The Big Beautiful Bill: Discussing RTO’s Finance and taxes with RG Co. CPA's

Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
SPEAKER_03 (00:07):
Hello and welcome to the RTO show.
I'm your host, Pete Chao, andtoday we're out here in this big
building all the way downtown tomeet with the guys of RG Co.
Look at those faces.
I love you guys.
You guys are amazing.
So Mike Helton and Alicia, is itHolloway?
Yeah.
All right.
So Mike was like, I don't wantto do this alone.
I need to bring some help.
So he brought he brought the bigguns out, and she's over here

(00:30):
making sure it's going tohappen, right?
Mike, how are you doing today?
How's everything going?
Dude, I swear to you, as I camein here, this place is amazing.
Like this place is seriouslyamazing.
So I figured maybe three, fouroffices, you know.
Like, no, this like three, fouroffices on this corner of the
building.
So we are literally an entirefloor downtown on 201 North
Franklin Street.
And I'm not going to tell youwhat floor because you're going

(00:51):
to figure that out on your own.
But I come down here and I'mjust telling you guys, it was
amazing.
As I walked through the door,it's it's absolutely beautiful.
If you guys can't tell, theskyline is absolutely amazing.
We're going to do a talk hereand kind of pick their brains.
Mike made me swear that I wasgoing to talk about this big,
beautiful bill and how itaffects you.
So we're going to go over that.
First off, how are you doing,Mike?
How's everything going?
Good, Pete.
Thanks for having us.
Yeah, I'll tell you right now.

SPEAKER_02 (01:12):
Appreciate it.
I'm honored really to be here.

SPEAKER_03 (01:15):
Well, I'm I'm glad you're here.
I'm glad that you're here.
You guys don't know.
We had to twist some arts to gether over here, but she made it.
She's good.
So tell me a little bit, Mike.
There's so much about you Ididn't know.
Yeah.
There's a lot about you I didn'tknow.

SPEAKER_02 (01:28):
There's probably more.

SPEAKER_03 (01:29):
I haven't told you, but there is so much about Mike
Helton that you just don't know,but we're going to figure it out
today.
First off, um, tell me a littlebit about your background.
Like, where do we start?
And I mean, we're gonna have tofigure out how we got here, but
where do we start?
Where does your your yourprowess and professionalism come
from?
Where do you where do you start?

SPEAKER_02 (01:47):
I grew up in Ashland, Kentucky.
So my start got there, well, itstarted there, and then went to
school in Southern Ohio, uh,Shawnee State University, and
got into the accounting programat that point in time, did my
first internship for a CPA firmup there locally.
Um, did that for a few summers,and then they hired me full-time

(02:09):
after I graduated.
So that's how I got involved inthis public accounting business.
Um not long after that, Imigrated to Florida.
Um, I was about 26 years old,you know, a long time ago now.
Um, but uh came to Florida, anduh the rest is history as far as

(02:31):
that goes.
I never really wanted to goback.
Um, I love it here, you know,here in Tampa, beautiful.
Um, and so thrilled to be here.

SPEAKER_03 (02:40):
Well, you know how you know rent to own is is a
crazy world because a lot of thepeople that I know in rent-town
never started a rent-to-owned.
They were doing something else,and somehow they migrated to the
rent-to-owned industry from onereason or another, whether they
had parents that were startingthe business of something else,
retail sales, you know, orslats, he decided to kind of
stretch out what he was doingand apply it to something else.

(03:01):
And then here comes therent-owned industry to follow.
We always kind of startsomewhere else, but I've always
seen accountants usually knowwhat they want from the
beginning.
You usually know, like, whateverit is, I'm this is what I'm
gonna do.
And most of the time, accountingis not rent-to-owned's favorite
thing to do, but it is soimportant because absolutely
it's different from a lot of theother businesses that we go

(03:23):
through.
I know that you I don't know.
Did you know what you wanted todo when you went to college?

SPEAKER_00 (03:28):
I'm looking at her face.
She knew it.
I actually did.
See what I tell you.
I knew it.
I took an accounting class inhigh school.

SPEAKER_03 (03:34):
So now you're a you're a native to Tampa, right?
Or or the area?

SPEAKER_00 (03:37):
Cape Coral.
So two hours from the house.
No, you're not that bad.
Basically, came here for collegeand never left.

SPEAKER_03 (03:42):
Where did you go to college?

SPEAKER_00 (03:43):
University of Tampa.

unknown (03:44):
Right there.

SPEAKER_03 (03:44):
Right.
I can't show it to you guys, butit's right out there.
It's actually one of the mostbeautiful schools in the Florida
area, in the Tambay area, but inFlorida, it's like absolutely
gorgeous.
So you played a littlebasketball?
I did.
I I would have never got that.
If you guys haven't met Mike,I'm gonna tell you right now, he
is not the normal accountanttype of guy.
Like you are completely like youare the one that will stand out
in the group for sure.

SPEAKER_02 (04:05):
I've been told that before.
Um, no, my background, dad was asteel worker.
My mom worked in the lunchroomat the high school, you know,
blue-collar neighborhood.
Um sort of remember aroundeighth grade, probably, um,
shooting basketball in thebackyard.
We had a goal, as everybody doesin Kentucky.
Right.

(04:26):
You know, it's pretty common.
Um, shooting basketball in thebackyard.
And the kids that day at schoolwere sort of talking about what
their parents were doing forcollege fund.
I'd never really heard or talkedabout a college fund before.
So I go home and I ask dad, he'sgrilling some burgers on the
grill, you know, while I'mshooting and asking him, I say,

(04:46):
hey dad, by the way, you know,what kind of college fund y'all
put away for me and my brothers?
You know, I've got two brothers.
You put them on the spot.
One older, one younger.
I said, Yeah, just tell me whatkind of college fund y'all have
for me.
He looked at me, said, See thatbasketball in your hand?
He said, Keep shooting, that'syour college fund.
So right then and there, I sortof knew that that was going to
be my path.
I was not a straight A student.

(05:08):
Um, athletics was gonna take meto college, and it did.
And luckily, I had all years ofschool paid for.
So, on scholarship.

SPEAKER_03 (05:18):
Beautiful.
So, in the world of accounting,how in God's name did you find
rent to own back then?
I mean, you know, you look at ittoday, and you and the
progression that we were talkingabout, I was talking about
before, is you know, there was alot of independence, and there
was only like two or three bigguys.
That was Rack, that was Aaron's.
I don't even, you know, buddiesreally wasn't as big then it is

(05:38):
it is now, or at least the namebrand and you know, where it
came from.
Now you've got larger names likethe rent roll and rent a wheel
are also getting big.
But how how do you guys get intothe world of rent to own?
Because now I I would say thatyou're like one of the experts
as far as accounting in rent toown.
I mean, you guys know thisindustry in and out, which is
something a little bit differentthan what, you know, normal

(06:00):
retail or normal accounting,period.
I mean, there's a lot of factorsthat go into everything that we
do that you know a lot more ofnow than I mean, than almost
anybody I know.
There's very few that handle thebusiness.
How did you get into rent toown?
Where did that start from, youknow, coming playing basketball,
you know, talking to dad, andthen all of a sudden here you
are.

SPEAKER_02 (06:20):
So I migrated to Florida, um, had a short stint
at a firm in Clearwater, uh,then found this place.
So just had my 26th anniversaryof employment here at this firm.
Wow.
26 years.
That's makes me one of the oldguys.
Um, but when I first startedhere, um it wasn't long after

(06:43):
starting, uh, slats had justpassed away.
And this is Norman Slatten andum the founder of Buddies.
And our firm represented andworked with the attorney and was
working on his estate.
So Slats estate was one of thefirst things I did when I

(07:05):
started working here.
Um and that's how I wasintroduced to the Slatten
family.
And so from there we we did alot of estate planning work for
for Miss Slatten um and thefamily, and did um, you know, it
started from there.
And that's how I met Joe Gazzoand Jamie um and some of those

(07:26):
guys.
And it wasn't long before umthey started asking me questions
about the company.
We did not represent thecompany, we were only
representing the family.
Um, and at some point in timethey they transitioned the
company work to our firm, wantedus to take over that.

(07:49):
And that's how I got reallyintroduced to rent to own.
Um shortly after that, theybasically they told me for like
two years, you you really needto start coming to some of these
shows.
You need to start coming to someof these shows.
I'm like, I didn't even knowwhat I was they were talking
about.

SPEAKER_01 (08:03):
Right.

SPEAKER_02 (08:03):
Eventually I made it to my first meeting of the minds
out in Vegas.
And what year was this?

SPEAKER_00 (08:09):
Great one to go to.

SPEAKER_02 (08:10):
Yeah.
I it was pre-2010.
I was trying to think like howlong ago it's been since my
first show.
Um it's been easily over 15years, but not quite 20.
So it was somewhere in the thelate, probably 2008, 2009, maybe

(08:32):
2007 period.
I don't know, somewhere aroundthere.

SPEAKER_03 (08:35):
That was a hard time for rent owned back then.

SPEAKER_02 (08:37):
Yeah.
Well, it was it was, you know,back then I was still trying to
grow a client base.
Uh still am, but you know, I wasreally trying to grow a client
base at that point in time.
Didn't know a soul.
And um, you know, spent a lot oftime with Terry Bevel back then,
who taught me a lot of therent-to-own accounting.

(08:58):
You know, yeah.
There was nobody better to learnit from, quite frankly.
Um, so I spent a lot of timewith him and Joe.
And Jamie literally dragged meby my arm and introduced me to
everybody at these shows.
Because that's Jamie.
That's Jamie.
That's Jamie.
And everybody knew Jamie.
So um that's how I got sort ofbaptized into rent to own.

(09:19):
And ever since my first show,credit to this firm, you know, I
came back and said, hey, youknow, we really need to get more
involved in this industry.
I think there's a lot of workout there that we could get, and
that they seem to need a lot ofhelp.
Um uh and came back and talkedto the partners.
I wasn't a partner at the time,you know.

(09:40):
Um, came back, talked to thepartners and see if they would
support it, and they did and andcontinued to send me to shows
where I actually had a booth andeverything at that point in
time.
Um and we've grown it eversince.

SPEAKER_03 (09:54):
Talking about going to shows, Alicia's now at the
shows.
I see her at all the shows now.
I even see this, I don't want tosay plaque, but this thing in
your office where FRDArecognized RG Co as being one of
the spawns, you know, just oneof the big names in the
industry, and they appreciateyou guys doing that.
How did you find the industry?
Or was it like I'm I'm going toRG Co, and you know what?

(10:15):
I'm now I'm a part of the uh RTOdivision.

SPEAKER_00 (10:18):
So I mean, Janelle and I kind of got baptized
because Kim left our firm.
So we had a need to pull morepeople in.
But it's a an industry that Ilike being in.
I feel like the people are allvery genuine and they care about
like you hear at the shows, theowners, the managers, they're
all saying that they know allthe names of all their
customers.

(10:38):
Like you don't hear that inother industries that we're in.
So it's been really good to go.

SPEAKER_03 (10:43):
You know what's you know, it's eerie.
The other day uh I was in one ofthe stores.
I hadn't been there in years.
And uh I forgot what we weredoing.
We're talking about something,selling something at the front
counter or something, and thisother customer walks in and he's
like, Hey B, where you been?
I'm like, bro, what's going on?
Like it just it's crazy yearslater.

(11:05):
I mean, they'll they'll call youout, you know, and I haven't I
hadn't seen this guy in inyears.
And then it was another customerwho was like, two customers that
came in after that that I thinkthat was, you know, this hey,
how are you doing?
Because I I used to run thestore, it was actually uh the
store in Armenian.
It was nice to see thosecustomers for for whatever time
frame that it was, it was justlike catching up, you know, it
was like just just how are thekids?

(11:26):
How's wife?
How's this?
How's that?
And but it's a relationshipbusiness.
And that's why I don't think youcall them customers.

SPEAKER_02 (11:32):
I think they're clients of yours.
Absolutely.
You know, in our business, wecall them clients because of
that personal relationship wehave, deep knowledge of what
they've got going on, both intheir business and personally.
Yeah, there's no different withyour relationship with your
rent-to-own folks.
And you know, to me, they'reyour clients because you know
them inside and out, and theyknow you, you know their family.

