U32 – We’re talking about Risk and Examples of How to Identify it
0:04
Hello everyone, this is John Jay. Thanks for joining.
0:07
As I think you see, my notes over there, as to what we’re going to be discussing.
0:10
It may not be the most compelling subject, But I think you’re gonna find it is useful, and it’s the kind of thing I like to share with people with clients that are in similar situations. I’m an entrepreneur, so when I talk to people, I assume they’re going to be doing something like an entrepreneur.
0:25
And so, a lot of the things I share with them, has to do with being effective at managing risk. And I know these are things like I came up with over the years. I’m not an official risk management risk manager. Like you would have in a mid-level type business. Obviously, most of the assets or cash flows that I’ve worked with over the years are for under $5 million annual income. So, just so you know where I’m coming from, but I’m going to share with you a couple concepts.
0:51
And some of you, I’m sure have heard some of these before.
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But I’m just going to, you know, put it all together for the purposes of this video. So, before I do that, I just wanted to mention, if you want to see more content, you can look at … dot com, you can also see videos.
1:07
I do publish some videos once in a while.
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Some short videos on the privacy bite channel on YouTube.
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And the name of that channel is Privacy. Fights just one word, privacy fight. You can also look at the video membership. It’s privacy, fight dot IO.
1:23
My content, all of my content, as much as I can possibly put up there, I’m putting up there right now.
1:28
So, that way, like, it may answer relieve a lot of your concerns as to whether or not if I’m maybe available in the next year or so.
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I intend to be, but a lot of my content is expected to be on this video membership, and may already be there.
1:43
And I’ve got three different levels, for, I think most of our discussion is going to be in the ultimate level, the third level.
1:51
Because we’re, we’re dealing with managing risk going forward, and planning for windfalls, and new cash flow. So, that’s what mostly these calls that I do on Thursday evening are going to be about.
2:02
So anyways, Bear with me, OK. This is going to be about risk.
2:06
And so I’m gonna start with a couple of examples here, And I’m gonna walk through it, And I want that my purpose here is to get you to learn how to identify risk. Because if you, If you want to take $10000 or $10 million, or $100 million, And put it somewhere.
2:20
I want you to just think first, how to identify risk and then a lot of times You can identify risk and make money with it.
2:28
But at the same time, there’s some very simple things and you know, I think my motivation for doing this is because a lot of people have are in situations because they relied upon people who They didn’t even realize we’re not risk.
2:41
Managers like attornies, those people are not risk managers, they’re not even they can even market their own businesses. I mean, these guys are just They bill by the hour. That’s all they know.
2:51
And accountants, you know, they have their role there. I would say a lot of them are experts at accounting. That’s great. We need them.
2:58
But, for the most part, if you’re running a business or managing an asset, there’s a different level of expertise that’s needed and when you need certain trade secret, let’s say information, or you need a way to manage risk, who do you talk to?
3:14
It’s not going to be The financial planner at the bank is not going to be a risk manager.
3:18
It’s going to be someone who’s actually done what you’re about to do. It’s going to be another entrepreneur, It’s going to be another investor.
3:26
So, anyways, If I could, I’ll just start with this case.
3:30
My first example here about how ways to look at risk, at that example I’ve given some of you aware that Jim, who called me, was running a factory, and his attorney told them to get $3 million of litigation insurance. And I know I’ve said this before.
3:46
My first objective in many situations is to set the cleanup, so that he will be able to avoid the costs of litigation. Now, sometimes that’s not avoidable, but that’s my first objective.
3:57
So, in this, in this example, this, this factory owner was being told by his attorney who gets paid by the hour and who gets paid when there is litigation to get litigation insurance. So, you gotta think for a second, OK?
4:10
Sure, The attorney is trying to make it to where he’s definitely gonna get paid, if he goes, If he has to deal with litigation, that would expose the risk of going into litigation, and that’s what the attorney would kind of want to do.
4:23
I’m not saying he’s like, you know, has an evil plan assist or plan of doing that, is just that.
4:28
He just might think, OK, this is what I’m supposed to do, because I’m an attorney, and I just got this insurance. And, therefore, you know, we should go to court, and that is not always a solution. In fact, court is not really a remedy. So what I suggested to him is this first Let’s identify the risk, and we had that conversation. What is the risk?
