[00:00:00] Speaker A: What I didn't know is that my mother in law's cancer would return. And as I'm winding things down in the company and I'm letting the last employees go because we got a clear no, she calls and said, my cancer is back. It's terminal. I only have a few weeks to live.
[00:00:19] Speaker B: Today we're joined by a small business owner who's got an incredible construction business with his wife and his five kids living out in Idaho. He began his construction career early on, first as a laborer, then moving up to a foreman, eventually as a project manager. However, he got fired as a project manager and decided, you know what? Screw this. I'm going to start my own company. Bringing five people around him to start his team. Over the years, he learned the ins and outs of how to run a business properly. We're going to talk a lot about that. And he discovered what his own strengths and his limitations were. He realized that his own abilities made him better suited to run certain things behind the scenes. So eventually, he put the hammer down, and he dedicated himself to running the business the best way he could. What's cool is that his eventual freedom in time led to creating and owning a business and allowed him to delve deeper into the tax code so that he could learn the secret tricks that every american needs to be aware of. Welcome to the show. Nathaniel Ely. So happy to have you on with us today, man.
[00:01:15] Speaker A: Richard, you summed it up there, man. That was good.
[00:01:18] Speaker B: I think it's really, it's really valuable to have you with us today because, you know, so much of the population in North America are in the construction world. You know, I personally am a recovering electrician, as you know. So I've spent a good number of years in that environment. Love getting my hands dirty. In fact, literally, I was building a fence yesterday because every once in a while I have to get it out of my system. And I just really appreciate what the construction trades really do for the world. Or they're, they're sometimes the unsung heroes, you know, without them coming in to fix things and build things, we don't have a lot of the stuff around us that we need. And theres a lot of hard work thats available there, but theres also a lot of great opportunities and its a really great career to have, regardless of what trade youre in. So your first foray into construction, was it the job that was available at the time, or was there something that pulled you into going that direction early on in your life?
[00:02:09] Speaker A: Clay yeah, I had the fortune of growing up in a construction family, which means I did not have a fortune. But I was fortunate.
I grew up in northern Michigan. My dad is a carpenter and he's been a carpenter for going on literally 53 years, I think, this year. So he's done it full time his entire adult life, which meant me and my siblings got pulled into it and we had to do construction work evenings, weekends, summers, whenever dad had needed help. And we even homeschooled a couple of those years, which meant I was doing construction work when my homework was done. So we did a lot early on and really learned a work ethic. Even though I did not enjoy a lot of the work. I enjoyed some of it, but my mind was on my next sandwich or thinking about girls or other things besides construction. At the same time, I picked up some skills, definitely learned some work ethic, and then thought, man, I never really want to be in construction again. And went to Germany as an exchange student, went off to college, but at the same time that was the skill I had. So even at college I was broke, needed to earn money. So I kept doing construction a couple of days a week for somebody here locally who would pick me up, take me to the job site, bring me back. I didn't even have a vehicle or anything, but I had some skills, so I got to use those. But fast forwarding, the reason why I ended up launching a company is because in your summary you mentioned some steps that were taken. First, I had a skill. It was a hot construction time, so I got hired on as a foreman in a company right out of college because it was one of the first times in my life I didnt have a plan of what I wanted to do next. I was skill stacking, though. I finished college a semester early. So I thought, you know what? Ive always wanted to learn how to weld. Knocked on a welders door, had him teach me how to weld, went over and did another thing for another guy and picked up skills and then jumped in as a foreman because it paid the bills.
Within six months, though, I was headhunted to be a project manager and actually launch a construction company for somebody else because they saw my work ethic, they had gotten to know me a little bit, felt they could trust me. And then my second to last day in the field, I decided to shorten these two fingers with a table saw.
Literally a Thursday. When Friday was my last day, I lapped those guys off while not paying attention to what I was doing. Because again, my unique ability is not to focus in a trade, but it is to have 30,000 flow level pictures and strategies and vision of where we could go and take things as a team and build a team. But I didn't know that at the time. I just thought, man, I should have paid attention.
And so after I lapped those off and started in the next company, I was six months there and I wrote a business plan, which I'd never written before in my life. And I was getting paid to do this. That was the cool thing.
However, the payment was deferred, let's put it that way, because I actually requested that I not get a wage in this company.
[00:05:18] Speaker B: So I got, that's a very unique statement to make to a new employer. So I'm sure they looked at that and they said, sounds great. When can you start?
[00:05:27] Speaker A: Exactly. Exactly. I said, don't pay me, I want equity. And so they said, oh, okay. And then we had a conversation around that, and it was a continuing conversation. And I worked easily 12 hours a day, six days a week most of the time to get this company launched because I was so excited and someone was literally allowing me to have a blank canvas, create a company. I didn't have any risk in it, and I could get equity out of it by working my tail off such a cool opportunity.
And so I would work 8 hours a day or ten in the office, getting things set up, working on the business, designing a 77 lot development, working with the city, working with an architect to design the homes, I mean, tons of stuff, even meeting with potential buyers. And then id work another two, four, 6 hours in the evening, remodeling a showroom on Main street here in our little town. And then as things progressed, I was doing more and more work and I started hearing from my boss, the owner, less and less point where at the end I literally didnt even hear from him for three weeks straight. Like, not a word. And Im running everything.
