The Doral Business Forum: Unveiling the Path to Sustainable Business Growth
At the heart of the bustling city of Doral, Florida, a significant event unfolded that could well define the trajectory of numerous businesses in the region and beyond. The Doral Business Forum, held at the Doral Cultural Arts Center on February 22nd, 2024, became a crucible for ideas, strategies, and insights aimed at fostering business development and trade. Among the distinguished speakers, Antonio Prado of Platinum Business Solutions captured the audience’s attention with his profound understanding and actionable advice on navigating the complex landscape of business ownership.
This post seeks to distill Prado’s insights, offering a comprehensive analysis and interpretation that could serve as a beacon for entrepreneurs and business owners striving for success in today’s competitive environment.
Understanding the Business Valuation Spectrum
Prado opened his address by laying out the fundamental challenges and opportunities that lie in the entrepreneurial journey. He emphasized the diverse resources available to business owners, including capital, tools for company improvement, market expansion support, and training financing. However, he posed a critical question that resonates with many entrepreneurs: Why embark on this arduous journey? The answer, as Prado suggests, lies beyond the superficial allure of business ownership; it delves into the deep-seated desire to create a lasting legacy and achieve financial freedom.
The Entrepreneurial Mindset: Navigating Through Uncertainty
Drawing from his personal journey and professional experience, Prado shared a window into the future of business ownership, categorizing the entrepreneurial venture into three distinct phases: survival, growth, and maturity. He argued that most business owners invest heavily in their ventures with the hope of flourishing in their “promised land.” Yet, this path is fraught with uncertainties and challenges that demand strategic foresight and planning.
The Alarming Statistics and the Imperative for Planning
Highlighting a concerning statistic from Social Security, Prado pointed out that 95% of people in the US might face financial instability by the age of 65. This statistic is particularly alarming for business owners, as only 7% manage to sell their business for a value that sustains their standard of living post-ownership. The root cause? A glaring lack of planning aligns the business with their personal missions and financial goals.
The Value of Strategic Planning and Risk Management
Prado meticulously dissected the critical areas where business owners often falter: protection of investment, business growth, tax efficiency, and planning for the harvest of their labor. He stressed the importance of having a backup plan and a buy-sell agreement to safeguard the business and personal financial interests against unforeseen circumstances.
The Growth Phase: People as the Core Asset
As businesses transition from survival to growth, Prado underscored the indispensable role of human capital in this evolution. The post-pandemic labor market dynamics have underscored the necessity for businesses to adapt and innovate their human resource strategies to retain talent and sustain growth.
Tax Planning: A Tool for Profit Maximization
Prado highlighted the often-overlooked aspect of tax planning as a critical tool for increasing company profits. He argued that leveraging the system to one’s advantage through strategic tax planning could significantly enhance financial outcomes for business owners.
The Final Frontier: Preparing for Exit
The culmination of Prado’s discourse focused on the necessity of preparing for the eventual exit from the business. He advocated for a strategic approach to ensuring that the business not only serves the immediate financial needs but also aligns with the owner’s long-term retirement and legacy goals.
Conclusion: A Call to Action for Strategic Business Ownership
Antonio Prado‘s presentation at the Doral Business Forum serves as a clarion call for business owners to adopt a strategic, forward-thinking approach to entrepreneurship. By highlighting the critical areas of planning, risk management, human capital development, and tax efficiency, Prado offers a roadmap for entrepreneurs to navigate the complexities of business ownership. His insights underscore the importance of aligning business strategies with personal financial goals to ensure not just survival but thriving success in the competitive business landscape.
The journey of entrepreneurship is undeniably fraught with challenges and uncertainties. However, armed with strategic insights and the wisdom shared by experts like Antonio Prado, business owners can chart a course toward sustainable growth and financial freedom. The Doral Business Forum has once again proven to be a fertile ground for nurturing the seeds of entrepreneurial excellence, and Prado’s contribution will undoubtedly resonate with many in their quest for business success.
Transcript:
So, I’m going to help you put into perspective all these different resources that you’ve encountered so far. Right. We’ve got capital, tools to fix my company, people who are going to help me open up markets, and individuals who will assist in financing the training for my team. I mean, we’re going to have people who will guide us on how to do it.
This is tremendous. But now the question arises: why? Why are you going through all this creative trouble? Because, how many of you agree with me that owning a business is crazy, right? Most of our money is invested in the business, and we’re hoping it flourishes into our promised land. So, I’m just going to give you a window into the future.
You’re either in one of these three situations. I’m going to help put into perspective what you are doing. So, think back to why you started your business. There was a reason, beyond just being able to find a job or staying home to watch TV all day.
Right. It’s much easier to not own a business. So, I’m going to share with you what I’ve heard over the years from business owners about their main concerns. But before we dive into that, the first thing you have to consider is what percentage of your retirement your business represents. Often, we find that the business’s value does not match what one needs.
