2283 - How One Veteran Overcame Self-Doubt to Achieve Business Success with Gary MacDermid

0:04Well, hey, Thoughtful Leader. Welcome to the Thoughtful Entrepreneur. On this show, I interview purpose-driven founders, experts, and change makers who are making a real impact in the world. Want to be a guest? Simple. Go to upmyinfluence.com and click podcast. I'd love to promote your story to our audience of over 100 ,000 and across over 2 ,300 daily episodes and counting. Want to get booked on other great shows like this? Simple. Go to podverified.com and get your free guest authority score. Thousands of hosts are looking for high quality guests and Podverified connects you the right way. Now let's dive into today's episode.

0:58With us right now, it is fellow Navy veteran, Gary McDermott. Gary, you are known as the cashflow engineer. You're a serial entrepreneur, investor, and it's great to have you. I'll be the author as well. It's great to have you. Well, thank you. Appreciate it and happy to be here. Excited to get going. Yeah. Your website is setyourgoalsbook.com. And that happens to be the title of your book as well. And it's on Amazon. It's in both Kindle and paperback, set your own goals or someone else Will, How to Overcome Self-Limiting Beliefs and Get Things Done. Well, Gary, before we kind of get into our conversation about your work and impact in the book, I know I always love kind of hearing what, you know, overachievers are into in their, you know, when they're not at work.

1:50What have you been geeking out on lately? Well, right now, so I live in Arizona and because of the intense heat, we typically go on a vacation this time. As soon as the kids get out of school, we're usually off to the races. So this year we went to do some scuba diving in some islands in the Philippines. I got to experience that, take everybody out. And that's usually what we do. Was that someplace that you were stationed there? No, I was not stationed in the Philippines. It just so happens that I'm a fan of the diving there. Some of the most amazing dive sites. The water is always perfect. And they really take care of you over there.

2:31I bet, I bet, I bet. So when, just before we kind of get into your, your, you know, the work you do today, tell me about your Navy experience. Yeah. So Navy experience was kind of forced to join out of high school. There was no money somehow made it through a commissioning program after joining. So I started as a new electronics technician and then got commissioned, went to the university of Washington and then was a, did a, did a surface tour, did surface tour on a destroyer and an aircraft carrier, and then finished off in the reserves at the operational level of war. Wow, wow, wow, wow. Well, and so tell us about your work that you do today.

3:13So today, I'm more of a full-time investor. So I've been studying and specializing in mergers and acquisitions. So currently, after building up a portfolio of real estate and then having some extra cash flow. I started investing in companies and now I realized that I could acquire companies the same way that I did real estate. So putting together a couple of financial services companies now, and then we'll continue to be rolling up tax accounting and advisory businesses under that umbrella. All right. So we have a room full of CEOs that are listening and business leaders, founders, they're kind of tuning in.

3:55What should we share with them? Well, it's just probably a lot to share that the most exciting thing for me was realizing that growth through acquisition is is is an interesting strategy, but it's also accessible where I previously thought it was not. And so that revelation, the mindset shift, if you will, that you could just look at any of the constraints, growth constraints in a business and acquire that as a company or another asset as opposed to just hiring it or growing it, that could be a lot faster. Yeah, well, so for our friend that's listening, they may be interested in why acquiring a business might be a great idea.

4:42Can you share a little bit about how that's worked for you? Or like, do you advise other people? Is that what you do? Do you advise people how to do this? Yeah, so I'm doing a little bit of that as well. So I guess there's two questions you asked. I'll go through them one at a time. So the first one, why would somebody want to acquire through acquisition or grow through acquisition? And so I'll give an example with one of the financial services companies. companies, we had a financial services company that I was working with, a business partner, and it was more on the advisory. And what happened, so the advisory, tax advisory, tax planning is more of a high ticket service, and so we had limited some of the commodity services, so the actual tax preparation.

