Justin Collier: 0:13

Welcome to the amplified whole health podcast. We're personal and organizational health meet. I'm your host, Justin Collier. And my goal is to bring you insightful interviews with business owners and leaders from a variety of different industries. We'll be talking about employee development. Leadership company culture and quality products and services and how they drive success in business. Thanks for joining me and let's get started. Well welcome, Steve. I appreciate you joining me on the show today. So your name's Steve Sefcheck and you're a CPA and

Steve Sefcik: 0:52

Justin it is great to be here today with you.

Justin Collier: 0:53

Well, thanks. I'm looking forward to this. I think what's interesting, at least from my perspective, as we start to have this conversation around, you know, what does a CPA do? I know, oftentimes I think of a CPA as somebody who's helping with personal taxes, but it goes far beyond that, right?

Steve Sefcik: 1:08

That's right. Yes. Yeah. So

Justin Collier: 1:10

maybe fill us in a little bit on what does that really mean or look like what does a CPA really do outside of personal stuff? Sure.

Steve Sefcik: 1:16

Well, there's all kinds of CPAs in that regard. Okay. People think of a CPA as kind of being this all-knowing individual from a financial standpoint. And that's not really true. If you think about the legal profession you've got, everybody's a lawyer. They're a licensed lawyer and technically, I guess they can practice any kind of law they want, but you've got people who are constitutional lawyers or family, law attorneys. They are a divorce attorneys, third trial attorneys. They are business to attorneys, you know, and they really specialize and focus in, in certain areas because the subject matter is just too great. Well, it's the same thing with CPAs. Okay. You really have people who focus on, auditing for example. Or taxes, taxes. You can have people specialize in business taxes, personal taxes, estate taxes, you know, again, the, the, subject matter is just way too broad for anybody to have, you know, knowledge of, of everything. And the continuing education is such that it's really tough to keep up with stuff. So, Then you get CPAs who like myself, who do a lot of business consulting as well as taxes and accounting. Now, my practice specifically, I don't do auditing for example, because it's really tough for a sole practitioner like myself to do both. Both auditing and tax work and consulting on top of that, it's just way too much to be able to do that. So does that give you an idea of kind of what we're talking about?

Justin Collier: 2:46

Yeah, absolutely.

Steve Sefcik: 2:47

And the other thing that I would say a differentiation, I, I know that you deal with, or this is geared, I think more towards smaller businesses. Okay,

Justin Collier: 2:56

sure. Yeah. Yeah. We talked to a bunch of different size folks, but one of the things I think that is important for us to have the conversation today is, is definitely how does this impact a small business?

Steve Sefcik: 3:05

Yeah. Okay. And the reason I bring that up is because, you know, you've got everything from the big four used to be the big eight and then went the big six. Now it's probably the big four. Okay. I mean, these are multi-national. Firms, broad. Now they can do everything. You do do everything. Okay. But the price tag in court, of course is obviously a lot greater than a small business needs. A small business doesn't need that kind of capability. So smaller businesses are more likely to go to a regional firm or even an individual like myself or small local firms. Okay. Small local firms again are going to have a little bit greater capability, probably because they may do auditing. As well as taxes and the state stuff, but just on a smaller scale. Right. So I think for the smaller businesses, yeah, they're, they're definitely going to be looking at their local CPA in their town.

Justin Collier: 3:58

So let's start maybe with the personal side and then we'll move into the small business as a, as an individual. How do you know when you should be bringing on a CPA?

Steve Sefcik: 4:08

Well, from a personal Oh standpoint, I would say, If you're a business owner. Okay. Soon, okay. Probably you're right up front. Okay. Okay. If you're an individual, you know, you're somebody who is an employee, you're working somewhere, you get a W2, you get some 1099 for investment income, things like that. You know, TurboTax is probably going to work fine for you. You don't need a CPA. Okay. You may have some specialty issues that maybe you're going to do on a one-off. Okay. Or you have a wealthier individuals who, because of their business, their, their investment interests and things like that may need some additional firepower, but I'm thinking if you are, you know, the typical employee, again, you get a W2 and 10 99, I'm not sure you need a CPA to do that.

Justin Collier: 4:57

Sure. Okay.

Steve Sefcik: 4:58

Okay. Now if you're a business owner yeah. Right. part of what I do as well is I will say, you know, my target area now is from a. A pre-startup. Okay. So somebody who's thinking about going into business. Okay. For me up to about 5 million or so. Okay. Okay. In revenue. I have had clients larger than that, but for the most part, that's a good break point for, but

Justin Collier: 5:23

5 million is not a small company.

Steve Sefcik: 5:25

Most of, most of your, listeners are probably well within that range, frankly. Okay. And the reason I do that is, primarily again, this a sole practitioner. Okay. I only have so much time. Available. Yeah. Okay. Larger organizations are going to have greater needs there. They may need, auditing for example, as well as tax. Okay. So the breadth of, of services that they need is going to be greater. Right. So they're going to need to go with a larger firm, for example. so I will work. So your question was, when do you bring one on, if you're a business owner? I would say sooner rather than later. Okay.

Justin Collier: 6:07

And why is that? Like what, what is it. Th that is kind of like the trigger sooner rather than later, but why what's really the driver there? I

Steve Sefcik: 6:16

would say, you know what upfront, you're probably, you know, another professional you're going to want to have in your pocket. There is a as an attorney. All right. Depending upon how you take the entity, you may, you probably want a little bit of legal advice in terms of, of, Of what kind of entity. Now I can advise clients on that as well, but I tell people, Hey, I'm not an attorney. Okay. So if you need specific legal advice, okay. You definitely need to go to an attorney. Okay. but in terms of, for if you're gonna form an entity okay. To, you know, technically people can do it themselves. Actually I have clients that do it themselves. Okay. I would recommend spend a little bit of money to have an attorney do it because they get that. They make sure all the I's are dotted and T's are crossed. Okay. Typically when you. When an individual doesn't themselves, they're doing the absolute minimum filing that they need with the state in order to get in business, to be legal with the business. Okay. That doesn't mean necessarily that they're set up the proper way with their company agreements or the bylaws, things like that. And attorney can add that value upfront,

Justin Collier: 7:30

but I mean, so much of what you're talking about though, as far as like the, you know, having someone help you define and set this stuff up, is it matters, especially when it comes to your taxes. Yeah.

