September 10, 2025 • 58 mins
Plan for your exit the right way.
In this episode of the Ground Transportation Podcast, Ken Lucci sits down with Phil Shetsen, President of Bona Vita Benefits, who shares some common financial planning mistakes made by transportation operators. Phil emphasizes the importance of life insurance, benefits, and retirement planning. He shares his personal and professional journey, the mission to help others avoid financial pitfalls, and offers insights into creating robust benefits plans, tax strategies, and fostering long-term company growth by retaining top talent.
CHAPTERS:
00:00 Introduction
06:35 Background
13:07 Life Insurance
18:59 Asset Sales
20:35 Specialized Products
25:26 PEOs
33:34 401Ks
39:43 Find The Right Clients
43:44 Tax Strategies
Connect with Phil on LinkedIn: https://www.linkedin.com/in/pshetsen/
Visit Bona Vita Website: https://www.bvbenefits.com/
NLA: https://www.limo.org/
At Driving Transactions, Ken Lucci and his team offer financial analysis, KPI reviews, for specific purposes like improving profitability, enhancing the value of the enterprise business planning and buying and selling companies. So if you have any of those needs, please give us a call or check us out at www.drivingtransactions.com.
Pax Training is your all in one solution designed to elevate your team's skills, boost passenger satisfaction, and keep your business ahead of the curve. Learn more at www.paxtraining.com/gtp
Connect with Kenneth Lucci, Principle Analyst at Driving Transactions:
https://www.drivingtransactions.com/
Connect with James Blain, President at PAX Training:
https://paxtraining.com/
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Ken Lucci (00:26):
So welcome everybody to an exciting.
Episode, another excitingepisode of the Ground
Transportation Podcast.
my name is Ken Lucci fromDriving Transactions.
We specialize in financialanalysis, enterprise valuations,
profit improvement and m and aadvisory services.
My, normal co-host, uh, JamesBlaine from PS Training.
(00:48):
Sadly, he is not here today.
Again, he's out traveling.
His is the ign.
most likely training a stellargroup, of chauffeur.
And that's fine, that's good forhim.
But I am joined today.
I've been looking forward tothis, for a while.
Um, I'm joined today by PhilSheen from.
President a Bonavita, benefits.
(01:08):
And Phil, I gotta tell you, I'vebeen dying to do this since I
saw your presentation at thechauffeur driven NLA retreat
event in Savannah.
Uh, so welcome.
I want to tee this up a bit andthen I'm gonna let you talk
about what you do.
I'm, nobody gives a better biothan, than themselves about
their business.
(01:29):
So, but why I wanted to have youon.
Was, we love what we do atdriving transactions and we've
been pretty fortunate.
We have about, we've reviewedabout 280 transportation
businesses from a million toover 150 million.
We've been blessed, working withthe best networks in the
industry, the best regionaloperators and local companies
(01:50):
doing financial analysis andvaluations.
But you know.
And I, and I honestly feel likewe're experts at what we do
because we've just had so muchexperience with it.
But one of the things that'sextremely uncomfortable for me
is when we speak totransportation operators about
exiting and we talk about theirfinancial situation, and we
(02:12):
observed that universally.
The majority of them are makingmonumental financial mistakes.
You know, number.
one, they're not planning fortheir retirement.
by opening outside investmentaccounts, which I hope you're
gonna cover.
They, they really are gettinghorrible advice.
on tax, and some of them are noteven taking W2 income.
(02:34):
They don't have 4 0 1 Ks, and Isee a lot of them in their prime
earning years or even aftersacrificing their own income,
pouring it back into a businessunder the delusion.
And that's exactly what it is.
Under the delusion that whenthey quote, when I sell my
(02:55):
business, it will fund myretirement.
And this is why I wanted you on.
So I could safely say to youthat after reviewing 280
companies, I want every operatorto listen to this.
And if you don't wanna listen tomy advice, talk to other
operators who have tried tosell, talk to other operators
who purchase companies.
and by all means, talk to.
(03:18):
As many successful people who'veexited their businesses as
possible.
But I'd say 90% of industryoperators, 90% of operators that
sell their businesses, even ifthey're successful, it's not
enough money to fund theirretirement.
So let's, let me start withteeing you up with some, some
stats on small business sales.
(03:39):
First of all, there are 30million small businesses in the
United States.
At any given time, 15 to 20% of'em are for sale.
Half of them are owned by babyboomers, which bill I, I'm sure
you see all the time.
These people are getting towardsretirement age, and that means
any given time, four to 6million businesses are for sale.
Now, small businesses, here'sthe stat for all small
(04:02):
businesses that typicallyaverage 3 million or less sales
in business, which is 90% ofprivate businesses, by the way.
Only 20% of them will ever sellto any unrelated third parties,
and they never sell for whatpeople think they're worth
there.
There's just like, for somereason this delusion that their
(04:23):
business is going to garnermillions of dollars, people are
lining up around the streetcorner to buy a limousine
company and it's just nothappening.
So.
It, it bothers me tremendouslyand it's something I never
really encountered until I gotinto this space, into, into what
we do in 2019, and it'sheartbreaking to me to do the
(04:48):
best valuation that you can togive the bene every benefit of
the doubt to what they built andcome back with a value that's
market value.
It's can be proven by everytransaction that's got a comp
and it's just not what theythink it is.
(05:09):
And, and I'm facing, dealingwith people that are much older
than me.
I'm 60, and they're like, I say,what do you have for your
retirement?
Nothing.
This is gonna be it.
What, what are you, you've beentaking practically no W2 income.
So I wanted you on here.
First of all, I want you to tellus all about your background and
your, your bio and your company.
(05:31):
but then I'm gonna ask you somequestions and.
I want you to be very brutallyhonest with what this, what
every small business ownershould be doing.
This is good.
We've got a good, greataudience.
We've got some young operatorsin the audience.
We've got some good success, bigsuccessful operators that listen
to us, but I, I, and I like tothink that it's the power of
(05:52):
more voices.
And voices with, with expertiseand credibility that get people
to change their behavior.
So first of all, what, what getsyou into this?
Tell us about yourself.
Phil Stetson (06:05):
Thank you, Ken, and again, thank you for having
me.
I think that what makes me mostpassionate about the work I do
is.
It's a common thread that we'relooking to serve an audience
that, for the most part ismanaging a day-to-day business,
month by month, quarter byquarter.
And they don't really have agreat insight into what their
future looks like.
And so I would say that lookingbackwards, to answer your
(06:28):
question on what got me intothis, I was a 21-year-old
graduate from Rutgers, you know,New Jersey Pride and.
Ken Lucci (06:35):
Very
Phil Stetson (06:35):
Yeah, yeah.
Rutgers graduate and I hadentered the marketplace
interested in becoming anadvisor.
I had taken a few interviews atMorgan Stanley and Merrill
Lynch, and What kept me fromgoing the traditional route of
being an asset manager, so tospeak, was the fact that I
couldn't really control my ownfuture and my own destiny.
I would never really control myown promotions.
(06:57):
It would be relegated to thetime and place and the people
that were coming in at thattime.
So when I had had a chance tobecome an advisor on my own.
You know, that was really agreat opportunity.
But again, nobody wants tolisten to a 21-year-old.
Right.
Probably knows nothing aboutlife and even less about
Ken Lucci (07:13):
Phil, I get, I gotta stop you there sometime.
People don't wanna listen to a60-year-old either.
Right?
Phil Stetson (07:19):
Right?
Ken Lucci (07:20):
Especially when you're telling them things they
don't want to hear.
But, but, so you are anentrepreneur because you didn't
wanna be a a small cog in a bigwheel.
Phil Stetson (07:27):
never.
And, and kind of to stem back towhat drove me to be an
entrepreneur, my father was anentrepreneur, ever since he came
over here from Russia, he camefrom over from Eastern Europe in
1981.
And what I had realized was thevery fiber of being an
entrepreneur and a, a wise onewas.
Brought, you know, upon mebecause my father, when I was
(07:49):
just a young kid, made somereally big mistakes and he lost
everything.
He lost absolutely everything.
And what would've been probablya track of middle class had
thrusted me into you know,really an impoverished
lifestyle.
I mean, my parents got divorcedwhen I was a very young kid.
My dad, you know, got in a lotof trouble with the IRS.
He made some really bigmistakes.
And when it came time to decidewhat market I would serve as an
(08:11):
advisor, as an entrepreneur.
I had decided that it would bemy life's mission to help
everyone avoid becoming myfather, right?
Make sure that as many people asat the very least, I could
educate and coach and providesome guidance, whether they
worked with me or not, if I leftevery single person with just a
little bit of a betterunderstanding of what their
future looked like and whattheir options were.
(08:31):
That's what made meextraordinarily proud of the
work I did, even if there wasn'tmuch success in the first three
to four years.
Right.
And so, you know what my fatherdid was he ran a business, which
you and I had discussed in thepast.
It was a lifestyle business.
It was a business that would notsucceed without him at the helm.
And that in itself is a majorissue for business owners
because if somebody wants to buya business, right?
(08:54):
You know this, somebody's buyingit either to acquire new market
share or.
As a way to just create cashflow, right?
So in this situation, my fathermade big mistakes with the IRS.
He had never figured out how tosucceed the business to another
party or to his children.
And that stems back torelationships and how to manage
relationships with secondgeneration heirs, right?
(09:14):
Of business, operators.
And so when it came time for meto decide who I wanted to focus
on, it was the business owner.
so, yeah, I've been doing thisfor 14 years.
Just to give you a little bit ofa background, I started
Ken Lucci (09:24):
Okay.
You still look like you're 21,Phil, which I find annoying, but
that's okay.
Phil Stetson (09:29):
It is the hair.
It's all the hair I've been ableto keep, although I just had my
first, I, I just had my firstkid a year ago, so it's starting
to go gray on the sides.
I, I've done a
Ken Lucci (09:37):
congratulations.
Phil Stetson (09:38):
Covering that up.
and so in, in reality, right,uh, over the 14 years that I've
been so to speak, sharpening mypencil, I have taken upon myself
to learn as much as I could formentors.
I think mentorship is huge.
And I took along estate planningattorneys, corporate attorneys,
CPAs, TPAs, who manageretirement plan adoption
agreements, benefits experts, sothat I could really become a
(10:00):
holistic advisor to a businessowner.
in essence, the reality was isthat I knew that I needed to
prepare for the first 10 to 14years of my career to be of
true, meaningful value tobusiness owners.
And so when it comes time tomake an introduction, which CPAs
and commercial insurance brokersdo often, or estate planning
attorneys do, they know that I'mincredibly well versed in all
(10:23):
things business owner, whetherit's a, a
Ken Lucci (10:25):
so most of your, most of your business not, but most
of your business is referredbusiness.
Phil Stetson (10:30):
I don't do any outbound sales calls.
I don't cold call anybody.
I've been able to build andfoster a lot of trust with other
professionals in tangential, youknow, industries who say.
Phil not only knows his stuff,but his team backs him up.
Right?
He can really, not just plan,but execute, implement, and
support along the way.
So I've been very lucky, right?
I would say that not a lot of 35year olds run an organization
(10:52):
with eight employees.
Not a lot of 35 year olds havethe.
Breadth and depth of knowledgethat I have, you know,
accumulated.
But when the passion foreducation and being able to help
people is the reason why you'reworking so hard, it makes it
easy.
Right?
And, you know, a lot of peopleearly on in my career said, you
know, chase, chase a good job.
Get a great career, get goodsalaries, be able to live in the
(11:14):
city or wherever you wanted tolive, pursue your goals.
And I said, you know, thereality for me was if I did what
I loved every day, even if Ididn't make very much money in
the first few years, I would behappy in the long run.
I've been very fortunate to bein an industry where I get to
interact with so many differentbusiness owners across all walks
of life.
Whether it's the business goingfrom a series A to a Series B,
or a startup, or an organizationthat's looking to succeed itself
(11:37):
to the next generation.
There are so many areas of thatconversation that I can
navigate, not just basically,but in depth, to really help be
a resource to a business owner.
Ken Lucci (11:49):
so tell us about your major lines of business at
Bonavita Benefits.
Phil Stetson (11:54):
Sure.
Great question.
Uh, where it started and whereit is today.
It's, you know, everythingevolves.
Just like you said, you know,you really entered this space in
a big way in 2019.
We started out doing a lot ofbuy, sell and Keyman life
insurance.
I mean, that was the, you know,way I was, yeah.
Where I was networking andmarketing myself at BNIs and LA
TIPS and all theseorganizations.
It was predominantly, you know,what's the situation with your
(12:16):
company?
How's it set up?
Is it a corporation?
Is it an LLC?
Are there operating agreements?
Are there shareholderagreements?
And you know, the more you talkabout all of these things, the
more you find yourself workingwith A CPA or with an attorney.
And if you're interested, trulyjust thirst for that knowledge,
you're gonna sit in on thosemeetings and understand what a
shareholder agreement needs tohave.
(12:37):
Why?
Ken Lucci (12:37):
so stop there for one second.
Life insurance, Keyman, lifeinsurance and life insurance
products.
You know, when, when I think oflife insurance, I think, okay,
well the average person thinksgreat.
It's a benefit for when I die.
But no, it's, you could buy taxdeferred.
It's, it's, it's, it's a taxstrategy.
(12:57):
It can be.
a tax strategy.
You can borrow against it
Phil Stetson (13:01):
Yeah, absolutely.
It depends entirely on the kindof policy you take out.
Ken, just sorry for interruptingyou
Ken Lucci (13:07):
Yeah, tell us about that.
So every small business ownerdon't think of life insurance
as, oh my God, I have to buy it'cause the people think I'm
gonna die.
Talk about, talk about therealities of buying life
insurance as a tax mitigationstrategy.
Phil Stetson (13:22):
for sure.
So we're gonna get back to therest of the lines that developed
in my business, but I'll, I'lltouch on this.
Particular area.
If you're a business owner that,let's just say runs a successful
company with a partner, one ofthe biggest challenges, just
from a basic challenge that youneed to overcome is in the event
that you pass away by state law,your wife will inherit or your
(13:42):
spouse will inherit the sharesthat you had owned in this LLC
or at corporation, whatever itmight be.
Uh, unless of course there areoperating agreements or
shareholder agreements thatwould suggest otherwise.
In that situation, your spousemay have zero knowledge of how
to run a business, but is verymuch entitled to the profits of
that business.