And this went to my head because Im just a young 20 something punk. And I thought, well, man, Im just in charge of this. I got it. But what was happening is my bosss vision was different. He was hearing some things from people about the way I was communicating to them, which was not in a professional manner. It was prideful, uh, to be blunt. And, uh, then he just fired me out of the blue, so I don't hear from him, and then he comes back and he just fires me on the spot. And so here I am. I worked for six months for no pay, and I was living on $400 a month, which at the time was feasible with, uh, my 152 50 cent, uh, uh, a month rent. $152.50. I still remember that.
And the rations I put myself on and, uh, and then some truck insurance that was like my only bills. And. Yep, and I had some savings, so I was able to live on that for the six months and, and take this risk. Uh, fortunately, uh, through some tense conversations and negotiations, I did get paid what would have been a base salary because this guy fired me. He chose not to proceed with the business, et cetera. So I ended up with about like $16,000, you know, after taxes, and use that to launch my own construction company. Not because it was the next logical thing, but because I didnt have a job and I needed to earn money and I had really good friends and mentors around me who said, nathaniel, why havent you started your own company? You basically just started one. Do it for yourself. By the way, I have this massive historical remodel you can jump right into tomorrow. Wow. That's how I got, I got pushed into it.
[00:08:15] Speaker B: There's a few things that stand out there is that there's a combination of belief in yourself and your work ethic and just the kind of the knowledge that that's eventually going to take you somewhere, maybe not knowing where it's going to land, but that creating an environment of people believing in you to be able to set up the position where you literally could start a business, but fundamentally, you had a job ready to go. You know, Dan Sullivan says, find out who the check writers are of and get the first check in order. And that's a great way to start launching a new idea.
[00:08:43] Speaker A: Yeah, absolutely. Now, that's. I'm looking back, that is absolutely key to, uh, you know, the success that I had over time. It sure looked like success. At the moment. It just felt like I was like, you know, stumbling and failing a lot of times. But I had people around me, I had relationships, I had, uh, you know, people that I had been a giver to in advance, and so they wanted to invest back in me. And then a lot of times there are people that for some reason saw something in me and I hadn't given them a thing, and that's probably the majority, and they just wanted to help me out, and that's. I contribute a lot of our success to that. Just kind people.
And putting yourself in community with other people is massive.
[00:09:22] Speaker B: So nobody wins in life alone.
[00:09:25] Speaker A: That's, that's for sure. And especially not in the construction industry. It is a team sport, so. And we'll. And we'll get to that. So then here I am, it's me. I've got some tools and a truck that my grandpa had given to me and I've got a job to do and I started doing it and I need some help. So I start talking to people I know and gathering people around me, and within six months I've got five other guys on my team. And you think, okay, five other guys in your team? Well, great, you're building something and it's happening super fast. Well, what I had was five guys who were 1099 subcontractors and this is a hot, hot topic in the industry and has been for years. They should have been employees, but I thought, man, employees are expensive. Ive got all these extra expenses ill have to have and all this extra paperwork, which was true. And so I had only 1099 contractors and I continued to build that way. And then I think within another few months I had like eight or nine of these guys and were jamming and were growing. But I am more and more disengaged for the business because I'm just running around with my head cut off, you know, trying to give quotes to people and I won't even call them bids because they were quotes, they were estimates and they were terrible estimates. You know, we would run over on our costs by like 30% to 200% on a quote. I mean, just ridiculous amounts because we weren't taking the time to actually line out what a job required. And of course its the classic contractor conundrum. Youre trying to close sales because youre starving while trying to finish a job that you underbid and you just are squeezed on both ends and you dont have the time to fix it. And for me, I didnt have the desire. Id just like, oh, I cant stand this. I liked that I was earning some good money. I liked that I could bring some guys in and have some friends to work with. But now I just want to sit in my little basement cave and read these business books. These are super fun. This is cool. This is cool stuff. I just love reading these books. But you know what, im not going to apply anything in here. Im just going to read it because it sounds so fun. So thats basically what I did. And at the same time, I thought it would be great to launch a concrete division because I had a guy come to me who is an unbelievable concrete finisher. So we got that up and running, got that wash for selling concrete jobs. But I neglected to screen for the fact that he was also an alcoholic and a Coke addict.
And I, of course, discovered these things very quickly, but just thought, oh, he's working on it, no problem. Which is one of those also classical situations in construction. So this continued for way longer than it should have. And then, mercifully, the recession ended it all.
[00:12:11] Speaker B: So the recession in the year 2009, my life completely and totally changed.
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[00:12:52] Speaker A: Come on. So by the time it hit our market, it was 2009. And so I laugh. All of my guys who are, I should mention now, employees, because to make things even more fun, I did get some advice, and the advice was, you have to turn these guys into employees. So I turned them into employees.
Of course, we're not charging enough to make them employees. And then the recession comes. So my bills radically rocket upward. Our workload drops by, like, 25%, and I. Just. Not sustainable. So I lay off all my friends. Cause these are all friends.
