Tag: Blog

Exit Planning: When to start?

Legal matters, business strategy, and life perspectives from the mind of a non-attorney.

A few weeks ago, we sent out emails to several business owners, inviting them to attend a presentation on Exit Planning. We met our desired room capacity pretty quickly, but we did get a few responses like this:

  • “I’m not exiting my business for 3 or 4 years, I’ll attend the presentation then.”
  • “We aren’t exiting until next year. Will you be doing this again in 6 months?”

Two separate business owners made a conscious decision to delay attending this kind of presentation until their exit is at arm’s length.

As a person who is very educated on what Exit Planning is and how much work it takes, let’s just say those decisions scare the s*** out of me.

Yes, I know, there is a certain contingent of business owners who simply cannot – and will not – mentally or emotionally handle the task of planning for their exit. In fact, we even wrote a blog about it: Exit Planning: Why Do Business Owners Avoid It? Bottom line: It’s just too much for them, so they stick their heads in the sand.

Those responses we got – you know, a few weeks ago after the presentation – those felt different. To my mind, it feels like those business owners actually think it is OK to wait longer than they already have. Like, with the rational part of their brain.

They weren’t being emotional, afraid, or willfully negligent.

It seems like they were just living their reality.

If that is the case, I have failed you all miserably.

Why?

The truth is, executing an Exit Plan takes a hell of a lot longer than 6-12 months. If you wait until then to even start LEARNING about Exit Planning, you are way behind the 8 ball. You are asking for disaster. I’m not saying you are S.O.L, but I AM SAYING that you have effectively put the ball in someone else’s court and left value – i.e. MONEY – on the table.

Really?

Yep.

Okay… So how long DOES it take?

Internal Transition

First of all, did you know there are really only four (4) practical ways that you can transition a business internally?

  1. Intergenerational Transfer: The transfer of a business to direct heirs, usually children. About 50% of business owners want to exercise this option; only 30% do it successfully.
  2. Management Buyout: Owner sells all or part of the business to the company’s management team. Management uses the assets of the business to finance a significant portion of the purchase price.
  3. ESOP: Company uses borrowed funds to acquire shares from the owner and contributes the shares to a trust on behalf of the employees.
  4. Sale to Existing Partners.

Here’s the deal: If I’m going to be your Exit Planner, and you are considering an Internal Transition of any kind, I want our initial meeting to be at least 10 years prior to your exit.

You heard me. 10 years.

Why? 2 Reasons.

  1. In all likelihood, you are not just GIVING this thing away. And you want cash at closing, not a promise to pay.
  2. In all likelihood, the person(s) you are selling it to can’t afford to buy it, and wouldn’t be able to secure financing.

If you come meet with me 10 years in advance, we can create a pot of money for your successor(s). The concept is simple: Money gets bonus-ed into the pot if – and only if – they achieve predetermined objectives that help you grow the value of the business. Pick your scenario:

  • Give successor(s) $0.00, have a company worth $2,000,000. In 10 years, receive a 20 year note and a $150,000 first year payment.
  • Give successor(s) $1,000,000.00, have a company worth $3,000,000. In 10 years, receive $2,000,000 and a 10 year note for the balance.

I know which one I’d pick.

If you come meet with me 5 years in advance, we cannot do that.

If you come meet with me somewhere in between, the numbers might work. They might not. It’s anybody’s guess.

External Sale

If you’re planning to pursue a sale to a third party, I will be thrilled if you give me a 5 year runway to work with.

You see, Exit Planning is a lot like flipping a house:

If you give me 5 years, we can update everything: new hardwoods, appliances, siding, and roofing. We can check the plumbing and electrical. We can remodel the kitchen and master bedroom. Hell, we can even toss on an addition. And the best news: All of that will be done in 2-3 years, giving us the opportunity to truly pick our spot and capitalize on favorable market conditions when they are present.

If you give me 3 years, we can still make a ton of updates. The house will truly be in great shape for buyers. Only problem: you aren’t giving yourself any time to play the market. Once the house is ready, you’re going up for sale, whether it’s a buyer’s market or a seller’s market.

If you give me 1 year, we can update a handful of things and slap on a fresh coat of paint. That’s it. Smart buyers – yes most of them are smart – are going to try and poke holes to drive the price down.

I know what you’re thinking: “Yeah, remodeling makes everything look great, but it ain’t free either. Is it really worth the investment?”

  • For most of you it’s going to mean the difference between a business that sells and one that sits on the market for 2 years before getting liquidated because nobody wants it.
  • We track ROI for our clients. We’ve never had someone come out in the negative. We generally EXPECT our clients to earn at least 30% on their investments in Exit Planning by the time it’s all said and done.

Getting Started

We generally kick off the process with a complimentary “exploratory” meeting. You’ll have the opportunity to ask questions and help us understand your true desires.

Assuming all parties agree to move forward, we jump into “Benchmarking” your business.

To stick with the remodeling analogy, it’s the basic equivalent of obtaining a real estate appraisal – on steroids. Yes, we deliver you with an estimate of value based on your financials. We also take it 5 steps further. We give you insight that says, “Hey, someone is going to fall in love with this house and pay 20% more if you gut the basement clean, paint the stairwell olive green and put a giant picture of Aaron Rodgers in the family room.”

At that point, whether you hire us to gut the basement and paint the stairwell, contract it out to someone else, or ignore our advice is entirely your prerogative.

 

Thanks for reading! To subscribe to our weekly content, you can enter your email on our homepage. You can also follow Epiphany Law on Facebook and LinkedIn for regular updates from the Firm. Finally, you can follow me on Instagram (@kelton.official), where I regularly post links to new blogs, as well as random pictures of my life.

Why Business Owners Should Fear Exit Planning

Legal matters, business strategy, and life perspectives from the mind of a non-attorney.

After a very brief hiatus, Breakfast at Epiphany’s is back – and better than ever.

Due – in part – to a recent uptick in demand for our services, yours truly got a sweet new title: Exit Planning Advisor.

It’s a definite blessing, and certainly part of the vision I had for my future with the firm when I joined a little over a year ago.

For the prospective client, very little changes. Kevin Eismann (Attorney/MBA/CEPA) is still the lead consultant. His unique blend of education, professional experience, and business acumen is the reason Epiphany Law is the premier source of Exit Planning in the Fox Valley.

The new guy simply provides an extra set of eyes and ears to sit in on your conversations. I also bring an interesting new perspective to the table: As a ‘millennial’, I’m naturally inclined to process information through the eyes of a business owner’s potential buyers/successors.

Compare that to most respected business consultants who – rightfully so – are well-seasoned, experienced, and trained to see the world exactly how business owners do. I’m inclined to see it with a twist. This allows me to chime in from time to time playing “devil’s advocate”. That perspective is particularly valuable to business owners selling or transitioning to a younger generation.

The Emotion of Fear

I talk a lot about emotions in this blog. I don’t know. Maybe I’m an emotional guy.

I asked my fiancé, Morgan, what she thought: “Eh… Yeah, kind of.”

Thanks babe. Appreciate the love.

She did go on to explain that with big decisions I tend to spend a lot of time analyzing and thinking things through, but when it comes down to it I will go with my gut. That made me feel marginally better.

It’s interesting that she would bring up decision making, though. Today’s post is all about how one emotion – fear – plays a huge role in influencing strategy and decision making.

—–

Fear plays an interesting role in our society. Sometimes it manifests itself in response to a legitimate threat to our wellbeing. This emotion was extremely valuable in more primitive times – say, thousands of years ago when day by day survival was anything but a given.

Fast forward to present day, and many of us are blessed to be able to navigate through an entire lifetime with less than a single handful of true life-threatening experiences.

From a purely logical standpoint, one may try to assume that fear plays a lesser role in today’s society. After all, it’s original adaptation and purpose – survival – is no longer the prevailing purpose of our lives.

People much smarter than myself indicate that assumption is far from the truth. According to Ahmad Hariri, a professor of psychology and neuroscience at Duke University, “Change has occurred so rapidly for our species that now we are equipped with brains that are super sensitive to threat but also super capable of planning, thinking, forecasting and looking ahead… So we essentially drive ourselves nuts worrying about things because we have too much time and don’t have many real threats on our survival, so fear gets expressed in these really strange, maladaptive ways.”

In other words, the fear-center of our brain is still very-much alive. But it doesn’t just sit around patiently waiting for the once-in-a-blue-moon instance where it truly needs to be used. Instead, it continues to be used by our brains on the daily.