Maybe not the compensation,which is oftentimes comes as a
(14:04):
surprise to, to a spouse thatinherits a business, right?
You're not entitled to the W2because you're not actively
engaged in working for theorganization, but certainly the
profits, right?
So one thing that businessowners need to understand is
that if there is.
A partnership or multiplepartners and you're
disinterested in inheriting aspouse or, or you know, an
(14:24):
ex-partner, decedent's partner,spouse into the business right
there off the bat, you know,life insurance is there to
provide the liquidity to buy outthe care.
But you know, going back to whatyou said, Ken, one of the
problem is, is that a lot ofpeople don't have a legitimate
valuation.
And that's incredibly necessaryat that moment because, you
know, you could say my businessis worth$5 million.
(14:45):
But if you know, you can sitwith them and say, no, quite
frankly, the legitimate value ona on a sale or the valuation of
the shares is only two and halfmillion, then your spouse is
only gonna find out at the timeof your passing that they might
be only entitled to$1.25 millionin a buyout.
And that's not really.
Ken Lucci (15:01):
you, a large part of what we Do, for valuation work
is a valuation for the purchaseof the Keyman life insurance.
And it is an, uh, forpartnership buyout, and then
it's an update.
We like to do'em every coupleyears because we think that's
where the, the, when the needlesmove,
Phil Stetson (15:20):
do you think that, and this is a great, great way
for me to ask you a question,having worked with some
valuation analysts in the past,you know, how frequently will
you do it on a company?
Is it every three years, everyfive?
What do you think makes sensefor the market?
Ken Lucci (15:33):
Three.
Phil Stetson (15:34):
Three.
Ken Lucci (15:35):
absolutely every three.
Look, you're sure changingyourself if you're doing it.
on one bad year, trailing 12months, and you're also being
unrealistic if you're doing iton a year that we just worked
with somebody who had a$10million contract that went away,
and I'm like, okay, well.
You are really not gonna valuethe, the market is not gonna
(15:55):
pay, this was a sale.
The market is not gonna pay fora contract that's gone, Right.
Never coming back.
So we like to do every threeyears.
Now, we do update when we haveretained clients, we do update
them every year for the sake ofwhat we do for them.
But from a life insuranceperspective, it would be every
three years.
(16:16):
From an exit planningperspective, it's usually every
three years.
So talk about the, the talkabout what everybody hates,
right?
Everybody hates they, they dowell, and at the end of the
year, their, their accountantsays to them, you owe 50 grand
in taxes.
Talk to us about life insuranceas a tax mitigation strategy.
(16:38):
First of all, it's a legitimateexpense, by the way.
It's a totally legitimateexpense.
Phil Stetson (16:42):
I mean, I mean it, I would suggest that, you know,
CPA would be best to addressthat and most times what I've
found is that LLCs and S Corps,because their pass through
entities, don't tend to benefitfrom insurance deductions the
same way that a C corporationdoes, for instance, right?
Where benefits are taxdeductible and they don't have
to good tax on.
So I would definitely referback.
CPA on that question, but I willtell you that in the scenarios
(17:05):
where they could possibly use abonus arrangement where they're
funding an insurance contract,then you don't need to buy life
insurance as a means to justmitigate the risk of a premature
passing, right?
You can certainly build it intoan asset long term that is
leverageable by the business orthat is provided to a key
executive.
It doesn't have to be an owner.
Right.
You can have a key executive inthe business that if they were
(17:26):
to pass away, it would leave a,a substantial challenge to the
business' operations, theirsales contracts, their
relationships.
And you can reward a, keyexecutive with an insurance
policy where if they die, thebenefit goes back to the
company.
But if they're alive, then cashaccumulates in the contract.
And yes, that cash value can beleveraged.
It could be withdrawn, it couldbe borrowed against.
(17:47):
I don't wanna get stuck on lifeinsurance because it
Ken Lucci (17:50):
No, no, keep going on all your benefits.
Phil Stetson (17:52):
yeah.
it was, it was a piece of mybusiness that I still am very
well aware of.
And, you know, I think businessowners tend to, I, I always
joke, Ken, if I sit on a planeand someone starts talking to me
and I'm not really interested intalking'cause I have to do work,
all I have to do is I say, Isell life insurance.
And they shut up.
They, they immediatelyheadphones go on, they turn into
the window and that's it.
(18:12):
'cause nobody wants to talkabout it.
But the reality of it is, isthat so many topics that I
address business owners don'tlike talking about.
Right.
They don't like talking.
Ken Lucci (18:20):
join.
Join the club.
Phil Stetson (18:21):
Yeah, they don't, they don't like to have to,
contextualize their futures.
They don't wanna have toquantify their futures.
Right.
And the problem there is that,you know, Stephen Covey said it
best, and I talked about it inmy presentation in Savannah,
Georgia for the executiveretreat.
I said it like, you have tobegin with the end in mind.
You have to think about whereyou're gonna be 5, 10, 15 years
from now.
(18:42):
And, and, and the businessowners that are young enough to
hear this and do something withit, right.
I hope this serves as some formof motivation to really take
stock of where you wanna be in10 to 15 years.
Because if you continue to buydepreciating assets, you know
this, right?
Like what happens in a sale,Ken, right?
I'm either sell buying a phonenumber, right?
And And the assets, right, whichis really more of an asset sale
(19:04):
than anything else, or acommission based sale, or I'm
doing a stock sale.
But how many businesses do stocksales in your industry?
I'm just curious.
Ken Lucci (19:12):
Oh.
Uh, from what we do, it's Eightout of 10 of them are asset
based sales.
20% are stock based sales, andthe stock stock agreements
selling the actual corporationis usually the larger
transactions that we deal
Phil Stetson (19:27):
Yeah, but they do it for the reasons that,
generally speaking, the rest ofthe industry wouldn't do it for.
Right?
Like, you know, in yourindustry, you're doing a stock
sale because somebody has anincredible workers' comp or an
insurance rate on their policy,and you wanna absorb that as
opposed to bringing the fleetunder
Ken Lucci (19:41):
There's a lot, Right?
There's a lot of good reasons todo stock sales, and if the
company is extremely well run,there's every reason to do a
stock sale, but in a lot ofcases, they're not very well
run, So, you have to do an assetsale because they have.
Pending liabilities.
(20:01):
They've never been profitableand their books aren't good.
so that's what leads people froma perspective of, choosing an
asset sale versus a stock.
You know, they'll, they'll,they'll make that choice.
Then we're working on a verylarge transaction now that is
actually rare.
It's an asset sale, but it's,you know, it's a business over,
let's just say the, sake ofargument.
(20:22):
It's over.
$30 million.
Normally those size businessesare stock sales.
So we talked about 40 millionsmall businesses, 90% of them
are less than 3 million.
What, what other products do youspecialize in?
Phil Stetson (20:37):
so I would say that for a business owner
that's, you know, sub$3 millionin revenue, which means that
their EBITDA is somewhere,generally speaking, between
what, 12 to 20%, maybe a littlebit higher, depending on how
many coaches or shuttles they'reutilizing.
Ken Lucci (20:50):
Average is about 17%.
If they get into the motor codespace, it'll be 21%.
Phil Stetson (20:56):
So in in this scenario, the question that that
business owner needs to addressis, can they.
Distance themselves from thatbusiness and convert it from a
lifestyle business to a businessthat they can sit back, hire in
some great operators and keepthe cash flow coming until
obviously, you know, industrieschange or evolve and then they
have to figure out how to tacklethat.
(21:16):
So in that scenario, when wethought about, when I thought
about it,'cause I am the solepartner of the organization, I'm
the sole owner of BonavitaBenefits group.
When I thought about what.
Story.
Am I weaving?
What, what fabric am I buildinghere?
It's one where you have to thinkas a business owner on how to
attract and retain talent.
Right?
That's, that's spot two for me.
Spot two beyond the lifeinsurance when I started a long
(21:37):
time ago was how do you attractand retain talent?
And when you're thinking about,all of the work that, you know,
some of the organizations withinthe industry do, they're,
they're there to help.
Figure out what's competitivepay look like in the
marketplace?
What are you paying a CDLdriver?
What are you paying a a, adriver of of an SUV or, or a
sedan, right?
But no one's really talkingabout the elephant in the room,
(21:58):
which is that a lot of peoplereally tend to, once you get up
higher up on the comp spectrum,they wanna make sure that you're
taking care of their welfare,their financial futures, right?
And so in this industry inparticular, I've found that.
Overwhelmingly, not a lot ofpeople have set up solid
benefits to attract and retaintalent, medical, dental, vision,
short, long-term disabilitygroup life.
(22:20):
A lot of people in this spacehave not thought about a
retirement plan, even a basicone.
Forget the concept.
I'm gonna bring out a little bitlater in this, in this
conversation, which is, how doesa business owner really take
advantage of a retirementprogram?
But you know, if I'm a 35 or40-year-old.
And I'm thinking about myfuture.
Why would I want to go worksomewhere where I'd have to
figure out my own insurance?
And I don't think I'm gonna haveanything you know, across the
(22:42):
finish line of my career intoretirement with, it's, it's,
Ken Lucci (22:44):
That's the number one Achilles heel when small
businesses are are, competingfor young talent.
The young talent.
Is asking the question, okay,what's my comp, what's my
benefits?
And what, my position gonna looklike 3, 4, 5 years down the
road?
Do you think it's because thesmall businesses don't have the
benefits plan set up?
(23:05):
Do you think it's'cause theythink it's really expensive?
Phil Stetson (23:07):
I mean, there's two factors.
I think that it's a headache,and I do this on a daily basis.
You know, we manage benefits forclose to 175 companies.
they're across the industry.
I think that for a smallbusiness, they say, I don't have
the bandwidth or the wherewithalor the knowledge to really be
able to.
Hunker down and take care ofsomething like this.
And so oftentimes that leadsthem to say, I'm not gonna even
(23:28):
look at it.
And that makes it a stickingpoint for an employee to say,
look, I can't continue to workhere for more than two or three
years'cause I'm not putting anymoney away.
My family doesn't have healthinsurance.
And, and it becomes a problem.
I will say I, I, I will saythough, in in this industry in
particular, what I have found.
The work I've done with a coupleof clients is that you, your
(23:50):
tenure is, is really, there's ahuge gap for tenure.
Right.
And what you find is that theindividuals who work with an
organization for three, fiveplus years, they tend to have
all of these things kind oftaken care of through a spouse,
possibly, right?
Like, I have a spouse, sheprovides insurance, I'll drive.
It's not a big deal.
It's good money, I'm good.
But for anyone kind of in themiddle.
(24:12):
I've seen that there reallyisn't a whole lot of tenure
beyond one year to three yearsor four years.
You're either with a companyforever or you're in and you're
out within the first year ortwo.
And so it's this gap that Ithink.
Businesses in this industry canreally compete on to suggest I'm
not just gonna give you an extradollar or two per hour, which by
the way, is subject to payrolltaxes and all the taxes that the
(24:33):
employee or the employer have topay, right?
From a payroll perspective.
But I'm gonna make an offeringavailable to you so you can feel
secure in this role long term.
Right?
And so for me, I have foundthat.
The headache of trying to figureout how to procure this is
challenge one.
The bandwidth on managing thisis challenge two and challenge
three is evaluating a, acomparable, or, what I would say
(24:53):
is a competitive offering thatwould attract people to
participate.
Ken Lucci (24:57):
So what does it look like?
What is the benefits plan thatyou can put into, you know, just
a medium-sized limousinetransportation company?
What does it look like?
Phil Stetson (25:05):
sure.
So there's a few ways to enterthe marketplace.
The first is to say, you know, Ihave my payroll provider.
I'm gonna figure out how tosource benefits by way of that
payroll provider.
I can work with a broker.
We can link that directly intopayroll.
A lot of people are unaware thatyou can set up a benefits
program and link it directlyinto your payroll system so that
as you hire or off board clientsor employees, excuse me.
It's very easy to manage itself.
(25:26):
An alternative is to work with aprofessional employer
organization.
Right.
Which is a PEO.
And that in itself is, is Icould do an entire meeting on,
but that is a co-employmentrelationship that you build with
a company that is an HRIS systemand they become the single
source solution to payrollworkers' comp, unemployment, tax
filings and all benefits.
Ken Lucci (25:47):
Do you offer, PO or no?
Phil Stetson (25:48):
Yeah, absolutely.
Of the, of the 175 clients wework with.
Give or take, around 40 of themare with PEOs.
Insperity, prestige TriNet, ADP, total Source Justworks.
Correct.
Yeah.
Ken Lucci (26:00):
Nice.
Nice.
So, so the operator goes fromwriting payroll checks or using
their own payroll service totheir employees now become part
of a large PEO.
Phil Stetson (26:11):
Exactly, precisely.
And that co-employmentrelationship allows them to
access what I would say is asubstantial, a possible
substantial savings on what theywould normally procure in.
The marketplace as a smallbusiness, if they were to go
route one, right, where they'dfigure out how to work with a
broker to procure the medical,dental, vision and all the
coverages, and then figuring outhow to tie that in right to
(26:31):
their payroll system.
So it's a little bit moreautomated.
me.
Where PEs professional employerorganizations find a huge value
proposition to individuals inyour space is the workers' comp
piece.
Right?
And I'm, I'm specificallyfocusing on the.
Operators that use drivers whoare W2 employees, not the iOS so
much, right?
Ken Lucci (26:50):
With you.
Hundred percent with you.
Phil Stetson (26:51):
Because if your workers' comp is say seven or$8
per hundred, because the cost ofworkers' comp is directly tied
back to the risk and the statecost for that particular
insurance carrier, then byblending your organization with
A PEO, where maybe 80% of that.
Pool population is white collar.
You're benefiting from a, aninsurance solution that you
(27:13):
couldn't access because the PEOis self-insuring and using a
captive on the workers' comp,and you're not gonna do that
unless you're paying two,$3million a year in premium
workers' comp's very hard toself-insure because of how big
the risks could be on, onclaims.
Then in addition to that value,right, you're getting state
unemployment insurancereductions because that's an
experienced cost, right?
(27:34):
Based on how much turnover youhave in the year, and access to
the benefits in what I would sayis a Fortune 500 offering,
right?
Big carriers, national networks,and it's all tied into one
system.
