Hidden Risks That Quietly Destroy a Good Business with Neal Rice

0:02John Lee Dumas:Who's ready to rock today, Fire Nation? JLD here and welcome to Entrepreneurs on Fire, brought to you by High Level, the all-in-one sales and marketing platform. And today we'll be breaking down hidden risks that quietly destroy a good business. And to drop these value bonds, I brought to Neal Rice and the EO Fire Studios. Neal is an attorney and business strategist who helps serious business owners make great decisions about their business, wealth and legacy. And today we talk about the hidden risk of success, the shift in risk profile, avoiding the death spiral, the 333 framework, and oh so much more.

0:34John Lee Dumas:And a big thank you for sparsing today's episode goes to Neil and our sponsors. Fire Nation, is your business stuck? Join Eric Trump and Clay Clark's life-changing business conference, November 5th and 6th in Tulsa, Oklahoma. Learn the specific proven systems Clay Clark has used to create thousands of success stories today at thrivetimeshow.com slash eofire. Again, request tickets today at thrivetimeshow.com slash eofire. Stop duct taping your business together. High Level runs your website, your funnels, email, automation, scheduling, payments, and memberships all in one place. And when you sign up at highlevelfire.com, you get a 30-day free trial plus my exclusive bonus stack that includes weekly office hours with me and much more.

1:17John Lee Dumas:Visit highlevelfire.com. Highlevelfire.com. Neil, say what's up to Fire Nation and share something that you believe about becoming successful that most people disagree with. Hey, JLD, Fire Nation. I am pumped to be with you today. And what I believe is that success in business is not about you. It's not about me. It's not about the founder, the strategist, the business owner. It has to be all about the customer. And I think most people would agree with that in theory, but in practice, it's really easy to drift away from it, especially JLD, once you've become successful. Because what happens is this, you start the business entirely focused on your customer and that's what builds it.

2:07That's what creates momentum. That's what leads you to success. But as the business grows, your attention can slowly shift from serving the customer to what could this business do for me and for my life. And shift isn't wrong. You should benefit from what you've built. But the danger is when the focus moves too far away from the customer, because when you take care of the customer, the customer takes care of the business and the business takes care of you. So stay relentlessly focused on serving your customer. And if you do that, succeed. If you don't, you won't.

2:42John Lee Dumas:I mean, it's really that simple, Fire Nation. It's really that simple as we continue to talk about the hidden risks that quietly destroy a good business. And I want to start with those hidden risks of success. I mean, what would you say, Neil, are the hidden risks that show up like once a business moves from startup into stability and profitability? And why do most owners just miss that completely. Here's the deal, John. Success creates a new kind of risk that most owners don't ever actually recognize. So when you start your business during startup, owners are worrying about acquiring customers, making sure cash flow is there, hiring their team, just surviving, and they should.

3:28But once the business becomes predictably profitable and stable, those risks don't disappear, but they do stop being the biggest threat. So the biggest threat is that the business can become increasingly dependent on one person and that's the owner. And so almost ironically, JLD, the more successful that owner personally becomes, the more irreplaceable they can become. And that's when emergency succession becomes what I think is the greatest hidden risk. So most people don't realize it. Most owners don't even realize their business has quietly evolved. They've overcome the risk of startup, but they've entered into a new risk of succession issues.

4:17So success changes your biggest risk. Early on, it's business failure. Later, it's actually owner dependency.

4:23John Lee Dumas:Fire Nation, we'll be diving into more of this because it's super important stuff to understand at a deep, deep level. And I want to kind of move into the shift in the risk profile because how exactly, Neil, does a business's risk profile fundamentally change over time? I mean, shifting from startup and operational risks, which of course we all have at the beginning, into what you like to call emergency succession risk. Yep, you're exactly right, Jaliti. Every successful business eventually experiences this shift and it's really from operational risk to continuity risk. And the way that I think about it is those startup risks are really external in nature.

5:04And then a mature business, the risks start becoming much more internal in nature. OK, so so if you think about that startup risk, again, we're talking about do you have enough customers, enough cash in the door? Do you have the right people and enough people to do the job and serve your clients, your customers? well? Do you have financing in place if you're using that as a growth strategy that can propel your growth? Now, once you're into a mature business mode, the risks become much more internal. Are we leader dependent? And if that leader is no longer there, who steps up next and how do they lead?