Steve Sefcik: 7:39

And a little bit how you are taxed. Okay. will depend upon, do you have partners? Are you sole practitioner? How big is the business? What kind of business do you have? I mean, you know, there are all kinds of issues that you'd want to sit down and talk to your CPA about. All right. so, so that's one aspect of it, certainly. Okay. the other thing is, depending on the CPA, some of them tend to be. it depends upon their strategy, I suppose, in running their practice as to whether they want someone to already have been in business. And that they are then really focusing say on the tax.

Justin Collier: 8:19

Gotcha. Yeah.

Steve Sefcik: 8:20

Versus the CPA like myself who says, look, I like working with you to help you with your business plan, with your financing plans, helping you through this process. All right. So the sooner I would get involved with somebody, the better. For both of us actually just helps me to understand them better and to guide them better from their standpoint, they have a better understanding of, of how to, how to move it forward. the other thing would be obviously the accounting system. Okay. it depends on. On the kind of business, how, how big it is, what you're doing, how you're structured, getting the accounting system set up upfront, saves a lot of time and effort, you know, for example, for example, me coming in and having to retrofit something that you have, you know, gerrymandered put together and now I have to, you know, undo certain things know. So,

Justin Collier: 9:10

so now. You wouldn't wreck well, or do you, maybe this is better. It's a question, which is, do you recommend someone immediately starts an LLC or a partnership or, or whatever, anytime they're thinking about going into business, at what point should someone form an entity?

Steve Sefcik: 9:29

Good question. Because I, I, I do get that quite a bit. you know, if you, if you have a kind of business that. You know, you've got some major investment coming in, and again, I'm not talking about venture capital, right. That kind of thing. That, that a, that's not my. My marketplace. It is not the marketplace for the vast majority of people listening to your, because it's such a small, small piece of business anyway. Yeah. Okay. People are going to do an IPO or get venture capital. I mean, it is a small, small slice of the business community, but I mean, somebody who is, you know, you've got some family members, you got friends, you know, friends and family. You may even have some. angel investors eventually that get involved. Okay. Okay. So

Justin Collier: 10:19

somebody who's coming in with some capital and significant. Yeah.

Steve Sefcik: 10:23

And they're, I would say, okay, let's sit down. Let's let's, you know, you've got the dough to, you know, move this thing forward in a big way. You've got to a more elaborate business plan, you know, you know, you're not going to do this well, let's set up some of those structures right up front. Right. If you are the individual who is starting out, maybe with a side business, right. You probably don't want to get too technical upfront. You don't necessarily want to get too structured upfront because that does involve, for example, if you're going to set up an S-corporation. Okay. that takes some filing with the IRS, you know, it takes, which is going to cost you some money. you know, the CPA that you sit down with is probably going to charge you to do that kind of work. Okay. plus if you decide, well, I don't want to do this anymore. You have to undo a lot of that stuff. So unless you're really committed to this, to the business and have some staying power, you probably want to start out as a, just a schedule C sole proprietor. Give it a try for a little bit, you know, figure out what you're doing. I say that Do you have to

Justin Collier: 11:28

file specific paperwork. If you're going to do a schedule C sole proprietor.

Steve Sefcik: 11:32

No, not at all that you just, you just decide that you're going to be in business. And maybe we talk a little bit about some of the legal entities first. Okay. So as a, when you're sole proprietor, it's one individual who decides I want to go into business. Okay. This is what I'm going to do. And they just decide to do it. They go out and perform their service.

Justin Collier: 11:51

Yeah. Like you're going to make soap and sell bars and stuff down at the local flea market, flea market or whatever.

Steve Sefcik: 11:56

Right. And a lot of us, most of those people probably are. J ust a sole

Justin Collier: 12:00

proprietor.

Steve Sefcik: 12:00

They file a schedule C with their taxes.

Justin Collier: 12:02

So they're doing their normal tax return. And then they've just got this additional schedule C that they're going to fill out as part of that process. And they don't really need to do anything else.

Steve Sefcik: 12:10

They don't even file with the state. At all. Okay. And keep in mind, all of these entities that we talk about are not at a federal level, they're at a state level. All this is is so the state of Arkansas is different than the state of Texas state of New York. You know, that kind of thing. Now there's an awful lot of similarities, especially when you get to LLC law, that seems to be an awful lot or corporation law, even. There's an awful lot of similarities. So I could, I could probably talk in 80% generalities with most States, but there are, and that's one reason why you have an attorney. Yeah. Okay. Who knows those differences? Yeah. Okay. So that's the sole proprietor,

Justin Collier: 12:47

sorry. I'd like to pause you. How important is that attorney CPA relationship?

Steve Sefcik: 12:53

Actually, I work closely with the attorneys. it depends upon the entity. I happened to be working closely one with one right now, actually on a termination in that the individual has. Decided that that it's time for them to retire. Well, it's time for them to shut down their business. Okay. There are specific steps that, that both the attorney and the CPA need to coordinate on. Okay. In order to bring that to a kind of a successful conclusion. Okay.

Justin Collier: 13:19

It's not, you don't just like wake up on a Monday morning and go, I'm shutting down my business.

Steve Sefcik: 13:23

Yeah.