It was devastating. And it's just me and my little cave in the basement and all these business books that I didn't act on, but that I had read and thought were interesting.
[00:13:46] Speaker B: So one of the takeaways there is that knowledge does not equal understanding. That's fair.
It's good to read a lot. But application of knowledge is, you know, they say that knowledge is power. I believe that the application of knowledge can become powerful. And there's a little bit more detail that they miss out in the quick statements there. And so, I mean, you mentioned things like you had to lay off people that were your friends. And I think, again, anyone in the construction industry, or even people who've just been around folks in construction, the jobs shift and change pretty dramatically. And some jobs end very quickly.
There's residential, we've got commercial, we got industrial construction. There's all these different avenues. And it really can be, it's very economically dependent, and it's also geographically dependent. So there's a tendency to have to move around. You have to move from job to job, from company to company, because somebody gets warded the big job in town, but everyone was bidding on it. And then everyone that was working for the companies that didn't land the big job, they have to scramble for other work. And so there's like this transition of, oh, well, hey, I used to be working for these guys. I got to go over here now because they've got the work, and it's a really weird kind of scenario with the industry. And so you would have seen all of that and been exposed to it. But the impact of having people that, you know, you love and they work with you day in and day out to have to make that big call and say, I'm sorry. Like, I literally can't afford to pay my own bills. I certainly can't afford to pay yours. That's a difficult conversation to have.
[00:15:13] Speaker A: Yeah, it was very difficult. So. And to, you know, add to the pressure, I just got engaged and was supposed to get married. And so my future brothers in law, and I found this out later, are looking at my wife and saying, can this loser provide for you?
So we ended up. Did get married, which is amazing, because my wife is the lion share of God's grace in my life since I met her. And she got an inheritance of, I don't know, a little over 20 grand. And we just threw it into the debt hole that I had created, this crater of debt, shutting things down, mostly that concrete division with the cokehead alcoholic that was entirely my responsibility for employing. And so I think we ended up just paying off the ten grand that was left in debt just by hustling and working myself, swinging a hammer. Still had enough work just to keep myself busy. And then that continued for the first three years of my marriage, where it's just me and a hammer, maybe a helper or two here and there temporarily, and just hating it. I just hated it. And I would apply to the jobs. I would actually get multiple interviews. I would get awarded the job, and then I would just be like, I can't take it. I just. I just don't have peace that this is the new direction. And that happened at least five times with five different industries. And then finally, after three years, I just. I just said, all right, goddess, if you want me to continue as a carpenter the rest of my life, I will just like, oh, you know, this is terrible kind of thing, but okay, if that's what's. What's happening. Cause this is clearly not going anywhere. And amazingly, within. I mean, just weeks or even a couple of months after that, um, you know, that realization and that turning point, um, I realized that I had all the tools I needed. Uh, I was just trying to reinvent the wheel constantly. And, you know, the Colby assessment, some of the viewers may or may not. There's an assessment that assesses your mode of operation, essentially how you initiate action. And mine's a quick start. So I just go and I iterate and I try new ideas. And the danger of that is you try to reinvent the wheel and everything when there's areas that have been completely charted, and you should just follow best practice. So I had to get over myself, just follow best practice and start building a company from scratch.
That was only about seven years ago when I got there, because there was a long period of time where I had all kinds of head trash around what I needed to do, and I wasnt changing. Even though I had read all these business books, I had the knowledge I was not acting on it. I had head trash around what I could charge in my market. I thought the max I could charge was dollar 40 an hour, which is ridiculous, but for some reason, thats what I thought. I thought that because I was attracting clients that didn't want to pay more than $40 an hour, but there's a whole nother market there I didn't know about. I had Ted trash on what helping looked like. I thought helping was always having an alcoholic or a drug addict or a convict or ex con on my team at all times and trying to elevate them in their life. And while there's a place for that, and it is wonderful to help people, and, you know, I'm glad that I got to help, you know, at least one guy I know, literally one guy who is sober today of that, of the hundred or so guys I employed over a decade.
But I realized at the end of that, through a whole other story, which I probably wont relate here, unless you want me to dig into it, that by loving these guys, I put quotes around that, too. Loving these guys, I was hating my clients.
That was a powerful realization. And thats when I pivoted, and that was about seven years ago. So head trash around what I could charge, head trash around what helping looked like. And then I guess that third one is head trash around employees. I thought they're too expensive and that I couldn't possibly go there. And so I had to get past all three of those things. And then I did, uh, through a horrible situation, which, you know, I mentioned before. The, the rough sketch is that two guys stole prescription narcotics from a client of ours, painkillers. Wow. Lied about it to my face, took drug tests. They both tested hot for him. I could not tell they were lying. And then the client turns to me and says, nathaniel, my brother, overdosed on that drug and killed himself. And I bell fell.
Yeah. And I said, this will never happen again. And I never again hired a guy who was a down and outer and said, I got to figure this out. So we pivoted from there and sought some advice.