4:44
What is the risk of being sued because you’re getting insurance against being sued, and all you’re doing really is creating a way to pay for that? So let’s not create a way to pay for that. Instead, let’s create a way not to get sued.
4:57
The first risk he was talking about was the fact that his customer has a propensity to sue his company, not because he’s running a bad company, it’s just that that was the nature of the business. And I don’t even know what the business was. It doesn’t matter.
5:10
And so I said, Well, you know, I asked him, do you what kind of training and policies do you have to interact with your customer? And so we went over that. And so that conclusion was to make sure that you have good, fair, honest policies. You know, refund policies, whatever that is, with the customer and you train your people well, and you reward them for giving good customer service and you, you penalize them for not. And you have your regular discussions about how to interact with customers in a positive way.
5:37
And so just that alone, would, would eliminate a lot of the likelihood of being sued. Let’s just say, I think that was the whole issue of being sued.
5:47
The next thing would be to have a written contract, which he didn’t have.
5:50
And it’s ironic that the attorney who was saying this, you know, Tell me, get litigation insurance.
5:55
Didn’t have, it didn’t propose first to have a well written customer agreement, which is a really great way to avoid being sued.
6:03
So it sounds like the attorney was setting them up to be sued, and I’m gonna show you another example after this one, as to how they just do this. And a lot of times, these attorneys don’t even understand they’re doing it.
6:11
They should, but this is what they’re doing.
6:14
We have a well written contract and so that narrows the types of disputes that you can have.
6:20
OK, it just sets forth what the what the expectations should be. They should be reasonable under the relationship that there’s no transaction going out for.
6:29
Then I said, in addition to have a written contract, let’s make it to where your customer does not have a competing interest with you, so let’s just put that in writing. Let’s just say, we’re going to add a clause in there.
6:39
That says, my customer is going to hold me harmless and indemnify me against all third party claims and I’m going to do the same for him. that way.
6:47
We’re not having an adverse relationship. I’m supposed to be fulfilling his needs, and he’s going to pay me for it, or whatever that deal is going to be.
6:54
And so at least that’s in writing.
6:56
And we’re basically what it says is we’re supposed to work together, OK, The other thing I recommend was having a non binding mediation clause.
7:04
What this means is that if there’s a dispute you, you want to, that, you guys can’t work it out.
7:09
I mean, in the contract, there should be a provision whereby you guys can work it out, and if you can’t, I mean, you’re gonna do that normally anyway. She should have a policy in place for that. But if you can’t work it out, you can bring in a third party. Now, you could spend a lot of money on this if you’re not careful.
7:22
You can, you can bring in, like you can, by default, if you go online and look for a mediation cause and a contract.
7:28
You’re going to, you’re going to be given the standard contracts for the National Arbitration Forum and the American Arbitration Forum.
7:34
And I’m tell you, right now, if you put those in your contracts, those are extremely expensive.
7:39
I’ve had some clients that found themselves in those situations.
7:43
I wouldn’t put them in there, but they found themselves in those situations, and they were paying 20 and $30,000 just to lose. It was crazy.
7:52
And it was, you know, the one example, if the person couldn’t avoid it, but after the fact.
7:59
So there are mediation services that will help you work out a dispute for really just a few hundred dollars, OK. So you want at nine non binding and I believe it should be non binding when it’s business to customer and not business to business. That’s just my opinion.
8:13
If it’s business to business, I don’t see a problem with binding arbitration meeting that once you guys work out a deal with a third party, you can never go to court.
8:23
You can’t work out the merits of the dispute in a court with non binding mediation.
8:28
I believe it’s fair for the consumer, and it’s not prejudicial to the business owner to allow the customer who may not have been able to work out something with the mediator, the mediation process, to then go to the court and work it out.
8:41
So what happens is with a non binding mediation clause, the customer suze you first, the court will have to dismiss the case because you have a written non binding mediation clause because it cannot take jurisdiction because of that.
8:56
But, moreover, now, it’s on your good graces if you want to try to even work something out because you don’t even have an obligation anymore, because that, that customer broke the contract and actually waived his right to mediation. And he waved his right to go to court, so it is very effective. And the reason why I mentioned it this way, because you may find yourself buying an asset now, maybe you don’t want to do it this way.