(11:54):
It's a it's a much drivencustomer relationship business,
as you know.
I mean, we may sell differentproducts or services, but it's
it's built on relationships.

SPEAKER_03 (12:03):
All of it's built on relationships.
And you guys know that more thanthan I mean, being here 26
years, you've had some long,long-term relationships.
Which kind of leads me into youstart working for one of the
pioneers of the RTO business.
His son then follows in hisfootsteps of pioneering in the
RTO business.
So we're talking about NormSlats, and then we're talking

(12:24):
about Jamie Slatt, and thenyou're talking about some of the
other names.
Like, I don't, I don't know ifthere was a person who started
working in 2015 and before whodidn't know Terry Terry Beveryl
was.
I mean, just the names alonecarry a whole lot of weight.
What did they teach you aboutrent to own or what did they
help you learn as far as what'sthe difference, uh just a
blaring difference between thenormal rent-to-own dealer

(12:47):
industry, the way it works, andhow it's, you know, how it's run
as far as financials versus alot of the other clients that
you have?

SPEAKER_02 (12:55):
Well, the good thing is back then, I was probably too
stupid to know it was muchdifferent.
Because I was prettyinexperienced.
I've learned through the yearsof seeing other types of
businesses how different it is,but I probably didn't appreciate
it when I first learned it.
So I was just sort of naked toeverything.
The just, you know, I was asponge.

(13:16):
Um, and Terry would sit me in myoffice, uh in his office and
with all his Florida State stuffand everything around.
And, you know, we would um wewould go through um general
ledgers and trial balances andjournal entries, and he would
walk me through.
I mean, he loved it.
He loved it and and did not mindspending time showing me how

(13:37):
that worked.
Um, you know, years later, I gotthe same sort of tutelage from
Chris Cale Sr., who sat me downin his office and went through
how he keeps track of things.
Um, and just had that's what'salways blown me away about this
industry from my first meetingof the minds on how much you all

(13:58):
share information andcollaborate for the greater good
of the industry and protectingthat business and transaction.
Um, you know, the the level andamount of of information you all
share on how you do things andwhat works, what doesn't work,
um, has just blown me awaybecause you don't see that with
other businesses at all.

(14:18):
And and I've received the sameattention from people that have
helped me through my career inthis.
I mean, it it it takes avillage, as you know, and I've
had a ton of help of peopletrying to help us gain traction
in this business um and teach usthat.
And you know, Bill French um uhtold me as a vendor The Bill

(14:39):
French.
Bill, we love you.
I just tell you.
We always talk about it still tothis day.
After my first show, I was sortof depressed and he saw me.
I was sitting over there, nobodylined up at my booth, nobody
talked to me.
I was like this black cloud inthe room that no one wanted to
speak to.
And and Bill walked over, hesaid, he put his arm around me,

(15:00):
literally, and said, buddy, hesaid, just keep showing up and
it'll happen.
And I remembered that.
I was like, okay, I just gottakeep showing up.
And it was year two, nobodycame.
By year three, we startedtalking to people.
And by the end of year three, westarted picking up some new
business.
And um so it it's very fraternalindustry, you know.

(15:21):
It is.
Once once I sort of becameaccepted, yeah, then I once
you're in.
Yeah, I felt like okay, I'm I'mI'm in now.
And now I I haven't stoppedshowing up since.

SPEAKER_03 (15:31):
Well, so talking about going, because you did say
it's the right place to start.
Are you going to Meeting of theMinds in Vegas this year?

SPEAKER_00 (15:38):
I don't know, am I?

SPEAKER_03 (15:40):
Oh no.

SPEAKER_02 (15:41):
She will not be there.
No, unfortunately.
No, though those are generallythe only ones we miss because
they are smack dab in the middleof tax season.

SPEAKER_03 (15:51):
Yeah, I can't.

SPEAKER_02 (15:52):
You know, it's usually like mid-March, and
that's like our busiest time ofyear.

SPEAKER_03 (15:56):
This one's in I think I think February, the end
of February.
Either way, I yeah, it's a hardtime for you guys that time of
year.

SPEAKER_02 (16:02):
It's anything between what I say, Gasparilla,
no one no one outside of Tampaknows.
But but from end of Januarythrough mid-April, we're pretty,
pretty busy.

SPEAKER_03 (16:12):
They're booked pirate season, just so you guys
know.
So talking about taxes, talk tome because one of the things
that I really wanted to get intowas everything else.
And you brought my attention tothe big beautiful bill, which I
appreciate you because I'm not atax guy.
I really don't know this stuff,but I would imagine that this
plays a big part in ourrent-to-owned lives today for a

(16:33):
lot of people listening and forin general knowledge.
What happened when this billpassed?
What is the difference and whatare the changes that came along
with it that might stand out inRTO?
Well, we were watching for awhile.

SPEAKER_02 (16:47):
So this didn't just happen overnight.
You know, there were mumblingsand grumblings for a while of
what may happen.
Um, and then it finally became abig push.
You know, it was supposed tohappen by the end of 2024.
It didn't happen, you know, sortof right after, you know, then

(17:08):
inauguration, all that stuffhappened, and you know, got all
that out of the way.
And there were some other thingsthat had to be dealt with with
Congress.
So you got all that stuff out ofthe way, then they could finally
focus on taxes again.
So it happened probably a yearafter when we thought it might.
Um, but eventually, you know, itwas going to happen during
Memorial Day, and then you know,July 4th became the day that

(17:29):
they wanted to get it all done.
So they it was signed on July4th of 2025.
And the big thing for rent toown is it basically put back in
a hundred percent depreciationfor bonus depreciation.
That's the biggest thing that itdid.
Um, bonus depreciation is andhas been the last few years

(17:50):
ratcheting down.
So it went from 100% down to 80down to 60.
This year it was going to be 40%bonus depreciation.
And where that makes a bigimpact is on the turn.
So you've got not the turn inyour world, the turn in our
world, meaning that you know,with you you expense something

(18:12):
when you buy it, and then whenyou dispose of it on that flip,
you know, you've got torecapture that cost.
So your book cost and your taxcost are very different at that
point once you get involved withbonus depreciation.
So um, but to be able to buy anexpense as you're paying for it

(18:34):
instead of having to pay for getthe expense over time was a big
swing.
And that's that's helpful forsmall businesses, especially
those that are funding theirinventory purchases with
operating cash.
Which is usually the case.
It is.
Uh, you know, some people use itout of a line of credit, and so
I I do throw caution out thereto the folks that are buying

(18:55):
inventory with debt dollars.
It's different than when you'rebuying inventory with your
operating cash.
Um, because you still have topay back the debt.
And then eventually go away.
Then eventually you've got thatflip on the tax bill.
You know, you get the expensegoing in, but then you got the
recapture coming out.
So um it does cause someplanning inconsistencies between

(19:18):
your books and your tax numbers.

SPEAKER_03 (19:20):
Isn't if anybody's using Versaret right now, that
is that little tax number upthere above the book value line.
You know, I don't want to getinto that because Lord knows I
know what I don't know muchabout it.
But what immediate actionsshould these businesses take
before year end to takeadvantage of this big, beautiful
bill?
Because it was signed in July4th of 2025, which means that it

(19:43):
wasn't an effect before thatit's gonna affect this tax year,
or is it coming to the 2026 tax?
I don't know how that works.

SPEAKER_00 (19:49):
Some of both.

SPEAKER_03 (19:50):
Some of both.
Okay.
So what is it?
Is it uh and for lack of abetter term, I don't want to
take this technical, but it'slike a 50-50 thing.
Some of it happens now, some ofit happens later, based on
because it was signed in themiddle of the year, like
literally in the middle of theyear.

SPEAKER_02 (20:04):
The the bonus depreciation piece, um, oddly
enough, what's the date?
January 19th.
January 19th, yeah.
Yeah.
So because the bill wasannounced on January 19th, they
made bonus depreciationeffective on that day.
So imagine that all yourpurchases between January 1st
and January 18th don't qualifyfor bonus depreciation, but

(20:27):
everything after January 19thdoes.

SPEAKER_00 (20:29):
I I would have been really nice if they put it back
to January 18th.

SPEAKER_02 (20:34):
I don't know why that 19 days had to be included
in there, but they did.

SPEAKER_03 (20:38):
So I mean, could it be because the govern the the
the president is sworn in onwhat, the 17th, 16th?

SPEAKER_02 (20:42):
No, it's the day that the bill was introduced.
Is it so so the um I can'timagine I've got one
rent-to-owned client thatpurchased anything this year
between January 1st and January.
That's usually a dead zone.

SPEAKER_03 (20:55):
January is a no-fly zone.
I mean, that's one of the don'tdo it, don't do it, don't do it.

SPEAKER_00 (21:00):
Everybody's still on vacation.
Christmas hangover, yeah.
They don't buy it till later inthe year.

SPEAKER_03 (21:04):
Yeah, the thing is it I mean, I think I think that
usually the first purchases endup being around meeting of the
minds because of that.
Like, don't touch January, letit let it just let it sit.
We've got to deal witheverything that came out of the
Christmas time and right.

SPEAKER_02 (21:15):
Well, you do have a lot of holiday purchases.
And so to mention, you know, howwe're planning for it, right now
we're sort of still in themiddle of fall busy season.
You know, September 15th andOctober 15th are big tax
deadlines for us.
Um that being said, right afterthe October 15th deadline, we
start doing year-in taxprojections for our business
clients.

(21:36):
And so that's when we'll starttalking about the impacts of
this bill and what that meansand running tax projections for
them.
Already had calls from peoplewanting to adjust their
quarterly estimated payments andthings like that as a result of
it.
So it will be impactfuldepending on whether you decide
to take bonus depreciation oryou can actually elect out of it

(21:58):
and not participate in bonusdepreciation.
Does cause some planningdiscussion?

unknown (22:04):
Yeah.

SPEAKER_03 (22:06):
Let me ask you a question, because this is
definitely this is outside of myrealm of doing.
But you get a you get a billlike this, it's a huge bill,
right?
Something comes down the pipe,you guys see it coming, you
learn a little bit about it.
But when these bills are passedand they're a law, what does it
take to learn about this billand then implement it

(22:26):
afterwards?

SPEAKER_00 (22:28):
A lot of reading.
How many pages was it?

SPEAKER_02 (22:31):
Yeah, it was about a thousand pages.
But we subscribe to plenty ofsources.
We spent a lot of money onresearch platforms that every
day there's something in ourinbox from each of them about
updates.
And as the IRS comes up with newnotices and new regulations and

(22:51):
new just here's how we're goingto address these new laws, we
stay on top of that.
And we share that informationwith our with our team here.
So every day there's somethingcoming up about reading.

SPEAKER_03 (23:05):
Is that the biggest so this this bonus appreciation,
is that the biggest advantagethat somebody in rent-town can
take as far as this bigbeautiful bill is concerned, or
is there other things that areinvolved in this that it's
really going to affect usdirectly?
And not just, you know, there'sthe broad stroke, right?
It's going to affect everybodythe same.
If you know your tax percentagegoes up, it goes up.
It goes down, it goes down.
Everybody's dealing with that.
But is there anything elsebesides that that really affects

(23:26):
the rent-to-one community wherethey can say, well, this was an
advantage or a disadvantage ofthis bill?

SPEAKER_02 (23:32):
There are.
I mean the Yeah.

SPEAKER_03 (23:34):
Go ahead.

SPEAKER_00 (23:35):
Well, you mentioned a lot of RTO um businesses use
debt to buy their inventory or,you know, run operations.
There was a limitation in placethat could disallow interest
expense.
Um it's still there, but they'vemade it a little more favorable.

SPEAKER_02 (23:52):
Yeah.
So the the I have no idea whatwe're talking about.
The nerdy code section is 163little J.
But what it did was limit theability for businesses over a
certain gross receipts cap, sothe bigger businesses, not the
smaller, to not uh to disallowinterest expense above a
threshold.

(24:12):
So let me clarify what thatmeans.
You've got taxable income forthe business, and what this law
does is it limits your abilityto deduct interest above 30% of
what they call adjusted taxableincome.
So what is adjusted taxableincome?
Well, you start with yourtaxable income and then you add

(24:34):
back interest and income taxesto get to an EBIT number.
The EBIT, the EBIT number.

