About the Guest: Kelly Bender Kelly is the President of TBS in Pittsburgh, Pennsylvania, and an accomplished tax professional with a motto of "life untaxed." She is recognized for her proactive approach to tax and accounting services and has significantly expanded her practice through strategic acquisitions. Kelly is an enrolled agent and holds the prestigious role of an instructor for the National Association of Tax Professionals. She has presented at various conferences, including the Taxposium, highlighting her expertise in accounting for family-owned businesses.
Episode Summary:
In this episode of the Teaching Tax Flow podcast, hosts Chris Picciurro and John Tripolsky engage in an enriching discussion with Kelly Bender, a seasoned tax professional, about the life cycle stages of a business. As businesses evolve from the startup phase through growth to transition, Kelly provides substantial insights into tax strategies, operational tips, and planning to ensure financial health and longevity.
During the conversation, Kelly emphasizes the importance of choosing the right entity structure from the outset and how those decisions should align with personal and long-term business goals. Navigating the growth phase, Kelly discusses strategies for operational delegation, particularly outsourcing bookkeeping functions, to allow for efficient scaling. Moreover, she sheds light on transition planning for business owners looking to exit or sell, advising them to start planning years ahead to maximize their business's value and ensure a smooth transition. Tune in for practical business advice that can guide you toward achieving robust financial health and success.
Key Takeaways:
Always begin with choosing the proper entity structure that aligns with your business goals.
In the growth phase, consider outsourcing your bookkeeping to focus on strategic business development.
Transition planning should ideally start five years before you wish to exit, ensuring maximum value and smooth succession.
Effective communication and humility in leadership are crucial, especially when steering family-owned businesses.
Use personalized tax strategies tailored to your situation, incorporating personal and business goals for optimal outcomes.
Notable Quotes:
"The only way we can multiply ourselves is by delegating things that are not where our primary brainpower is used best." – Kelly Bender
"It's better to exit with a plan than to exit by accident." – Kelly Bender
"As soon as you start to feel like you're not giving the bookkeeping enough attention, it's time to let go of the reins." – Kelly Bender.
"The person who's netting $5,000 a year is a very different conversation than the person netting $50,000 a year." – Kelly Bender.
"Simple is really better because you don't even know how to handle that yet." – Kelly Bender.
Demonstrating how different phases of business require varied approaches to tax and operational strategies, this episode is a must-listen for any business owner or aspiring entrepreneur looking for actionable advice. Keep following our podcast for more insightful discussions with industry experts!
Exploring Business Life Cycles and Investment Opportunities
Sports Rivalries and Podcast Guest Dynamics
Proactive Tax Strategies for Family-Owned Businesses
Advice for New Business Owners in Their First 24 Months
The Importance of Proper Entity Structure for Business Success
The Pitfalls of Unnecessary Business Partnerships
Strategic Tax Planning for Business Growth and Sustainability
When to Outsource Bookkeeping and Payroll for Small Businesses
Successful Business Transitions Through Strategic Planning and Humility
Balancing Business Risks and Lighthearted Hockey Rivalries
About the Guest: Kelly Bender Kelly is the President of TBS in Pittsburgh, Pennsylvania, and an accomplished tax professional with a motto of "life untaxed." She is recognized for her proactive approach to tax and accounting services and has significantly expanded her practice through strategic acquisitions. Kelly is an enrolled agent and holds the prestigious role of an instructor for the National Association of Tax Professionals. She has presented at various conferences, including the Taxposium, highlighting her expertise in accounting for family-owned businesses.
Episode Summary:
In this episode of the Teaching Tax Flow podcast, hosts Chris Picciurro and John Tripolsky engage in an enriching discussion with Kelly Bender, a seasoned tax professional, about the life cycle stages of a business. As businesses evolve from the startup phase through growth to transition, Kelly provides substantial insights into tax strategies, operational tips, and planning to ensure financial health and longevity.