Ken Lucci (27:45):
So your po, what's the smallest size from in terms
of employee, or is it annualrevenue to be attractive to a
PEO?
What is it?
Phil Stetson (27:56):
So realistically, most PEOs won't play in a space
with less than five W2employees.
The risk of the healthcaredoesn't outweigh the, the
potential losses.
Ken Lucci (28:06):
there.
I mean, that, that's easy.
That's, that's the typicalmillion and a half or above.
You'd like to think 2 million orabove.
And so you're basically sayingto me that if I have five W2
employees, I can get basicFortune 500 kind of benefits
through a PEO.
Phil Stetson (28:24):
Correct, correct.
And the challenge, the challengeis, is that you have to figure
out which PEO is the rightpartner.
So again, like as a businessadvisor, which is really what I
call myself, you know, I haveletters like Chartered Financial
Consultant or CFP after my name,but I really function as an
overall business advisor to mostclients.
We work with.
In that, in that space inparticular, it's about finding
(28:44):
the right partner within the PEOmarketplace, right?
I mean, there's probably,probably 400-500 PEOs in the
country, believe it or not,right?
There's a lot of them and it'sabout finding the right partner.
We've recently, and again, thisis not to, to.
Tote or, or talk about, uh, theassociation health program.
But we recently, in September oflast year, became the brokers of
(29:05):
record to the Association HealthProgram by way of the National
Limousine Association, the NLA.
So NLA members who are listeninghave access to an incredible
opportunity to, to.
Take a similar approach ofpooling their employees with a
much larger pool, but it doesn'trequire that you lug along with
that, the payroll, the workers'comp, the state unemployment
that could sit on its own inwhat we call a captive, right?
(29:28):
A large captive insuranceprogram.
And, and, and again, people whoare listening to this, who are
involved in captives, theyunderstand the value of them,
right?
Because it can significantlydrive down their cost of their
commercial liability.
Insurance and professionalliability, all of that, but in
this world, it's a healthcarecaptive, and so that is a really
attractive offering because byway of your partnership or your
membership with the NLA, you'reable to access that program,
(29:51):
right?
Without that, you're not able toaccess that.
Ken Lucci (29:53):
See, I wasn't aware that the NLA program changed to
you guys.
Phil Stetson (29:56):
yeah, no, it did in October of last year, and of
course.
Like anything, when you become anew broker to a plan, you really
have to understand what's goingon prior to us joining.
But since we've joined, we'vereally been able to triage some
of the challenges that, youknow, individuals who
participate in it have faced andwe've, we've been able to grow
it and grow it with.
The resources that my firmbrings, which I think, you know,
(30:18):
again, to a small businessowner, you don't have the
bandwidth for everything.
So when we work with our clientson benefits, we give them an
in-house HR benefit specialistto work with, not for, just from
an administrative perspective,but we also give them an
employee benefit specialist.
So if employees have issues,they have somebody they could
talk to directly, not a one 800number.
Ken Lucci (30:37):
Yeah, and you know what your CPA doesn't know the
HR and the benefits aspects ofthings.
So you basically, you are likehaving a a fractional HR, HR
consultant right there
Phil Stetson (30:51):
Yeah, I, I mean, in a way, I, if I would, to
change my title, I would say,you know, a, a fractional.
C-F-O-C-P-O.
I mean, there's a million thingsthat I can do for a business
owner, and that's where it getsa little tricky because when
people hear the name Bon VitaBenefits group, they think, oh,
the guy does benefits.
The guy can do our healthinsurance or our PEO.
(31:11):
Uh, but they missed the 401k,they missed the succession
planning, they missed theadvisory.
Right.
Which, you know, we're gonna getto.
So you start the business in2011, Phil Sheen, that's me.
Right?
You start off with buy, sell.
A lot of the people we weredoing buy sell arrangements for
came back to us and said, Hey,our brokers really don't know
anything about health.
I mean, we're small groups.
We have seven, eight employees.
(31:31):
Can you figure out how to helpus out?
And this was right around 2014when the a CA laws started to
change how insurance carriersidentified small business owners
in the marketplace.
We went from zero groups toabout 12 to 15 groups within six
months, and I, I said, you know,this is a, a real niche for me
to find myself in.
I'm doing the life insurance, Iam the insurance guy right now
(31:55):
for everyone, which was hard toshake right off later on in
life.
And so we started building apractice around providing small
to medium sized businesses withbenefits.
Benefits administrationsolutions, you know, connections
between the carriers and thepayroll systems.
And we've really been able tosupport that with additional
staff members that, again, standin like fractional HR people you
(32:16):
don't have to pay for.
I mean, that's the benefit,right?
Yeah.
So, so that was exciting.
And then, you know, anotherevolutionary, you know, change
in my business was that a lot ofthese business owners eventually
came back to me and said, youknow, a DP screwed up our 401k.
Can you look at it?
And this is something I can't.
Begin to tell you, not that I'mgonna take ADP's name in vain
'cause there are some thingsthey do really well.
(32:37):
but a lot of these largeorganizations can, their sales
compensation arrangements areall predicated on moving units
volume, right?
Ken Lucci (32:46):
Exactly, and, and, and once you're in, I'm gonna
say it for you.
They don't give a shit.
They don't care.
They don't care about you.
In a lot of cases, they don't.
Phil Stetson (32:55):
And And what's worse about specifically the
401k space?
I started getting referred topeople who had set up 4 0 1 Ks.
When you set up a 401k, that isa legal document, you're setting
up an adoption agreement, right?
And that adoption agreement,along with the filings have to
be registered with the IRS on anannual basis, the 5,500.
And that adoption agreementisn't easy to just snap your
fingers and undo.
(33:16):
So you really need to make surethat you get your 401k adoption
agreement right.
Off the starting line, becauseif you don't, then there's a
strong likelihood that thetriage will be ineffective,
right?
The correction of that adoptionagreement or that the triage
will require that you give moreto employees than you had ever
intended on doing initially.
So.
Right around the time where Istarted getting introduced to
(33:37):
401k opportunities, I said,look, I know what I know really
well.
Life and health incredibly well,dental, vision, all the
insurance benefits, the PEOmarketplace.
But what I'm lacking here is A,is a real, genuine understanding
for the 401k and profit sharingand pension space.
And so what I had done was Ihad, uh, I'm gonna give Peter
Coleman a shout out here.
Uh, he's the managing directorof a company called The Benefit
(33:57):
Practice, and I said, Peter, Icannot represent 4 0 1 Ks or
TPAs unless I know everythingabout them.
I mean, that, that's literallywho I am, Ken.
I'm not gonna talk about thingsI don't know.
I'm only going to talk aboutthings I do, and I cannot
represent myself as aprofessional in a world where I
don't understand it.
And, uh,
Ken Lucci (34:14):
Especially if it's that complex.
You're
Phil Stetson (34:16):
yeah, and, but that's a sad part, right, Ken?
To be honest.
A lot of business owners arebeing called incessantly by
salespeople who know how to sella product, know how to schmooze
somebody, but they don'tunderstand how the sausage is
made.
And quite frankly, once they'vemoved on from that sale, they're
no longer tied to therelationship.
Somebody else is animplementation or account
service.
And so what I found for me isthat taking Peter on as a
(34:39):
mentor, learning the ins andouts of an adoption agreement,
understanding what.
capabilities, profit sharingprograms have for, companies
that are business owners orpension programs, cash balance
plans or variable plans.
It equipped me with, again, justanother arrow for my quiver,
right?
Like, that's pretty much what itwas.
And you know, that space hasgrown dramatically.
We now manage 50 companyretirement programs, across a
(35:01):
number of providers.
Ken Lucci (35:03):
By the way, so let's, let's stop there for a second.
How big do I.
have to be to, to offer a 401kplan?
Phil Stetson (35:09):
So it's interesting, you might say, you
might say, oh, don't I have tobe a, a huge employer?
No.
The answer is that that's notthe case.
Right?
It's a matter of how you set upthe plan.
The larger the company really,when I say the larger the
company, I mean, when you havemore than 15, 20 W2 eligible
employees.
Eligibility just for anyonelistening on a 401k for the,
from the 401k perspective is athousand hours or more, right?
(35:29):
You become eligible forretirement plans if your
adoption agreement is built thatway.
If your adoption agreement isone hour of work, then guess
what?
Anyone is eligible toparticipate and get money from
the company.
And so that's where, again, likeyou really need to be careful on
how you're advising clients onsetting up these programs.
Uh, but in that sense, companiesas little as 5, 7, 10, 12, 15
(35:49):
employees can set them up.
And what people don't
Ken Lucci (35:51):
Do, do you, do you, you know, we, we struggle with,
we, we help people.
With obviously budgeting,financial performance, and we've
always seen companies strugglewith bonus plans.
Do you think 4 0 1 is a goodincentive?
Phil Stetson (36:09):
So you're touching on such an incredible point, and
it's a part of my practice thatwe meet with our clients kind of
towards September and October toevaluate the profitability and
figure out whether or not therewill be a bonus pool.
Some years, there are some yearsthere aren't bonus pools.
What people tend to forget, andthey don't do this because
they're not paying attention,but they just don't realize it.
If I wanna give out a 80,000 ora hundred thousand dollars
(36:30):
bonus.
Pool to say 30 or 40 employees,right?
Those employees are likelyrelying on that money to pay for
presents, for vacations, forcredit card bills.
And so when you start talkingabout shifting a bonus pool to
possibly some form of a deferredbenefit, like in a 401k or a
profit sharing plan, you end upstarting to play a little bit,
uh, of a game of optics, right?
(36:52):
How will my employees receivethat As, as, uh.
As a way of maybe still payingout the same a hundred thousand,
but maybe putting 25 of it intoprofit sharing or 401k
contributions.
But people don't know what'sgood for them.
Like that's the reality of it,right?
And what's good for most peopleis to save, and most people
don't.
And so for me,
Ken Lucci (37:09):
Uh, you, you, you, you're, you're a hundred percent
right.
I mean, my father taught me whatcompound interest meant.
Phil Stetson (37:14):
and that's,
Ken Lucci (37:15):
I didn't learn that in school.
My father taught me
Phil Stetson (37:17):
I think Ben Franklin said it's better than
sex.
Right?
I think that that's actually aBen Franklin quote, if I'm not
mistaken.
Ken Lucci (37:24):
I would ag, I would agree with him, whether it was
Ben that said it or not,compound interest is fantastic.
Phil Stetson (37:30):
so the earlier you get to the starting line again
there, the better you are,right?
Compound interest is verysimple.
Comp, uh, simple.
Story to tell.
The money you earn interest onthat interest will earn more
interest long term.
And the earlier you get to asaving strategy, the easier it
is to complete.
let me go back to what youasked, right.
Really quickly.
(37:50):
You said, you know, do I have tobe a company of 30 or 40 or 50
or 60 in people to do this?
The answer is no.
But there are also somelegislations that have been
passed in the last year or two.
Depending on what state you are,and depending on how many
employees you have, you aremandated to offer a retirement
plan, and people are completely,you know, unaware of that as a
problem.
It's a big sales push forcompanies like Paychex and a DP,
(38:12):
which are trying to sell 4 0 1Ks.
They're saying, gettingcompliance with us before you
get penalized by the stateyou're in.
But again, it's so important andcrucial that you set this thing
up with the goals of theorganization or the ownership.
At the heart of it, because ifyou do it wrong, it's not great,
you know?
Ken Lucci (38:30):
Yep.
And, and more and more companiesthat I deal with where the
operators are young and, and youknow, I've got one particular
that we just did a proposal for,and he is doing a great job, but
I've said to him, I said to him,he struggles with his number
two, number three, and numberfour People and he wants to
create a team that will run thebusiness without him.
(38:52):
And this is what comes up, ishow to bonus out and how to
incentivize the team and how tobuild a long-term team that will
stay with you instead of theconstant turnover entrenched
employees.
Phil Stetson (39:08):
I mean, but think about this, right?
You know this.
If I'm gonna pay out a hundredthousand dollars in bonuses to
say, employees that are makingless than$176,000 a year,'cause
that's the social securitythreshold for taxation,
approximately, I'm gonna have topay approximately 10% in a
payroll load between workers'comp, social security, Medicare,
and possibly some unemploymenttax.
If you have a high wage cap inyour state, so if I'm gonna pay
(39:31):
a hundred grand, it's gonna costme$10,000 as a business.
If I instead pay 80, I'll save$2,000 in taxes, and that might
go towards the cost of running a401k plan.
Ken Lucci (39:40):
Yeah, I'd, I'd rather pay to my employees than the
federal government.
Phil Stetson (39:43):
And that that's, that's priority one.
Honestly, I'm gonna saysomething that's gonna be
difficult for anyone to hear onthis call.
I hate one kind of client, can Ibe honest with you?
It's juicy.
I hate clients who do not careabout their employees.
I do not wanna work with them atall, because at the end of the
day, what I'm doing is notreally meaningful.
It's not gonna create anydifferences long term for any
(40:05):
families or any people.
And it just, it's not the kindof person I like to work with.
I like to work with people whocare about their staff because
they realize.
It's, if it weren't for thatstaff, they wouldn't be driving
$150,000 AMG They wouldn't
Ken Lucci (40:18):
Well, it you, I, I feel the same way.
And our, I, I, I call it, I justspell it out this way.
If you are running a lifestylebusiness to perpetuate your
business sooner or later, it'sgonna bite you in the ass,
number one.
Your employees are gonna resentyou.
Number two, you're not gonnabuild a company that can survive
without you.
I choose to deal with and workwith people who want to build a
(40:41):
company that is based on peopleand profit.
Those two things go hand inhand, and, and that's when it
comes down.
I'm with you.
I, I'm a hundred percent withyou.
I, I, when I, when I deal withlifestyle businesses, they
usually.
They never want to talk to youwhen they're doing well, but
they won't leave you alone whenthey're not doing well.
When business is down or whensomething has occurred.
(41:03):
And because they are the end alland the be all.
And there's, listen, there'snothing wrong with lifestyle
businesses, but just realizewhat you, what you've created,
you created a job for yourself.
Phil Stetson (41:16):
Exactly 1.
That you're not gonna be able towalk away right from without
selling.
What?
Just your depreciated assets onthe balance sheet.
That's pretty much all you're
Ken Lucci (41:25):
A a and you're, you know, and, and I, I, I gotta
tell you, I mean, I, I, I have asaying with my clients, when you
stop listening, I stop talking.