9:18
Maybe want to, you just want to throw some money over somewhere and trust that the people you throw the money to, or they’re going to make the money that you want and, and everything is gonna work out just fine. And then your money’s going to perform. And this sort of thing I really don’t think that’s a reality. I think Julia Lamm meeting ID pound.
9:38
Sorry about that, Someone.
9:40
Someone had some sort of recording here anyways, so that’s Fairyland to think that someone is going to take your money that you waited so long for, or that you worked for, that you learn how to get you planned for it, and then he’s going to be as responsible as you would be.
9:55
So, I really think it’s, it’s just part of, the right way to do things where you’re going to, to start looking at the particular asset that you’re involved in, and you’re gonna run into these situations. You’re gonna look at these types of risks, and you gotta talk to attorneys, and they’re gonna tell you certain things.
10:09
And I want you to think Question why an attorney would propose such a thing, and I’m gonna get into the example here in a second.
10:17
So we have good customer service policies, we have a written contract.
10:22
We have a non binding Mediation clause, we have a mutual mutual indemnification clauses what it’s called.
10:28
OK, we’ll hold Harmless Clause, we’re working to work together with each other, among other things. I don’t want to get into too much detail.
10:34
And then, so by this time, he was kind of upset.
10:38
I mean, not at me, but he felt like he had been cheated by his attorney even though he didn’t go ahead and buy the policy, So I saved in the policy. I know he didn’t buy the policy, but, um, what I suggested to him was this.
10:49
So we’re, we agreed on this, that he’s running a factory. It has a brand name. It may not be like a McDonald’s $80 billion brand name, but it’s a brand name. Everybody recognized in that market, a lot of people recognize it.
11:01
And he doesn’t want to jeopardize it. And people have this. There’s a stigma with being sued that people think, if you’re being sued, you must have done something wrong and who wants to his business associated with being sued, Right?
11:12
So you want to isolate any of those types of matters, which we’ve effectively done with the contract and everything else. But then, sometimes you might get sued.
11:20
So.
11:22
What we what what he, what I suggested is that if someone were to sue and have no option, but to name his core company and his brand in the court, then whatever happens in that proceeding is going to show up in the court. Who wants all the private e-mail messages, and all the communications and all that, right? Let’s all avoid all that drama. So here’s what we do.
11:41
We just set up a whole new company.
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And it does one thing.
11:46
It provides that brilliant, first class, customer service to the customer makes him happy.
11:53
And if he has a problem with that, if there is a dispute somewhere, that dispute has worked out to that third party company, which is not a brand, it’s isolated from the core company. It doesn’t even handle cash flow.
12:04
It has no money, So, even if a dispute with a customer and the contract is written in the name of that new company, OK, that the second company, that’s away from his core company, even if there is a lawsuit, there’s no money there. There’s no insurance, there doesn’t need to be, OK.
12:20
So, it’s not an incentive for a customer to sue that company in that situation. Really, he just selling a piece of paper.
12:27
And once I told him that, it was, I mean, he already knew what to do.
12:31
I mean, there was nothing It answered the question, because he asked me, Well, then, do I need to have the attorney? And I said, Well, do you want even answer everything? Because I think I know the answer to that. So, it’s not bad to have an attorney.
12:46
But these guys aren’t business owners. A lot of times, they’re not entrepreneurs and they’re not risk managers, but maybe you are.
12:53
So realize who you’re talking to. The attorney is not the boss. He’s not your boss.
12:57
He has his areas of expertise, and just because he has his area of expertise, does not mean you need to lead your activities down that path, But he understands very well, OK. Just because he knows how to sue somebody, doesn’t mean that’s a good way to go.
13:11
So, anyways, that’s how I suggested, that he backed out of that scenario, and, and really, effectively, avoid that situation. Now, here’s a similar example.
13:19
I was talking to him recently, and she said that she had this professional type consulting business, and she had an attorney set up a company. No problem. It costs a little bit more, but that’s OK.
13:28
They’re available for questions, So it’s kinda nice, but the attorney advised her to get a million dollar, professional, insurance policy, to cover any situation, where she would advise her client.