During the conversation, Kelly emphasizes the importance of choosing the right entity structure from the outset and how those decisions should align with personal and long-term business goals. Navigating the growth phase, Kelly discusses strategies for operational delegation, particularly outsourcing bookkeeping functions, to allow for efficient scaling. Moreover, she sheds light on transition planning for business owners looking to exit or sell, advising them to start planning years ahead to maximize their business's value and ensure a smooth transition. Tune in for practical business advice that can guide you toward achieving robust financial health and success.
Key Takeaways:
Always begin with choosing the proper entity structure that aligns with your business goals.
In the growth phase, consider outsourcing your bookkeeping to focus on strategic business development.
Transition planning should ideally start five years before you wish to exit, ensuring maximum value and smooth succession.
Effective communication and humility in leadership are crucial, especially when steering family-owned businesses.
Use personalized tax strategies tailored to your situation, incorporating personal and business goals for optimal outcomes.
Notable Quotes:
"The only way we can multiply ourselves is by delegating things that are not where our primary brainpower is used best." – Kelly Bender
"It's better to exit with a plan than to exit by accident." – Kelly Bender
"As soon as you start to feel like you're not giving the bookkeeping enough attention, it's time to let go of the reins." – Kelly Bender.
"The person who's netting $5,000 a year is a very different conversation than the person netting $50,000 a year." – Kelly Bender.
"Simple is really better because you don't even know how to handle that yet." – Kelly Bender.
Demonstrating how different phases of business require varied approaches to tax and operational strategies, this episode is a must-listen for any business owner or aspiring entrepreneur looking for actionable advice. Keep following our podcast for more insightful discussions with industry experts!
(00:14) - Exploring Business Life Cycles and Investment Opportunities
(01:59) - Sports Rivalries and Podcast Guest Dynamics
(03:38) - Proactive Tax Strategies for Family-Owned Businesses
(08:21) - Advice for New Business Owners in Their First 24 Months
(10:12) - The Importance of Proper Entity Structure for Business Success
(12:59) - The Pitfalls of Unnecessary Business Partnerships
(14:47) - Strategic Tax Planning for Business Growth and Sustainability
(19:37) - When to Outsource Bookkeeping and Payroll for Small Businesses
(22:01) - Successful Business Transitions Through Strategic Planning and Humility
(27:22) - Balancing Business Risks and Lighthearted Hockey Rivalries
Creators & Guests
Host
Chris Picciurro
Founder, Teaching Tax Flow
Host
John Tripolsky
VP of Marketing, Teaching Tax Flow
Guest
Kelly Bender
President, TBS
What is Teaching Tax Flow: The Podcast?
Welcome to “Teaching Tax Flow: The Podcast”, the show that’s all about demystifying taxes and helping you keep more of your hard-earned income in your pocket.
Hosted by tax experts from the Teaching Tax Flow team, this unfiltered (but clean) podcast is designed to empower you with the knowledge and tools you need to confidently navigate the world of taxes. We’ll cover everything from understanding tax laws and regulations to maximizing deductions and credits.
In each episode, we’ll break down a specific tax-related topic in a clear and accessible way, providing practical tips and strategies you can use to optimize your tax situation. We’ll also answer listener questions, share the mic with amazing guests, and share real-world examples to help illustrate key concepts.
Whether you’re a freelancer, small business owner, real estate investor, or just looking to understand your taxes better, this podcast is for you. So tune in, take notes, and start building your confidence in taxes today.
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John Tripolsky:
Alright, everybody. Welcome back to the Teaching Tax Flow podcast as I always like to poke fun at or I should say, demand maybe is a better word or just highlight. We know you listen to every one of these shows dating back to number 1. And, yeah, we apologize for about the first 15 or so. They were pretty they were pretty rough.
