S2Ep38: Build Your Personal and Business Financial Wealth

Hey, everyone, welcome to the show. I’m Allan. I’m a family man and attorney and an entrepreneur. Each week, we provide resources and advice to help build your business. Are you ready? Then let’s go. Welcome to the show today. Glad you can join us at The Business Growth Pod. I’m excited for our guests. Today we’re going to talk about money, right? We’re going to talk about entrepreneurs. We’re going to talk about money, two of my favorite subjects. Our guest today is Derick Van Ness. Derick is the founder of Big Life Financial, and he’s an expert in helping business owners create financial certainty and confidence and kind of everything that’s financially related. And we’re gonna get into that a little bit today. So welcome to the show, Derick. Happy to be here. Allan, this is gonna be fun. So tell us a little bit about your background. It looks like you’ve founded this company, Big Life Financial. That’s super exciting. Tell us about Big Life Financial, tell us about how you help entrepreneurs.

So big life, financial is probably the third business. I mean, there’s been more in there, right. But the first one I had I flipped houses for many years and did about 150 fix and flips pre 2008 kind of got caught with my pants down during that whole meltdown in Southern California. Oh, geez. Yeah, yeah, yeah. So I got to build a business, then I got to lose it. And I will tell you this, you learn a lot when you’re losing a business, when it’s failing, you start really examining everything. Because every dollar matters, then kind of went into marketing for a while and started actually coaching a lot of business owners on business strategies of finance, all the sort of elements, I was kind of the quarterback to a financial company. And that kind of got my feet wet working with entrepreneurs. And I really, really liked that. But I was working for someone else. I was 1099 had control of my schedule and everything. But there’s a ceiling on that. And so I thought, gosh, you know, I really want to get back to that real estate money, because you know, I was making really good money in real estate. So I jumped back into it. And I realized very quickly, I love people so much more than I love houses. Like real estate seems cool. But like truly making a difference in someone’s life is just so much more powerful. And I really missed that. So after a couple years flipping smart houses, I came back started my own firm, that’s where big life financial came from, and the name kind of came from, why am I doing this? Like what do I really want to accomplish? Right, like kind of the whole Simon Sinek start with why approach to things. And I just thought I want people to live a bigger life, I feel like a lot of people get trapped under the money. And they’re chasing money and they forget about their life. And the whole point of this is, is quality of life, having a life that you enjoy and can suck the life out of. And if you don’t have the money piece in there, you know, you can do okay without money, but it’s pretty suffocating. So money is just sort of like, it’s the structure that allows you to really go out and be who you truly want to be. I think you know this, once you hit that financial independence, and you’ve got plenty of money, or money’s not the primary driver of whether you do or don’t do something, life changes, and I want to get more people there. So they can do the work. They’re here to do. And listen, that’s what entrepreneurs are doing. But I think a lot of them, you know, struggle with the money side, they have the ideas, they have the inspired action in many cases, but they don’t have the structure to support that. Living your purpose is great. But when you have the financial skeleton to kind of help support that and prop it up, it goes a lot better.

You kind of have to be in a position where you’re not worrying every day about how you’re going to pay rent, right in order to kind of really excel in life. And I run into quite a few people through my social media, lots people that I don’t actually know that always remind me that money isn’t everything. I have three kids. I have a little girl that’s three years old. I know that money’s not everything, but it’s important. There’s so much good that can be done with resources. Right. And so I think there’s this contingency of entrepreneurs that there’s some guilt there. Right? Where, I mean, in the beginning, it’s a grind. But if you kind of put a couple of things together in the business world, you can make a lot of money. Have you heard about that concept of entrepreneurs who like, the years down the road, their business starts making massive amounts of money, and they kind of feel like, you know, what do I do now? Do people run into that scenario?

