We're talking with Scott Reib from Reib Law, and he is the author of a new book called Seven Strategies of Shatterproof your Business. In this episode, you will found what are the seven different strategies to grow a business exponentially.
As the official Zig Ziglar Small Business Lawyer and a Ziglar Legacy Certified Trainer, it’s no wonder that Scott Reib is known as “America’s Legal Coach.” For the last two decades, Scott has been helping business owners, entrepreneurs, and coaches “shatterproof” their businesses by implementing specific strategies for structure, growth, and protection.
Over the last three years, Scott has been sharing these strategies with business owners and coaches, and watching them grow and succeed!
Narrator: Welcome to Cracking the Cash Flow Code where you'll learn what it takes to create enough cash to fill the four buckets of profit. You'll learn what it takes to have enough cash for a great lifestyle, have enough cash for when emergency strikes, fully fund a growth program, and fund your retirement program. When you do this, you will have a sale‑ready company that will allow you to keep or sell your business. This allows you to do what you want with your business, when you want, in the way you want.
In Cracking the Cash Flow Code, we focus on the four areas of business that let you take your successful business and make it economically and personally sustainable. Your host, Josh Patrick, is going to help us through finding great thought leaders as well as providing insights he's learned through his 40 years of owning, running, planning, and thinking about what it takes to make a successful business sustainable and allow you to be free of cash flow worries.
Josh Patrick: Hey, how are you today? This is Josh Patrick. And you're at Cracking the Cash Flow Code. And my guest today is Scott Reib from Reib Law. And he is the author of a new book called Seven Strategies to Shatterproof Your Business. And I kind of am curious how I can shatterproof my business. So, let's bring Scott on and start the conversation.
Hey, Scott. How are you today?
Scott: Hey, Josh. I'm great. Thanks for having me on the show.
Josh: My pleasure. So, shatterproof my business, that sounds like an interesting idea. So, let's go through the seven strategies and see how far we get today. How's that?
Scott: Sounds awesome.
Josh: Okay. What’s strategy one?
Scott: Yeah. So, the first step in shatter proofing your business, Josh, is that you need to assemble what I call a team of key advisors, right. And those advisors start with a CPA. Every business needs to have a CPA that can advise them on how to know their numbers, right?
Scott: You have to know your numbers. And then make sure that you keep most of your money and not give it all to the government - whether that's Uncle Sam or, if you're in another country, pay taxes, right? That's kind of the first advisor.
The second would be you need to have an insurance broker that can help you protect the business from the known risk. Every business has some known risks that you can insure for.
And the third would be you want to have a banking relationship, a banker. That's someone, a person - it’s not a bank, that you can call. You know, they have on speed dial that if you have a question about your account, that you can call them, and they will call you, and they'll help you set up things like lines of credit. They'll help you make sure that if you needed to write a check today and make a deposit tomorrow, that you have that kind of relationship with the bank. And then--
Josh: Okay. So let me--
Scott: Go ahead.
Josh: Let me just stop you right there because that's a--
Scott: You bet.
Josh: --that's a key thing and most business owners blow this one. I'm a big fan of community banks versus the money center banks. So, if you want to have a relationship with a bank, make sure it's a community bank which is a small bank, where you actually have a relationship with your loan officer, and you're just not a number and/or a credit score. So, that's really good advice. Keep going.
Scott: Yeah. So, the next thing you'd want to do is make sure that you have an attorney, right? It’s not last but, at least, you want to have an attorney. And that means, if you've already got one, you don't have to go find one when something bad happens because it's not if something bad's going to happen in your business, it's when. And you need to have that relationship lined up. And it needs to be something that you can afford and someone you're comfortable with because you need to be very transparent. All right.
And then, the last, but not least, is you need to have a business coach. It's very hard to grow a business exponentially and get where you want to go fast without a guide. And the business coach can be your guide and hold you accountable to the plan of action that you've created with them. Without them, I couldn't be where I am today. I couldn't have broken into six figures and couldn't be on my way to seven if I didn't have excellent business coaches.
Josh: So, let me-- since that’s my world, I want to just step in and add a piece there. In most of the world, there's two types of business coaches. There's the economic business coach who is your accountant, lawyer, business advisor, who helps you with creating an economically sustainable business. And the second type is the personal coach who's going to help you not get burned out. And that's for personal sustainability in the business.