John Tripolsky:
Literally kinda kinda they were rough around the edges. Let's put it that way. But promise that this topic will not be rough around the edges. We're gonna talk about these life cycles or stages, if you will, of a business. So, obviously, even if you buy a business.
John Tripolsky:
Right? Like, you go out, you purchase one that's been around for a while. You kinda come in fresh ideas. It may be in existence for a bit, but you may treat a little bit like a start up. Every one of them is in a different stage of a business life cycle.
John Tripolsky:
So we're gonna talk about it today. And, you know, I I'll bring the the hair on top of my head to the party, but Chris Pacira will bring the brains for this part of conversation. Chris Pacura,
Chris Picciurro:
how's it going, buddy?
John Tripolsky:
I'm wonderful. How are you? You know, I I have to say this. Right? Because I think you're trying to make my blood pressure boil by letting all these people from Pittsburgh on the podcast.
John Tripolsky:
Not only are they from Pittsburgh. So if anybody's from Pittsburgh, totally fine as long as you're not a Penguins fan. But unfortunately for me, Chris keeps finding these people and bringing them on the podcast. So I'm putting this out there into the ecosphere, whatever we wanna call that. I am bound and determined to find the biggest University of Michigan fans that we have in our network, and I'm gonna bring them on here and not tell Chris.
John Tripolsky:
So it'll happen.
Chris Picciurro:
It may take me well, John, you might be surprised because you might bring someone on that's a in a closet Michigan State Spartan fan for all we know. Well, John, how much look. You know, first of all
Kelly Bender:
Ohio State.
Chris Picciurro:
Oh, the the Ohio State. At least we're keeping it in the big ten. Right? Well, John, I would say this. You realize that almost everyone in Pittsburgh is is a Steeler fan and probably a Penguin fan.
Chris Picciurro:
Yo, Jen, I know you don't flip through the newspaper to the sports section very often. But I don't even know how
John Tripolsky:
to find it. I'm sure it's in there somewhere.
Chris Picciurro:
When we get yeah. Usually get stuck in the funnies and and and then take your, silly putty out and try to try to copy the little squares. Anyway, if you know what we're talking about, then you're old just like me. And on a serious note, we get a ton of questions in the teaching tax law community about businesses. And a lot of times, we're answering these ad hoc questions.
Chris Picciurro:
But, ultimately, depending on what what season your business is in, the answer from a from a professional tax adviser would change. So I am thrilled that we have an amazing special guest this week. We're gonna talk through what her advice would be for businesses in one of the three main stages of their life cycle. That's going to be start up, that's gonna be growth, and then transition. We have Kelly Bender, again, from Pittsburgh, Pennsylvania into John Chagrin, a penguin and Steeler fan.
Chris Picciurro:
And Kelly is the president of TBS, and she also has a, goes by the motto of life life untaxed. She is an awesome wealth of knowledge. I had the pleasure of meeting her. What's we're by the end of 2022. She is very respected in our industry as a tax professional.
Chris Picciurro:
As I said, she's an enrolled agent and, also, a prestigious presenter and instructor for the National Association of Tax Professionals. She she presented at the Taxposium Conference, which is what I call the Super Bowl of for the National Association of Tax Professionals, and we're thrilled to have her here. And she's really an expert in helping closely held because I I don't really like to use the term small businesses, because a lot of these clients that we work with, Cali, are not necessarily small. They're closely held. Welcome, to the Teaching Tax Flow podcast.
Kelly Bender:
Thanks, Chris. Yeah. Yeah. Exactly. I try not to say closely held more, like, family owned because more times than not, that's exactly what these small businesses are is, generally speaking, they're usually family owned in some way, shape, or form.
Kelly Bender:
And if you run a small business, you know that your family, like it or not, usually has to be involved in the process with you. So
Chris Picciurro:
Mhmm. Oh, absolutely. There's no very rare as as an entrepreneur and anyone that is an entrepreneur, there's there's not much separation between church and state really when when you own a business. You're always you're always thinking about it. But tell us a little bit of history.