[00:19:45] Speaker B: Jeff, amazing. Well, the advice is important, and people get advice from usually someone who's got an experience there. But often we seek or ask for advice from just people that we know that have zero experience. So the quality or the direction where you seek advice, I think, is important for people to understand. And when you're seeking advice or some. Maybe some mentorship, you probably want to go to a source where, you know, there's some proven track record or expertise in that zone versus calling up your brother in law and saying, hey, I'm thinking about, you know, building XYZ in this house, and they've never touched a hammer in their life. Like, maybe not the right place that you want to be asking that particular advice.
[00:20:25] Speaker A: Yeah, that's spot on. Now, we decided to hire a consultant who was in the industry and was respected, and it costs a ton of money. Even at the time, it was an astronomical amount for us. I would still say it's expensive today for what we paid, and they did give us good advice. The irony of the advice is that we just needed to have the self discipline to do the things we knew to do.
And so that's what it came back to for me. And it has time and time again to the point where I realize now that sometimes I do need to pay what I call the self discipline tax.
And so when I go to the gym, I joined only a year ago, and I literally told the proprietor, I'm just here to pay myself discipline tax.
I have a weight set in my basement, but I stare and I'm like, oh, weights.
But I go down to the gym, and they tell me what to do for an hour. I don't have to plan it. I don't have to think about it. I don't read ahead. I don't even record what I'm supposed to be doing, which is probably best practice. I don't care. It's getting me the result I want. I go in, I work out for an hour. I leave. So I pay my self discipline tax. And in this situation, we had to pay a hefty self discipline tax. And to be told, yes, you need to do what you know and you need to do, and then to actually implement. And this is when we actually did start seeing traction, though. So instead of having, I got rid of all that head trash, because I had someone look at it and be like, no, you can do these things. You just need to actually market. You need to actually build systems and have some standards.
And, uh, we went all the way into the other ditch in terms of, uh, hiring personnel. So now it was going to be full employee and it was going to be top quality. And, uh, you know, we got a great lead carpenter and we were starting to run. And then, uh, you know, we cast this vision with the consultant and we were going to hire two more lead carpenters by May. And this was like, you know, the end of the year. And so we started putting the word out, we started conducting interviews, and our lead carpenter that we have comes to us. It was the day after Christmas, I think. And he just says, hey, Nathaniel, I got some bad news, man. My mom got in a car wreck back in California, and my brother's taking care of her now, but I got to go back and help care for her. So I'm going to leave no later than July. And we were just, and we felt terrible for him. How can we help? And then, of course, after he leaves, we're just like, oh, man, this is terrible. Huge setback. But hey, we're interviewing. Let's see where this goes. And so, you know, I'm a big believer in praying specific prayers. So we prayed a specific prayer. He said, lord, help us hire not one, but two lead carpenters on May 1. And if you do this, Richard, whether you believe in praying or not, you have a concrete goal with a concrete timeline. And, you know, if you got a yes or a no. And so we are interviewing people and interview after interview. None of these guys are quite fit, fitting. And Im investing, of course, a ton of time into this and money and I think were posting on Craigslist and just super basic stuff. I mean, I doubt we were even on Facebook for any of this, but were getting people to come in. Its a tough time for guys to find quality work. So were getting leads. And then theres this one guy interviewing and he is just so experienced. He was perfect. And we get to the end of the interview and he says, hey, nathaniel, I know Im the guy you need, and I can't take this position after interviewing with you. I just need to find like a corporate role because I don't know if my wife is going to have tenure and we're going to be here. So I just got to decline the position. Just want to be in front of you, you know, I really appreciate what you got going on here. Uh, don't want to just jump in and leave on you. So I'm like, okay. All right. So we just keep interviewing, and then we get some guys in our pipeline that kind of advance on some stages and mays approaching. And then on May 1, we have two guys in our pipeline and not one, but both these guys absolutely bomb out of the process on the same day. Just like hard fails, they're gone. And so I turned to my bike, and I'm like, well, that was a clear no. We got nothing.
And so we were actually going to wind our construction company down. We are going to let this thing go to bed. At the same time, we had been buying some foreclosure properties and turning them, flipping them, keeping some as rentals, but I have been doing that outside of my company and just employing subcontractors to do most of the work so we could run both simultaneously. So I thought, I'll do more of that, do some real estate, but we'll figure it out.
What I didn't know is that my mother in law's cancer would return. And as I'm winding things down in the company and letting the last employees go, because we got a clear no.
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[00:25:42] Speaker A: He calls and said, my cancer is back. It's terminal.
I don't have a few weeks to live. But we had wound everything down, so now I have free time, so I stay home with our few little kids. At this point, we got, I think, two little kids with a third one we were just going to have at that time. Actually, maybe three at that time. Yeah, three kids, and I'm home watching them. So my wife could be with my mother in law at her deathbed, and she passes six weeks later. And my wife got to be at her side almost the whole time. Um, an unintended blessing in what we thought was a horrible situation for us professionally and literally the week my mother in law dies, I get a phone call. Hey, Nathaniel, I dont know if you remember me. I interviewed with you way back in the winter, and I really appreciated our interview, but I couldnt take the job. Do you still have that position open? And I said, thats incredible that you would call right now. Were going through some tough times right now. Um, I really don't intend to open the remodeling company again because we got a clear no on hiring. But, uh, if you would entertain really running the whole program, then, then we would entertain opening a backup. He said, yeah, that's what I want to do. And so we hired him, and he's still with us today, seven years later. Wow. Yeah. And uh, so we were company was, you know, was going to die and got resurrected. And then the things that were key from there were, uh, again, just getting rid of that, that head trash and then being super disciplined on our hiring practices.
