The Seven-Figure Tax Strategy

Last week, I sat down with Jim Richter from Monotelo Advisors, he’s worked with over 400 small business owners, mostly in the trades.

And what he shared about taxes, private equity, and exit planning is something every service business owner needs to hear.

If you're a service business owner pulling in consistent high-six or seven figures, this is for you.

Here's something that really hit home for me...

Your CPA charges you $1,500 to process your corporate tax return. They take your info, run it through their system, and hand you back a return on April 15th.

But here's the problem: By April 15th, your bed's already been made.

Real tax planning needs to happen in the prior year. It requires time, deep knowledge, and strategic thinking.

I learned this the hard way. When I sold my first company at 26, I was one year away from qualifying for QSBS (Qualified Small Business Stock) tax benefits. My CPA never mentioned the 1045 deferral strategy that could've saved me a fortune.

I had to find it myself through Google. At 26 years old.

That's when I realized: If you don't ask the right questions, you won't get the right answers.

So when it comes to taxes, plan ahead. Always be thinking 12-18 months in advance to see how you can save some dollars or deploy cash in tax efficient ways. 

Jim breaks down tax planning super simply. You have three buckets:

The game isn't just about saving money between now and year-end.

It's about shifting money between these buckets strategically so you pay less over your lifetime and leave more to take home for your family to enjoy or ensure your retirement is worry free. 

As Jim said, it’s not always about reducing your tax bill now, it’s about planning over your lifetime: "Maybe we pay more tax upfront in the first couple years, then save hundreds of thousands over your lifetime."

Here's what's happening right now in the trades:

Guys in their late 50s and 60s want to exit. But they've built their business around themselves. No succession plan. No management team. The business IS them.

And when private equity comes knocking with a big number, they think they've won the lottery.

But here's what Jim revealed about private equity that most people miss...

PE sponsors aren’t better operators than you.

They're not. They lever up your balance sheet.

You've got a company doing $10M EBITDA. PE buys it for $100M—$50M equity, $50M debt.

Now a third (or more) of your free cash flow is just servicing debt. You can't reinvest the way you used to. You can't weather slow seasons the same way. And if things get tight, that debt payment is still due.

Jim didn't hold back: "It's totally absurd that a couple of Ivy League business school grads are gonna run a business better than an operating family has been running it for 40 years."

So what's the play?

Jim's advice: Get your business exit-ready FIRST. Then you have options:

But you need to deleverage yourself from operations so the cash flow is repeatable without you.

No one's going to pay top dollar for a business that's 100% dependent on you being there.

Look, I get it. You're focused on growing your business. You're thinking about hitting $10M, $15M, $20M in revenue.

But while you're building that empire, don't forget about the personal side.

You need someone who understands:

As Jim told me: "Elegant solutions have simplicity to them."

But simple doesn't mean easy. It means getting expert help BEFORE you need it.

Most service business owners are leaving millions on the table because they're treating their CPA like a tax processor instead of a strategic advisor.

And if you're thinking about an exit in the next 5-10 years? You need to start preparing NOW, not when private equity shows up with a term sheet.