EntreLeadership - #183: John Venhuizen—Differentiating Yourself From the Competition

Episode Date: January 23, 2017

Ace Hardware’s CEO and President John Venhuizen joins this week’s episode to share his company’s story of successfully reinventing itself to fight against ever-increasing competition from big box stores. With more than 4,800 stores locally owned and operated across the globe, it’s wasn’t an easy job. The secret? An irrational commitment and pursuit of amazing customer service and a whole lot of excellent leadership, culture and community along the way. Whether your company is big or small, you’re going to want to listen to this conversation. entreleadership.com/podcast Small-Business Tax Preparation Checklist Infusionsoft's 2017 Strategy Kit EntreLeadership Summit Learn more about your ad choices. Visit megaphone.fm/adchoices

helping business leaders grow themselves, their team, and their profits. This is the Entree Leadership Podcast. Now here is your host, Ken Coleman. Broadcasting from the Music City, this is the podcast of leaders, by leaders, for leaders. Thank you so much for joining us in this all-important conversation. We have a jam-packed episode. I'm going to take you into our conversation with John Vinheisen. He's the president and CEO of Ace Hardware.

And this is a fun, fun conversation, and I think you're going to really enjoy it, or else we wouldn't bring it to you. Let's be honest. Then Chad McKinney stops by. He is a certified public accountant, one of our Ramsey Solutions endorsed local providers. We're going to dive deep and very specific on taxes, how to save somebody. This is an important thing for you small business owners. And then a young entrepreneur. We have never done this before. Have we, Eric and Bruce? We've never had anybody young who is a teenager.

And this kid's 14 years old. His name's Kyle Graham. And we learned about him from a previous guest by the name of Mike Rowe. Of course, Mike is no stranger to our loyal audience, but Mike of Dirty Jobs fame and so many other things talked about this kid on social media, got its way back to us, and we went after. And this is a really good story. So if you've got kids that are getting close to working age in the summer or, you know, just kind of a little small business before they're of legal working age, this is a

a must listen be great family time, and it's really practical for you parents or grandparents. So that is a rundown of what's coming to you. John Van Heisen is our feature conversation, and this guy is a 23-year veteran of Ace Hardware. I like this story because he didn't come in the organization from another organization high up the ladder there. He started as a marketer, and he worked his way up. And I like organizations that develop leaders. they develop within. And I just think this is a great story.

And in 2016, Ace Hardware was ranked for the 10th consecutive year, the highest in customer satisfaction in home improvement retail stores. Now, they've got 4,900 hardware stores, and John and I discussed this a bit in the conversation, but they're locally owned in all 50 states in the United States of America, plus about 60 countries. So I don't want you to check out here. If you're the small business person, you're going, well, this is another big organization. What kind of give it? They have a small business, entrepreneurial, versatile mentality. And one of the key things that I want you to take away from this conversation, if nothing else, is when John says you need to differentiate or die.

You just think about this for a moment. Ace Hardware is competing now, not just against other brick and more. hardware stores, right? Lowe's, Home Depot, giant stores, but also Amazon is just one digital option. So how do they stay healthy? How do they reinvent the sales? What is the differentiator for Ace hardware? We're going to unpack that, and I think there's so much transferable truth for you here. You make sure that if you're not a place where you can write down that you make some mental notes, go back and listen to this, because I think this is great stuff. So let's get right to it. Here's my conversation.

with president and CEO of Ace Hardware, John Van Heisen. John, great to have you on with us. I know you're busy and you're running the day-to-day there, and I've got to tell you, as we get started, I've always had positive experiences at Ace. Thanks for that, and I know you're proud of your company and you're proud of the team that makes that experience so great. Good to be with you, Ken.

Thanks for the kind words. You're pleased with Ace because of our local owners, and so appreciate you bragging on them, too. Well, and that's why we wanted to have you on, because I think, you know, for our audience, we have a lot of entrepreneurs and people that are in small business. And so I think if they think of Ace Hardware is the big brand that we all know and has been in our conscience for some time, we think, oh, that's overwhelming. But what can we learn from John? And the big statement that you made there is that you've got a lot of local owners that are small business, men and women on their own, and you're working together with them.

And so I'd love to just start out by talking about the culture and environment you're trying to create and maintain at a business. ACE with those extensions, if you will, of the big brand? Yeah, like you said, many people may think of ACE as a pretty big company, and in many respects we are. You know, we have 4967 stores around the world in all 50 states, 63 countries. But with the exception of 95 of them, every last one of our stores around the world is locally owned and operated. And they, in fact, are the only owners and shareholders of the entire company.

You know, the numbers may sound impressive when you hear about our stores doing like $14 billion to their consumers. but really these are just small, mostly family-run businesses serving the communities they live in. The way I've articulated it for some time now is for about 92 years we've been blessed to be in the business of serving others. Any credit we've had or will have in the future falls squarely on the shoulders of our local small business owners. That is who operates these things and that is the very folks who own the place. You know, we talk a lot about story and how we're communicating that story to our customers here on this podcast. and I know you have a unique selling proposition, if you will,

or there's something a little bit different about the way you're putting your story out there. So I'd love for you to share that and how it's working and why you believe that is connecting your uniqueness. We have a benefit, I guess, in the last five or ten years where supporting small and local is becoming increasingly popular, and that's certainly our sweet spot. That's not to say we don't have plenty of very strong, well-funded, well-capitalized, large enemies. we most certainly do, and competing with them is a fistfight. But we think about it in terms of a David and Goliath story. You know, these are well-funded, aggressive, and on-the-prol retailers

who have, feels like to us, unlimited access to capital. But while we, you know, like the soft, filial sound of small and local, and that's who we are, we are well aware that the David and Goliath story is very true here, and there's no misunderstanding about who's day. David and who's Goliath here, but David didn't show up for that fight with, you know, cookies and ice cream. He came with a wrist rocket and some very sharp stones, five of them actually. And so we know our local owners are at war, and we're not trying to attack on all fronts. We want to stick to our knitting and wage the battles against these very large, well-funded