Um, we would complain just like every other contractor out there that we couldn't find anybody to hire.
There's no good candidates. You know, it's impossible to find them until we said, you know what, we gotta stop complaining and do something about this. And started getting serious about learning. So I literally took sales copywriting classes. We looked into what do recruiters do? We started researching and reading on it and developed a process to attract talent. And that evolved and we got to hire another person. And then that person would step into the hiring process and each person we hired would actually add to our ability to hire better the next time.
[00:27:54] Speaker B: Wow.
[00:27:55] Speaker A: Building systems and processes. The point now that we have a detailed written hiring plan, there's ten distinct steps with five interviews. And an example of its effectiveness is we acquired another company January 1, a window and glass company. We needed to hire a general manager, and we had 60 candidates within ten days and hired the one that's running the company today.
[00:28:17] Speaker B: Amazing.
[00:28:18] Speaker A: Incredibly effective. So we literally built the tool that we were lacking, and we now deploy that as a unique ability across all of our platforms. That's in our construction company. So our construction company still hires for all of our other companies because we built that ability inside of it.
Yeah, thats been phenomenal, Trey.
[00:28:37] Speaker B: Well, thats also a clear innovation. And it was driven by the need. The need was you cant build and you cant complete and you cant grow if you dont have the right people on the bus. And its really built into a decade of experiences of having the wrong people and constantly bumping your head against the wall and challenges where, you know, there was there was, there was no other way other than to make a change. And so the, the key thing I want people to take away is that you invested in, number one, looking at the problem differently, calling the problem for what it is. Okay. Getting clear on the problem and then saying what is, what are some possible solutions? Let's go deep and do some research so we can do things differently. What are other people doing that's working in demonstrated areas that are outside of construction? How can we take that knowledge base and then act on it in this, in our own business? And so there's some really key fundamentals there that I think are important to not glaze over for a listening audience.
[00:29:32] Speaker A: Yeah. And that's spot on. And the thing that I would highlight and all that is these are the things that we complained about for years or failed at for years. And you don't need to do that. You know, if you notice yourself complaining about something or, you know, with, like, you know, I'm talking just, like, whining. We were just, we would just be the whole, like, ah, I guess this is how it is. It's just terrible. If you find yourself saying that, pause and think, is there anybody out there who has solved this? Is there anybody out there who is world class at solving this problem? And I guarantee you there are guaranteed. Right. And so then you just go find best practice. Don't reinvent the wheel and do what they did. And then after you nailed it, then you can iterate. You can reinvent a little bit as needed. So I think that's the biggest thing I could pass on, on top of what you said to the audience, is, don't keep complaining.
Stop buying. Best practice, execute, then iterate. So.
[00:30:28] Speaker B: And if you're not the person to execute, make sure you hire or find a person who is execute worthy and does that naturally.
[00:30:35] Speaker A: Richard?
[00:30:35] Speaker B: Yeah, I often say that I'm slow, but I'm worth waiting for.
[00:30:40] Speaker A: That's good. That's right.
And I'll highlight that point as well. Even in our hiring process, I'm barely involved in the hiring process. My team does all of it. I see a candidate at something like step seven and like nine or something like that, so I don't even find out about them until they're basically going to be hired.
[00:31:00] Speaker B: I love how little attention to the details you pay. You don't even, of the ten steps that, you know, there's ten. You don't even remember what step you get, which point you get involved with. That's how well it's working as a machine.
[00:31:10] Speaker A: Yes. Correct. That's correct. You know, they present the candidate to me. They know how to present the candidate. I cover a couple of basic things, you know, meet and greets, um, and then we, you know, have them over for dinner at the end. Like, that's it. So the rest of my team is running. Um, so that is the way to do things, is finding people, helping them discover their unique ability, you know, taking away the things that are not in their unique ability, the things that drain their energy that they're not good at, giving them more with what's in their unique ability. Um, and we've, as we've done this and we committed to doing it, uh, seven years ago without having the vocabulary around it we have now. But we were just like, we were dead set on only hiring the best and just slowly building. Um, we have literally not lost a single team member. We have not wanted to leave the company in those seven years. I mean, that's astounding. In the construction industry, well, it's.
[00:32:00] Speaker B: It's more. It's even more, uh, I think compounded from that vantage point, when we think about what's happened in the last seven years, three of those years was a Covid situation where we had massive overruns in construction costs, pricing of lumber, and a whole host of other challenges to the construction industry as a whole. Everyone stuck at home and saying, boy, I really dont like it in here. I need to do some renovations. So theres a number of things that took place there. And to be able to maintain and keep people during a tense timeframe says an awful lot, Trey.