In the absence of true threat, our brain has figured out how to conjure up illusions of threats to our existence.

Dr. Karl Albrecht concludes that ALL of these illusions stem from one of 5 core fears common among humans.

  1. Extinction – The fear of literal death.
  2. Mutilation – The fear of damage to one’s body.
  3. Loss of Autonomy – The fear of immobilization, imprisonment, or other loss of control.
  4. Separation – The fear of rejection.
  5. Ego-death – The fear of public humiliation or self-disapproval.

Why Business Owners DO Fear Exit Planning

Without question, there is underlying fear (some real, some self-conjured) at play for business owners who consider Exit Planning as a resource. I want to expose those fears for what they truly are, and discuss whether they are illusions of the mind or justified concerns.

1) Fear of getting old.

Through numerous conversations with business owners and years of research into the field of Exit Planning, it’s apparent to us that the departure from business ownership signifies “the end” of youth for many. The words “I sold my business” literally equate to “I’m old”. Ouch.

But old age isn’t one of the 5 core fears common among humans.

So what exactly is the underlying fear? At first blush, one may assume it to be death itself. People who fear old age are really fearing death, right?

Maybe.

We have to be careful about making sweeping generalizations in this arena, as each individual is different. However, in our experience, it is actually more common that the classic “old age” fear is more closely associated with an Ego Death fear. In this case, being old equates to a dramatic loss of self-worth.

“Logic”:

Exit Planning = Old Age.

Old Age = I’m worthless (Ego-Death).

I fear Ego-Death; Therefore, I fear Exit Planning.

Conclusion:

One of my favorite quotes is from Abraham Lincoln, “It’s not the years in your life that count. It’s the life in your years.” Every day is a blessing, and making the most of it is simply a matter of choice. Those who choose to live with that perspective are able to find meaning in spite of a number.

Bottom line: Aging is a state of mind. If you think you’re old, you are. If you think you’re young, you are. Retirement has nothing to do with it.

 

2) Fear of being bored.

Make no mistake, simple “boredom” is relatively easy to cure for people who value themselves and have passion for life outside of work. We live in an era of limitless activities and hobbies for people of all walks of life. One simply has to open their eyes and give it the “ole college try”.

In our experience, those worried about “boredom” are covering up a much deeper-seeded fear. Once again, it’s Ego Death. This time, self-deprecation stems from a feeling that their value as a human being is intrinsically attached to the title on their LinkedIn profile.

If you look in the job description of most business owners, you will find the word “workaholic” as a prerequisite. Decades of painstakingly building a business hard-wires the need to be “productive” in one’s DNA. However, most will tell you that mowing the lawn and working around the house does provide the same level of satisfaction as spending a full day at the office.

But why? Work is work, isn’t it?

Many business owners describe their passion for the job as, “It’s all on me.” The level of responsibility is unmatched: Quite literally, the entire livelihoods of employees, families, and – in some cases – entire communities depend on you. Over the years, the relationship between business and business owner becomes almost symbiotic – that is, they need each other to carry on.

It’s the feeling of being needed that drives the productive nature of many business owners. While the relationship is alive, few things provide more satisfaction. When it’s over, many find themselves asking, “What’s the point?”

“Logic”:

Exit Planning = I am not a Business Owner.

I am not a Business Owner = I’m no longer needed (Ego-Death).

I fear Ego-Death; Therefore, I fear Exit Planning.

Conclusion:

Business ownership creates an illusion of high self-esteem. It isn’t until the former is abruptly ripped away that the problem is exposed.

For business owners who actually want to deal with the issue, there is truly no better resource than Exit Planning. The best Exit Planning consultants take emotional challenges of business departure very seriously, making it a staple in their process. That is, they dedicate several hours to the conversation – forcing clients to truly consider the impact that retirement will have.

 

3) Fear of consultants.

Business owners of the D / C personality type (DiSC Personality Profiles) are particularly prone to this, but for different reasons:

C-style personalities take enormous pride in their expertise and show tendencies to fear criticism – no matter how constructive it may come.

D-style personalities take enormous pride in their independence and show tendencies to fear giving up control of any kind.

Type-D “Logic”:

Exit Planning = Hiring a Consultant.

Hiring a Consultant = Giving up Control.

Giving up Control = Ego-Death.

I fear Ego-Death; Therefore, I fear Exit Planning.

Type-C “Logic”:

Exit Planning = Hiring a Consultant.

Hiring a Consultant = Potential Criticism.

Potential Criticism = Ego-Death.

I fear Ego-Death; Therefore, I fear Exit Planning.

Conclusion:

If there is one message that we consistently drive home with clients, it’s this: “It’s your business, not ours. You don’t have to listen to our advice. We are simply here to provide recommendations based on our years of experience working with owners that were once in your shoes.”

If you avoid hiring someone because they bring nothing to the table – you are a wise.

If you avoid hiring someone because they know more than you – you are a fool.

Why Business Owners SHOULD Fear Exit Planning

Business owners should fear not what Exit Planning is, but the root cause of its existence as a practice.

Consider for a moment the first time you heard of “Exit Planning”. With a great degree of confidence, I’d venture to guess that most have learned about it within the last 5 years. I’d be shocked if you knew about it prior to the Great Recession.

Why is that? Why does it feel like this is such a new and growing idea?

Did we just begin buying and selling closely held businesses in the past decade?

Of course not. In a free economy, businesses transactions have taken place from the time the first one closed its doors.

The real reason is that selling a business the way you want, at the time you want, and for the price you want is getting harder and harder with each passing day.

To be fair, selling a business has never been “simple”. On a scale of complexity, it’s always been closer to “figuring out your wife’s mood” than “figuring out your dog’s mood”.

These days, the scale has been flipped into overdrive. Vastly more complex, we are now talking about a scale that includes “figuring out your pregnant wife’s mood”.

One needs only to have a rudimentary understanding of supply and demand economics to understand what I mean.

Baby Boomers own 67% of private businesses in the United States. Let me repeat: two out of every three small businesses are owned by individuals aged 54 to 72.

Two out of every three private businesses in this country are owned by someone that is VERY NEAR normal retirement age.

That, my friends, has the makings of a mass exodus.

What happens when the market becomes flooded with businesses trying to sell? Is that an attractive situation for business owners who need to net big money in order to retire?

Nope. When supply abruptly exceeds demand – we call that a buyer’s market. The proportionately few individuals that are looking to scoop up small businesses will become extremely picky. Businesses who don’t make the cut will sell for pennies on the dollar – if they sell at all.

Roughly 10 – 15 years ago, very smart people saw this trend coming. In response, they created a practice called Exit Planning – something to teach business owners how to prepare for the sale of their business. I guess it took a while for word to spread.

I have news for you: the floodgates have begun to open. Brokerage firms are reporting that business sales are at all-time highs.

The sliver of good news, for business owners selling soon: Your potential buyers have extremely easy access to capital. For the time being, demand for private businesses is keeping up with the supply on the market. That will not always be the case, particularly as interest rates continue to rise.

 

Conclusion

The knee-jerk reaction of many business owners is to fear Exit Planning for what they associate it with: A threat to the Ego.

By digging a little deeper, it’s easy to see that Exit Planning itself is in fact acting as the scapegoat for pre-existing character flaws that are likely to be exposed regardless.

Business owners SHOULD fear Exit Planning because of what its existence represents:

Businesses are becoming HARDER TO SELL. Business owners who don’t capitalize on a business sale lose control of their future.

Now THAT is a legitimate fear.

 

Want to take back control? PLAN. FOR. YOUR. EXIT. 

 

Give us a call or shoot me an email if you have more specific questions!

Thanks for reading! To subscribe to our weekly content, you can enter your email on our homepage. You can also follow me on Instagram (@kelton.official), where I regularly post links to new blogs, as well as random pictures of my life.

How To: Transfer Ownership to Children

Legal matters, business strategy, and life perspectives from the mind of a non-attorney.

One of my life’s obsessions is empathy.

For those who don’t know what that is, empathy is the ability to understand and share in the feelings of another.

Put another way: It is the ability to put yourself in someone else’s shoes. To understand what they think, how they feel – and beyond that – why they feel the way that they do.

Empathizing with someone is one of the kindest, purest things you can do for another human being. It takes TIME to empathize. It expresses true care.

 

Beyond that, the practice of empathy helps YOU succeed in life. By empathizing, you instantly become a better communicator.