enemies on ways we think we can win. And so uniquely for us, it's all about service, convenience, and quality. We are going to market every day by having almost a little bit of, an irrational commitment and pursuit of amazing service. Very proud of our stores in that regard. They are the ones who get the credit for this. We've been able to win JD Power Awards and customer satisfaction 10 years in a row, and that is because of our local owners really pursuing service to their neighbors in truly ways that would make your jaw drop. Convenience is obviously incredibly important. Something like 70% of the U.S. is within a 15-minute drive of an A-store,

so being faster, more convenient is incredibly important. It's who we got to be. And then obviously a commitment to quality. Very often these big boxes, you know, low price equals low quality, and we try to go the other way. We want to offer the neighbors in our community something different. So we say we have a fanatical devotion to locally relevant high quality stuff. And I just give you a little fun fact here, which shows you how hard it is, but how strongly we are committed to it. I mentioned we have about 4,967 stores. Not one of those stores anywhere in the world has the same exact assortment of goods as another, which, shows you how hard it is to execute, but how firmly they believe in being different and better

to their local community than some of the other choices. So if you think about our business versus some of the competitors, probably the two words that will help you get your arms around it is we're about home preservation. They tend to be more about home renovation, right? So if you're going to pluck $50,000 down to renovate your kitchen, you may end up going to a big box for a lot of the materials you need for that. But if you want to spend 40 to 50 bucks on a couple of cans of paint to spruce it up and preserve your kitchen, you know, that's where we operate. Oh, I like that. That's a very interesting distinction.

And I want to go back to something you said in your answer there. You said that there's some jaw-dropping service. I'm coining it that way, but you said, you know, the service that your local operators provide sometimes will make your jaw-drop. I think it's important for leaders to refocus on this issue sometimes, that that sometimes is the single differentiator to win and keep business. I'm just curious, John. Give me a story of a jaw-dropping example, something that pops atop of mind when you mentioned that to me.

I think it would be good to hear that. I can tell you one from last week. I mean, it doesn't pass a week around here where I don't hear of some ace owner doing jaw-dropping stuff to amaze their neighbors. You may have read in the national news about these wildfires going on in Gatlinburg, Tennessee. Very close to us. Yeah, that's right, right where you guys are. So you know it closer to home than it is for us. Well, we have an ace owner named Libby in Gatlinburg, Tennessee, and like everybody in that community was very worried and concerned about their family, their own homes, their associates that work for them.

But this woman went out of her way to lobby and pound the local authorities to make sure that they could go get their Ace Hardware Store open because the community was going to need them, despite the fact that the wildfires were right there. In fact, some of the businesses right around them burned to the ground. So instead of staying home like most and dealing with the things you need to with that sort of risk and sort of travesty happening in your community, she fought to make sure the A store was open. And in about five seconds, the local authority said, oh my goodness, you're exactly right. We'll allow you in there. Go ahead. Do what you got to do to go get in that A store because the neighborhood needs you. The neighborhood needs you most of all now.

And I won't bore you with all the details, but it's not as easy as just driving your count down there and open the store like a normal day. but that's who they are. You know, her DNA is embedded in her view that she is there to serve her neighbors. And when it hits the fan, she's going to be there to do that. And those kinds of things produce an engagement level with customers that every small business owner can appreciate. And you can't get by staring at a computer screen. It's that human-to-human connection that, you know, we believe very strongly in. Yeah, and this doesn't happen my accident, John.

So I want to pause the conversation here, and I want to ask, What is it that Ace is doing from a corporate standpoint that when you are, and again, I don't know your franchise process, but let's unpack it from a standpoint of how are you at Ace finding people like this store operator you just mentioned and making sure that it's those people you're hiring who get the corporate mission of that kind of extraordinary service? What are you doing to make sure you have those people on the team? You know, we don't use the F word around here. We don't call it a franchise. Yeah, forget me. I didn't know how to set that up because every one of you guys is different. I'm kidding.

I'm kidding you, though. We do talk that way. We say, listen, we call it the F word, you know, tongue and cheek here. I love it. It's very much like a franchise model. And many of our owners that come in as new owners are comparing us versus other small business opportunities they have, many of which are franchising opportunities. And we're very similar in that respect, except that we don't call franchise.

You can call them owners because they own the place. Love it. Having said that, when the business. When those folks are exploring, and there's hundreds of them doing that at any given time, we try to be very candid about them, and we tell them that owning and operating an Ace Hardware store is difficult. Nothing's easy. There is no small business that's easy.

I've never seen one. But it is very difficult, and so we tell them right out of the box that if their heart does not race for service, if it's just about money, they probably should go look somewhere else. So we try to be very clear up front. once they're here, and many of them have been here for generations. I mean, we are a 92-year-old company. And many of these are family businesses that have descended for generations. We try to focus on, you know, it's a hundred things, Ken, but really three things in my mind are critical.

Communications, values, and behaviors. You know, with communications, we try to permeate service into everything we talk about at ACE, with sort of aspirational language that we are fanatical about customer service. You know, our mission is to be the best most health. helpful hardware stores on the planet. Very carefully chosen words to say that this isn't just a plaque on the wall. So communicating that this is important in everything we do throughout the enterprise is critical, but then also talk is cheap, so we recognize the second thing is even more important, which is our values. We've got to live this out. You know, many customers and many companies

talk about customer service, but most folks rolled their eyes because they know it's a lip service. and over time it becomes very difficult to fake service. You either have a heart of service or you do not. And so we've got to make sure we're living that out that in the very DNA of the folks we hire, of the owners we bring in, that if their heart doesn't race a little bit about serving other people, both their associates and their neighborhood, ACE probably isn't the place for them. And then lastly, it's a little bit more practical, but equally important is just our behaviors. and the way we think about it, you know, our brand is about helpful.

We say helpful's our weapon in the world. Hopefully everybody knows ACE is the place with the helpful hardware folks. But we do need to operationalize helpful. Those aren't just marketing slogans. Those aren't just words. And it's not just about being nice. So we operationalize helpful so that our stores truly distinguish between them and their competitors by being noticeably different when it comes to service.

