Wealth Strategy – Matt Rinkey

Matt Rinkey:
I feel like a lot of business owners, they might have a business coach, or they have business consultants. They might not ever even be working with somebody in our capacity. They might not have traditional liquid assets that most financial advisors need. These conversations might not actually be happening. We don’t care about that liquidity. The sooner the better, right? It just creates more optionality in the business. If we’re trying to pull levers to then enhance value. It’s a multi year process, right? Even just trying to sell a business can take on the short end, nine months, a year, and that becomes a distraction.

Matt Rinkey:
Trying to sell.

Dana Robinson:
Exit plan is a podcast for business owners and those who.

Dana Robinson:
Want to be business owners.

Dana Robinson:
I’m always in search of the lesser.

Dana Robinson:
Known stories of entrepreneurship.

Dana Robinson:
In the exit Plan podcast, you’ll hear stories from startup to sale and hear from the professionals who helped business owners achieve their exit. Hosted by me, author and private equity manager Dana Robinson, along with my co hosts and guests, you’ll hear real stories and tools that will help you plan for the exit you want, whether you are still working at a day job or running a business. Let’s get started with this episode of the Exit Plan podcast.

Dana Robinson:
Hey, everybody, it’s Dana Robinson coming to you with the Exit Plan podcast. In this episode, I’ve got a wealth advisor named Matt Rinkey talking about exit planning. In fact, I saw on your resume your certified exit planner. And my podcast is called Exit Plan, and I’m not a certified exit planner, so I have to figure out how to become a certified exit planner to keep using that name on the podcast.

Matt Rinkey:
Right? For sure. I think, you know, real life experience is absolutely critical and necessary to everything. So whether certified or not, all good.

Dana Robinson:
Well, what. Let’s start with, what does that mean? What does it mean to be a certified exit planner, and what does exit planning mean for you and your practice?

Matt Rinkey:
Yeah, for sure. Well, a certified exit planner, somebody’s gone through a rigorous educational background to learn all the different facets to help entrepreneurs kind of maximize their business value and then set themselves up to be in a position to exit the business, whether they want to remain in the business and they’re going to exit from it, or be prepared to maximize that value and make sure it’s transferable. So when the time comes to actually exit, they can have quantifiable value that they realize from that exit. So whether the exit is in the near term or the long term, it’s just part of a journey and a process to help maximize life and the resources in your business along the way.

Dana Robinson:
Love it. I love it because I think most people who are listening to me are trying to figure out, how do I get value out of my business? And I’m always saying, to exit a business, to sell business, to get the economics that you want, you have to stop thinking in some ways about the exit and start thinking about how do you optimize that business and take the benefit of that while you actually own it. So even though my theme is like the exit plan in some ways, do you agree with me? And maybe you can speak to this? A business owner should be thinking, how do I optimize this business for me and understand that that driver will drive more value to the ultimate exit than if they gyrate a lot on what do I need to do in order to exit?

Matt Rinkey:
100%. Yeah. I mean, I think for entrepreneurs, oftentimes we think about building a business for all of our clients. How do we build our business around the life that we want to have? How does that business get built to provide for the life, the lifestyle, how we want to spend our time that we want to have. And that often gets missed. But at the same time, when we think about business exits and maximizing that value or being prepared for it, I think the same principles apply. Whether you are going to become chairman of the board of your business and be there to oversee it, and you’re not in the day to day, or you’re actually going to sell it to some third party or someone internally at your company, or to a private equity firm or to another strategic buyer. And the same principles need to be put in place.

Matt Rinkey:
And that’s how do I replace myself in this business? And that happens whether you’re going to formally sell it or you’re just going to step away. That’s what helps to maximize value, is that it’s nothing critically dependent on the owner themselves.

Dana Robinson:
Yeah. Okay, so this is a theme that cuts across every business book, every discussion you have with entrepreneurs that are stuck. And it’s interesting from just the sort of advisory standpoint, it’s your tip of the spear as well. You’re saying that the number one thing across every business, you would help plan their exit, no matter what stage it’s at, is how effectively can they stop being the operator, the bottleneck, the one that is spending all of their time running the business?

Matt Rinkey:
Yeah. It’s either related to that, or they’re the relationships of all the business. They’re the key salesperson and have all the client relationships roll through them, as opposed to there’s other people that can maintain these relationships if and when you’re no longer with the business. So whether it’s the doing, whether it’s the selling, whether. But some of these other critical functions, it’s like the owner needs to be removed. And if it isn’t, then that value of that business is going to be immensely lower than an equivalent business where there’s diversification and talent and people have, other people inside the company have those responsibilities. And it’s not all falling back to the owner.