It doesn’t add up. You need $3 million from your business, but it’s worth $1 million. We have a problem. Just to give you some context, I’m not originally from here. I’m from Venezuela and have been here for 34 years, coming in search of bigger and better opportunities in the land of opportunity. Right. I think many of us are in the same situation. But here’s a statistic from Social Security that I learned many years ago, which keeps me focused on my mission: 95% of people in the US will be broke by the age of 65.
The number one concern is running out of money. That’s why you see older individuals working in various places, right? They’re not just there to pass the time playing bingo. They need to make some extra money because they don’t have enough. As a business owner, this is a very concerning statistic because it highlights the reason a risk-smart individual works harder, hoping to achieve results.
In fact, only 7% of business owners actually sell their businesses for what they need to maintain their standard of living post-ownership. A staggering 93% of owners do not get what they need. And there’s one reason for this: they have never taken the time to make a plan to ensure that their business aligns with their personal mission.
And let me just say, what do you mean, ‘no plan’? Well, there’s no plan to protect your investment. How many of you agree with me that most of our capital is tied up in the business? It’s where most of our money is. How many of you are in the same situation, right? Most of it. There’s no plan to grow your business. And when I talk about growing your business, I’m not just talking about getting resources; it’s about your people, the team you build around you, your employees. How can I prevent them from leaving? There’s no tax efficiency plan for your business with Uncle Sam, which is where most of your profits could end up going if you don’t have a plan. And last but not least, there’s no plan to harvest the fruits of your 20, or 30 years of labor.
And that’s where most people find out they’re part of this unfortunate statistic. So, let’s address the first issue. I want to share with you some of the concerns I’ve heard many times in the past. One major fear is that the eventual sale of the business will not provide enough to maintain their standard of living. Others worry about losing key personnel to the competition, essentially turning into a training ground for their rivals. Many are concerned about meeting both family and business obligations in the event of sickness or injury. Some complain about paying too much in taxes, feeling lost on how to convert business profits into personal wealth in a tax-advantaged way, without overly favoring Uncle Sam.
Most people wish for their investment in the business to revert to their family if something goes wrong. That’s a common desire. Now, let’s talk about the first stage of your business, the 1 to 5 years, often referred to as the ‘survival’ phase. I’m sure many of you can relate to this. During this time, you’re just trying to meet needs and make things happen. What could happen to me? We aim to help you grow your business and sustain it over time, aligning it with your mission. But we need to understand where we stand and what measures we need to take to ensure this happens over time.
We call this the ‘survival’ phase and most of your efforts and investments are poured into the business. And here’s what could happen to your business if you don’t have a backup plan. A backup plan means having someone ready to step in or a strategy for how money will continue to come in if you’re temporarily or permanently unavailable. The reason is that when you start your business, no one else can assure you that your idea, your ‘baby’, is something only you fully understand, including all its ins and outs. Without a backup, you could fall ill tomorrow, and there’d be no one to step in to keep the business and income flowing for you and your family. Without a plan in place, how will your family recover the investment? How will they get their money back?
In your business, when you have partnerships, there is actually no exit strategy for either partner without a buy-sell agreement. This agreement outlines how the transition will occur in case something goes wrong. It could be due to death, disability, a dispute, bankruptcy, or even war. So many different things can affect both of your businesses.
They say it that way. And if you’re an individual and a small business owner without an actual plan, it’s like you’ve seen CDs have a backup plan for emergencies, right? You’ve seen that? Well, guess what? Your business needs a backup plan too. You need an emergency plan in case something significant happens to your business.
Right, but guess what? You’ve survived your first five years by luck. Nothing happened, and you keep going. And now, you realize that if you want to continue progressing, you move into the second stage. Your second stage, from 5 to 15 years, is called the growth stage. Okay, you decide, ‘I’m going to grow my company. I’m going to secure these loans. I’m going to acquire a bigger warehouse. I’m going to increase sales.’ But remember, actual growth goes hand in hand with people, not just sales.
One of the biggest revelations since the pandemic is that over 60% of the labor force has switched jobs in the last two years.
So, what does that mean? It means everything has changed, and there is a different market now. If you have not adapted to the new times, you’re essentially training your competition. Your company becomes an educational entity because you’re teaching all these people who pass through your business, only for them to leave for someone who pays better according to the market, or they start their own venture, believing they can do it better, especially if they’re immigrants, who almost always possess an entrepreneurial spirit.
Yes, and since this business is your ‘baby’, you lack the tools to retain people on a long-term basis, which is where the real value of your company lies. The value of your company is in the people you build your team around because that’s what a future buyer will look for.
Okay. So, essentially, as you keep training your people, they take your secrets, your clients, and your vendors; they can take everything and go to the bigger companies which do have all these tools. Therefore, my invitation to you is: if you’re thinking about growing your company and you realize that it takes ten employees to find one good one—a key person, that manager, the one who knows your company secrets, the one who has your trust, the superstar in your sales team—it takes one out of ten. So, if you’ve already had that special person leave and it hurt your business, then you need to recognize the need to change your system because it’s going to keep happening.
