The intuition to work towards the best practices for running a corporation is not something that comes to a person overnight. It takes quite a period of patience and diligence. But once you’ve mastered the art of running a corporation as well as honed your own instincts, then you’ll be at the top of your game, doing everything you need to be able to do. Aaron Young is a lifelong entrepreneur who is the Chairman and CEO of Laughlin Associates. Drawing from his own experience, Aaron shares with Solomon Ali the journey of working your way to the top of the corporate ladder. If you’re also working with the same goals in mind, then this is one lively conversation that you won’t want to miss.
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Running A Corporation: The Journey To The Top Of The Corporate Ladder With Aaron Young
How are you, Aaron? I’m going to take a little bit of time and tell everybody a little bit about you. Better yet, I’m going to let you tell them about you. What I’m going to say is something simple. I’ve been involved with Aaron’s company for a long time. Aaron is a person that I love and enjoy. I’m doing business with Aaron. What I wanted Aaron to do is share with our readers a lot of the minorities out there that are looking to go into business, why they need Laughlin and the services that Laughlin provides. Could you tell us a little bit about you?
It’s always fun to be here with you. This is a guy you want to be listening to. Basically, I’m a guy who came from a humble household. My dad worked a couple of jobs. My mom did daycare. When I was a teenager, I was coming home from school to help him change diapers and stuff. I was the oldest of five kids. If I was going to have anything extra, I had to figure out how to earn money. From the time I was a teenager, I started figuring out not just how to have a job at McDonald’s or something, but how to make more money that I could make getting some an entry-level job. By the time I was eighteen years old, I had a number of people working for me. We’re painting apartments, refinishing floors, doing everything it takes to turn apartments.
Is that the exact same business? That’s the first business I started when I got out of the military. It was cleaning apartments, getting everything done so they can rent out. That’s amazing.
I went to a year in college, I had terrible grades. Anybody that’s out there that feels like, “I suck in school, it’s hard for me,” or whatever, don’t feel bad. 80% of the world’s billionaires do not have a college degree. Many of them don’t have a high school degree. The point is I came out, I didn’t like school. I did poorly in school. That year I went to college, it was a junior college. I don’t even know if I got grades that year because I was singing in the show choir and chasing girls. That was what I did for a year. At the end of that year, before I turned nineteen, I started my first official business with payroll with pay stubs and it was a recycling business.
We built that up in a few months to about 5,000 monthly customers. That ran for several years. I sold it and in 1986, it became one of the first cellular phone dealers in the Northwest. Built that up, did it incredibly well, and then like what happens when you’re too young and inexperienced and successful, the market shifted. I thought I was the exception to the rule. I thought I could survive the change. What that meant was I ended up losing all my savings, all my credit, all my credit lines. Soon, I’m several hundred thousand dollars in debt with no good way to get out of it. I’m 27, 28 years old. I was sitting there with my wife with a little baby and nine months pregnant in bankruptcy court. That was an epic crash and burn. Thankfully out of that, somebody who knew me as the big seller guy recruited me to come to work for his company.
I said, “What’s the deal on?” First, I don’t know if you can relate to this, but I didn’t know if I was worthy of having a job because I didn’t have a degree. I hadn’t worked for anybody else. They’re going to see everything, all my failings. All my insecurities are going to come out if I get a job. The job was a significant job as vice president of sales for a large publicly-traded company. They’re a NASDAQ-traded company, got 350 offices worldwide and all of a sudden, at 29 years old, I found out about public companies, stock, stock options. I learned there were salary and benefits, but there was a whole other world that was available. I came out of that 3.5 years later. I left with a pocket full of money, started buying companies, bought the company that you were referred to. Laughlin Associates was one of many companies that I bought.
My experience with Laughlin, in the beginning, was that Warbucks strategy. I cannot say how much it has helped me and been a blessing to my life and the things that I’ve been able to accumulate and the things that I have been able to do.
If you’re a real player or you know you’re heading in that direction, there’s going to be real wealth and assets, not dreams. That’s the thing about Laughlin that I always love to why I bought the company was because they were 29 years old when I bought them. They were a mature company with lots of clients, about 80 employees. I bought the company because I knew there was much depth. The bench was deep as far as the strategies, the products, the services. I knew we could do well. We had to change the culture. That’s a big thing as you start to develop a business. As you’re looking to start a business or grow your business, never forget your culture needs to be intentional. It’s not how it unfolds and how we get along.
Based on your own values, your own goals, the outcome that you want for that company, you have to create a culture. Think of Tony Shea at Zappos or Walt Disney at the Disney Corporation. These are people that built a culture and that culture allowed them to grow to a huge number of employees and the culture, which was all based on the founders’ values and outcomes. It’s what they stood for, what they stood against, how they engaged with their clients, how they engage with their vendors, with each other. That culture allowed the business to grow way beyond what the founder could have been like policing, trying to make it a certain way. The culture gives you the ability to grow and scale without you having to work 20 hours a day as the owner to watch it all happening. I started buying, selling companies and continue to do that now. We work with about 48,000 or so, according to my marketing people.
What about 40,000 companies?
They’re about 48,000 companies, fewer owners. Many of the owners have multiple companies. It’s a lot of companies, a lot of people. It’s everybody from Joe Blow who’s getting started with a simple idea. They’re hoping and they’re maxing their credit cards out to try to launch their dream, up to large companies that famous people that you know. That could be authors, actors, producers. Fill in the blanks, we’ve got these clients. We have Solomon Ali.
Let me ask this question because it’s a question that I’ve been asked many times. Is it better to start a company from scratch, from a concept or perhaps go out and find a company that’s doing something of what you’re looking to do and acquire it and then builds up from there?