And that's a lot of components I won't bore you with, but it includes a tremendous amount of training and knowledge. There's a lot of stuff. We have about 30,000 items we stock in those Little Ace Hardware stores around the world, and there's a lot to know. So training's important. We've got to lean out the operations so that the tasks that have to happen in a store become reduced in time so that we can focus and expand the amount of time on that,

which is most important, which is delighting our customers, which we call neighbors. And there's a tremendous amount of operational procedures to do that. But between how we talk, communications, how we act, you know, our values, and then what we do, our behaviors and how we operationalize it, we think we've got a far from perfect, but a nice system, but make sure that we fulfill our brand promise of being more helpful than the other guys. Yeah, I think this is an important thing to note here, John, and I just want you to encourage our listeners on this. What you have done is you have systematized a big part of your culture, and that's important. Like, I think we think systems around operations, but I just talked to so many leaders, successful leaders like you, and as I'm just observing and listening in it along with our listener right now, it just occurs to me, you've got to be super intentional, almost to the point of systematizing culture.

Is that correct? You know, Ken, it's a great point. I think about it in two ways. There's sort of these two opposite, but equally dangerous ditches we do not want to get in. One is the Wild Wild West where you have no systems whatsoever, and you don't have. operationalize anything and you just, you know, you talk a lot but don't deliver. And the consumer feels that and it's always bad. The other ditch, though, is to be so systematized and operationalized and leaned out and Six Sigma and all those fancy terms everybody gets bored with that you suck the

life out of the culture and you become a Dilbert cartoon. We will not go there. So we think about it in terms of codifying, communicating, and living out our culture, systematizing some of the necessary evils that it's just a requirement of running and operating a store. Every one of your listeners is a business owner, right, and they've got back offices, and they understand the efficiency needs there. We try to systematize that so we can unleash the personality, we can unleash the entrepreneurialism, and that tends to be less codified and more creative, and we love it. We tend to say we like to be the most bottoms up company on the planet. And that means allowing local owners to deliver an experience in their communities that represents the communities they serve.

And a lot of that is creative. It's the softer side of business. And when we're good at the systemization of some of the necessary evils, we think it unleashes the culture to be the personality it needs to be. Now, it's codified in a bunch of values that we try to speak to all the time. I could talk about those if you'd like, but we don't want to suffocate and, you know, strangle the personality of local businesses. Those entrepreneurs, those founders of those local businesses have a personality that doesn't need to be impeded by the corporate culture. Yeah, I love that. Yet it does behoove us all to kind of say, hey, here's some standards around culture,

has set kind of some guidelines, and then we're going to live within that. So that's really, really good. Earlier in the conversation, you mentioned the battle between that small business owner and the big box. I mean, everybody gets that. I love the David and Goliath. reference. And I want to throw another Goliath in there. We get the big box, but now we're talking about big digital, right? Amazon, I mean, Amazon literally is dominating. I saw a stat. I want to say that on, what was it, what do they call that? It's not Black Friday, but it's the Big Monday, the Cyber Monday. Thank you, Eric, the producer, saving me there. They dominate, like over 60% or something, I think I read. That's a reality, too. What would you say to the small business owner right now who's

playing to win digitally as well. How do they balance those battles versus the big box and now big digital? Great question. Amazon is a very big, good company. They may arguably be, in fact, I'd say they're indisputably the most disruptive company in the history of the world. And they're terrifying. They're big, they're well-funded. They're incredibly aggressive. And they're very good at what they do. And so my message to our owners and to any business owner is, you had better differentiate or you will die. If all we offer, be the A stores or any small business, if all we have to offer is the same commoditized stuff that you can get on Amazon,

we're dead. They are going to become a very good transactional player on commoditized stuff. And so differentiations everything are I think you're dead. And there are numerous examples of companies who are smarter than us, better than us, had more money than us that are no longer here, because Amazon killed them. And it'll be more to come unless we differentiate. So we think about that in two ways.

Hopefully this is some relevance to your owners, though the practical implications might be different. But the macro point, I think, is the same. So we sell stuff predominantly, and we make sure that what we have to offer in our stores is more local, more relevant, higher quality and differentiated than everything you can get on Amazon. I'll just give you two examples.

Grilling is a big thing for us. It's a great time of year to talk about it. The best charcoal grill in the world is a big green egg. And you can't get it on Amazon, but you can get it at your local ace. You know, because to them, to Big Green Egg, big box discount places are the places premium brands go to die. But local high-touch, high-service outlets is where they want to be partnered with. So we try to go out of our way to disproportionately invest our inventory dollars

in more premium high-quality stuff like a Big Green Egg. At the same time, we also sell a lot of Weber Grills. You can get one of those on Amazon right now. So what are we going to do to differentiate? Well, your local ace owner will assemble and deliver that grill for free. Oh, see, now there it is right there. Let me just tell you, that's it for me, because I can't assemble. I can barely tie my own shoes.

So that is, that's the selling point for me. That's huge. That's a great example. I'm sorry, go ahead. I just got excited because you literally sold me on a new grill, and I don't even need a new grill right now. We'll ship you one. I like it. No, you don't want to ship, right?

I want it assembled. But you want the thing, right. That's incredible. And that's the kind of creativity, nimbleness, and high-touch service that we believe only a small business owner will come up with and do. And so, yeah, it's the difference between technical and personal service. You know, there's a lot of websites that are very good with technical service.

But listen, the whole world seems to be chasing after technical, impersonal, faceless interactions. we're actually going the other way, Ken. We're betting the farm on what we believe is a timeless principle, and that is that human connection and human relationships are the only thing that have the potential to stir a soul. And when they do, it's not just good for business. We think it's good for society.

And it's not to say we're not going to make massive investments in technology. It's not to say most of your listeners right now are wringing their hands or making major checks to put capital in technology. We are too. But most of our efforts are disproportionately going into what we believe is going to be a dog that will hunt forever. And that is empowering humans to interact with other humans in an emotional way. That's what we're betting the farm on. So it's about differentiation, yes, but we believe it's about a business principle that has proven to be successful for generations and will to come.