Absolutely. And there’s definitely a big imposter syndrome to it too. Because most businesses, it’s like, if you’ve become super successful, you just got really good at one thing. And a lot of times it was I don’t want to say luck, because I think we do create our own luck to some some extent. But they like, kept chugging away, and they found this groove. And that groove really took off for them. And so they feel like I figured out this one little thing, and it’s just like, exploded everything. But everybody’s looking at me, like, I’ve figured out the key to life. And they haven’t, they’re still regular human, and they still struggle with how to discipline their kids or whatever, like normal life stuff. And a lot of them I talked to, they’re like, I feel like, like, I made all this money, but I almost feel like I cheated the system somehow, like I got away with something like I, I got lucky. And so there is this imposter syndrome. That happens. And there is guilt around some of that, especially once you get to the point where you’re doing really well. And then if you start looking around the world, there’s a lot of people who go without, and you know, some people struggle with that more or less than others, but it’s 100% a thing. And some people even implode over that.

Most of my listeners are early entrepreneurs, I do have people I was actually talking with a guy last night, about halfway through our conversation, I was coaching him through a few things. And he told me that he has a company worth $20 million. And I was like, Oh, geez, okay, so that advice that I just gave you, that doesn’t apply? I thought you just started your business. And so I do have some people that are very well off that listen to show. But what is it that early entrepreneurs do financially speaking, that can kind of cause some problems for themselves down the road? What are these, either just prior to starting their business? Or within the first year or so? What are the financial mistakes that you see?

Well, I mean, I think a lot of this stuff is tied together, right? You got to have a sound plan. You don’t want to go out and borrow a bunch of money. without a plan on a wing and a prayer, right? In just a good idea isn’t enough, you definitely need the means to execute. Right? There’s a ton of good ideas, millions of them. But execution is super, super important if you don’t have the ability to execute. So those are just like some basic things where I think you shouldn’t borrow money unless you have the ability to execute, right? Like you’re really putting yourself in a bad position. I think people have over romanticized this idea of, we got to live on beans and rice, and we got to like mortgage our house and we got to take all these risks. You don’t have to do that. You don’t have to put your family in danger. You don’t. I mean, you don’t usually get to come out of the gates making millions of dollars, but you should have a plan. You should have some money set aside. You should have some basic things in place so that your family is going to be okay. Because there’s a lot of burned up health and a lot of burned up relationships and a lot of burned up families from someone chasing a dream. Yeah, that they say that they want for their family. Right. We got to think a little more holistically here. Why am I really doing this? I’m really doing this for my family. Does it make sense for me to burn them up for five years to hopefully someday make it down the road? now. So I think you got to have a little more pre planning. And I feel like some people don’t do that, and prepare. The other big mistake I see is a lot of entrepreneurs just don’t pay themselves as soon as you can. I think you need to have a structure for paying yourself people reinvest and reinvest and reinvest to their own detriment. And they kind of wear themselves then and wear their family thin and wear everything thin. Whereas I think it’s important that you have a structure to pay yourself as soon as you can. Right? I just see too many people who the business is doing well. But they’re not paying themselves. Like literally yesterday, I was on the phone with the guy. He’s got a software business, it’s valued at about $40 million. He’s got 15 grand in the bank, and like $30,000 of credit card debt just went through a divorce. Maybe there’s something there and literally has almost no other assets except for a house. She’s right. And it’s like, Why haven’t you been paying yourself here? Maybe that has something to do with your divorce. I’m not causing any judgment cuz I don’t know the whole story of all that we’ve only talked briefly but my point is, like I see this reinvest in the business thing happened. And I think it takes over a lot of people’s lives to the point where they’re not taking care of themselves. It’s like the guy who who wants to go go go and doesn’t ever want to sleep. Like you have to rejuvenate. You have to take care of yourself. You have to take care of your family and your relationships or there won’t be any Then when you get to the Promised Land of a bunch of money, a bunch of money without anybody to share it with or, or anyone to enjoy it with is worth nothing. I’m just telling you right now.