13:40
Now, remember, she’s not selling a product, she’s providing a service, which essentially was a consulting service, and The million dollar policy was that if someone she’s consulting with on a professional basis, is going to sue her company, and then the insurance would cover that, which is, I just have to say, that is really stupid.
13:58
It’s really stupid, OK, first of all, It’s a professional service, So where’s where’s there going to be an injury, what kind of insurance claim can you possibly make, OK, and even then Any risks that you would have you can easily have separated out from your personal risk from your business risk as you guys have heard me explained before and I’m not going to go into too far with that.
14:18
But on the million dollar policy, it’s extremely unlikely that someone’s ever going to make a claim, but here’s what’s interesting about insurance Is that it’s almost like painting a target on your back because if you have insurance, I mean that’s one of the first things attorneys. Look for an opposing attorney’s, gonna look to see if there’s a payday. And one sure way to tell that is if you have insurance.
14:38
So if you have insurance, that’s just an invitation to get sued.
14:41
And so I suggested a similar, you know, re-organization, even not a re-organization.
14:46
And really all I say I always suggest that she do is have have a contract with her client where there’s specific terms and expectations outlined in the contract and limitations. And also, I mean, I gave her the idea of the non binding mediation and all that stuff. But, just the fact that she has a written contract where before she didn’t, I mean, she had a life, she had not like ****, an insurance policy.
15:10
Because the attorney said to get one, but he never said, Right up terms with your customer, that’s similar to other businesses in this industry. Never did that.
15:20
So I said, Just at least do that much, and you can decide, you know, after this conversation, if you want that million dollar policy.
15:25
And by the way, I mean, he started that business out for He did at the company.
15:30
He registered it, He got he got ready to buy the insurance, but for several years, she had no cash flow in the business.
15:37
So what she insuring against her house like if someone sues her and and wants to attach your house, or that just takes one piece of paper to eliminate that risk.
15:46
So, you know, just think the step through, identify the risk, and look for alternatives, other than what people who are not, risk managers will tell you, I’m not a risk manager, and I’m not, I’m a risk manager, but I’m not a professional that is isolated from a situation where I would have to be a risk manager. So I’m a risk manager, because I take my money or other people’s money, and I get into projects. Hopefully, we make money, and I have to, I have to really make sure that I understand what risk I’m getting to. I, sometimes, I screwed up, but I’m not going to take some attorneys advice, just because he’s an attorney. That tells me, I need to buy insurance to manage your risk, which I can manage with pen and paper, and common sense.
16:30
So, you’re gonna get into some assets there like that. You’re gonna wanna buy some assets, You’re going to take your windfall and re-invest it somewhere else. It’s going to be like that.
16:39
Yeah, so that, I think that was a good example. Now.
16:41
Then I want to get into something which I don’t talk too much about, because not many of us have this experience, but you may you may end up in this, So I was talking with a gentleman who he developed a proprietary method of eliminating pests, like rats, for example, From large buildings.
16:57
This sounds really unusual, but it was just a gentlemen I was talking to, and he spent 35 years developing this business, and it became so valuable.
17:05
In fact, there was no technology that existed at the time he made his first contract.
17:13
And the contract was offered to him out of desperation, because no one could solve the problem. And he just said, Yeah, I’ll do it, and he didn’t even know how he was going to do it, so he figured it out.
17:22
So he did this repeatedly for 35 years, and he got to a point where we had this conversation and he was retiring, and he wanted to benefit from all this knowledge, and whatever, this business, anyone to sell it. And the problem This is a good problem to have, is he didn’t know how much to sell it for.
17:39
And what was interesting is some of the viable purchasers were saying to him, just tell me how much you want.
17:46
They were giving him a blank check, just right on the check. And I and you. It’s yours. I just want your business, OK, so they said, that is awesome. Right. That’s fantastic.
17:54
And I don’t know exactly how we can address that, but, but let me explain something to you, just described to me, all the proprietary information.
18:03
All of this, all these trade secrets you had to develop yet, or you invent from scratch. that you use to solve problems. And then you use to make millions of dollars, and you still have it, and nobody knows about it, and why?
