Adam:

Coming up today on David versus Goliath.

Van:

If you’re a bootstrapper entrepreneur, you owe to yourself to look into these types of tools.

Adam:

Job means just over broke. You start your own business, you’re broke or you’re not broke.

Speaker 3:

Welcome to today’s episode of David versus Goliath, a podcast dedicated to helping small businesses leverage technology to not only help them compete against their large competitors, but win. Your host is currently the CEO of Anthem Business Software, a free time Inc. 500 recipient and a serial entrepreneur with a passion to help small businesses everywhere find, serve, and keep more customers profitably. Please, join me in welcoming your host, Adam DeGraide.

Adam:

Hey, everyone, it’s Adam DeGraide with the David versus Goliath podcast. It’s a beautiful day here in central sunny Florida. Hopefully, everyone, it’s beautiful where you are as well too. Today, we have Van Carlson, the founder and CEO of the SRA 831(b). What the heck does that mean? This should be awesome. Today’s episode is brought to you by automatemysocial.com, where if you’re a small business, you can automate 100% of your social media, never have to think about it again, including the creation, posting, and strategy of future content. Pretty wild. No, this is not using AI technology and ChatGPT and all these other things. This is real content, real information that your potential customers need to know. Check out the demo today at automatemysocial.com. Also, you can visit us online at davidvsgoliathpodcast.com. There, you can apply to be on the podcast and subscribe to receive our newsletters. Let’s get right to it. Van, welcome to the David versus Goliath podcast.

Van:

Yeah, thanks for having me on. Looking forward to our conversation.

Adam:

We did it, I can’t believe it. We got your microphone and your speakers to work. It’s always a great day when that happens. When I saw this come through the email, I said, “Very rarely do I get some business that I’ve never really heard of or I’m not familiar with.” Although I will tell you, I’m pretty much… I pay a lot of people to be familiar with these things, so hopefully, they’re familiar with them. When I started to read about the SRA 831(b), which is fascinating, I said to my daughter Brooke, who helps me schedule these events, I said, “Brooke, I’ve got to have him on, I’ve got to talk to him about it.” Van, for the watchers and listeners, primarily watchers, tell them a little bit about what SRA 831(b) and your company actually does.

Van:

Yeah, so we’re a risk management company. 831(b), for the down and dirty of it, it’s very comparable to a 401(k). What the 401(k) allows you to do is build up retirement for yourself as an owner and the employees. 831(b), these are just tax codes, we are looking at the ability to defer income in the business, expense it, drop it into an 831(b), and now it gives you the ability to build up a rainy day fund. It’s been around since 1986, and if you look back to 1986, which was a long time ago, basically what was happening back then there was a crisis liability. People were being non-renewed, traditional insurances. Congress got together and said, “Hey, we need to create an incentive for business owners to really take on risks.”

They either couldn’t transfer to traditional means or they were basically self-insuring. Now, fast-forward today after COVID-19, and I think 831(b) is probably more important than ever today for small to middle market business owners to start to build away their own rainy day funds. I know the PPP came in, now we got employee credit retention, and all that good stuff going on, but we still don’t know all ramifications of what we did after COVID-19 and during COVID-19. For me personally, I think it’s one of the… Substantial let down, it felt like a little ad hoc-ing going on. One of the things that we’re talking today with business owners about is, “What does round two look like, if that was to be in our next 20 years?” We can’t do what we did in the past, we got to have a better plan in place.

The 831(b), this literally allows you to build up your own rainy day fund through insurances that… If you’re going to retain the risk and you can’t transfer it to traditional insurance, this is the tool you got to use. That’s really what it comes down to. We’re the administrator, no different than a 401(k) administrator, no different than a company you got to hire to assess R&Ds, research and development discounts for your tax returns. You got to have an administrator help administer the tax code, and that’s where we fill in as an 831 administrator.

Adam:

That is fascinating, because basically, if I’m understanding this correctly, it’s a way to take deferred earnings or deferred profits of the business, and instead of paying taxes on those, you’re funding an SRA 831(b) account, which is put aside in the hopefully unlikely scenario that you’d need the money to cover for an insurance risk. You were underinsured or you weren’t able to get insured in a specific area of your business and now the 831(b), kicks in allows you to use that money. You weren’t taxed on it, so you have 100% of it at that time. What happens as the business goes along? At what point does it become due? Is it a transfer of ownership and the sale of a business, or does it carry on forever?