Practicing Empathy

Example:

Here is how most people give advice:

Friend: “My boss is such a jerk. He treats me like I’m an idiot or something, constantly patronizing me. I don’t know if I can handle working there anymore…”

Advice-Giver: “Yeah, I remember when I had a boss like that. I wouldn’t put up with that if I was you. You need to get out of there. Just move on? You deserve to be treated better than that.”

Friend: “You might be right…”

 

Here is how someone practicing empathy gives advice:

Friend: “My boss is such a jerk. He treats me like I’m an idiot or something, constantly patronizing me. I don’t know if I can handle working there anymore…”

Advice-Giver: “Yikes, that doesn’t sound good. Does he treat everyone like that?”

Friend: “Sort of. I’ve heard other people complain about it too.”

Advice-Giver: “Do you like the other people that you work with?”

Friend: “Yes, I really do. There are a lot of good people there.”

Advice-Giver: “Do you enjoy what you do?”

Friend: “Yeah, I actually love it. And they give me a ton of flexibility with my hours too. I just wish he wouldn’t treat me like that sometimes. It’s so frustrating!”

Advice-Giver: “That would frustrate me too. Definitely a confidence/morale killer for you. How do you respond when he talks down to you?”

Friend: “I don’t know… I guess I usually just not and bite my tongue. Try not to say something smart back to him, you know?”

Advice-Giver: “That’s definitely a good thing to do. It amazes me how some “leaders” can be so out of touch with the abilities of their employees. I had a boss like that once. Only thing I could say is that if you want something to change, you might have to experiment with how you respond to him talking down to you.”

Friend: “What do you mean?”

Advice-Giver: “Well, obviously you know the situation better than I do… But when you just nod and bit your tongue, he might walk away having no idea if you really understand what he said. It might kill you to do it, but you could try vocalizing your understanding, having more positive body language. I mean, don’t be overtly sarcastic about it, but force yourself to be genuinely positive and express your understanding. It might take a while, but eventually he might start treating you differently.”

Friend: “Huh. I never thought about that. I guess I could give it a try.”

 

Who gives better advice?

 

The best communicators are selfless. They take the time to gather more information. They figure out how the other person feels. Then they adapt their own actions/behavior/advice accordingly.

 

Communication is a huge key to the successful transition of a family business. As the current owner of the family business, you are in a great position to extend empathy to any children who are next in line.

 

Transfers to Children

Here are a few tips:

  1. If you want them, tell them. If there is an opportunity for them to “take over”, it is up to you to make it known. “Well they haven’t shown any interest” is a cop-out. Ask yourself why they haven’t shown interest. Talk to your spouse about it. There are likely some obvious reasons. If they aren’t clear to you, they may be clear to your spouse. Above all else, have an open and honest (non-confrontational) conversation with your kid(s). It’s up to you to be the leader that your family and your business needs. If you don’t do it, you will always wonder, “what if?”
  2. Don’t expect them to be you. It happens ALL THE TIME. There is a named successor. Maybe it’s the owner’s daughter. She has a solid role within the family business. Business owner: “I don’t know if this is going to work out. She just doesn’t have the sales skills to drive new business and that is an important part of what I do.” Stop it. Focus on her strengths instead of her one glaring weakness. Figure out if there is a way that you can restructure the business so that sales no longer fall on the owner’s shoulders… i.e. hire a sales team!
  3. Address concerns directly. If there ARE unavoidable concerns with your successor, address them directly. Don’t make backhanded comments hoping to send the message. Don’t embarrass them in front of other employees. And most of all, don’t sit on your concerns “hoping” that something will magically change. If you do, you are setting everyone up for failure.
  4. Don’t forget about non-family employees. Whether you made specific promises to key employees or not, don’t forget about them as you begin making a transition. Allow them to express any concerns, and let them be a part of the solution to those concerns. This will help them feel valued and “in control” as the transition begins to take place. Also, there are many ways to reward key people for their years of loyalty without giving them cash or a stake in the family business.
  5. Don’t get greedy. We see this one a lot too. A business owner will have an outstanding successor lined up, the transition of duties will go extremely smoothly and all-of=-a-sudden the business will experience a growth period. Of course, no formal agreements were made so the owner decides to hand on and reap the rewards a little (or a lot) longer. Make formal agreements and stick to the terms of those agreements, otherwise conflict is inevitable.
  6. Show them how to buy-in. It is entirely possible (likely, in fact) that you cannot afford to “give” the company to your successor. Don’t let this deter you from keeping the business within the family. If time is on your side, there are ways of helping your successor build enough capital to buy you out.
  7. Multiple children. The absolute worst thing you can do is ignore the conversation and keep the future of your estate a mystery to your children. In the face of mystery, most people begin to act very irrationally. Starving for clarity on the situation, they will formulate their own (false) set of facts to try and control the narrative. Depending on their outlook on life, those facts will be heavily slanted for or against them, and fracture within the family will ensue. This can all be avoided if you – the leader of the family – are willing to step up and provide a clear and well-reasoned agenda for how the business will be distributed. You should do it the moment you sense it becoming a concern among your children.

 

Above all, be selfless and practice empathy while exploring the possibility of business transition. For those that are able to do this, the logistics of “who, when and how” become exponentially easier. If you need someone to help you plan out the logistics, give us a call. J

 

As always, give us a call or shoot me an email if you have more specific questions!

Thanks for reading! To subscribe to our weekly content, you can enter your email on our homepage. You can also follow Epiphany Law on Facebook and LinkedIn for regular updates from the Firm. Finally, you can follow me on Instagram (@kelton.official), where I regularly post links to new blogs, as well as random pictures of my life.

Don’t Panic, it’s just a Will!

Legal matters, business strategy, and life perspectives from the mind of a non-attorney.

 

I was diagnosed with a Panic Disorder in February 2014.

If you’re reading this and you know what a panic attack feels like: I am sorry.

If you’re reading this and you don’t know what a panic attack feels like, the first part of this blog post is for you; to help you understand what the rest of us go through.

 

What does a Panic Attack feel like?

Now, once again I feel the need to preface my comments by saying that EVERYONE IS DIFFERENT. For some, panic attacks might not be quite as dramatic as I describe. For others – unfortunately – they are every bit of what I describe, and even more.

Imagine this:

You’re in your car at dusk, driving along the winding back roads on your way home from a weekend of camping with friends and family. It’s a dark Sunday evening, heavy cloud cover concealing the moon and the stars. That’s the least of your concerns, though. All you can think about is what you have to do to get ready for work tomorrow morning.

Really shouldn’t have stayed that late on a Sunday… But the Packers had the Sunday Night game, so whatever, it was worth it.

Then, strangely, your right foot starts falling asleep.

Why is my right foot falling asleep? That’s annoying.

You shake it to try and get the blood flowing. Adjust in your seat. No help.

How am I supposed to drive with a tingly foot?

Angrily, you slam down the remainder of your now-cold coffee.

UGH.

You adjust the radio to a different station.

Just as you turn the dial, three (3) things happen simultaneously:

  1. Your right foot gets extremely heavy. It slowly depresses more and more on the accelerator. You try and lift your foot off the pedal, but for whatever reason YOU CAN’T LIFT IT OFF.
  2. The volume on the radio starts increasing.
  3. The headlights on your car shut off. Complete darkness.

All you can do is sit and watch as the RPMs go red. You’re FLYING down the road at 120… 130… 140 mph.

You can see nothing.

You know that trees line both sides of the road. Curves in the road are coming up soon.

Def Leppard blaring in your ears.

Do you feel like you’re going to die? Of course you do. It’s the only logical explanation based on all the facts you have.

That is what a panic attack feels like.

It feels like someone grabs ahold of all the figurative “levers” inside your brain and whips them into overdrive, all at once, for seemingly no reason at all.

Heart rate approaches 2-3x its normal speed. Thoughts begin racing and swirling so much that you physically cannot hold a conversation. Breathing becomes incredibly short and thin – a 1000 lb. weight is sitting on your chest.

Roughly 6 times a year I will wake out of a dead sleep in the middle of the night to this happening to my body.

Half the time I am able to control my thoughts enough to remember what is going on. I utilize some of the tactics I have developed over the years, and my ‘episodes’ end more quickly.

The other half of the time, my world spirals out of control and I all-but pick a spot on the floor for myself to die.