The first thing is many people don’t have a great idea. They don’t have a big vision, but they have some money and they’re sick of punching the clock for somebody else. They’ll say, “I’m going to buy a McDonald’s franchise, a dry cleaner, a bookkeeping thing or dog grooming,” or whatever it is. That’s what you’re talking about. My first thing is if you’re buying it, do you have enough money to buy it? If you buy it, what is the guarantee that the seller won’t compete with you or that the people that are the current clients aren’t in love with the owner? I’ll give you an example. I go to a dry cleaner. There’s this specific guy that I go to. I go to the dry cleaner a lot. When I walk in, he knows my phone number. He punches my phone number into the computer to pull up the bill. I’m still walking in and he’s going to get my stuff off the rack because he knows me, “Where are you going, Aaron? What’s going on? What did you learn?”80% of the world's billionaires don't have a college degree. Click To Tweet
I like this guy. I’ve got to tell you, his prices are a little on the high side. I was paying cheaper money. I found him by accident one day when I needed to drop some stuff off, but he got to know me. I’m paying more money for a relationship with this dry cleaner even though I only see him every couple of weeks for 5 minutes. The point is when you go to buy something, make sure that you, A) Can afford it, and B) Can be additive to what it’s doing already. Can you take it and do more with it than the other person that had it? That’s the first thing I’d ask. Otherwise, start from scratch and build it in your own image.
I’m going to add to your story because I have personal experience. When I go to my favorite cigar shop Aroma, I walk in. As I’m walking, the gentleman is bringing my favorite cognac. No one else can bring me my cognac except him. Otherwise, I won’t drink it. It’s a nice feeling to go somewhere where they know you and you get that type of relationship. It’s like the banks. You go to one of the large banks and you’re a number at the bank, versus going to one of the small boutique banks and they know you.
Your deposit matters to them. You’re helping them, they know you. That’s like Cheers. You want to go where they know your name. That’s human nature. When we’re creating businesses, whether you buy it or start it, what’s your differentiator? Why do people want to work with you versus somebody else? If you say, “I’m going to provide this service,” and the clients will pay you this much. That’s a fair transaction. Here’s what I’m willing to sell for. Here’s what I’m going to pay for it. That’s a fair transaction, but it’s unemotional and not memorable. It could be the buyer too. It could be if you leave a big tip and the server remembers you. If the buyer comes in and the seller does a tiny little bit more, almost nothing but does a little more than was expected, all of a sudden they’re your go-to place.
You’re like, “They didn’t have to do it, but they did it,” and that’s magical and everybody wants to get a present. They want to be known and cared about. I would say if you’re going out to do something like that, figure out, do you have an idea that people want to buy? A lot of people start businesses. I bet you’ve seen this a lot in your industry. People want to start a business based on some passion that they have and they’ve heard for years, “Pursue your passion.” That’s crap. That is a lie. Find something that the market wants to buy and then you get passionate about doing it. Out of the abundance that you create because somebody wants your stuff, then you can do your passion. I’m a horseback guy, you know that. If I wanted to make horseback riding, horseback training, horseback breeding, horseback trips my income, I would be poor. If I make my company, which doesn’t seem exciting, form a corporation, help people with their corporate minutes, make sure that they’re doing all the reporting to the state properly, make sure that they’re issuing stock properly, it doesn’t sound sexy. That’s not like lose 30 pounds in three days.
I want to share a story and I’m going to go back to the Warbucks. It’s how I got involved with Laughlin. They’re talking about Warbucks and I thought that was exciting. I was like, “What is Warbucks?”
Can I give a definition? Warbucks is all based on how to control things without owning them. As you build greater wealth, you become a bigger target for lawsuits. What you want to do is organize your wealth in a way that it makes it difficult for a frivolous lawsuit. I’m not talking about fraud, but I’m talking about frivolous litigation. It makes it very difficult for anybody to get into your pocket. It was called the Daddy Warbucks/Red, Inc. There’s a lot of money control, but when anybody looks at you, you look like you’re losing money.
I had this Warbucks Strategy and everything and I had got it from Laughlin and I had all these nursing homes and all these employees and things of that nature. However, I never applied the Warbucks Strategy. I paid for it, had everything, kept it all current but I never applied it. I said, “I will get to it. Time will come.” All of a sudden, I had a problem. When I had a problem, I was kicking myself because I lost a lot. I lost tremendous amounts of money. Thirteen facilities, give or take. We had approximately 500 employees. I didn’t get my accounts receivables or any of this stuff back. I learned what you know that you don’t apply is costly.
My next business, I turned around and we started this private equity company. We created all these trusts. We created another Warbucks. Before I even started the business, before I even started anything, I made sure everything was set up, structured properly. You go to some of their attorneys, they have no clue of what you’re talking about, but you do need their help and guidance. We made sure everything was structured. We made sure our trust on this, they own these different LLCs and things of that nature. We’re going to make these investments. It worked beautifully. Could you tell them why they need that?
That story is what I call event-driven. You’ve had a bad event and you’re like, “That can never happen to me again. I can never let that huge loss. I can never go through that again.” In your case, it’s doubly painful because you had the medicine, but you hadn’t taken medicine.
It was painful, at times I was thinking about taking my own life. It was that severe to me because I never thought, one, that I would have achieved that amount of money and success and then to have it lost for no reason of doing bad business or anything of that nature. That was hurtful. To turn around and know that I can’t blame anyone for this except myself because I had the solution. If I had applied the solution, none of it would have happened or if it would have happened. I wouldn’t have lost the monies and stuff of that nature. It was hard to deal with. A lot of people would say, “After I went through that, what are you going to do? Can you help me?” I was like, “I can’t help you. I’m in a bad place. I got stinky thinking. My mind’s not right.” I had the solution and never applied it. I want you to expand on why is that important that when you start a business, go into business and you take a strategy, whether it’s Warbucks or something else that you properly are set up with your corporation, your paperwork, your corporate veil and everything of that nature.
Stephen Covey said, “Begin with the end in mind,” and it’s also in the Bible maybe before Stephen Covey heard it. Most entrepreneurs, most of the people that start a business start it because they want to take a skill that they’ve been selling to somebody else for paycheck. I can fix cars, I can write code, I can cook at a restaurant, whatever their thing is. They go out to do it themselves, but they do it only to make a living, to pay their rent, to pay their car payment, to live. They’re not thinking about where can this business go, what can it grow into? Most people have a fuzzy fantasy of, “I’m going to get rich by doing this,” but they don’t have any sense of what needs to be done to get wealthy.