Josh: Typically, people find two of those. If you can find one that does both, you're much better off.
Scott: I would agree. I definitely agree with that. That's not easy to find but if you can find [inaudible 00:04:52]--
Josh: No. There's aren't many of us around. I'm one of the few that can actually do that and have training in both sides of it, but they do exist. It’s probably 1% or 2% of the business advisory people in the world is my experience. So, very low number. And they're hard to find.
Okay, that's step one. What's step two?
Step two is to create your business on a solid foundation. And what we're talking about there is that you need to have the right entity or enterprise structure for your business, whether it's a corporation, whether you need limited liability company, whether you need multiple limited liability companies, or a limited partnership, or some other form. You want to make sure that you understand the different forms and what is best for your business so that you can have that foundation to build everything on. You don't want to go back later and have to fix your foundation.
Now, I just moved out of a house I've had for 16 years. And that house had foundation problems. And we would have had to put, you know, lots of money in just going back and fixing that foundation. I wanted that to be someone else's problem, so we sold it at a reduced rate and let them fix it. You don't want your business to be like that. And the entity that you form is that foundation. So, you want to make sure you build that right. Okay? Does that make sense?
Josh: Cool. That makes sense to me.
Scott: Right. So, we do that. And so, now we've got the advisors and we've got a solid foundation. And then the next thing you want to do is create a system for what I would call documenting everything. Okay? So, you want to--
Josh: When you say documenting everything, can you be a little more specific about that?
Right. So, in your business, there's a couple of things you want to look at. We just set up this great structure. So, we have a solid foundation. Now, there are formalities that you need to document. You’d have annual meetings and keep minutes of those meetings. You need to document your human resources. That means you have offer letters, applications. You have contracts with your employees. If you have independent contractors, those are written agreements, right? And then, everything that you do as far as selling for your business, you have written proposals. You keep those copies of those. And you have written contracts with your customers, clients, patients, whatever you have in your business, but those are-- everything is written. And if you need releases, then they're signing those and those are written.
Now, this can all be digital. Documentation has changed over the last decade. It can all be digital, but you need to document all of those things.
Josh: So, most business owners I know do a pretty bad job with that.
Scott: Yeah, almost all of ‘em. That’s the--
Josh: Yeah. So--
Scott: That's the number one problem I see in small business is that they're all still doing handshake deals and not documenting things.
Josh: Well, the truth is, you know, I've had a whole bunch of businesses over my life and a fair amount of them the clients just won't sign contracts. That's the end of the con-- you know, if you want to do business with me, it’s a handshake, and that's the way it is. I really rarely had a problem with that.
And, you know, it's sort of when I go to somebody and I say, “Gee, I want you to put this under contract with me.” The first thing they're going to say, “Why are they doing that? And why don't they trust me?” So, do you have a good way of getting somebody to sign a contract that likely doesn't like to do so?
There's multiple ways to do that. And one thing is you want to kind of remind people that the reason we're using contract is not because there's distrust, but contracts are what we use to keep honest people honest. Right? So, we can go back and look at what we agreed upon later and be able to easily see that these were the deal points.
So, here's how you do that in a very simple way, maybe without even getting a lawyer involved. You have your phone conversation with your prospect. You agree on whatever those scope of services are going to be. You've asked questions of each other. You've narrowed it down to “here's the seven deal points.” You type those into an email, “Dear Prospect, Here are the seven things that we agreed that we're going to do for you.” And then, ask them to confirm by email that they agree with those terms.
Right now, you have a contract. And it's very easy to go back now. And when they say, “Hey, you're supposed to do X for me.” And you can go back and say, “No. Let's look back at the at the email agreement. And we have these seven things and only these seven things. If you want to do the eighth thing, we can do that but that's a separate deal.”
But if you document it with an email, I reply to an email, what's unequivocal is a digital signature. And so, you have a contract. So, you don't have to have, you know, a 10‑page bulletproof document that a lawyer has reviewed and that no one in their right mind would sign. But you need to have something that's clear, that shows what you're going to do for your customer or client and maybe what you're not going to do - you know, what's excluded, but that can be very simply in an email.