Eventually my world always stabilizes. It feels like hours while I’m going through it. The reality is that it last 20-30 minutes.

I guess you could compare the “post-panic” feeling to the feeling of waking up from a particularly disturbing nightmare. The pure thankfulness to be alive – to have your family happy and healthy – to have everything be ‘normal’ again.

I’ll say it again:

If you’re reading this and you know what a panic attack feels like: I am sorry.

It is living through a state of hell that nobody should have to experience.

 

As for the rest of you: When someone you love comes to you and complains of panic-like symptoms, please do not blow them off. Please do not demand that they “get over it”. Please do not seek out “real” explanations for the symptoms they are having. Want to get them checked out for a heart arrhythmia? – great. Beyond that, seek a reputable mental health professional for a consultation. And most of all: Love them. Support them. They feel stupid enough already, don’t do anything to add to it.

 

Drafting your Will

According to a 2017 study conducted by Caring.com, only 42 percent of U.S. adults have estate planning documents such as a will or a living trust.

For those with children under the age of 18, only 36 percent have those documents in place.

Those are not opinions. Those are facts.

I’m not here to lecture. I get it (probably better than most): Facing your own mortality is extremely difficult.

But guess what? You’re not doing it for yourself. You’re doing it for the people you love.

You need to be able to answer these questions when drafting your will:

  • Name a guardian for your children.
  • Name a caretaker for your pets.
  • List specific personal property assets. Name desired beneficiaries. Name alternate beneficiaries.
  • Name a ‘personal representative’ to make sure your will is carried out. Name an alternate representative.
  • Name a beneficiary of any property left over.
  • Specify how debts, expenses, and taxes should be paid.
  • Specify instructions for the care/upkeep of real estate.

 

The time is now: Just do it. I know that you can handle it.

 

My tips for dealing with Panic Attacks:

  • If you are able to recognize that you are having a panic attack, focus intensely on breathing. Force yourself to take long, exaggerated breaths. In for 4 seconds. Hold for 4 seconds. Out for 4 seconds.
  • Have a “go-to” person to call or talk to. It could be a parent, a significant other, or a friend. Coach this person on your condition. Tell them to talk “at you”. They shouldn’t expect a response. They can talk about dreams, sporting events, or even just recount their day. The simple act of listening to someone talk can be enormously helpful.
  • Ice on the back of the neck. No idea why, but the change of sensation helps me.
  • Take a shower. Again, no idea why, but the change of sensation helps me.

 

Thanks for reading! To subscribe to our weekly content, you can enter your email on our homepage. You can also follow Epiphany Law on Facebook and LinkedIn for regular updates from the Firm. Finally, you can follow me on Instagram (@kelton.official), where I regularly post links to new blogs, as well as random pictures of my life.

 

What does Tax Reform mean for Departing Business Owners?

Legal matters, business strategy, and life perspectives from the mind of a non-attorney.

 

Do you remember that sinking pit in your stomach you got after you received an exam back from the teacher and it was a bad score?

68% D

That feeling has got to be one of the worst things ever.

At least it was for me.

I’ve always been my own worst critic, so it killed me inside when I didn’t live up to the standards I set for myself.

Thankfully, my mom always knew what to say to get me back on track.

“It’s done now. Control what you can control.”

Simple, but great advice. It helped me refocus my perspective and move forward with new energy.

Talk to the teacher, do extra credit, and above all else: Bust my a** to make sure it didn’t happen again.

 

2018 Tax Reform

Whether you were a big proponent of the Tax Cuts and Jobs Act, or a harsh critic, my mom has some advice for you:

“It’s done now. Control what you can control.”

The bill was passed and signed. Barring something unprecedented, it will be effective for at least the next 4 years.

If you’re a small business owner nearing the end of your runway, in some respects this bill should feel more like “100% A+” territory than anything else.

Why?

2 reasons.

1. Higher Net Cash Flows Leading to Higher Valuations

BizEquity recently published a white paper predicting trends for 2018 valuations of privately-held businesses. The spark-notes version of their findings is that valuations are expected to trend upwards, across the board, in 2018 due to positive GDP growth and tax cuts.

The overall methodology is pretty simple: The economy is doing well, so in general, businesses should make a little more money than last year. Those businesses also don’t have to pay quite as much in taxes as they did last year. These two elements result in more money on the table for the owner(s) of the business at year-end. Increasing the “bottom line” is one way to increase the value of your business. The bottom line of every business in the nation was just increased, by virtue of the 2018 tax bill.

2. Lower Taxation of Asset-Based Sales

According to wbjournal.com, more than 90% of business sales to an outside 3rd party (where the purchase price is < $10 million) are Asset-Based sales.

So?

Asset-based sales are confusing. I won’t get into the details of how they differ from stock-based sales this time (we’ll save that for later), but this is what you need to know:

  • 99% of the time, an asset-based sale requires the seller to pay ordinary income tax on some portion of the gain from sale.
  • Sometimes, like in businesses that have a large amount of fixed assets, accounts receivable, or work-in-progress, the amount taxed as ordinary income is quite large.

Thanks to the new tax bill, the highest marginal rate fell from 39.7% to 37.0%.

2.7%, for many business owners, can mean tens – if not hundreds – of thousands of dollars in tax savings – if you sell your business in an asset-based sale under the current regime.

I would get into an example, but again, it’s highly complex and I don’t want to distract from the point (look for a future post on asset vs stock sale).

Bottom line: Business owners who are approaching the end of their runway just received an A+. Especially when you consider that tax rates could have easily gone the other way

 

What will tax rates do in the future?

Look, I’m not here to speculate. I’m here to bring you facts. Period.

Some people like to look at the past to predict the future. If that’s you, you’ll enjoy the following chart. The blue line represents the United States’ highest marginal tax rate for each year since 1913. The orange line shows the current highest marginal tax rate.

Based on that chart, in the last 100 years (since 1918), there have only been 22 years of MORE FAVORABLE tax environments to departing business owners.

Other people like to look at the Nation’s current Debt situation as an indication of where taxes might head in the future. If that’s you, you’ll enjoy the following chart. The blue line is the same. The grey line represents Debt / GDP (an indication of our country’s ability to repay debt) for each year since 1913.

Based on that chart, it’s interesting to see that the last time our Debt / GDP trended downward was between 1946 and 1981. The average highest marginal tax rate in that time? Over 80%. Current highest rate: 37%

I don’t know what the tax situation will look like the next time someone rolls out a new tax bill.

To be honest, I don’t care.

Neither should you.

I’ll say it again: CONTROL WHAT YOU CAN CONTROL.

If you are a business owner who is approaching retirement, you were just given an A+ grade.

Now you control the situation for at least the next 4 years.

It’s time to strike while the iron is hot.

Use your time to develop an Exit Plan. Control your risks. Maximize the value of your business. And get out on favorable terms.

None of us know what the future holds, so there’s no sense wasting any more time worrying about it.

Let’s get to work.

 

The time to start your Exit Plan is NOW. Contact Epiphany Law to do so.

 

 

Thanks for reading! To subscribe to our weekly content, you can enter your email on our homepage. You can also follow Epiphany Law on Facebook and LinkedIn for regular updates from the Firm. Finally, you can follow me on Instagram (@kelton.official), where I regularly post links to new blogs, as well as random pictures of my life.

http://www.taxpolicycenter.org/statistics/historical-highest-marginal-income-tax-rates

https://www.usgovernmentdebt.us/spending_chart_1900_2020USp_XXs2li011tcn_H0sH0lH0f_Combined_Gross_Public_Debt#copypaste

 

Got Sued? Now what?

 

Legal matters, business strategy, and life perspectives from the mind of a non-attorney.

Careful what you wish for…

In 2016, 852,828 new lawsuits were opened in the state of Wisconsin… We only have 5.8 million people living in the state. For those that were never “math” people, that’s roughly 1 lawsuit for every 7 people in the state.

The statistics get even more mind-numbing if you expand the scope to include the entire United States, where over 100 million new cases are opened each year in a country that is home to 323 million (about 1:3).

Facts:

  • On average, a new lawsuit is filed every 30 seconds.
  • 78% of lawsuit defendants never thought it would happen to them.
  • America has 80% of the World’s lawyers.
  • 96% of the WORLD’S lawsuits are filed in the United States.

Yikes.

Unless you’ve had the misfortune of being involved in a lawsuit, the likelihood is that you have no idea how the whole process works.