John, a couple quick follow-ups based on your answer there, and we've got to honor your time. So we've only got about 10 minutes with you here. but I've got to ask you these follow-ups. From a business perspective, you mentioned, obviously, you know, the big green egg will only go to small local sources. I want to come back to that in a second, but there was something else that you just said, and the idea is the differentiation. And so you can go to Amazon and buy a grill, and they'll ship it to you. But if you go to Ace, they're going to assemble it and deliver it. I'm assuming that you're charging more than the same grill I'm going to pay more at,

Ace than I am at Amazon, correct? First question. Is that right? That specific example, believe it or not, the retail price on that grill is exactly the same at Ace as it is on Amazon. And frankly, from a business perspective, it's a high ticket item. There will be other types of items that might be a little different, but generally speaking, like most small businesses, if it's an expensive item and Amazon has it, we're basically at the exact same price. So the reason I ask that, though, is this. Amazon businesses are all about convenience, right? Oh, you're going to ship it to me. Yet, the better convenience play is ace, because I don't have to assemble it, and you're going to deliver it. And I'm just making this point here that sometimes if you step back for a second, and it's not about, you know,

the convenience of it's just shipping is the convenience. It's a couple steps further. And I think that's a winning proposition. You might be able to charge more for that. I guess my point is, John, I think I'd pay more for that grill from you knowing that it's going to be delivered and assembled. And I just think, isn't that a differentiator there that you can actually win and charge a little more if you do a little more? Yeah, the specific example happened to be about the same price, but as a general rule, no question about it. The price premium that you're going to pay on a particular item or on whatever your service or whatever product your business is peddling has to give a value equation to the consumer that warrants it. And so generally speaking, across the board and a macro

basket of items, yeah, you might pay a little bit more. for X, Y, and Z at Ace, but you're going to get some service, knowledge, experience, in this case, delivery and assembly that more than covers the cost of doing so. So, yeah, I think that is exactly where we need to go. Right. And I asked that question, because I just want our audience to hear that from you, that don't be terrified of the lower price. You know what I mean? You've got to be you. And I think that's a great lesson. And I want to ask you to distill a lesson on the green egg here. And I don't know why. It just jumped out to me. You said that the premium brands like Green Egg don't want to go to big box stores because that's where they go to die and they want to go to where the

high touch is. What's the lesson that our audience can learn from Green Egg on that decision? Again, it's an example of our flavor in a particular item just to give your mind something to hold on to of what differentiation means in practice. You know, many of your listeners like me are probably worn out from reading business book after business book after business book. And very often And there's nuggets to be had, but it's sort of this eye-rolling academic crap. In the real world of business in fighting and scratching and clawing and trying to make sure you're meeting payroll, and working their fannies off, regardless of whatever government says, to actually pay their people more because they value them so much,

you've got to actually make decisions to compete against these Goliaths. And what's that going to look like? And in our view, if it is about the absolute lowest price on commoditized stuff, the race to that bottom is going to go to the biggest Goliath in the room. And dot com today, that is certainly Amazon. And it's not a criticism of them. They're very good at what they do. Look at their volume.

You can see consumers like it. So what are you going to do that's different and better? Well, very often that is for us anyway, a higher quality, higher touch, higher service end that's going to be in the more premium range. And when we actually deliver a value, both in the product and the service, that is better. You're absolutely right, Ken. there's going to be a premium price for that. Now, Amazon has kept us all in check. You can't be ridiculous about that.

But there's a value equation there that every small business owner understands. But more importantly, the consumer appreciates and values. And if you look at it, it's sort of a bifurcated market right now. Some of the folks who are winning the most are those who are offering their higher touch, higher service, more premium experience. You mentioned Black Friday and Cyber Monday. Yeah. According to the NRF, online sales were up 18 and in-store traffic.

was down 11. Our local A stores had customer traffic up 1.9%. Now, we're not pounding our chest about it, but it shows you that it can be done. David can beat Goliath. Don't be discouraged. And Green Egg wants that premium experience because it keeps the buzz factor of a premium brand as opposed to eight green eggs on one little section of an aisle in Lowe's or something like that. That's the lesson. Exactly. Another example that's really hot right now, Yeti Coolers and Yeti Mugs, they're the most premium. coffee mug and cooler in the world. They say they're bearproof. You know, they'll keep ice in there for, I think they argue 100 years. I think it's more like a week. It's totally true. You won't find one of those in Walmart or Amazon. Right. That's exactly right. It's because low price often is low quality and we're going the other way. And I think many business that you have right now are thinking about that very thing in their business as well.

Yeah. This is good. I think this is great, folks. I think we need to be thinking more about premium products and premium service. It goes hand in hand. You can't. sell premium products with crappy service. And Ken, the other side of that is when you're in the communities you're serving, that local touch isn't just puffery. There is something to be said about a local business getting the back of another local business. One of our biggest growth engines right now is actually the supply place powered by, and then we let our local owners fill in the blank, Ken's Ace, Ken's Hardware Store,

whatever. Because small businesses have needs that need to be met, and another small business owner tends to have an appreciation. and a convenience and I get it. I've been there and I live it to feel. That is different than a big box corporate run store by a store manager or a massive website powered in Seattle. There's nothing wrong with those things,

but it's different and it can often be a very good proposition. I tell you, Ken's hardware store sounds really good. The problem is I wouldn't know about anything on the shelves. And so I can't see that being a successful enterprise. But, hey, John, this has been so good. I hate to stop us, but you are the CEO. of Ace and your assistant told us that you have a hard stop here in a couple minutes, so I want to get you out early so it's not to upset her because she's the real reason we got

you on here. We appreciate you. This was really thoughtful stuff, and I know you encourage our audience. We're better for it. Thank you, sir, for being with us. Ken, thank you. You're being very kind and gracious, but I'll tell you, it's a pleasure to do this because as I understand your audience, you are talking to tens of thousands of small business owners, and boy, if there's ever a company that wants to be known as the defender of the little guy, of the advanceer of the small business entrepreneur who gets cremated in the press as a bad guy all the time, but is actually the heartbeat of global economies. We just want to be encouragers of those folks. That's who we are. And again, I just want to encourage, these are the folks doing most of the heavy lifting,

job creating, taxpaying, wealth building in the world. And I just encourage your listeners, outside of maybe spiritual forces, you are the greatest force of good around the globe. So don't be discouraged by how you get cremated in the media. Keep listening to this show and keep after it. You're doing good things around the world. We find you inspiring. I'm going to add a hearty amen to that and leave it at that. John, we're better for it.