Justin Collier: 13:24

There's more to it than that.

Steve Sefcik: 13:25

Right. Yeah. And, and, Part of my consulting practice is working with buyers and sellers of business as well. Okay. And one of the things I will say is that do not wake up one day and decide you want to sell your business. This should be a multi-year decision where you're looking down the road, because some of the things, the way you manage the business a while you are. While you're owning and operating. It may be different than when you're selling it and you want to position it for sale. Okay. So you should be thinking about that ahead of time.

Justin Collier: 14:00

There should be an exit strategy.

Steve Sefcik: 14:02

It's definitely exit strategy. I like to tease clients and say, you know, you're going to have an exit strategy or you need an exit strategy because you're going to exit the business one way or another, whether it's horizontally or vertically. Okay. You are going to exit this business. So you're better off thinking about that upfront and having a plan when the time is right. now there is a voluntary exit strategy and then voluntary is we just kind of hinted at okay. which leads to a success and plan succession plan. Okay. And that you should. You know, I have some basics down in, in the event of your death, you know, incapacity, you know, that kind of thing. What am I going to do with this business? How is it going to be dealt with now? You're a sole proprietor making the soap at the, at the, the, Yeah. Flea market market there. Yeah. I mean, that's pretty easy. You just basically take whatever's leftover and yeah. Get rid of it. You know, there's not much else to do. Okay. But if you're a,

Justin Collier: 15:02

so let's move on. Yeah. So we we've talked about a schedule C idea. What's the next?

Steve Sefcik: 15:06

Okay. So the next one would then be you have a partner. Okay. Okay. Two people get together and say, well, let's. Well, let's, you know, form a business here. Let's do this together. Okay. That's going to take a nother area where you're probably wanting an attorney. Okay. Because partnerships can be formed, even if you don't. Intend to form them or think you're forming them. Okay. So you gotta be careful about that. Okay. But it is important to, to then have a company agreement. Okay. Let's say you're willingly coming together. You and I say, let's form this business. what you really need to do is have a company agreement that says. This is how we are going to run this thing. Okay. who's, who's going to be making the management decisions, you know, are we both general partners? Are you a general partner? I'm a limited partner. I mean, you know, those kinds of things. how are distributions going to be made? When are distribution is going to be made? There's there's a whole myriad of. Of of, decisions that need to be, followed in operating the business. Okay. Starting an operating and even terminating it. Okay. So you want me to basically get that in, in, in a written document up front? Okay. So that takes some coordination right now. That's going to be a, I mean, you have a partnership now you have a separate entity, which now has to have a separate tax return. Okay, now you on a federal level. All right. So let's keep in mind that what you've got federal issues to deal with and you've got state issues to deal with. Okay. for me, my practices in Austin, Texas. Okay. You know, Texas has a very. on, from a business standpoint, of course we have no personal income tax. Okay. On a business standpoint, there's a very high threshold of where on a state level, you do need to file tax return, but no taxes do. Okay. So it's, there's some thresholds you have to actually exceed before you actually pay tax. All right. But you still have to file a return. Yeah. and then you've got the federal. Okay. Which of course every state is, you know, people are subjected to, so on a federal level and I'm going to talk primarily from federal level. Okay. Because, this is the state of Arkansas here. So, you know, I, I, I'm not prepared to talk about, you know, Arkansas and Texas and Texas. Yeah. So, so on a federal level, then now you have to file a 10 65, which is a partnership return. Okay. And it's not technically a tax return. Well, it is an information return and the reason is it's what is called a, a flow-through entity. And that, what that means is that the partnership itself does not pay tax any, any, profits, losses, deductions credits, et cetera, flow through to the individual. And they, they get what is called a K one, which lists all the stuff out. And then they ha they integrate that into their 10 40, their personal tax return.

Justin Collier: 18:05

So at this point you're still not filing as like a true business. In this sense, like when I say you're not filing as a true entity, when you think about like a corporation.

Steve Sefcik: 18:15

Yeah.

Justin Collier: 18:15

It's really more at this point, still going on your personal tax return very much like a schedule C. That's correct.

Steve Sefcik: 18:20

Okay. That's correct.

Justin Collier: 18:22

Got it.

Steve Sefcik: 18:22

Now what happens with that? There's a, there's a specific place now you may be as an individual. Let's say you're a silent partner. Okay. Or, you are a. Even if you're a general partner. Okay. you're going to be getting these okay. Those have to be integrated into your 10 40. Now that's becoming a little more, little more difficult. Okay. You may need CPA. help on a personal level. I think

Justin Collier: 18:53

what's really interesting about this is. I think for a lot of people starting a business, there's a big fear element, you know, it's like, okay, I'm going to take this step. I'm going to, you know, leap into something new that I don't necessarily understand. And then on top of just trying to get into business, there's all of these tax implications and everything, you know, legal implications and all the stuff that goes along with it. And that adds this burden of stress. And so it's, I think for many people they get kind of hung up and how am I supposed to do that?

Steve Sefcik: 19:22

And what do I do?

Justin Collier: 19:24

Oh my gosh.

Steve Sefcik: 19:25

I don't know what to do. Yeah. And that's why you need good, professional advisors.

Justin Collier: 19:29

Yeah. I mean, it's just one of those things, like you should just spend the money and get it to help.

Steve Sefcik: 19:33

It's a good investment

Justin Collier: 19:34

if you're going to start a business.

Steve Sefcik: 19:35

Yeah.

Justin Collier: 19:37

you need the help. You cannot go at it

Steve Sefcik: 19:38

You can't do it all yourself. Yeah.

Justin Collier: 19:41

And nor should you.

Steve Sefcik: 19:41

Right.