[00:32:30] Speaker A: Yeah. And it really goes back to our team. Im just so impressed with our team members. Theyre amazing. And I think if you're an owner listening to this, just having the utmost respect for your team members makes all the difference. I look at what each of my team members does. I think I can't do what you do, how you do it. There's no way. And so that builds such a respect when that's mutual across the team. And I think that's one of the pillars that keeps our team together. Mutual respect.
[00:32:57] Speaker B: With all this activity, I mean, you talked a lot about the phases that you went through in the learning journey. You talked a little bit about mentorship, and at some point in time, you got involved with strategic coach, and that's how you and I came to know each other. Incredible organization. Big shout out to Dan Sullivan, everyone. Strategic coach. But what were some of the things that you began to see and implement? First of all, what was the decision to make to move forward and join coach as an example for you, and then how have you seen the implementation of the tools and the resources and the knowledge base there start to infuse its way into your business systems?
[00:33:32] Speaker A: Yeah, no big, again, big fan of coach as well. Very grateful for the organization. For me, one of my goals early on when I actually had a business was to have time freedom. So it wasn't necessarily earning the big bucks, although definitely we want to make a profit, it was time freedom. And so when I encountered coach and they've talked about how you can have time freedom and you can actually have a profitable company and to have time freedom, I was pulled in right away. And then when I added to that the concept of that people have unique abilities and you can discover them, you can work in them and you don't have to do the stuff that just drains you. I was pretty much sold, um, what I had because I'd been so focused on time freedom ahead of time. I wasn't one of those contractors that worked, you know, the hundred hour weeks, the, the long hours that I worked were back when I was launching the other guys company. Once I launched mine, I really wasn't working crazy hours, you know, maybe 50 hours, you know, maybe 60, like a couple times early on, but then after I got things kind of up and running, I was more like a 40, 45 hours a week guy, um, for most of that, that career. And then, uh, you know, as we got serious about building our own team, those hours have just, you know, gone down to where we have a self managing company over the last three years, and coach basically gave me permission to do what I was already doing. I already had quite a bit of time freedom, you know, 40 hours a week is like a vacation amount of work for a lot of owners. So I had that. But when I came into coach, it gave me permission to let go of all those other things. The point where I remember the day that I went into my office and I came in, I looked around and I thought, im not needed here.
And whats interesting is we often run towards a goal that we think is so powerful and is so powerful for us, and then when we get it, we think, this is terrible. Theres actually a moment where you have a panic where youre like, im useless here. So I didnt get over that, um, and, and progress, but in doing so, I freed up more and more of my time, did make myself redundant, and I actually checked my hours and I was down to sub 5 hours a week in that business. A couple of years ago and like 3 hours a week right now because it literally runs itself. And coach helped, you know, it helped again get permission, but also present tools that I could then bring to the team that built a lot of that infrastructure in there for you.
[00:35:53] Speaker B: Well, what's incredible about that is, I mean, I think that's there's anyone watching this wants to be able to be in that position, to have that time freedom. But that feeling of being redundant, there's a little bit of an emotional connection to that. Oh, like I'm not needed sort of a scenario. But what that does create, because you have space and time and you still have energy and drive and determination, work ethic, is you're not going to sit on the sidelines and do nothing. You could take all that energy and that effort and you could refocus it into something else to try and solve new and creative problems. And that's where we find ourselves with you going deep down the rabbit hole and figuring out what could you do around some of the tax problems that you have. So let's talk about this. One of the things that really, one of the reasons I want to have you on the program is because, you know, I learned from you about the Augusta rule, something that I was unfamiliar with. Granted, being canadian, it's not something that we, we operate with. We're in Canada. But I was fascinated by how so few people understand what it is, but also when and how to utilize it in their life. And it's something that's really fundamentally available to pretty much every, every american in the states that they can implement. So talk to us a little bit about what caused you to go down this track to learn about it, and then what's kind of come up with that innovation from that vantage point.
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[00:37:38] Speaker A: We have definitely done a deep dive into the tax world.
One of the results of becoming profitable was that we had a huge tax bill. So about the same time that I started launching an actual company, instead of just having a job, we got profitable. And when I saw my tax bill for the first time, that exceeded what I actually earned as an income all year.
I thought, this is insane. There's no way this is correct. And so I went down a journey of, okay, first, do I have the right account? And so I switched accounts. And I think I had done that even prior to seven years ago. I looked at this, I thought, man, my account is not saving me the money I need. What's going on? And then, sure enough, I hired another accountant, and they saved me, like, an extra 15 grand by refiling my taxes, which I don't know where our listeners are at, but for me, 15 grand is a lot of money still. And still I have 15 grand. I bent over to pick that up.
[00:38:41] Speaker B: So if it was just laying there on the ground.
[00:38:43] Speaker A: Just laying on the ground, I think it.
[00:38:45] Speaker B: What's in that briefcase that's there? Oh, take a look.
[00:38:47] Speaker A: Take a look. Yep. So. And I got that just by switching accounts. So I started thinking, well, this is nuts. If I. If there's that much difference in tax professionals, what else am I missing here? And so I started having conversations with other tax professionals, asking questions and seeking advice. And then I went to a real estate get together, and this was also in 2017. And while there, I met a tax attorney who was specializing in rentals and real estate.