Chris Picciurro:
Obviously, we know that you're from, the Steel City. And, but tell us about how you found tax and accounting and and how you got to the point of being president of, a really successful tax and accounting practice.
Kelly Bender:
Thanks. Yeah. So I am born and raised from Pittsburgh. I love it here. And, I guess I kind of sometimes call myself an accidental entrepreneur.
Kelly Bender:
I didn't actually think I'd be wanting to be self employed because, an accountant by, you know, education. However, the bug of entrepreneurship has been instilled in me since I was young and eventually just kept migrating into, there's gotta be a better way to build this thing. And early on, one of the things that kind of made me realize I was a little bit different, than your average, accountant, is that one, I don't wear a pocket protector. And 2, I just always sort of had this nature for looking at things, in, like, a really proactive nature and trying to help people stay ahead of the curve instead of always reacting. And, so that's kind of been really my big change is looking at things on a real proactive nature, trying to look ahead, trying to be better educated for people and teach mostly small businesses how to maneuver, the lovely world of taxation.
Kelly Bender:
But also that really, you know, adds in so many other things into their life cycle. So because taxes are just one part, they're obviously like this huge big part of everybody's conversation. But, you know, they are also a byproduct of whether or not we're running a healthy, successful business. And that's kinda how I've focused on growing. And like I said, by accident or whatever, we've been very blessed to be able to do several acquisitions of other accounting firms because as we know, our industry is continually consolidating.
Kelly Bender:
And in that, I've been really focused on acquiring other firms that also do continual ongoing proactive tax and accounting services. And so that's really kind of developed us into what I say is our you know, we're kind of the go to place if you have a small business in, Western PA.
Chris Picciurro:
Well, I think that definitely aligns with teaching tax flow. We you know, one of the three laws of teaching tax flow is that your tax return is a verb and not a noun. We need to look proactively. And I think what you offer, to a to a family owned business or closely held business is real world experience. And you like you just mentioned, you've you've been in that start up phase.
Chris Picciurro:
You've been in that growth growth phase, and and you and I both know, and in our in in our industry, there's a lot of consolidation. There's a lack of transition planning. And when you're in that growth phase, it comes with different challenges, and not all growth is healthy growth. And then I'm sure you've worked with tons of clients, and been involved with transactions personally on clients in that transition phase. So what would you what's your best advice for someone that that you're speaking with or or a group that you're speaking with?
Chris Picciurro:
I know you do a lot of speaking. That's kinda in that first, let's say, 24 months of of, starting a business. And what are some of the things that the best pieces of advice you'd like to give that that type of person?
Kelly Bender:
Yeah. So, I mean, this is basically what I usually refer to as that baby business stage. And so you have this new little person. And if any of you are parents, you can understand that they're like, they're trying to figure out the world. And, a lot of times I caution brand new business owners that we always have to walk before we can run.
Kelly Bender:
And that's really what this first phase is for, you know, small businesses. And like you said earlier, this doesn't necessarily mean that we are just starting a brand new startup from day 1 where we're, you know, going out and having to figure out what it is we're even gonna sell. But sometimes this is just that early part of owning a business, whether you've acquired it or started it from, you know, from scratch. This is that early, learn to walk phase for a small business. So the big things that I always start with here, and this is why this extends beyond just tax, and I know that you guys have talked about this is the first conversation we have to have as entity structure.
Kelly Bender:
And so before we can even talk tax, that's like way down the road, We have to figure out what is it that your personal goals are for this business? What is the I ask very specifically to my new clients, what's your 13510 and absolute crazy hairy goal? Because those conversations give me a little bit of insight into, you know, which path is probably best for that person. And so that's, like, the very first thing that we always talk about is proper entity selection. Make sure that you're properly protected from a legal perspective, and then really just getting those ducks in a row.