Yeah, you know what’s funny is that I think you just described me to a tee early on when I first started investing in companies. And, man, my wife’s the same. I didn’t pay myself anything. I’m talking like 24 grand a year, I think was my first salary and everything that we made, we just kept as retained earnings and reinvested into the company for growth. Now, there were some tough times, and looking back on it. I don’t know if I would do it differently. But I would have liked to have this conversation with somebody, like, hey, it’s fine to sacrifice, you’re gonna sacrifice, right? You’re an entrepreneur and a person, you’re gonna run into challenges. But enjoy the journey just a little bit. Right? Don’t spread yourself so thin. that once you do make some money, like you said, there’s no one there, right? Take care of those relationships. That’s something that I didn’t have a plan for. I didn’t expect it. I’m just like, well, there’s no money. But then we made money. And I’m like, well, there’s still no money, because I wanted it to go all back into the company. What is an entrepreneur to do? How do they know? Like, is this something they plan out before they start their business? Do they talk to somebody? How do they know how much they should pay themselves? And how much they should reinvest into their companies? Because entrepreneurs were so passionate about our ideas? It’s just go, go, go, go go. And you know, there’s nothing left over. Right?

Yeah. And so I think the main thing is, because every business is different, right? Everybody’s financial situation, your overhead and what your family used to living on, and where are you? I mean, are you coming right out of college, or you quit, and as a CEO of IBM, right, like, your needs are going to be different. But I think you come up with a strategy, because like you said, there’s going to be some really lean times. And it could be that you don’t even pay yourself in the beginning, but start making some rules about, okay, as the owner and the founder of the business, I want to 10% of the profit off the top comes to me, right, or 20%, or 30%, depending on your business model, and how all that works. But creating some rules around that. So as the business does better, so do you, right, and you’ve got to structure within that, that you have a basis for making that decision so that you don’t go, Okay, I’m gonna pay myself 24 grand? Well, if your business is making nothing, maybe you’re starving the business with your 24 grand. But if your business is making a half a million dollars this year paying yourself 24 grand is starving you. So I think having some structure around that and just kind of looking at Okay, projection wise, where do we think we’re going to go? And if we get there, how much could the business afford to pay me if I was the CEO, or if they had to hire someone else to do my job. And let’s figure out a scale that kind of goes along there. And as we do better, I do better. So I’m incentivized to do that. Because that’s the other thing I think I see as sometimes people don’t pay themselves enough, the business is taking off, but them or their spouse starts to get discouraged, like, well, the business makes more but we don’t, our life still sucks. What about us? When do we get to enjoy some of that. So I think just having a plan is the biggest thing, because it is quite a bit different from person to person, and not overpaying yourself, but also not underpaying yourself as much as you can be conscious of that. And I think the main thing there just being in the conversation of it, because I think a lot of people do, they struggle too too long. And it’s great to reinvest in your business and grow it. But the truth is, like if your business can’t afford to pay you something similar to a salary at some point, within the first two years, you probably aren’t in a great business or you’re not doing a good job.

I love this idea of coming up with a plan early on, I think it’s great for a couple of reasons. One reason is it gives you something to look forward to, like, Hey, I’m paying myself 24 grand, but I’m going to get to the point where I’m paying myself a lot more than that you can kind of hold on to that during the tough times. But it also makes you do it. So I just hoarded cash early. I think part of it was because I was afraid. I was afraid something was going to happen in my business was going to run out of money. And I like seeing that, okay, we’re good. We’ve got some money in the bank. But it’s great to have a plan before you make the money so that you kind of just hold yourself to it. This is especially true if you have partners, if you have business partners, because you’re going to have different expectations. One business partner is going to be like hey, if you know we make money, we’re going to distribute it and others gonna Hey, let’s gonna put it back into marketing. But if you do that, but it’s easier to do it before you have it. Right. It’s easier to come up with a plan before you get there.