So when I find that I repeatmyself three or four times and
saying the whole same thing'sover, and what I hear is, yeah,
but my business is different.
No, it's not.
You know, the thing with thelifestyle business.
(41:45):
The thing with all smallbusinesses, they hit a ceiling
and the ones that don't growbeyond the founder.
Okay, beyond just number one,caring for the founder, those
become companies and to me.
You cannot become a companywithout attracting and, keeping
talented people, and you're notgoing attract and keep talented
(42:09):
people unless you have thethings we've been talking about
For 30 minutes.
Unless you've got the benefits,unless you've got, unless people
portray you, oh, wait a minute,that's Ken's company, or that's
Ken's business versus that's anambassador limousine in sedan.
So at the end of the day.
what you provide is basicallyyou provide all of the products
(42:32):
and tools that if, if the smallbusiness person takes advantage
of them, you can be on the samelevel playing field with Largest
companies in the, in the, in thecountry.
Phil Stetson (42:43):
and it's easier, right.
To do it for, you know, the lastpiece I wanna really touch on
here,'cause uh, you know, I knowour time is coming up is the
fact that 401k and profitsharing plans, that's one
document, generally one plan,right?
But the, the ability to considera cash balance pension plan or a
variable defined benefitprogram, right?
(43:04):
These programs allowed thebusiness owner, assuming they
have the right W twos and theright variables, the
demographics of the organizationto take much larger deductions
from the business and put itdirectly into the retirement
accounts that they have.
We've worked with a lot oforganizations that might have
20, 22, 25 people where thebusiness owner might be in their
fifties or sixties, and they aresuccessfully run businesses.
(43:26):
They might be LLCs.
Everything is subject toself-employment tax, and that's
important.
People don't realize that, Ken,when you're talking about
retirement plan contributions,social security and Medicare tax
have to be paid on the salariesby which you are attributing a
retirement plan contributionfor.
So if I.
Ken Lucci (43:42):
So you're taking distributions.
You can't, you
Phil Stetson (43:44):
Can't use those.
So if I'm a, if I'm an S corpand I'm, I'm doing what's right
and let's just say I'm taking$200,000 in a W2 and I'm taking
$300,000 in a K one rightdistributions, or I just leave
it as profit in the business atthe end of the year that I'll
pay tax on that$300,000.
You can't do anything with thatcompensation to create
retirement plan contributions.
(44:04):
You're only using that 200,000number, which means that yes,
you might be able to get$31,000out.
Personally,'cause that's the maxfor anyone over the 50, you
know, year mark to defer ontheir own personally from their
salaries.
But if I want to come up with apension plan or a profit sharing
plan, it's directly tied back tothat$200,000 number, not the
overall$500,000 that you'reprofitable or taking comp on.
(44:27):
So in in that world, you know,we're able to sit down with a 55
or a 56-year-old and we canaccelerate their retirement
savings.
By millions if they have thecorrect variables, the
components of the organization.
Within only a five or six, sevenyear period, right?
I'm not even kidding.
You have two,$300,000contributions.
You can't do that in a 401k or aprofit share, but in a pension
(44:49):
plan, it becomes a viablesolution for a business owner or
their partner and or, ortogether, right?
Yes.
You ultimately have to givesomething to the staff.
In that case, I'm not sittinghere and saying, you're not
going to, but what you have togive to the staff, which is also
tax deductible to the business.
It wanes in the amount of taxsavings you receive just on that
$300,000 deposit, right?
If you're in a 40% tax racket,you're losing 120 grand on
(45:12):
three,$300,000, right?
We can, you and I are mathpeople.
If you put 50 away for the staffand you hide 300 for yourself,
you're still netting out 70grand just in tax savings.
Do you get my
Ken Lucci (45:22):
And, and, and I don't know if, if you agree with this
statement, but I find thatpeople say, well, my CPA didn't
tell me that your CPA is not atax planner.
They're not a benefits person.
Phil Stetson (45:33):
so many CPAs are in the business of filing
returns and not proactivelygiving advice, right?
And the
Ken Lucci (45:39):
Exactly.
They're not certified, first ofall, they don't have your, They
don't have your certificationsand they're also it something
like 90% of CPAs are not taxplanning certified.
Phil Stetson (45:51):
No.
And, but like, you know, thereality of it is, is that they
work in the lane that they'veworked in for years, and they
work with the variables thatthey're comfortable with working
on.
And, and if that is in your, inour industry here specifically
for, for those that havechauffeur, you know, chauffeur
and companies, it'sdepreciation.
Right.
That's it.
That's like all you have.
Maybe you can advance a fewexpenses before the end of the
(46:12):
year.
Right?
But at the end of the day,depreciation's now back on on
the docket, right?
With the O-B-B-B-A bill that.
Ken Lucci (46:19):
A hundred percent depreciation is back, but you
know, at some point,
Phil Stetson (46:25):
I was rooting against that.
Believe it or not, Ken, I wasrooting against that because it
might actually give the businessowners the wherewithal to say,
oh my God, I cannot continue toreduce my income and the taxes
using the assets I'm buying forthe business.
And I thought for a second, ohmy God, this is a great place
for them to fit in a two,$300,000 deduction for
themselves and do something goodfor themselves long term, you
know?
Ken Lucci (46:45):
Right.
Well, to your point, okay.
I've seen, huh.
This is a notorious story hereat Driving Transactions where we
had three years ago, we had aclient we love him, but we, he
shall remain nameless onChristmas Eve.
He called us and look, we'relike a lawyer.
We, we, we, we work bankers andlawyers hours.
(47:06):
You, Chris, around the holidays.
We could take two weekscompletely off at the end of the
year.
Well, this particular personcalled, uh, new Year Christmas
Eve and said, oh my God, I'vejust, you know?
we, we realized we just, youknow, we made two or$300,000 and
I, I need to go out and buy avehicle.
I spent.
Between Christmas Eve and NewYear's Eve negotiating his
(47:27):
purchase of a motor coachreading over his purchase
agreements and it, it was like,we're not doing this anymore.
So for what we do, we don't dotax planning.
We give you a tax prep report.
As of July, we know what you'vedone For the first half of the
year, we know your coststructure, so we're gonna
extrapolate the last half of theyear by looking back at your
(47:48):
numbers, Right.
Last year.
So we're gonna give you one taxprep report in July, and then
the other, the most importantone to me is the one in October.
Okay.
But to your point.
Most of these guys say, okay,well their advice is okay, go
out and buy a vehicle and we candepreciate all of it.
Well, the sad part is most ofthese guys are not paying for it
(48:09):
in cash.
Right.
And unfortunately they're addingdebt to their company.
So, so just, and, and I knowit's not The case for everybody,
but just give us some, just somebroad strategies on tax
mitigation.
Phil Stetson (48:23):
Sure.
So let's just suggest for aminute, let's use your story.
Can we use that for a minute?
You get a call on on ChristmasEve, oh my God, we have$300,000
in profit.
What are we gonna do with it?
Right.
And this is to no offense to theunprepared owner, right?
Which quite frankly, accountsfor a lot of them.
What if I were to say that youdidn't have to burn the profit
(48:43):
before the end of the year tostill be able to claim a
hundred,$200,000 deduction?
You see, most people don'trealize that when the secure
act, the original one, not 2.0came out, it had given people a
much longer time period tolaunch retirement programs
retroactively for the yearprior.
So people think I have to setup, uh, a 401k profit sharing
plan, pension plan.
(49:04):
For 2025, I've gotta do it now.
Yes, in some cases you do havesome deadlines.
Safe harbor plans requiredeadlines and notices to
participants.
But profit sharing plans andpension plans, you can set up as
late as the filing deadline orextension.
Right?
For the prior year?
For the, for the prior year.
So what, right now, let me giveyou an example.
I have a organization that we'reworking with in the industry.
(49:27):
And they're, they filed anextension for 2024, right?
They, they didn't wanna file ontime, and that's fine.
Some business owners don't havethe time earlier on in the year.
Ken Lucci (49:35):
a lot of people do that as a strategy.
I get it.
Phil Stetson (49:38):
And, and, and that's fine.
But what we're talking aboutwith them is where their funds
went at the end of last year.
Do they have the funds that theycan make a contribution of two
to$300,000 and, and claim it in2024?
For their return.
People don't realize that.
So with retirement programs,yes, some plans need to be set
up in the year that you wannautilize them, but other programs
like profit sharing plans andpension plans, you can leave the
(50:00):
money on the, on the incomestatement at the end of the
year, come back in March, April,may, June, July, and still
launch a plan for 2024 and getthe money off of your, off of
the income sheet for Pro fromlike a tax perspective.
So.
Ken Lucci (50:13):
Interesting.
Phil Stetson (50:14):
It's, it's really unique.
You know, and I'll tie this allback to the same story, right?
Like it comes back to my father,right?
Had my father had the goodadvice that maybe he would've
met me.
I would've told him that the CPAis doing something questionable
and don't listen to them.
Go find another CPA.
Think about your business from aperspective of where you're
gonna be in 20 years and how youget out, or 10 years or 15
(50:36):
years, right?
And think about how you're gonnaaccumulate the money.
And when you think aboutaccumulating money, whether
it's.
Investing outside of aretirement program, which, yeah,
we're gonna talk a few secondson here.
put the money away in the mosttax effective manner.
Phase one, right?
Phase one is to save as muchtaxes as you can, and that
aligns with CPAs and that alignswith business owners.
Phase two is don't overindulgein retirement programs because
(50:59):
you're only going to have onetype of dollar to pull out of an
account later on, and it's allgonna be subject to income taxes
at that time, right?
Ken, if I put$3 million in a401k and I say, okay, I'm ready
for retirement.
Every dollar that comes out ofthat thing is gonna be taxable
and it's.
Really anyone's guess on whethertax brackets are gonna be higher
or lower than they are today inthe future, right?
(51:20):
And so you could end up doingyourself a disservice.
But then diversify outta that.
So the last component of ourrelationships that we've really
loved, and this is what I thinkreally makes a difference, is
we've aligned ourselves asquarterly advisors to review the
profit and loss, identify thetax liability, pay the tax, and
then figure out what does theopex need to look.
(51:42):
Like, you know, OPEX isoperating expense reserve,
right?
So what does the opex need tolook like and what is in excess
of that, right?
That isn't being attributedtowards a retirement plan
contribution?
Take it out.
Take the chips off the table,put it into an investment
account and a brokerage account,a managed account.
Invest in the s and p 500.
Do something to do to earn morethan what it's earning in a
checking account in thebusiness, or a savings account
(52:04):
in a business.
Ken Lucci (52:04):
afraid to do it.
Phil Stetson (52:05):
You know, and, and people say, well, what if my
business needs it?
No problem.
It's as easy as taking adistribution and then making a
contribution, a shareholdercontribution.
It's literally just the samething that you're doing, except
you're leaving it in thebusiness.
Right?
And what business with theliabilities that you guys have
to face in your industry wantsto have 70$800,000 in a bank
account, right?
Ken Lucci (52:24):
No, It's a target.
Phil Stetson (52:26):
It's a target.
It's a hundred percent a target.
So, so what we've loved aboutthe relationships that we've
fostered and we've really moldedis the fact that when you work
with a firm that is equipped to,to navigate so many disciplines,
you know, shareholderagreements, estate planning
conversations, retirementplanning benefits, and
ultimately succession planning,which is what it all leads back
to.
(52:46):
You get an advisor that'sliterally like building yourself
a board of directors where twoor three of those roles are
filled by somebody who has theknowledge.
Right.
My biggest challenge, quitefrankly, is that I, I don't, I
need more people, I need morestaff, right?
That's the reality of it.
But for the relationships thatwe've built that, you know, we
have calls quarterly.
(53:06):
We have calls weekly or monthly,whenever we need to, to identify
the problems.
It's important to align yourselfwith that kind of a, like that
kind of a sales person, right?
Because we are all salespeople,right?
At the end of the day, can yousell your service?
I sell mine.
But you're, but theaccountability measure, right,
is completely different topeople who are entrepreneurs
like us than to the corporationsthat simply throw thousands of
(53:29):
units into the marketplace on amonthly basis,
Ken Lucci (53:31):
Yeah, and, and, and I think you're setting yourself up
for disappointed.
Dis disappointment is a smallbusiness.
If you don't have.
A trusted advisor that you canpick up the phone and say,
listen, Phil, I get this idea.
What, what, what should I bedoing here?
Versus you?
You're gonna be calling your repfrom Paychex or a rep from any
of the big companies, andthey're not gonna take the time
(53:51):
to learn your business.
It's the argument that we havewith people all the time.
Your CPA does your taxes.
He's not interested in knowingyour business.
Listen, we, unfortunately, wehave to stop there.
But tell us how people can reachyou.
If you wanna give out your cellnumber, give out your cell
number, give out your email.
Phil Stetson (54:10):
So you could reach me on(973) 953-1700.
That's my cell phone.
My office is(201) 523-9997.
And if you need to reach me,it's PHIL Phil dot sheen,
S-H-E-T-S-E-N, atprudential.com.
Now just quickly, Prudential.
(54:31):
It's not my only brand.
We represent everything in theindustry across the board.
It's just where I hung myshingle when I was 21 years old
and they let me build my owncompany and they let me have
full autonomy in my own office,my own staff.
So if anyone on this call oranyone listening to this call
obviously has a question, mytime It's valuable, but I'm
happy to make.
If anything happen, I, I'm happyto help people, help educate and
(54:54):
coach people.
Look at an adoption agreement.
I'm not gonna charge for that.
I'm, I'm really there, like Isaid, Ken, to help right.
Prevent anyone from becoming myfather.
That's literally
Ken Lucci (55:04):
And, And, you have to give to get, that's why I do so
many webinars and so manyeducation programs, so many free
white papers, and that's why wedo this podcast.
Sometimes we can have, you know,a, a conversation that that can
be a little zany.
But this one is important to mebecause, and I, and I really
wanted to have you on because itjust, when I re meet people that
(55:26):
have built a business over 30years, it's their blood, sweat,
and tears.
It's the only thing they everdone.
And when I tell them, well, thisis the.
This is, this is the only thingit's worth.
This is what it is worth.
And the fact that 20%, only in20% of the cases do these
businesses, any businesses sell,especially seven day a week
(55:46):
businesses.
It's disappointing.