Van:

It can, it can. We have rules in place. We do need more guidance from the IRS to get us down the path on some of these things and it’s coming with time. I will say this, it is a C corp, so the box… the 831(b) plan has the box that sits in, has to look and feel like an insurance company. There are some qualifying elements, there’s a four-part test to it, and all that good stuff. Those are just regulations that get put into any code, the 401(k)s got a ton of codes that are really legal precedents, where 401(k) sits today, which has become more of a traditional business concept. We think 831(b) is going to get there, too. Down the road, if the business sells… What we see, too, in selling the businesses, the company doesn’t get devalued, because a lot of people don’t have, we call them unfunded risk, is your rep and warranty.

If you’re going to sell a bunch of product out there and give warranties out to it, now you’re going to sell your business, commercial bankers and all those lovely folk, they like to devalue businesses, because of all that. They have these kind [inaudible 00:06:52]. Yeah. When they have these strategies in place-

Adam:

I’m very familiar with that, Van. I have built and sold several businesses in my life and they want to devalue everywhere they can devalue, but you got to fight back, you got to push back hard, because your business is worth more than they want to give you for it. If you don’t believe it, they’ll not believe it, and that’s a really important thing. You said something fascinating, you said you were disappointed. I was massively disappointed with the way everyone handled COVID. I thought COVID was… I still to this day think it’s totally nuts. By the way, I’m probably going to get censored for saying that, I mean the response to it. I’m not saying that it wasn’t real, I’m not a doctor. Response to COVID was 100% completely nuts, especially in the business world, including the fact that they gave away free money. Supposedly nothing’s free.

The fact that none of us know what’s going to happen at the end of it. What you are suggesting to the watchers and listeners is smart, because when you take something from somebody and they haven’t clearly articulated or defined what that means to you, you could become shackled to be holding to them in the future, if they haven’t clearly defined what in fact they’re giving you and what you owe them. It’s interesting you said that, because I have gone through this in real time, because I sold my business in 2020. I don’t know if you knew that or not.

Van:

No, I didn’t.

Adam:

[inaudible 00:08:20] My last business in 2020.

Van:

[inaudible 00:08:22] March?

Adam:

No, we sold it in November. Sold in the heat of the moment, as they say. (Singing) Hold on, I got to take a break. I can sometimes yap a little bit too much, but when we come back, I promise we’re going to continue the dialogue. You’re with the handsome host, Adam DeGraide, Van Carlson from the SRA 831(b). Stay tuned, we’ll be right back.

Speaker 3:

Do you own a business? Do you have or need a social media presence? If you are like most businesses, you spend either no time or too much time and money on your social media strategy. Spending thousands of dollars per month only to get mediocre and inconsistent results, this leads to frustration and, in some cases, sleepless nights. Introducing automatemysocial.com. Automate 90% of your social media and never have to think about it again. That’s right. Automate your businesses’ social media posting and strategy forever. Automate the essentials and customize only what’s needed. Save time, save money, and get better results with automatemysocial.com. Our patent pending technology gives you the ability to automatically create your social post and distribute them immediately, like in seconds, across all your social media platforms.

Stop the madness of paying someone to create, post, and manage your strategy and let our software do the work, so you don’t have to. If you’re an agency or social media manager, you too can let our software do all the work and you can get all the credit. It will be our little secret. With automatemysocial.com, you can have it all. It’s easy to use, never complains, and never asks for time off or more benefits. See this amazing new software application at automatemysocial.com. If you own a business or manage client’s social media and want to save time, energy, money, all while increasing your return on investment, then let’s get this party started at automatemysocial.com.

Adam:

We’re back for segment two with the bearded wonder boy, Van Carlson from the SRA 831(b). I wanted to give you a chance to respond to my tirade against the [inaudible 00:11:23] that we all went through.