But I've found-- I've been in business almost 16 years here, with Reib Law, and almost everyone is willing to sign a contract if it's simple and clear as to what you're trying to do. The problem is most contracts are prepared by what I call deal killers. And they're so long. And the language is so-- it’s so full of lingo mumbo jumbo, no one in their right mind would sign it. And so, you don't want to do that. You want to use very simple plain for documents that say, “This is what my company is going to do for you. This is what I require of you to do that. And these are the dates and the amounts of money that are going to be exchanged hands.” And if you do that, in a very clear, simple way, most people are going to be willing to sign your agreements.
Josh: Cool. So, what's the next thing on your list?
Scott: The next thing is you want to use a professional registered agent, right? And a lot of people don't even know what a registered agent is. But if you have a corporation or an LLC, the State requires you to have a person that is responsible for receiving notices from the state and for receiving notices of lawsuits, right? That’s the two major things. And a lot of people will just make themselves the registered agent, kind of, by default. Well, that's okay, except sometimes you go on vacation, and sometimes you don't open your mail because you're too busy taking care of business and something can get overlooked. Your charter for your corporation could be forfeited or you could have a lawsuit against you that you didn't know about and didn't answer.
Another thing I see a lot, Patrick, is that we’ll use a CPA, maybe, or even a lawyer as your professional agent, and they go out of town and go on vacation, or you switch two or three times to different professionals. And now, it's three back. They have no relationship with you. And it doesn't mean anything to them so they don't forward it to you in a way that gets your attention.
How this goes wrong is they don't forward it, someone has sued you. You don't file an answer because you didn't get it. And suddenly you've got a judgment against your company for several hundred thousand dollars.
I've seen this happen. I get a call from a business owner that's distraught because the sheriff or constable is at their place of business, locking the doors and seizing their assets for a judgment they didn't know existed. It could’ve all been avoided if they had a professional registered agent. And there's multiple companies that do this. It's not hard to find.
Josh: So, what you're saying is you should get a separate company, as a Registered Agent, who’s not a lawyer, who’s not a CPA, is not you but is a company that only accepts services?
Scott: Correct. And they do it 24/7 365. So, they're always there for you. Most of them have really nice internet portals where all those documents are stored so that you can access them easily. They'll text you or email you whenever there's an alert.
Josh: And how would you go about finding a registered agent?
Scott: You know, if you just Google “registered agent service,” you'll get a list as long as your arm that gives you a very good list. And if they'll reach out to me, I can make some recommendations of companies that are reputable, who do a really good job with that, and lead them to a good professional registered agent.
Josh: Yeah, that's good advice.
For folks who are listening, if you want to get a registered agent, don't search on the internet, call Scott. You'll likely get a better person. There's too much junk on the internet when you start doing searches. So, make sure you find somebody that's reputable, if you're going to do that.
What's next for you, Scott?
Scott: The fifth is call an employee, an employee. Here's a huge mistake that a lot of business owners and online entrepreneurs make is that they think they've got someone that's an independent contractor. It’s what they're calling them. But they're telling this person what to do. They're supplying the tools to do it. They're controlling how they do their work and, in actuality, it's an employee.
At some point in time, that employee gets audited by the IRS and they say, “Well, my employer never took out the taxes.” And suddenly the IRS comes back to you and says, “Hey, you didn't take taxes out for your employee. And so, now, you owe both sides of the payroll tax plus penalty and interest.”
Another great add on for this is that you can't bankrupt out of this tax. There's no way. You can't get away from it. It goes through your corporation to you, as the business owner. You have to pay those taxes. So, if you misclassify someone, there can be very big penalties.
And to most business owners that I work with, and they work on small margins, you know, people-- and it could be devastating to suddenly have to pay a $20,000 bill because you'd misclassified one employee. What if you misclassified a hundred employees, right?
So, you need to be very careful and err on the side of calling people an employee. An employee is someone that's doing work for you, even if it's on a temporary basis, that would be a seasonal employee or a part‑time employee. That's not an independent contractor.
An independent contractor is someone that has their own tools, has other customers that they work with. They just do projects for you occasionally. And there's a set price for that project and they get paid. You're not keeping track of their hours. You're not telling them, you know, when and where to show up and providing tools.
All right. So, make sure that you're classifying people the right way. It can really avoid some really big headaches down the road.
Josh: There's two things I want to talk about in that particular thing. One is, it doesn't mean you shouldn't use independent contractors. It means you should follow the rules if you're going to use independent contractors. And, if I'm not mistaken, I think there's seven or eight things that the IRS looks at to establish whether you're an independent contractor or not?