USLegal.com explains it this way:

“In Wisconsin a civil action commences by filing of a complaint.  (The) Party who commences the action is called the plaintiff, and the opposite party is called the defendant.  A civil action can be classified into various stages that include: pleading stage, discovery stage, trial stage, and judgment stage.

Pleadings acceptable in Wisconsin courts are: complaint, answer to complaint, counter claim, reply to counter claim, cross claim, answer to cross claim, third party complaint and answer to third party complaint.  A complaint should be filed by the real party in interest… Parties may obtain discovery by depositions upon oral examination or written questions; written interrogatories; production of documents or things or permission to enter upon land or other property, for inspection and other purposes; physical and mental examinations; and requests for admission.

At the trial stage, a party may demand for trial by jury.  A judgment is passed after trial.”

To be fair, it started off promising. The basic identification of how the process begins. Definition of Plaintiff/Defendant. But then… … … ???

Let’s see if I can do better.

So someone wants to sue you.

How do they do it? When do you know it’s for real? Better yet, when should you contact an attorney?

Chill. One question at a time, please.

First of all, they can’t just text you saying, “I hate your guts, I’m suing you for $500 because you’re the worst!”… I mean they CAN do that, but it doesn’t mean anything. If you’re a fan of The Office, someone doing that to you is basically the equivalent of Michael Scott’s famous, “I. DECLARE. BANKRUPTCYYYYYYY!!!!!!”

You don’t need to get worked up yet. And unless you’re truly having a meltdown, there’s probably no need to contact an attorney.

Everything gets real when the person who hates your guts files a “Summons and Complaint” with the Clerk of Courts. It basically says two (2) things: 1) Hey, guys, this jerk is the worst! They did “X, Y, and Z” to me and those things are against the law. 2) I will give this jerk “X” days to respond to my claim, otherwise they admit guilt.

Once the Clerk of Courts receives this “Summons and Complaint”, the information will be forwarded along to you. When YOU receive it, “You’ve been served.”

At this point, you have a whole bunch of options. The ball is in your court:

  • “Yep, I did it.”
  • “Nope, didn’t do it.”
  • “Yep, I did ‘X’ but I didn’t do ‘Y’ and ‘Z’”
  • “Hey, I don’t like you either! I want to sue you back!”

Unless you know beyond the shadow of a doubt how you should respond, this is a very good time to contact an attorney.

DISCOVERY

Short of you admitting guilt or not responding to the claims, the next step is for your case to go into discovery. It is what you’d expect: both sides ask each other information about the case, trying to discover as much factual information as possible, with the goal of building the strongest possible case. The length of the discovery period can vary dramatically, but usually lasts several months.

MEDIATION

After the discovery phase is over and all the facts are out in the open, the sides may decide to avoid trial by seeking to resolve the case in mediation. Mediation is heard by an unbiased 3rd party, who will offer a nonbinding verdict (meaning if either party disagrees with the verdict, the case will continue on and be heard by a judge/jury). However, if both parties DO agree, the case will be resolved without going to court! Pursuing mediation makes a TON of sense if you feel the individual(s) opposing you have some sense of rationale. Mediation, in general, offers the advantages of being much less time consuming, stressful, and costly than the standard Civil Court process.

One could say that pursuing mediation is the “mature” way of handling a dispute. “Hey, man, I see where you’re coming from. You see where I’m coming from. Let’s just get this over with so we can get on with our lives.”

Rather than waiting months – sometimes years – to have your case heard by the court system, a hearing with a mediator can often be scheduled within a couple of weeks.

SUMMARY JUDGEMENT

If the facts clearly support one side over the other, a motion for summary judgement may be filed. “Hey, Mr. Judge, just take a look at these facts. It’s obvious what happened here. We don’t need to waste our time with a trial. Just make your decision.”

PRETRIAL HEARING(S)

The judge and both sides discuss the facts of the case, charges faced, and what evidence will be allowed at the trial. This phase can amount to one brief hearing or several lengthy hearings, depending on the complexity of the case. This is usually a final opportunity for the sides to come to a “settlement”.

TRIAL

Each side presents evidence. Judge / Jury deliver a binding verdict. Cases that go all the way through trial normally take well over one (1) year from “complaint” to “verdict”.

Appeal

Just when you thought it was over. If you or your counterpart doesn’t like the decision the judge/jury made, that decision can be brought to an “appellate” court. “Hey, I think the judge/jury made a serious mistake in handling my case. I want someone else to look at these facts.” You should know, once the judge delivers a verdict, you are generally facing very long odds to get that decision overturned in an appellate court. But… There is always a chance.

Thanks for reading! To subscribe to our weekly content, you can enter your email on our homepage. You can also follow Epiphany Law on Facebook and LinkedIn for regular updates from the Firm. Finally, you can follow me on Instagram (@kelton.official), where I regularly post links to new blogs, as well as random pictures of my life.

An Interview with Patrick Furman

 

Bachelor of Arts: West Virginia University

Juris Doctorate: University of Pittsburgh School of Law

Married: Yes; Tiffany

Kids: Yes; Mariah, Kyarra, and Alysia

Practice Area: Estate Planning

DiSC Profile: DC Style

 

Summary

“People with the DC style prioritize CHALLENGE, so they want to explore all options and make sure that the best possible methods are used. As a result, they may be very questioning and skeptical of other people’s ideas. They also prioritize RESULTS, so they’re often very direct and straightforward. Finally, they prioritize ACCURACY. Because they want to control the quality of their work, they prefer to work independently, and they may focus on separating emotions from facts.” – Excerpt from Pat’s DiSC Workplace Profile.

Key words and phrases: Explores all options, skeptical, direct, accurate, separates emotions from facts.

Dang. That’s good stuff right there. Definitely the kind of person I want handling my most important affairs. Here is what I will add: I would imagine that many people with this personality type tend to come across very dry, arrogant, or even rude because they have so much knowledge about topics that their clients – well – don’t. Pat manages to overcome that. I don’t know if it’s just a natural gift of his or if it’s something he’s worked on over the years, but he really has this great way of being relatable and knowledgeable, without making you feel dumb for not knowing nearly as much as he does.

 

Interview

KOD: “Thanks for doing this, I really appreciate it.”

PDF: “Are you kidding? It’s my pleasure!”

KOD: “So how long you been doing this for?”

PDF: “Being an attorney?”

KOD: “Yeah.”

PDF: “Since 1997. No wait… ’98. 1998.”

KOD: “So almost 20 years. Take me back through your journey, because if I remember correctly you started out in undergrad at West Virginia and then went on to Law School at Pitt?”

PDF: “Uh-huh“

KOD: “How did you end up here?”

PDF: “Took a wrong turn in Indiana.”

KOD: Laughs.

PDF: “What had happened was… My parents moved to WI at some point while I was going to school to work for Badger Mining. After I finished school, my fiancé decided we should follow them out there. So we did. And – funny story – the night I took the bar exam she told me she didn’t want to get married.”

KOD: In shock.

PDF: “But luckily I passed the exam on my first try, fell in love with the area, and met Tiffany somewhere along the way. It all worked out in the end.”

KOD: “Wow. Amazing how life goes.”

KOD: “Who’s your favorite NFL team and why?”

PDF: “It’s the Steelers. I grew up in Pittsburgh, around the greatest team that’s ever existed – the Steelers of the ‘70s. I met pretty much all of them in one shape or another – “

KOD: “– How did you meet all of them?”

PDF: “I went to training camp every year with my dad and we would wait around between their dorm and the field. A lot of the guys would stop and talk or say hi or whatever. It was really awesome. I always remember during one of the camps, Theo Bell, who was a wide receiver, took my hat and wore it around.”

KOD: “That is incredibly cool. What a great memory!”

KOD: “If you could go back in time and relive one Steelers moment, what would that be?”

PDF: “Super Bowl 40 when we beat the Seahawks. I was actually at that game, and it was a close game until the end. Really fun to be at. The stadium was mostly Steelers fans because it was played at Ford Field in Detroit, which obviously is pretty close to Pittsburgh. Just a great time. That would be a fun one to relive.”

KOD: “So as a die-hard Steelers guy, do you hate the Eagles?”

PDF: “Yes… I hate the Patriots too… … …”

KOD: “You gonna watch the Super Bowl this weekend?”

PDF: “Yeah. As a football fan I have to.”

KOD: “Who are you cheering for?”