Van:

The exciting thing about risk management is we work with business owners and we do have response teams. I’ve worked with companies out of Houston area that have hurricane response. They have a hurricane exposure, so we build a response team to that, or earthquake-prone areas. You have to have an action plan, especially for you’re a business. What’s disappointing to me in COVID-19 was it seemed like a lot of ad hoc-ing going on and they made up rules after they gave the money away. I will tell you this, Adam, the tip of the iceberg is already just started with the amount of fraud. Again, I come back to everybody and I say, “Listen, there’s a code on the books. Allows business owners to do that. Clarify, get some hair off of it, make it a normal business practice, because if you’re a bootstrapper entrepreneur,” and what you said earlier, “You don’t want to be beholding to anybody.” You owe it to yourself to look into these types of tools and that’s really what it comes down to.

Adam:

[inaudible 00:12:21] That makes you a slave to something else, you have to avoid at all costs. As you know, Van, one of the things they’re trying to do now to us is get rid of the actual monetary system the way we know it, make it all electronic. That will absolutely make you a slave to everyone who is watching you. Trust me. If there’s no more cash, if there’s no more actual real money and it’s all digital, you are a slave. I’ll probably get in trouble for saying that, but I don’t care. My brother said something fascinating yesterday to me, we were talking about a lot of different things.

He said, “The next things that they ask us to do, we all just have to say no, because at the end of the day, you get the government you deserve, you get the policies you deserve, and if we want something different,” to your point, “You have to act differently and you have to prepare for it in advance, because what you don’t prepare for in advance will kill you, but if you prepare for in advance, you can take on just about anything.” Now, switching gears, because people love the personal side of this stuff too. You started your business, I think it was 2008, right? Is that when you started it?

Van:

Yeah. Right during the great recession, so it was a great time.

Adam:

Yeah. Hey, listen, man. I remember I had an insurance agent once that was a client of mine. He says, “Never let a good crisis go to waste.” Used to say that all the time.

Van:

Truth to that really.

Adam:

Yeah. You come from the insurance base. Tell people a little bit about how you started SRA 831(b). People love to hear those stories.

Van:

I was introduced to this concept around that time and I didn’t really see much value in it until the great recession hit. Unfortunately, I saw a lot of my business clients, great clients, pillars in the community go out of business. It’s because they knew leverage, so they just kept betting every year was going to be better. That’s a hint of insanity, right? I looked at this as a way to manage the financial.

Adam:

It’s more delusion than insanity. It’s not necessarily insanity, it’s delusion, which is a very big difference. Now, if you’re deluded a few times, then you keep getting duped, and then you continue to do it, that’s insanity. Delusions of grandeur is the first step to insanity.

Van:

God bless business owners, you got to have short-term memory. You wouldn’t get out of bed sometimes and they do. Again, mine started out of at more of the financial risk business owners take, and how do we manage it better? Because this is what smart money does, to your point, about the crisis and stuff. People make their money during those crises. The smart money, the big companies, didn’t matter what’s going on in the economy, they’ll still make money. How do you position your business to do the same thing? This is a tool that does that. Now we’re a 15-year overnight success story, I tell people, but truthfully, it’s taken a lot of work, we’ve learned a lot of stuff, we’ve got some cases that won by the IRS that showed us the way to do some things right.

Now I think we’re ready, and COVID-19 obviously is proof of concept at this point. We’re ready to grow massively and really make this a normal business practice. That’s what we got to tell business owners, “Don’t rely on the PPP next time.” Here’s the other thing. Look at cyber exposures, look at the amount of companies you relied today on third parties that, if something happened to them on their supply chain risk or their ability to communicate to you, how that’s going to affect your business. Third-party liability exposure is huge today and nobody’s even addressing that in the insurance community today. Unfortunately, there’s a ton of risk that goes on in businesses, that they don’t realize they had it until it’s too late sometimes.

Adam:

Yeah, totally. It’s interesting. When you look at all the crises that led you to start your own business, all the areas of weakness you saw, one of the things I liked on the sheet that you put here is that you didn’t want to have a job anymore, because a job meant for you that you were just over broke. You were just over broke.

Van:

[inaudible 00:16:29] Always something like that, right?

Adam:

It’s funny you say that, because in my life, I’ve had jobs and then I’ve been a job creator. Every time I’ve had a job, I’ve been just over broke.

Van:

Yeah.