18:13
Because you never described it, and you never maybe manufactured it and sold it to third parties, you just used it internally, so you have inventions that have extreme value, beyond the value of your company, on the books, that’s not even in, in the value there. That’s not even that. I look at like this. If I’m buying a company, if I were gonna buy that company. That’s the first thing I would look for is the intellectual capital.
18:39
OK, so this has to do with risk is identifying, intellectual capital and things you’re buying now.
18:46
Selling and buying are two different things.
18:47
So if I’m buying, I really kind of don’t want the seller, this may sound cool, but I don’t want to sell it or realize that. he has this valuable valuable information.
18:56
He may have a clue as we’re talking, But I want him to commit to a price before I started evaluating all this stuff and there’s a way to get that information so this guy knew it, and he knew it even better when I explained the type of value they could have, and here’s a suggestion I made to him.
19:11
Now this is more like business structuring, I mean, maybe you want to call it some form of risk management, but what I suggested is that he go through and and try to collect all the procedures and policies that people he’s trained over the years and the materials and try to categorize all these things.
19:27
He’s used these tools that he developed, um, document them, OK?
19:35
Because he could, once he, once you’re able to describe something and you can claim the intellectual property rights over it, you can then license out the use of the thing.
19:46
So not only could he sell his business, but then he can license out the use of elbows implements he created to the new buyer.
19:53
So, there’s that aspect of it, but the other aspect of it, is, you’ve got all this value that’s floating around over there, and people’s minds. And who knows?
20:01
I mean, if you don’t protect it, some guy might, some guy, an employee might see what you did, and think it’s very clever, and then take that idea, and go home and make it something for something for his private use. And then other people might see it. And then he might just, you know, go and start making it for other people.
20:20
And all of a sudden, you have no control over something that was, or it could be worth quite a bit of money, over a long period of time.
20:26
So, one of the things I wanted to mention is, when you’re looking at acquiring assets, these are things you may want to consider is the intellectual capital and whether or not it’s been properly documented.
20:38
Now, there’s things called, there’s information that’s confidential.
20:42
There’s things called electronic, um, store electronically stored information, Confidential information. This is communications like e-mail or any type of written communication. This is any documents.
20:56
This also includes Sales records, because Sales records have a lot of demographic information about your niche markets.
21:04
So maybe you’re just brilliant about discovering niche markets, so you just got lucky and discovered some markets, and the demographic data is in your payment processor, and you didn’t even know that, OK.
21:14
And so this is just missed value, OK, If you don’t so, and this is another another aspect of, uh, acquiring an asset. If you see that the seller didn’t already appreciate this value.
21:26
You’ve got a lot of value in there that you can, you can acquire for a price that the seller is happening to, to accept.
21:33
When you know you’re getting a smokin deal, that’s even better than he thought.
21:37
So, I mean, really, it’s business, so, just, you know, not like you’re cheating somebody, but just, you know, being pragmatic.
21:44
It’s just it’s just a way to do things.
21:46
So, what you want to do as far as managing risk when it comes to proprietary data, I know kind of a long story, but you want to label it as proprietary. In fact, you can be **** about this, sorry, to use that term. But you can get a stamp and train your people, and just when you have legal documents, or documents that describe something. I mean, they can sit there all day with a stamp and literally stamp, stamp, stamp, a proprietary proprietary proprietary.
22:09
I, like you would see in the movies, top secret, OK, it’s proprietary.
22:13
You claim it.
22:14
You should also have a log of all proprietary data.
22:18
So you’ll have an implement a thing you did or a process which is maybe grounds for utility patent, or a patent on up on an item and implement, OK.
22:28
I’m not saying you should patent something.
22:32
Sometimes you don’t want to.
22:33
I’m just saying you should document things that are unique, and possibly proprietary, and a trade secret, unique to your business, and not in the public domain.
22:44
That is the important distinction, OK.
22:47
So, if something is not in the public domain, it can become a trade secret, and it can be worth a lot of money.
22:54
So, you want to label it.
22:56
You want to describe it. You want to have it in your policies as to how it is to be treated.
23:00
You want to limit access to the thing, like only certain people with certain types of employment level can access it, and you also should have a privilege log.
23:09
in case you’re involved in litigation. Sometimes you get involved in litigation.