PDF: “The Eagles. I want to see the upset. Also, this Eagles team is a lot more likeable than some Eagles teams of the past. They are the underdogs. If they win, it would be a miracle. So I’m good with that outcome.”

KOD: “Date 1 – Marry 1 – Punch 1: Tom Brady, Bill Belichick, Rob Gronkowski.”

PDF: “Ummm… Probably marry Tom Brady cuz he has all that money. Punch Belichick because we can’t beat him. And date Gronk because he would be a lot of fun.” Laughs.

KOD: “Truer words never spoken. Gronk would be fun to hang out with!”

KOD: “Did you watch cartoons growing up?”

PDF: “I was a big Scooby-Doo fan growing up, but I hate it now.”

KOD: Confused. “What? Why do you hate it now?”

PDF: “I don’t know. I think it’s the special appearances that they throw into the show. The cameos. Like all of a sudden KISS would show up on the show. It’s just annoying to me now.” Laughs.

KOD: “What’s your favorite ‘90s jam?”

PDF: “Can I pick an album?”

KOD: “Sure.”

PDF: “Radiohead: Ok Computer. Best album of the decade.”

 

Here you go >>> Radiohead – Airbag.

 

KOD: “How many pennies do you think would fit into this room?”

PDF: “None because there shouldn’t be any pennies. They should be discontinued.” Laughs.

KOD: “A penguin walks through that door right now wearing a sombrero. What does he say and why is he here?”

PDF: “He says, ‘I’m Sidney Crosby and I’m going to give you season tickets to the Pittsburgh Penguins games.”

KOD: “Wow. Greatest response ever. I love it.”

KOD: “Tell me about 1 person outside of your immediate family that you love.”

PDF: “Hmmm… Kevin Eismann – Epiphany Law.” Laughs.

KOD: “Oh brother. Barf.” Laughs.

KOD: “Why are you an attorney?”

PDF: “I like helping people. Usually they will come in with some sort of problem that they don’t think can be fixed, and when you can fix it for them it’s the best feeling.”

KOD: “What is one thing that you are proud of yourself for?”

PDF: “My kids. It sounds sappy maybe, but I’m really proud of the way they act. They are really well behaved and I’m proud of them for that.”

KOD: “Pretend I’m thinking about hiring you as my attorney to do some legal work for me. What do you bring to the table? What can I take to the bank? Something you know you will deliver on every time.”

PDF: “A great amount of knowledge. I’m going to genuinely care about your problem. And we are going to find a solution.”

KOD: “Pretend I’m a young attorney, fresh out of Law School. Tell me why I should apply at Epiphany Law.”

PDF: “The environment allows you to be yourself. It allows you to feel comfortable. And you get genuine support from others.”

KOD: “How is that different from other places?”

PDF: “It’s usually not a ‘real’ team at other places. People might work in the same building, but nobody is going to go out of their way to help you. It can be pretty cutthroat. Like, you’re on your own, figure it out. That sort of thing. It’s a lot easier to be successful at Epiphany, just because the culture is different.”

KOD: “Give me one thing that people miss or do incorrectly a decent amount of the time when they try to do Estate Planning on their own?”

PDF: “They gift things to their kids without understanding what the consequences really are. So… they don’t understand capital gains, or they don’t think potential liability they are creating by gifting.”

PDF: “The other thing is that when people create a trust or will on their own, they often do it with just one possible outcome in mind. For example, they create the trust assuming that the husband will die first, and the wife second, and that’s it. They don’t take the time to think through all the possibilities. So they plan it all for one scenario, and if things work out that way it will be fine. But if, for some reason the wife dies first, the plan doesn’t work.”

KOD: “That’s really smart advice.”

KOD: “Alright lets finish this off with a little rapid fire.”

KOD: “Cookies or Cake?”

PDF: “Cookies.”

KOD: “Cats or Dogs?”

PDF: “Dogs.”

KOD: “Coke or Pepsi?”

PDF: “Coke.”

KOD: “Superman or Batman?”

PDF: “Batman.”

KOD: “Blonde or Brunette?”

PDF: “Blonde.”

KOD: “Horror or Comedy?

PDF: “Comedy.”

KOD: “Bud Light or Miller Lite?”

PDF: “Absolutely neither.”

A huge thank you to Pat for taking some time to chat with me! A super smart guy, and clearly has an awesome personality! I am a bit skeptical of his Coke/Pepsi response, however. If you look closely you will see that he was drinking a Diet Pepsi during our interview…

Thank you once again to all the readers of this blog. B@E continues to march on! To subscribe to our weekly content, you can enter your email on our homepage. You can also follow me on Instagram (@kelton.official), where I regularly post links to new blogs, as well as random pictures of my life.

What is a B Corporation?

Legal matters, business strategy,

and life perspectives from the mind of a non-attorney.

 

Shown below are several different types of business entities:

C Corporation

Limited Liability Company

Municipality

Charitable Organization

Joint Venture

Nonprofit Corporation

Cooperative

Limited Partnership

Sole Proprietorship

General Partnership

Limited Liability Partnership

S Corporation

Holding Company

Massachusetts Business Trust

Series LLC

On November 27th, 2017, Wisconsin became the 34th state to pass Legislation allowing the existence of Benefit Corporations (B Corps). Wisconsin companies can begin filing the B Corp election on February 26th, 2018.

WHO CARES! Toss it on the pile, right??

WRONG.

B CORPORATIONS ARE CHANGING THE GAME.

How do B Corps change the game?

In the United States, for-profit Corporations are required to act “solely for the ultimate purpose of maximizing financial returns for shareholders.” In other words, the people pulling the strings are legally obligated to make as much money as possible for the people who have invested in the company. Profit. That is the only consideration that matters. If there is an opportunity to make money, the powers that be must take it, or face the wrath of disgruntled investors and cunning corporate attorneys.

B Corps, in the 34 states that allow them, are also for-profit Corporations. Their directors are also legally obligated to make as much money as possible for shareholders. However, directors are also legally obligated to consider the social impact that their decisions have on society.

Let me kick you two scenarios to help explain the point:

  • C Corp. Directors are faced with the opportunity to experience significant cost-savings by relocating a large manufacturing plant overseas. Their research into the opportunity shows extremely low risk and potential for significant returns for shareholders. 10,000 jobs would be lost, severely damaging the community where the plant resides. If the Directors choose not to move forward with the relocation, they would likely face significant public scrutiny, termination, lawsuit, and career damage. Why? Because their only legal obligation is to maximize returns for shareholders.
  • B Corp. Directors are faced with the same opportunity. This time, Directors are legally obligated to consider and balance the financial incentive of relocating with the social impact it would create for the community. They can choose to act on either side and can balance the negative social impact with the positive financial opportunity however they see fit.

Unless a basis is created by the company itself, there is no hard-and-fast rule that says how much consideration directors should give to financial return versus social impact. The B Corp structure simply gives Directors the latitude to make decisions that truly are in the best interests of shareholders AND society as a whole.

Do B Corporations get a tax break?

No. B Corps are taxed like other Corporations. They may elect the S or C treatment.

Is anyone actually going to use this election?

Yes. As of today, there are over 2,300 B Corps across 130 industries. Here are a few of the most popular B Corps:

Mission: Preserving and expanding Ben & Jerry’s social mission, brand integrity and product quality, by providing social mission-mindful insight and guidance to ensure we’re making the best ice cream possible in the best way possible.

 

 

Mission: Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis.

 

 

Mission: Since 1969, Natura’s mission has been to help build a better world through our commitment to transparency, sustainability and well-being.

 

What are some potential business benefits beyond the ability to “do the right thing”?

Access to talented workers. Young, talented individuals want to work for companies that are changing the world. Organizing as a B Corporation legitimizes a company’s cause as more than just lip-service. In today’s competitive environment, B Corps are an outstanding recruiting tool.

Increased employee retention and motivation. Similarly, a workforce is inspired by more than just a paycheck. Employees work with blood, sweat, and tears when they identify with their company’s cause.

Increased customer loyalty. Some customers are willing to pay more – and come back time and again – for brands that have a strong purpose. Socially responsible consumers are a real thing, and there are more and more of them every day.

What additional requirements do B Corps have?

Requirements change slightly depending on what state the company is organized in, but basically, B Corps have to create an annual benefit report that assesses their overall social and environmental performance. Most B Corps make this report available to the public – it’s generally a good marketing strategy to do so – and it’s a best practice to benchmark the company’s performance against a 3rd party standard. Reports can be generated for free from http://bimpactassessment.net/

Here is a sample report.