Justin Collier: 19:42

Because it's like, what do you want to do? Do you want to run your business? Because that's what you're good at. You know, you're good at making the soap. You should be focusing on making the soap, not figuring out tax implications Or you

Steve Sefcik: 19:53

get the hairdresser loves, loves cutting hair. Okay. Well now winds up, you know, opening a studio and having people coming in, they're cutting the hair and there, and the other, you know, the, the owner is now doing the accounting. The PA, you know, any kind of, disbursements, you know, they're taking care of all the business stuff. They're not cutting hair. Well, they don't, they don't, they're not doing what they really like to do. You know? So some of that stuff can be outsourced outside bookkeeper, for example, or a CPA, you know, and that kind of thing. I think founders

Justin Collier: 20:24

find themselves in that situation a lot. Where they end up doing the things in the business that they don't love doing.

Steve Sefcik: 20:31

Right, right. Before we, before we go down that path, let me just quickly finish the tax.

Justin Collier: 20:37

Let's do it.

Steve Sefcik: 20:37

Cause we're kind of halfway into it. Let me just, I'll just quickly talk, talk this through and we can come back to this issue. so you can have, so again, you can set up the general partnership. You don't to have to do anything with the state in general. Okay. However you can have what's called limited partnership where you have a general partner who runs the place, and then you have these limited partners. Okay. I want to think about a partnership by the way is every partner is, is, liable for any debts of the business. Okay. Business gets sued. You borrow money, whatever it is everybody is, is, individually liable as well as collectively. Okay. Okay. So what you can have now, you have to file with the state is what it's called limited partnership, where you can have one or many general partners. And then you have these limited partners who basically are putting in money only. All right. They have no say in management, their liability is limited to their investments.

Justin Collier: 21:36

Got it.

Steve Sefcik: 21:36

Okay. that would also involve the 10 65, by the way, in terms of tax fillings. Okay. So similar to the general partnership. now there is a, a lot of people are heard about an S corporation. Okay. And they think about this as a, as a separate kind of legal entity. Okay. Which isn't technically true. What you've got is you've got your legal structure. Okay, which would be, you know, an LLC, a partnership, a corporation, whatever. And then you elect to have an S corporation, election that you make with the federal government. And it's strict. It's really strictly at the. At the federal level, some States do have kind of the equivalent of an S-corporation. Okay. But that's, that's separate from, from at the federal level. So the S is the election you've made with the federal gov with the IRS to be taxed a certain way. Okay, but you're still, you're still have a separate legal entity. I, for example, am an LLC. I'm a PLLC, which is a professional limited liability company, but I filed an S-corporation. Okay. So you're, if, if, if somebody was to ask, what are you I'm an LLC filing is as an, as an S corporation. that also is a pass through entity, which means the S corporation is not taxed. All right, again, file a, a return and 1120 S right. It's an information return. Looks like it looks and smells like a tax return. The only difference the entity doesn't pay the tax it's, everything is passed through to the individual. And once again, you get a K one, a different kind of K one that goes on your 10 40. Now another level of, of, of potential complication. If somebody got partnerships and S corporations, you know, now you got two different kinds of, of K ones to deal with. And you know, that can get a little complicated because they are, there are differences. the last thing that I'll cover is what we think of is the C corporation. That is a C that is a separate legal entity that does pay tax.

Justin Collier: 23:39

What's an example of a C corporation, just off the top of your head, pick one,

Steve Sefcik: 23:43

Google, Amazon, Microsoft. Okay. One of the advantages here. All right. And that's why most of my clients, I do have them. Okay. But, some of them have come to me as C corporations already is, and they all eventually elect to become S corporations, frankly. So the legal entity is a C corporation with an S status. they are, why did they do it? If you think you, you need additional capital because it's going to be easier for a C corporation to get additional capital than probably a partnership. Certainly a sole proprietor really can't get additional equity capital. They have to borrow. Okay. so, you know, I think, if you, if you ever, if you're positioning the business again, like a technology business, because to maybe target for an, for, a, an IPO or something like that, well, you can a really need to be a C corporation, but again, I think most of your, your people listening to your podcast probably a C corporation doesn't necessarily really need to make sense, you know, So the major drawback there. Okay. Is the whole issue of double taxation. All right. With a C corporation, the corporation actually pays tax, federal taxes. So there, so whatever. whatever they earn on. Okay. They're paying tax the federal government now any dividends that are passed to the individual. Okay. That individual is paying tax on that as well. So those earnings are taxed twice rather than once. Right? So that's why you see the vast majority of entities in this country. Okay. are S corporations outside of sole proprietors. There's a ton of sole proprietors, certainly, but in terms of, of entities, okay. There are filing as S corporations.

Justin Collier: 25:37

Got it.

Steve Sefcik: 25:37

yeah, there was some question whether that would change with the, with the recent, you know, Trump tax changes, but it seems like nothing's changed there. We'll have to see how that shakes out in the future, but

Justin Collier: 25:50

yeah, that makes sense.

Steve Sefcik: 25:53

Oh, so I just wanted to bring,

Justin Collier: 25:54

yeah, no, I appreciate that. I think that's really good perspective for so many people, because there it is. in some ways daunting, I think, trying to figure out, well, what do I need to be and how do I need to be? And

Steve Sefcik: 26:06

Hey, with the T with the tax laws, the way ours is taunting for the CPAs. Yeah.

Justin Collier: 26:11

Yeah. Well, and speaking of, there's a lot of continuing education that you go through. It's like me, it's like, I'm not studying this stuff. I don't understand it. I don't, you know, it's like, I can, I can file my own taxes thanks to turbo tax. And beyond that, Yeah. Yeah. I mean, it gets over my head quick,

Steve Sefcik: 26:25

you know, in the state of Texas, I'm required to do 40 hours a year. And in, in, in, continuing professional education, not all in taxed necessarily. I mean, there's a broad range, but the. The, you know, the purpose of the, of, of the CPE requirement by the Texas state board of accountancy is to keep the CPAs up to date on what's going on. Okay. And you really do that through, through your CPE and there's a ton of options to do that. So,

Justin Collier: 26:56

yeah. Well, so we talked a little bit about these different corporations and we started to kind of go down a rabbit trail.