Kelly Bender:
So basic things here are gonna include making sure that your bank accounts are actually properly titled in the name of the entity, making sure that the you know, you have operating documents and partnership agreements or all of those kind of things that I've seen because so many times people mess that up. And I know all of us have been in that situation where you get this person that comes to you, you know, in year 6, and they're like, oh, yeah. I do all this for my business. They never had any of this stuff done. So this is really that baby step foundation principle, you know, stage of the small business where you gotta get a good adviser who understands and listens to you so many times.
Kelly Bender:
This is not the time to, like, listen to the talking head on the Internet because your personal goals do matter here. And so if you tell me that you're just doing this for, like, the next 2 years and then you're out, well, I'm gonna choose something very differently than the person who's like, no. I'm starting a business that I will pass through generational wealth for the next 50 years. Like, those are there's just not one size fits all. So it's so important that we talk about proper entity, you know, proper structure and formation before we start, running.
Chris Picciurro:
That's a great point. And I you know, I've just just thought about something that I I do ask people, or prospective clients and clients often what their what their goal is in the next, you know, 3 to 5 years is kinda my really focused window, especially with Tax Cuts and Jobs Act set to expire. But what I like that you just said is that you're asking for 1 year, 3 year, 10 years, and long term, because, also, what it's telling you is if they even thought that far in advance, and maybe they haven't, which tells me that they're putting a lot of energy and are just making sure their operations are functional right now. I know when I started my practice over 22 years ago, I I I couldn't think past maybe 3 to 4 years. That was a stretch for me because I was just in that survival mode.
Chris Picciurro:
You know, just trying to, like, make sure that I've got things set up. What is as far as entity formation, which which is a great way to, great point to bring up, What do you see as the biggest mistake people make? Because I have a strong opinion on that one. But I'm very anxious to hear. I really don't know what your answer's gonna be.
Kelly Bender:
Okay. So I guess my big frustration with mistakes that people make that I think is, you know, well intentioned, but ill advised is often forming unnecessary partnerships. And so so many times, you know, particularly in marriages, we have, you know, taxpayer and spouse come to the table and they're talking about this business endeavor. And I go to we we you know, we're a baby. And so do we need to create this massive conglomerate where we have, you know, general partners, limited partners, you know, moms, friends, nephews, uncle is involved with a 2%.
Kelly Bender:
Like, sometimes we just way overcomplicate this when a single member LLC would have been totally sufficient for you to be able to start selling something. And, you know, again, because taxes and the reporting comp it gets complex as you add people. I just think sometimes, you know, small business owners get way too far and they they create all these multilayered structures. And, I mean, you probably see this particularly with, like, real estate. We have, you know, just all these ridiculous layers of LPs, GPs, and all these.
Kelly Bender:
And, again, those have a place, but for the average person, like, just starting out and dipping their toes in the water, simple. It's it's like what? Keep it keep it simple, stupid. Like, simple is really better because you don't even know how to handle that. And so we need to just usually start simple.
Kelly Bender:
So I'm I'm a very simple person. I like things to stay, you know, simple until you've proven concept that this is something that's gonna have a viability, you know, beyond the 1st 6 months.
Chris Picciurro:
Yeah. That's I I say I think electing s corp's a big a lot of people do that too early in in kinda like you're you're saying how many there's a unfortunately, there's a lot of people that, start the start businesses and and create all these entities, and their compliance costs are more than their sales the 1st year. It's like, oh, man. You know? Yeah.
Chris Picciurro:
Which dovetails into the next so I I love what you're saying on the start ups, on the on the on the growth mode. So you're let's say you've got your feet under yourself. You might not have you an employee yet, but you're you're at least supporting yourself or your family. You've got maybe a product that's that you have a market for. What are the what are the things that you that you're looking for?