Want to get set up as a B Corp? I know a few good attorneys who can help with that…

Sarah M. Coenen

Kevin L. Eismann

Kathryn M. Blom

I appreciate those of you who continue to follow Breakfast at Epiphany’s. To subscribe to our weekly content, you can enter your email on our homepage. You can also follow Epiphany Law on Facebook and LinkedIn for regular updates from the Firm. Finally, you can follow me on Instagram (@kelton.official), where I regularly post links to new blogs, as well as random pictures of my life.

Bitcoin: Explain it to me like I’m 6

Legal matters, business strategy, and life perspectives from the mind of a non-attorney.

Bitcoin. It’s all the craze.

Pretty easy to understand why… People are making MONEY. Not stacks – no, no – heaps and piles and truckloads of money. We’re talking life-changing, legacy-altering, never-have-to-work-again-if-you-don’t-screw-it-up kind of money.

But how? I mean… What is it? And… Are we all stupid for not jumping in?

These were all questions that my family was asking as we hovered over our meals on The Night Before Christmas.

I sort of knew what it was: This Virtual Currency thing that people somehow “mine” to acquire. I knew that “mining” it took a lot of CPU horsepower. I knew that some merchants accepted Bitcoin as a “legitimate” means of purchasing stuff. And finally, I understood that it was traded on Exchanges, just like any other stock/bond/currency.

Basically, I didn’t have much to offer that the #fam didn’t already know, so instead of jumping into the conversation… I kept quiet and let somebody else struggle through the difficult web of questions that inevitably accompany a Bitcoin conversation.

Damnit.

The one guy that had a legitimate background in finance and currently spends his days working with – arguably – very smart business minds came up with: nothing – zip – zilch – nada.

I blew my shot to look smart in front of the crew.

SMH.

Albert, you wise son-of-a-b****.

I don’t have any stats to support this, but my feeling is that maybe .1% of our population (300,000 Americans, for example) have an extremely intimate knowledge of everything Bitcoin. Certainly, many others “get it”. Maybe they can’t explain it to a child, but they know what’s going on. Well enough, at least, to have an opinion on whether or not they would ever invest in it. Then, there’s the rest of us. We’ve heard of it and we have no freaking clue what is going on.

If you read my first blog, you know THAT is why I write. To explain complex legal and business matters in a way that people can actually understand.

So, here is my shot at redemption.

What is Bitcoin?

It’s money. But you can’t put it in your wallet. You can’t hold it.

When did Bitcoin start?

January 2009.

Who started Bitcoin?

An alias named: Satoshi Nakamoto. This alias could represent a single person, or – more likely – a small group of people. Regardless, the true creator of Bitcoin has never come forward.

How did Bitcoin start?

In the beginning, the person – or small group of people – who created Bitcoin had to convince other people that this “thing” was worth something. A trade had to happen.

Allow me to repeat: they had to convince someone that a Bitcoin – this thing that you cannot see or feel or smell or taste or hear – was worth money.

How much money? In the beginning, one Bitcoin was worth about $0.00076 USD

In other words, 1,309.03 Bitcoin = $1.00 USD

Basically worthless, but still, it had to start somewhere.

Why did the first – and subsequent – trades happen?

Ideas are worth something. Ideas have potential. This “Bitcoin” idea promised – and still promises – the following:

  • Globalization. You don’t have to worry about crossing borders. Bitcoin is accepted anywhere.
  • Decentralization. It’s a fancy way of saying that there is no government authority – or any authority, really – that regulates Bitcoin. Nobody will “print” or “create” more of it on a whim, and nobody has the authority to declare it invalid.
  • Accessibility. Payments can be made at any time, to anyone, including on “holidays” when banks are traditionally closed.
  • Transparency. Bitcoin users will know if extra fees – no matter how miniscule – are being charged by merchants when they pay with Bitcoin.
  • Privacy. Payments can be made without personal information being shared.
  • Low Fees. The cost to process a Bitcoin transaction is currently much lower than the cost to process a credit card transaction.

The first users of Bitcoin were believers in that idea. They were willing to trade actual money – something that is universally accepted – for Bitcoin – something that would only be accepted among their own tiny network of users. They believed that as the idea spread, more people would be interested in using it. Eventually, real demand would be created and the cost of Bitcoin would rise.

What is Bitcoin “mining”?

It is HIGHLY complex and, to be honest, way beyond my capacity for understanding. It involves computers, algorithms, and really really smart people.

I will not attempt to describe the detail that goes into Bitcoin “mining”. Why? 1) I will fail miserably 2) It isn’t important. Here is what you need to know:

Bitcoin “mining” is the process that verifies a Bitcoin transaction is valid.

To best explain it, allow me to go back to the beginning again. We don’t know for certain, but let’s imagine it went something like this:

In the beginning, Satoshi Nakamoto had some Bitcoin. Let’s say it was 1,000 Bitcoin.

Satoshi sold some Bitcoin to another person. Let’s say it was 100 Bitcoin for roughly $0.08 USD.

Now, this is when “mining” happens. After a transaction is accepted, it must be verified. Computers talk to each other… Smart people do smart things… 10 minutes later… Approved!

What is the incentive for Bitcoin “mining”?

People that verify Bitcoin transactions are called “Miners”, and Bitcoin transactions are grouped together into a “block”. “Miners” are awarded Bitcoin for making sure the transaction data inside a “block” is legit.

In the beginning, “mining” a “block” of transaction data came with a reward of 50 Bitcoin.

It’s safe to assume that Satoshi was also the first “miner”. So, following the first transaction, the breakdown of Bitcoin looked something like this:

1st Investor: 10 Bitcoin

Satoshi Nakamoto: 990 owned + 50 mined = 1,040 Bitcoin

Total in Circulation: 1,050 Bitcoin

The reward for verifying transactions decreases over time. Every 4 years, the reward is cut in half.

The reward has gone from 50 -> 25 -> the current reward of 12.5 Bitcoin per “block”. Rewards will be cut to 6.25 Bitcoin per “block” in June of 2020.

As more and more users join the Bitcoin network, the transactions become increasingly difficult to verify. More difficult algorithms = more powerful computers = more energy consumption = higher costs for miners.

To tie that point together: As time passes, the benefit is going down and costs are going up for Bitcoin “miners”.

How many Bitcoin are there now?

As of the time of this writing, there are roughly 17 million Bitcoin in circulation. The maximum capacity of Bitcoin is 21 million. Once 21 million are in circulation, “miners” will no longer be awarded new Bitcoin in exchange for verifying transactions.

Most estimates indicate that all 21 million Bitcoin will be in circulation by the year 2140. At that point, the reward will be .00000042 Bitcoin / Block “mined”. Again, the current reward is 12.5 Bitcoin / Block “mined”.

Err… will “miners” still do the work to verify transactions if there is no incentive?

Nope. They will not.

At some point, the cost (primarily energy consumption by high-powered computers) of “mining” Bitcoins will outweigh the actual reward, and it will no longer be profitable to “mine”.

At this time – or much sooner – “miners” will start charging transaction fees to Bitcoin users who want to buy something with their Bitcoins.

The business that is Bitcoin “mining” – while HIGHLY profitable now – will likely become one of razor-thin profit margins at some point in the future. Small margins may be palatable, however, if millions of transactions are occurring daily.

What is one Bitcoin worth?

In January of 2011; about 7 years ago, one Bitcoin cost $0.35 USD.

In January of 2014; about 4 years ago, one Bitcoin cost $881.66 USD.

In January of 2017; about 1 year ago, one Bitcoin cost $985.56 USD.

As of January 5th, 2018 at 9:00 am, one Bitcoin costs $15,188.70 USD.

That’s over 4,000,000% growth in 7 years.

Conclusion

Straight facts homie. I’ll leave all the hot takes to the so-called “experts”. Show us some love if my shot at redemption was a success.

I appreciate those of you who continue to follow Breakfast at Epiphany’s. To subscribe to our weekly content, you can enter your email on our homepage. You can also follow Epiphany Law on Facebook and LinkedIn for regular updates from the Firm. Finally, you can follow me on Instagram (@kelton.official), where I regularly post links to new blogs, as well as random pictures of my life.