5:32We couldn't do as many, so we had to outsource a lot of that work. Now, the other thing is, is if you want to grow your business, typically you do marketing. So if you're at a point where you're really doing well, but you have to outsource some of your business, and then you don't necessarily have the marketing team to do marketing at the time, but you want more clients, why not acquire another company that gives you clients, which would be your constraint? Like you don't have the marketing team, so you need clients. So if you acquire another business that has a bunch of clients that would avail of your services, and they also have the way the staff to fulfill on what you're outsourcing, which would be the tax preparation or the bookkeeping, then that's a win-win.

6:22So by acquiring another tax firm, we now acquired over a thousand clients. and then what happened is that normal tax firm is low ticket, so it's just tax prep once a year, but we overlaid the high ticket advisory. So now you take that, you acquire that book of business, you double the revenue in a year just by adding the high ticket services, and you instantly have a thousand clients that may, you know, a good percentage would benefit, and our conversion rate was pretty high in the first month of just offering the advisory services to a previously untapped audience. And, you know, for the company that you acquired, you know, I don't know why they didn't offer advisory services.

7:07I mean, obviously, you know, you're looking for an opportunity because what you want is you want the relationships. You want the foot traffic that's already established. And, you know, I guess not every business owner, you know, leverages, you know, what else they could be doing with all those relationships. Right, right. Exactly. So as far as like your question on, you know, what you find when you look at CPAs, tax preparers, they typically are reactive. And the planning that they offer might be very basic, like, you know, have a 401k or maybe buy an SUV and depreciate it, like some of those basic things.

7:48But if you wanna look at like entity structure, how do you, like we were doing a lot of real estate, so we have real estate investors, it's a little bit of a niche. How do you take that next level to cost segregation? How do you structure it so that you can compartmentalize, say, passive income through rental real estate so that gets taxed as a partnership and then active income from flips that gets taxed as an S corporation? How do you set up your structures in an efficient way to segregate the income? Like things like that. Yeah. Charitable plan giving, selling a business, qualified small business stock, QSPS, exclusion.

8:26All things that these folks may need. And again, I'd say that, you know, the former business owner, you know, they maybe even consider doing that. Like, yeah, but then we'd have to staff up and, you know, who knows, right? Right. Gary, can I ask you, so let's say that there's a company or let's say that I've identified a target that I want to acquire because, say, they're kind of in a sim situation. I'm like, OK, well, I've got a product and they have a big audience. And if they're looking to exit or they're opening to exit, you know, am I expected? And let's say they say, well, listen, you know, we would need to sell for about half a million dollars or something like that.

9:11And I look at my bank account and I'm like, well, I don't have half a million dollars in cash sitting around because I usually try to keep things active here. What how do you how do you what do you do? Well, the first thing I do is I get I like to really if the seller says, you know, I need half a million or whatever the number is, I like to just get a little bit more clarity on, you know, why did you come up with that number? Did you come up with that number because you need that to buy something else for your next gig? Or did you come up with that number because you just felt that that's what it was worth?

9:45And and usually that conversation really dictates the way that the sale is going to go. A lot of times it can offer an opportunity. What I found, and just if you look at statistics, you know, more than half of business owners that want to sell won't be able to. So just knowing that, right, like why is that? A lot of times people don't know how the business should be valued. So if I ask, you know, well, how did you come up with that number? And they more often than not will not be able to say, well, typically industry multiples for this type of business, for this revenue level or this. So this is where I'm the range that I'm, I mean, they don't typically answer that way.

10:26And, and oftentimes I can unpack, show them a little bit about how a business should be valued and it becomes a little bit more educational. And then we can have a serious conversation about the money, why they need it. And then maybe some creative financing, maybe offering the inventory as consignment, earn out, seller financing, SBA, or just many other things. I would imagine that that could be a pretty attractive, and I don't know what you're, maybe you could give us a little glimpse on this. That strikes me as a pretty attractive loan for an SBA bank to provide capital on. Like you're coming in with some pretty firm numbers as opposed to somebody that's like, well, here's my business plan.