They’re coming at starting a business from a small place, a place of scarcity. When you think about putting together a Warbucks Strategy that is going to cost a few dollars, they go, “How am I going to do that?” Because they’re early and they don’t have a lot of revenue yet and they have ideas and dreams, but not the fulfillment of that yet, they think, “I’ll get around to it. Now I’ve got some money. I’ll buy it, but I’m not sure if I want to put anything into that yet.” Once the storm hits, it’s too late. You can’t fix anything during the storm. You have to ride the storm out. At the end of it, you go, “What’s leftover? I’m going to learn.” Unfortunately, I’m going to have to lick my wounds while I now go back and say it makes sense to spend a little extra money, a little extra effort upfront in order to protect everything you’ve built so that you’re hurricane-proof. The storm hits, you go, “I may not do a lot of business during the storm, but I’m not going to lose everything in the storm either.” Even if you have to deal with a problem, the storm could be a lawsuit, the storm could be a divorce, it could be a parent who has Alzheimer’s and you’ve got to take care of them or cancer or something. You don’t know what the storm is that’s going to hit your life.
In my life, it was regulatory issues. You didn’t see it coming. You thought everything was going well. In my case, I had been running the business for many years. It wasn’t like a few years. There are 5 or 6, 7 years down the road. I didn’t think anything would ever happen. I thought we were mature, seasoned, we were on our way and then that happened.
All of us citizens, we have to stay aware of what’s going on politically. Whenever you think about the President or your Governor or the Congressman or whatever, there are all these bureaucracies that exist and the people that run those things are not elected. They’re entrenched and they’re running these multibillion-dollar-like monolithic things. They can make a rule. They can make a rule and never went to a vote. It was no Congress that did it. No president that signed it. They made a rule. Now, that rule has the effect of law and it can change things that quickly. It can turn things around and wipe out an industry. Look what happened. It’s a good intention, President Obama and Obamacare.
It was a good intention to fix healthcare. Healthcare was runaway. It was too expensive. Prescriptions were too expensive. They’re having a legitimate problem to solve. What did they do? They changed the regulations and it took the whole industry a quick 180 degrees. How do you bill? What you have to record? How much you can get paid for an illness, for treatment? It was all changed. What happened? All the insurance companies went, “We can’t do this.” They all backed out of the exchanges and all the thoughts that the people they were going to get didn’t happen because a regulation changed that impacted a whole bunch of private or public companies.
Those public companies all of a sudden said, “We can’t live with that regulation. We either have to change or die or whatever.” You don’t know as a business owner when some city, county, state, federal rule is going to change and screw up your whole plan. If you think, “I don’t need to pay attention to politics, I don’t need to pay attention to that bond measure,” you’re going always to play a small game. Anybody that’s becoming more successful has to stay on top of this. This is why we have a lobbyist in the state legislature in Nevada where our business is because we can’t have our business get yanked around by a random decision. We’ve got to be actively playing a part.
A person is starting in business, “I have an idea or I want to buy a company, whatever it is. I need to get incorporated or get an LLC. What do I do?”
You could do a ton of research yourself. There are books, there are videos. The reason we’ve been around for many years is that we’re good at what we do. We’ve been in business since 1971. Our clients stay with us. Look at you. Our employees stay with us. Our average tenure is over fourteen years. There’s something we’re doing well that keeps the customers. We have almost a 90% renewal year over year with our clients. What you do is you come to somebody like us, Laughlin Associates, and let’s talk to you about what are your goals? What’s the outcome you’re trying to achieve? Who’s going to own the business? Where’s the money going to come from? Is it going to be public or private? What’s going to happen? We can help you put together a plan along with if you have a lawyer or a CPA or a trusted advisor, you want to get them in on it, fine. We do that all the time. Let’s put a plan together though based on where you want to go.
If I’m new, starting out, don’t know a whole lot, I call you and you’re going to help me think through this whole process.
We’re going to start helping you build a roadmap from where you are now to what you think you can do in the short-term. What do we think that’s going to turn into 3 or 5 years? You probably need a corporation or an LLC. You need to make sure that you are following the rules associated with that. That’s inexpensive. It depends on the state, but we’re you’re talking about a few hundred dollars to maybe $1,000.
I’ve made literally millions and millions of dollars. I don’t have it. I don’t own it, but they’re still there. It’s still controlled for per se. That’s what I thank you for in your company because that’s what you guys help me do and achieve. When I applied those things that I was taught from the people many years ago, it works. I know it works.
It does work. We’ve done this particular strategy that you’re referring to, the Warbucks, which we now call only because people didn’t know who Daddy Warbucks was anymore. The fun in the name started to dwindle. The same exact thing you’re referring to. The Warbucks Strategy, if you were to check in with us, we now call it Rockefeller because John D. Rockefeller told his children on his deathbed, “Own nothing, control everything.” It’s the same strategy. Exactly the same deal, but we now call it the Rockefellers. If you look for Warbucks on our website or if you called up, they’ll go, “What?”
Even going further than that, you guys help set up the corporation. You talk through the process of what the end looks like, what we’re thinking about. To a person who doesn’t know what the end looks like, to talk to someone at Laughlin to explain, what your objectives are and do that analysis to be able to inject in their business, that’s critical. Tell us about that.
Because we’ve done this for so long and worked with many people, we’ve seen things that work and things that don’t work and people’s decisions. Over 200,000 companies over time. That’s a huge number of almost a quarter of that still with us in over almost 50 years. That’s a big deal. We want to work with people where they are. We don’t want to undersell them and give them less than they need. We don’t want to oversell them and burden them with an expense that they’re not ready for. We do want them to get what they need and that will meet their goals and meet the law and then have a road roadmap that says, “As you get to this level, then we need to talk about another additional strategy. As you get bigger, we’re going to look at even more,” so that you always have what you need. No more, no less. You’ve got that absolutely solid granite foundation to build whatever your dream is.
Aaron, I know how to make pies. I don’t know anything about business. I come to you and say, “All I want to do is make pies.” What do you do for me?