5:44What's their plan? Are there decision bottlenecks? The leader's gone. who makes the best decisions, how are those decisions thought through and implemented? Is there a lot of complexity in the organization that's creating confusion if the person at the helm is no longer there? So the way to diagnose this is really to say, if you're a business owner, ask yourself this question. If you didn't come to work tomorrow and you didn't come to work for the next 90 days, what will happen? And most owners have never really seriously tested that question. So established businesses don't usually die because they lose customers or they lose cash flow.

6:27They die because they lose their leadership.

6:29John Lee Dumas:I mean, Fire Nation, we're going to make sure you avoid that death, specifically the death spiral. So Neil, what's the number one way a business disorder can avoid what we like to call the business death spiral. If they're suddenly unable to lead or make decisions, which we have to be honest, it could happen. It could. And doesn't that sound ominous, John? Business death spiral. And that's because honestly, it can be, and I've seen it happen. And so what I call the business death spiral is what happens when the business loses its leader before the business knows how to lead itself. Okay. And so the death spiral, it's not one event.

7:12It's actually a sequence of things that are culminating in a very bad outcome. Okay. So it's leadership and decision-making suddenly stop. Employees become uncertain. They're making inconsistent decisions or they're frozen, not making any decisions at all. And we're talking about a scenario here where the owner of the company, the leader of the company either has a disability or has passed away or something has happened that they are out of the fight. And so that can quickly lead to business collapse, but it doesn't have to be that way. None of these events, none of these things that I'm describing are surprising.

7:52They're actually pretty predictable and largely, John, they're preventable. And so that business death spiral, here's the thing about it. you're not really going to stop that spiral with what I would call after the fact heroics. I mean, even JLD is not going to be able to necessarily jump in with his cape and save the day in this situation if no one has done any kind of thinking, preparing, and planning before a crisis like this. And so that's exactly what the business survival playbook is designed to do. It creates clarity around who leads, who decides, who communicates, how a business would keep operating successfully during the most critical days, weeks, months after an owner is gone or incapacitated.

8:42John Lee Dumas:I mean, Fire Nation, these are scenarios you have to think about, you have to plan for so that you are prepared if, that's the big if, if they do happen. Yeah, that's it. And I was going to say, I've never met a business owner who said, hey, if something happens to me, you know, I hope my employees spend the next month wondering who's in charge, right? Or I hope my spouse has no idea who to call now. I hope my customers start questioning whether this company can still serve them. Of course not. But that is exactly what can happen if we don't have a great plan. And that's why we're going to talk about the 333 framework, where businesses break first and more when we get back from thanking our sponsors.

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10:29John Lee Dumas:Learn the specific proven systems Clay Clark has used to create thousands of millionaire success stories. See thousands of success stories and testimonials from real people just like you who Clay Clark has mentored and coached into prosperity at thrivetimeshow.com slash eofire. Clay's proven business coaching program is month-to-month and it costs less money than hiring a minimum wage employee. Yes, it's month to month and costs less money than hiring a minimum wage employee. Schedule your free personal 13-point assessment with Clay Clark himself today at thrivetimeshow.com slash eofire. Because Clay only takes on 160 clients and only allows 300 attendees to each business conference, you will interact with Clay directly.

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12:15John Lee Dumas:Stop piecing tools together. Start building momentum. Visit highlevelfire.com and start building your something today. All right, now we're back. And I kind of teased this framework before the break, the 3-3-3 framework, because every business, what does it need? Continuity planning. So how does your three days, three weeks, three months business survival playbook work? in the real world? Great question. So when a business owner is suddenly unable to lead, whether from death or disability or some unexpected event, you know, the goal isn't to solve every possible problem immediately. It's not to lay out some exact 500 plan treatise on the operations of the company.

13:01The goal is simply to move the business through three critical phases. And that's why I teach what I call the three days, three weeks, three months framework, the big three framework. All right. So the first three days, John, it's all about confidence. The first three weeks is all about continuity. And the first three months is all about clarity. Let's dive deeper. First three days, you got to restore confidence. The first few days after something like this happens, John, people aren't looking for perfect answers. they're just looking for reassurance. Your employees are wondering, am I going to have a job next month?