23:13
Maybe one of the employees wants to make an intellectual property claim over something, he helped the company invent and most employment agreements preclude employees from retaining any intellectual property rights. It’s cruel, but that’s just the way it goes. So if you document the fact that a thing was proprietary, it makes it almost impossible for someone later on to grab it.
23:33
So that’s the idea.
23:35
So you got confidential information electronically stored information, or they call it ESI.
23:41
There’s trade secrets.
23:43
Sometimes it’s patented. Sometimes it’s not, OK. That’s another plan. I don’t wanna get too far into that.
23:50
When you’re discussing things with, OK, all employees should have a non disclosure non-compete agreement.
23:55
Anybody who’s going to get access to this type of knowledge, should have to sign a non-compete, non disclosure.
24:01
And sometimes I will have a client want my opinion on something that he is doing and I will I will give him a non-compete non disclosure and explain about that, because I don’t even there’s something of benefit to the person giving me the information so that I can answer his questions. And we can discuss a thing and maybe solve a problem, but there’s something in it for me to give that agreement because, now, I’m not on the hook. If anyone were to subpoena me in court, I can say, Look, guys, I’m under, I’m under non-compete agreement with a $6 million penalty, I can’t tell you anything.
24:31
So that protects me as well, even though it’s not my intellectual property.
24:35
So, you have undocumented trade secrets.
24:39
They should be documented, discover what they are. Intellectual property, intellectual capital is what you’ll find, it’s being used in the industry. And then customer demographics, which I did allude to earlier.
24:51
So two major, two major topics there.
24:56
OK, I’m gonna get into, We did mentioned costs of litigation. So that was, this kind of relates to that first example when we get into costs litigation.
25:05
So I’m always looking at the possibility of my client being sued, and I want to eliminate that, if I can.
25:12
Well, I want to make it to where, if he is sued, it’s of no consequence to him. And then there will be some times where you just have to deal with the courts.
25:18
And you have to deal with public scrutiny and things like that.
25:20
So one of the things you can do, and let’s go back up to the non disclosure agreement in a non disclosure agreement and a non-compete or confidentiality agreement, as they’re called a confidentiality agreement.
25:32
If you have to sue to enforce the agreement, if it’s not written properly, you will have to use litigation to establish the value of the information, or the proprietary information that was disclosed, whatever that was.
25:46
And that could be expensive. I’ll tell you it.
25:50
That type of discovery can cost $100,000, OK. Just to, just to establish the value of what it was that was supposed to be confidential. So, a consideration that would recommend, and you can actually have an attorney do this, where you can actually have an attorney write this up. Some of them are pretty good at this stuff.
26:06
You want to have a clause that’s known as liquidated damages in a contract and as many contracts as you have that protect a business or an asset in some way.
26:18
If there’s a penalty or if there’s a prohibition on some type of conduct, You want to have clear penalties.
26:25
And you want to have liquidated damages. Here’s why.
26:29
If it goes to court and you want your damages, you don’t want to have to spend lots of money to calculate it, you want it to be on the face of the instrument where the judge says, well, hey, it says it right here, OK, that’s going to save you a lot of money, that is gold right there having a clause for liquidated damages that’s worth a lot.
26:47
I mean, of course, the typical thing about startup costs, I mean, we’re looking at some things right now where we want to, we want to have a way to, to fly without being harassed. We won’t have a way to travel on the ocean.
27:00
And there’s all kinds of technology for that, But the thing that’s kind of daunting is, this is re-inventing the wheel, and it’s not just the wheel, it’s re-inventing.
27:09
No air travel, this is really expensive, So just like anything else, There’s startup costs, which is a risk, and so my, my interest in being an entrepreneur, and I’m not a kind of person that would, um, have raised a lot of capital over the years. Although I have raised small amounts of money.
27:27
I don’t like to raise $10 million if I’m not that kind of entrepreneur. But I will raise $2000 or $20,000, And I will make a million dollars with it, So I’ve done that before.
27:38
But startup costs.
27:40
You can, you can minimize that. Mostly, what I’ve done over the years is bootstrap things. Now what I’ve found is by Bootstrap, that means start from nothing if I do that.