SPEAKER_03 (24:41):
Earnings before interest and taxes.
That's the EBIT number, guys.
I've there's an elusive name outthere for it.
That's it right there.
The EBIT I see on every all mypaperwork.

SPEAKER_02 (24:50):
So they limited it to 30% for the last few years of
EBIT.
What this law did was itadjusted the definition of
adjusted taxable income back towhere it started in 2018, which
was to EBITDA, EBITDA, whichadded back depreciation and

(25:10):
amortization on top of that,which is huge for rent to own.
Yes, that I do know.
Depreciation is a huge number.
So that really imp increasesthat adjusted taxable income
threshold.
So 30% of that is gonna allow alot more interest to be deducted
for that business than what wasnormally allowed.

SPEAKER_03 (25:30):
Well, guys, I would tell you right now, if you
haven't started on your taxpreps or you don't understand
it, please reach out to theseguys because they're gonna tell
you there's another way to doit, and hopefully it helps all
of us out uh in the time tocome.

SPEAKER_02 (25:41):
So the other thing I will mention about this big
beautiful bill is forrent-to-owned employees who are
in overtime, there's anexclusion now on overtime pay up
to twelve thousand five hundred.
So now your employees who are inovertime can exclude twelve

(26:03):
thousand five hundred from theirtaxable income for overtime pay.

SPEAKER_00 (26:09):
Up to a threshold.

SPEAKER_02 (26:10):
Now, the the the part that's excludable is when
you when you think of time and ahalf being overtime pay, it's
just the half portion, not thestraight rate portion that
qualifies.
So they have to be under acertain gross income threshold,
which is I think in themid-150s.

SPEAKER_00 (26:30):
I was gonna say 150.

SPEAKER_02 (26:31):
Around 150.
But for those people that areearning overtime pay, there will
be a new form that will allowthem to deduct some of that
overtime pay on their tax billas well.

SPEAKER_03 (26:42):
I know a lot of employees are really gonna enjoy
that part as much as humanlypossible.
Uh I can tell you right now,there's there's so much that you
guys understand about thisbusiness that I just don't.
And I really appreciate that youguys are even here because Lord
knows this there's it's not anoperational thing.
And I I think that sometimesbeneficially we forget.
And there's guys like, you know,even like myself, that are guys

(27:05):
out there who just want to opena business.
They want to get in there andthey want to get it open.
But there's so much behind thescenes of understanding your
business, how to run yourbusiness, how to be successful
in your business that don't justit's not just counter work.
You know, how you spend yourmoney, where you get your money,
whatever you do with it is justas important as saying hello
when they first walk in the doorand making sure that they have

(27:25):
the greatest customer experienceyou can give them.
And learning that over theselast few years has probably been
the biggest thing that I can sayis there's so much in front and
behind the counter that I justdidn't know.
And so, you know, being able totalk to you guys about that and
understanding it is it's a hugeadvantage for everybody who does
it.
You got to help me out here,though.
I got to stop it for a minute.
I say RG Code because I justcannot say it the right way.

(27:49):
Help me say it.
Rivero, Gordomer, and Company.
Gordomer.
Okay, so it's Rivero, Gordomer,and Company.
Yes.
And where did the RG code comefrom?

SPEAKER_02 (27:56):
So it's just their initial.
So basically, we got tired tooof saying Rivero Gordomer
Company everywhere we went.
And and you know, the person onthe other end of the phone
saying, Can you spell that forme?
So, you know, we basically, whenwe rebranded logos and
everything else, we just sort ofshorten it down to RG and Co.

unknown (28:14):
Okay.

SPEAKER_03 (28:15):
It just seems easier.
You know, as I was comingthrough the as I was coming
through the offices, I seen allthe I believe it says
shareholders on there.
Yeah.
And I see Mike's face on there.
It's like, okay, well, I'm inthe right spot.
Um, how many, how many of theiris it?
We have 10 shareholders.

SPEAKER_02 (28:30):
10 shareholders.
Yeah.
And yeah.
So I'm I'm one of them.
Um, you know, Alicia is a seniortax manager.
Um, so she's one step away frombeing on that one.
Oh, are you gonna be are yougonna be 11?
We don't know yet.

SPEAKER_03 (28:44):
She's like, I can't say I can't speak on that just
yet.
I mean, it it's she will if shewants to be.
Let's just put it that way.
There you go.
That's the question.
You know, we were going throughuh, you know, April had done a
lot of of these webinars thispast year or so.
There was a lot of peopletalking about a lot of different

(29:05):
things.
There was a part where youactually spoke on the valuations
of businesses in the RTO worldand and how they can vary and
differ.
What are some of the things andand I I'm not gonna go into like
the corporate world becausethat's just crazy.
I mean, you got you know athousand stores.
I I'm not even gonna ask thatkind of question.
But what are some of the biggestthings that cause a different

(29:27):
valuation from one RTO companyto the next?
What are some hot points thatyou can say this matters most?
You know, whether it be, youknow, you have three vehicles,
this guy has one, this guy hasmore customers than you do.
This is you have customers, butthis guy has agreements or
revenues.
I mean, what what are the hugedifferences between saying this
this company is worth it versusthis one needs a little help

(29:48):
before you buy?

SPEAKER_02 (29:49):
So I'm gonna back up a little bit before I answer
that question.
Um and sort of start from wherewe started with that.
So a few.
A few years prior to this, umyou know, I was asked to host a
panel at RTO World withpanelists that included people

(30:14):
like Trent Agin, MichaelBennett, we had um our valuation
and advisory person there aswell.
This may have gone back to like2021, because I think it was
when we were here in Tampa.
Um that being said, the thepanel was on valuation and
buying and selling businesses.
Um and so we had dealers and wehad professionals, we had people

(30:37):
that have done it for buy side,sell side, you know.
All over.
Yeah.
And when I first got started inthis business, um, what I
learned was pretty mucheveryone's exit plan was Aaron's
or rack.
Right?

SPEAKER_03 (30:51):
That was everyone's exit plan.
I'm gonna make this as big as Ican so that somebody buys me out
in the end.

SPEAKER_02 (30:57):
Yeah.
Almost like a house.
But there was also there wasalso that state of mind that I
know they'll buy me.
So I didn't have to really worryabout how I was gonna exit.
I know they'll want me andthey'll take over my store if I
if I want, you know, so thatstopped at some point.
Yeah, that stopped.
And so then everyone sort ofbecame all right, who's gonna

(31:18):
buy me?
Who's interested in buying me?
What's my company worth?
And so I think there was moretalk about that.
Um, you know, now there's stillthe swap stores and different
things going on.
Um, but but that panel sort ofdrove some discussion, I
believe, for um for dealersabout their own exit plan and

(31:40):
and who's going, how's thatgoing to transition?
So we started talking about notjust selling off to a
competitor, but you can alsotransition your business to key
employees or to a family member.
We've got some second generationowners in this business, as you
know, who do very well and havegrown up in this business.
Um so you know, it's sort of allof that is what we wanted to

(32:05):
discuss more is how can youtransition and when should you
start transitioning?
Not just the what's my businessworth, but we also talked about
the key components of how thatgets built.
So Charles Smitherman came to meum, you know, late last year and
talked to me about doing one ofthese APRO webinars and said,

(32:25):
hey, I really want to create aresource for APRO to have to
where people can go on who aremembers and access information
on valuation and on exitstrategies and on that.
So I want you to kick it offwith another discussion on that
topic, and then I want to putsomething into our platform that

(32:48):
people can draw from resources,and that's where we're at now.
Is he's you know, we've we'vesort of taken the slides from
that presentation, built out aneducational draft, and we've had
different iterations of it anddrafts going back and forth.
Um, and I think it's now come toconclusion to where Charles is
basically about ready tofinalize it and put it out

(33:09):
there.

SPEAKER_03 (33:10):
I'm gonna tell you right now, when he as he was
talking, I I had like threepages of notes, and I was like,
I can't, I cannot write thisenough.
I cannot, there's too much forme to put down on this.
It was just so much that youcovered on there, and it was it
was pretty in-depth.
I mean, yeah, it is.
You gotta know your business.

SPEAKER_02 (33:28):
It is, and it unfortunately it's pretty
in-depth, but it's still verybrush strokes.
I mean, it's high-leveldiscussion because when you
actually get into an actualbusiness valuation, so much more
detail goes into it than whatI've discussed.

SPEAKER_03 (33:42):
Now I'm kind of now I'm kind of worried to find out
what are those major things thatmake it you, you know, they're
gonna be like, but that's that'snot what I know.
You know, is the these thingsthat make these differences, uh,
you know, and I I guess it'sgonna be for a lack of a better
term, a very broad coverage ofwhat these topics might be.
But there must be some difficultconversations there that must be

(34:02):
had when you you know you havesomebody who's like, I'm ready
to get out, I've got you know,how many ever stores, and I
think they're worth this.
And well, let's just let's justkind of cover the bases because
you might not be.

SPEAKER_02 (34:14):
Well, the first thing I tell people is I've been
through a lot of MAtransactions, both buy side and
sell side, not just RTO, butmany businesses.
Um never once have I ever seenin any purchase agreement an
allocation of purchase price tosentimental value.

SPEAKER_03 (34:33):
So that's not the big, beautiful bill.
Hold on, hold on.

SPEAKER_02 (34:36):
So I get them over the hurdle really quick that
your sentimental value is worthzero to a buyer.
So let's talk about what theyreally want to buy.
They want to buy cash flow.
They're buying a cash flowstream.
So when you get into are theybuying assets, are they really
buying delivery trucks?
Are they buying inventory units?
They're buying all of that.
They're buying a recurringrevenue stream, but really they

(34:59):
want to know how much cash flowis this thing dropping and what
am I willing to pay for it?
And that comes back to risk.
How much am I willing to pay forit?
That risk drives the multiple.
So, what I try to explain inthese discussions is we're gonna
wait, we're gonna discuss themultiple word because that is a
big word read to own.

SPEAKER_03 (35:18):
I would tell you even when I was like we las
learning everything, there wasthe word multiple that came out.
And I was like, What?
Whoa, whoa, whoa, what didn't Ijust hear?
We're gonna go back to that.
But but it so it fuels so all ofthis helps fuel the multiple of
the sale.
We'll talk about that.
And so I'm sorry, I didn't meanto cut you out.

(35:38):
Just that multiple word, it justit's one of those those
catchphrases, one of thoseterminologies that a lot of
people are gonna get they'regonna hit me back and go, that's
where the multiple came from.
Yeah, that's what it is.
Yeah, Josh, just so you know,this is for you.

SPEAKER_02 (35:50):
So it yeah, I mean, that's really what drives it.
And so what I try to explain tothem is what where to start.
And it starts going back to theEBITDA discussion.
You know, what is what isEBITDA?
And then how do we go fromEBITDA to free cash flow?
And once we know free cash flow,which basically means

(36:12):
operationally what the companyis driving, once I normalize
everything, so every businesshas different things in it that
run through the company that mayor may not be an expense item of
what a buyer may have.
So for instance, if you're anowner, you may have a very
inflated salary.
You may have your car on there,your wife's car on there, you

(36:36):
know, your kid's car on there,you may be running some stuff
through there.
It might be more personal thanbusiness.
All of those things, they sortof look at the numbers and say,
well, how do we flesh out whatthis PL is going to look like if
we take it over?
And so you sort of normalizethose earnings and adjust it
all.
Where rent to own is a littledifficult is you have to account

(36:57):
for the differences between thedepreciation cost of goods,
which is a non-cash item.
So I've paid for it, but lastyear, but now it's hitting my
books this year and my cost togo.
Right, right.
You know, so you sort of have toflesh out those differences with
addbacks and subtractions forwhat am I really paying versus

(37:18):
what am I expensing, and sort ofnormalize what that cash flow is
to get to free cash flow.
Then once I have free cash flow,I I basically apply a
calculation to that free cashflow, which you refer to as the
multiple.
We refer to as an inverse of thediscount rate.

(37:38):
So it gets discounted based uponsome present value of what
somebody's willing to pay nowfor a future cash flow stream.
So am I willing to pay a dollartoday for the right to earn
three dollars over the course ofthe next five years?
And how risky is that dollartoday?
That risk factor drives themultiple.