Chris Picciurro:
And and, actually, in your private practice, this is what happens with us. Sometimes some a client will come to us in this growth phase, and they maybe have been working with someone or maybe they've even been at DIY, goodness gracious, and they've outgrown that solution, and they're looking for some advice from their tax professional. So what are some of the things you're seeing that that a lot of the the growth companies could use as far as advice?
Kelly Bender:
Yeah. So this is really that that's that next phase. Right? This is like adulthood. So we've grown up a little bit.
Kelly Bender:
Now we're figuring out. We've got our feet under us, and now we say, okay, I'm making usually enough money that it matters and and all money matters. And and, you know, not to negate, I love tiny baby businesses, but, you know, it's a very different conversation for the person who's netting $5,000 a year than the person who's netting $50,000 a year. And so, you know, we've moved into now something that is more sustainable and looking like regular livelihood money. And so now we have a couple things that have to happen.
Kelly Bender:
One is if you hadn't created a solid foundation, we have to go backwards, make sure that all of that's created. But really now is where we start to layer in personalized tax strategies. And, again, all tax strategies that we give to our clients have to align with their personal goals. So you mentioned earlier, like, electing s too early or electing s at all. I just had a conversation with a a gentleman who heard, you know, he's gonna do s or thinks he is.
Kelly Bender:
He comes to me and says, that's what I wanna do. I wanna create a consulting business. I'm gonna go s select. And then he tells me I'm only doing this for the next 18 months. You know?
Kelly Bender:
So, again, it's like the the long term plan, and I so I explained to him what the cost of doing that versus the unwind versus just kinda going forward for 18 months because he's literally 18 months from retirement. So those personal goals and tax strategies now start to matter, and each movement now has really strong impact into, you know, the person the person's personal life because now we're paying taxes that are that are sizable and they matter. And so we really start to layer in, you know, tax strategies as you grow through this. And the this is really that longest phase of the life cycle for most businesses where, you know, you're implementing standard operating procedures. You're putting your structures in place.
Kelly Bender:
You have a little bit of room to breathe. You have a little bit of money to usually play with in the sense of, hey. Do I wanna put it into my own retirement? Do I want to, start to diversify my portfolio? Because my main business that's you know, my driver is earning so much money.
Kelly Bender:
Now I can look at investing in real estate, doing a self rental, things like that. So this is really that that structure where this is that time that you need a strong partner, you know, to walk through. Because each year as your business grows, hopefully, so does your strategies and and start to layer in what makes the most sense for you in the phase that you're in here, in this cycle.
Chris Picciurro:
And in the growth phase, I love what you said there is in in I've just thinking out loud. A lot of times, we taxpayers have to be give themselves a little grace and understand that sometimes you've gotta go back and clean things up. You know, it could be an operating agreement. It could be, oh, man. I bought you know, I I just you you see it.
Chris Picciurro:
Right? There's a little bit of cleanup in the back end that just has to happen so you can move forward, and that's okay. One of the things I wanna ask you before we jump into, into the kind of that transition phase, and this is something specifically for small businesses or or growth minded businesses. At what point do you advise someone to outsource that bookkeeping and payroll function? Right?
Chris Picciurro:
Because, sometimes they do it on their own or their spouse does it or or their aunt or uncle does it. Yeah. What what time is it does it make sense for them to consider outsourcing that? And that's a tough control things for some people too.
Kelly Bender:
It is. So, you know, this is interesting because I always say I actually you know, obviously, we do for this is, like, our under current of our business is that we do outsource bookkeeping and payroll and all of those good things. But I actually recommend in the baby phase that the most small business owners, the the brand new entrepreneur at least tries to do their own bookkeeping even if you mess it up because you have to start to understand at least the high level of how these numbers work. However, at the point where the amount of time and energy that you're spending, I'm
John Tripolsky:
a
Kelly Bender:
huge proponent of, you know, we cannot multiply ourselves. And the only way we can multiply ourselves is by delegating things that is not where our primary brainpower is used best. And so very frequently after maybe the 1st 12 to 24 months of a new business as they start to get a little bit of traction, the business owner says, hey. I'm spending 8 hours on a Saturday catching up on my whole week and and or worse, I'm not doing it for, you know, 3 months at a time, and now there's no ability to pro be proactive. So as soon as you start to feel like you're not giving it the time and attention to stay on top of it is when I say it's time to it's time to let go of the reins.