Adam:

Every time I’ve been a job creator, I’ve either been broke or not broke. Hold on, two ways to go folks. Job means just over broke, if you start your own business, you’re broke or you’re not broke. Those are the only two [inaudible 00:17:03].

Van:

Truthfully, I was willing to work 60, 70 hours a week for… I was working for FedEx at the time, I was going to blood, sweat, and tears, bleed purple. I thought, “Man, if I’m going to do this for a company, why wouldn’t I do this for myself?”

Adam:

Exactly.

Van:

That’s really where the “Just over broke” thing came from. I had a financial planner tell me that and it drives me nuts when I hear kids talk like that. Coming out of college, “I’m just looking for a job.” It’s like, “No, no, no, no. If you’re looking for a job, always position that job to grow, learn something from it, and move on to the next one. Eventually, you’ll find your path.” If you’re not learning, move on, go to the next job. Because that’s all it is, it’s a job.

Adam:

If you’re not growing, you’re shrinking.

Van:

Yes.

Adam:

A great little funny story about that is I was with my father, who is now 75. My dad used to be six-foot one, I think he’s like five, seven now. If you’re not growing, you’re shrinking. My brother and I, we are not growing anymore, which means we actually started shrinking, but we’re at the peak of our height that we actually will be then, so we were starting to take pictures of my dad going, “Little daddy, little daddy.” He was laughing, my mom was laughing at it too, because my mom’s really short. You think my dad’s short? My mom got even shorter. That’s what it’s all about.

Just like your body actually shrinks and it disintegrates before you die, so do things in business, in your personal life, if you’re not growing. If you’re not working on your personal life, if you’re not working on your business, and it’s gotten going this way, it doesn’t stay here, it either goes here or it goes here, but it doesn’t stay here. It might be there for a short period of time, but that’s not the way the world works. Stay tuned, we’ll be right back with Van and Adam DeGraide. Here’s another message from another great sponsor here on David Versus Goliath. Stay tuned.

Speaker 3:

At ISU ARMAC agency, we want to be your one responsible source for all of your insurance needs. From a rocket engineer in California to several hospitals in Illinois, our personal lines team specializes in hard-to-place risks and high net worth clientele. With two locations and 20 plus agents, we can write in all 50 states to better serve our clients with needs in multiple states. Family owned and operated since 1962 and four generations carrying on the tradition of insurance. Celebrating our 60th year in the industry, we are truly proud of where we have come from and where we are going. With over 300 carriers nationwide, our agency can offer individuals and businesses more choices and better prices. ISU ARMAC brings a wide variety of solutions to the table. For more information, visit us online at www.isu-armac.com.

Adam:

I’m back. The reckless man, Adam DeGraide here screaming at the top of his lungs today. I’m pumped. I’m a huge Rush Limbaugh fan. I used to love him when Rush would [inaudible 00:20:31] it’s formally stained fingers. God bless that man, I’m reading his book right now. Radio’s greatest of all time and I miss him. No offense to all you cats that are out there, I might just have to take over his show, because quite frankly, there’s not enough entertainment out there with good senses of humor. He was amazing. In closing, one of the last things we talk about is courage. To go just over broke means you have to be broke to start your own business and then you can flip it. What gave you the courage, Van, to start your business and keep it going?

Van:

I had a young family. I was married at 20, my wife was 19. I’ll tell you what, man, nothing scares you more than anything than being responsible for other humans. I used fear, scared to jump over the hump, man. Sometimes you get paralyzed or sometimes it causes you to go to action. Today, I try to focus on not worrying about things, because somebody told me, “Worrying is the practice of fear,” and I will avoid that at all costs, because I don’t want to fear anything. It’s the most intense emotion humans have. For me, if I start to feel that way, I start to look in a direction that I need to run to. In SRA, we use a buffalo as our mascot. One of the things that’s fascinating about the buffalo is, when they see a storm coming across the prairie, they turn into the storm, they run through the storm, and they know, on the back end, there’s fruitful abundance of new grass and everything else that’s growing in there.

They’ve learned that, they’ve evolved to that over the hundreds of years. I always try to keep that in mind, where if you see the storm coming, turn into it and take it head on. That’s where we went.