Being a landlord really taught me this and it is have the conversation up front of if you don’t pay the rent, here’s how it goes. If you beat up the house, here’s how it goes. I know you’re not going to do any of that. But if it were to happen Here’s how this is going to go down. Are you okay with that? Do you agree with that, because like you said, it’s hard to have that conversation with the guy when their family’s in dire straits, and they can’t pay the rent. But when they’re coming in, they’re about to move into the house, they’re telling you, they can pay it, they’ve got a good job, get the agreement of understand where I’m coming from. And I think the same thing with partners. I mean, my rule with partners and in generally doing business with someone is I won’t do business with anyone I wouldn’t do it with on a handshake. But I will also put it in writing because it is amazing how our memories change. I used to joke with us when we do real estate negotiations. And I’d say if you go to someone and you say, well, we’ll take over your mortgage, we can give you 10 or $20,000, what you heard was 10, or what they heard was 20. Right? Right. And our memories are like that. So you need to trust the people you’re working with, but you need to have it in writing. And, and I think so many of these things, it’s just about being intentional, like a lot of stuff we don’t think about and you know, I’m not a huge fan of like overanalyze it. But I think you got to have a basic plan of like, how’s this gonna go, and I’m doing the business so that I can make money provide for my family build something that matters? How are we going to make some rules around how that’s going to go so that we don’t have to figure it out. And listen, you can always change the rules in the future. It’s just the idea of putting a little thought into it instead of going, Okay, let’s see if we make some money. And if we do, I guess we’ll figure out how to pay ourselves. But at that point, you’re like, so wrapped up in it, it’s hard to have a clear head. So I think as much as you can, mapping that kind of stuff out in advance, just just keep it the way you see the business will be different.

Yeah. And I think if then scenarios are perfect for this type of situation. If we make $500,000 within the first two years, then we distribute this, if we make 300,000, we distribute that, or it’s a percentage, or, you know, you have these kind of contingencies. And I think you hit the nail on the head when you said, hey, it’s not set in stone, just because you come up with a plan doesn’t mean you can’t change it midstream. Right. I mean, all of my plans change to some degree, right?

100% It never goes the way you think it’s going to go. But you have to start out with the plan.

Yeah, I mean, the plan starts the conversation. And I actually love this topic. I love this idea of entrepreneurs coming up with a plan when they make money and what they’re gonna do with it, especially if they have partners. And even if they don’t, who else? Is it gonna affect right? Because I think I changed a little I think with, and I started my first business, that wasn’t real estate with a partner. And when we started, I think I assumed we were going to distribute sooner than I ended up wanting to once we made money, because then I’m like, oh, man, this works. Like, let’s just keep it going. Right? Yeah. And so if we had a plan in place, even if we decided to change it, tweak it here and there, that you can have that conversation. And this is something I think small businesses struggle with. I think it’s very common, right? You hear that you hear the concept, hey, you need to diversify your assets, diversify your assets, diversify your assets. And what do entrepreneurs do? Like this scenario you described, I own a software company, I have a net like, net in the red net worth, except for my software company, which is my only asset. Oh, and by the way, it’s worth $40 million.

And here’s the other thing, this is something I learned from my real estate business. I was doing exactly what I’m telling you reinvest, reinvest, because I was making like 300% of my money every six months, right like, doing fixin flip. So it was just like, my income was like tripling every six months, it was just like, boom, boom, boom. And I was like, Wow, this is amazing. I wasn’t paying myself anything. And I didn’t totally get taxes back then, because I had an S corp, right. So it all would flow through to me anyway. But I wasn’t really paying myself anything. And then came the mess in 2008. I had to file bankruptcy, guess what, file bankruptcy but I had to file a personal bankruptcy to because I hadn’t paid myself if I had done it properly, if the business collapsed, but I had a couple 100 grand in my own personal accounts, I would have been okay and been able to weather that storm as it turned out. I hadn’t paid myself anything. So when the business went down there when everything right just like this, this guy was telling you about the other day. And so I made that mistake, I started paying myself but it was too late like I just couldn’t build up enough. So I think as soon as you can start paying yourself and within what you pay yourself start saving some of that money you got to build your emergency fund just like you would with a regular w two or another job. You know, I know a lot entrepreneurs think that’s a dirty word w two and I get that, but you still need to save money, you still need to invest money, you got to grow your personal wealth, in addition to the business because someday you might sell the business. Someday the business might go under, there might be a lawsuit. Well, if everything you’ve got is tied up in that business, even if you’ve got protection, asset protection in place, which heaven forbid, but you’ve got to have your own personal assets to. And I think business owners forget that a lot of times early on. 

