came in um other tax advantaged things. You know, retirement plans ways to while we’re holding the staff accountable were also motivating them. You know, because I believe that in business, that relationship, I always called it a two way street.

And I told people who worked for me that um, I am gonna expect a lot of you if you want to work here. The bar is high, but you can expect a lot from me because I’m going to spend most of my life thinking about the quality of your work experience, then you’re gonna go out and the company is gonna do great. So that whole concept we’re introducing and uh and that was a little uncomfortable as it is for most people. It’s almost like, I mean, I really need to hold people accountable.

And and you know, it was in this person’s nature, she wanted to take good care of her people. That’s in her D. N. A. But we talked about how, because sometimes you think you’re doing a great job of taking care of people and they think maybe you’re doing pretty good. But so, you know, the question is why don’t you just ask them? Well sometimes when I suggest that I get, you know, the joy has the ground, you know, it’s that old uh issue around inclusion. You know, I’m a big fan of inclusion because I think most people, when you ask an honest question, I’ll give you an honest answer and that gives everybody an opportunity to have a better quality of life and increase profitability at the same time.

That’s a win win. So that that journey has just started. But I love the energy that I’m getting back from the owner of this business. She’s really, you know, uh, anxious to move ahead and keep going. And uh, you know, it’s it’s kind of like, I’m looking forward to continuing the process because, you know, we’re just starting, you know, she’s relatively young. We’re just starting. And I just, in my head, I see this great upside because she’s passionate about what she does. So, um, so that’s relatively new experience.

One that’s been going on for 30 years. Um, I have to laugh because my relationship with this gentleman goes back 30 years and we’re good buddies and um, great human being uh passionate about his profession, you know, tremendous uh, acumen when it comes to understanding how machines work. You know, he’s just like, you know, he may see this someday. So I have to laugh at him, but he’s off the charts, you know, in terms of how he and his brain neurologically he can see what’s going on inside those machines.

Um, then he started a business because he was so smart at that. And then, but he knows nothing about business. So, as he grew, he got harder and harder to pay the bills because he was not a business guy, he’s a, you know, a mechanical although extremely talented, but you know, when I say mechanic, I mean that in a very positive light, this man ah is unusually able, I guess, I would say. And that’s one of the things that makes it fun when I when I see him, uh people come to him with questions, how do I get this done problems and Just, he doesn’t know, he’ll figure it out.

But then there’s the business side where, you know, the business really went through some tough times and then he hired us. It’s probably about 30 years ago now and we had interesting discussions along the way because I’d say some things to him like, you know, you gotta hold your people accountable. Oh, they’ll do that themselves. Um okay, meanwhile, you know, we start looking at the numbers and why are these jobs so unprofitable when you guys are so talented? Well, part of the reason was because he would say we’re just gonna do this job so well, so incredibly well that our reputation will grow Plus that that’s in his DNA to be that good.

However, the budget doesn’t always allow for, so here’s a guy who’s, you know, got a great business, a great attitude and the prophet was minimal and he was, you know making a living, but the profit minimal. Um and we had this dialogue for years, you know, we just had this dialogue for years and then and every month we would dissect the numbers and after a while things just started moving forward despite the fact that his bias was to always give the client more than they’re paying for because that was who he was.

And I respected that. And I remember having conversations with him like, well that’s your choice and I respect it, but if you’re gonna go that route, the profit will never be what it can be should be or what you want it to be. So, you know, you’ve got a decision to make and that decision didn’t get made overnight. It got made gradually over years. And after a while the business did become pretty profitable. The company has a great reputation. And the next part of it was that, well, now that we see how good we are at this, why don’t we do any marketing of any sort?

You know, we have a couple of sales guys that we just say, okay, you’re the sales guy, see you later do what you’re gonna do, You know, that sort of thing, No accountability, no management. And we would so that was the next conversation that went on for years and about four years ago, the owner said, you know what, I’m not getting any younger, you want to take a shot at growing this thing using because the business did well just because they were so good at what they did, you know?

Alright, So now we jump into sales and marketing, long story short, you know, and I was part of that. First of all, I’m pushing it, you know, I was close enough with them so I could sort of just keep on being obnoxious about it. Um and so I think we pulled the trigger three or four years ago. I want to say in a nutshell, that bottom line, triple. Yes. And now what he always says is I’m really glad that we made that decision. I’m glad he always I’m glad that I listened to you even though you’re not the brightest guy in the world.