Steve Sefcik: 27:02

Yeah, go ahead. what

Justin Collier: 27:04

founders are doing, right? This idea that founders, oftentimes I think getting caught up doing things in the business that they don't really enjoy. And they think that that's what they should be doing, you know? So it's like, like you said, the haircut, you like to cut hair. And now all of a sudden you find yourself doing all this paperwork and you know, more running the business than doing the actual thing that it is that you were particularly passionate about. And do you think that that causes, Or prevents companies from, from growing effectively because they get distracted with other things. Or do you feel like maybe they get burned out or, I mean, you've talked to a lot of small businesses. So what challenges do you feel like they run into?

Steve Sefcik: 27:48

You know, I was thinking about this the other day and once again, I think for. Probably your target audience. One thing I would advise smaller companies to be aware of. Okay. There is a difference between a giant multinational corporation and you know, the small, you know, corner guy doing something they're completely different worlds. And now and this small. Small businessman. Okay. Business person should, should not be looking to the larger corporations, seeing what they're doing. Okay. And try and emulate them. And primarily because of resources, they don't have the financial resources or the human resources or the, you know, other organizational resources, technology resources to, to try and match that in any way. Right. They've got to recognize they've, they've got limitations. They have to deal with it. And I think one of the, one of the major problems that I. Encounter with smaller clients. Okay. Is limitation of finances. Okay. Let's face it. They just don't have enough capital. They're probably under-capitalized to start with, frankly. Okay. And then it becomes more difficult for them to borrow. All right. So. So there, and they don't have great profitability. I mean, these are not, they're not the margins of a Google or an Apple or people like that. I mean, you know, some of these people, a lot of small businesses, the owners are making a living at it and that's it. They're not, they're never going to get really, really big what they, what they can have as a profitable. And a very good lifestyle

Justin Collier: 29:36

sure.

Steve Sefcik: 29:37

By having their own business, you know, but so to try and mimic what, you know, to read the newspapers or see these, see, you know, other, other kinds of, of, of avenues, you know, seeing what the big companies are doing, forget it. You're not going to match them. Okay. It doesn't mean you don't have to compete with them sometimes, but you can't match them. You can't go toe to toe. Okay. so, you know, and when I say resources is not just cash, it is. The human resources. i.e. Finding a trained staff, you know, they can do the job, right. That can be difficult. All right. And that can be a real limitation to growth, you know,

Justin Collier: 30:16

would you recommend, you know, the person who who's cutting hair, who started their business because that's what they wanted to do. And now they find themselves doing paperwork and all these other things. Would you generally, if you were to walk in and begin consulting with them, would you typically recommend that they, they figure out a way to do that differently and to get them back into the thing that they were passionate about? Or would you typically recommend no, you've got, you know, keep doing this and, you know, cutting hair is not as important right now.

Steve Sefcik: 30:45

Well, I think that depends, you know, what, that really depends upon the individual. Okay. Part of what I, the role I play, I think with those individuals is kind of. Psychologist, I guess. Yeah. And, and they don't lay down on a couch and talk to me, but you know, it's the same kind of thing. I mean, what do you want to do, do if you want to cut hair and you really like to cut hair then? probably either, either go run your own space and cut hair. Or if you want to have your own business, you know, you can always, you can always, if, again, if you've got resources, you could always hire a manager to do that stuff and you go cut hair. You're still the owner of the business. You're profiting from it, et cetera, et cetera. But you got somebody else doing the work of the general manager and you're cutting hair. Okay. if the PR, if the PR, so, or do you say I really. I like being in the, in the, haircutting business, I don't necessarily cut para. I want to open a studio and then I went open a second one and the third one become, you know, the owner of a bunch of, you know, beauty studio

Justin Collier: 31:55

sure.

Steve Sefcik: 31:55

Or whatever they call it. so, so they've got to figure out what they want to do now, if they want to be the owner. Okay, then that's what they need to focus on. I shouldn't say the owner, the general manager. Okay. If they want to be the general manager of the business, then they need to kind of forget about cutting hair cut. Maybe in part-time kind of a few select clients, something like that, and focus on the business because the business needs. Focus. I've had clients who have failed because of absentee, you know, ownership and management, you know, businesses where we're perhaps marginal to start with. And if you're an absentee owner, you know, it isn't going to fly, you know? so if they've decided they want to be the, you know, the, to be the general manager. Okay. And take this thing forward. Okay. Then they have to look at, I think things like, what are they good at? And what should they do versus what should they outsource? And this kind of hits on what we were talking about before the marginal stuff. Okay. You got employees, I think I only had one client at this point, and I really don't want to take on any other clients who don't use a payroll service that is going to get you in deep with the IRS. If you don't do that correctly.

Justin Collier: 33:15

So you you'd recommend someone who's going to have employees get a payroll service.

Steve Sefcik: 33:19

Absolutely, absolutely. And if they were, if they were my client, I would require it. That's how important it is. I've had clients, in the past where. they have had major tax problems because they haven't properly deposit made their tax deposits and things like that. And they're, they're working through those issues now and they can be a real problem and they catch up with you over the long term.

Justin Collier: 33:41

So it's not day one.