I think we hear mixed messages, right. I checked out your YouTube channel, I encourage my guests to do the same great video about Dave Ramsey. Right. And I have very strong opinions about Dave Ramsey ruin, about what he does great video, I agree with a lot of your points, actually. But on one hand, we have Dave Ramsey, who’s saying, Hey, don’t ever get debt, like just beans and rice, rice and beans, I think is what he says. And then on the other end of the spectrum, we have a guy like Grant Cardone, that’s like, if you have $10, in your bank account, go invest in something, it’s not making you money. And I think we need to live somewhere in the middle, right, as entrepreneurs, even though it’s your business, even though you have 100% control over it. There’s some aspects of the business that you don’t have 100% control over, there’s some aspects of your business, you don’t control, you don’t control whether COVID is going to happen. You don’t control if we’re going to have a real estate crisis. And so diversify your assets, get some cash, get some, you know, different assets, get some real estate, so that if one sector is affected, you can still survive.

I think overall, what you’re saying makes sense. But I think early on as an entrepreneur. Another mistake I see is people over diversify. I literally had this conversation with the guy, where he’s like, Derek, I’m starting 10 businesses right now. And none of them are working. And he was dumbfounded. And I was thinking to myself, when was 10% of your effort ever good enough to make something worthwhile happen? Right? But he was over diversified. He’s like, if I do 10, at least one is going to work. Right? And this is the idea of the over diversification, we’re spread too thin. My belief, is this with your business find, like the profitability, where can we make money? Where can we start this business on firm footing, get really, really good at that, once we get really good at that, then we can add some layers to that and diversify, right? With my business that we’re doing right now. For the first two years, all we did was do something called the infinite banking strategy, which is a way to build kind of a privatized banking system inside of a life insurance policy. Because life insurance, your money can grow tax free, and you’ve got guaranteed rates of return, but it’s still liquid like a savings account. So we feel like you can get similar rates of return as you would get in the stock market. But for business owners, the problem with the stock market, especially 401k, is IRAs, that kind of stuff is you lose control of your money. With this kind of strategy, you get to keep it. So we just got really good at this strategy. We’re focused on business owners, we know how to present it, we know how to sell it got really, really, really good at that, after two years being real profitable, then it’s like, Okay, what else do my business owners need? They all need Tax Help. So we started looking at what are the really important strategies that people need to know what are the ones they’re missing? So we got really good and just kept layering those on, oh, they need tax credits, oh, they need tax incentives. Oh, there’s investments out there that you can get tax advantages on, boom, boom, boom, started stacking all of these in our we got wider. But the reason we could do that, because when you first try this new stuff, you’re kind of messy, you don’t know exactly what you’re doing, you, you kind of know, and you’re working with some people who know, but you screw it up, you don’t ask all the questions. You know, you make some mistakes, not like hurting the client, but you’re just not very efficient, right? 10 units of effort go in and one unit of profit comes out. But because you have the one vein of the business that’s working really well, it kind of makes up for some of that. And then you get pretty good at that second layer, then pretty good at the third layer. And so now we’re able to take people all the way from like, beginning all the way to super advanced tax strategy where you know, people are making multiple millions a year. And we’ve got the tax strategies all the way up there and income strategies and different things for all those groups. But we didn’t start out there. Right. So I feel like that’s what people should do is worry a lot of real estate investors, and they’re doing real estate investing. And they’re starting a business over here. And they’re trying to create a digital product. And it’s like, you know what, just pick one, the one that has the most viability and that your heart’s in. So that if that’s still when you ever did, you’d at least feel proud of your work and feel like it mattered. Start there. Get that really dialed in. Once you got that dialed in, now you can hire some people, hand it off, automate it. Now you can go to the next thing and you can layer those on top of each other. So I think over diversification, now, what you’re saying is once you’ve got some nice income, I agree, let’s get some money working in a couple of different ways. My investment advisor that works with all of our clients, he really teaches something called the endowment model. And you can google it if you want but it’s really how these large universities and institutions allocate money. And they do exactly what you said. But people think, oh, I’ve got money all across the stock market, I’m I’m diversified. That’s not true. All your assets are in one asset class, you’re diversified within stocks. But stocks are only one piece of the pie. So he’s looking at stocks, fixed income, real estate, private equity, other alternatives, all kinds of different types of investments and investments that are not correlated, meaning that if one of them gets hurt, like if the stock market crashes, if you’ve got money in precious metals, it’s probably going to do good. If you’ve got money in private equity in a couple of different kinds of businesses. Private equity is like ownership, but it’s private ownership, not like stock market ownership with businesses. Well, those might be in some industries that are completely different than what’s happening with the market. Right, a lot of different kinds of things. So you’re, you’re getting true diversification. I just think people think they’re diversified in stocks.