And I love telling that story because you know what it’s about great company, great owner, great people in the company. But he had to overcome some of his biases. It happened and we worked together I guess you would say to do that because his bias was and he will tell you this, I just fixed equipment, that’s all, that’s all, that’s all I have to say. I would say, you know, let’s let’s hold people accountable, let’s do this. Let’s you know what the heck with that. I just fix equipment.

All right. And he used different language that I won’t use here. And I was like, okay, but your bottom line will be what your bottom line is gonna be until you make different decisions and you know, and we’re still working together and the company is doing great. And again that’s the type of thing that gets me up in the morning. Yeah you change this man’s life. It’s it’s it sounded like over decades it was a shifting of the internal self image which is your internal self image is such a strong magnet.

You know, it’s hard to you know get over that. So I think it’s a beautiful story of how you coached him over literally decades to and and the fruits are there right? That you said the sales and marketing decision, that’s that’s nothing to scoff at. I think one thing that helps me is that maybe because of the fact that I had it did get a small business and worked for something. I always had the utmost respect for all these guys. I don’t care what their P. And L. Said you know what if you can do this and you can make this work.

And then the fact that you know the H. V. A. C. Guys who are fixing this equipment, working on installing, fixing, maintaining to me that’s a whole that’s a whole nother language that I and I absolutely respect these guys because I couldn’t begin to even have a conversation with them. And once in a while when they were in a meeting somebody will talk about a certain job they’re having a challenge on. I’ll say oh you want me to go out there and take a look, I’ll take some readings, you know, but I really respect these guys, you know, it’s a pleasure to work with of that.

Um and we’re about eight minutes left for the podcast on the hour. So I think I wanted to transition into defining financial freedom and what that means for you and just just jam a bit about financial freedom as well as the topic of mindset. So maybe you start off the first question and then the name of the show is H Vac financial freedom podcast. Um, but first like to you like what does financial freedom if it mean? Um probably my definition is not much different than a lot of people’s, which is to be able to make choices in your life that are if not 100% at least partly independent of the financial result.

Um, so like today, the reason that I keep working even at this late later time in my life, I managed to build that financial freedom, I’m grateful for that. Um but I keep working. It’s a choice. That’s freedom. You know, it’s a choice because I love what I do. So that’s the choice. Um, so that’s kind of my version of it and that’s what I hope for others is that they build their company such that the role that they play in their company is not driven totally by the financial result, which means that they built the company with the right team around them and things like that that to me is you know the financial freedom and whether that means that you build it and sell or you build it and not sell and what I found sometimes people who wanted to build it and sell when we built out, we were building the company sometimes what happens is when you build the right team around you now all of a sudden you have options and it’s kind of like why sell, I just had a new client that came on board and said you know I got ah our family business is now turned over to me and it’s worth a lot of money, you know, and I would like to sell it and then okay and then once we got into looking at it and talking about it and things like that, he changed his mind and said, wow if I build this the way we’re talking about it, I will have the freedom to do what I do and this is a very profitable business, so I’m not so I’m not thinking I want to sell this business anymore and we’re in the process now of bringing in a management team um so that’s sort of a different version of that, so that’s what financial freedom means to me in a nutshell, got it and and financial freedom is a goal that a lot of people have, but even having the skills like you know, you gave the example of someone, you know mechanically amazing skills, but like sometimes there’s mindset things that stop us from getting there and I was wondering could speak to maybe one or two of those things that you know prevent people like to give one quick example.

Um if someone has the money psychology to spend as much as they earn, you know, no matter how much they earn, they will never reach financial freedom. Could you talk to maybe some of those other things you’ve seen over the years and entrepreneurs and individuals that might stop them from getting there and it has to do with their mind. Yeah, I can think of two things right away. One is the idea of I made a deal with a client who was any time he had any extra money.