We appreciate you, friend. We'd love to meet you. If you ever get in Nashville, come on by and see us. I know Dave Ramsey'd love to give you a high-five for the example of your setting. We appreciate you. Have a great day. You too, Ken. what you're doing. Hey, if you want to learn more about Ace Hardware and John, specifically,

Eric DeBruce has got a link for you. In our show notes, just go to ontraeleadership.com slash podcast. Hey, we've been telling you about our summit event. It is a one-of-a-kind event. And I've been telling you that and telling you that and telling you that. Why am I telling you that? Because it really is one-of-a-kind. It's a special event, multiple days. Unbelievable lineup. We're going to be in Orlando, Florida, May 21 through 20, 24 and Simon Seneca, Pat Linchioni, John Maxwell, Lou Holtz, Robert Hershevik, all joining Dave Ramsey and our team of Chris Hogan, Christy Wright, myself, we're all going to be there. It's going to be fun.

I'll be hosting the event. Looking forward to meet you folks when you come, and there's no event like this. It really is a lot of fun. I would put it up against any leadership event in the country, and I just want you to kick the tires. I just want you to learn more about it. It's going to sell out. Entreeleadership.com slash summit.

That's all you got to do. Entreeleadership.com slash summit. Check out the information and call our team and talk to them. Put them to the test. Ask them the detailed questions. They've got the answers. And they might, just might, have a special offer for you podcast people. Tell them you're a podcast listener.

Give me the Ken Coleman podcast listener discount. Ken's a man of the people. He said that if I call you, I get a special deal. So there you go. What else do you want, folks? Just check it out. Entreeleadership.com slash summit. Would love to see you there.

All right, folks, let's just, like, can I be really honest with you? This topic that we're about ready to discuss probably gives me hives, nine times out of ten. Taxes! Oh, I hate taxes. I'm a constitutional, conservative. I hate the entire idea of the government taxiness. Taxes are necessary, yes, but they should be extremely limited. But that's not where we're going.

You're not going to hear me rant on. taxes. However, it's important that you as a small business owner make sure that you are doing everything you can to save yourself money. There are all kinds of legal options to save money on how much you pay. Or how about this? Just be prepared throughout the year to make sure that you don't get whacked upside the head. You're facing enough challenges. The last thing you need is an unforeseen tax bill because you weren't prepared. You weren't planning. You didn't have a professional guiding you, protecting you.

So what we decided to do, our Ontario leadership team, so amazing. Said, hey, Ken, can we put on one of our endorsed local providers, somebody that's gone through a stringent process, and we have vetted them, and they are helping small business owners all around the country, specifically in their area, if you will, but our endorsed local providers are all around the country. Poised and ready to help you. And so we brought in one of our superstars, Chad McKinney,

local guy. And we're going to walk through a couple of things you need to know. It's not long, but it is vitally important. So listen in as Chad tells us how we need to be prepared, the vital importance around knowing what you're doing or having a professional, rather, to help you know everything you need to know on taxes. Well, Chad, I'm so thrilled that you're with us because when you talk about taxes, it just creates so many emotions in people, right? You've got the heartburn for me. I get heartburn, you know. Right.

People start sweating. It's just not a fun topic to talk about. We don't talk about it a lot on this podcast, but we need to. And so we're so thrilled to have you here. And so let's just get right into this because this is so important. I want to identify, if you can, for our small business audience out there, some pitfalls, some traps that they could fall into when it comes to preparing their taxes, and that can end up really setting them back sometimes years.

Sure. So when it comes to the small business, there are really a couple of things that. we see most often in our business, and that is the lack of an accurate and timely accounting. That's quite common. Now, that changes as the business grows. They tend to have internal or external sources that can help them with that, but in the small business, we often see just a lack of accurate and timely accounting that has to be done after the fact. So many of us, we're sitting here in January, and we may not recall what happened in March of 2016. That's one of the greatest pitfalls that we see in trying to come back after the fact many months and

capture everything and inadvertently going to leave money on the table when you do that. The second thing that we would see would be a small business forming an entity and not leaning on external resources like lawyers or accountants and so on and so forth. When they do that, when they go it alone and then they reach out to a lawyer or a tax professional, more often than not, we see errors in that and then things that maybe they didn't fully understand or know as they were forming that entity and there's a lot of cleanup work that has to be done with that. All right. So let's look at that. But that's great advice. And so when should a small business owner begin the preparation process for the taxes that are going to be coming to. So how far

out ahead when it comes to preparation should we be getting prepared? Well, I think that's a great question. And, you know, the textbook answer would be tax isn't a year-round thing. We think about it throughout the year. We talk about it throughout the year. We consult with our tax advisors throughout the year. For many small businesses that are just starting out or maybe they're in the embryonic stages and so on and so forth, that's probably not realistic. We would like to see. We would like to see. those small businesses begin thinking about it in November, begin having those conversations in November. Why is that?

Because when the ball drops on New Year's, there's not a lot that can be done about our tax situation. And so if we're thinking about it, having those conversations in November and taking a look at that accounting and making sure that it's updated and accurate, we have December to make some critical decisions that could potentially save us some meaningful tax dollars.

All right, I want to go back to the first piece of advice you gave us, this idea of that accurate accounting. And in light of the conversation we just had there, like November, and the realism that these small business owners are going fast and furious, and it may not be realistic at first for them to have that monthly meeting. Let's be practical. Let's challenge some folks here. Would you say at minimum a quarterly meeting with your tax advisor so that you kind of got a current snapshot, but you're also looking forward? Absolutely. I think that at a very minimum, you know, a quarterly meeting would be so, so valuable.

Not only to take a look at the accounting for that particular period, but to have time, to take the time to have those conversations about matters that may have a profound impact on one's tax position. We do that with a lot of our clients where we will meet with them quarterly. Maybe they handle their own accounting, and that's just fine. But we'll sit down with them every quarter and chat about their accounting position and the tax ramifications as a result of that. You just mentioned that some people handle their own accounting and that's just fine. But I want to push on that a little bit. Right, absolutely. Because I appreciate the Cynic.

I appreciate the cynic that's listening. They're going, thanks for this information, Ken. But I've been doing it fine. I haven't been pulled off to jail. We haven't had massive fires. I do a good enough job. I want to save that money, if you will, that I would pay to a professional because I've been doing it okay. So for that, Seneca.

And I appreciate that. Absolutely. What would be the R.O.I? Why shouldn't they at least consider the benefits of paying some money out to somebody? Is there an R. is it worth it to have a tax professional come alongside of you? Well, I think the answer to that, like a lot of things, is it depends. I do believe that there's an ROI.