Are you going to own a building? What’s it going to cost to get all of the equipment that you’re going to need? Does that money come out of your pocket? Do you have investors coming in? Are they loaning you the money? Are they investing the money and taking stock? We want to understand how you’re going to be able to make and sell the pies because the structure, the corporates, C Corp, S Corp, LLC, nonprofit benefits corporation, a limited partnership. Depending on the outcome and depending on who the players are will determine the right entity. It’s not a matter of, “My uncle has a C corporation, my friend has an LLC. I’ll do that.” That’s a mistake. We spend way more time shopping for the car you’re going to drive than you do thinking about how you’ll structure your business. That made me think of something.If you don't issue stock to yourself as a shareholder, you don't own the company. Click To Tweet
If you’re shopping for a car and you have four children, odds are you’re not going to buy a Corvette as your primary family vehicle. Where will you put the kids? Maybe that’s the goal. I don’t know. If you need to transport the kids, especially if they’re little, where am I going to put car seats? I better get a minivan. I better get a Suburban. If you live in the city, you’re single and you’re commuting short distances, maybe you want a bicycle, maybe you want a Prius. Maybe you want something like one of those Fiats, two-seater cars because you can park it anywhere. You don’t need a Suburban. You don’t need a minivan because that’s not the outcome. You don’t need that. If you’re doing excavation, using the Prius will not help you move seven yards of dirt. You need a dump truck. You get the right vehicle to do the job. It’s not interchangeable. C Corp, S Corp, LLC, they’re all different. They’re as different as the dump truck, the Prius and the bicycle. You want to get the right vehicle to accomplish the goal.
If we understand what the goal is, we can work with you and your professionals to understand what the best vehicle is for accomplishing the goal. That’s a big deal because if you get it wrong and then all of a sudden you start making money or you want to bring investors in or something, you may have to go all the way back to square one and throw out everything you’ve done and start over again, which is expensive. It can create taxable issues. It can create all kinds of problems if you screwed up. Ideally, and if you’re reading this now and you said, “I’ve already been in business for three years and I don’t know if I’m in the right thing.” It’s okay. As you said earlier about implementing things, once you hear something, you should at least investigate it and say, “Does that apply to me?” It’s better to fix a problem now when it’s only a little problem versus when the problem gets much bigger.
One of the other services I know Laughlin offers is we signed up an old entity and you guys said, “We’ll go back and clean up the books and the records for 2, 3 years and get all that in order.” It was things such as resolutions and how to open their accounts, cars, all that stuff. People like myself, as a man, don’t always pay attention to those particular details of doing the paperwork. I typically find that women are better at doing the paperwork and paying attention to the details. As a weak spot for me, and I’m sure it’s a weak spot for many of them out there as well, could you tell us a little bit about that? What’s the importance? What would that mean?
When you form a corporation or an LLC, you have a responsibility to have the entity, the corporation or the middle liability company, be separate from you. It’s a separate paper person in the eyes of the law. That’s why we use them because it can die without us going down with the ship. They can die without us getting killed. We use entities to shelter our personal houses, college savings for kids from the business activity. We also do it to save the business from some problem where our teenager goes out and rear-end somebody. We want to keep those two separate. The thing that separates them is called the corporate veil. You could also think of it as a corporate shield or some a big huge castle wall that nobody can get through. The corporate veil is the only thing that shows that you and the company are separate. The way you ensure you have a solid corporate veil is to be holding a regular board of directors’ meetings, keeping minutes of the meetings, passing resolutions for decisions, issuing stock and so on. These need to be done multiple times a year.
What is the actual purpose of having regular meetings?
The board of directors, which is the one that has the meetings, they have to make decisions and then tell the president of the company or the manager of the LLC what to do. For most of the people that are out there, one person owns 100% of the shares is the only member of the board of directors and is the only employee of the company. They’re the president, the chairman of the board and the shareholder. That’s almost everybody. The idea of having a board meeting with yourself seems a little crazy. Why should I have to go through this process when I’m the only one at risk? It’s all my money at risk. I’m doing all the work. I don’t have any investor money. Why do I have to do it? The answer to that is that if you want to take the tax deductions, which are huge, thousands of deductions that a corporation can take that a sole proprietor cannot.
You want the tax deductions, you want to be able to defend your deductions, you want the lawsuit protection. If there’s a problem that comes up, you want that company to do its job. The only way the law will let the company do its job or the IRS will accept your deductions is if you’ve been going through the same process that Apple, General Electric, Disney, or whatever have to do. When you see twelve people sitting around a boardroom table in a movie or TV, they’re all in their dark suits and they’re arguing over things. You have to do that as a one-person board of directors. The fact is we don’t know how to do it. Most individual entrepreneurs don’t know how to do it, aren’t thinking about it. What you said about your Warbucks Strategy, they go, “I know I’m supposed to do something, but I don’t know what to do, so I’ll do nothing.”
Know what to do. I just didn’t make the time to do it.
My point is that they know that there’s something I should do. There are empty stock certificates in my corporate book. I don’t want to ride on them because what if I do it wrong? I don’t want to touch that. The fact is if you don’t issue stock to you as a shareholder, you don’t own the company. If the company never takes that blank stock certificate, puts your name on it, sat down in the ledger and you take the certificate out and put it in your desk or in a strongbox, they don’t even own the company.
I bet you 90% of the people who have companies don’t know that.
I’m sure that’s true. That’s our experience. It never matters until somebody looks at you. In my talks, I say, “You can drive 100 miles an hour every day through the school zone and it only matters when you get caught.”
What you’re saying is as an owner of a corporation, I’m supposed to have my board meetings and create my resolutions and then the resolutions and to have it executed. Is that to keep the corporate veil from being pierced?