He went out and bought another bulldozer backhoe anytime there’s any money at all. And to the point where I think we’ve got more backhoes than we need here, but I love, you know, I’m gonna buy the biggest, you know, the bucket is gonna look so what I said after a while getting to know this person was I’ll tell you what you give me X. Number of dollars a month and then go buy all the back what you want And and that number was programmed so that if we just did this every month for the next 20 years, life would be good.

So so that’s that mindset of people keep putting it off and then, you know, well I don’t need to save money because my business is I’ll sell it for retirement, which is, you know, there’s a certain amount of risk associated with that, of course. So I always said yes, I would like your business to be the gravy, We’re gonna build out a portfolio for you over the years so that the business value isn’t what we hoped it to be. We’re still okay. So every month, a certain amount of money goes away.

And, you know, that’s why I brought up the conversation and say, you give me this amount of money every month we put, um, and, you know, have a financial professional financial planner and then go out and buy all back all you want. That’s the deal we made. And that’s what’s happening. The other thing that I noticed from a mindset standpoint is, um, sometimes, uh, guys, um, they don’t look at themselves as successful business owners. You know, sometimes their mindset is one of what do I know, I just, you know, it’s the H V A C O. I know I know about equipment, I don’t know nothing else I know about equipment.

So why should I have such high expectations? Or maybe I do have high expectations, but I’m just not, I’m just not that sure I should, that sort of thing. And I’d love to have that dialogue and we say, well, listen, you know, if you’re passionate about what you do and you and you started this business, you should be patting yourself on the back number one and number two then let’s talk about how we take it to the next level in a way which hopefully is as pain free as possible and I can give you quality of life.

And that’s why all these conversations that I have all the time that’s geared to that. Um so that so that’s what that second part that mindset of. Why should I have such high expectations? And some guys, some do a lot, don’t a lot are just looking to I hope I can make payroll tomorrow, you know, and that’s it and if I can make payroll that’s about all I can expect and I like to sell to the business owner. No you should, you’re passionate, you’re smart, you should maybe expect more than that.

Let’s talk a positive expectation for for the future. It can be a fulfilling prophecy many times, the things that we expect, yep, I love that. Um so awesome. So I think we’re almost at the hour, is there any last advice that you want to share with anyone? And I think also how would people get into contact with you or your firm if they’re interested in learning more about you know developing out their holistic financial plan. Okay, well I listen I again I’m passionate about this, I love talking about it and I will say that even if people are working with their C. P. A. S. And you know sometimes a reluctance to start another conversation but I can tell you is that I’m happy just to talk.

I’d love to just talk kick things around and if we never talk again that’s great, hopefully I can bring some value and a lot of times I’ll learn something so I, you know, this is my passion. So I invite that That outreach and you know, I’m happy to give myself my email address, whatever you think is appropriate. I’m happy to put out there sure whatever you feel would be best to connect. Okay, let me just throw it out there for anybody who might be interested um sell 201 248 1455 and by all means feel free, love, love to talk.

Uh it’s not my email address. M Sharp sharpest H S H A R P E at S K C A N. D. As an N. C. O dot com. Perfect lock that in. Well mitch, I just wanna say thank you so much for your generosity in terms of time as as well as advice and wisdom, especially as this, the timing, you know, as we come to a close with 2022 you know, there’s a lot of things, you know, a lot of us, you know, we weren’t taught a lot of these things having to do with money and tax, savings and planning for the future and you really are doing us a really great service by bringing us awareness to these concepts like the opportunity zone funds, that’s three times the savings as well as you know, shifting our internal self image because a lot of times that’s the magnet that holds us back.

So I just want to say thank you. Um and and I, you know, it’s a fun conversation and this is the stuff that I love talking about, you know, I love digital marketing, but this is really the things that I feel that really moves the world forward. So thank you to all that you do and um all the people that you in fact, okay, thank you so much for the opportunity then for everyone else, you know, thank you for joining us on the show again this show and thank you to our sponsor paulina for um you know, being able for us to have this show.

Um and so with that, thanks so much if we don’t hear from you until the end of this year, have a great new year, happy holidays and um wishing you a fantastic start to 2023. All right, take care everyone, thank you for joining us for the H Vac Financial Freedom podcast. Follow us on Stream Yard Apple podcast, Spotify amazon music and check out our main website www dot H. Vac Financial freedom dot com to find out how you can also achieve financial freedom.

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