Scott: No. Actually, there's 20 points that they utilize kind of as a test. And not any one of them is conclusive. You know, it's kind of a total sum of what's going on. But there's 20 points. The first one would be must the individual take instructions from your management staff regarding when, where and how to work, the work has to be done? Okay? That’s one point.
Josh: Right. That's a biggie. That's a biggie.
Josh: The other biggie which I've been told, over the years, is that you want to make sure that your independent contractor is not just independently contracted to you, that they actually do have other businesses they work for.
Josh: Unless you're a specifically excluded person, like we have a wealth management business and the people who are associated with other wealth management business, get their own 1099’s, have their own corporations. They set how they work, and what they do, and when they do it within the rules of the SEC, but I don't tell them when to come in every morning.
Scott: Right, yeah.
Josh: So, there’s this second piece, Scott, I want to ask you is you just said, “Call an employee an employee.” Can I call an employee a team member?
Scott: Yes, you can. But if they're a team member - if you start calling independent contractors team members, for instance, then they're probably an employee. If they're that integral of a part of what you do on a daily basis, they're very likely an employee.
Josh: No. I'm just talking about people that would call - I have talked to several business owners who absolutely hate the term employee. “They said they're not employees. They’re team members.” And--
Scott: I understand. When I worked for Disney, I was a cast member--
Scott: --years ago. Yeah, I was not an employee. I was a cast member.
Josh: But you're actually an employee even though they called you a cast member.
Scott: That’s right.
Josh: But that's okay.
Scott: That’s okay. Yeah, you can make up other words for it. Just make sure that when it comes to the taxation, that you're classifying them as W2 which will be [inaudible 00:17:16].
Josh: Right. Right. So, you're paying them W2.
What's next, Scott?
Scott: You know, the next thing on the list is protect your intellectual property.
Josh: Ooh, biggie. Biggie.
Scott: Intellectual property-- yeah, it's huge. It's really the lifeblood of your business. It's your brand. It's what you're selling. It's your ideas. And there's very specific ways to protect them.
The categories of intellectual property are your patent, trademark, copyright, trade secret, and confidential information. Those are the main categories. Most entrepreneurs don't have patents. Some do. And, if you do, you need a patent lawyer to help you with that.
Every entrepreneur pretty much has a brand name that should be trademarked, if possible. If you don't register your trademark with the United States Patent Trademark Office, someone else could take your trademark and use it in other areas of the country where you are not and you could get locked out.
The other thing that could happen is you could be using a brand name that you don't own - someone else owns it and you don't know because you didn't go through the trouble of getting that registered with the United States Trademark Office. And you've just built your brand on top of someone else's, and you get sued for infringement. And maybe, even worse, have to start over, you know, several years into your business.
Had a client that is in the DJ business. For over a decade, they bought the business from their employer and realized, when they came to me, that they had not trademarked the name. No one had trademarked it. So, after a decade, they're in several States. They have to go roll the dice and see if they can get it registered. It was very close. We got it registered. But had they not, they would have had to rebrand this decade‑old business at a huge cost and probably loss of business just because someone didn't do their work upfront.
You've got to protect your intellectual property as you create it, not go back later and do it. As you create it, protect it.
Josh: And I'm going to add one more thing there.
Josh: An awful lot of small business owners today are online advice businesses of one type or another. And you have a bunch of intellectual property, ebooks, infographics, checklists, systems, whatever they are. We like to see those put into a separate LLC with a license between the operating company and the LLC. So, if they come after the operating company, you're not flat out of a business, you just reopen and re‑license from that LLC. Especially if you're doing public events, this becomes crucial.
Scott: That’s exactly how I advise all of my coaches, speakers, trainers, and online entrepreneurs to do theirs. You should have that separate IP holding company and license it to whichever operating company needs it at that moment, which could be a coaching company, and then could be an event company, depending on the time, you know, what they're doing. But by having that in a separate company, it's never exposed to the activities of the operating company that does business with the public because the public is where all the liability is.
Another thing you want to really watch out for is, like you mentioned, you know, we're constantly giving away content because that's what we're taught to do is, you know, give value so that we can then bring people on board for paying services. Even that free stuff needs to be protected because you don't want them to take that free stuff, trying to make it their own, pirate it, and then start giving that away as their free stuff. So, you have to make sure that you're doing the things necessary to protect the stuff that-- I mean, if it's worth putting into an ebook, it's worth registering the copyright for it. Not a big deal to do it. And make sure you're protecting that stuff. And then, podcast. You’ve got to make sure that you have all those things protected.