Dana Robinson:
Let me use a hypothetical avatar, because I’ve seen a lot of, of businesses at some inflection point in a business, in a service business, it’s probably, there’s a couple of them. It’s five, $6 million in revenue where an owner is doing pretty well, might be extracting as much as a million dollars in owner discretionary earnings so that there’s a meaningful amount of money. And they hear this because they’re going to hear it. Whether they read Emyth or they realize they should put their business on eoshdhehehehehehehehehehehehehehehehe. Whatever the methodology is, they’re hearing it from everywhere. But what I’ve seen in my hunt and find and buy business world is the owner’s unwilling to spend that money on that maneuver, the maneuver of hiring, for example, general manager or a sales driver, so that they’re. Because to do that, they have to go, all right, this year I’m only keeping 300,000 of my discretionary earnings, and I got to take a risk with the 700,000 difference and hire some people. And there’s fear.

Dana Robinson:
And in some cases, you can make a mistake. You hire the wrong people, you spend a year spending your wheels, you’re down. You had a year where you didn’t get to throw half million dollars into your IRA or into your investment pool for your retirement. Do you see that a lot in terms of the stuckness of owners that are at a size that’s risky to take what they’re keeping for themselves and turn around, throw that into trying to get themselves above and out of the day to day of the business, for sure?

Matt Rinkey:
Oh, yeah, absolutely. I think it happens. As you said, a lot of times they don’t want to. They see it as a risk. But I think we need to, on our side, help our clients do personal planning to understand what is that actual investment you talked about. I need to pay $300,000 to do this. Well, after tax, it’s $150,000 for some of these entrepreneurs in California. So what are we really talking about? How might that impact their personal plan? It doesn’t mean that they need to be completely absent because they’re going to hire this person and they’re going to let the rails, the wheels fall off the organization and hiring that person.

Matt Rinkey:
There’s still obviously critical functions that the owner needs to be involved with while they hire that next person that could be integral to their long term planning. So really, what is that real risk? Can we quantify it? Does it mean not as much money is going into their retirement plan this year, but what might be the improvement in terms of valuation that they might get from their business with them removed? Can we help figure that out? What might that business be worth without them in the mix versus them staying along? Or do they have to? Has the owner even done any personal planning to say, what if they are disabled and they don’t have a person like this? Can the business even function without them for an extended period of time? So the real risk might not be the hiring. It’s the fact that they don’t, that they haven’t done it.

Dana Robinson:
I like that. That’s a great way to turn the table on that fear, because I’ve even been at the table with a number of companies where the owner, it’s very evident that the owner knows that they’re the ones stuck in the business and that selling it is important to them because they’re stuck in the business. And when you talk through it, you realize, well, they have the resources to invest in building a team. Do that. They’re afraid of losing the control of the liquidity that they have right now. And to your point, that puts them in a precarious position. As you age, there’s probably not enough life and disability insurance to even offset the value of having operators in your business that can run it without you. And to your point, I guess if you take a business that’s putting a million dollars in owner discretionary income, but requires the owner, a buyer is going to add that back in the reverse, right? You’re going to say, well, if I buy this business, I need an operator.

Dana Robinson:
So your effective EBITDA might be half a million dollars, and then let’s say they’re paying you four times that versus if you got an operator in the seat and it’s portable management without you, you know, you might get five times EBITDA and you might drive your EBITDA up a little bit if you have that person actually, you know, if their efforts are accretive before you go to transact.

Matt Rinkey:
So 100%. And I think, yeah, that’s in the size of the business. It absolutely matters. Right. We have a million dollar EBITDA business versus a $5 million EBITDA business. And as you’ve probably seen, it’s like a lot of businesses don’t ever transact. They think that there’s value, but there’s not because it’s still all stuck with the risk of the owner. If something happens to the owner, the new buyer is.

Matt Rinkey:
Yeah, yeah.

Dana Robinson:
And very few people want to buy a job. Right. And if they do, the amount they’ll pay is, is a lot less. So if someone refuses to get out of the business when they sell that business, most buyers are not going to be private equity or professional investment groups. They’re going to be someone who will buy a job. And to do that, they’re not going to pay you tons of money that you might be carrying back half of the deal and hoping that they can perform.

Matt Rinkey:
Exactly.

Dana Robinson:
What are some of the things talk to me about you as a professional and what, you know, like, I talk too much in my own podcast and I guess I’m entitled to, but you’re the guest I’d love to learn more about. What’s the process you take your clients through and what are some things that you can teach me and the people who are listening?