So my message to everybody who'slistening is, it's not too early
to start an investment accountis, and my.
My friends who own businesseswith more than five W2
employees, you owe it toyourself to have a benefits plan
'cause you're gonna attractbetter talented people who could
(56:06):
help you build a company.
Phil, thank you so much for uh,your time today
Phil Stetson (56:12):
Ken, thank you for the opportunity.
Really appreciate it.
I'm so happy to share myknowledge.
Thank you for listening to theground transportation podcast.
If you enjoyed this episode,please remember to subscribe to
the show on apple, Spotify,YouTube, or wherever you get
your podcasts.
For more information about PAXtraining and to contact James,
go to PAX training.com.
(56:33):
And for more information aboutdriving transactions and to
contact Ken, Go to drivingtransactions.com.
We'll see you next time on theground transportation podcast.
So welcome everybody to an exciting.
Episode, another excitingepisode of the Ground
Transportation Podcast.
my name is Ken Lucci fromDriving Transactions.
We specialize in financialanalysis, enterprise valuations,
profit improvement and m and aadvisory services.
My, normal co-host, uh, JamesBlaine from PS Training.
(00:48):
Sadly, he is not here today.
Again, he's out traveling.
His is the ign.
most likely training a stellargroup, of chauffeur.
And that's fine, that's good forhim.
But I am joined today.
I've been looking forward tothis, for a while.
Um, I'm joined today by PhilSheen from.
President a Bonavita, benefits.
(01:08):
And Phil, I gotta tell you, I'vebeen dying to do this since I
saw your presentation at thechauffeur driven NLA retreat
event in Savannah.
Uh, so welcome.
I want to tee this up a bit andthen I'm gonna let you talk
about what you do.
I'm, nobody gives a better biothan, than themselves about
their business.
(01:29):
So, but why I wanted to have youon.
Was, we love what we do atdriving transactions and we've
been pretty fortunate.
We have about, we've reviewedabout 280 transportation
businesses from a million toover 150 million.
We've been blessed, working withthe best networks in the
industry, the best regionaloperators and local companies
(01:50):
doing financial analysis andvaluations.
But you know.
And I, and I honestly feel likewe're experts at what we do
because we've just had so muchexperience with it.
But one of the things that'sextremely uncomfortable for me
is when we speak totransportation operators about
exiting and we talk about theirfinancial situation, and we
(02:12):
observed that universally.
The majority of them are makingmonumental financial mistakes.
You know, number.
one, they're not planning fortheir retirement.
by opening outside investmentaccounts, which I hope you're
gonna cover.
They, they really are gettinghorrible advice.
on tax, and some of them are noteven taking W2 income.
(02:34):
They don't have 4 0 1 Ks, and Isee a lot of them in their prime
earning years or even aftersacrificing their own income,
pouring it back into a businessunder the delusion.
And that's exactly what it is.
Under the delusion that whenthey quote, when I sell my
(02:55):
business, it will fund myretirement.
And this is why I wanted you on.
So I could safely say to youthat after reviewing 280
companies, I want every operatorto listen to this.
And if you don't wanna listen tomy advice, talk to other
operators who have tried tosell, talk to other operators
who purchase companies.
and by all means, talk to.
(03:18):
As many successful people who'veexited their businesses as
possible.
But I'd say 90% of industryoperators, 90% of operators that
sell their businesses, even ifthey're successful, it's not
enough money to fund theirretirement.
So let's, let me start withteeing you up with some, some
stats on small business sales.
(03:39):
First of all, there are 30million small businesses in the
United States.
At any given time, 15 to 20% of'em are for sale.
Half of them are owned by babyboomers, which bill I, I'm sure
you see all the time.
These people are getting towardsretirement age, and that means
any given time, four to 6million businesses are for sale.
Now, small businesses, here'sthe stat for all small
(04:02):
businesses that typicallyaverage 3 million or less sales
in business, which is 90% ofprivate businesses, by the way.
Only 20% of them will ever sellto any unrelated third parties,
and they never sell for whatpeople think they're worth
there.
There's just like, for somereason this delusion that their
(04:23):
business is going to garnermillions of dollars, people are
lining up around the streetcorner to buy a limousine
company and it's just nothappening.
So.
It, it bothers me tremendouslyand it's something I never
really encountered until I gotinto this space, into, into what
we do in 2019, and it'sheartbreaking to me to do the
(04:48):
best valuation that you can togive the bene every benefit of
the doubt to what they built andcome back with a value that's
market value.
It's can be proven by everytransaction that's got a comp
and it's just not what theythink it is.
(05:09):
And, and I'm facing, dealingwith people that are much older
than me.
I'm 60, and they're like, I say,what do you have for your
retirement?
Nothing.
This is gonna be it.
What, what are you, you've beentaking practically no W2 income.
So I wanted you on here.
First of all, I want you to tellus all about your background and
your, your bio and your company.
(05:31):
but then I'm gonna ask you somequestions and.
I want you to be very brutallyhonest with what this, what
every small business ownershould be doing.
This is good.
We've got a good, greataudience.
We've got some young operatorsin the audience.
We've got some good success, bigsuccessful operators that listen
to us, but I, I, and I like tothink that it's the power of
(05:52):
more voices.
And voices with, with expertiseand credibility that get people
to change their behavior.
So first of all, what, what getsyou into this?
Tell us about yourself.
Phil Stetson (06:05):
Thank you, Ken, and again, thank you for having
me.
I think that what makes me mostpassionate about the work I do
is.
It's a common thread that we'relooking to serve an audience
that, for the most part ismanaging a day-to-day business,
month by month, quarter byquarter.
And they don't really have agreat insight into what their
future looks like.
And so I would say that lookingbackwards, to answer your
(06:28):
question on what got me intothis, I was a 21-year-old
graduate from Rutgers, you know,New Jersey Pride and.
Ken Lucci (06:35):
Very
Phil Stetson (06:35):
Yeah, yeah.
Rutgers graduate and I hadentered the marketplace
interested in becoming anadvisor.
I had taken a few interviews atMorgan Stanley and Merrill
Lynch, and What kept me fromgoing the traditional route of
being an asset manager, so tospeak, was the fact that I
couldn't really control my ownfuture and my own destiny.
I would never really control myown promotions.
(06:57):
It would be relegated to thetime and place and the people
that were coming in at thattime.
So when I had had a chance tobecome an advisor on my own.
You know, that was really agreat opportunity.
But again, nobody wants tolisten to a 21-year-old.
Right.
Probably knows nothing aboutlife and even less about
Ken Lucci (07:13):
Phil, I get, I gotta stop you there sometime.
People don't wanna listen to a60-year-old either.
Right?
Phil Stetson (07:19):
Right?
Ken Lucci (07:20):
Especially when you're telling them things they
don't want to hear.
But, but, so you are anentrepreneur because you didn't
wanna be a a small cog in a bigwheel.
Phil Stetson (07:27):
never.
And, and kind of to stem back towhat drove me to be an
entrepreneur, my father was anentrepreneur, ever since he came
over here from Russia, he camefrom over from Eastern Europe in
1981.
And what I had realized was thevery fiber of being an
entrepreneur and a, a wise onewas.
Brought, you know, upon mebecause my father, when I was
(07:49):
just a young kid, made somereally big mistakes and he lost
everything.
He lost absolutely everything.
And what would've been probablya track of middle class had
thrusted me into you know,really an impoverished
lifestyle.
I mean, my parents got divorcedwhen I was a very young kid.
My dad, you know, got in a lotof trouble with the IRS.
He made some really bigmistakes.
And when it came time to decidewhat market I would serve as an
(08:11):
advisor, as an entrepreneur.
I had decided that it would bemy life's mission to help
everyone avoid becoming myfather, right?
Make sure that as many people asat the very least, I could
educate and coach and providesome guidance, whether they
worked with me or not, if I leftevery single person with just a
little bit of a betterunderstanding of what their
future looked like and whattheir options were.
(08:31):
That's what made meextraordinarily proud of the
work I did, even if there wasn'tmuch success in the first three
to four years.
Right.
And so, you know what my fatherdid was he ran a business, which
you and I had discussed in thepast.
It was a lifestyle business.
It was a business that would notsucceed without him at the helm.
And that in itself is a majorissue for business owners
because if somebody wants to buya business, right?
(08:54):
You know this, somebody's buyingit either to acquire new market
share or.
As a way to just create cashflow, right?
So in this situation, my fathermade big mistakes with the IRS.
He had never figured out how tosucceed the business to another
party or to his children.
And that stems back torelationships and how to manage
relationships with secondgeneration heirs, right?
(09:14):
Of business, operators.
And so when it came time for meto decide who I wanted to focus
on, it was the business owner.
so, yeah, I've been doing thisfor 14 years.
Just to give you a little bit ofa background, I started
Ken Lucci (09:24):
Okay.
You still look like you're 21,Phil, which I find annoying, but
that's okay.
Phil Stetson (09:29):
It is the hair.
It's all the hair I've been ableto keep, although I just had my
first, I, I just had my firstkid a year ago, so it's starting
to go gray on the sides.
I, I've done a
Ken Lucci (09:37):
congratulations.
Phil Stetson (09:38):
Covering that up.
and so in, in reality, right,uh, over the 14 years that I've
been so to speak, sharpening mypencil, I have taken upon myself
to learn as much as I could formentors.
I think mentorship is huge.
And I took along estate planningattorneys, corporate attorneys,
CPAs, TPAs, who manageretirement plan adoption
agreements, benefits experts, sothat I could really become a
(10:00):
holistic advisor to a businessowner.
in essence, the reality was isthat I knew that I needed to
prepare for the first 10 to 14years of my career to be of
true, meaningful value tobusiness owners.
And so when it comes time tomake an introduction, which CPAs
and commercial insurance brokersdo often, or estate planning
attorneys do, they know that I'mincredibly well versed in all
(10:23):
things business owner, whetherit's a, a
Ken Lucci (10:25):
so most of your, most of your business not, but most
of your business is referredbusiness.
Phil Stetson (10:30):
I don't do any outbound sales calls.
I don't cold call anybody.
I've been able to build andfoster a lot of trust with other
professionals in tangential, youknow, industries who say.
Phil not only knows his stuff,but his team backs him up.
Right?
He can really, not just plan,but execute, implement, and
support along the way.
So I've been very lucky, right?
I would say that not a lot of 35year olds run an organization
(10:52):
with eight employees.
Not a lot of 35 year olds havethe.
Breadth and depth of knowledgethat I have, you know,
accumulated.
But when the passion foreducation and being able to help
people is the reason why you'reworking so hard, it makes it
easy.
Right?
And, you know, a lot of peopleearly on in my career said, you
know, chase, chase a good job.
Get a great career, get goodsalaries, be able to live in the
(11:14):
city or wherever you wanted tolive, pursue your goals.
And I said, you know, thereality for me was if I did what
I loved every day, even if Ididn't make very much money in
the first few years, I would behappy in the long run.
I've been very fortunate to bein an industry where I get to
interact with so many differentbusiness owners across all walks
of life.
Whether it's the business goingfrom a series A to a Series B,
or a startup, or an organizationthat's looking to succeed itself
(11:37):
to the next generation.
There are so many areas of thatconversation that I can
navigate, not just basically,but in depth, to really help be
a resource to a business owner.
Ken Lucci (11:49):
so tell us about your major lines of business at
Bonavita Benefits.
Phil Stetson (11:54):
Sure.
Great question.
Uh, where it started and whereit is today.
It's, you know, everythingevolves.
Just like you said, you know,you really entered this space in
a big way in 2019.
We started out doing a lot ofbuy, sell and Keyman life
insurance.
I mean, that was the, you know,way I was, yeah.
Where I was networking andmarketing myself at BNIs and LA
TIPS and all theseorganizations.
It was predominantly, you know,what's the situation with your
(12:16):
company?
How's it set up?
Is it a corporation?
Is it an LLC?
Are there operating agreements?
Are there shareholderagreements?
And you know, the more you talkabout all of these things, the
more you find yourself workingwith A CPA or with an attorney.
And if you're interested, trulyjust thirst for that knowledge,
you're gonna sit in on thosemeetings and understand what a
shareholder agreement needs tohave.
(12:37):
Why?
Ken Lucci (12:37):
so stop there for one second.
Life insurance, Keyman, lifeinsurance and life insurance
products.
You know, when, when I think oflife insurance, I think, okay,
well the average person thinksgreat.
It's a benefit for when I die.
But no, it's, you could buy taxdeferred.
It's, it's, it's, it's a taxstrategy.
(12:57):
It can be.
a tax strategy.
You can borrow against it
Phil Stetson (13:01):
Yeah, absolutely.
It depends entirely on the kindof policy you take out.
Ken, just sorry for interruptingyou
Ken Lucci (13:07):
Yeah, tell us about that.
So every small business ownerdon't think of life insurance
as, oh my God, I have to buy it'cause the people think I'm
gonna die.
Talk about, talk about therealities of buying life
insurance as a tax mitigationstrategy.
Phil Stetson (13:22):
for sure.
So we're gonna get back to therest of the lines that developed
in my business, but I'll, I'lltouch on this.
Particular area.
If you're a business owner that,let's just say runs a successful
company with a partner, one ofthe biggest challenges, just
from a basic challenge that youneed to overcome is in the event
that you pass away by state law,your wife will inherit or your
(13:42):
spouse will inherit the sharesthat you had owned in this LLC
or at corporation, whatever itmight be.
Uh, unless of course there areoperating agreements or
shareholder agreements thatwould suggest otherwise.
In that situation, your spousemay have zero knowledge of how
to run a business, but is verymuch entitled to the profits of
that business.
Maybe not the compensation,which is oftentimes comes as a
(14:04):
surprise to, to a spouse thatinherits a business, right?
You're not entitled to the W2because you're not actively
engaged in working for theorganization, but certainly the
profits, right?
So one thing that businessowners need to understand is
that if there is.
A partnership or multiplepartners and you're
disinterested in inheriting aspouse or, or you know, an
(14:24):
ex-partner, decedent's partner,spouse into the business right
there off the bat, you know,life insurance is there to
provide the liquidity to buy outthe care.
But you know, going back to whatyou said, Ken, one of the
problem is, is that a lot ofpeople don't have a legitimate
valuation.
And that's incredibly necessaryat that moment because, you
know, you could say my businessis worth$5 million.