Steve Sefcik: 33:42

It's not day one. It's more like two years from now. By the time the IRS. Reconciles, all this stuff. Okay. It can be one, two, maybe even three years before this stuff has caught up with you. And then it's a real problem. Right? So that's a number one. Okay. And I don't do payroll, for example, I don't, I don't do what I call operational services. Okay. because that is a specialty type thing. Okay. And you need somebody who can, do that on a regular basis. if I was a business owner, I'd have to be asking myself, we want to be able to take time to go on a vacation if I can, or do I have to be here to do payroll, or if I got a payroll service, the payroll is being taken care of. Yeah. Okay. bookkeeping is another one of those things. Okay. Now I do recommend for people starting out businesses. Okay. You know, I'll help them start set up their books and starting to kind of get going on this. A lot of them, I would recommend. probably they're small enough that I can, I would help them upfront. I don't do bookkeeping services, myself. A lot of CPAs do. That's a, that's an important part of their practice. does a lot of independent bookkeepers out there who can, who can do this work. Okay. But I would say with the owner, Do some of the bookkeeping upfront. So you're comfortable with the financial statements, what they, what they mean? How do you use them? The bookkeeping itself? You know, when you have to actually do the bookkeeping, you have a better perspective on what all this stuff means. Okay. But then eventually step out of that. Cause, cause that's, it's certainly not a waste of time. It's something that needs, needs to be done. You just shouldn't be doing it now. Yeah. Yeah. Outsource it. Pay for it. It's relatively cheap. Just like payroll companies are relatively cheap for what you're getting. Okay. Bookkeeping is kind of the same way. All right. Take the burden of data entry and reconciliations, all kind of stuff off your plate. Okay. So you can start to focus on the, develop the business, the strategy of the business, you know, that kind of thing. How important real value adds,

Justin Collier: 35:47

how important is strategy? When you're, when you have these conversations with your customers, do you often find that they have a pretty clear defined strategy? Or is it something that they're still trying to like work through and, and process

Steve Sefcik: 35:59

depends on the client. Depends on the client. Those that have been in business longer term and are a little larger, have better business acumen. They've kind of survived. They've got the battle scars. I know that that's important. Yeah. You know, I think strategy has changed over the years. it used to be, you know, that you would do these big formal strategic documents and, you know, you know, there's always the talk of the Japanese who, you know, would plan out 250 years from now. Well, you know, probably for small business planning out in the next year is probably, you know,

Justin Collier: 36:39

a lot,

Steve Sefcik: 36:40

a lot now. Not that it's not necessary, but that's probably what happens is they're, they're thinking, you know, current and they're trying to get through the next month, let alone, you know? Yeah. But it really is important. You've got to figure out, what direction do you want to go here? Okay. It's like having a compass, you gotta have a compass in some way. All right. I guess if you don't really care where you're going, then you're, you know, you're never lost. You don't need a compass. You just keep going, you know, and that's not necessarily going to get you where you want be. Yeah, I know. so I think it's very important. Okay. How much does it have to be documented? I think some of that is maybe what makes it more of a daunting task for small business people is the actual kind of documenting this thing. And they're, they're not really sure, you know, what to, what to do, but you know, somebody once said and, I thought it was, I thought I had read it was General Eisenhower and how I don't, I forget who exactly it was, but he said, you know, he said, plans are nothing planning is everything. And that's, you know, it's always when the first shot is fired, you know, the, the battle plan goes out the window cause it's all. And that's kind of what businesses, you know, you can sit down pre business. I can talk to you till we're blue in the face to come up with strategies and stuff like that. And then you get in the real world, you know, looking for that first dollar coming in and you know, and everything's out the window because all of a sudden you found a new competitor, you know, you're. People quit on you, whatever. So you're in the thick of bowel right in front, but it's the, one of the value adds that I try to do with my clients is the planning process. And what that means is sitting down and just talking through things. Asking questions. I mean, I come, I'll tell people, you know, you got the answers. I don't necessarily have the answers, especially if it's a specialty type business or something, you know, that, that I'm not particularly familiar. You know, I can't be an expert in everything. Okay. You're the expert in that business. What I can do is help draw out those, you know, draw that out of you by asking questions, kind of like actually educated by educating myself. Okay. I'm helping you to figure out your business. Yeah, because I'll ask us what looks like a stupid question you know. Yeah. Just because I don't know the answer, you know, and they can, based on that answer, I may, I may ask a different question and all of a sudden it gets them thinking about something different, you know, and it's not like I have brought a solution necessarily. I've helped them to find their own solution.

Justin Collier: 39:16

Yeah. I think that's so much about what amplified focuses on is. Is coaching. I mean, that's really what it is. It's asking quality questions to get people to stop and pause and reflect and think because we do this in our personal lives. We, I think we do this in our business lives as well, which is we oftentimes don't stop to ask ourselves. The question. And even if we do ask ourselves the question, we don't always stop to actually process it and ponder it

Steve Sefcik: 39:44

and then execute

Justin Collier: 39:45

it and then execute it. It's oftentimes we kind of, you know, it's like, well, what, what am I going to wear today? I want to wear clothes and that's the end of the thought process and we just kind of stop and we need to dig deeper.

Steve Sefcik: 39:57

Or say, we should do this and go back to autopilot do or done before. Yeah. And some of it is obviously with smaller companies and we're getting back to limited resources. It's like, you're drinking out of a fire hose as they say, you know, I mean, you can, you can plan to do this, but there's so much coming at you that that day I didn't get a chance to do what I wanted to do, what the plan said I should be doing, wanting to do. Yeah. so. You know, it's planning is so important and having, having a certainly a direction as to where you want to be. Okay. And then trying to come up with some, some strategy. And I find I've, I've got some clients that are, again, a little bit larger companies where some very talented people and not really. Really know what they're doing. Yeah. Okay. And others, not so much, you know?

Justin Collier: 40:45

Yeah. They're learning.

Steve Sefcik: 40:46

Yeah.

Justin Collier: 40:47

Figuring it out.

Steve Sefcik: 40:47

Yeah.