I think that the lens that I look through may be very different than what others would look through. It's not how much money can you potentially save in your tax position. That's one piece of it that can be very important, no doubt. But it's what is your time really worth? What is your time really worth? And, you know, in our business, we quantify everything based on hours. And when you look at the average tax return that's prepared, whether it's by an individual, certainly by a business.

And this is information on the IRS's website. It requires a lot of hours to prepare your own tax return. And so I have taken a look at that many years ago, and when you're looking at a family who's making about $80,000 a year and the amount of time that it requires to prepare that tax return, they may actually be losing money if they sit down at their computer using whatever method on a beautiful Saturday in the spring

as opposed to hiring an outside professional to do their tax return. Yeah, I got to tell you personally, it's more than just money. It's time. My time is more valuable than my money. Right, right. And I also am very vain. And so I don't want to lose any more hair than I'm organizing. And I think if I'm preparing my own taxes, I might lose extra hair. You know what I'm saying? So there's just an added benefit for getting with a professional. All right, so one of the things that a lot of businesses do, and you understand this uniquely, because they don't have a lot of resources. They can't hire a CFO full time. So they go out and on a contract basis or whatever and they get a CFO. for rent, if you will. Let's talk about that. Pros and cons to that. Sure.

Well, I think that. Let's talk about the cons first because there may be fewer of those. And the one disadvantage to that would be that you don't have somebody down the hall that you can just go to. So that would be one aspect of it. And the other aspect would be that CFO for hire, if you will. You know, they've got a number of other clients that they're dealing with. They're not working just on your account. They're working on many accounts.

Okay. Now, there's good that comes with that as well. And the hope would be that with the business owner's due diligence, they would hire somebody that has a lot of experience in that particular industry. And so they're going to be running several clients in the same industry parallel. And so they're going to see things that maybe if you're an internal CFO, you may not see. And I've been in that space years ago as a control or CFO,

and sometimes you feel like you're on an island out there by yourself. And so that can be an advantage as well. And naturally, you know, one of the advantages can be cost. You know, hiring CFOs, hiring people in general is quite expensive. By the time you add the wages and the taxes and the employee benefits and the paid time off and on and on, that can become quite expensive. And quite often, quite often, it's more economical to hire that outside CFO. I want to stay right here for a minute because I think you just mentioned something that is a huge issue for small business owners.

Very practical issue. So that is the 1099 employee, right? because we're talking about the cost associated beyond salary. So do you have any thoughts on when 1099 versus, okay, it's a diminishing return at this point. Now I'm going to go W2. What are your thoughts on that? Well, I think that that is a great question, and it's a very popular question that we get. And what I want to speak to on that, the employee versus contract labor, is it's honestly not our decision. Okay. And what I mean by that is that the tax code, and this is a great example, is predominantly substance over form. In other words, what's happening? What's happening in this particular activity, this transaction, this relationship, based on what's happening, this is how we're going to treat it. And the same is very true with contract labor versus employees.

So we've got to first look at the relationship of that individual, okay, and determine based on that, are they contract labor or are they employee? Now, that can get a little heavy, and maybe it doesn't make a lot of sense, but the IRS has some very good tools out there that are user-friendly. There's examples in that. anybody can read and understand, and that is specifically publication 15A that they can take a look at and make a determination on their own if this individual is an employee or are they contract labor? Huge, huge question, huge talking point that we deal with on a regular basis. Thanks for bringing that up.

Well, good stuff from Chad McKinney, one of our tax ELPs, as I mentioned earlier, and we had Chad in because this is so important. And as usual, our Entree leadership team, we're not just going to bring up a topic we want to help you. And so, you know, our ELP team so valuable in thinking, okay, what are the resources that we can give to our audience? And this is a small business tax preparation checklist. That's what we're going to give you. And here's a deal, folks. I ran a small business two different times, one for somebody and one for myself. And I'm just going to tell you, I hate taxes.

Not just fundamentally and constitutionally and politically, I'm not going to get into that. But, I mean, just as somebody who's leading a business and I'm very entrepreneurial, which means let me just pick on myself. For those out there who are like me, you are a disaster administratively, right? You're just a disaster. You're good at coming up with ideas and you're good at executing and you're good at making things happen. But this is just, it makes your throat swell when you think about taxes. So here's the good news. We're going to give you this resource, as we do all the time for free.

It's absolutely free. It's a small business tax preparation checklist. It's essentially very much like any tax professional who is worth their salt would give you. They give you this list and it allows you to not have to stress. All you got to do is walk through the checklist. This is everything you need to be prepared to fill out the tax return to give it to a tax professional. It's everything you need to allow you to maximize what's most important is that, and that is savings, right? Savings on taxes.

More money back in the business. There's so many loopholes, so many opportunities for the small business owner. But the reality is we know how busy you are. You got a million plates spinning. and you need help. This is where you start. Of course, we want you to talk to one of our ELPs in the tax space that can help you out like Chad, because they can literally save you so much time, energy and money. But we want to get you started with this tax preparation checklist. This is the ultimate list so that you can maximize savings when it comes to taxes. Why wouldn't you

do this? Very simple stuff. Text the phrase tax prep, tax prep, T-A-X, P-R-E-P, to 3-3-3. To 3-3.3. 344. 3344 is the number. You text the phrase tax prep, and we will send you the small business tax preparation checklist. This might be one of the most valuable resources we ever give you because of the implications of how much it saves you, not just financially, but emotionally. This is huge stuff. So make sure you take advantage of it. If you don't want to text it, no worries, you can get the link to the resource at entreleadership.com slash podcast in this episode. It's in the show notes. Eric the producer put it in there, just download it that way. Or again, you can text tax prep to 33444.

Now, I want to tell you one other thing, because I don't do this very often. We give you resources all the time, and they're helping you. People are downloading these things. Thousands upon thousands upon thousands of people are diving into these things. But this is something I've never said before, Eric, the producer. This is something you need to send to your friends. You need to tell your friends about this. Don't be selfish with this.