(14:45):
But if you know, you can sitwith them and say, no, quite
frankly, the legitimate value ona on a sale or the valuation of
the shares is only two and halfmillion, then your spouse is
only gonna find out at the timeof your passing that they might
be only entitled to$1.25 millionin a buyout.
And that's not really.
Ken Lucci (15:01):
you, a large part of what we Do, for valuation work
is a valuation for the purchaseof the Keyman life insurance.
And it is an, uh, forpartnership buyout, and then
it's an update.
We like to do'em every coupleyears because we think that's
where the, the, when the needlesmove,
Phil Stetson (15:20):
do you think that, and this is a great, great way
for me to ask you a question,having worked with some
valuation analysts in the past,you know, how frequently will
you do it on a company?
Is it every three years, everyfive?
What do you think makes sensefor the market?
Ken Lucci (15:33):
Three.
Phil Stetson (15:34):
Three.
Ken Lucci (15:35):
absolutely every three.
Look, you're sure changingyourself if you're doing it.
on one bad year, trailing 12months, and you're also being
unrealistic if you're doing iton a year that we just worked
with somebody who had a$10million contract that went away,
and I'm like, okay, well.
You are really not gonna valuethe, the market is not gonna
(15:55):
pay, this was a sale.
The market is not gonna pay fora contract that's gone, Right.
Never coming back.
So we like to do every threeyears.
Now, we do update when we haveretained clients, we do update
them every year for the sake ofwhat we do for them.
But from a life insuranceperspective, it would be every
three years.
(16:16):
From an exit planningperspective, it's usually every
three years.
So talk about the, the talkabout what everybody hates,
right?
Everybody hates they, they dowell, and at the end of the
year, their, their accountantsays to them, you owe 50 grand
in taxes.
Talk to us about life insuranceas a tax mitigation strategy.
(16:38):
First of all, it's a legitimateexpense, by the way.
It's a totally legitimateexpense.
Phil Stetson (16:42):
I mean, I mean it, I would suggest that, you know,
CPA would be best to addressthat and most times what I've
found is that LLCs and S Corps,because their pass through
entities, don't tend to benefitfrom insurance deductions the
same way that a C corporationdoes, for instance, right?
Where benefits are taxdeductible and they don't have
to good tax on.
So I would definitely referback.
CPA on that question, but I willtell you that in the scenarios
(17:05):
where they could possibly use abonus arrangement where they're
funding an insurance contract,then you don't need to buy life
insurance as a means to justmitigate the risk of a premature
passing, right?
You can certainly build it intoan asset long term that is
leverageable by the business orthat is provided to a key
executive.
It doesn't have to be an owner.
Right.
You can have a key executive inthe business that if they were
(17:26):
to pass away, it would leave a,a substantial challenge to the
business' operations, theirsales contracts, their
relationships.
And you can reward a, keyexecutive with an insurance
policy where if they die, thebenefit goes back to the
company.
But if they're alive, then cashaccumulates in the contract.
And yes, that cash value can beleveraged.
It could be withdrawn, it couldbe borrowed against.
(17:47):
I don't wanna get stuck on lifeinsurance because it
Ken Lucci (17:50):
No, no, keep going on all your benefits.
Phil Stetson (17:52):
yeah.
it was, it was a piece of mybusiness that I still am very
well aware of.
And, you know, I think businessowners tend to, I, I always
joke, Ken, if I sit on a planeand someone starts talking to me
and I'm not really interested intalking'cause I have to do work,
all I have to do is I say, Isell life insurance.
And they shut up.
They, they immediatelyheadphones go on, they turn into
the window and that's it.
(18:12):
'cause nobody wants to talkabout it.
But the reality of it is, isthat so many topics that I
address business owners don'tlike talking about.
Right.
They don't like talking.
Ken Lucci (18:20):
join.
Join the club.
Phil Stetson (18:21):
Yeah, they don't, they don't like to have to,
contextualize their futures.
They don't wanna have toquantify their futures.
Right.
And the problem there is that,you know, Stephen Covey said it
best, and I talked about it inmy presentation in Savannah,
Georgia for the executiveretreat.
I said it like, you have tobegin with the end in mind.
You have to think about whereyou're gonna be 5, 10, 15 years
from now.
(18:42):
And, and, and the businessowners that are young enough to
hear this and do something withit, right.
I hope this serves as some formof motivation to really take
stock of where you wanna be in10 to 15 years.
Because if you continue to buydepreciating assets, you know
this, right?
Like what happens in a sale,Ken, right?
I'm either sell buying a phonenumber, right?
And And the assets, right, whichis really more of an asset sale
(19:04):
than anything else, or acommission based sale, or I'm
doing a stock sale.
But how many businesses do stocksales in your industry?
I'm just curious.
Ken Lucci (19:12):
Oh.
Uh, from what we do, it's Eightout of 10 of them are asset
based sales.
20% are stock based sales, andthe stock stock agreements
selling the actual corporationis usually the larger
transactions that we deal
Phil Stetson (19:27):
Yeah, but they do it for the reasons that,
generally speaking, the rest ofthe industry wouldn't do it for.
Right?
Like, you know, in yourindustry, you're doing a stock
sale because somebody has anincredible workers' comp or an
insurance rate on their policy,and you wanna absorb that as
opposed to bringing the fleetunder
Ken Lucci (19:41):
There's a lot, Right?
There's a lot of good reasons todo stock sales, and if the
company is extremely well run,there's every reason to do a
stock sale, but in a lot ofcases, they're not very well
run, So, you have to do an assetsale because they have.
Pending liabilities.
(20:01):
They've never been profitableand their books aren't good.
so that's what leads people froma perspective of, choosing an
asset sale versus a stock.
You know, they'll, they'll,they'll make that choice.
Then we're working on a verylarge transaction now that is
actually rare.
It's an asset sale, but it's,you know, it's a business over,
let's just say the, sake ofargument.
(20:22):
It's over.
$30 million.
Normally those size businessesare stock sales.
So we talked about 40 millionsmall businesses, 90% of them
are less than 3 million.
What, what other products do youspecialize in?
Phil Stetson (20:37):
so I would say that for a business owner
that's, you know, sub$3 millionin revenue, which means that
their EBITDA is somewhere,generally speaking, between
what, 12 to 20%, maybe a littlebit higher, depending on how
many coaches or shuttles they'reutilizing.
Ken Lucci (20:50):
Average is about 17%.
If they get into the motor codespace, it'll be 21%.
Phil Stetson (20:56):
So in in this scenario, the question that that
business owner needs to addressis, can they.
Distance themselves from thatbusiness and convert it from a
lifestyle business to a businessthat they can sit back, hire in
some great operators and keepthe cash flow coming until
obviously, you know, industrieschange or evolve and then they
have to figure out how to tacklethat.
(21:16):
So in that scenario, when wethought about, when I thought
about it,'cause I am the solepartner of the organization, I'm
the sole owner of BonavitaBenefits group.
When I thought about what.
Story.
Am I weaving?
What, what fabric am I buildinghere?
It's one where you have to thinkas a business owner on how to
attract and retain talent.
Right?
That's, that's spot two for me.
Spot two beyond the lifeinsurance when I started a long
(21:37):
time ago was how do you attractand retain talent?
And when you're thinking about,all of the work that, you know,
some of the organizations withinthe industry do, they're,
they're there to help.
Figure out what's competitivepay look like in the
marketplace?
What are you paying a CDLdriver?
What are you paying a a, adriver of of an SUV or, or a
sedan, right?
But no one's really talkingabout the elephant in the room,
(21:58):
which is that a lot of peoplereally tend to, once you get up
higher up on the comp spectrum,they wanna make sure that you're
taking care of their welfare,their financial futures, right?
And so in this industry inparticular, I've found that.
Overwhelmingly, not a lot ofpeople have set up solid
benefits to attract and retaintalent, medical, dental, vision,
short, long-term disabilitygroup life.
(22:20):
A lot of people in this spacehave not thought about a
retirement plan, even a basicone.
Forget the concept.
I'm gonna bring out a little bitlater in this, in this
conversation, which is, how doesa business owner really take
advantage of a retirementprogram?
But you know, if I'm a 35 or40-year-old.
And I'm thinking about myfuture.
Why would I want to go worksomewhere where I'd have to
figure out my own insurance?
And I don't think I'm gonna haveanything you know, across the
(22:42):
finish line of my career intoretirement with, it's, it's,
Ken Lucci (22:44):
That's the number one Achilles heel when small
businesses are are, competingfor young talent.
The young talent.
Is asking the question, okay,what's my comp, what's my
benefits?
And what, my position gonna looklike 3, 4, 5 years down the
road?
Do you think it's because thesmall businesses don't have the
benefits plan set up?
(23:05):
Do you think it's'cause theythink it's really expensive?
Phil Stetson (23:07):
I mean, there's two factors.
I think that it's a headache,and I do this on a daily basis.
You know, we manage benefits forclose to 175 companies.
they're across the industry.
I think that for a smallbusiness, they say, I don't have
the bandwidth or the wherewithalor the knowledge to really be
able to.
Hunker down and take care ofsomething like this.
And so oftentimes that leadsthem to say, I'm not gonna even
(23:28):
look at it.
And that makes it a stickingpoint for an employee to say,
look, I can't continue to workhere for more than two or three
years'cause I'm not putting anymoney away.
My family doesn't have healthinsurance.
And, and it becomes a problem.
I will say I, I, I will saythough, in in this industry in
particular, what I have found.
The work I've done with a coupleof clients is that you, your
(23:50):
tenure is, is really, there's ahuge gap for tenure.
Right.
And what you find is that theindividuals who work with an
organization for three, fiveplus years, they tend to have
all of these things kind oftaken care of through a spouse,
possibly, right?
Like, I have a spouse, sheprovides insurance, I'll drive.
It's not a big deal.
It's good money, I'm good.
But for anyone kind of in themiddle.
(24:12):
I've seen that there reallyisn't a whole lot of tenure
beyond one year to three yearsor four years.
You're either with a companyforever or you're in and you're
out within the first year ortwo.
And so it's this gap that Ithink.
Businesses in this industry canreally compete on to suggest I'm
not just gonna give you an extradollar or two per hour, which by
the way, is subject to payrolltaxes and all the taxes that the
(24:33):
employee or the employer have topay, right?
From a payroll perspective.
But I'm gonna make an offeringavailable to you so you can feel
secure in this role long term.
Right?
And so for me, I have foundthat.
The headache of trying to figureout how to procure this is
challenge one.
The bandwidth on managing thisis challenge two and challenge
three is evaluating a, acomparable, or, what I would say
(24:53):
is a competitive offering thatwould attract people to
participate.
Ken Lucci (24:57):
So what does it look like?
What is the benefits plan thatyou can put into, you know, just
a medium-sized limousinetransportation company?
What does it look like?
Phil Stetson (25:05):
sure.
So there's a few ways to enterthe marketplace.
The first is to say, you know, Ihave my payroll provider.
I'm gonna figure out how tosource benefits by way of that
payroll provider.
I can work with a broker.
We can link that directly intopayroll.
A lot of people are unaware thatyou can set up a benefits
program and link it directlyinto your payroll system so that
as you hire or off board clientsor employees, excuse me.
It's very easy to manage itself.
(25:26):
An alternative is to work with aprofessional employer
organization.
Right.
Which is a PEO.
And that in itself is, is Icould do an entire meeting on,
but that is a co-employmentrelationship that you build with
a company that is an HRIS systemand they become the single
source solution to payrollworkers' comp, unemployment, tax
filings and all benefits.
Ken Lucci (25:47):
Do you offer, PO or no?
Phil Stetson (25:48):
Yeah, absolutely.
Of the, of the 175 clients wework with.
Give or take, around 40 of themare with PEOs.
Insperity, prestige TriNet, ADP, total Source Justworks.
Correct.
Yeah.
Ken Lucci (26:00):
Nice.
Nice.
So, so the operator goes fromwriting payroll checks or using
their own payroll service totheir employees now become part
of a large PEO.
Phil Stetson (26:11):
Exactly, precisely.
And that co-employmentrelationship allows them to
access what I would say is asubstantial, a possible
substantial savings on what theywould normally procure in.
The marketplace as a smallbusiness, if they were to go
route one, right, where they'dfigure out how to work with a
broker to procure the medical,dental, vision and all the
coverages, and then figuring outhow to tie that in right to
(26:31):
their payroll system.
So it's a little bit moreautomated.
me.
Where PEs professional employerorganizations find a huge value
proposition to individuals inyour space is the workers' comp
piece.
Right?
And I'm, I'm specificallyfocusing on the.
Operators that use drivers whoare W2 employees, not the iOS so
much, right?
Ken Lucci (26:50):
With you.
Hundred percent with you.
Phil Stetson (26:51):
Because if your workers' comp is say seven or$8
per hundred, because the cost ofworkers' comp is directly tied
back to the risk and the statecost for that particular
insurance carrier, then byblending your organization with
A PEO, where maybe 80% of that.
Pool population is white collar.
You're benefiting from a, aninsurance solution that you
(27:13):
couldn't access because the PEOis self-insuring and using a
captive on the workers' comp,and you're not gonna do that
unless you're paying two,$3million a year in premium
workers' comp's very hard toself-insure because of how big
the risks could be on, onclaims.
Then in addition to that value,right, you're getting state
unemployment insurancereductions because that's an
experienced cost, right?
(27:34):
Based on how much turnover youhave in the year, and access to
the benefits in what I would sayis a Fortune 500 offering,
right?
Big carriers, national networks,and it's all tied into one
system.
Ken Lucci (27:45):
So your po, what's the smallest size from in terms
of employee, or is it annualrevenue to be attractive to a
PEO?
What is it?
Phil Stetson (27:56):
So realistically, most PEOs won't play in a space
with less than five W2employees.
The risk of the healthcaredoesn't outweigh the, the
potential losses.
Ken Lucci (28:06):
there.
I mean, that, that's easy.
That's, that's the typicalmillion and a half or above.
You'd like to think 2 million orabove.
And so you're basically sayingto me that if I have five W2
employees, I can get basicFortune 500 kind of benefits
through a PEO.
Phil Stetson (28:24):
Correct, correct.
And the challenge, the challengeis, is that you have to figure
out which PEO is the rightpartner.
So again, like as a businessadvisor, which is really what I
call myself, you know, I haveletters like Chartered Financial
Consultant or CFP after my name,but I really function as an
overall business advisor to mostclients.