Kelly Bender:
There are really good ways to keep controls on on your books, but, you know, everybody has to come to that point. And, obviously, I'm an accountant. I don't even do my own books anymore. Like
Chris Picciurro:
Yes.
Kelly Bender:
Have to you have to allow for the people that you surround yourself as you build a business or you'll you'll only be an a solopreneur. And so if you have any growth goals that involve other people, you have to learn how to give control of it's one of the key focuses, and this is this is really when that
Chris Picciurro:
It's basically the equivalent of of you not cutting your own lawn or you not doing your own oil change. Like, some people actually like it, and if and if you do, great. But, you know, but we're I mean, we're both firm owners. I I haven't touched our books in 10 years in in payroll, in 10 years, unless, like, year end adjustments and that sort of stuff, but on a day to day, the bookkeeping function. So so that is an amazing advice for that growth minded, entrepreneur or family owned business.
Chris Picciurro:
Now that 3rd major phase again, there are many phases in between these phases, but, of of transition. And, unfortunately, sometimes transition happens unexpectedly, and there is no plan. And that's what we really wanna avoid. And then sometimes, you know, there are challenges with multigenerational transitions, but there's a beauty and a pride. And I I love working with families in multigenerational transition to ownership.
Chris Picciurro:
So can you tell us kinda what first of all, when do you see most most people that are looking to transition out of their business, are they typically, approached by someone as an initiation point, or is it typically someone that's kinda done and they and they are looking to to get out of the business? Obviously, when you when you're approached by someone, that's the better option. Right? Because you're probably gonna get a better factor or a better price. But what are you saying there, and what are some of the advice you can give to someone that's maybe they're they're kind of afraid for that transition, meaning they they're like, well, I you know, I my books aren't perfect or this, that, and the other thing, and and, I would tell people, hey.
Chris Picciurro:
My books aren't perfect either. Right? That's why we have, month end entries. But, yeah, what are some of the things that that those people can should be thinking about in in working with someone like yourself on?
Kelly Bender:
Yeah. So, you know and you mentioned early, and this is why I talk so much about, you know, the the inner play between your mindset of running a business and the practicality of, like, the function of all these things, particularly with the numbers and books and all that. But in my experience, the most successful transitions from whether it's, you know, parent generation to child generation or just, you know, great sale come from the business owner who has the humility to understand that if the business is something that they love and care for, and monetarily, this will be beneficial to them, that it is better to exit with a plan than to exit by accident. And so usually the most proactive exit happens about 5 years is where the yeah. I think is a good sweet spot to start to think.
Kelly Bender:
Okay. I am this age or I've done this this long. It's not always an age thing here either. I mean, I have a client now that is exiting after 15 years. This has just been a good it's it's it's a heavy intense type of business, and she's ready to exit.
Kelly Bender:
She is nowhere near retirement age, but the time is there for the exit of this particular business. And so usually 5 years before that, if you're starting to put in the headlights, like, I I may wanna make a plan, That's a good time to start to make sure. It's almost like going back to the beginning that your foundation is set strong, that your financials are in a good shape, that your financials are telling the story that you want it to tell. And this is important if you're talking about valuations when you're you know, if you wanna approach potential seller, or a potential buyer, like, I have a great business. Maybe this will fit into your business line.
Kelly Bender:
Well, I would like to present to them the strongest set of financials that I can. So sometimes that takes a year or 2 to make sure that you're not, you know, taking some excessive positions on things or that you've got, you know, your payables and receivables in good line and they're cleaned up and your internals, your inventory is clean. Like, all these different things that we know that doesn't happen overnight. And so it takes a little bit of time to get, you know, to that. And then usually the average transition from, you know, one generation to the next.