And then kind of an overlooked one is confidential information. So, when you're hiring employees, you're hiring independent contractors to do jobs, you want to make sure you have, in your contract, a confidentiality clause that protects your company's confidential information. If you don't treat it like confidential information, they won't either and they'll take it and use it, and you'll have a very tough time convincing the court that it was important to you if you don't have it documented in your contracts.
Josh: Okay. So, I've lost track of how many we're at. We have time for one more.
Scott: Perfect. We're on number seven.
Scott: This one's really, really hard. Don't use someone else's stuff, right? So, this is the other side of the coin. And it's the one that especially people that are online have a big problem with because we're throwing together webpages. We're doing social media posts. We're doing all these things. And there's all this great free stuff on the internet, right, and Google images that I can just grab. “That’s a cool image. It must be free. It's there.” No, it's not.
All of those images have copyrights attached to them. And you’ve got to be careful. And you want to make sure that you're either using true royalty‑free things that you can use. So, you have to read the license, follow the terms of service, if you're going to use those images.
And even better, find a service where you can buy what you need. And buy the images that you want to build your website, to build your social media campaigns so that you know for sure that you're in control. Because I've seen a lot of clients hire webmasters and social media companies to produce all this stuff for them. If they're not careful, they'll use things that they aren't licensed, that they don't have permission to use, you'll get a letter in the mail from a really nice lawyer demanding $5000 to $10,000 because you've infringed someone's copyright but there’s no defense. There's no oops defense for that. You're on the hook.
You may negotiate down the money but you're going to pay something to get out of that. And then, you have to start over on whatever that digital campaign was. So, don't use other people's stuff. If you need to use it, get permission. A lot of people will give you permission to use limited portions of their material. Or you can buy a license. But don't use other people's stuff because you don't want them to use yours.
And that is the seven‑strategy to shatterproof your business.
And I've actually had a bad experience with that. We now use sites that have site licenses. So, everything on their site that we choose is licensed and we don't have an issue. You'll also want to make sure you have attribution because that'll come back and bite you also.
Scott: They will.
Josh: Scott, that's great advice. And we are unfortunately out of time. And I'm going to bet that people who are listening or watching are going to want to find you. So, how would they go about doing that?
Scott: You know, the best way to do that is go to reiblaw.com, www.reiblaw.com/crackthecode. And if you'll go to that page, we have a special offer just for you guys, for listening today, where you can download that ebook, The Seven Strategies, the e‑version of my book and book a 20‑minute, what I call, laser legal coaching session with me so we can dive into your business and try to help you shatterproof it.
And I've got two things I'd like you to do. You know what the first one is. I ask it every single podcast episode. And that's please go to where you're listening to this podcast and give us an honest rating and review. If you're new to our podcast, welcome. I'm glad you're here. And if you liked what you heard today, you can give us five stars. If you hated it, well, I hope you didn't. But, if you did, you can give us one star and I'll cry a little bit but maybe I'll get over it, maybe I won't.
And the second thing is I just published my second book called The Sale Ready Company. It’s a continuation of our business parable with our friendly Aardvark family. This time, John Aardvark is actually starting to think about transitioning out of his business. We have all sorts of fun things that happen as John decides who he's going to transition the business to, how he's going to transition the business, if he can transition the business, and when this is going to happen.
So, it's really easy to get, just go to www.salereadycompany.com where you can buy the book for 50% off. We’ll selling it for $7.95. And, along with that, you can also get into our resource center. We have all the how to’s on do the stuff that's actually in the story of The Sale Ready Company.
So, this is Josh Patrick. We're with Scott Reib. You're at Cracking the Cash Flow Code. Thanks a lot for stopping by. I hope to see you back here really soon.
Narrator: You've been listening to Cracking the Cash Flow Code where we ask the question, “What would it take for your business to still be around a hundred years from now?”
If you've liked what you've heard and want more information, please contact Josh Patrick at 802-846-1264 extension 102, or visit us on our website at www.sustainablebusiness.co, or you can send Josh an email at email@example.com.
Thanks for listening and we hope to see you at Cracking the Cash Flow Code in the near future.