(38:02):
So whether it's a multiple offour or five or ten or whatever,
that multiple is driven basedupon their determination of how
risky you are.

SPEAKER_03 (38:14):
Now, when you say risk, are we talking about
because I'm I'm I'm trying toput my brain around this.
And I'm sorry, guys, I'm not I'mnowhere near on that level, but
when you say risk, are wetalking about how many customer
returns that we've had in thelast six months on average, how
many agreements lost, or howmany agreements gained, or a
little different.

SPEAKER_02 (38:31):
So let's start with if you were if you were gonna
take a dollar and invest it intoa treasury bill, very safe
investment.
You're not gonna lose the money.
Absolutely.
You're also not gonna have a bigreturn on that money because
there's no risk.
Right.
But it's safe.

(38:52):
You start there.
All right.
So what is the risk if I investin a treasury bill?
What is the risk if I invest ina publicly traded company?
Publicly traded company has areadily ascertainable market
value on any given day at anygiven time.

SPEAKER_01 (39:08):
Right.

SPEAKER_02 (39:08):
I can point to Amazon stock right now and say,
there's the stock.
That's what it's worth.
That's what it's worth, andthat's what I can sell it for.
You can't do that with privatecompanies.
There's no easy market outthere.
So they define risk with otherthings.
How does it compare to atreasury bill?
What is the the risk that thisrecurring revenue stream doesn't

(39:33):
exist tomorrow?
How strong is my employmentbase?
How strong will the ownerleaving influence my business
tomorrow?
All of those things they look atand and sort of build up levels
of risk based upon safeinvestments versus pub publicly

(39:54):
traded companies versusnon-publicly traded risk versus
now you've got an industry risk.
What is the industry risk withinthat private industry?
Who puts together this riskportfolio?
Is it you?
Valuations, experts.
They all do it.
I mean, but if you give if yougive 10 business valuations, uh

(40:15):
10 valuation experts, a set ofnumbers, the same set of numbers
with a three-year trailing, youknow, set of books, they'd
probably all come up withsomewhat of a different range
based upon how they determinewhat that risk would be.
Um, and that's looking atcomparable sales, that's looking
at what's going on in themarket, that's looking at

(40:35):
interest rates, that's lookingat all of those external forces
that can drive a riskierinvestment.

SPEAKER_03 (40:42):
Is it I'm curious because this is something that I
do, right?
And and I'm trying to dumb thisdown for myself here, but I just
want to talk to you about it.
So, like if I want to get my ACrepaired, I'll call somebody.
And they come out and they'llsay, hey, 500 bucks, 1,000
bucks, whatever the case is.
Okay, I'll call you back.
I just did that this weekend, asa matter of fact.
And I'm gonna call up somebodyelse, you know, and and I'm

(41:03):
gonna tell them, hey, this iswhat's going on with my AC.
Come on, take a look.
Oh, it's gonna be 400 bucks.
Oh, it's 400 bucks, 400 bucks.
You know, give me a workup.
This is what you're gonna do forthis amount of money and yada,
yada, yada, right?
I'm gonna call somebody else.
Usually we have the rule ofthree in operations.
The rule of three says you takewhat you see out of three and
you kind of figure it out.
Is the cheapest price the best?

(41:24):
Or is it a guy at 500 becausehe's gonna give you$100 worth
more of value to not have tocome out again, right?
Because you got the cheap guy,you've got the middle guy, and
usually you get the one guy whosays, Yeah, this is gonna cost
you$800.
Why is that?
Well, this is out now.
That's gonna go out in threemonths.
And if I have to come out here,I'm gonna charge you$175 for
both visits.
You can just knock it out nowand be done with it, and you
won't see me for another year,and I'll give you a you know, a

(41:44):
year's warranty, right?
Whoa, you just blew me out ofthe water now.
Valuations, because they're sodifferent.
Does somebody go, hey man, thisis the valuations that they're
giving me?
This they're saying that I'mworth$500,000,$600,000.
Does somebody go out and say,hey, I want Alicia's idea of
what my company's valuated atversus Mike's and then work it

(42:06):
out in between?
Or is it a company standard,whatever I go with you and you
tell me it's worth, and then thebuyer has their guys who do
valuations, they said it's worthworth, and we kind of just kind
of figure it out there.

SPEAKER_02 (42:15):
Yeah, the buyer will generally hire a company like
ours to do what's called aquality of earnings.
So even if you had a valuationreport done as a seller, said,
okay, my company's worth amillion dollars, the the buyer
is just not gonna take thatnumber and say, okay, you know,
I'll I'll buy you for a milliondollars.
They might, but there'snegotiation.

(42:38):
Right.
Um, they're gonna come in and dodue diligence, they're gonna
look at your numbers and that'sand put together using a
professional firm like ours, aquality of earnings, which
basically looks and says, okay,what is real here?
Is the revenue real?
Are these contracts good?

(43:00):
Are these customers paying?
Right.
And they'll look at samples,they'll look at trends, they'll
look at trailing three years ofactivity, and so they'll
determine and give a reportbased upon, all right, we've
tested these things, we'velooked under the hood, these
numbers are good, thesecontracts are good, we pulled
the contracts, they're real.

(43:21):
So, you know, it's not an auditand it's not a valuation, it's a
quality of earnings.
And so it basically presents onwhat is the quality of the
numbers that they're presentingto you based upon what you feel
you're gonna take over with yourpurchase price.
How long does this usually take?
Months.
Really?
Yeah, yeah.

(43:41):
It takes um 30 days minimum,depending on the records that we
get.
Generally, getting theinformation to do the work we
have to do is the hard part.

SPEAKER_03 (43:53):
Alicia, what's what's what's something that you
when you started out and youfound out about rent to own, it
was like, this is this is waydifferent than when I started.
This is something this is adifferent way of looking at
business than I'm used to.
Come out of the classroom andnow here we go.

SPEAKER_00 (44:08):
I think the inventory is the biggest
difference how you treat it.

SPEAKER_03 (44:11):
Because it doesn't just leave.

SPEAKER_00 (44:13):
Yeah.
And it could come back.

SPEAKER_03 (44:15):
And leave again.

SPEAKER_00 (44:16):
Yeah.

SPEAKER_03 (44:18):
So if if you over the years, now that you're here,
you know, now, would you saythat you have a lot better grip
on rent to own than you didbefore?
And how long did that take?

SPEAKER_00 (44:29):
I mean, it's I've basically been in it for less
than one year at this point.
Oh, okay.

SPEAKER_02 (44:33):
All right.
Well then how are you 12 monthslater?
Uh uh one year.
Yeah.

SPEAKER_01 (44:37):
Yeah.

SPEAKER_02 (44:37):
Another month.
So our RTO committee here ismade up of we got about six
people.
Not just me, not just Alicia,but we've got others.
Some tax, some audit, somevaluation advisory.
We meet every couple months totalk about what's going on in
the industry, what we'velearned, what's going on with
our clients, what services weneed to be doing, and we
collaborate on those things.
So, so that she is continuing tolearn more as she goes.

(45:02):
Um, but learn more at all.
She's fairly new to it in in allrespects of what we've been
doing here as a firm for awhile.
She's only been with us four anda half years, um, but really
stepped up last year to getinvolved in rent to own when we
had personnel departure andstepped up to basically say,
hey, I'll I'm willing to learnthis and help out and take over

(45:24):
some of these relationships.

SPEAKER_03 (45:25):
Welcome to the RTO family.
So, you know, one of the thingsthat I've been asked, um, and
I'm gonna ask you because youguys see it on a whole different
level than we do.
Some people have said, you knowwhat, rent owned's fine, the
economy is just going throughwhat it's going through.
It is what it is.
And I've heard people say, Oh myGod, the bottom's gonna fall
out.

(45:45):
Oh my gosh, what are we gonnado?
Have you seen a change in in therent-owned industry in the last
few years, depending on what'sgoing on?
It's like far as maybeconsolidation.

SPEAKER_02 (45:54):
Sure.
Um, but I've always felt thatthe rent-to-owned industry I
won't I hate to use the wordrecession proof or economy
change proof, but it somewhat isinsulated compared to other
businesses we work on.
Okay.

(46:14):
So you got to remember our firmdoesn't just do rent to own, it
is a very full-service firmdoing all walks of life in all
industries.
So compared to other industrieswe see that very much get
impacted with ebbs and flows ofeconomy, rent to own I've seen,
is impacted less.

(46:36):
And I'll say that it doesn'tmean the numbers aren't going up
or down in interest rates or,you know, but generally
speaking, your clients,customers, um will may change,
you know, if someone has aneconomic shift in their life
where they were a retail buyerand now they want to look at the

(46:58):
rent-to-owned transaction, orthey're just not as confident
because of their job status togo out and want to buy
something, they want to rentsomething that's less risky,
going back to that word.
So your business may shift alittle bit, but less impacted, I
think, by the economic ebbs andflows as others.

(47:18):
Now, when you're in therent-to-owned business and you
don't see everything going onoutside, you probably don't
recognize that because you'relike, okay, my customer counts
down, they're paying slower.
Yeah.
You know, all of that stuff.
But compared to otherbusinesses, it's less.
Does that make sense?

SPEAKER_03 (47:35):
Well, I mean, you're always looking for the benefits,
right?
If I have a car business andthere's a car boom, I'm doing
well.
If there's no, you know, there'sno car boom, then you gotta
think.
So you gotta always look at thebright side and you always want
to manage the risks.
Uh, right now, I think that theeconomy is going through
whatever it's going through andit's gonna be hard.
Uh, one of the things that Iwanted to talk about was as this

(47:56):
looming idea of tariffs come up,does that play any difference in
the taxes of a rent-ownedcompany?
Or is it just your your costgoes up with what comes in, and
that really doesn't affect thetax side of it at all?

SPEAKER_02 (48:11):
Your cost goes up, so should your pricing model.
It has to go up.
Has to.

SPEAKER_03 (48:14):
Yeah, right.

SPEAKER_02 (48:15):
You've got to pay for that somehow.
So from an income taxperspective, it doesn't really,
it doesn't drive any decisionswe're not already doing.
But from operations it does,because it does affect your
pricing models and how you'rehow you're looking at what you
have to price product out at andwhen you have to order so that
it shows up when you want it to.

(48:36):
Absolutely.
All of those things.
You know, the the um theindustry itself, though, is you
know, and I keep saying this,has shifted.
You know, you guys have had tolearn how to do online sales.
You've had to learn to dodifferent things post-COVID.
You know, you've had to go backand learn to rent and collect,

(48:58):
whereas a few years you just hadall this economic stimulus money
that was floating around outthere.
God, it was such good times.
Good times.
But you're also experiencinglabor loyalty issues just like
the rest of us are.
Yeah.
You know, and so constantlyhaving to retrain people coming
and going.
Um, so you're experiencing someof those things too to run your
own companies.
And I see that rent to own nodifferent than others.

(49:21):
You've got good operators andyou've got less involved
operators.
Yeah.
And it's very much you know,you've got to be you as an owner
and and a manager, you've got tobe heavily involved in your
business and know your numbers.

SPEAKER_03 (49:36):
Yes.

SPEAKER_02 (49:36):
You got to pay attention to it.

SPEAKER_03 (49:38):
Well, I've seen them both.
I've seen guys that are, youknow, at the front counter every
day.
And I've seen guys that theylike to drive, uh, they like to
drive off the lot at 12 o'clockin the afternoon and not come
back to the next day.
It just happens, you know.
Um what when we're talkingabout, because you you were
talking about the exit strategy.
I want to, I want to build this,I'm gonna have three, four,
five, twenty stores, whateverthe case is, I want to get out.

(50:00):
And now the big players are notin it.
At least not the way they were.
Because I remember there was agrowth cycle rental center, and
I'm with you on it.
They bought anything that wasalive.
Uh, you know, I'm not that muchwith the errands, but I also
know another couple of companiesthat were like, hey, we'll grow
uh if it has a rent-to-ownmoniker on it, I'm gonna stick a
couple of trucks and a few guysin there and I'm gonna see if it
works out or not.
They were buying anything.