13:41Your family is wondering what's going to happen to our family's finances. Your leadership team is wondering who's in charge. And so in those first three days, the immediate objective isn't to make all kinds of strategic decisions. It's to create confidence that the business is stable, the leadership is in place, and there is a plan. So the first three days. They're not about having every answer. They're about giving people confidence that someone is leading and there is in fact a plan. First three weeks, all about continuity. You with me?

14:13John Lee Dumas:I'm with you. Objective, keep the business operating as normally as possible. You want your customers to not feel those bumps in the road. You want your vendors to be assured that you're still a good partner for them. You want, if you have lenders, you want your bank to have confidence the business is still going to be healthy. Your employees should know that they're going to be taken care of. And so you're protecting relationships. You're making sure payroll happens. Customers are served. Bills are getting paid. Projects continue largely on schedule. The business keeps moving. And so above all of this, in this phase, you really have to communicate.

14:53All those people we just talked about have to be reassured that the business is going to be be okay. So don't leave a void of silence here or those people will decide for themselves what they think is happening and it probably won't be great. And so if in those first three days, you're building confidence, the first three weeks is proving the business can keep operating. First three days, first three weeks. Now the first three months, John, it's all about clarity. So by now, the initial shock has worn off. Panic has settled. If we've done the first two phases correctly, the business is functioning.

15:33You finally have the ability to make thoughtful decisions instead of emotional ones. So questions like who should ultimately lead? Should we sell this business? Should we transition it to another family member? Should we hire professional management for the company? Is now the right time to bring in that outside leadership. Those are strategic decisions and strategic decisions should never be made in the midst of a crisis. So the greatest gift a business survival playbook gives a family and a company isn't necessarily an exact plan. It's time, time to make a good decision for the family and for the business.

16:16John Lee Dumas:And I love just really hammering down on that, that it's time. You're giving them time to make not a rush, not a panicked, not a freaking out death spiral decision. So that kind of moves us into where businesses break first, because when an owner is unexpectedly removed from the business by any number of things, I mean, you could just, again, come up with all these different scenarios where that could happen. What typically fails first? And why are these breakdowns so gosh darn predictable? Well, they are. And so when the owner disappears, the first thing that breaks isn't really the business itself.

16:53It's actually certainty around the business. So once people no longer know who's leading it or what's supposed to happen next, uncertainty spreads through the organization and that business death spiral can kick off. So it's not necessarily financial. It's not operational. The first breakdown is leadership certainty. So people immediately begin asking questions, who's in charge? Who signs contracts? Should we keep moving forward with this project? Is this company going to be sold? Is my job safe? Those are the things that go on in people's minds and not just in their minds, they might audibly ask those questions.

17:35And so employees, others start making assumptions. So customers begin wondering about the company's stability. And so the value will start to erode. So confusion, here's the real issue. Confusion in this situation, John, compounds faster than almost any other business problem at that stage. So uncertainty compounds faster than leadership can actually restore confidence. And that's why continuity planning is really about eliminating uncertainty before it has a chance to spread. So here's the beauty of having a business survival playbook. Let me give you two scenarios. You good with that?

18:15John Lee Dumas:Yeah. All right. Let's say there's a fella named, I named this guy myself. Let's say there's a fella named Jimmy Lou Dobbs and they call him JLD for short. I don't know where they got that nickname. I don't know. But Jimmy Lou, Jimmy Do built a successful HVAC company. He's got 20 employees. He's doing 10 million a year in sales, but JLD goes down with a long-term illness. He can't be at the company. He can't give direction. Nobody really knows how long it'll last like this, how long it'll be before he can recover, come back to lead his company. All right. Scenario number one is this. The day after Jimmy Liu goes down, his 20 employees show up at the company.

18:56They're looking around at each other saying, we heard he's in the hospital. we heard it's not good. What are we supposed to do next? Scenario number two, the day after JLD goes down, JLD's operations manager walks into the company. The 20 employees surround that operations manager and she says, guys, I know this is tough, but JLD has already thought about what he would want done in this situation. We have a plan. Here it is. This is our business survival playbook. Let's go. Which of those two scenarios do you like best, my friend?

