Exit planning for group practice owners with Erik Brenner

Dan King: [0:00] Hello, everyone. I'm delighted today to be joined by Eric Brenner. He's the CEO and founder of Hilltop Wealth and Tax Solutions. Eric, welcome to the show. We'd love you to share what you do and who you help. Eric Brenner: [0:13] Yeah, sure. Thanks for having me. So my firm is an independent registered investment advisory firm, and we work with folks that are in the medical profession, business owners, pre-retired retirees. We are a fully independent firm that we call ourselves comprehensive and really offering a chief financial officer experience, meaning that we help people from their basic retirement calculations and investments, their insurance, tax, estate, help bring that all together to make sure that they're making the right decisions financially. Dan King: [0:49] Nice, nice. And what are some in our space in healthcare slash mental health, what are some of the most common poor financial decisions you see folks making? Eric Brenner: [0:59] You know, I think one of the decisions as, you know, especially if you're, you know, a business owner and, you know, running your clinic, you know, and you're in the day-to-day work is a couple things. One is, you know, a lot of times it's really challenging just to be working on your business instead of in it. And so having someone kind of help through a plan on where do you want to take the business? plus how do you want to exit from the business eventually, Eric Brenner: [1:30] where people just don't think about it. And then they get to a stage of life saying, okay, I'm about ready to get out of this, whatever that looks like. And they really don't have a plan in place for that or whether they can actually do it financially. And so we want to help them set up those parameters and then help them with the decisions when that time comes. Dan King: [1:51] So exit planning is a big thing you do. Eric Brenner: [1:53] Yeah. Exit planning. Another thing that we do is, you know, making sure people have succession plans. You know, what if you become ill, right? Incapacitated, you know, for sometimes it's just a temporary period of time, you know, who's going to take care of what, you know, what's your backup. And if something happens to you and you pass away, you know, how's your family taken care of? What happens? Eric Brenner: [2:18] So having a good succession plan in place really matters as well. Dan King: [2:22] If I'm starting a mental health practice and, you know, let's say my intention is to run it for 10 years, at what point should I start to think about or how should I think about when to engage an exit planner? When should exit planning be something I actually do? Because day one, it probably doesn't make any sense, right? But there comes a point where it really is a thoughtful use of time. How do you think about advising people on that kind of question? Eric Brenner: [2:46] You know, I would encourage someone, you're right, day one, it's not the time you're getting it. You know, if you're starting out, you know, you're getting it ramped up. You want to grow the business. You're certainly focused on that. I think the exit planning really comes with three years or less if it can be that far out. And so when I think three years, I don't necessarily think you have somebody identified. But, you know, there are things you can do to help prepare the business for sale if you're going to sell it, if you're going to exit that way. So there's things you can do to prepare it. And then it's not just last minute decisions. You know, when people make decisions based on emotion and not facts and data, or they make decisions that are rushed, they're usually, in my experience, not the, probably the best decision. And so that three years out, two years out is a good time to think about it. The other thing is, if you've got a successful business, so assuming what your question and we say, okay, now we've grown this business's success and it's time to get out. How's that going to look from a structure standpoint? How are you going to get out? How are you going to get the valuations out of it? How's your tax situation? Eric Brenner: [3:55] So, you know, when you strike a deal, you know, there's the gross deal and there's the net deal. You know, the net deal is how much is you going to put in your pocket? So oftentimes a gross deal sounds really good, but maybe when you look at it overall and you look at it also from a net perspective, it's not as good. So, you know, those are some of the things that I think about and we help people Eric Brenner: [4:18] through in their decision making. Dan King: [4:20] Makes perfect sense. Do you identify potential exit, either investors or folks that might acquire companies, or is that out of scope for you? Eric Brenner: [4:29] Yeah, it's really not out of it. That's out of a scope for us. What we will do is if somebody has it identified, so oftentimes it's, you know, somebody that they identify that's skilled in the area, whatever business they own, right? And they are going to market that business if it's not an internal sale. Um, but what we do have the experience and I have the experience of being a business owner and I have bought and sold businesses along the way is helping them be a third party guide. So, you know, you need good legal help, right? You need good tax help, which we have tax professionals on our team as well. But you also need someone that I believe often that can bounce ideas, you know, directionally, Hey, take a look at this. This is the deal. What do you think about it? So I actually like that often versus me or the firm representing the sale. So that would obviously would be a little more partial to selling the business, making the commission right on the sale where we can be a third party to our clients on really helping them along the way. Is this the best deal for them? Dan King: [5:36] More commonly, you play rather than sell side representation. You're playing that third party role. Eric Brenner: [5:40] Yeah, exactly. Yeah, that's exactly right. And that's really where we fit versus trying to find, a right fit. You know, we do have some resources. We can direct them to maybe people to talk about doing that for them. But we really, we