And how many of you feel that you pay too much in taxes? Does anyone feel that it’s too much? Yes? Okay, very few people here. So, you’re happy with your taxes? Not at all, right? Well, guess what? What we find is that most people do not leverage the system in their favor. They do not use the tools available from the system to their advantage.
The fastest way to increase your company’s profits is by conducting tax planning. It’s not through more sales, not by laying off people—none of that. You do tax planning. You take advantage of the system. The U.S. business system is the most generous to business owners in this sense. As I mentioned, most profits go to the IRS because if you don’t take tax deductions, guess what?
You’re still going to pay. You can pay yourself through tax deductions for you and your employees, or you’re going to pay Uncle Sam. So, you get the choice, right? Tax efficiency. I’m aiming to achieve financial freedom, to be a millionaire through my business, but what happens when all your money is trapped in the business? You’re a millionaire in the business but poor personally.
The reason you don’t transfer the money is that you want to keep it there, avoiding taxes, just letting the tax burden grow bigger. And you have no strategy to convert your business profits into personal wealth in a tax-advantaged way. So, you start building the other part, which is what you need and eventually want.
Right. And, you know, because my business is my retirement, I have no retirement plan. So, personally, I’m broke. I have nothing. And most of us are aware of the statistics in the business world: how many businesses fail quickly. And if the business fails, there goes your retirement too. Everything disappears. So, we as business owners need to learn to separate one from the other because the business should serve your purpose.
And that’s one of the things a lot of people forget in their day-to-day, trying to do their best for their business, for their ‘baby.’ Right. The more I work, the more I pay. And that’s the rule. And it’s going to stay like that as long as you keep doing what you’re doing. And last but not least, for those who raised their hands, hoping to become millionaires when they’re old, one of the top five or whatever, after 50+ years—consider your exit strategy.
Right. And these are the questions that you need to answer by that time. The first one is crucial: Is the business value enough? Is what I’m going to get for my business enough to meet my needs? However, there’s a significant problem: 98% of business owners who look at that number have never actually valued their business.
They have no idea what their business is really worth. They make an assumption like, “This is what it’s worth.” But that’s not accurate. Okay, let me tell you guys. So, your business is your biggest retirement asset, yet you don’t know how much it’s worth. Does that make any sense at all? Just think about it. There’s no timeframe for when I’m actually going to sell it.
Who am I actually going to sell it to? One-third of business owners will be lucky enough to sell it to their own families. Two-thirds will either sell it to their employees or a third party, but they don’t have anyone in place for that. So, when you ask many business owners, “When do you plan to retire?”
They all answer the same thing: “No, I’m never going to retire.” And the reason is that they don’t have a plan, and they don’t see a way out. That’s the truth. If I ask you, do you want to stay in your business for life or travel the world for the last few years, the answer is obvious, right?
So, those who plan to sell it to their family don’t know how they’re going to transfer their business and extract their money. Yes, you can trust the business, but what about the money? I need to live. So, they have no idea. And these are the ones who already have someone to sell it to.
Just imagine those who do not have a family member to sell it to. So now, I want you to understand why 93% see all the things that you have to overcome and plan for to ensure that it works for you. Another concern is: How will I get paid? Many people opt for what’s called seller financing to sell the business.
“I’m going to finance my business to you over five years.” So, now you’re giving someone else your 30 years of work, hoping they will work for you and you’re risking your 30 years in someone else’s hands, hoping they will pay you back. And that’s a strategy most people use without actually knowing what other options they have.
And obviously, Uncle Sam is going to be there by your side. Uncle Sam will be there when you sell your business, and you could lose as much as 40% of the price if you don’t have a plan. So, if your business is worth a million now, it’s $600,000 because Uncle Sam is your partner, and you never had a plan to deal with him.
And the question remains: Will it be enough? Will it be enough to maintain the same standard of living I had as a business owner? Will I have enough money to do that until I die? Right. So, I’ve been doing this for 24 years. Before that, I was a business owner and went broke three times.
I never had access to these kinds of resources, but like you, I aspired to become a millionaire through my business in the land of opportunity. Unfortunately, I wasn’t able to do it. It’s not easy. So, I decided to learn how to make it happen. My mission today is to help people achieve that goal through my knowledge and the resources that we have explored together.
Consider the simple math: If you’re a business owner who needs $10,000 a month from age 67 to age 90, which is the expected lifespan, you’re going to need about $3.5 million gross. That’s $10,000 a month amounting to $3.5 million. So, how is your plan coming along? Does your business align with your personal financial goals?
That’s my invitation to you. I’m currently running the business valuation program for the City of Doral, designed to help you create a game plan to tackle all of these issues. We aim to ensure that your business efforts are directed towards achieving your personal goals. I invite you to visit our tables, and meet our team because we are all part of a system that your company needs. Let’s get the help we need, following the lead of larger companies that seek assistance.
We should understand the importance of seeking help when necessary. I thank you for your presence, and your time, and I hope this has been helpful.