19:39John Lee Dumas:I think we all know which scenario that I like the best, for sure. That's right. And 80%, I always like to say it this way, 80 % of the value of having a playbook like this is so that we can say to your team in this situation, we have a plan. We've thought about this. You can be confident we're going to get through this together. Man, so you did mention continuity planning. And I want to kind of dive deeper into this for the last point, which, you know, is business continuity alone. It's just not enough. You know, we, again, we've talked about this, but how does a legacy risk assessment expand the conversation into ownership, into estates, into family dynamics.

20:20That playbook, the survival playbook, helps your business survive without you if that's necessary. But a legacy risk assessment helps make sure everything you built is prepared for what comes next. So most successful business owners, they spend decades with their heads down building the business, growing the team, solving problems, creating opportunity, growing wealth, and as they should. That's what they were designed to do in this world. But very few take the time to stop, step back, ask whether all the important pieces of their legacy are truly aligned. And so that's what a legacy risk assessment is designed to do.

21:02It helps a business owner pause, look at the big picture, ask the big questions like, will my family face a big estate tax bill that could have been avoided? Is that partnership agreement I signed 20 years ago and haven't looked at since still protecting me or is it going to cause my family problems? If I died tomorrow, would my spouse know what to do with this business? And so the legacy risk assessment helps address those kinds of problems, uncover those problems before they actually cause major issues for your business and your family. So give you a quick story. I had an auto repair business in the early years.

21:43There was a key employee in that business and the owner had given that key employee an option to purchase the business if he ever sold. This was a documented option. Years later, 20 years later, his son was the heir apparent to the business. Well, we caught that in an assessment and we said, hey, you signed this document 20 years ago. it is going to be a real problem if you try and transfer this company to your son without addressing it. So that's the kind of thing we uncover in legacy risk assessments. We help the client address the problem before it becomes a major issue.

22:13John Lee Dumas:I mean, Fire Nation, I think that's the kind of stuff you would want to know before going into a very important decision like that. So today we talked about the hidden risk of success, the shift in risk profile, the death spiral, the 3-3-3 framework where businesses break first beyond continuity planning, this legacy risk assessment. So of everything we talked about today, Neil, give us the one key takeaway you really want our listeners to get to understand from our conversation. And then how can we connect with you? How can we take the next step if we want to maybe see a little bit more about this legacy risk assessment?

22:50Yeah, let's go. So if you're a business owner, you've created that business, you've built that business, you know it inside and out. And so you are the world's leading expert on how best to protect it, to keep it healthy, to pass it on well. And that's what I want for you. And that work, that work that you have to do can feel a little heavy. It could even feel daunting, but with the right help, you can make great decisions about your business and your legacy. and that is the result I want for you. So if you've built, I'm gonna give you three scenarios here. And if you fit in these scenarios, then I want you to go visit me at hopewellconsult.com and schedule a 15-minute strategy call with me.

23:37It's free. Scenario number one, you've built an established business. It's serving your community, providing for your employees and your family. And you're wondering what steps you can take to protect that business from risks like unexpected litigation or your personal health issue, or even a sudden death, we can help you. If that's you, you're listening right now and that's you, go to hopewellconsult.com, schedule a private 15-minute strategy call with me. It's free. Number two, you're a high net worth business owner wondering how to limit your estate taxes, wondering about trust, business succession, important family conversations.

24:10We thrive in this. We can help you. Go to hopewellconsult.com, schedule that private strategy call with me personally so we can get you where you need to be. And number three, JLD, if you're a business owner wondering how much your business is worth, how to think about selling your business, maybe to a family member, a key employee, maybe just on the open market, we can help you figure that out. Go to hopewellconsult.com, schedule a private strategy call with me personally. JLD, can you tell I love this stuff and I love business owners?

24:39John Lee Dumas:I can tell that you are fired up, my friend, you are prepared to ignite. Actually, there's already been ignition. So take us home. What is the last thing you want to say before we say goodbye? It is just this. You have been specially gifted to lead and run your business. And it's important that every one of us in this world follows through with the gifts that we've been given. It's what makes this world a better place. So if you think I can help you with that, come get a free consult with me. I wish you well. Fire Nation, you're the average of the five people you spend the most time with. And hello, you've been hanging out with NR and JLD today.