27:49
I find that I don’t really have a robust launch and it doesn’t last the way I want to, I can’t develop it out and I can’t really get a buyer. Like I would want to, you know, I can’t start something for a penny. Now, you can do this, but I haven’t been able to, you can’t start something for a penny, and then in 10 years sell it for $20 million. It can be done.
28:07
I’ve never done that, but I know that if I raise enough capital, if I get the right team on board, um, then I can.
28:14
I can have a more valuable company faster, I think anyways, but startup costs can be managed if you, if you buy established assets So someone’s already done all the ugly legwork, right?
28:25
Someone’s already took, taken all the risk. Someone’s already dealt with all the regulators, all the licensing. Someone’s already dealt with his competitors, OK. He’s already figured out what advertising to do. That’s why I’d just love to buy something, like, for example, if I have a product to sell, but it’s on the Internet. Here’s an example.
28:40
If I ever, if I ever abolish shampoo to sell, well, shampoos saturated market, well, I’m going to go find a competitor would be competitor who’s already doing that.
28:51
And I’m going to find someone who’s interested in selling his retail operation that sells bottles of shampoo and I’m gonna buy it and I’m gonna put my product on there and I’m gonna make it to where it serves my purposes.
29:03
And that would be a way to avoid startup costs.
29:06
There’s still going to be a tiny amount of startup costs, but you’re not re-inventing the wheel.
29:10
So so many people have called me and said, hey, I have this idea for even my own brother.
29:14
I have this idea for a website, and I want to sell this thing.
29:18
And so my responses, you actually have an idea for a thing, not a website. The website is your tool to sell the thing.
29:24
And he says, yeah, OK, fine.
29:26
I’d say, Well, yeah.
29:27
But if you look at it that way, if you think that way, what you’re going to do is incur the cost of setting up a website and re-inventing the wheel, especially if you’ve never done that before. So, why not find somebody who’s done that and go in with them as a partner or buy them out?
29:40
And I think you’re gonna have a less volatile situation.
29:44
And same thing. Another way to do it, like I described, you can do joint ventures.
29:47
So Like maybe you want to you want to promote a thing you’re doing a product or service and go in with somebody who’s got a platform that you can bring in to a revenue sharing type situation, and Launch the thing you’re doing and get the publicity and then build up your type of customer. From his larger niche market, you might have a smaller niche market, and then you, you include that person’s business in with what you’re doing, and that’s a joint venture, and those are temporary don’t have to be, but they, they are most likely temporary. I mean, that’s what I’ve done. Temporary being anywhere from three months to two years, OK.
30:24
So, that way, you’re not the alternative to doing that, a joint venture where I’m marketing a product that I already have.
30:30
The alternative is: I’m Anna.
30:33
Create my advertising and my platform from scratch, and it’s expensive to do that, as you can imagine.
30:41
And then, hopefully, attract the right niche market, and maybe have some trial and error, and hopefully, I didn’t spend too much money on making them too many mistakes.
30:49
But if I look at someone else’s business has already done that, there’s an opportunity to work with a person, right?
30:55
Now, the next thing, which is like the last group here, I want to discuss, I did allude to this earlier.
31:02
Ask yourself, who knows about risk?
31:04
It’s people that have risk, money, things, their reputation, whatever, and succeeded.
31:11
Maybe not the first time. It’s people who have risk, money. It’s entrepreneurs. If you’re an investor or an entrepreneur. Well, other investors and entrepreneurs that have come before you have taken certain types of risks, and those are the types of risks that may not be in an actuarial table somewhere like a bank would have an insurance company.
31:28
There are some risks for which you want insurance, because it’s not worth it to handle the risk yourself, but, um, you still want to talk to other people who have done things, and ask them.
31:39
I mean, sometimes, sometimes, those are trade secrets you’re asking for.
31:44
So be, be prepared to kind of, somehow, I would say, bribe them, but maybe pay for it or offer a special treatment of some kind or some sort of incentive monetary incentive to work with you in a way that doesn’t appear to be creating a competitor. OK. Some people don’t like to create competitors.
32:04
So, I would go to, as far as managing risk, OK, this is my, my thinking, and it’s things I’ve developed over the years. I’m not the only guy in the planet.