(50:21):
Fast forward to today, they'renot growing like they used to
be.
Not saying that it's a badthing, but they've decided, hey,
we're gonna work on our own.
We're gonna grow thisorganically.
If we open it up, we're eithergonna do one of two things.
We're gonna evaluate and makesure this is 100% good idea, or
we're just gonna open it upourselves, right?
But the exit strategy is has notgone that far.
There are people that are stilltrying to get out of this and
trying to figure out whatthey're gonna do.

(50:42):
What as you guys have seen, whatare the more active buyers now?
Are they big companies?
Are they investment groups?
Like, who's buying rent-to-owntoday?

SPEAKER_02 (50:54):
You can use the term private equity, you can use the
term venture capitalists, youcan use the term just regular
entrepreneurs.
You know, we've seen an influxof people that weren't in the
rent-to-own space come into thisbusiness that are interested in
buying cash flow models.

(51:16):
Rent to own is a cash flow modelbusiness.
It's not real estate whereyou're buying that building.
Right.
You know, you're buying a cashflow stream, just like I talked
about a moment ago.
So you've got groups out therethat may be having a portfolio
of real estate.
They may have part of theirportfolio and other franchise

(51:38):
groups like Popeye's Chicken orDunkin' Donuts, and they learn
about this rent-to-ownedbusiness and they go to a show
or they go to a franchise showand they learn more about it.
And so they start looking at thenumbers.
And so they have made an influxof investments into this

(51:59):
business as well, to where theymay take over control, or they
may take a back seat as far ashow how much they're involved in
the the day-to-day.
Most of the ones that uh theones that I work with and have
have taken over majoritycontrol.
They've basically bought thebusiness effectively and and

(52:20):
taken over stores or groups orchains or whatever.
So um, and that's what they'redoing.
So you don't have the the racksand errands and different groups
like that, the big companiesthat are just taking on
everything, but you do haveother investment groups, but
that has slowed down withinterest rates rising, you know,

(52:41):
because those groups do come inwith plenty of capital, but they
also want relationships withbanks.
So we'll transition to thatdiscussion.
Banks don't really like thisbusiness.
So I hear.
So I hear.
And I know you've had some otherpodcast people out here before
and had that very discussion.
But that being said, we all knowthat.

(53:03):
We're we we all continue tosearch for banks to get them
comfortable with this business.
Those investment groups do thesame thing.
I have plenty of discussionswith banks all of the time about
this transaction, this balancesheet.
Why is there no accountsreceivable?
Why is there not inventory?
What's in my cost of goods sold?
I don't understand this at all.
It doesn't fit into my retailmodel at all, and I have it's

(53:25):
broken.
So we have to explain that tothem all the time.
And so they go through the samething.
So as interest rates rise, riskbecomes heavier, banks want,
don't want to lend out,especially to a business they've
never lent to before.
So you've seen a slowdown inthose transactions the past few

(53:45):
years too.
And so it's it's causing some ofyour aging dealers that do want
to exit to look at other things.
You know, what can I do?
You know, can I transition this?
Can I um do I have a familymember that's interested or you
know, son or daughter that wantsto take this over?
Do I have a key employee?
How do I do that?

(54:05):
And so that requires them tostart planning a little bit more
in advance.
You can't just wake up onemorning and say, ah, you know
what?
I want to retire tomorrow.
I'm ready to get out.
I'm for sale.
Let's hang up for sale.
Somebody buy me.
So you got to start planning inadvance.
And to do that, you've got tostart looking at the numbers and
some of the things that we'retalking about to plan for that.
What's attractive to a buyer?
And now scrub your own numbers.

(54:26):
Let's look at your numbers tosee what can what your value is
today and what you can do toimprove it to make it attractive
to a buyer.
Or if you want to transition tosomeone else that can't afford
to buy you out today, maybe youcan do a seller note and bring
them in over time to where theycan buy in slowly to take you
out over time.

(54:46):
Wow.
So there's all of thosedifferent things that we've had
to do to plan for differenttypes of exits depending on what
someone's faced with.

SPEAKER_03 (54:54):
You know, usually when I see Mike, he's just
talking about the weather.
You get him involved in taxeswhen he's just coming out.
You see it coming out, right?
You see it too.
He's like, you know, but then hejust gets into it.
That's what I love about you,Mike.
You really believe in this, andI and I I really appreciate
that.
Talking about this is gonna beyour least listened to podcast.
No, no, no, listen.
Everybody everybody needs toknow what they're worth.

(55:16):
Everybody needs to know how toget to where they're going.
I mean, the Yellow Brick Roadwasn't an easy walk, but it was
it was there.
You know, it's something that wegotta do.
We've got to, we've got to facethis person at the end.
And the end is always, what areyou worth and what can you make
happen?
Uh, you know, talking aboutadvice.
You are on the uh April VendorAdvisory Committee, right?
I am.
And so what does that involve?

(55:36):
Does he require help on that?
What is it, what do you dothere?
I mean, you're you're doing thison the show, and I really
appreciate it because there's alot of there's a lot of advice
that you guys are giving, a lotof knowledge that you're
dropping here that some peoplejust don't know about.
And I'm telling you the truth.
I can 100%.
And I from multi-unit all theway down to the guy standing
behind a counter, they justdon't see this type of the
business.
Now, you are gonna havelisteners gonna be like, that's

(55:58):
very important.
So many guys have listenerslike, you know what?
I might skip that one because Idon't know anything about taxes.
But if anybody wants to know,it's hugely important to figure
out what is important.
And as you are advising, being apart of the vendor advisory
committee, talk to me about thatand how does that work?
APRO is a big part of our of ourindustry, and so are you.

SPEAKER_02 (56:16):
Yeah, and so what kudos to APRO for having the
vendor advisory committee.
But really, what it is, it's aforum for vendors to sit down
and talk about what they can doto help the industry, how they
can get more involved, to becomemore educated about the industry
and talk about what's going on,but also how to make the shows

(56:38):
better.
Because when you talk aboutmeeting of the minds, when you
talk about RTO world, itwouldn't happen without the
vendors.
So this is my shameless vendorplug.
And here we go.
All right, the money flows fromthe vendors that help underwrite
the cost of all of this stuff.
We know that.
So you got it without vendors,there wouldn't be this business.

(57:00):
Right.
Right?
And so whether that's product orservice vendors, and so you got
a mixed group of both that siton a committee that talk about
what we can do to make the showsbetter.
And it's everything.
I mean, it's everything from,you know, how do is the is the
conference room gonna be bigenough?
Is the showroom, the tradeshowroom, gonna be big enough

(57:22):
to, you know, the cost of Wi-Fi,or how do we get rugs in there
or shipping and frayage and allthis stuff?
You know, the the the freightpiece is huge when it comes into
who we're gonna deal with.
And are we dealing with um uh aunion-based group when we get
there or not?
And what's the cost of all ofthis stuff gonna be?

(57:44):
And so, you know, it's it'severything that the vendor
advisory committee talks aboutto help educate um April and and
even you know, Dennis isinvolved too and listens to
those things.
We're talking about DennisShields of the Group.
And so, what can make theseshows better?
And um it's it takes a village,and the vendors, the voice of

(58:09):
the vendors is a big part of it.

SPEAKER_03 (58:10):
Well, talking about new people in the village, it's
been a year.
You said now it's been a year,it's coming full circle.
We're gonna have a birthdaycelebration sometime soon.
How has been your venture cominginto this?
Because I know for a fact thatthis business is not as old as
some other ones, but you've gotsome guys that have been doing
this 40, 50 years on the top ofthat ladder.

(58:32):
And they know a lot of people,so it's almost like a family
thing.
And, you know, like Mike saidearlier, I came in and it took
me a couple years before theyrecognized who I was and they
actually said my name.
But now that you've been herefor a year, how has that venture
been for you?

SPEAKER_00 (58:45):
I don't think I've had any issues coming in, but I
also have a family member that'salready, you know, been invited
in, that's showed me around,introduced me to everyone.
So everybody's been nice.
They they come to me withquestions.
It's not like they just go toMike.

SPEAKER_03 (59:02):
Are you taking the Jamie Slatten kind of approach?

SPEAKER_01 (59:04):
Here she is.

SPEAKER_02 (59:06):
I I tried, but what I really want to hear her say is
when she first started gettinginvolved in this business, her
mindset of this whole businesswas more stereotypical.

SPEAKER_00 (59:18):
Oh, yeah.

SPEAKER_02 (59:18):
So why don't you discuss that and how that has
changed since you got to knowthe folks?
It is different.
It is different.

SPEAKER_00 (59:26):
Yeah.
So I don't remember my initialcomment.
Something about how I kind offeel bad for the clients,
customers, um, because they'repaying more for the product.
But Mike educated me like thisis the only way that some of
these people can get thatproduct.
That's how they'd survive.

(59:49):
Is that what where you weregoing with that?

SPEAKER_03 (59:51):
Well, you well, you know, usually that comes from
the operations piece.
Usually that you you see that inthe needs.
And when you're talking to theowners who have who are who are
now playing both sides of theRight.
They're paying the I I've got tobuy this a certain way.
I've got to stretch out myfunds.
I've got to make sure that I'mpaying the labor and the taxes
and the big, beautiful bill thatcomes along with it.
But they also know what it'slike to stand in the front
showroom and talk to a you knowa family who just has needs.

(01:00:14):
And their needs sometimesoutweigh their ability to pay
for those needs.
And you know, it's it's thatrelationship and how you're
working it out with your clientsto make sure that they 100% are
involved with you, you'reinvolved with them.
And then that transitions into acash flow that we get RG
co-involved in, right?
So it's it's it's that wholerunaround.
And if you've only been here fora year, hold on, because there's
a whole lot more coming up.

SPEAKER_00 (01:00:36):
My opinion has changed a lot from the day when
I heard I was gonna kind of beon this industry.

SPEAKER_02 (01:00:43):
Yeah, I mean there's a there's a whole slew of of
services that the rent-to-ownedindustry provides their clients,
their customers, um, beyond justtaking payments.
Um, you know, if somethingbreaks, it gets replaced.
You know, all of those thingsthat you don't get with the
retail transaction.
It's it's about information.
So it's it's it's totallydifferent business.

(01:01:04):
And I think, you know, educatingher for me has been no different
than I've had to do educatingbanks and other people, even
investors that want to getinvolved in the business.
For instance, um some of thefranchisors that we represent
and work with, as franchisees bepotential franchisees become

(01:01:28):
interested in this business andare looking at the business,
they will have them set up acall with me to talk about the
numbers, to talk about thatpiece of the transaction and
help educate them on thebusiness as a whole, because
they're coming in with adifferent mindset of things that
they've heard or read about orwhatever, and they just need to
be educated.

(01:01:48):
And that's where April and Tribbecome great, and this industry
is wonderful, sharing thatinformation to educate people
and the masses about why thisis, you know, this is a great
business.
It's it serves um uh it servesan uh probably an
underprivileged group thatwouldn't have access to things

(01:02:10):
otherwise.

SPEAKER_03 (01:02:10):
Well, you know, we just uh we're just talking to
Dennis Shields about that.
It's it's a billion-dollarindustry.
Okay, we're we're knocking onnine to ten billion dollars.
There is a lot of help to goaround.
Yeah, it's needed.
Right.
You know, and we we'd love toserve our community.

SPEAKER_02 (01:02:23):
And you read about that with the stories, the
giveaways, the, you know, justduring COVID, the the laptops
that were going out to schoolsand the kids that had to be now
homeschooled and things.
I mean, it's just it's endlesswhen you read about what's going
on because of your customerrelationships and how entrenched
you are in your own communities.
You're living in thosecommunities.

(01:02:43):
Your kids are going to school inthose communities, they're going
to school with those other kids.
So it's it's a differentrelationship.
And I think we've learned that,I've learned that over time, and
she's sort of on the cusp ofseeing all that too.

SPEAKER_00 (01:02:56):
I've learned it.

SPEAKER_02 (01:02:57):
Yeah.
So it's it's just where we are.

SPEAKER_03 (01:03:00):
So as you're part of this vendor committee, you're
also part of FRDA.
Now, the FRDA is a FloridaRental Dealer Association where
they're there are RDAs all overthe country, right?
For different states.
But you're part of the FloridaRental Dealer Association.
Um and you guys were justrecognized.
How important is that to RG Co.

(01:03:20):
How important is that to Mikeand Alicia to be recognized for
your involvement in the RDA?