play that other role of, you know, we want to run alongside you and be on your side of the table. Dan King: [6:02] I think that that is rare because my experience as a buyer and an investor in businesses is it's pretty unusual that a seller gets competent, impartial advice. So very often a seller will just talk to people they know. They'll call up their accountant, for example, and their accountant very often has an interest in a deal not proceeding. The accountant knows after there's a deal, there's a pretty decent chance they may lose the customer. And so it's pretty rare, I think, that sellers of high-quality businesses do get, especially smaller businesses, do get impartial advice. Eric Brenner: [6:36] Yeah, I think you're absolutely correct. And so we just try to fill that you know, fill some of that need. And like I said, there's a gross amount and a net amount. So, you know, we, if somebody has done their work and has somebody that they're working with to say, okay, here's the structure of the deal, but also how, what's it going to mean from a tax perspective? Cause we have to remember that most of the, most of the sales, especially if it's a successful business is the major cost is the tax that's going to get paid and how you might go about mitigating that. And many of these sales to do that, you want to know in advance. So, you know, when you get down to it and you're close to closing, you know, there may be less that we can do. I think that having that someone on your side, like we said, that, you know, we're not passing along or we lose the client or whatever, you know, clients have said it's very helpful. Dan King: [7:30] Yes. Yes. I can imagine it is. I think also perhaps part of, part of the secret sauce you're bringing, tell me if I'm right, is you're a business owner and an entrepreneur yourself. So there's a degree of empathy that you're bringing into this equation, where as someone that has bought and sold businesses, you know, it can be an emotional roller coaster, right? You've been in their shoes, you know. It's not an easy thing rationally. It's not an easy thing emotionally. Eric Brenner: [7:54] Yeah, that is correct. And, you know, I have worked with and seen a lot of letter of intents and non-disclosure agreements and sale agreements. And again, we don't bring in the legal aspect, but, you know, I've seen and done it myself as far and also seen it when we work with clients. And so, you know, we've seen a lot. Eric Brenner: [8:12] And so we can bring that to the table to really help guide our clients along the way. Dan King: [8:17] What are some of the nuances to working with folks in the medical healthcare space that you see? Eric Brenner: [8:22] Well, I think the, you know, I know the nuance that, you know, and the challenge that they have is, you know, insurance and how they get paid and revenue sources. That's certainly a challenge and managing people. Eric Brenner: [8:36] So, you know, I find, you know, that in a lot of industries, when you think about it, healthcare and other industries, a lot of them grew up in the industry. So, you know, in the healthcare, you know, example is they started out maybe as a therapist or a doctor or, you know, whatever the profession in. They didn't really start off leading people and then they grew this business and all of a sudden they're leading teams. And so I think that's a challenge for a lot of folks versus corporate world. Eric Brenner: [9:05] You know, oftentimes those people that lead those companies, they've been schooled, mentored for many, many, many years and move up among the ranks. And so I think balancing that's a challenge. And then really the other challenge is, as I said earlier, is working on your business versus in it. You know, when I work on my business and think about my business, I try to get away from the business and I try to have time that I'm not thinking about the, you know, way down deep and working in it. Right. Where's the business going? How am I thinking about it strategically? So I think, you know, really trying to manage your time and working on that versus, you know, it gets done when it gets done. I think those are some of the challenges. The other thing is, I think, you know, a lot of times folks want to, you know, cut a corner, if you will, or try to get it done. I can understand this. And, you know, by not, you know, by not getting good, having a good team and a good guidance, you know, it can really cost them time, effort, energy, knowledge, and financial. You know, over time, it can cost you a lot more than what you were trying to save. So those are some of the things I think that I've seen. Eric Brenner: [10:16] Or have seen, you know, over the years. Dan King: [10:19] So at what point, you know, we talked a little bit about exit planning, retirement planning. I know even before we get to those points at the journey, you guys are there to help with tax as well. Who is the right sort of, and you've talked about the verticals that you work with, but at what point in the journey does it make sense to engage you generally? Like, let's say I need tax planning support. How big should my business be? But what's the point in my journey where it makes sense to work with you? Eric Brenner: [10:43] Yeah, I mean, the tax, we kind of see in a journey of small business start out and then they grow, you know, small business still needs maybe some bookkeeping support, you know, things that the owner tries to do on their own. And oftentimes they do it, but then they get behind on billing. They don't have the right financials, you know, having really solid financials and all of that. So when you talk about a business owner, we often see, you know, that as a piece, you know, get a, if nothing else, get a firm that, you know, can do bookkeeping, you know, even if it's basic, right? What's the need? So I think growing into that. And then once you get into. Eric Brenner: [11:22] You know, I was, I'll say, you know, 500,000 to a million in revenue, a million revenue and up, then you can get into more tax planning. You can get into more benefits, you know, should I offer benefits to my employees? You know, is it some sort of health insurance, some sort of retirement plan, some sort of flexibility, you know, some sort