Justin Collier: 40:48

But they've taken the leap.

Steve Sefcik: 40:49

They have take the leap

Justin Collier: 40:50

and I think there's something to be said for that.

Steve Sefcik: 40:52

Yeah. And you know, what, I would say there, I would say that. I think if you ask a hundred people, would you like to own your own business? Probably. You know, these are numbers making it. Yeah. Okay. 98, 98 out of a hundred are gonna say, Oh, sure. Yeah. I'd love to. I love to have my own business. and what I would argue is out of that hundred. Probably only again, making up a number. Only six of them should be in business, you know, because the other ones should be employees. Okay. What they want to do is they want to roll out of bed. Okay. And, let me not be, I may not sound so condescending. They want a certain lifestyle and they may be hard workers. They may be, very knowledgeable and good at what they do. Okay. But you know what? They don't want the headaches of being a business because they really don't understand all what happens after the front door closes, you know, and the customers go away all that's required. Or when w when do you think all that bookkeeping gets done? It gets done to Saturdays and Sundays, you know, when does the strategic thinking get done?

It's probably a 2: 41:57

00 AM in the morning when you're awake, trying to figure out, you know, what are you're gonna do the next day? And they, they don't want that kind of, of, hassle plus they're not willing to take the risk. And this comes back to what you were talking about before. W you're starting to talking about what's the risk. Okay. You better be prepared to take risks. In business. Okay. At some point you have to jump, you know, if you're, if, if you want to go into business, okay. Yeah. You can do some part-time stuff and you can kind of, you know, do this maybe as a hobby and things like that. But eventually if you're gonna be successful, successful at this and move forward, you're gonna have to make that jump and take that risk. Okay. so

Justin Collier: 42:37

yeah, at some point you, you just got to pull the trigger and got a, to do it. And so many people. Like you're saying almost aren't really cut out for it. Right. It's a romantic idea.

Steve Sefcik: 42:47

Yes.

Justin Collier: 42:48

Right?

Steve Sefcik: 42:49

Yeah. Oh yeah. Yeah. And I'm going to, Hey, I'm going to make so much money. Okay. B I can do whatever I want. Yeah. You know, and C, I think success. How, how could I not be successful? Look at my business. Look at my business plan.

Justin Collier: 43:03

Right. Well, so that's it. This is an interesting question. Our idea is if you think about as an employee, you know what most of us are going to work 40 hours a week. Let's just say, right. That's kind of the typical. If you're an employee, you're going to work 40 hours a week. Think back to one of your clients. How many hours a week, do you think they work

Steve Sefcik: 43:23

well, I'll tell you what, I've got a client right now that I work quite closely with, more than just a CPA. I'm really, much more, integrated into the company from consulting standpoint. And, I love these people. They are really there. They're probably in their late thirties. Okay. one is very good at marketing. The other is very good at the production aspects. Okay. I have, have been through, some trials and tribulations, you know, but they have worked like crazy. Okay. I, now they are, they're moving into, into a higher growth phase. Okay. Yeah. It's not unusual for them easily to work six days a week. And now for the last couple last month or so because of increased sales and things like that, there were at seven days a week.

Justin Collier: 44:20

How many hours a day?

Steve Sefcik: 44:21

12.

Justin Collier: 44:22

Yeah.

Steve Sefcik: 44:22

I mean, they're putting a lot of effort into this business. They've got a lot of potential. This is not a, it's a, it's a, let's call it a manufacturing business. Okay. And they've done a. A good job of marketing. There the company they're starting to play with with big boys in their, in their industry, you know, but they're working, they're working their butts off. Yeah. But they're good at what they do. I think they love what they do. Yeah. They get tired, but they're, you know,

Justin Collier: 44:56

but they just keep grinding

Steve Sefcik: 44:57

They keep grinding away. I really admire these people. Yeah. They work hard.

Justin Collier: 45:01

Yeah. And so that's, that's an interesting point, which is what do you want your life to look like? Because if you want to work 40 hours a week and then go home on the weekend and play with your kids. Yeah. There's nothing wrong with that. And that's a wonderful thing, but that,

Steve Sefcik: 45:16

and most people probably ought to do that.

Justin Collier: 45:18

Yeah. But then you take another like this coupler or partners or whatever that you're speaking of, you know, they're working seven days a week. And so they've either got to really love it, or there's gotta be a different motivation there.

Steve Sefcik: 45:32

Yeah. And I would say, You know, their motivation is I think is kind of interesting. Obviously they wanna make money. I mean, let's face it if you don't want to be, if you don't wanna make money. Oh, geez. I mean, why, why are you doing Yeah. And, and if you want to be a, if you want to be, someone who provides social goods will then go work for a nonprofit, you know, And I, you know, when I was in business school, you know, we very much focused on which I still do. Sorry. Is. This a stockholder value. I'm not interested necessarily in stakeholder value. Now there's a lot of thinking of businesses as these social entities. Okay. And once again, I think we're talking about a big corporations who have the luxury of, of, being involved at the social level versus smaller. You know, smaller entities. Okay. Who, who probably really just need to focus on making money because it's going to be more difficult for them to, you know, to make money. Okay. so I forgot where I was going with the whole story. This is not usual in my life.

Justin Collier: 46:55

Oh, that's all right. You know, I think that as the end of the day, I think it's really a question of. Of what do you want your life to look like? Where do you see yourself? One year from now, five years from now, 10 years from now. And, and, and also, I think it's important to remember that life is about phases or chapters. And so just because you start off in one place doesn't mean that, that it's where you have to.