As soon as you skip that step, these board meetings have to be done at or near the time of a major decision. Buying a ream of paper at Office Depot is not a major decision, but there are hundreds and hundreds of things. How much petty cash are we going to keep? We’re going to change CPAs. We’re going to open a bank account. I reimburse for my gas. I’m going to sign the lease. I’m going to take some money. It goes on and on. There are hundreds of them that are required to have board resolution. If you’re audited or sued, the first thing they’re going to ask for is to see your corporate minute book. That’s the first part of the due diligence. When they’re going to sue you or audit you, we want to see your minutes
They look, and if you haven’t been doing them, they go, “We’re not dealing with a corporation.” It doesn’t matter that you’ve been paying the state. We’re ignoring that. You’re a sole proprietor. I don’t care if you have a thousand employees, if they disregard your entity, you’re back to a sole proprietor, which means tons of those deductions disappear. You’re going to owe back taxes now. Plus, 45% penalty on unpaid taxes. That’s huge. That takes $100,000 to $145,000, which you have to pay them. You say, “What if I’ve never taken that much?” If you had to all of a sudden pay $20,000 plus a 45% penalty, would that suck? Would that be a bad day? It would be bad.
It pierced the corporate veil. A corporation is another human being, it’s a legal entity.
It’s a legal paper person.
If we don’t do the things you described, it’s what I’ve heard as a sham.
They call it your alter ego. You and I are about the same age. We’re friends, we work together. We have common goals. You would take exception, I believe, right now if I reached into your pocket, we even have the same wallet. If I reached into your wallet and took money out or took your credit card and spent money on your credit card without you giving me permission, without there being a plan, you wouldn’t like that. Even if we’re great friends, even if we love each other and we’re best friends, you still would go, “What are you doing?” Yet we do that with our companies all the time. We get into the money.
We use an asset that we’re paying for that truck with the company money. When our sibling says, “Can I borrow your truck to go move a couch?” We go, “Sure.” That’s like me saying, “I’m going to go grab Solomon’s truck and let my sister use it without asking.” It’s unacceptable. It’s against the law. That’s what the minutes and resolutions do. They explain how is the company going to operate? What decisions are we making? We can have a board resolution that says Aaron can use the truck from time to time for personal use. You have to have the board resolution. If you don’t, then I’ve said the company and I are not separate. The company’s my alter ego. The separation is what keeps you safe.
I know we ask people a lot of times, CEOs who want to borrow money where I go, “Let’s see your resolution and your minutes where your board voted on it, and then how will the monies be used?” If you come into us as a CEO and saying you want to borrow money and use it for my company, however, we give you the money. It’s like that’s a love offering. If you have those resolutions, that corporation owes that money and it has to pay it back and you have to follow those details. Can you tell us a little bit about that?
There were two elements. One of them is the obvious one, which is there’d be a contract. We’re going to do something together. Once we, as the presidents of the company, negotiate our deal, then theoretically we both should go back to our board of directors, even if it’s still you and me. We have the minutes that say, “On this day, we at Laughlin Associates had a board meeting and talked about the new contract with Solomon Ali’s company. This is what was discussed and the decision was to execute the contract. Go ahead and do the deal.” Even though you and I can agree, we still need to go through the process, even if it’s us by ourselves individually. I still need to have the board minutes, the board resolution that says as the president I can sign the contract. Most small companies don’t think of themselves as having these layers. It’s my company. It’s my stuff.
I imagine they run in a lot of problems.
If you get sued, audited, if you want to get a government contract, if you want to take investment capital, if you want to go bankrupt, any of those, if you don’t have the minutes, the stock ledger current, if you haven’t been keeping a writing resolutions for things you’re doing, then when you get into a good situation or bad situation, it can all get unwound in that moment. It will ruin the deal simply because you didn’t go through the process of acting like a real corporation or LLC.
That’s the reason they should call you, to get Laughlin to help them structure, work with their other professionals if they have them. Get them thinking the right way on their structure, the paperwork, what particular entity they need, thinking, and acting.
You thought about it, you bought something and then you came back in pain. The great thing is, and to your credit, most people who’ve made wealth, my experience with those people is they don’t know how they did it and they have a hard time recreating it. They’ll build something up. They’ll make a lot of money. Everybody thinks they’re freaking smart, but they never are able to do it again. One of the things that I’ve admired about you, what you do is that you know the process. You know there’s a system. For anybody reading, I’m a big believer in following the formula or the recipe of somebody who’s already proven it and doing what works instead of trying to go, “Learn it all your own.” If you do your own study and it never is, it’s always better to bite the bullet, get some good counsel, guidance, coaching, consulting, whatever it is from somebody who’s already proven how to do it.
I read a book called The Richest Man in Babylon. It tells you to hire the right people to do the right job. Don’t hire a brick maker to go out and buy jewels. That was one of the examples. A lot of times, especially when I was younger, I thought I didn’t have the money. What I would do is say, “Let me learn a little bit here,” and then go try to apply it without paying that person for that knowledge. That was a huge mistake because what that normally happened is I went through this huge learning curve. I learned some more knowledge along the way, but I still failed. It would’ve been much more inexpensive and frugal to pay them to take me through the minefield, so I can get to where I’m going and do it a lot faster in less time.The black community starts about three times as many businesses as the white community. Click To Tweet
Most people that fail, it’s because they’re doing what you described. They’ve taken everything they’ve got and they’re spending it on bad experiences and they’re learning from the bad experiences. By the time they start to figure out what they’re doing, they’ve run out of money.
I could probably tell people all the ways to fail, but I can only tell you 1 or 2 ways to make it and you will make it. One of those keys is you have to hire competent people who know what they’re doing. Do not try to figure it out. I don’t try to figure out anything. I hire the people to do the job that they state they can do. I verify that. That was one of the reasons like, “I had another problem,” I said, “Let me call and look up Laughlin and let me see.” Many years later you guys are still here, still able to help me. That’s amazing to me because that’s half a century. That’s a long time.
It is a long time. The ‘70s don’t seem that long ago. The bottom line is in my experiences, learn from a group when it comes to private equity, public companies, knowing how to use the financial tools out there, I come to you because you know what you’re doing. You love it. That’s your superpower. What I know how to do is I know how to build a business and get it to get the people in place, so that it can run without me having to be the most important employee. Scaling, you should be working yourself out of a whole bunch of jobs.
For the freedom when they go into business, they think they’re going to have. When I first went into business, and you probably experienced this too, we thought we would have freedom, but we were working 15 hours a day, 6, 7 days a week nonstop. You’re saying now you’re going to teach them how to work themselves out but still control it.