You know small business leaders. You do. You do business with them. Why wouldn't you share something like this? with them because this is a resource that's not just about you and personal growth like this can help people so just tell them they don't have to listen to the podcast but just tell them about the podcast here's the deal go to entreleadership.com slash podcast and get it that way or just give them this tax prep 3-3-4-4-4 they get a free tax checklist and guess what you help them we fight the government

together get a little more money back who doesn't like that and the best part you get a slap on the back because you're a good friend. So there you go. Chad McKinney, thanks for being with us, buddy. This is good stuff. We need this. We don't want to give the government money unless we have to. That's right. That's right. It's my pleasure. Good to see you, buddy. We'll have you back. Absolutely. Big thanks to Chad McKinney. Vital stuff. Folks, make sure you protect yourself so you can win big. Hey, speaking of planning, a lot of what Chad was talking about was just planning. Infusion Soft, our longtime partner, love them. They've got a 2017 strategic planning kit. It's not too late to get this resource. And it's certainly not too late.

In fact, I would say, now is the time to start planning. Dive into 2017 with a strategic plan. If you've never done it before, it's not intimidating. It really isn't, especially when you have a resource like this. They're going to help you identify purpose. They're going to analyze results so that you can continue to improve. Help you understand how strategy guides your actual planning. It's not the other way around.

They're going to help you with a meeting rhythm so that you can stay on top of the things that you have planned to do. and how to involve your team. It's a free PDF. It'll guide you this entire year. Infusionsoft.com slash 2017 planning kit. Infusionsoft.com slash 2017 planning kit. Now, this is fun. I'm a guy who I had my first job when I was 14 years old.

My dad got me out working pretty early, you know. And I love talking to this stuff about my kids, you know. Dave teaches this. Dave Ramsey teaches this all around our organization. wound you want money, where do you go? The answer is work. And this idea of getting your kids out there and working and earning their own money, then they get to purchase their money, it's so much more rewarding, and it sets them up beautifully

for life. And so Kyle Graham is this 14-year-old kid, and at the age of 12, he starts a business. He lives in the Jacksonville, Florida area, and I love to just sitting around thinking about, what could I do in my neighborhood? And he comes up to this idea, and we're going to tell you this story. I want you to listen to this kid. The first time he's ever done an interview, is that right, Eric? So this is fun.

But I want you to play this for your kids and let them dream a little bit. What could they purchase? I think this is an important conversation for young entrepreneurs. Whether this kid does this for the rest of his life or not, it's going to be huge for him. The importance of entrepreneurship in the lives of our kids has all kinds of positive benefits. Whether they ever go into it, it doesn't matter. It's what it teaches them. So listen in to Kyle Graham, 14-year-old entrepreneur.

Well, Kyle, this is fun. When Eric brought this to me, I thought this is neat because Mike Rowe, who's been on this podcast, who I have great respect for, first made his audience. And thus our audience, and it got to us, made us aware about your business. And so let's get right to it. You were 12 years old, I understand. When you decided to start a business, tell us what the business is. Well, what I do is I go to people's backyards and I clean up after their dogs every week for monthly payments. How did you get this idea?

At what point did you go, I think this is a need and I'm willing to do it? Well, I thought of like a chore that I don't like because I figure a lot of other people wouldn't like it too, and they'd be willing to pay for other people to do it. So it just kind of made sense. I like that. I like it. You're going, okay, there's a need and nobody likes to scoop poop. So I think maybe I'll do that.

So I want to go back. So here you are. You're 12 years old. And obviously you've thought of this. And how did you begin to test it or ask people, would they be willing to pay you to do it? Putting out ads on Facebook. My dad was helping me do that for a while. And did you go door to door at all?

Did you go in your actual neighborhood and go, hey, listen, I'm willing to do this if you want to pay me? No, but I put cards up at a vet's office. And what was that like? Was it nerve-wracking? Were you a little bit nervous to go to the vet and say, hey, here's the deal. this is who I am, this is what I want to do. How confident were you? I was a little bit nervous, but we did email them before asking if we could come in there. And how do they react to you, a 12-year-old? What was their reaction like when you pitched them? They thought it was like really

cool and they said like, of course you can do that and it was like, they were really nice about it. So if you're talking to other 12, 14-year-olds or my oldest son is 11, if you're talking to and you're saying, hey, I was nervous, but this is what you do? Here's how people are, what would you say to them to encourage them to at least try this? As soon as you just start talking, it just makes it so much. easier so the faster you can start, the faster it's over, like, what's the worst that's going to happen? All right, so if you can remember, take me to the first job that you had. Describe it. What was the situation? Take me through it all. Like, give me all the details. Don't feel like you got to rush.

I want to know what was that first gig like. Well, I went to the house and I knocked on the door first. I was really scared to even talk to them. It was hard to even open my mouth. And then they were really nice and friendly and they let me play with the dogs for a while. I went out there. and they were talking to my dad. It was just so nervous. I had butterflies in my stomach and my heart was racing. Then at the end, I went to tell them that I was done. And I said, thank you. And at that point, I realized, oh, that wasn't that bad. And I could do that again. So how much did they pay you on that first one? $50 per month. And I come out once every week. So once a week you come out and you scoop it. I got to know, because I just bought a puppy. What equipment are you using to scoop the poop? I got to know.

We were going to use like, you know, the poopers with a little claw, but those don't work very well. And you just kind of smudges, so we put gloves on, and then we put Publix bags over. We use the ones that my mom goes shopping with, so it's like recycling them. Okay, so you're getting right down in there. You got it, you got some Playtex gloves on, and then you, if you will, double bag it. You put a Publix bag over top the gloves, and you get right down in there and grab it. Yes, sir. This is good. I'm learning something, and so is our audience. So you had the first experience, and when you got paid, when that first $50 showed up, what did that feel like for 12-year-old. 50 bucks a lot of money. Yeah, I felt like really accomplished and I felt like it was

something that not a lot of other people did. And I felt, I guess, the best were to be special. So how quickly did you add another client? I got two very fast. And then a third one came slower and it just gets slower and slower and it has ups and down times like in the summer. That's right. There's a lot more people willing to pay because it's like 90 degrees here in Florida all the time. Yeah. Yeah. Who wants to scoop poop? the humidity. Kyle does. Kyle does. That's who. So how do they pay you? Did you sit your dad? I want I want people to understand who have kids that this is not that difficult to do, and I'm just curious how you're doing it. Do you have your separate bank account? What's that look like?