Steve Sefcik: 47:20

Oh my gosh, absolutely. Yeah. I mean, Oh, that brings me back to these. These folks besides making money is I think they want to be, players in the industry. They like their industry. They like what they do, actually, the products that they, that they manufacturer are, are, do have kind of a social value. Okay. Certainly it impacts individuals. Yeah, very much so. And it's related to some of some healthcare issue, things. So. I think they feel good about themselves and their business, you know? and they want, they want it to be successful. You know, they're hard workers. They're, they're, they're to good old fashioned Americans. Yeah,

Justin Collier: 48:03

yeah. Put their head down and

Steve Sefcik: 48:05

yeah. And they work hard.

Justin Collier: 48:07

So this is actually now I'm reflecting on a conversation I had with my wife the other day in regards to the greatest generation and. And I, and I wonder to myself if they weren't the greatest generation, because they went to war at a very young age and they were put into a situation where they had to just grind it out every day in a war time scenario. So the men were often in battle and the women were at home taking care of, you know, like building tanks. And I mean, it was like, you know, it was like a huge

Steve Sefcik: 48:40

and don't forget coming off the great depression.

Justin Collier: 48:42

Yeah. And so there's this, you know, it's like, they were really. Working. And so the moment that they got out, they knew what it was like to work and to work long hours and, and to, to really push forward. And I think maybe we've lost some of that.

Steve Sefcik: 48:59

Well, if you want to get philosophical, I can do that. But I, I would agree. I think there is, I think there's a lot of truth to that. Yeah. You know, it was the greatest generation, you know, and, you know, I think, having, being too affluent can be a problem. If things come, there's a term for the affluenza. You've probably heard that term. Okay. You know, entitled, you know, children, for example, who just have a lot of, lot of money. They don't have to work for it. They, you know, have everything handed to them, et cetera. And we are fortunately, thank God. We are a very affluent country. Okay. we've been a very successful country. But to keep that going, it's going to require hard work. Yeah.

Justin Collier: 49:44

Yeah. Well, I think I was listening to a book the other day on audible. I'm not much of a reader. I wish I was, but I finally just don't take the time to do that, but I can listen to a book. So I'm sure that I'm doing that.

Steve Sefcik: 49:55

That's as good as reading.

Justin Collier: 49:55

Yeah. And it's close because I can multitask. I can do something mindless and listen. And so I find, or the book was talking about this idea that wealth often skips. Generations. And it's because of exactly what you're talking about. You're, you know, you're an affluent child. And so you don't develop those habits that made your parents successful. And what made your parents successful was most likely grinding it out.

Steve Sefcik: 50:22

Yeah, well, you know, I've, I, I didn't read the entire report. I've read some excerpts of it. And there was a study that was done. Oh, years back. I want to say it was the federal bank of st. Louis that did this. And the upshot was, it was first generation makes the money, the second generation expands it and a third generation squanders it. Okay. And if you think about it, it's the it's distance from the original yeah. Effort and how much work has to go into making that money. Right. You know, second generation has the, has the advantage of the basis already been built by the first, you know, and that, by that first generation, I'm not necessarily talking about, you know, my parents that greatest generation. Sure. It's it could be a first-generation today. Now, like the clients that I just talked about who are working like crazy, you know, they may build this thing up to a. A good level while their children may inherit it and expand it. And then their great grandchildren might have squatting it's squandered that. So, yeah.

Justin Collier: 51:27

And we're, we're, we're kind of getting to the point where I want to make sure that we wrap up, but how much is purpose going to dictate or drive some of that? Right. So it's like, as the founder, I have a very clear purpose for what it is that we're doing, or at least I hope I have a clear purpose for what it is I'm trying to do. And as you go generations away that purpose. Does it get lost? Can I get lost?

Steve Sefcik: 51:49

It can get lost. And I think that you'll see that happening. again, not an expert in this area. I'd probably be, you know, I have to probably be some academic that studies this, but you could probably take some of the wealthiest families in the country. Okay. names that you would know, right. And, or, or maybe more likely names, you don't know, you know, these. Firms that have been in the hands for generations. Okay. And the children have been bred almost. To inherit that business in and the values associated with that business the purpose. So it's kinda like being, you know, English royalty, right? Those, those folks are, are I think, bred to feel like they are responsible for this nation, you know, and they've got a purpose, you know, and I think in a lot of. Family owned businesses that have been around generation after generation that has, has been bred. And you probably see, you know, there's five kids in the family and, you know, two of them want to go off and become musicians or something two them, want to work in the business, you know, and, but they keep it going because there's a, there's a legacy. There's a, there's a, you know, a heritage associated with that, but a sense of pride associated with that business, you know,

Justin Collier: 53:09

So that's really good. Yeah. Well, as we wrap up, I guess what, you know, maybe it's one thing or a couple of things, would you recommend to the individual that's just starting out? Like if you just kind of had to sum up our conversation today.

Steve Sefcik: 53:24

Hmm. One thing, and this sounds self-serving, but it isn't get some advisors. Okay. Get some professional advisors in technical areas that you don't know about. Okay. And I mentioned two them legal and, and, accounting. Okay. acounting tax. Okay. Another one might be, and this is somewhat related to, probably the legal side, but if you're needing real estate, get out, get a good commercial broker who can help you out getting good, you know, space. and, and some marketing help. Some, some are probably not right out of the gate. Okay, but pretty soon on marketing's extremely important and I'm not, you know, I use the marketing in a broad sense, not just advertising, although that's extremely important. Okay. And selling that's extremely important, but thinking about, you know, what they call the four P's, you know, and, and, and having a good marketing plan. Right. and then, operations, you know, being able to operate the business, you know, in an efficient manner, Yeah. Does that answer that question?

Justin Collier: 54:35

I think it does. That's a really good word. Yeah. Appreciate you taking the time to, to explain that and thanks for coming on the show.

Steve Sefcik: 54:42

I'd love to do it again sometime.

Justin Collier: 54:43

It was a lot of fun. I really appreciate it. Yeah. Thanks.