People were surprised that my wife and I had been staying down to our beach house, not working for 1.5 months. First, they were happy for us, but over time they started going, “What’s up? How can you still be there?” Before that, it had never occurred to me that the way I did wasn’t the way everybody did them. I never knew that because I was never paying attention. Now we’ve had hundreds of companies go through this training I did called The Unshackled Owner and they all go, “This completely changed my business. I have more time with my family. I make more money.” One guy told me, “Profit margins had all gone up in this tech company by simply applying a formula that works over and over again.”
No matter what it is, no matter what you’re doing in any part of business, there are things that work and things that don’t. If you can find the people that know what works and listen to them and if it means only buying their book and reading their book or listening to their podcast. Until you can afford to get a conversation with that person, go to a live event or hire them to come into your business for a day, you can only do what you can do. Everything you do, in my opinion, is going to be better if it’s all done with the intention of getting to a certain outcome.
As long as we’re clear on the end goal, where we want to go, like a little baby, take little baby steps, little faltering steps. It’s not going to be like you come right out, the day you learn how to walk, you’re running marathons. You stumble forward until you learn more and more. You get the help that you need at every stage of your growth. Bob Iger put out an autobiography and he talked about the mentors that brought him along in television with Steve Jobs, Michael Eisner, all these people were coaching him. Now, he’s running the Walt Disney Corporation and it’s enormous. Everybody that’s successful will tell you they have mentors, coaches, trusted advisors. I don’t care who you are. Jeff Bezos, Bill Gates, Warren Buffett, they all have them.
One of the exciting things, I know you started a new venture and I’m a part of it and I’m starting a new venture, you’re a part of it. We’re starting a new venture. We’re working together to do something that is going to be fabulous to help companies to be able to gain access to capital and to go public and things to that nature. You’re going to train them so that they can scale and everything and be able to place those management systems so that they can have some freedom. Do you want to talk about it?
The thing is that’s going to be fun. For those reading, Solomon and I, it even happened on the podcast about painting and turning apartments. The more we get to know each other, the more we are coming to understand. We’ve done wildly different things but have had a parallel track. We have different skillsets and the idea of bringing everything both of us have learned in our many years each. We’ve learned some things good and bad and wanting to help specifically are our initial goals. Fifty companies, they’re already a solid company, not a startup, not a wish or a dream. A real company that wants the education, the infusion of capital, to go public, and to be able to go from $5 million, $7 million, $10 million to $50 million, $80 million, $100 million or wherever, the moon. It’s exciting.
The fact that we get to do it together and we’re bringing it to the financial and the formula, the operational and the financial tools together with people who have the guts and the will and the drive to run and do it is going to be fun for everybody. There are at least 50 companies and thousands of employees and probably millions of customers that will benefit from this thing. We are moving the ball and we do have companies already going away. We’re looking for those that will fit that specific criterion. Most people will not qualify. Some people who are anywhere from $3 million to $15 million, $5 million to $15 million, something like that. They have something that can scale, that has a management team that’s willing to learn, bend, grow, stretch, become better than they are now and happen to also get rich in the process. That’s what we’re looking for.
It’s going to be exciting to work with you, but also to work with these companies and helping them to bring their dream and their vision together and to scale it, to take it to where they want to go and the impact that it will make on society and whatever it is their companies may be. I look forward to that.
My goal for my life going forward, I could give you all the reasons why. If anybody wants to listen to my podcast called The Unshackled Owner, you find it everywhere. Go look it up if you want to hear more. My philosophy, this is why I’m excited about what we’re already in the process doing. My goal is to help more companies stay in business for more years, making more money. The reason for that is like what you said. When business owners, almost for whatever gripiness we hear in the media about big corporations, the fact is most businesses as they grow, they hire more people. They give more to charity, they sponsor the Little League team. They do good things. They do 401(k) matches. They’d pay for your health insurance as they grow. They’re not going to be in business forever. I look back at companies like Kodak or Montgomery Ward, a lot of companies that were institutional entities are gone. Sears is almost gone. Kmart’s basically gone. The things that seemed like some of the biggest companies in the world and they’re gone.
They’re not going to last forever, but if we can keep them in business longer, more successfully, making more money, creating jobs, and helping those jobs do better-paying jobs. Have more benefits and help the overflow, the abundance from the company go out and make donations to charities and tag good contributions, all that stuff. It helps the whole society. Not to get too altruistic here, but the fact is that the US economy is the largest economy in the world. The US dollar, the $100 bills and the currency of the last resort for the world. If this economy is strong, it leverages everybody. All the boats rise. Some of the poorest countries do better. The richest companies do better and individuals do better as long as we keep growing in the right way.
I don’t know what you’d think about this, but I heard approximately 80% of the small businesses help drive our continent. It’s not the big businesses that are creating all the jobs.
In 2017, 86.3% of gross domestic product, that’s every transaction, was done at businesses with 50 employees or less. Not General Electric, not Walt Disney, not Delta Airlines. The coffee shop, the landscape company, that dry cleaner, the restaurant, the law firm, the accounting firm, these are all small companies. 83% of all the new jobs were created by small businesses. We must protect small companies and keep them alive and thriving.
That’s one of the reasons we want to help them have a stronger economy.
It’s going to make everybody’s life better if companies are successful. The free market works and in a way that doesn’t help the owner, but you’re going to find that most owners are not these greedy jerks that they’re painted to be in the media. There may be a few examples of that, but for the most part, business owners, if they have a surplus, once they’ve met their goals, they’re dumping all that back into their people and keeping their people improving their assets, their apartment, building, their whatever. They’re doing good things and they get a bad rep for it a lot of times. Remember, 86.3% of all of our economies are created by small companies.
I took a page out of that and stated that’s why I wanted to start MBA to help minorities that were in business. I read the research, it said five million businesses in the United States with employees. There were less than 100,000 businesses that were a minority, black-owned with employees. I went to, “Let me see how many publicly traded companies that were.” There were 8,000 public traded companies, but there were only fifteen black publicly traded companies, black founder or black-owned and managed. I was like, “They do not have access.” Maybe a private equity person is always raising financing for people. I said, “They can’t go get a loan.” Typically, when you go get a loan, you need three years of historical numbers.