SPEAKER_02 (01:03:26):
Well, we um you know, we were able to become
title sponsor this past year,which was which was great for
us.
It was great publicity.
It was, I never thought I'd beable to be, our firm would be
able to be title sponsor at anyof these shows.

SPEAKER_00 (01:03:43):
Um, but it was It was great for Mike's ego.

SPEAKER_02 (01:03:45):
It just worked out.

SPEAKER_03 (01:03:47):
Um Well, listen, I mean, you guys have been doing
this a long time.
I mean, RG Co has been aroundfor a while.
It's this isn't a this isn't a anew transition.
So it it really is kind of likeone of those milestones where
you can say I've I've lastedhere long enough, I've been part
of the industry long enough tobe seen as somebody to lean on.

SPEAKER_02 (01:04:05):
Well, in 2021, our firm was recognized as the
vendor of the year.
And that was really cool becauseI never thought that we'd be on
that stage getting one of thoseawards.
And that was an honor.
Um, and then to be become atitle sponsor for any event, you
know, was was to me was awesome.
And to do it here, the Floridashow, it's done locally.

(01:04:26):
You know, we looked around theroom that day, and everyone in
there, every group representedin that room that day was
clients of ours, except for one.
It's pretty amazing.
That's true.
When you when you think aboutthe the impact that we've been
able to accomplish with thoserelationships.

(01:04:47):
So when we when we identifiedthat, it's like, why wouldn't
we, you know, sponsor if we havethe opportunity to?
And cost and everything comesinto play for it.
And you know, it was it wasdoable for us this year, and we
were glad we could do it.

SPEAKER_03 (01:05:00):
Well, at least it wasn't during tax season, right?

unknown (01:05:03):
True.

SPEAKER_03 (01:05:04):
True.
So talking, you know, going backa little bit, we were talking
about some of the things that,you know, the valuations, the
even uh who's gonna buy, who'snot gonna buy, things that are
valuable and things that arenot.
What what are some of the trendsthat you're seeing as far as in
the RTO world since you havethat many people involved in RTO
and and you see a lot of theback end of what's going on with

(01:05:26):
the dollars, with the income,with the revenues.
Uh, you know, what what rightnow is is kind of like that uh
what's happening with theprofitability and cash flow?
Is it that we're that we're nowwe're facing, and I guess I I
guess I should say that intereston taxes is actually going down,
right?
As of last that I heard.

SPEAKER_02 (01:05:45):
Well, interest rates are interest rates are going
down, right?
Correct, yes.
So uh that being said, I mean,you you first have to look at
where each dealer is in theirlife cycle.
You know, if they're in thefirst couple of years, they're
probably not generating theprofitability yet that they
ultimately will get to.
If you've been in business foreight, nine, ten years, then

(01:06:06):
you've seen the ebbs and flowsthat we've discussed.
Um, the good dealers are uh willmake money no matter what.
You know, they're they're justrunning their businesses very
well.
Okay.
Um, do they have ups and downs?
Yes, but they've generallyestablished a pretty recurring
customer base cash flow.
They've got their numbers down,they pay attention to their

(01:06:28):
margins, right?
Um, they follow the right KPIsand those things, and and they
pay attention to their business.
Others that are still learningthe business, you know, struggle
a little bit.
You know, this business is isvery cash flow, capital
intensive, you know.
So, you know, you get into thisbusiness, you buy a unit for
$500, you rent it.

(01:06:48):
So you've paid$500 for the andnow you rent it.
You get$16 for that week andit's out the door.

SPEAKER_01 (01:06:55):
Yeah.

SPEAKER_02 (01:06:55):
But now you got to buy it again to replace it.
So you've spent$1,000 andcollected$16.
That's hard for people to gettheir arms around, right?
You know, and I'm doing this ata very elementary way.
No, no, and that's exactly whatit is.

SPEAKER_03 (01:07:09):
But is that how the banks look at it and go, wait a
minute, yeah, you've invested aton of money and we're not
seeing the return.
The cash flow is way low forthis.
We're not getting$100 a week.
We're talking about$16 to$25 aweek on a on a regular
stationary, and then maybe,maybe you get$35 to$45 on a on a
motion, but like, what is thatin comparison?

SPEAKER_02 (01:07:30):
Yeah.
So I and I I know I'm using veryvanilla examples and numbers,
but um, you know, what I'veexplained to people is look, you
basically before your secondpayment, you may have bought
that unit twice.
Right?
I mean, think about that.
So you have to develop that thatcustomer base has to build,
right?
You got to get that BOR outthere and increased.

(01:07:51):
Right.
So that being said, I mean,you've you've got people that
stay on top of that and somethat don't.
Um, it's been a little harder.
You know, I hear more complaintsthan than the you know previous
few years.
You know, the last few yearshave been a little tougher.
Um you've had to go back to someof the fundamental rent and

(01:08:12):
collect training and and justgetting people in the store.
And and less people are going inthe store these days.
They're shopping online.
They're so you've had to retooland retrain and develop
technology and all of that stufftoo.
It's been it's been hard, butit's it's it still will thrive.
It's not going anywhere.

(01:08:33):
I don't believe the brick andmortar stores are going
anywhere.
There's still a purpose.
People still want to see whatthey're buying.
Um, and there there isdefinitely a customer out there
that does not ever go into anystore.
Um, and that age is is there,but there's still plenty that
that will and and will want to.

(01:08:54):
Um, and I think the presence inthe community, the the
storefronts in the communitiesmake a big difference too.

SPEAKER_03 (01:09:00):
I've got to say there was we we just hit the
third word, or I should say,numbers of the day.
First it was the multiplier,then it was the EBITDA, and now
it's the KPIs.
We're hitting everything today.
What do you what would you sayis a mature store then?
Some somebody is saying, youknow what, because you you're
right.
You start up that there could bea lot of startup, there could be
another store, part of thestartup, right?

(01:09:21):
I'm six months in, I think I'mdoing a good job.
I want to add another store,another year maybe goes by.
But I mean, that's that's a lotto take on.
So what would you say is amature standpoint?
This store has been here for andit does this and this on a
regular basis would probablyhappen around this year without
a lot of acquisitions andchanges and such.

(01:09:43):
Yeah.

SPEAKER_02 (01:09:43):
I mean, what I've always heard that and I've never
operated a rent-to-owned store,so you probably know this better
than me, but what I've alwaysheard, rules of thumb, you know,
500 BOR, 500 customer count, or$50,000 a month in revenue, or
whatever that might be.
So, you know, I don't reallyknow.
I think it goes back to how bigyour store is.
You know, if you've got a storethat you lease for$4,000 a

(01:10:07):
month, it's going to bedifferent than if you're paying
$12,000 a month.
I miss those days.
They're not here in Tampa.
No, no, they're not.
They're not.
And so, but it depends on whereyou're at, where you're located,
what those, how many of thosenumbers you need to cover cash
flow.
Because again, it comes back tothe cash flow.
And when you're monitoring thosemargins and you look at, all

(01:10:28):
right, my my cost of revenueshould be somewhere around 35%
of my revenue.
So I'm dropping 65 cents to mygross margin.
And then I've got 25% going topayroll, and now I've got
another 10% going to occupancy.
By the time you you look atthose numbers and dwindle it
down, how much is hitting thebottom line?

(01:10:49):
So you the hard part about thisbusiness is you have to pay
attention to those numbers.
You can only buy for what youcan afford to buy.
Right.
But if you don't buy, you runout of revenue run runway,
right?
Because your stream dies ifyou're not buying.
So it's that yin and yangbetween when to buy and how much
to buy that you've got tocontrol.

(01:11:10):
Like Alicia said, the inventory.
Understanding the ebbs and flowsof that inventory and how much
can I afford to buy.
And that's going to ramp up asyour customer count builds up,
and then your your cash flow isgoing to build up from there.
So you have to start under acontrolled growth scenario.

SPEAKER_03 (01:11:28):
I mean you can't just go gangbusters.
Well, right.
Well, you know, there's a lot ofpeople who've said a lot of
things in a different way, butthere's a curious comment,
there's curious thought.
It is cash intensive.
I don't know anybody who hasn'tsaid those two words when it
came to opening up arental-owned store without
saying it within the firstparagraph.
Yeah, it's a great thing.
It's cash intensive.

(01:11:49):
It eats cash.
It it it will, you know, youhave to have a big lump sum just
to start it, not let alone keepit going.
But rental have people that arediehard in it.
I know businesses who don'trequire a quarter of what it
takes to open up a store, yetthey love it.
Is it really that advantageousto have a company that costs so

(01:12:11):
much up front?
And what does it give you in theback?
When you see those numbers, isit really something that
somebody's really like, is itthe one store that can work off
of 65 to 75,000?
I would love 50,000.
50,000 was a long time ago.
That was a long time ago.
Yeah, yeah.

SPEAKER_02 (01:12:28):
But you know, yeah, I mean, even a million dollar a
year store now isn't what itused to be.
No, well, you know, it's funny.

SPEAKER_03 (01:12:34):
I was having a conversation with uh a couple of
people out there.
The the million dollar store nowis almost like it's it's either
a million five or two.
Yeah.
The million dollar store is goneout.
It's gone.
Correct.
And so that's always the bigquestion is with all the with
all that it takes, with all themoney, with all the finances
that it takes, is it worth it?
I I I would hope so, but I don'tknow anything about that, that
side of the business to say Ionly know about my bonus checks

(01:12:57):
and if I'm working and doing theright thing, right?
Which I guess we can depreciate.

SPEAKER_02 (01:13:02):
So I mean it's a val, it's a valid question.
And you you're right.
Most people in this businesslove it.
They they love what they do.
They they came up in thebusiness or were uh a delivery
driver, was a store manager, wasan operating district manager,
something, and they they'vethey've come up in this
business, and that's what theyknow.
No different than me.
I don't I don't know what Iwould do if I did something else

(01:13:24):
than what I do.
It's you know basketball?
Well, I'm still waiting on theNBA draft coach.
All right.
Yeah, so I don't know thatthat's gonna happen at this
point in my life.
But uh, but I think it's a veryvalid business, you know, from
that perspective.
And it does drop money to thebottom line.
You just have to pay attentionto it, you know.
And like I said, you know, youwe here take a very balance

(01:13:47):
sheet driven approach.
If I'm a store owner, do I justwant to look at my revenue
number and my bottom line numberand call it a day?
No, you have to look at thebalance sheet.
If you're not reconciling cashvery regularly, daily, twice a
week, weekly, don't waitmonthly, don't wait quarterly.
You know, you you got to do iton a regular basis.

(01:14:08):
That's a little takeaway thatsome people should do,
especially, you know, the biggeryou are, the more you got going
on, you have to pay attention tothe cash at any level.
Reconcile cash, tie out yourbalance sheet inventory to your
POS.
Make sure those ins and outs arehappening and being recorded
properly.
Once your balance sheet iscorrect, you know, then you can

(01:14:32):
trust your PL more.
I can't trust your PL until Iknow your balance sheet is tied
out.
Right.
Where we see a lot ofdiscrepancies with the numbers
we see is the POS numbers don'ttie to the balance sheet.

SPEAKER_03 (01:14:48):
So it's saying I'm like so nice right now, the
discrepancies that we see.

SPEAKER_02 (01:14:54):
Don't be late.
Don't be late doing this.
We see that a lot though.
And so you you gotta stay on topof that.
And you know, you're as you makethose debt payments, you know,
break out the principal, breakout the interest.
Um, and and so you you have topay attention to that.
And everyone's got AP,everyone's got unpaid invoices
that they've got on their booksthat's been booked into their

(01:15:14):
POS, that's hit their balancesheet, and now you've got this
difference between what youraccounts payable is and what
your books say it is.
And so again, if your balancesheet is not tied out and
correct, I can't trust your PL.
Right, right, right.

SPEAKER_03 (01:15:31):
Uh, so you know, going back to the big beautiful
bill, because we were talking,we're talking about money today.
We're talking about where youare, paying your bills, making
sure that you're understandingyour PL, your GNL, and
everything in between.
Was this bill helpful?
What does the outlook look likean RTO in the next five years
because of the changes of thisbill?