We work with.
In that, in that space inparticular, it's about finding
(28:44):
the right partner within the PEOmarketplace, right?
I mean, there's probably,probably 400-500 PEOs in the
country, believe it or not,right?
There's a lot of them and it'sabout finding the right partner.
We've recently, and again, thisis not to, to.
Tote or, or talk about, uh, theassociation health program.
But we recently, in September oflast year, became the brokers of
(29:05):
record to the Association HealthProgram by way of the National
Limousine Association, the NLA.
So NLA members who are listeninghave access to an incredible
opportunity to, to.
Take a similar approach ofpooling their employees with a
much larger pool, but it doesn'trequire that you lug along with
that, the payroll, the workers'comp, the state unemployment
that could sit on its own inwhat we call a captive, right?
(29:28):
A large captive insuranceprogram.
And, and, and again, people whoare listening to this, who are
involved in captives, theyunderstand the value of them,
right?
Because it can significantlydrive down their cost of their
commercial liability.
Insurance and professionalliability, all of that, but in
this world, it's a healthcarecaptive, and so that is a really
attractive offering because byway of your partnership or your
membership with the NLA, you'reable to access that program,
(29:51):
right?
Without that, you're not able toaccess that.
Ken Lucci (29:53):
See, I wasn't aware that the NLA program changed to
you guys.
Phil Stetson (29:56):
yeah, no, it did in October of last year, and of
course.
Like anything, when you become anew broker to a plan, you really
have to understand what's goingon prior to us joining.
But since we've joined, we'vereally been able to triage some
of the challenges that, youknow, individuals who
participate in it have faced andwe've, we've been able to grow
it and grow it with.
The resources that my firmbrings, which I think, you know,
(30:18):
again, to a small businessowner, you don't have the
bandwidth for everything.
So when we work with our clientson benefits, we give them an
in-house HR benefit specialistto work with, not for, just from
an administrative perspective,but we also give them an
employee benefit specialist.
So if employees have issues,they have somebody they could
talk to directly, not a one 800number.
Ken Lucci (30:37):
Yeah, and you know what your CPA doesn't know the
HR and the benefits aspects ofthings.
So you basically, you are likehaving a a fractional HR, HR
consultant right there
Phil Stetson (30:51):
Yeah, I, I mean, in a way, I, if I would, to
change my title, I would say,you know, a, a fractional.
C-F-O-C-P-O.
I mean, there's a million thingsthat I can do for a business
owner, and that's where it getsa little tricky because when
people hear the name Bon VitaBenefits group, they think, oh,
the guy does benefits.
The guy can do our healthinsurance or our PEO.
(31:11):
Uh, but they missed the 401k,they missed the succession
planning, they missed theadvisory.
Right.
Which, you know, we're gonna getto.
So you start the business in2011, Phil Sheen, that's me.
Right?
You start off with buy, sell.
A lot of the people we weredoing buy sell arrangements for
came back to us and said, Hey,our brokers really don't know
anything about health.
I mean, we're small groups.
We have seven, eight employees.
(31:31):
Can you figure out how to helpus out?
And this was right around 2014when the a CA laws started to
change how insurance carriersidentified small business owners
in the marketplace.
We went from zero groups toabout 12 to 15 groups within six
months, and I, I said, you know,this is a, a real niche for me
to find myself in.
I'm doing the life insurance, Iam the insurance guy right now
(31:55):
for everyone, which was hard toshake right off later on in
life.
And so we started building apractice around providing small
to medium sized businesses withbenefits.
Benefits administrationsolutions, you know, connections
between the carriers and thepayroll systems.
And we've really been able tosupport that with additional
staff members that, again, standin like fractional HR people you
(32:16):
don't have to pay for.
I mean, that's the benefit,right?
Yeah.
So, so that was exciting.
And then, you know, anotherevolutionary, you know, change
in my business was that a lot ofthese business owners eventually
came back to me and said, youknow, a DP screwed up our 401k.
Can you look at it?
And this is something I can't.
Begin to tell you, not that I'mgonna take ADP's name in vain
'cause there are some thingsthey do really well.
(32:37):
but a lot of these largeorganizations can, their sales
compensation arrangements areall predicated on moving units
volume, right?
Ken Lucci (32:46):
Exactly, and, and, and once you're in, I'm gonna
say it for you.
They don't give a shit.
They don't care.
They don't care about you.
In a lot of cases, they don't.
Phil Stetson (32:55):
And And what's worse about specifically the
401k space?
I started getting referred topeople who had set up 4 0 1 Ks.
When you set up a 401k, that isa legal document, you're setting
up an adoption agreement, right?
And that adoption agreement,along with the filings have to
be registered with the IRS on anannual basis, the 5,500.
And that adoption agreementisn't easy to just snap your
fingers and undo.
(33:16):
So you really need to make surethat you get your 401k adoption
agreement right.
Off the starting line, becauseif you don't, then there's a
strong likelihood that thetriage will be ineffective,
right?
The correction of that adoptionagreement or that the triage
will require that you give moreto employees than you had ever
intended on doing initially.
So.
Right around the time where Istarted getting introduced to
(33:37):
401k opportunities, I said,look, I know what I know really
well.
Life and health incredibly well,dental, vision, all the
insurance benefits, the PEOmarketplace.
But what I'm lacking here is A,is a real, genuine understanding
for the 401k and profit sharingand pension space.
And so what I had done was Ihad, uh, I'm gonna give Peter
Coleman a shout out here.
Uh, he's the managing directorof a company called The Benefit
(33:57):
Practice, and I said, Peter, Icannot represent 4 0 1 Ks or
TPAs unless I know everythingabout them.
I mean, that, that's literallywho I am, Ken.
I'm not gonna talk about thingsI don't know.
I'm only going to talk aboutthings I do, and I cannot
represent myself as aprofessional in a world where I
don't understand it.
And, uh,
Ken Lucci (34:14):
Especially if it's that complex.
You're
Phil Stetson (34:16):
yeah, and, but that's a sad part, right, Ken?
To be honest.
A lot of business owners arebeing called incessantly by
salespeople who know how to sella product, know how to schmooze
somebody, but they don'tunderstand how the sausage is
made.
And quite frankly, once they'vemoved on from that sale, they're
no longer tied to therelationship.
Somebody else is animplementation or account
service.
And so what I found for me isthat taking Peter on as a
(34:39):
mentor, learning the ins andouts of an adoption agreement,
understanding what.
capabilities, profit sharingprograms have for, companies
that are business owners orpension programs, cash balance
plans or variable plans.
It equipped me with, again, justanother arrow for my quiver,
right?
Like, that's pretty much what itwas.
And you know, that space hasgrown dramatically.
We now manage 50 companyretirement programs, across a
(35:01):
number of providers.
Ken Lucci (35:03):
By the way, so let's, let's stop there for a second.
How big do I.
have to be to, to offer a 401kplan?
Phil Stetson (35:09):
So it's interesting, you might say, you
might say, oh, don't I have tobe a, a huge employer?
No.
The answer is that that's notthe case.
Right?
It's a matter of how you set upthe plan.
The larger the company really,when I say the larger the
company, I mean, when you havemore than 15, 20 W2 eligible
employees.
Eligibility just for anyonelistening on a 401k for the,
from the 401k perspective is athousand hours or more, right?
(35:29):
You become eligible forretirement plans if your
adoption agreement is built thatway.
If your adoption agreement isone hour of work, then guess
what?
Anyone is eligible toparticipate and get money from
the company.
And so that's where, again, likeyou really need to be careful on
how you're advising clients onsetting up these programs.
Uh, but in that sense, companiesas little as 5, 7, 10, 12, 15
(35:49):
employees can set them up.
And what people don't
Ken Lucci (35:51):
Do, do you, do you, you know, we, we struggle with,
we, we help people.
With obviously budgeting,financial performance, and we've
always seen companies strugglewith bonus plans.
Do you think 4 0 1 is a goodincentive?
Phil Stetson (36:09):
So you're touching on such an incredible point, and
it's a part of my practice thatwe meet with our clients kind of
towards September and October toevaluate the profitability and
figure out whether or not therewill be a bonus pool.
Some years, there are some yearsthere aren't bonus pools.
What people tend to forget, andthey don't do this because
they're not paying attention,but they just don't realize it.
If I wanna give out a 80,000 ora hundred thousand dollars
(36:30):
bonus.
Pool to say 30 or 40 employees,right?
Those employees are likelyrelying on that money to pay for
presents, for vacations, forcredit card bills.
And so when you start talkingabout shifting a bonus pool to
possibly some form of a deferredbenefit, like in a 401k or a
profit sharing plan, you end upstarting to play a little bit,
uh, of a game of optics, right?
(36:52):
How will my employees receivethat As, as, uh.
As a way of maybe still payingout the same a hundred thousand,
but maybe putting 25 of it intoprofit sharing or 401k
contributions.
But people don't know what'sgood for them.
Like that's the reality of it,right?
And what's good for most peopleis to save, and most people
don't.
And so for me,
Ken Lucci (37:09):
Uh, you, you, you, you're, you're a hundred percent
right.
I mean, my father taught me whatcompound interest meant.
Phil Stetson (37:14):
and that's,
Ken Lucci (37:15):
I didn't learn that in school.
My father taught me
Phil Stetson (37:17):
I think Ben Franklin said it's better than
sex.
Right?
I think that that's actually aBen Franklin quote, if I'm not
mistaken.
Ken Lucci (37:24):
I would ag, I would agree with him, whether it was
Ben that said it or not,compound interest is fantastic.
Phil Stetson (37:30):
so the earlier you get to the starting line again
there, the better you are,right?
Compound interest is verysimple.
Comp, uh, simple.
Story to tell.
The money you earn interest onthat interest will earn more
interest long term.
And the earlier you get to asaving strategy, the easier it
is to complete.
let me go back to what youasked, right.
Really quickly.
(37:50):
You said, you know, do I have tobe a company of 30 or 40 or 50
or 60 in people to do this?
The answer is no.
But there are also somelegislations that have been
passed in the last year or two.
Depending on what state you are,and depending on how many
employees you have, you aremandated to offer a retirement
plan, and people are completely,you know, unaware of that as a
problem.
It's a big sales push forcompanies like Paychex and a DP,
(38:12):
which are trying to sell 4 0 1Ks.
They're saying, gettingcompliance with us before you
get penalized by the stateyou're in.
But again, it's so important andcrucial that you set this thing
up with the goals of theorganization or the ownership.
At the heart of it, because ifyou do it wrong, it's not great,
you know?
Ken Lucci (38:30):
Yep.
And, and more and more companiesthat I deal with where the
operators are young and, and youknow, I've got one particular
that we just did a proposal for,and he is doing a great job, but
I've said to him, I said to him,he struggles with his number
two, number three, and numberfour People and he wants to
create a team that will run thebusiness without him.
(38:52):
And this is what comes up, ishow to bonus out and how to
incentivize the team and how tobuild a long-term team that will
stay with you instead of theconstant turnover entrenched
employees.
Phil Stetson (39:08):
I mean, but think about this, right?
You know this.
If I'm gonna pay out a hundredthousand dollars in bonuses to
say, employees that are makingless than$176,000 a year,'cause
that's the social securitythreshold for taxation,
approximately, I'm gonna have topay approximately 10% in a
payroll load between workers'comp, social security, Medicare,
and possibly some unemploymenttax.
If you have a high wage cap inyour state, so if I'm gonna pay
(39:31):
a hundred grand, it's gonna costme$10,000 as a business.
If I instead pay 80, I'll save$2,000 in taxes, and that might
go towards the cost of running a401k plan.
Ken Lucci (39:40):
Yeah, I'd, I'd rather pay to my employees than the
federal government.
Phil Stetson (39:43):
And that that's, that's priority one.
Honestly, I'm gonna saysomething that's gonna be
difficult for anyone to hear onthis call.
I hate one kind of client, can Ibe honest with you?
It's juicy.
I hate clients who do not careabout their employees.
I do not wanna work with them atall, because at the end of the
day, what I'm doing is notreally meaningful.
It's not gonna create anydifferences long term for any
(40:05):
families or any people.
And it just, it's not the kindof person I like to work with.
I like to work with people whocare about their staff because
they realize.
It's, if it weren't for thatstaff, they wouldn't be driving
$150,000 AMG They wouldn't
Ken Lucci (40:18):
Well, it you, I, I feel the same way.
And our, I, I, I call it, I justspell it out this way.
If you are running a lifestylebusiness to perpetuate your
business sooner or later, it'sgonna bite you in the ass,
number one.
Your employees are gonna resentyou.
Number two, you're not gonnabuild a company that can survive
without you.
I choose to deal with and workwith people who want to build a
(40:41):
company that is based on peopleand profit.
Those two things go hand inhand, and, and that's when it
comes down.
I'm with you.
I, I'm a hundred percent withyou.
I, I, when I, when I deal withlifestyle businesses, they
usually.
They never want to talk to youwhen they're doing well, but
they won't leave you alone whenthey're not doing well.
When business is down or whensomething has occurred.
(41:03):
And because they are the end alland the be all.
And there's, listen, there'snothing wrong with lifestyle
businesses, but just realizewhat you, what you've created,
you created a job for yourself.
Phil Stetson (41:16):
Exactly 1.
That you're not gonna be able towalk away right from without
selling.
What?
Just your depreciated assets onthe balance sheet.
That's pretty much all you're
Ken Lucci (41:25):
A a and you're, you know, and, and I, I, I gotta
tell you, I mean, I, I, I have asaying with my clients, when you
stop listening, I stop talking.
So when I find that I repeatmyself three or four times and
saying the whole same thing'sover, and what I hear is, yeah,
but my business is different.
No, it's not.
You know, the thing with thelifestyle business.
(41:45):
The thing with all smallbusinesses, they hit a ceiling
and the ones that don't growbeyond the founder.
Okay, beyond just number one,caring for the founder, those
become companies and to me.
You cannot become a companywithout attracting and, keeping
talented people, and you're notgoing attract and keep talented
(42:09):
people unless you have thethings we've been talking about
For 30 minutes.
Unless you've got the benefits,unless you've got, unless people
portray you, oh, wait a minute,that's Ken's company, or that's
Ken's business versus that's anambassador limousine in sedan.