Yeah, I have a savings account where I deposit checks, and occasionally I get paid in cash, in which case I keep that for spending money and everything else goes to my savings account. All right, that's what I was going to ask next. How much? So let's just, let's just. Let's just, just do some simple math here. So let's just say 50 bucks a month. Let's say you're bringing in a couple hundred bucks a month. Okay. And how much of that do you save versus spend? Because at the end of the day, you're 14 years old. You got, you got things you need to buy. What's your formula? Do you have a set ratio? Typically try to save like a little bit more than two thirds of the cash, of the money. I like that. And tell us what your biggest purchase has been.

since you started your business. So this was with your money. I bought a boat, a 17-foot bass boat. Come on now. How much did that cost? Around $3,000. Wow. So here you are now, what are you, two and a half years in, two years into this business? Yeah, almost three now. All right. And what's the name of the business? Call of Duty. Duty spelled D-O-O-O-D-I-E, because there is all the other ones taken.

Yeah, the website is Call of Duty jacks.com. love that. You get it because you're in the Jacksonville area, I'm guessing. Yeah, I live in Jacksonville, yes. Okay. And where does this go? I mean, you're now three years into this. What are you thinking? You're getting ready to move into high school. Where does this go? Do you plan to expand this business? What are your hopes and dreams for this? Well, I don't really plan on scooping up poop forever. I really want to like talk to people and tell them how to do it, like almost what you're doing on this podcast. And just help other people do it because that seems. less messy. Because there are a lot of kids out there who don't realize that they can make some pretty easy money, right?

Yeah. So what would you say to parents? Because here's the deal. We don't have a lot of kids listen to this podcast. But you're talking to a lot of parents right now. You're talking to me. I got three kids, 11, 8, and 8. And what would you say to parents from your perspective, the kids' perspective, about maybe

starting the conversation, maybe they listen to you on this interview and the kids listen? What would you say to the parents about helping the kids get started? Well, they need a lot of help because they just need to have that motivation because a lot of kids these days just don't have motivation. Like, my parents need to help me constantly and just ride me the whole entire time on my back telling me, did you post on fit? Did you make an ad yet? Did you email your customers? And you just always need to be there. And then soon it just clicks and they start doing it on their own.

And then they're like, wow, this is easy. And then... You got to stay on the kids. I love this advice. You got to stay on them. But once you start collecting checks and putting money in the bank account, is that when it clicks? Um, not right away, not for me at least, but it takes a while. I don't know. Like, I bought a boat. Then it kind of clicked like, hmm. Ooh, game changer. All right. Now, let me ask you this. You're only 14. Are you thinking about college or are you thinking, hey, maybe I won't go to school. Maybe I'll just go right into business. Have that conversation started to happen with your parents?

Yeah, I've been thinking about it and I've talked to my parents about it And I'm not sure if I'm going to go because college is like a huge investment Especially now it costs so much And of course if I might open a business in the medical field or law field I'll have to go to college and get like degrees But if I plan on doing something else like just even talking to people about it Then I might save like the I don't know $40,000 for a living and going to college and put it towards my business Expand on it

Come on with that kiddo I like the way you're thinking thinking, okay, let's put you to the test. You want to talk to kids or people, but right now you're a kid. So let's put a challenge out there. I'm going to start, all right? So the challenge is, all right, parents, I want you to gather your kids around and listen to this portion of the podcast. And, Kyle, this is your moment. All right? You're talking to kids right now. You're 14. You have kids of all ages listening. What have been, if there's a couple of things, or if it's just one thing, that has been the key to you being successful. And you, you're going to you. You said earlier that there have been some ups and downs, and I like that.

You're being really honest. That's the life of a businessman. That's the life of an entrepreneur. What would you say to kids right now the key to being successful is? The key is to always keep on working. You might not get a new customer every single time that you go to check your email, check your Facebook messages. You have to keep on advertising and how you have to keep on looking up,

how you might not have a new customer, a new email from someone, or a new Facebook message from someone asking about your business. But if you keep on advertising, that's the only chance that you're going to have. And knock on doors, if that's what it has to take, send, boost your Facebook posts and all that. So just find more people, expand to your targeting. And yeah. And so, Kyle, to kids again, if they want to go get some money, what are they going to do? They just got to work.

I like it. I did not set him up for that, folks. He did not know I was going to ask him that. And that is an absolutely spot-on answer. Kyle Graham is 14 years old, and the company is Call of Duty. Love that. D-O-O-O-D-I-E. He's in the pooper-scooper business, and this is fun stuff, and I appreciate you being on here, Kyle.

I think you're going to do great things and excited to see and follow your career. We appreciate you hanging out with us here on the Entree Leadership Podcast. Thank you, and thanks for having me. I love Kyle, and I didn't share this with him in our conversation, but I wanted to share this with you all, because again, I think this puts a nice little bow on what does this teach our kids? It just puts him in an environment where good stuff can come out. Here's an example. This was a note that we got in our research that his team provided us, his dad, essentially.

This was a note from one of his customers. I adore Kyle. This young man takes care of my yard every Friday. This past weekend, he brought me to tears when he sent me a message after he came by offering us 50% off the upcoming month of August because he saw our welcome home daddy sign. He learned that my husband had just returned from an eight-month deployment. So the kid on his own says, you know what? I respect my elders.

I respect somebody from the military. I respect my clients. They're a client. I'm going to do a little something for him and cut him a 50% off break just because dad came home. Now, let me just tell you something. Is every kid going to do that when they start a business? Not necessarily. But do you see what happens?

The kid gets in the situation and he begins to take care of customers. He begins to realize valuing people. He's learning valuing people by valuing his customers, right? He thinks, I want to do something special for my customer. They put a sign in the yards at welcome home, and the kid at 14 is perceptive enough to go, oh, that's a special thing? What can I do to make them feel special? He gives them 50% off.

You see what's happening here? I just think when we put our kids in situations like this, it doesn't have to be an entrepreneurial situation, it could be learning an instrument, could be performing. Put them in a space where they've got to learn how to swim. You will be amazed at the things that they do. It's really, really beautiful stuff. Love Kyle.

Appreciate him being on the show. Also want to thank John Van Heisen again for his time. And of course, our ELP, Chad McKinney, terrific value from both of those gentlemen, and we are grateful. Hey, folks, I say this every time, but I surely mean it. On behalf of Eric the producer and our entire Entree leadership team. Thank you for listening. We'll talk with you again.

very soon.