You got to bring three years of your financials, three years of tax returns on you in the business to get that loan. If you’re not making money and can’t show that you can service the debt, you don’t have access to capital. I’m not going to mention that one of the big companies that it’s the largest company in the United States, they lost money for fourteen years. It told me, “They wouldn’t have been able to go to the traditional banking process and get a loan.” The only reason they were able to get a loan was that they were publicly traded and they were able to turn it around and get literally billions of dollars and keep going. Now they have cornered the market and they distribute all kinds of things all over the world.
That’s amazing. I said, “What can I do personally to help minorities, my people, that seem to have been left out?” Most of the time people don’t think about them in the equation. I said, “I can’t look to someone else to think about them. Solomon, you know this stuff. You go back and give to them first and you think about them so that you can help them say how do you get in the business?” Because it’s more than a notion. The first step I would tell them, “Go to Laughlin, get the right structure.” The second thing I would say is whatever little monies you have, do not apply it to buying some widgets yet. Apply it to creating the proper structure. Apply it to, “Let me get access to some financing.” What do you say about that?
For a business perspective, I agree. First, build your foundation and then build on top of it. From a minority-owned business perspective, it’s interesting. What you’ve got your finger on the pulse of what the Japanese admiral said right after they bombed Pearl Harbor, “I fear we have awakened a sleeping giant.” That’s the black community because the black community starts about three times as many businesses as the white community. Did you know that? Black people tend to be more entrepreneurial than white people, black women in particular.
Why do we have less?
I’ve never been black or in the black community, so this is supposition. My supposition is that the black community is only relatively lately been even invited to the real party. Before the Civil Rights Act in 1968, 1969, there was a significant marginalization of black people. As a group, they weren’t getting the same level of business education. They might be a great mom and pop business. They might be a great store, a great mechanic, a great fill in the blank, but they weren’t learning about growing a corporation. They weren’t growing and scaling and the system was against them. As the system is starting to crack and there are opportunities for people to step through, and you can say this for black people, you can say this for women, which happened about the same time for women in the early ‘70s. You go back and watch that movie 9 to 5 from the ‘80s, “That was how they were perceiving women in the workplace?” That wasn’t that long ago.
These boundaries are breaking down. It’s only now that you’ve got a few people like yourself who’ve managed to do great things against the odds who can now share that and extend a hand and lift people up. One of the big reasons people say there’s not enough women in the C-Suites of big companies. Women aren’t getting the management jobs in middle management in Google or Facebook. Here’s why. There’s not a culture amongst women to train your replacement. Men have been training their replacements for years. That’s the culture. It’s a fraternal thing. Women have been competing for a few scraps and now the new generation is being born into a time when that doesn’t have to work anymore and they’re going, “What’s up with this?” They’re fighting now to get recognized. Their moms didn’t have that.
It makes me think about one of the people who run the private equity company that I originally started. She’s a woman. I had phenomenal numbers in returns on investment and everything. She blew my numbers away. Three years in a row, I was like, “Wow.” She’s a woman, but women are not known to be in private equity. Everyone loved her. I was barely accepted. It was like, “Who’s this little black guy here?” I had to keep showing up at the door with my little pennies, “We can do this.” Finally, it broke open for me and my returns were high and the companies and the things of that nature I was investing in, but hers were phenomenal. I would say it’s because women pay attention and if men are disregarding women, that’s a huge mistake.
I’m well married. I have a brilliant wife, competent. I’ve learned that most of the time her intuition is better than mine. Her read on people is often better than mine. Men tend to be great visionaries as a group. Men tend to be more visionary. They see an opportunity because it’s in our DNA to go out and kill the water buffalo or to conquer the other army. We see this thing. From a practical day to day application operationally, women are more inclined to stay in the same things that made women great raisers of families, keepers of homes. Keeping the fire warm, keeping the food there, preserving something. Davy Crockett, Daniel Boone are out in the woods for three years. Their wife is home with the kids keeping it all together.The first thing you need to be successful is a good idea. Click To Tweet
What I want to ask you, I’m thinking about my audience people of color that’s out there. Black folks out there getting ready to start a business. I know how to bake a cake, but that’s all I know how to do. When I come to you, I need to depend on you to guide me because maybe forward all these other professionals and have you guys all work together or not. One thing I do know, and I know this from experience, I’m going to back up, is that I do need what you have and then needing what you have. All I know is how to bake the cake.
One of the things that people ask me all the time is, how do you become successful? Most people’s definition of success is they’re beyond starvation. They’re beyond desperation.
How do you make real money and have freedom?
There are three things that you must have to be successful. One is you have to have a good idea. It’s got to be not a stupid idea. A lot of stupid ideas or you could have a brilliant idea, but you’re ahead of the wave. Technology or awareness isn’t ready for what you have yet. You could have a great idea. Look at MySpace. It was a great idea, but they got eclipsed by Facebook. Facebook came in and did it better. The ones that were in first don’t necessarily mean they’re going to be the winner. You need to have a great idea. It’s got to be good timing. If you have a good idea, then you need to have access to capital. Either your own money, self-directing an IRA, getting investment capital, getting a debt. Debt’s tough on a brand-new company because there’s no way to service it.
You’ve got to get money into the company. Most entrepreneurs have limited money, which means if you want to grow your business into something that’s you’re going to be excited about, that’s going to make you rich, you’ve got to be willing to live low for a little while and not consume everything the business makes. If that means you’re couch surfing or you have to ride the bus instead of having a car, if that means that you’re doing a Mark Cuban eating ketchup packages from McDonald’s because you can’t afford a cheeseburger, that’s what you do to feed the company. The goose that lays the golden eggs gets fed first.
You have to have enough money to let the company grow, so either it’s going to be out of your pocket, borrowing it or getting investment money of some sort. Now, you’ve got a good idea and you have money. The reason a lot of companies that are venture capital-funded fail is because the founders have a good idea. They raised a lot of money, but they’ve got no skin in the game except for all this investor money. They squander the money. They have no clue what they’re going to do with the money. They have a business plan, which is a work of fiction anyway.