Had a little bit of construction clients as well, but mostly real estate. But he gave some great advice, and he also gave us a bunch of different areas of the tax code we might focus on to save money. And one of those areas was known as the Augusta rule. That's a nickname. Its a nickname for section 280, a subsection G for the nerds out there that want to look it up. And it has been in the tax code literally since 1976, unchanged. So were going on almost 50 years, unchanged from liberal to conservative governments, and in between.
And this section of the tax code basically says you can rent your home for up to 14 days a year, 100% tax free. Okay, well, what's the big deal? Well, the neat part about that is, as a business owner, your business is a separate entity. And so what you can do is you can actually rent out your home without actually renting it out to somebody externally, like a third party. So what I do is I rent my residence, my personal house, to my construction company up to 14 times a year for actual business events, emphasis on actual business events. So, for example, we'll have a quarterly meeting with the team, or we will have a client appreciation dinner, or we had a trade partner lunch where we taught them how to hire, gave some economic updates, talked about things that pertain to each their trades, and each one of these things is a legitimate business function that a business would otherwise rent a space for and conduct the meeting. And so by doing this at your home, you can take advantage of this portion of the tax code, and your business then pays you money for the use of your home without you having to move out or rent it to anybody outside of the family.
The cool thing about this is youre having a deduction in the business of income, right? So lets say you can rent your home for even just $1,000 a day, which, by the way, is, is fairly conservative for people who have a decent home and a decent neighborhood.
So you do that, you can do it 14 times a year. So you're reducing your income by $14,000. So that comes out of the business, which means you're not taxed on it. But then when you receive it personally, you're also not taxed on it. It's one of the very few things in IR's code that you can do a left hand, right hand deal and it's allowed, and people think, nah, that's garbage, or whatever. I've heard about this on TikTok, and my CPA shot it down. Well, most cpas, most tax professionals still don't know about this rule. Amazingly, if they know about the rule, they're nervous because they're super, super conservative by nature and they haven't delved into the ins and outs of it. And if they have delved into it and they understand that it is legitimate, then you, as the business owner, are still left to execute everything, all the paperwork, all the hurdles, not screw it up, not create more liability for yourself and distract yourself from your business to execute it. And so nobody does it. And when I say nobody, I mean like a fraction of, a fraction of the business owners in our country are aware of the rule, aware of it properly, and are actually doing it. And doing it properly.
[00:42:36] Speaker B: Properly is key here, because like anything in the tax code, if you're not documenting properly, like, the burden of proof is always on the taxpayer. So there are very specific steps and sequences you need to do in order to, to utilize this properly. And you mentioned the word like legitimate several times. So you gave a perfect example of that within your own business, you know, a trade, trade partners, okay? So you have, you know, plumbers and other individuals that you might hire a sub trades, come out to your property, you put on an event, you put on a spread of some food, you do some training. Everyone's got a workbook. It's it's no different you, if you would have went to a hotel room to do that otherwise.
[00:43:08] Speaker A: Yep, that's exactly right. I would've rented some sort of, you know, a convention, uh, you know, room or something like that, or, uh, you know, meeting space that was commercially available and would've paid for it. So you may as well use a resource you already own to then reduce your income and your business and receive income tax free. So it's a very low hanging fruit. It does take a little effort to, to set up in the beginning. It's a new habit. New habits always take a little bit of effort. And I think the thing that we need to think about as business owners is what's the compounding result of this? If I'm bothered that I'm paying too much taxes, am I going to continue just being bothered like we talked about with these other things and just be like, oh, I'm bothered not going to do anything about it? Or you could do something about it. And this is one of the things that you actually can do. And if you start today, the future value of the money that you can save in the lifetime of your career is massive because this isn't just a one time event. It's 14 a year and its annual every, it's 14 times every single year going forward. So if youre going to be in business another decade, thats 140 potential tax savings events you can have. Youre going to be in business another 30 years. Youre approaching almost 500 events. You can have to save taxes between now and then. And that adds up massively. Preston. So, Preston, I think its important for.
[00:44:23] Speaker B: People to understand how did this rule even come into being? It has to have come from somewhere. Maybe that is part of the answer and the solution in itself.
[00:44:33] Speaker A: Yeah. So, yeah, that's a good segue. So you're giving me a softball to talk about the background of the August rule. So the background of the August rule and like, why is it called this? Why does it exist? Why does it still exist? So back in 1976 and the year or two preceding, there were people around the Augusta golf course in Georgia, where the Masters tournament is held. Thats the Augusta that a lot of people know about. And the rule was nicknamed after the Augusta course because the residents of the course successfully lobbied our congress back in the day to not have to open up an actual business entity in order to rent their homes out for the tournament. Instead, they said, hey, can we please just do this and not have to open up like a separate business? We just rent our home out for a week or two a year on this tournament. And we would really like to do that and not have to do a bunch of paperwork. And I suspect, I don't know this, Richard, but I suspect that a fair number of residents on the course were congressmen, legislators, judges, et cetera.