Adam:

I love that, by the way, the buffalo. One of my favorite football players of all times said something similar to that, his name is Tom Brady. I’d like to tell you he’s my personal friend, but he’s not. I wish he was my personal friend.

Van:

Yeah, right?

Adam:

He used to say things like, “A storm is brewing and I am the storm.” I’ve always loved that mentality. There’s two things you never run from, I’ve said this before on the podcast. For my regular watchers who’ve heard this before. For those of you who haven’t, that means you’re not watching enough. There’s two things you never run from, okay? Problems or praise. People find that fascinating, because people love to run from problems, right? Hide, hunker. To your point, turn into them, face them, get through it. The quicker you face it, the quicker you can get through it. Never turn away from a problem, run into it. The other problem is praise. Some people are not good, Van, at being [inaudible 00:23:35]. They’re doing a great job. Now, others have been told their whole lives that they’re beautiful, we pat them on the fanny, “You’re going to be great,” and it’s not true, they’re horrible human beings.

For those of us that value, run into problems, and those of us that face these things every day, when somebody says, “You know what? You mean a lot to me and you’ve changed my life,” take it. Suck that praise in as much as you can, because it’s only a matter of time until you turn that corner, and as Van says, a buffalo in a storm is waiting. You got to turn around and you got to face that storm of life. Now, Van, how can people learn more about you and learn more about your business?

Van:

Really, we own the 831b.com website and it’s like owning the 401k.com website.

Adam:

How did you get that?

Van:

It’s a a unique story, I’ll have to tell you sometime. Bri, my marketing gal, worked on it. The people we bought it from didn’t know what they had, so it worked out really well for us. 831b.com, that’s really where they can start. We have educational videos on there. The one thing I try to tell people is, “You took a risk to do what you did. Now, how do you mitigate that risk?” Really, it’s utilizing tools like this. Your competitors are doing it. If you’re competing against big companies, they’ve been doing these types of tools for many, many years. We’re trying to level the playing field and not be dependent next time you have to worry about, “Do I qualify for PPP or employee credit retention?” You’re doing things on your own. That’s one thing I learned in the last couple of years, we all pride ourselves on being bootstrappers. Are we or are we not? If you’re going to run to the government to help bail you out… Hey, nobody had a choice last time. I get that. There’s a choice on the table now.

Adam:

Yeah, we’re smarter now. They can’t pull the wool over my eyes anymore, Van. First of all, I don’t think the wool was ever pulled over my eyes. I was the guy that was constantly yelled at, “Where’s your mask? Where’s this? Why are you out of the house? Why aren’t you your house? Why aren’t you staying [inaudible 00:25:41]? Why aren’t you doing this? Why aren’t you doing that? Why?” I said, “Who made you my mother?” What are we talking about here? I’m a big boy, I’m 50 years old at the time, or whatever it was, 48, 49. I can’t remember at this point how old I am. At some point, you got to take control of yourself. You don’t want to be a slave to somebody else, you can do it, and Van can help. Van, thank you so much for taking the time to be on the David Versus Goliath podcast. Did you have fun?

Van:

I have. Hey, Adam, thank you very much, man. It’s been a great conversation and you make me want to watch you. I’m glad to be here.

Adam:

I’m glad, too. Now, for the watchers and listeners, they’re going to find this out right now. You need to go subscribe on YouTube, follow me on Spotify, although we don’t have a lot of Spotify views. It’s posted to YouTube and then Rumble. I don’t know if you’ve heard of Rumble, Rumble’s a very big competitor to YouTube. They’ve been big supporters. We’re about almost 13,000 subscribers there. We love it here on the David Versus Goliath podcast, we’re having fun. You need to go, subscribe, and tell all your friends. I’m going to know, a little birdie’s going to tell me, because I’m going to call Bri and I’m going to say, “Bri, did he subscribe?” If she says no, this episode’s not airing. [inaudible 00:27:00] and make it happen.

Anyway, thank you so much, watchers and listeners. Another amazing episode in the can here at David Versus Goliath. Where are you going to hear things like this? Did you even know there was such a thing as 831(b)? Hey, stay tuned next week. You never know what you’re going to learn here on the David Versus Goliath podcast. Have an awesome day.