Yeah, and I mean, this, this advice is great for beginning entrepreneurs. And I actually wrote a blog article just a couple of weeks ago about what do I do if I have 10 business ideas. And I kind of go through this step by step about how you know how they can kind of narrow it down to one, but in the end, the advice was, pick one. And don’t look back for, you know, not necessarily forget the other ideas, write them down in a book, but then forget them, right. And literally point where you can come back to them, but not right now. Right? Now you have to spend all your time focusing on just one concept, put everything that you have into one concept.

I agree I have a board right over here, cuz I’m an idea guy. It’s called the parking lot. And all my ideas that I think are amazing. And I want to do go in the parking lot, until we have the bandwidth to bring them on and use them. Right. So yeah, my business is really laser focused on what we’re doing right now. And I’ve got 10 more off to add on ideas that are over there. But I’m not getting to those until we get these really, really dialed in.

Yeah, Jim Collins in his book, Good to Great. He talks about how the great companies, they focus on their core competencies, element of that which is hard for entrepreneurs is to not get distracted. I’m involved in several businesses and these particular set of businesses, I don’t necessarily run slash manage. And I see how my partner’s man, they get distracted by the smallest thing, they get distracted by the smallest thing, and they’re not at the level of some of my other businesses. And I can see it, and I tell them, those are some good ideas. Let’s pull back, let’s make some money. Let’s get good at what we started first, I swear entrepreneurs, they see something shiny, they’re going to chase it, right. It’s just I think it’s in our DNA, right to get distracted and you got to be successful. It’s okay, put that down to three years down the road. Once you’ve kind of really honed in on what you’re doing right now.

I heard on one of your other podcasts, you guys were talking a little bit about this about the shiny thing syndrome. And what I find for myself is the problem is as soon as I master something, I get bored with it. And I want to do the next thing. The problem is, once I mastered that’s what I’m just cresting the hill towards not all uphill, now I can get some momentum, what we really have to remember is, that’s when you need to hire people to do that stuff. So yeah, you’re going to be bored for a while, in the sense that you’ve mastered this thing, right. But that’s when you get really nuanced. When you get the really deep knowledge, you’ve done it 100 times 1000 times a million times, hire some people, bring them in, replace yourself, and then you can go on to the next shiny object. But if you just try and go right on to it, you’re doing all the hard work, you’re doing all the investment, all the learning curve, you’re not reaping the rewards of it, because you’re bored. I totally run into that. So I get it.

I think you hit the nail on the head with that, right? When we get good, then we’re like, Okay, this isn’t really challenging anymore. But take a deep breath. Give yourself some time to reap those rewards. Derek, Hey, man, this has been a pleasure. I can tell that you know, you have a wealth of knowledge of how to help entrepreneurs. Where can people find more about big life, financial, all the great things that you’re doing?

You can go to big life, financial calm, that’s kind of our central hub. There’s a free real estate course there. There’s stuff on r&d, tax credits, and all the other financial stuff we do also have a YouTube channel so you can check me out on YouTube, just google Derrick Dennis, there’s only one of me out there. There’s, I guess there’s two but only one with a YouTube channel. Can’t miss it. And you’ll hear all kinds of things there. But those are probably the two biggest places. I’ve got Instagram and Facebook and all that. But most of the energy goes into really working with clients and doing the videos on YouTube.

Love it. Well, thanks for joining us today, Derick It’s been a pleasure. Loved it. Thanks, Allan.

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