And I also suspect that they still might be to some degree. So this rule has remained unchanged regardless of the policies of each administration that have gone through over the years. So what they did is they said, okay, were going to put a carve out on the code that says you can just write your own for two weeks. You dont even have to record paperwork. You dont have to have an entity, you dont have to pay taxes on it even.
Go ahead, youre good to go. And then, because your entity actually is considered a separate person, you can then rent to that separate entity, your business. And this is black and white allowed by the IR's. In fact, the first time that it was actually challenged, and when I say it, I mean using the Augusta rule to specifically rent to your business versus actually just renting out to a third party like most of the people around the course were doing was actually literally last year. And its a case where the sinopoly family was using their business to then rent their home and applying the Augusta rule. This got challenged in court and the court said, absolutely, this is a legitimate application of the rule. What the court also said is you had no paperwork. Synopolis like none. So we are going to smack this down and you are going to pay penalties. However, we will allow you to value the house at dollar 500 a night.
And the IR's or the tax court, when they got done, looked at that and attorneys interpreted that and said, you know what, that was generous. Like they were kind because you had no paperwork. So a couple of takeaways. One, the rule is 100% legitimate. Two, you better have your paperwork. You better have a legitimate business event, which they did have, which is why they did grant them some random money, but they had no comparables, they had no rental agreement that I know of. They had did nothing.
Even prior to hearing this case, I kept running into other entrepreneurs and we're trading different things that we're doing to optimize our take home, to optimize our teams, to optimize the missions that we're accomplishing. And so this is one that would come up from time to time I'd ask, guys, hey, you guys know about this Augusta rule thing? Because for me, my house, I'm currently renting mine for $3,000 a day. It's a really nice house. Ive got a large meeting space. I can have large groups here, and its got construction elements on the house that I can show potential clients that I literally cant find anywhere else in town. So its got a high value. And so thats a $42,000 deduction every single year on autopilot for me. So that turns into a real savings when ive already built a habit around having meetings and using my own.
So, getting back to what I was saying, you have to have all the paperwork, you have to have all the infrastructure. And so I'd mentioned this to other business owners, and one, they didn't even know about the rule.
Two, of course, they have no idea about compliance, no idea about anything. And after I did this, like, 6810 times, and I even talked to a guy who is a very successful wealth advisor, and he administrates the Augusta rule for his clients, like, teaches them about them, about the rule, has them do it. And I'm talking to he and his wife in an event. I'm just saying, hey, what do you guys do for your paperwork on this? What do you do for this and that? And they look at each other like, oh, yeah, we don't really have any paperwork. We just have them do the take, the deduction. And that's what I thought. You kidding me? Like, if you get audited, not only are you, but all of your clients are going to get just smoked, okay. And so I thought, well, I could, I could, I could help people with this and that. And I'm passionate about, uh, business owners and entrepreneurs keeping more money, because I want the most productive people in our country to be even more productive and be rewarded for their work. And so this isn't just like, oh, let's turn a buck. It's like a mission to put money back in the pockets of business owners. And so at first I thought, well, I could build something, and, you know, I can get, like, you know, virtual assistants to kind of process this. And I thought, oh, it just sounds like a ton of work. Forget that. And then time went on, and I'd have more conversations and realized the need was, you know, was huge. And so I ran into a guy at coach who had an app building company and started talking to him. And that led to another thing. And pretty soon, we start building an actual app to automate most of the processes and all of the paperwork for the August rule. And you just have to enter your information one time, then it auto populates all the forms of it auto populates all the forms for every, you know, every event besides the details of the exact event, it communicates with your tax professional, tells them how to file it properly so that you don't have risk. And we're even working on rolling out an audit guarantee where if in, in the terrible situation where you did by chance get an audit, um, you would be entirely covered up to a million dollars for the audit defense on the Agusta rule. So not only can you use the rule, um, we have different add ons that if people want to, they can, you know, reduce their risk even further in case of an audit and know that everything is being filed properly and benefit from it. So that is literally, the software was literally delivered last Wednesday and we are about to roll it out. So the timing is, is perfect to talk about this to an audience.
[00:51:00] Speaker B: Yeah, you've been, you know, since I met you. I mean, probably about a year ago we were talking about this and you were starting the process. The app was in testing phases, it's gone through multiple iterations. You've been having people giving you great feedback, that whole beta process. So to be at a stage where you're able to launch this is absolutely fantastic. And what a gift to be able to provide the citizenry of your country by helping them understand how they can legally and legitimately create an opportunity for more capital to be in their hands so that they, as productive members of society, can stimulate the economic machine of the country. I mean, it's absolutely fantastic what you're doing and what a tremendous innovation on something old that existed that you probably never would have delved into if you didnt create time freedom in your primary business to be able to seek other problems that youre naturally gifted to solve. So with that in mind, I want everyone to consider whats a problem that you could be solving for the benefit of everyone else in the way that Nathaniel has done. And make sure to look up the Augusta rule, learn more about it. Well put a link in our show notes about that. And man, can't wait till our next episode. Nathaniel, thank you so much for dropping so much value, talking to us through your journey, the problems you've overcome and where you're going, moving into a brighter and much bigger future. Thanks so much.