Matt Rinkey:
Yeah, for sure. I mean, for us really being, you know, they’re, we really serve as our clients outsourced kind of family, virtual family office. And we’re integrating all aspects of their financial life from the business to the personal to the outside investments. We have the 30,000 foot view and help them crystallize their long range, you know, planning possibilities, what they want to create in their life, but also helping on the micro decisions as well, big and small alike. And so when it comes to exit planning, obviously this gets back to the overarching goals of the entrepreneur and helping them quantify the wealth gap that they might have. What do they need their business to be worth for them to be able to potentially exit and maintain that lifestyle you talked about? It’s like, all right, I’m earning a million dollars a year. I’ve got a nice service business. It’s bringing home a million bucks a year.

Matt Rinkey:
But if I can only sell that for 4 million and after tax, I net three, how is that going to sustain my life for the rest of my life? How can I be financially free? And so we want to be helping our clients vision what that future might look like, help them truly understand the numbers that allow them to become financially free from their business, whether it’s continuing to extract profits and growth, growth of the business and growth of the profits to we want to exit and we need to increase the valuation. What steps now does the business owner have to tangibly work on their business that fulfills on that overarching personal plan? So we’re looking at all of that to how do we then de risk, help our clients de risk that business, as you said, is there any type of contingency planning in place? Do they have life insurance? Do they have disability insurance? How do we maintain the value right now that there is in place and not risk that as the starting point and then figure out how do we grow and enhance the value along the way. So the personal planning, the business planning, it’s everywhere in between. At what stages do we start to diversify outside the company? What’s our investment plan? If we’re going to be extracting profits and not reinvesting in the business, how are we going to manage our portfolio in that way? Are we going to go look to become a real estate entrepreneur? And is that going to distract ourselves from our service based business? I think a lot of entrepreneurs, they have other entrepreneurial friends. They get deals shown to them a lot, they see other people doing other things and they might want to. So really creating a filter for them to make decisions and to have a framework to say yes to things, to say no to things and to help them prioritize. Hey, these next few years are really business growth focused. And no, I’m not going to go buy a home to fix and flip it right now because that’s a 10% roi, while over here might be multiples and multiples of that inside the company.

Matt Rinkey:
So there’s a lot of different aspects and phases to the work that we’ll be doing with our clients.

Dana Robinson:
Yeah, I can tell you’ve worked with entrepreneurs. I call that the shiny, the shiny new toy syndrome. And, you know, or, you know, shiny object. It’s really common and it’s really hard to talk entrepreneurial people out of doing things that, that might be a distraction. And so I’d love to know, like what if you’re able to get in people’s kitchen and help them? What are some ways that you can, that you’re able to help them decide? I’m not going to chase that shiny new object. Is it breaking down the math? Is it like you’re their business counselor, talk about like that piece? Because I think there’s a lot of people I do this, and I probably need somebody like you to smack me and say, have you lost your mind?

Matt Rinkey:
For sure, for sure. I think a lot of it gets back to what is it that our clients value and really understanding core values, both personally, but also when it comes to business and investment, what are our investment philosophy, our investment values that we want to apply? And I think for so many people, they don’t ever have anything written down. So how do we create investment checklists and our investment criteria? And it’s not the financial advisor checklist. Oh, you put it in this cookie cutter pie chart of stocks and bonds and let them do the work. It’s truly, how does this checklist fulfill on the entrepreneurs competencies, interests, psychological makeup, past experience, how their time allocation? Are they gonna get a return on their time if they’re spending it on certain type of investments? So building out their own investment checklist then allows us to be objective. It allows them to be objective around, does this next investment actually fit? As opposed to, hey, my buddy sent me this. This looks like an interesting deal, but does it fit within all the framework that we laid out? And if it doesn’t, we’ll be saying no to those things, and we’ll help hold our clients accountable to them and then defining around that. When we think about their overall investment plan, is it noise? We’re just going to throw a few bucks at something, and then it’s just noise and doesn’t add anything, or it detracts from where they might be spending their time.

Matt Rinkey:
So we’re trying to truly put pen to paper that provides the objective way to evaluate it based on their values, their goals, their history, their competitive advantages, what they know well, what they want, if they’re going to partner with other people. So, yeah, really a due diligence kind of investment framework and checklist for them.

Dana Robinson:
Yeah, I think that’s a great idea. I hadn’t thought of that. The only way I’ve been able to try and talk a few colleagues off the Badlandhouse, you know, decision has been to try to help them understand the value of their time.

Matt Rinkey:
Yeah.