of, you know, what's your PTO policy, right? Do you have these policies in place? You know, we found that, you know, it's really, I don't think it's a secret that it, you know, with employees now, it's not just all about the money and what they make. It's also about the entire package and what you're offering. So we find that to be, you know, do you have an overall package that is going to keep folks with you. And so when someone gets into kind of that revenue, depends a little bit on the business for sure, but they kind of get into those revenue numbers. And then once you're really personally taking out of the business and making a living that is well, a very, what I would call well-established, and you see your tax bill continuing to increase, one of the things that we see a lot is when people have incomes that continue to go up, They're paying more tax and they just kind of pay it. Eric Brenner: [12:36] You know, because they have the money to pay it. So they're just, well, I'm making more money and versus being proactive. So, you know, there's a reactive and there's a proactive. And so proactive would be, do you know where your tax bill is going to lie, right? As you get towards the end of the year? I mean, how much are you going to owe? There should not be a guess. It's really hard with businesses. And we do a lot of planning as we end the year with our clients and those that are businesses. We have to sometimes plug in, you know, last month's numbers before we get the end of the year, but knowing where do you land? What is your tax? Now you should have at least a projection idea. And it's amazing to me, the amount of folks, business owners that don't have any idea, none. And there's a lot of year end stuff we can do, you know, as you grow, I think that's really important. You know, sometimes the money's just coming in, things are going well in your business and you say, man, I'm paying a lot of tax. But if you don't do something about it and influence it, it won't change. I always tell people, Daniel, that Uncle Sam will not call you to tell you you're paying too much. He's not going to pick up the phone and go, hey, I noticed you're really increasing your tax nut. Eric Brenner: [13:49] What about this idea and that idea, right? It's up to you as the taxpayer ultimately or the professionals that you're working with to guide you along the way and make sure you're making the right decisions and so really really important hopefully that answered your question you know as far as the progression of a business owner clinician you know uh and some of Eric Brenner: [14:10] the things they want to think about what. Dan King: [14:12] Excites you i'm curious you've been doing this for a while before we hit record you told me you've been doing this for more more than 30 years what's exciting for you next where are you in your journey what are you excited to do next Eric Brenner: [14:23] Yeah. I mean, what's exciting for me is to see, to see success in how they define it. So, you know, our clients, you know, how did, how they define their success, which is, you know, really, really great that it's different. It's so different for everybody. So I like people to feel like there's a level of success, right? However they define it. I like that with our clients. I love, you know, helping people get to really good decisions. Absolutely. Just want to minimize what I can from a tax perspective, but also just see people's success and then also success of the team, you know, so that, you know, I like people to see that they're growing and being successful in their careers and just have a, you know, a real passion around that and helping people. And what we've done just, you know, like a lot of professions that are in, you know, a profession that helps people versus building a lawnmower or snowblower or something, you know, I guess that help someone to mow the lawn, Eric Brenner: [15:23] but, you know, really having an influence, that really is what motivates me. Dan King: [15:27] Nice. Nice. As we come towards the end of our time together, I always like to end on a human note and ask folks when you're not working on your business, which is a baby of a sort, what do you do for fun? What do you enjoy outside of the business? Eric Brenner: [15:39] Yeah. So I love to, I love to play golf, spend time on the golf course. My wife and I like art and wine. So sometimes, you know, those go together real well and sometimes maybe not so well. So we like going to art shows and doing wine tastings and, you know, having that. And we're now empty nesters. So we're enjoying our time. You know, we have four now grown. And so we're kind of enjoying the next stage of life there as well. And just, you know, just in, in, enjoying the time, you know, that we have in the off time that we have. Dan King: [16:14] What kind of wine do you like? Eric Brenner: [16:15] We're typically Cabernet Merlot, California based, right? That's where we're at, you know, mainly. I'll drink just about any type of wine except the real, real sweet. But, you know, we stay in the red, you know, red area. And that's because my wife is a Cabernet person. And, you know, the more woody taste, right, the more of that, the more she likes it. But that's been real fun. Awesome. Dan King: [16:41] Awesome. Well, it's been a pleasure to have you, Eric. And so important for business owners to get intentional about thinking through some of these things that I know from personal experience are so easy to put off. So thanks for your... Eric Brenner: [16:52] Yeah. Yeah. I appreciate that, Daniel. I'd like to offer your listeners a free book that I wrote. It's called The Personal CFO Revolution. And, um, so I'll just send them to my website at hilltopwealthtax.com slash podcast. So it's hilltopwealthtax.com slash podcast. They can go to the website, uh, download a free copy. I'd say it's a read that, um, it's not a, you know, tremendously thick book, but it talks, you know, some of what we talked about here today, I think it'll help people with direction. They can find out a lot more about our firm as well, obviously on the website. Dan King: [17:26] We will put that in the show notes for folks to click and give them easier access. So thank you. Eric Brenner: [17:30] That's great.