32:14
There’s another guy down the street, and I’m gonna point you in a direction here. If you’re asking me, well, who else, John? Who else can we talk to you? that? You know, entrepreneurs, investors, and have, they have access to resources. They have access to funding.
32:28
They have access to bankers and the insurance companies and we can make our determinations and decisions based on that.
32:34
Who can I talk to that’s not needing to sell me something?
32:38
An attorney needs to sell me something.
32:41
Right, so so what I point people to is The Georgia Real Estate Investors Association.
32:52
It’s Giorgia real is what they call it?
32:56
The Georgia Real Estate Investors Association.
33:01
Now this is not just for real estate, it’s entrepreneurs, it’s everybody.
33:06
So get in there, connect with those people, get on there, newsletter’s, free conferences, things like that, you may find that there is some worthwhile material to purchase, but just, I’m just giving you a lead, OK?
33:24
There was one more thing, and I know I’ve probably beaten this one, to death about combining unlike liabilities.
33:31
I’m not going to talk about that, and I’m going to have to end this call, because I feel like I can’t continue talking. I’m losing my voice.
33:38
So, I’m sorry about that, but we’ve talked a lot about combining unlike liabilities.
33:45
We’re not doing that, and how to exclude liabilities.
33:48
I’ll just make a little brief comment, But basically, you already know the idea.
33:52
When you see something that’s worthwhile, whether it’s going to be a business and investment, excuse me. Let’s say it’s going to be some kind of treasure. You’re going to build up, right?
34:02
I want to isolate it in its own islands, so to speak.
34:06
I want, I want to make it into owned by something that is outside of my estate, and maybe I’ll have a partner.
34:13
So in doing that, my partner’s liability won’t attached to it. My liability will not attached to it because of the way that we set these up. Now, of course, we can use a limited liability company, all these things that trust. So, you’ll, you’ll understand that for the most part.
34:27
I just want to make that one little comment there, but in any case, I’m sharing this with you.
34:32
And it’s a little bit comprehensive, because these involve a series of probably, I don’t know, I’d say 12 to 15 different scenarios over the like the last 15 years that I’ve. There are really important situations I work people through, and I’ve discovered this. You know, and how to deal with that. You will have your own situations.
34:50
Don’t think that you’re immune to this stuff when you when you want to get into someone. Let’s give an example. Let’s say you want to buy.
34:57
I say this because my daughter wants to You want to buy a chick fil a OK. Restaurant. So you go to your local chick fil a are you go to your business broker And you you asked the broker to set up a meeting and your proposal to the chick fil a owner or maybe it’s a board of directors that owns it, right?
35:15
Your proposal is I would like to put 30% Into your company 30% of its value. I’m gonna buy. I want to own 30% or maybe I wanna own 12%. I would like to buy into your company now.
35:27
What’s in it for you to sell me, part of your company, liquidity?
35:32
They would do it, don’t think that that’s not, you know, out of the question.
35:36
So, you will be doing things like that, And I am going to bring in some people that actually do that on a larger scale.
35:44
They’re going to talk about how, we set up a limited partnership relationships between your organization, which might be your LLC or your trust, and the core organization that you want to buy into that you want to merge with, OK?
35:58
So, you’re my purpose in explaining all this is so that you have a you’re looking at this type of transaction in the way that I’m describing here, don’t just except some attorney telling you that you have to get this type of insurance. Just because I said so.
36:13
Now, there are some times where you have licensing requirements that require certain type of insurance, and sometimes you can avoid that.
36:21
… case, you get the idea.
36:22
So, I hope this is going to be useful and effective, and that it wasn’t too off topic.
36:28
I mean, really, I’m a risk manager, OK, so it’s not off topic for me.
36:32
I know you guys like to talk about taxes and kryptos, and things like that, and so do I But I just wanted to share this with you, because I think we’re moving into a period where, in the next, like three months, that’s kinda early in my book.
36:43
But three months to a year and a half, you’re going to need a situation where it’s time to spend some money and buy some assets and re-allocate.
36:50
So, anyways, I’m gonna end it for this evening, so I can’t do Q and A I feel like I’m just gonna not be able to talk at about two minutes, so you’ll have a good evening, and I will post this recording as soon as I can get it available.
37:04
Thanks, everyone.