11:15I think it's going to work. Like you already have a working business. They have a working business. You know, you're just looking for some capital to make more business out of it. Right. And the same applies to just looking or going to an investor, right? So if you look at SBA, so, you know, just looking at some of the acquisitions we've had to do, you look at SBA. the rates can be pretty high, over 10%. So as just to a normal person that is looking to invest anywhere, a 10 % or more note is a pretty good deal. So whether it's SBA or a private investor, you calculate the growth capital, the debt service and everything before you buy the business, and the business should be cash flowing.

12:05Oh, yeah. Yeah. And, you know, paying back a note, you know, if you're on a long term or whatever. Okay, so you're a few thousand dollars a month and paying off your debt, but you can out earn that easily if you have the means to do it. And obviously that would be part of the whole plan that, you know, how do we make this completely dummy proof? Why would you not in that case? Well, absolutely. So that's kind of why I've pivoted a little bit. It was like an evolution of what is the highest and best use of my time and pivoting from just buying a portfolio of rental real estate where you're waiting for appreciation increase in the cash flow over time to getting an exponential growth by combining multiple multi-million dollar businesses together.

12:48That has an exponential effect that would take a lot longer with just waiting for appreciation and growth of real estate. it. Gary, tell me about your book, set your own goals or someone else will. Right. So set your set your own goals or someone else will is basically what I wish that I was handed somehow along the transition of me getting out of the Navy, because as as as I shared before, being forced to join at a high school, you're in this follow orders mentality almost forever. and even when I was transitioning out of the service it's like how do you get a job how do you how do you leave structure and then find something to do there's headhunters that target folks like us when we when we leave service and then it just becomes more of the same you know that the head hunter gives you all these interviews and and then you end up picking a job but don't know whether or not it's something you really want to do because they just threw it all at you and and so for me it was a pretty powerful thing when I realized that, you know, I could start my own business.

13:54I could be an entrepreneur. And I never really thought that I could because I spent my whole life following orders, just following, achieving somebody else's goals. Yeah, that's typically how it is in the Navy, my recollection. Well, Gary, our friends that are listening, so obviously go pick up the book. It's on Amazon. You can find it to a friend that's listening, just go to setyourgoalsbook.com and you'll see it there. Gary, what else will they find there? So in there, you'll find just a quick, I have a couple of freebies. There's a, there's a five-step goal setting process that that's the exact same process that I use day in and day out that has worked for me and has worked for many other folks that I've shared it with.

14:45There's also a link in there to get the first three chapters of the book, which kind of sets the framework. And then there's some contact information for me because the steps in the process is one thing, but really the power of the rest of the book is the mindset shifts. Because if I were to have given myself that book, you know, 15 years ago, I probably wouldn't have been able to execute because I didn't have the right frame of mind to understand that I could believe in myself to do something powerful where I was just stuck in this rut of following somebody else's and chasing after mission after mission.

15:22So all of that, setyourgoalsbook.com, the five-step goal-setting process that I use, the first three chapters to kind of get the framework of how it works, and then contact information if you want more. And Gary, just to be clear, so you offer consulting as well, or speaking, obviously? Yes, I'm mostly speaking. I do also consult for businesses along the lines of what we're talking about with acquisition. And I don't, a small handful I might take as maybe some mentorship. That's typically, I'm not a full-time coach as you can probably imagine, running and consulting in some of these businesses takes quite a bit of time, but happy to help.

16:07I just, I really want to give back to especially transitioning military. Mm-hmm, all right. So to our friends listening, if you know anyone who's a, particularly if they're a VAT or, you know, looking, you know, they're going to be exiting soon or reaching the end of enlistment or their term, send them Gary's way. Gary McDermott, again, great having you. Set your own goals, or someone else will. That is at the website, setyourgoalsbook.com. Gary, thank you for joining us. Thank you for having me. Pleasure.

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