 

Credit:

https://www.buybitcoinworldwide.com/price/

https://coinreport.net/coin-101/advantages-and-disadvantages-of-bitcoin/

https://www.coindesk.com/information/how-do-bitcoin-transactions-work/

https://m.youtube.com/watch?v=GMOzih6l1zs

https://www.focus-economics.com/blog/tulip-mania-dutch-market-bubble

https://themarketmogul.com/bitcoin-tulip-mania/

http://www.bitcoinblockhalf.com/

An Interview with Sarah Coenen

Bachelor of Arts: UW – Stevens Point

Juris Doctorate: Valparaiso University School of Law

Married: Yes; Corey

Kids: No

Practice Areas: Business Law and Estate Planning

DiSC Profile: C Style

Summary

“People with the C style place a high priority on Accuracy. Because they want to ensure superior results, they tend to analyze options rationally and separate emotions from facts… they’re uncomfortable with quick or risky decisions and prefer to take time to make an informed choice.” – Excerpt from Sarah’s DiSC Workplace Profile.

Undoubtedly, you have to take Personality Profiles with a grain of salt, but COME ON… What else are you really looking for in the individual who is responsible for drafting your legal documents?? Sarah is an absolute tactician. Laser-focused. And for her age, she is a fountain of knowledge. Without question, she is one of the people I most admire in the office. Sharp and humble. It’s a dangerous combination. The kind of person that people will sleep on because she doesn’t sing her own praises, but trust me, her star is rising.

Interview

KOD: “Thanks for making some time to do this, what’s your billable rate? I’m trying to figure out what this is going to cost me…”

SMC: “We’ll put this on Epiphany Time, don’t worry about it.”

KOD: Laughs. “Well I appreciate that. I’ll do my best to get you some good PR out of this.”

KOD: “First question: What were you like in High School?”

SMC: “Very quiet and reserved.”

KOD: “Did you do pretty well in High School?”

SMC: “Yeah, I always did pretty well… Except for Calculus. I hated it.”

KOD: “In High School, did you know you wanted to be in law?”

SMC: “Yeah.”

KOD: “At what point did it become a desire for you?”

SMC: “When I was 12 years old I wrote a book report on Sandra Day O’Connor—“

KOD: “—Who is that?”

SMC: “She was the first female Justice on the US Supreme Court. She inspired me.”

KOD: “What was your favorite cartoon to watch growing up?”

SMC: “Rugrats.”

KOD: “Favorite character on the show?”

SMC: “Tommy Pickles.”

KOD: “You’re a new addition to the crayon box. What color are you and why?”

SMC: “I’ve been told before that I’m a yellow crayon –“

KOD: “—What shade of yellow? Like a gold or a soft yellow?”

SMC: “Are you telling me that this is the 64 crayon box instead of the 8 crayon box?? Jeez. I guess I would say more like a standard bright yellow. Like a sunny yellow.”

KOD: “Why?

SMC: “I try to always have a positive disposition and attitude toward my work and my life.”

KOD: “What’s your favorite ‘90s jam?”

SMC: “Everybody by the Backstreet Boys.”

 

Pause. Here you go.
Resume.

 

KOD: “How many pennies do you think would fit into this room?”

SMC: “1 Trillion… No 2 Trillion.”

KOD: “A penguin walks through that door right now wearing a sombrero. What does he say and why is he here?”

SMC: Laughs. “He says, ‘Where am I?’ and he is here because he is lost and is having an identity crisis.”

KOD: “OK, enough with the crazy questions, let’s get a little more serious.”

KOD: “Tell me about 1 person outside of your immediate family that you love.”

SMC: “I would say my cousin Miranda because she is like a sister to me. I can always go to her with anything. She is two years younger than me, but she has a lot of wisdom. And she brings a sarcastic tone to conversations that I really appreciate.”

KOD: “Why are you an attorney? Other than your inspiration from Sandra Day O’Connor.”

SMC: Laughs. “I enjoy the logical process. I enjoy helping people. And attorneys get a bad rap sometimes, so I accept and enjoy the challenge of changing that narrative.”

KOD: “What is 1 other career that interested you in the past?”

SMC: “When I was really little I wanted to be a firefighter… But I thought about teaching for a while in college.”

KOD: “What is one thing that you are proud of yourself for?”

SMC: “Wow, that’s a hard question Kelton.” … “I guess I’m proud of myself for not giving up all the different times I could have on my way to becoming an attorney. Being rejected. Undergrad. Law School. I just kept going.”

KOD: “You got rejected for Undergrad and Law School?”

SMC: “Yeah. So for undergrad, I really wanted to go to UW-La Crosse but I got wait-listed. That ended up being a blessing in disguise though because UW-Stevens Point was amazing. And then for law school, taking the LSAT was really hard. I had to take it twice to improve my score before I got into Valparaiso. And it’s really hard for me to talk about it, but let’s just say I didn’t pass the Bar on my first try. There were a lot of times I thought about giving up but I didn’t.”

KOD: “That’s amazing. I’m glad you didn’t quit.”

KOD: “Pretend I’m thinking about hiring you as my attorney to do some legal work for me. What do you bring to the table?”

SMC: “I am always upfront and honest with my clients. I like to think that I’m a pretty nice person to work with. And you’ll get a good product.”

KOD: “Pretend I’m a young attorney, fresh out of Law School. Tell me why I should apply at Epiphany Law.”

SMC: “Epiphany is a very unique environment in that – even though we have a ‘boss’ and managing partners and things like that – there isn’t the hierarchy that you find at most other firms. We are all willing to help each other and there is no “elitist” attitude that says ‘I don’t need you’ or ‘I’m better than you’ –“

KOD: “—Why is that a good thing for a young attorney?”

SMC: “Because you don’t know as much. Law School tries to prepare you, but there is no substitute for real world experience. Being here, I was able to learn a lot, very rapidly, because people were willing to share their real-world experience with me. The culture here helped me to have confidence even when I didn’t know all the right answers. I knew I had amazing people in my corner to help at any time.”

KOD: “Do you have any advice for someone that is in Law School right now?”

SMC: “Wherever you intend to practice law after you are done with school, go to that area during your breaks and make connections in that area the best that you can. Meet with attorneys, judges, business owners. Networking is absolutely essential and that is one thing they don’t teach you in law school.”

SMC: “Also, learn how to talk to clients. Clients ARE NOT stupid. They just don’t know the law like you do. It’s on you to learn how to explain things without coming across like you are arrogant. You have to learn how to explain things in a way clients can understand and relate in order to be successful.”

KOD: “I’m a new business owner. I don’t think I have any legal work for you… But I would like to establish a relationship with a good attorney because that seems like a smart thing to do. What should I do?”

SMC: “Call. You should absolutely call. I’m not going to try and give you any advice over the phone, but there are a few basic questions that I can ask to help me figure out if we should meet or not. You’re not going to get a bill for the conversation. I won’t push you into anything. We’ll figure out if we need to meet, and either way you will feel better knowing that you now have someone in your corner when you need them.”

KOD: “Give me one thing that people miss or do incorrectly a decent amount of the time when they try to do Estate Planning on their own?”

SMC: “Language. A good example of that is with a Power of Attorney. Power of Attorney’s can be ‘springing’ or ‘immediate’, and depending on how you word the language, you may be unintentionally giving someone else control over your decisions right now.”

KOD: “What is one thing that a new business owner might forget to do?”

SMC: “If someone sets up their business entity on their own, the State does not require them to provide a draft of their bylaws / operating agreement. So, if it’s not required, there are a lot of times when people just don’t have them altogether. Those documents are essential in laying out the fundamental aspects of how the business is to be run. It helps to protect the business owner when they have those documents.”

KOD: “How does it protect them?”

SMC: “If someone sues the business, and that business owner isn’t abiding by the fundamental rules of their organization, an attorney may be able to Pierce the Veil. It’s extremely easy to Pierce the Veil if that business owner never made fundamental rules to begin with.”

KOD: “Last question: Date 1 – Marry 1 – Punch 1: Lord Voldemort, Napoleon Dynamite, Austin Powers”

SMC: “Ugh…” … “Punch Lord Voldemort, Date Napoleon Dynamite, Marry Austin Powers.” … “Can’t I just punch all three?”

Thank You

A huge thank you to Sarah for taking some time to chat with me! She is truly a treasure to work with! Thank you once again to all the readers of this blog. Because of your great support I have been approved to continue to producing palatable legal and business content into and beyond the New Year!

From all of us at Epiphany, we hope you had a very Merry Christmas and we wish – but do not guarantee – you a Happy New Year!