(01:15:53):
Is it a better?
Is it not it's no big deal, it'snot a not a big change.
Is it, oh my god, run for thehills, find some investment
company to buy it, call RG Cofor your valuations, and boom,
get out from get out from underit.
I mean, what do we see in fiveyears?

SPEAKER_02 (01:16:09):
It it's helpful.
It was helpful.
It's helpful.
And but again, I I throw alittle caution out there that
um, and I've had this discussionwith clients, is you don't have
to take bonus depreciation.
Some of the biggest tax problemsI've seen with RTO dealers in

(01:16:30):
this business is they took bonusdepreciation and now they've got
a big tax bill on the back end.
You know, they're and so theythey want to exit, they want to
sell, they want to get out, theywant to do something, and now
they've got this.
And hear these lingering bills,big re this deferred tax
liability that's out there thatbonus has created.
Bonus is beautiful if you'repaying for it with your

(01:16:54):
operating cash.
If you're using debt dollars tofund inventory purchases and
driving losses to your taxreturn that you're offsetting
other income with, now when thatturn happens and now you're
generating the funds on thebackside, you've got the taxable
income and you're paying off thedebt.

(01:17:15):
So you have no cash to pay thetaxes.
It that's where it becomesproblematic.
You have to monitor and plan forthat flow.

SPEAKER_03 (01:17:23):
And then that changes the valuation.

SPEAKER_02 (01:17:25):
Not necessarily.

SPEAKER_03 (01:17:26):
No, no, no.
See, you see you see how you seehow it is?
I I I just don't know.

SPEAKER_00 (01:17:31):
Uh you know, they and these changes are only
permanent for as long as youknow certain governments are in
place.
Yeah, so it's it they say it'spermanent, but it could change
the next election.

SPEAKER_02 (01:17:42):
I will tell you, buyers love this bill because
buyers are gonna look at thislike, look, I can buy this RTO
company.
I can get all this bonusdepreciation in year one that's
gonna help underwrite basicallythe cost of this business for me
right out of the gate.
I'll deal with the taxes on theback end.
I'm not worried about that.
When I sell, I'll have enoughcash to pay the taxes.

(01:18:02):
I'm not concerned.
So will that help MA potentiallyhappen?
Yeah.
Is it is it good for theindustry?
Yeah.
Do you have to go into it with amindset of understanding that
bonus depreciation creates bigdifferences between your book

(01:18:23):
numbers and your tax numbers?
And the people that elect outdon't really have that
volatility.
Their tax numbers are prettysimilar to their book numbers.
So planning for taxes is prettyeasy for them.
They look at their PL and say,okay, that's where I'm made.
When you've when you're in bonusdepreciation and you're looking
at your cost on your books, thatdoesn't even come close to
representing what your cost maybe for tax purposes.

(01:18:45):
So it's it it requires basicallykeeping track of two separate
two sets of books.
It becomes a little more costly.
It's it's it's harder to track.
It's more work on our end todeal with that.
Not saying it's a bad thing, itjust is what it is.
And so you have to plan for thatbusiness decision.

SPEAKER_03 (01:19:05):
Is this is this bill too good to be true?
Is this one of those bills thatare too good to be true?
Somebody else comes into theoffice later on and goes, Yeah,
that was wild ride.
Let's get back to normalbusiness.
Or is this something that canactually be worked with with the
economy and the American peopleand say if somebody else comes,
and this is just this isthoughts.
I'm not saying that this is orit isn't.
But if somebody comes in andsays we should just keep working

(01:19:26):
with that.
Because, you know, sometimessome things are too good to be
true.

SPEAKER_02 (01:19:30):
I'm not going to get into politics.
But I can tell you uh toAlicia's point, if if the office
is changed, would would I expectsome of this stuff to go away
potentially?
Yeah.

SPEAKER_03 (01:19:43):
That's that's kind of what I expect.
Just a thought, you know.
Uh and you know what they say.
I mean, you can't pleaseeveryone all the time.
It just doesn't happen.
Hopefully, um moving forward,regardless of who's in the
driver's seat, we stay on acourse for pushing the economy
for growth.
We need that.
I don't care who you are in theworld, we need that.

(01:20:05):
Uh especially in America withthe American dollar under under
fire as it is right now.
We need it in any way, shape, orform.
But we won't get into that part.
We're not going to get into thatpart.

SPEAKER_02 (01:20:14):
I mean, one piece of this bill I will mention that
they did make permanent to useher term with air quotes,
permanent.
Nothing's permanent.

SPEAKER_03 (01:20:20):
As permanent as Congress allows it.

SPEAKER_02 (01:20:22):
But it's not cliffing, because this one was
supposed to go away after nextyear.
Um, the the qualified businessincome deduction, QBI, Section
199 CAP A, which is basically20% deduction for your
pass-through entity income.
So basically you're taxed on 80%of your pass-through entity,
which is an S-corporatepartnership, instead of 100%.

(01:20:45):
So RTO businesses qualify forthat qubit deduction.
And so this was made permanent.
It's not going away.
It's only permanent until thenext change, but it has been
extended.
Let's just say that, which is agreat thing for this industry as
a whole.

SPEAKER_03 (01:21:01):
Alice, I just want to ask you a question.
If you ever do anything, does herefer back to the manual on page
49, subsection 3D?
This is what it says that youshould.

SPEAKER_00 (01:21:10):
He probably could.

SPEAKER_03 (01:21:12):
I love it.
So listen, I you guys have beenamazing and kind of just being
able to put this in aperspective that I think I or
other people that are listeningto this can understand because
uh there is a whole lot morethat I'm sure we can get into.
You didn't see it last year, butso Mike comes into the the the
RTO live event, and uh, youknow, we have some people

(01:21:33):
talking.
It's nothing real big.
It was a there was a lot goingon, right?
So they stick us in this backroom, which is okay.
We're talking about it.
And then uh Mike comes to themic and he just drops us a
couple lines on this.
We weren't ready for all that,Mike.
He has a he has a way of doingit.
We loved it though.
It was great.
So, real quick, I got some rapidfire questions for you guys.

(01:21:55):
Should we go, should we go oneat a time or should we do them?
Should we do them both and youguys answer them both, or should
I go one and then one?
Oh you got some answers ready.
Whatever you want.
All right.
So, Mike, what's the mostsurprising thing you've learned
about the RTO industry in thelast 17 years?

SPEAKER_02 (01:22:12):
Oh, the camaraderie, as I mentioned, just how
everyone interacts and talks.
That's the most surprising thingI've learned about.

SPEAKER_03 (01:22:20):
We've talked about every almost every time I have a
podcast with somebody who's beenhere for a long enough time to
say it, they always say that.
Yeah, whether it be Tissett,Shields, uh Charles, everybody.

SPEAKER_02 (01:22:30):
They all say that.
They've all got mentors, andeveryone should have a mentor in
this business with anotherdealer, another operator,
somebody that they can talk to,and they do and they share, and
it's it's amazing.

SPEAKER_03 (01:22:43):
Yeah.
Yeah, but you know, uh, thelegends that I've talked to so
far, and they'll be coming outon the podcast later.
But, you know, Kathy Windsor,Lynn Leach, Gary Ferp, they all
say the same thing.
They've reached out to somebodyat some point in time in the
industry who's technicallyreally understand they're your
competition.
I don't care where they are,they're your competition.

(01:23:04):
But because we're local andwe're in local towns, you know,
you don't deliver that.
I don't deliver into the nextstate.
They have these conversations ofthis is what you should try with
your business, this is what I'vecome across, this is what you
can learn, this is what you canunderstand.
Call RG Code because they knowwhat the heck they're talking
about.
There's something, and it andthe camaraderie is unbelievable
because I've seen the pioneers,I've seen the the people who

(01:23:24):
have started these businesses,all the way from you know, from
Daryl uh to Norm to all the guysthat they've talked about, Larry
Sutton, they all have thiskinship that they just they they
have talked and gone over againand again and again the ideas of
this business.
And I agree with you 100%.

SPEAKER_02 (01:23:41):
Speaking of Larry Sutton, uh I I gotta share this
before we ever had any level ofprofessional relationship.
So imagine someone not evenhaving a relationship.
I went up to Larry and asked himif he would just mind having
lunch with me occasionally so Icould pick his brain.
And he always did.

(01:24:02):
Never batted an eye.
So, yeah, let's do.
Let's do it.
Larry's great for aconversation.
And he talked to me about theRTO industry, his background, a
little bit about what he'sdoing, and just shared with me
things that you know youwouldn't think anyone would ever
do without having a relationshipat all.
Just some guy that he didn't hebarely knew just asked him to

(01:24:22):
pick his brain, and he was morethan willing to sit down with me
and have lunch.

SPEAKER_03 (01:24:26):
He's such a unique guy.
Have you ever met Larry Sutton?
They don't call him the Reverendfor Nothing.
So if you ever ask him to lunch,you better be prepared for a
sermon.
But I mean, he is amazing.
He's amazing.
So Alicia.
And it's it's gonna be I mighthave to be for both on this one,
but biggest change you've seenin the RTO financial management.

SPEAKER_00 (01:24:44):
That might need to be your question just because I
haven't seen enough yet.

SPEAKER_02 (01:24:47):
I would I would say online selling and and just
virtual RTO competition.
Oh, yeah, absolutely.
Absolutely would be my answer.

SPEAKER_03 (01:24:54):
There's two there's two letters that come into play,
and it's AI for everything.
I'm hearing AI for everything.

SPEAKER_02 (01:24:59):
Well, it's the new thing.
It's it's what's coming now.
You know, that's what everyone'stalking about, yeah, including
your podcast.

SPEAKER_03 (01:25:05):
Absolutely.
We talk about a lot.
So then we'll direct this onetowards you.
One financial habit that everyRTO owner should develop.

SPEAKER_00 (01:25:12):
I think Mike hit on it before, you know, checking
your balance sheet, making sureeverything ties out.

SPEAKER_03 (01:25:17):
Every day, every two days, every week.
Well, we what would if it and Iknow you're an accountant, so I
mean, try not to get too farinto weeds in that, but if it
was you, how often do you do it?

SPEAKER_00 (01:25:28):
I would do it every day, but I'm very should I use
the word that I use.

SPEAKER_03 (01:25:33):
You're just very detailed on that, right?
There you go.
Mike, best investment an RTOowner can make in their RTO
business.
Their time.

SPEAKER_02 (01:25:41):
Uh uh they've they've already put all their
money in.
Uh it's important that they givetheir time to the business to do
exactly what she's talkingabout.
Spend time every day in yournumbers.
Pay attention to them, you know,reconcile cash daily.
So to give their time to theirbusiness so that they learn
their business.
Remember, many of these peoplehave transitioned to be owners

(01:26:02):
that were used to be employees.
Being a good employee does notmake you a good owner.
Yeah.
It does not.
Yeah, that's well, so you've gotto learn.

SPEAKER_00 (01:26:11):
I think you also need to keep in touch with your
employees too.

SPEAKER_02 (01:26:14):
And you know, but being an owner does not mean now
I'm I don't have to go to workevery day.
It means more.
I've got to work more.
I've got to pay attention tothis stuff day and night and
weekends and look at it.
And it's just part of being anowner.
So yeah, their time.

SPEAKER_03 (01:26:27):
All right.
Biggest takeaway.
This is both of you guys,biggest takeaway from the 2025
Tax Act for RTO owners.

SPEAKER_00 (01:26:35):
Bonus.
Bonus.

SPEAKER_03 (01:26:37):
The bonus.
Bonus depreciation.
Bonus.
And that wasn't one of my keywords, but I'm saying it is
today.
And their bonus depreciation isgoing to make it happen.
So what's next for you guys?
What's next for you guys in theRTO industry?
What comes up next?
What do you guys foresee in thenext few years that you're going
to be a part of?

SPEAKER_02 (01:26:51):
I just rolled off being part of the board.
So I was as part of the vendoradvisory committee.
Um, I was lucky enough for thelast five or six years to be
part of the board as one oftheir board liaisons.
Um I I've just now been votedoff the island, so to speak.
So I'm no longer on the Aprilboard.

(01:27:11):
Um, but that won't changeanything.
We'll continue to be involved.
You know, we go to these thingsbecause we become just as
educated as we're educatingwhile we're there.
Um, and you know, there's only afew of us CPAs that show up to
these things, and we know whothey are, and um they're we're
all there.
Dan we're talking about you.
Dan, Dan, we're talking aboutyou.