So at the end of the day.
what you provide is basicallyyou provide all of the products
(42:32):
and tools that if, if the smallbusiness person takes advantage
of them, you can be on the samelevel playing field with Largest
companies in the, in the, in thecountry.
Phil Stetson (42:43):
and it's easier, right.
To do it for, you know, the lastpiece I wanna really touch on
here,'cause uh, you know, I knowour time is coming up is the
fact that 401k and profitsharing plans, that's one
document, generally one plan,right?
But the, the ability to considera cash balance pension plan or a
variable defined benefitprogram, right?
(43:04):
These programs allowed thebusiness owner, assuming they
have the right W twos and theright variables, the
demographics of the organizationto take much larger deductions
from the business and put itdirectly into the retirement
accounts that they have.
We've worked with a lot oforganizations that might have
20, 22, 25 people where thebusiness owner might be in their
fifties or sixties, and they aresuccessfully run businesses.
(43:26):
They might be LLCs.
Everything is subject toself-employment tax, and that's
important.
People don't realize that, Ken,when you're talking about
retirement plan contributions,social security and Medicare tax
have to be paid on the salariesby which you are attributing a
retirement plan contributionfor.
So if I.
Ken Lucci (43:42):
So you're taking distributions.
You can't, you
Phil Stetson (43:44):
Can't use those.
So if I'm a, if I'm an S corpand I'm, I'm doing what's right
and let's just say I'm taking$200,000 in a W2 and I'm taking
$300,000 in a K one rightdistributions, or I just leave
it as profit in the business atthe end of the year that I'll
pay tax on that$300,000.
You can't do anything with thatcompensation to create
retirement plan contributions.
(44:04):
You're only using that 200,000number, which means that yes,
you might be able to get$31,000out.
Personally,'cause that's the maxfor anyone over the 50, you
know, year mark to defer ontheir own personally from their
salaries.
But if I want to come up with apension plan or a profit sharing
plan, it's directly tied back tothat$200,000 number, not the
overall$500,000 that you'reprofitable or taking comp on.
(44:27):
So in in that world, you know,we're able to sit down with a 55
or a 56-year-old and we canaccelerate their retirement
savings.
By millions if they have thecorrect variables, the
components of the organization.
Within only a five or six, sevenyear period, right?
I'm not even kidding.
You have two,$300,000contributions.
You can't do that in a 401k or aprofit share, but in a pension
(44:49):
plan, it becomes a viablesolution for a business owner or
their partner and or, ortogether, right?
Yes.
You ultimately have to givesomething to the staff.
In that case, I'm not sittinghere and saying, you're not
going to, but what you have togive to the staff, which is also
tax deductible to the business.
It wanes in the amount of taxsavings you receive just on that
$300,000 deposit, right?
If you're in a 40% tax racket,you're losing 120 grand on
(45:12):
three,$300,000, right?
We can, you and I are mathpeople.
If you put 50 away for the staffand you hide 300 for yourself,
you're still netting out 70grand just in tax savings.
Do you get my
Ken Lucci (45:22):
And, and, and I don't know if, if you agree with this
statement, but I find thatpeople say, well, my CPA didn't
tell me that your CPA is not atax planner.
They're not a benefits person.
Phil Stetson (45:33):
so many CPAs are in the business of filing
returns and not proactivelygiving advice, right?
And the
Ken Lucci (45:39):
Exactly.
They're not certified, first ofall, they don't have your, They
don't have your certificationsand they're also it something
like 90% of CPAs are not taxplanning certified.
Phil Stetson (45:51):
No.
And, but like, you know, thereality of it is, is that they
work in the lane that they'veworked in for years, and they
work with the variables thatthey're comfortable with working
on.
And, and if that is in your, inour industry here specifically
for, for those that havechauffeur, you know, chauffeur
and companies, it'sdepreciation.
Right.
That's it.
That's like all you have.
Maybe you can advance a fewexpenses before the end of the
(46:12):
year.
Right?
But at the end of the day,depreciation's now back on on
the docket, right?
With the O-B-B-B-A bill that.
Ken Lucci (46:19):
A hundred percent depreciation is back, but you
know, at some point,
Phil Stetson (46:25):
I was rooting against that.
Believe it or not, Ken, I wasrooting against that because it
might actually give the businessowners the wherewithal to say,
oh my God, I cannot continue toreduce my income and the taxes
using the assets I'm buying forthe business.
And I thought for a second, ohmy God, this is a great place
for them to fit in a two,$300,000 deduction for
themselves and do something goodfor themselves long term, you
know?
Ken Lucci (46:45):
Right.
Well, to your point, okay.
I've seen, huh.
This is a notorious story hereat Driving Transactions where we
had three years ago, we had aclient we love him, but we, he
shall remain nameless onChristmas Eve.
He called us and look, we'relike a lawyer.
We, we, we, we work bankers andlawyers hours.
(47:06):
You, Chris, around the holidays.
We could take two weekscompletely off at the end of the
year.
Well, this particular personcalled, uh, new Year Christmas
Eve and said, oh my God, I'vejust, you know?
we, we realized we just, youknow, we made two or$300,000 and
I, I need to go out and buy avehicle.
I spent.
Between Christmas Eve and NewYear's Eve negotiating his
(47:27):
purchase of a motor coachreading over his purchase
agreements and it, it was like,we're not doing this anymore.
So for what we do, we don't dotax planning.
We give you a tax prep report.
As of July, we know what you'vedone For the first half of the
year, we know your coststructure, so we're gonna
extrapolate the last half of theyear by looking back at your
(47:48):
numbers, Right.
Last year.
So we're gonna give you one taxprep report in July, and then
the other, the most importantone to me is the one in October.
Okay.
But to your point.
Most of these guys say, okay,well their advice is okay, go
out and buy a vehicle and we candepreciate all of it.
Well, the sad part is most ofthese guys are not paying for it
(48:09):
in cash.
Right.
And unfortunately they're addingdebt to their company.
So, so just, and, and I knowit's not The case for everybody,
but just give us some, just somebroad strategies on tax
mitigation.
Phil Stetson (48:23):
Sure.
So let's just suggest for aminute, let's use your story.
Can we use that for a minute?
You get a call on on ChristmasEve, oh my God, we have$300,000
in profit.
What are we gonna do with it?
Right.
And this is to no offense to theunprepared owner, right?
Which quite frankly, accountsfor a lot of them.
What if I were to say that youdidn't have to burn the profit
(48:43):
before the end of the year tostill be able to claim a
hundred,$200,000 deduction?
You see, most people don'trealize that when the secure
act, the original one, not 2.0came out, it had given people a
much longer time period tolaunch retirement programs
retroactively for the yearprior.
So people think I have to setup, uh, a 401k profit sharing
plan, pension plan.
(49:04):
For 2025, I've gotta do it now.
Yes, in some cases you do havesome deadlines.
Safe harbor plans requiredeadlines and notices to
participants.
But profit sharing plans andpension plans, you can set up as
late as the filing deadline orextension.
Right?
For the prior year?
For the, for the prior year.
So what, right now, let me giveyou an example.
I have a organization that we'reworking with in the industry.
(49:27):
And they're, they filed anextension for 2024, right?
They, they didn't wanna file ontime, and that's fine.
Some business owners don't havethe time earlier on in the year.
Ken Lucci (49:35):
a lot of people do that as a strategy.
I get it.
Phil Stetson (49:38):
And, and, and that's fine.
But what we're talking aboutwith them is where their funds
went at the end of last year.
Do they have the funds that theycan make a contribution of two
to$300,000 and, and claim it in2024?
For their return.
People don't realize that.
So with retirement programs,yes, some plans need to be set
up in the year that you wannautilize them, but other programs
like profit sharing plans andpension plans, you can leave the
(50:00):
money on the, on the incomestatement at the end of the
year, come back in March, April,may, June, July, and still
launch a plan for 2024 and getthe money off of your, off of
the income sheet for Pro fromlike a tax perspective.
So.
Ken Lucci (50:13):
Interesting.
Phil Stetson (50:14):
It's, it's really unique.
You know, and I'll tie this allback to the same story, right?
Like it comes back to my father,right?
Had my father had the goodadvice that maybe he would've
met me.
I would've told him that the CPAis doing something questionable
and don't listen to them.
Go find another CPA.
Think about your business from aperspective of where you're
gonna be in 20 years and how youget out, or 10 years or 15
(50:36):
years, right?
And think about how you're gonnaaccumulate the money.
And when you think aboutaccumulating money, whether
it's.
Investing outside of aretirement program, which, yeah,
we're gonna talk a few secondson here.
put the money away in the mosttax effective manner.
Phase one, right?
Phase one is to save as muchtaxes as you can, and that
aligns with CPAs and that alignswith business owners.
Phase two is don't overindulgein retirement programs because
(50:59):
you're only going to have onetype of dollar to pull out of an
account later on, and it's allgonna be subject to income taxes
at that time, right?
Ken, if I put$3 million in a401k and I say, okay, I'm ready
for retirement.
Every dollar that comes out ofthat thing is gonna be taxable
and it's.
Really anyone's guess on whethertax brackets are gonna be higher
or lower than they are today inthe future, right?
(51:20):
And so you could end up doingyourself a disservice.
But then diversify outta that.
So the last component of ourrelationships that we've really
loved, and this is what I thinkreally makes a difference, is
we've aligned ourselves asquarterly advisors to review the
profit and loss, identify thetax liability, pay the tax, and
then figure out what does theopex need to look.
(51:42):
Like, you know, OPEX isoperating expense reserve,
right?
So what does the opex need tolook like and what is in excess
of that, right?
That isn't being attributedtowards a retirement plan
contribution?
Take it out.
Take the chips off the table,put it into an investment
account and a brokerage account,a managed account.
Invest in the s and p 500.
Do something to do to earn morethan what it's earning in a
checking account in thebusiness, or a savings account
(52:04):
in a business.
Ken Lucci (52:04):
afraid to do it.
Phil Stetson (52:05):
You know, and, and people say, well, what if my
business needs it?
No problem.
It's as easy as taking adistribution and then making a
contribution, a shareholdercontribution.
It's literally just the samething that you're doing, except
you're leaving it in thebusiness.
Right?
And what business with theliabilities that you guys have
to face in your industry wantsto have 70$800,000 in a bank
account, right?
Ken Lucci (52:24):
No, It's a target.
Phil Stetson (52:26):
It's a target.
It's a hundred percent a target.
So, so what we've loved aboutthe relationships that we've
fostered and we've really moldedis the fact that when you work
with a firm that is equipped to,to navigate so many disciplines,
you know, shareholderagreements, estate planning
conversations, retirementplanning benefits, and
ultimately succession planning,which is what it all leads back
to.
(52:46):
You get an advisor that'sliterally like building yourself
a board of directors where twoor three of those roles are
filled by somebody who has theknowledge.
Right.
My biggest challenge, quitefrankly, is that I, I don't, I
need more people, I need morestaff, right?
That's the reality of it.
But for the relationships thatwe've built that, you know, we
have calls quarterly.
(53:06):
We have calls weekly or monthly,whenever we need to, to identify
the problems.
It's important to align yourselfwith that kind of a, like that
kind of a sales person, right?
Because we are all salespeople,right?
At the end of the day, can yousell your service?
I sell mine.
But you're, but theaccountability measure, right,
is completely different topeople who are entrepreneurs
like us than to the corporationsthat simply throw thousands of
(53:29):
units into the marketplace on amonthly basis,
Ken Lucci (53:31):
Yeah, and, and, and I think you're setting yourself up
for disappointed.
Dis disappointment is a smallbusiness.
If you don't have.
A trusted advisor that you canpick up the phone and say,
listen, Phil, I get this idea.
What, what, what should I bedoing here?
Versus you?
You're gonna be calling your repfrom Paychex or a rep from any
of the big companies, andthey're not gonna take the time
(53:51):
to learn your business.
It's the argument that we havewith people all the time.
Your CPA does your taxes.
He's not interested in knowingyour business.
Listen, we, unfortunately, wehave to stop there.
But tell us how people can reachyou.
If you wanna give out your cellnumber, give out your cell
number, give out your email.
Phil Stetson (54:10):
So you could reach me on(973) 953-1700.
That's my cell phone.
My office is(201) 523-9997.
And if you need to reach me,it's PHIL Phil dot sheen,
S-H-E-T-S-E-N, atprudential.com.
Now just quickly, Prudential.
(54:31):
It's not my only brand.
We represent everything in theindustry across the board.
It's just where I hung myshingle when I was 21 years old
and they let me build my owncompany and they let me have
full autonomy in my own office,my own staff.
So if anyone on this call oranyone listening to this call
obviously has a question, mytime It's valuable, but I'm
happy to make.
If anything happen, I, I'm happyto help people, help educate and
(54:54):
coach people.
Look at an adoption agreement.
I'm not gonna charge for that.
I'm, I'm really there, like Isaid, Ken, to help right.
Prevent anyone from becoming myfather.
That's literally
Ken Lucci (55:04):
And, And, you have to give to get, that's why I do so
many webinars and so manyeducation programs, so many free
white papers, and that's why wedo this podcast.
Sometimes we can have, you know,a, a conversation that that can
be a little zany.
But this one is important to mebecause, and I, and I really
wanted to have you on because itjust, when I re meet people that
(55:26):
have built a business over 30years, it's their blood, sweat,
and tears.
It's the only thing they everdone.
And when I tell them, well, thisis the.
This is, this is the only thingit's worth.
This is what it is worth.
And the fact that 20%, only in20% of the cases do these
businesses, any businesses sell,especially seven day a week
(55:46):
businesses.
It's disappointing.
So my message to everybody who'slistening is, it's not too early
to start an investment accountis, and my.
My friends who own businesseswith more than five W2
employees, you owe it toyourself to have a benefits plan
'cause you're gonna attractbetter talented people who could
(56:06):
help you build a company.
Phil, thank you so much for uh,your time today
Phil Stetson (56:12):
Ken, thank you for the opportunity.
Really appreciate it.
I'm so happy to share myknowledge.
Thank you for listening to theground transportation podcast.
If you enjoyed this episode,please remember to subscribe to
the show on apple, Spotify,YouTube, or wherever you get
your podcasts.
For more information about PAXtraining and to contact James,
go to PAX training.com.
(56:33):
And for more information aboutdriving transactions and to
contact Ken, Go to drivingtransactions.com.
We'll see you next time on theground transportation podcast.
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