Dana Robinson:
And the problem with a lot of entrepreneurs is they’ve, you know, they work like crazy for free for two, three, four years or whatever, and then get a big payout. And so they’re used to this starvation, you know, feast and then famine and then feast cycle. But as a lawyer, I know what my time is worth, so I can say, all right, this little angel investment is going to take some money, but it’s also going to somehow seep the back into my life and take something from me in terms of my time. And if I bill 690 an hour, then what’s my investment look like? If I’m giving this business, you know, 5 hours a month, you know, what is it? You know, is that, that’s me investing 30, 40 extra thousand dollars a year into that business? And do I get a return on that? I’ve tried that and unfortunately, most people don’t bill their time, so they don’t really value their time the way they could. Right. If pick, I mean, you’re an advisor, you probably don’t bill by the hour, but you could reverse into what your hourly value is and then you could say to someone, if you want my advice, you want me to be on a board, you want me to mentor you, here’s the value of my time. But most people don’t do that. I like your checklist idea.

Dana Robinson:
What are some of the things that, is that a tool you give away? Is that a tool is just part of when people engage for your services?

Matt Rinkey:
Yeah, I mean, it’s going to be custom to every single client, and we have our math, we’ll bring them through a process, but it’s something that we’re going to, we co create, you know, together, and then it can be tied back to all the different assets that they’re going to have and that make up and comprise their, you know, total wealth portfolio, whether it’s private equity in businesses, whether it’s real estate, whether it’s self directed real estate, whether I’m going to be partnering with folks and how much of my portfolio do we want with partners and what do we look for in partners. So it’s truly kind of a co creation process that will guide clients through.

Dana Robinson:
That’s cool. I think that sounds like a great, doesn’t sound like anything I’ve heard of before, so that’s cool. So far, just thinking in terms of, you’ve identified two of the most common mistakes of entrepreneurs. One is not working their way out of a job while they own the business. The other is chasing shiny objects. We didn’t ask for what the most common problems, behaviors of entrepreneurs are, but since we’ve got two, do you have a third most common behavioral problem of entrepreneurs that you probably have some strategy around?

Matt Rinkey:
Yeah, I mean, I really think oftentimes that the entrepreneur hasn’t done a lot of the personal planning. I think we see that a lot is that they’re building a business or they’ve created a, you know, they’ve built a nice income stream and they spend it. You know, they live up to that lifestyle. They don’t really know. Are they close to being financially free? Right. And so how, how do then we build all the other infrastructures to ensure that that business is providing what they really want in life? Maybe they have the lifestyle, you know, now, but if something happens, they might, you know, they might not be able to continue or sustain themselves. And so I think a lot of times is kind of going back to what I shared is how is that business truly built around what we want our life to be and what we see for it in the future? Maybe that’s an expanded lifestyle. Maybe it’s, we have other things that we don’t in our life right now, but the businesses might just be completely flying blind.

Matt Rinkey:
It’s not emotionally connected and quantifiably connected. Back to those personal aspirations, what you want for your family, kids, college, moving second homes, whatever it is that they may want, and yes, they’re building it, but it’s not truly integrated together. And I feel like that’s a vital component because how else then do you budget? If you think about, people don’t like the budget, but if you think about a business owner, the business budget should be built around the operations should be built around how much we’re going to reinvest into that business should be built around how much we need to take out to pay all of our personnel bills should be built around how much we need to extract from the business, not reinvest in the business, to reinvest elsewhere to provide diversification outside of the business. If we don’t have all of those things, then we really don’t have a true business budget that’s reflected back to the lifestyle that we want to have. So really reverse engineering it and designing the life integrated with the business.

Dana Robinson:
Do you, amidst your experiences working with business owners, do you find most of the people are coming to you with sort of toward the time where they’re thinking, I think I want to transact. I’m not sure how to get the right value. They don’t really, and then they’re missing these things, these no personal financial plan. The business that’s, that’s not got portable management. And maybe they are distracted with shiny objects and distractions that take their time and maybe distract their, them financially as well. Dana Robinson here.

Dana Robinson:
Quick plug for my book, the King’s FlyswAtter.

Dana Robinson:
You can see it here behind me. If you’re watching this, I’ve got it in my hand.

Dana Robinson:
It’s a beautiful hardcover book printed to.

Dana Robinson:
Make it giftable, something that you can share with a family member buy as a gift.

Dana Robinson:
So, this latest book, it’s a fable about a person who has a really crappy job. Let’s just start there. This is a book that most people can relate to because we’ve all had crappy jobs.

Dana Robinson:
This is the story of Ubar, a.

Dana Robinson:
Servant in the court of a babylonian king who masters his boring, monotonous job and then learns to listen to the king, hearing him rule the kingdom while quietly swatting flies behind the king. Eventually, Hubbard becomes the wisest and most successful man in the kingdom. The story is fun, and it’s easy to read, but it’s not mythology. It’s my story. And as I shared the idea with colleagues and friends, I learned that it was their story. And guess what? It’s your story if you’re at a job of any kind, one that you love, one that you hate, one that’s just enough to get by. This little book gives fresh perspective on. On how to leverage that job to get you something greater than a paycheck.