80% of them fail. When you file a little business plan, 80% of them are unexecutable.
If you don’t have skin in the game, you’ll probably squander other people’s money. You got to have skin in the game. You have a good idea, access to capital. The critical third piece is the formula to follow. On a financial level, I listen to you. On a structural level, a lot of people listen to me. If you have those three things in place, you can win.
For everyone at MBA, how do they reach you?
If you go to LaughlinUSA.com, you can find the website. If you want to get information about how do we start helping you with your corporate records, we talked about the minutes and resolutions, get on our mailing list.
For the person already in business, you can help them too.
We don’t even advertise for startups. We work with a lot of startups, but we advertise for companies that have been in business for at least three years and have three or more of them.
Let me see if I understand this correctly. What you’re saying is I already have a corporation or an LLC or something. I can still call you. It’s 4 or 5 years old.
You should call me because if you’re 4 or 5 years old, odds are you’ve figured out how to stay alive, which means you have something to lose now. In this case, odds are you haven’t been following the rules. You haven’t been holding those board meetings regularly. You have an issued stock. You don’t know what the asset protection structures like Warbucks are. You don’t know what you don’t know. Ideally, you’re the person that’s calling me. If you’re getting started, we help lots of people get started. Our primary aim is to help people that are already beyond hanging on by their fingernails who now got a little momentum and they want to say, “How do I protect what I’m building? That’s where you go to LaughlinUSA.com.
Here’s something I do. I do a thing twice a month called the Freedom Call. This might be an ideal place to start. I come on the 1st and 3rd Wednesday of the month for 30 or 40 minutes and I teach. I’m going to talk about some of the important things you and I discussed. I’m picking up insights. We have all this conversation with these little nuggets. I go, “People need to hear that.” The same thing you’re doing here, on The Freedom Call, these are people who show up and maybe it’s ten people or maybe it’s 150 people. I never know who’s going to show up from one Wednesday to the next, but I’m sharing with them what I have been learning. What have I heard? What are my predictions of what’s happening over something going on timely?
You’re sharing with them all the successful people that you may have been talking to and they’re getting that information. That’s invaluable.
If you go to the website and sign up, it’s $500. We use it sometimes to go to a new audience to let them learn about us. If you go to Laughlin USA and sign up for the Freedom Call, it’s $500. If you go to your cell phone and text, Freedom Call, to 797979, you get it for free for a year and then it’s $500 the second year if you want to stay on. Here’s the deal. Nobody ever quits. Everybody stays on the group. It gets bigger. If you don’t know who Solomon Ali is, you don’t understand the level he’s playing. If you go back to some of the friends that I hang with, my best friend, founder of WebMD. In my men’s group, founder of Uggs, founder of Make-A-Wish foundation, creator of Pictionary, former CEO of Samsung. The people you and I get to talk to are playing a big game. I can share that with a beginning entrepreneur and say, “Let me tell you what I heard from the former CEO of Samsung.”
You’re never going to get a meeting with him. You’re never going to meet this guy. Odds are regular. I can tell you what we hadn’t talked about at our every other month’s men’s group meeting. I’ll tell you what’s going on. It’s free if you do it because you came to MBA. I’ll tell you what, I know a lot of MBAs, I look and I hire a lot of MBAs, and I work with a lot of MBAs from Oxford, Harvard, Wharton, all of this stuff. The best MBA you’re going to get is learning from somebody who’s done it on the street. Everything you learn in business school is fine and useful and might get you in the door, but it does not teach you how to run a business. It teaches you how to be a critically important employee to some other guy or gal who didn’t get an education but figured out how to make money. It’s the truth, almost every time. Look at Bill Gates. He dropped out. Steve Jobs dropped out. These guys dropped out.
I always say I’m not the smartest guy there, but I’ve gone up against some PhDs, some MBAs, and at the end of it we come to the conclusion that I’m talking to theory. You’re talking about how this works in the real world. It’s different and everyone has a place. What they do is they can help you take your business in a different direction once it’s been all, I say, departmentalized. As an entrepreneur, I have found you have to wear 10 to 15 hats and you have to be proficient in each and every one of those hats you put on.
Everybody wants a strategy. Henry Ford had a great quote and maybe I can end my comments. You can go to Laughlin USA or go to Freedom Call 797979. Henry Ford is one of my heroes. Henry Ford said famously, “I’m not the smartest, but I surround myself with competent people.” As you build a business, a lot of inexperienced entrepreneurs are terrified to tell their people what’s going on, to share their secret sauce, to be open because they think this person has got a better education than me or something. “They’re going to steal my idea and run with it.” It’s not true. 99% of the time, the person that went through college and followed the rules and followed that linear track to become a CPA, a lawyer, an MBA, a PhD or a customer service person, they don’t have that weird second sight that an entrepreneur has. They don’t know how to do what you do. You don’t know how to do what they do. Work together. Henry Ford, not a big education, but I surround myself with competent in this company is still going on.
One of the things I would urge you to do is do not do what I have done and that’s wait, buy something or not buy something. Seek out people who are competent. Get the information. We’re giving you a lot of information for free so that you can go out and be successful. Where it starts is you have to call Laughlin.
We’re easy to find because we’ve been out there on the web from day one.
Let them help you get the correct structure. If you’re already in business and you’ve already been doing business for some years, call them up so that they can help you get your corporate documents and everything of that nature in order so that you’re not running the risk of being sued. When you get sued, that corporate veil will not be pierced. A regulatory body, when they come, they will find that you have your corporate documents and structure all the way it’s supposed to be. That’s what they will help you to do and that’s extremely valuable to you and your company. Aaron, I want to thank you. I love you.
Thanks for having me. I appreciate it.
- Warbucks/Red, Inc.
- The Richest Man in Babylon
- The Unshackled Owner – Podcast
About Aaron Young
Aaron Young has been empowering business owners to build strong companies and proactively protect their dreams. An entrepreneur with several multimillion-dollar companies under his own belt, Aaron has made it his life’s work to arm other business owners with success formulas that immediately provide exponential growth and protection.