Kelly Bender:
The transaction is anywhere from as quick as maybe 3 months, which is super quick. I would say on average 9 to 18 months as far as negotiations, plans, transition, and all of that. And then lastly, if you're the average small business owner that I work with, the best tax outcome for these transitions is often by creating, an installment sale type of transaction where we agree to seller finance. And that then ties you to another 5 years. And that though is the reason that's so positive is that that helps the tax situation for the exiting owner by, you know, kicking that can down the road, giving a little bit of comfort level to them, but also setting up that next generation for success, which is what I love to sort of stand in the middle.
Kelly Bender:
I love when both parties walk away and they're like, I left on a high and I got the most money for my business and I'm taken care of. And the new generation is like, I got a great deal and I have a great seller that I, you know, worked with and and they're set up for the next generation. And that's how we maintain the transition of generational businesses.
Chris Picciurro:
Now that's great advice, and I like that. I love thinking back, you know, surfing you about it 5 years out and, you know, my final comment is this. It just hit me. Like, I think we've all been there driving down the expressway and our tank our, like, vehicle's almost out of gas. And our gas light goes on, and it's now down to 5 miles, 3 miles.
Chris Picciurro:
And you might be in the middle of nowhere, and the next gas station's 6 miles away. And you're just every quarter mile, you're just grabbing the steering wheel. And my point is, don't don't do that with your business. Don't hold on too long. It's nice when you roll in.
Chris Picciurro:
You know you got about 20 miles to spare to the gas station, and you're not even worried you're gonna be stuck on the side of the road. So
Kelly Bender:
Yep.
John Tripolsky:
Chris, I've I've maintained, keep my mouth shut this entire show, but I feel like you were talking about Pittsburgh penguin fans there. You know, they just hold on.
Chris Picciurro:
Oh, goodness.
John Tripolsky:
Fanship too.
Kelly Bender:
Woah. My gosh.
John Tripolsky:
Oh, yeah. I know that was a
Ad Read:
Like a little dig
Kelly Bender:
at the edge? Wait. Well, you know, Kelly, I'm gonna
John Tripolsky:
I figure you I figure you both would be really good at numbers. Right? But, Kelly, obviously, you missed the boat being that the the red wings have won twice as many. Championships as the Penguins, but we'll leave that alone too. It's all good.
John Tripolsky:
We'll let it go. But I well, I'll I promise I'll save the rest of my comments for a later date. I'll I'll refrain from them for and then while I want and they'll watch our team loses this year, then I'll be really upset.
Chris Picciurro:
Like, we should probably run around this one. Sarge, I'll wrap it up and say, Kelly, thank you so much. I know how much you have going on between your business and family and and other passions. We are we are honored to have you, and I know we're gonna be asking you back in the future to we'll badger you again, and I'll make sure John doesn't harass you about about hockey.
John Tripolsky:
Good luck, sir. Good luck. Well, Kelly, thank you. Echo what Chris said. Thank you so much for joining us.
John Tripolsky:
I know this one, we we can absolutely have a much longer conversation on, so we'll definitely Yeah. Definitely have you back for sure. And I promise I'll be nice. I'll try. But alright, everybody.
John Tripolsky:
Well, thank you again for joining us here on the teaching tax flow podcast as we like to wrap it up with. We'll see you back here again, same place, roughly the same time, completely but semi related topic here on the show. Thanks for joining us.
Disclaimer:
The content provided is for educational purposes only. We encourage you to seek personalized investment advice from your financial professional.
Disclaimer:
For all tax and legal advice, please consult your CPA or attorney. Investment advisory services are offered through Cabin Advisors, a registered investment adviser. Securities are offered through Cabin Securities, a registered broker dealer.