Dana Robinson:
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Dana Robinson:
The King’s Fly swatter by going to danarobinson.com dot, where, you know, where do you find the people actually showing up, and where should they show up?

Matt Rinkey:
That’s a good question. I mean, they’re showing up at all different time frames in their journey. Like, there’s not a definitive time, right. People that have shown up that have to do make quick decisions, which are obviously suboptimal. Other times, where there’s farther Runway. I feel like a lot of business owners themselves, they don’t necessarily. They might have a business coach or they have business consultants. They might not ever even be working with somebody in our capacity because they might not have a traditional liquid assets that most financial advisors need.

Matt Rinkey:
So then these conversations might not actually be happening. Either the other people aren’t trained in them, or they’re just not. They don’t know how to find groups like us, where it’s not like, oh, you got to have a million dollars in investment portfolio for us to work with you. We don’t care about that liquidity. So I think the sooner the better. Right. It just creates more optionality in the business. I think if we’re trying to pull levers to then enhance value, it’s a multi year process, right? Even just trying to sell a business can take on the short end, nine months a year, let alone what do we need.

Matt Rinkey:
And that becomes a distraction when we’re trying to sell, let alone what are all the things that we’re trying to do ahead of time to increased growth, increased profitability, which will have a multiplication effect on values. And those things take time. So the sooner the better. There’s not one clear point where I can say all these clients are showing up then, or they haven’t really thought of these things, and now it’s time to broach the subject.

Dana Robinson:
Yeah, I’ll call out a real world example of people not knowing that people like you existed, been in transactions on the buy side where the seller is having meetings constantly with a financial advisor about this transaction that they’re trying to prepare for to sell our group, their business. And the guy, it could be a man or woman, but the guy that’s there seems to very often in those circumstances, just be a sort of classic stock market bond kind of advisor. And they’re completely out of their element when they’re talking about the structure of the deal, tax planning around the deal, the earnouts and attritions and clawbacks and all of the things that go into deal. And their only financial advisor is the guy that’s got their doing the trades for stocks and bonds or managing their iras and that sort of thing. You find, you know, I haven’t found too many people in your position. You typically end up with an investment bank or an accountant accounting firm that ends up kind of substituting for the role of business transaction exit planning advisor, for sure.

Matt Rinkey:
And I think, you know, for us, it’s like we need to know where, you know, where we’re best at. And then our role is also, how do we build out that team if they don’t have it, you know, that they need or have they outgrown their CPA for the next type of, for the type of planning that we’re going to need to do in preparation for this exit to, you know. Yeah. Do they have a business broker? Do they have a banker? How are we thinking about the banker? Is it generic? Are we getting industry specific? Like we, you know, we need to be the ones to help them build that team if they don’t, if they don’t have it. And some of it might be our knowledge, but it’s also our network and, you know, experience working with other groups to help them build that out with best in class professionals.

Dana Robinson:
That’s great. Talk. Talk to me more about your practice. I want, you know, again, this feels like a unique conversation where I haven’t met very many people that are in, you know, advice. I’ll call you, I’ll call you. A financial advisor, a financial ish advisor versus an investment banker that’s going to help you broker the transaction. That’s going to give you visibility into, like, what you need to do to, you know, I don’t know, recast your financials or an accounting firm that you’re doing something really cool. So I want to learn, you know, I want to learn more about it.

Dana Robinson:
Maybe you’ve got some stories or some anecdotes that you can share that sort of talk to how your clients find you, interact with you and what you do for them.

Matt Rinkey:
Yeah, for sure. So, I mean, most of our clients are really finding us through kind of referrals, very much a referral based business. We’re not doing a whole lot of marketing and haven’t done a whole bunch of podcasts, but it’s fun to get.

Dana Robinson:
Out there and, yeah, thanks for coming.

Matt Rinkey:
The knowledge and whatnot. You know, our team, we’re a boutique team, I mean, where 16 of us as part at the company, and we, you know, each client in their family is surrounded by, I would say, a team of other financial planners, mostly cfps, being an entrepreneur and starting the company, you know, the reason why I started the company, just, you know, my own family’s entrepreneurial experience that impacted everybody in our, in our family. And so that’s kind of why we’re here today. And we’ve always wanted to serve entrepreneurs in a different way. We don’t want, we, as we talked about before, like that financial advisor sitting in that meeting who’s out of his league, like, whether there’s liquidity event or not, we believe that, like, clients still need to be doing all of the planning. Maybe there’s not the traditional stock bond mutual fund portfolio, but there’s a whole host of other things that need to be looked at and prepared, cared for and considered. And so our role is to serve, irrespective of that liquidity event. Yes, we want to be there to prepare for it.