SPEAKER_03 (01:27:32):
I'll see you at the next one.

SPEAKER_02 (01:27:34):
Um, but you know, he does a great job showing up, and
he's very well respected.
And and we we show up to learnand and not just to see the
clients that we have, but alsoto learn about what's going on
in the industry.
And I think that means a lot.
It means a lot to the industrythat we do that, and um we'll
continue to do that.

SPEAKER_03 (01:27:52):
Well, now that now that he's seen the off ramp, is
there any chance that we're evergonna see Alicia part of a
board?

SPEAKER_00 (01:27:57):
Maybe.

SPEAKER_03 (01:27:58):
Maybe also we're not we're not against it.
All right, that's what we talkabout.

SPEAKER_00 (01:28:02):
Or Janelle, you never know.

SPEAKER_03 (01:28:04):
Possibly, we're also trying to get away.
Where is she today where she shedid not show up for the tax?
That's people, you know.

SPEAKER_00 (01:28:10):
She's not in the office, she's remote.

SPEAKER_03 (01:28:12):
She's remote, yeah.

SPEAKER_00 (01:28:13):
But she's amazing for the city.

SPEAKER_03 (01:28:15):
Oh, that's that's good.
So coming out of what you do,because this is a big part of
it.
I I can't emphasize enough howmuch this plays a role in a
successful rent-to-ownedindustry, a successful business.
What does RG Co's legacy looklike in the next 10, 20 years?

(01:28:36):
Is it Mike finally being able tostep back a little bit and have
some of the uh younger talenthere take over and be a part of
April and be a part of the FRDAsor the RDAs period?
Is it, you know, we keep itstreamlined and we just do what
we do and make sure that wehunker down and give everybody
the best tax advice that we can,the best valuations and EBITDAs
that we can?
I mean, what does it look likein the next five, 10, 20 years?

SPEAKER_02 (01:28:57):
We just came out as a firm of our strategic planning
where we talked about the nextfive years.
And we'll have some of ourpartners that that roll out of
here in the next five years thatare ready to retire themselves.
I'm not.
You know, my youngest is stillin sixth grade, so I'm not going
anywhere.
But as far as the therent-to-own industry goes and
our commitment and loyalty toit, it's not going to change.

(01:29:19):
We're going to continue to grow,stay involved.
Our committee shows that.
The fact that Alicia is hereshows that.
Um, I want people to know us inthe industry, not just with my
name attached to it, but others.
And um, you you only do that byshowing up and becoming
educated.
So we're not we're not goinganywhere and we plan to continue
to stay involved as a firm.

(01:29:40):
We are also going through thechallenges of learning how to
use AI and what to do with thatand what that means as far as
what our ideal clients are,training our people properly,
um, and and basically going outand and dealing with technology
and what kind of innovation wehave to use so that we.
We can train to serve our idealclients, and rent to own is

(01:30:03):
squarely within our idealclient.
So yeah, that's that's what's onnext for us.
The challenge, not just withinthis industry, but as a firm and
all of the clients that we serveis how to better serve them and
continue to stay on top.
Our firm size is very niche.
You know, we're not a big firm,and we're not a sole

(01:30:24):
proprietorship either, as you'vementioned with our office space.
We're about 85 people top tobottom.
So um we can serve smallclients, we can serve large
clients, we compete with the bigfirms on a regular basis.
We don't serve publicly tradedclients, and so the closely
held, privately held company isis well within our wheelhouse,

(01:30:46):
and that's what we're gonnacontinue to build on.

SPEAKER_03 (01:30:48):
Well, you know, he says that so nice.

SPEAKER_01 (01:30:50):
He does.

SPEAKER_03 (01:30:51):
I know that in the beginning, the only thing that I
was really thinking is hisdaughter's gonna say, Hey dad,
what do you what do you do formy college tuition?
So I gotta stay here.
I gotta stay here.

SPEAKER_00 (01:31:02):
I'm sure he's got that well taken care of.

SPEAKER_03 (01:31:04):
You know, I I I met your wife.

SPEAKER_02 (01:31:07):
She plays basketball, but she, you know,
she can't score in a gym byherself.
So you know, she's more of adefensive uh weapon.

SPEAKER_03 (01:31:14):
Well, listen, there's a lot of scholarships
out there.
We're not gonna put it down.
She's great.
Uh your wife's amazing as well.
We've seen her last time that wewent to uh to Washington for
LedgeCon.
Guys, just to let you know, ifyou can ever do LeggeCon, it's a
great thing to do.
Are you gonna go to LeggeConeventually?
Are we gonna see Alicia's facein the in the halls of the White
House?
It's pleasant.

SPEAKER_02 (01:31:33):
So um yeah, I think this year it's literally
starting on the April 15th,which is the tax deadline.
So we we have supported it anduh will continue to support it,
whether the dates will drivewhether we can attend it or not.
But I try to even this year, itwas like April 8th through 10th,
and I was there.
Um, so it's important to thisindustry, it's important to us,

(01:31:55):
it's important to see.
And so if you haven't attended,whether you're a vendor, dealer,
or a manager or just an employeein the business wanting to learn
more, um, it's a time where weall show up and and and fight
for this industry and talk aboutit.
And it's great not havingtroublesome issues to discuss.
Oh, God, yes.

(01:32:16):
Um, but they still love hearingthe stories, and it's important
that we continue to do that.

SPEAKER_03 (01:32:21):
I think I think the podcast this year is going to
try to be a part of the fellowprogram and see if I can get one
person up there with me.
Uh, I know that it changed mythought process of seeing
everything, not only the processof just being involved and
saying I've actually advocatedfor my industry.
I can say that out loud.
I mean, a lot of people, howlong have you been in industry?
You know, have you ever doneanything for it?
No, I clock in, I clock, youknow, I go home, I spend the

(01:32:41):
money that they give me.
No, but to say that there was aclear advocation for the
advancement of the industry orto stay where it is and make
sure that it isn't changed inany way or form, like, you know,
the things that are going on inNew York right now that have a
lot of implication on what canhappen in the future.
So it's it's great to see that.
And uh, I'm definitely thinkingabout bringing somebody with me
because that opened my eyescompletely as to what you know,

(01:33:02):
what we were about and what thecamaraderie is on a whole
different level.
It's one thing to see it at uhmeeting of the minds, it's one
thing to see at RTO World, it'sanother thing to see it that
everybody gets together underthis same one banner to walk the
halls of you know DC and say,hey, as a one voice, we're we're
here as an industry.
We're doing great for ourcommunities, for the people, for

(01:33:23):
our not only for just thecommunities that we serve, the
employees that we have.
I mean, there's a lot ofemployees in there.
There's a lot of things thathappen, the vendors that we
support, the areas that wesupport, like you said, the
schools that we support.
It's so important.
You know, on our way out, on ourway out, as we talk about this
and we've we've kind of settledon everything, you know, we have

(01:33:44):
talked about the the big guys,we've talked about some of the
small guys.
What would you say is someadvice to a new company, a new
owner coming up that doesn'thave a CPA at this point in
time?
What is something that you wouldsay, if I'm doing this and I
don't know what I already know,because Mike's got years and
years and years of service andhe's got an Alicia, but how do

(01:34:07):
you say, you know, this is whatyou should be looking for in
your CPA?
If you're looking for somebodyor this is the benefits of
having a CPA at this point intime of your business, and I
wouldn't go without it, theseare my words of wisdom.

SPEAKER_02 (01:34:20):
Spend the money on a good POS system that you can
trust and an accounting system.
Um the taxes will come later.
Generally, these businessesdon't make taxable income in
year one.
So tax planning and things likethat aren't something that you
focus on out of the gate.
It's cash flow.
Talk to them about how to managecash flow, how to pay attention

(01:34:43):
to the things we've discussedtoday, um, and and understand
that transaction, control theirspending, but spend enough to
build your cash flow, yourrecurring revenue.
That's what you want.
Your your par, your smur, yourpotential, whatever you want to
call it.
Your ideal.
You got it, your ideal.
You gotta grow that, right?
But you got to grow it in a waythat you can afford.

(01:35:04):
And so I talked to them aboutthat.
Uh, all these new dealers thatthat are coming in this business
that I that I get theopportunity to talk to, that's
what we discuss is understandingthat.
And taxes come later when youstart making the money.
But first it's controlling thespend and understanding your
cash flow management.

SPEAKER_03 (01:35:22):
Do you have any uh, you know, tax softwares that you
would recommend?

SPEAKER_02 (01:35:26):
The I mean, we have our internal stuff that that we
have.
Um, the accounting softwarethat's out there, you know,
QuickBooks Online.
I'm sorry, that's what I meantto say.
The accounting software.
I figured that's what you weretalking about.
You know, QuickBooks Online isperfectly good.
You know, it's easy to use, itlinks, it pulls in bank
statements and transactions.
Um, you know, it memorizestransactions.

(01:35:48):
There's some other things outthere too that that work.
Um some of the POS systems aretrying to figure out ways and
have to talk to some of theseaccounting systems too, which is
also good.
Um, you know, it costs a littlebit more to have that privilege
and ability to do that.
Um so uh QuickBooks, 90% of ourclients are probably using

(01:36:09):
QuickBooks.
And so it's perfectlyacceptable.

SPEAKER_03 (01:36:12):
Well, at least it doesn't cost a million bucks,
right?
You just need to know where yourdollars are going and coming
from.
That's right.
That's the important part.
So if somebody says, man, thatwas an amazing show, and for
some reason, I'm not using RGCo.
What's some information?
How can they reach out to youguys and say, hey, listen, this
is what we want to do.
We want to start using you guysfor our evaluations and our
EBITDAs and everything else thatfalls in between.

SPEAKER_01 (01:36:34):
And audits.

SPEAKER_03 (01:36:35):
And audits, right?

SPEAKER_02 (01:36:37):
How do they reach out to you guys?
Yeah, I mean, to her point, Imean, we do uh auditing services
and things as well because banksrequire it once you're at a
certain lending level.
You've got to do thecompilations or the reviewed
financials or the auditedfinancials.
So yeah, we have a wholeauditing department that does
that when banks require it.
Um but that being said, ourwebsite, you know, www.rgcoc.com

(01:37:03):
is a is a great way to learnmore about us.
Um my phone number is813-2021612.
As he remembers.
Yeah.
Yeah, that's my direct line is agood way to reach me and our
email.
You know, our email is is on thewebsite as well.
Both of us are listed there.

(01:37:25):
Um, so that's the best way tofind us.

SPEAKER_03 (01:37:27):
So go online, check you guys out.
You can call Mike directly, oryou can go online and find an
email, send you guys out, andyou guys reach out and and kind
of connect there.
Absolutely.
Well, I tell you, I reallyappreciate it.

SPEAKER_00 (01:37:37):
Casey got his number wrong, by the way.
There is the main office linethat you can call as well.

SPEAKER_02 (01:37:41):
Yeah.
813-875-7774.

SPEAKER_03 (01:37:45):
Mike Helton, Alicia Holloway.
Thanks guys for being heretoday.
I am actually, I appreciate youallowing me being here today.
The site is amazing from thisoffice here.
I just want you guys to knowthis is the uh the ebor room.
Is that what I say?
It is the ebor room.
The ebor conference room, andthere's a reason for that.
We are looking out at Tampa Bay,and it is absolutely beautiful
today.
Thank you so much for guys beinghere.

(01:38:06):
I tell you guys again, pleasehit me up, Pete at the RTO
ShowPodcast.com.
You can email me there.
You can also go on the website.
It's www.thertoshowpodcast.com.
You can feel like free to go buysome swag on there, find out how
to be a somebody who can helpout the podcast and be a
sponsor, just like RG Co has.
It's been amazing to be here.
Uh want to tell you guys always,hit us up on Facebook if you

(01:38:28):
want to do the DMs, Instagram,LinkedIn, and where you're gonna
see this on YouTube.
Make sure you subscribe.
And I will tell you guys asalways, thank you so much for
being here.
Thank you for having us.
I am so glad that I got a chanceto work this out.
I've been trying to get a micfor a long time, but I tell you
guys as always, make sure to getthe lesson below to get your
sales high.
Have a great one.

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