Matt Rinkey:
Absolutely. In whatever shape or form that shows up in but how do we have a true partnership where we’re helping to grow their financial life in an objective, intelligent way, not be tied to, you’ve got to put x amount of dollars in an account at our firm for us to collect a management fee off of. So we have really a flat fee model in which, you know, our clients can come to us with any type of financial question, big or small. We could be preparing for a transaction, or, you know, we’re in California. Should I put solar on my house? Is that a good ROI? Should I, you know, are the leases up in my car? It’s a crazy car market. Should we buy or lease it? People just don’t know day to day financial questions. We want them to use us as that resource. But also the event driven, major life altering things as well, is what we’re helping our clients plan and prepare for.

Dana Robinson:
You’ve alluded to your family’s entrepreneurial journey. Is there a story you can share?

Matt Rinkey:
Yeah, so my grandfather, depression era guy, I’m from Minnesota originally, he had a glove leather glove manufacturing company that kind of built up and eventually sold and exited in the mid. Yeah, mid eighties, mid to late 1980s, and had a business partner. Never really had a personal plan, never had an investment plan. And he invested some. He had a stockbroker back in the day, and this was around the time, I don’t know if you remember, there’s like the junk bond craze of the eighties and Michael Milken and all these folks. And so his stockbroker at the time basically took my grandpa’s nest egg and put it into companies, public companies that went bankrupt. And so the vast majority of his nest egg was gone within a few years of retirement. Yeah, certainly my grandpa’s personal responsibility.

Matt Rinkey:
But he wasn’t the financial planner. He wasn’t the, you know, knowledgeable investment advisor. He was a guy who built the glove company. You know, like, it’s a blue collar dude who built a glove manufacturing company. And so, you know, that just, you know, kind of led from one decision to another bad decision, you know, like, there’s a lot of guilt and shame that come along with that. Right, where you could have been set for life, right. His money could have invested in government bonds at 15%, never touched principal, you know, for 30 years, and been pretty. Been truly set for life.

Matt Rinkey:
So that just reverberated to who does he trust, right? And then going at it alone and then making other decisions that didn’t work out because they were probably more emotional, event driven decisions. And then within a couple of years of selling the business, there was an opportunity to buy it back because the people like who he sold it to didn’t do the best job. He could have bought it back for pennies on the dollar and probably flipped it again. But then his money’s tied up in these illiquid penny stocks that went bankrupt. And so it changed generations, it impacted generations, it changed how my parents worked to help support them because they eventually ran out of money, which, you know, probably unfathomable at the time of selling that company. So that’s kind of been the kind of the driving force around how we position ourselves to make sure that people like my grandfather have an outlet and have the ability to have somebody, a partner on their team for all of these decisions. So, yeah, pretty impactful.

Dana Robinson:
Yeah. No, I think that’s fantastic. I mean, that’s a great mission, and I think your avatar fits somebody who you’ve got great empathy for. That means your trusted advisor role can’t ever be, how does your firm make a bigger commission? Or how does your firm get more fees? You want to be agnostic to the economics in a way, in order to be truly somebody that’s an advisor and counselor to. To business owners that maybe you can speak to this anecdotally, I think business owners that have not had a significant failure tend to make rash and sometimes bad decisions when they have a success. And sometimes that’s venture backed. I grew company, sold it, made a bunch of money. Kind of people who think they’re heroic, and then the next thing they do crashes and burns because they thought that they were magic.

Dana Robinson:
But also, for a lot of legacy business owners, even an interfamily transfers for years between family members. They finally exit. They don’t know what it’s like to fail. And so they sell this business. It’s the. The only transaction they’ve ever done. And I’ve seen some bad decisions come. I mean, a little bit like maybe your grandfather, but also kind of like, look, I just made all this money and it feels like I got a lot, or it feels like that was easy and they forget how long it took them to accumulate that and to make bad decisions.

Dana Robinson:
Have you seen some of that?

Matt Rinkey:
Yeah, for sure. No, absolutely have. I think where we’ve seen things show up in some cases is the entrepreneur that built the business had a really good exit and generated some wealth, and now they think that they’re the venture capitalist, and what they then do is invest their money in a whole lot of private companies in non control positions, and completely screw up their balance sheet and completely impact their lives potentially forever, because, and it’s a completely different skill set, you know, building something versus purely investing and doing something from a place of control versus a place of non control. And, you know, kind of managing that overarching wealth ends up really, really hurting them. And as opposed to, you know, maybe going slowly into the process and being more thoughtful and figuring out how big a checks that we’re going to write in doing this. And what if it goes wrong? What other avenues or what other. What other wealth do we have to rely on? So, you know, we’ve seen that a number of times with entrepreneurs who have this exit, and then the way that they, you know, they like the control. They don’t want to just put it into the stock market.

Matt Rinkey:
Right. They don’t trust that. But then they’re, they’re not necessarily the savviest of venture capitalists, and they don’t even have that experience, but they had an exit, and now they think that they do. So we’ve seen that a number of times, which is unfortunate.

Dana Robinson:
Yeah, for sure. Yeah. It’s understanding your limitations. And some of that comes from listening to podcasts like this or others and learning about, I mean, angel investing even, is technically venture investing. It’s illiquid. And a lot of people, I think, get liquid, and then they start seeing deal flow, and they don’t realize that there’s hundreds of thousands of opportunities a year and that they certainly can plunk down some $25,000 checks on some interesting opportunities, but none of them are urgent. You’ll never know the next payPal or ebay exactly at that stage. So you end up advising a lot of people around their desire to invest in kind of like that post exit.

Matt Rinkey:
Absolutely. Absolutely. I mean, for us, as we said, the traditional advisor wants the liquidity. They need that money to collect that aum fee. How do we make our clients better investors? Some of them might already be investing and doing, you know, investing on their own, invest to have other real estate investments. How can we help them professionalize what they’re already doing if they’re still self directed in some way versus completely outsourcing the investment management to third party? How do we make them better investors? Or if they do want to go down the path of buying a multifamily building that they’ve never done before, how do we make sure it fits? How do we go through that process? How do we underwrite it to make sure it aligns with our goals? How do they get financing what is their, you know, what is their balance sheet to look like? We want to work with them to create their plan. It’s not our plan, it’s their plan. So how do we make them better as investors? And that’s just not by, hey, send your money here.

Matt Rinkey:
That’s not the path.

Dana Robinson:
Well, I love what you do. How do you garner a breadth of expertise that lets you speak to real estate and, you know, publicly traded private venture angel, you know, startups and partnerships and all of that?

Matt Rinkey:
Yeah, I mean, the team, the background of the team, the experience of the team, you know, lived experience. I think our clients that get the benefit of, we’ve gone through so many different things with our clients along the way that if they’ve never had an exit, we’ve walked that path with numerous clients and numerous industries, different types of outcomes, that this can shortcut their way if they’re going at it, if they’re going at it alone. So my background prior to starting my own firm, I was in work for kind of a family office work for a hedge fund, really large hedge fund in the public markets. It was in the public markets, but it was almost private equity in the public markets and the way that we operated. And then being out in California for 15 plus years having this business, you’re in New York City and it’s kind of Wall Street, California, it’s real estate. The name of the game is real estate out here. And so we just, with our approach of not having to be tied to assets, the real estate investors aren’t investing in the stock market. And so being a part of real estate investment, just, we get so much exposure and experience along the way that I think most other, you know, advisory groups aren’t, they’re not rolling up their sleeves.

Matt Rinkey:
It’s just not how they operate. So our, you know, our area is entrepreneurs and real estate entrepreneurs, which lends us to be able to support this group.

Dana Robinson:
Yeah. So then your expertise is certainly gained from each of your members expertise, but then you’ve got the benefit of every client who comes in is another round of experience and helps season you and your ability to continue to advise people. So I guess you’re less broad than, I mean, your breadth. For example, are you helping people when it comes to an IRA with some public stock, or do you hand that off to another advisor?

Matt Rinkey:
We have the ability to do that. Our engagement’s not going to be dependent upon that. Like, whether we do that. We’re often finding efficiencies in our approach because of how our fee model is say, look, you’re paying somebody there, like there’s no additional impact. If we take that over, like we’re, we’re gonna, you know, it’s gonna be part of the service as opposed to, you know, you’re, you’re paying double, you know, you’re paying twice. So we wanna find, we can find those cost savings. So yeah, we’re gonna help entrepreneurs, you know, if they need to establish a defined benefit plan, help them set that up to, you know, manage, manage a 401K plan. We can do all of those things.

Matt Rinkey:
And oftentimes it’s a, how do we save them time, like the administration time, who’s coordinating with their third party administrator and the actuarial on the defined benefit plan. Like, you know, so we’re, we’re helping to save time in addition to think about those, you know, traditional retirement planning strategies and accounts to the underlying investment of it as well.

Dana Robinson:
Cool. As we get toward the end of the podcast here, I was just thinking maybe, what are some of the most common strategies? We talked about some of those common mistakes of entrepreneurs that disable them from creating value and optimizing their business around an eventual exit. What are some of the top strategies that you find are the most common? I mean, is it defined, you just talked about defined benefits plan. Is that, is that a pretty high up there on. Lots of people need this who come to you or maybe say, two or three of the top tools, strategies that you see people deploying?

Matt Rinkey:
Yeah, I mean, it depends. The defined benefit plan is good if you’ve got six plus figures of, you know, extra capital that can be put into a retirement account. So, from a tax planning standpoint, where we’re looking for lots of different ways to move the needle in tax, that’s one of them. That’s more of a tax deferral than complete tax elimination. But like, pulling up, looking under the hood from the business, what are all the, where are all the opportunities to move the needle? And that could be, yeah, the right retirement plans. I mean, I feel like being in California, real estate has significant advantages. And so we’ve had clients of ours that own real estate where the spouse isn’t working. The spouse can become a real estate professional.

Matt Rinkey:
When you’re a real estate professional, you can. Now, if you acquire real estate yourselves, you can accelerate depreciation. And that depreciation could be six plus figures, depending on the type of property you buy, which offsets the business income or your wages that you’re taking out of the business from a tax, from a tax minimization approach. So, I mean, there’s so many different things that can be considered depending upon how people are structuring their lives. But we often see the real estate avenue having a lot of synergies with the entrepreneur, whether they’re buying their own building that might work for them, depending on the industry that they’re in. And similarly, there you buy the building. You don’t need to be a real estate professional. You can group them and get accelerated depreciation through a cost segregation study and then use that depreciation to offset the business income.

Matt Rinkey:
So, you know, it’s a plethora of different things. And, you know, how do we make them? How do we figure out which works for each client? Is our goal. There’s our responsibility.

Dana Robinson:
Yeah, that’s great. I love the real estate plus, plus entrepreneurship, entrepreneurs. You know, I’m in California, so I’ve experienced it myself, and that’s so defined. Benefits plans, maximizing real estate, both in terms of asset allocation, but also just so the listeners know what Matt’s talking about. If you own rental property, your depreciation, what you can take against your other income, is capped each year unless you are a basically full time real estate professional. So if I have $50,000 a year in depreciation right now, as I’m sitting here today, not actually, you know, not a professional, I can. I’m capped at 21,000 a year. And passive and depreciation I can allocate to my.

Matt Rinkey:
Yeah, I mean, you have to like $150,000 of income and then up to 25,000. You can use $25,000 of passive losses. But for most of our clients, the income is too high to be able to do that unless they’re fully real estate people, which in that case, they have no taxable income ever, which is incredible. Yeah. So, yeah, the real estate, if you’re just a mom and pop real estate investor, I own a single family property. If there’s losses generated by that property, you really can’t use that loss on the property to offset your wages or other business income.

Dana Robinson:
Unless you work 500 hours a year, you typically get licensed. Right? So you’re saying, like, it’s a common strategy is to have one spouse or partner or whatever in a relationship, get license, practice in real estate enough to be full time, and then, you know, you. You have at least more opportunities for allocating more of those losses against the household income. So super good strategy. Thanks for drawing that out, Matt. I think that’s a cool one to sort of put a pin in. But, you know, in these podcasts, I talk more than I should. But did I miss anything that you think is important for people to understand about what you do and the value that you and your firm bring?

Matt Rinkey:
Yeah, no, I think I appreciate you asking the question. I hope people got value from this. And I think realizing that, you know, your, your existing team of advisors, I think it’s really important to continue to vet them out, to continue to understand their capabilities and whether that’s on the tax side. And you’ve had somebody working with you for years, you can always get a second opinion. Right? Like, if your tax returns are prepared incorrectly, you can go back three years and amend return. So I would say evaluate your financial team. Are they in a place to be able to guide you for where you want to go, not where you’ve been? And so whether that’s your, you know, your financial planner, your financial advisor, whether it’s your CPA, your estate planning attorney, all of those professionals need to be, you know, evaluated to help you, you know, take it to that next level. And so our role is to help do that, help build that team for our clients and so that they can, you know, be set up with, you know, the right strategies for the wealth that they want to create and the life that they want to have.

Matt Rinkey:
So hopefully that helps.

Dana Robinson:
Awesome. It does. Matt Rinkey, illuminationwealth.com is your website. Are you active on LinkedIn or any other platforms?

Matt Rinkey:
Yeah, pretty much. LinkedIn is the sole place where dates and resources and try to be pretty active on there.

Dana Robinson:
Cool. It’s matt Rinkey, r I n k e y, with illuminationwealth.com. Matt, thanks for coming on today.

Matt Rinkey:
Yeah, thanks for having me. Best of luck. Thanks for the.

Dana Robinson:
Thanks for joining me on this episode of the Exit Plan podcast. I’d love to hear from you. Feel free to hit me up with questions or comments by emailing me at hello@danarobinson.com or leave comments and questions by calling 858-252-7785 call 858-252-7785 and leave a message.