The Big Beautiful Bill: Discussing RTO’s Finance and taxes with RG Co. CPA's

What if your business is worth less (or more) than you think—because buyers don’t pay for sentiment, they pay for cash flow? We sit down with CPA Mike Helton and senior tax manager Alicia Holloway from RG & Co. to decode the “big, beautiful bill,” revive your understanding of EBITDA and multiples, and lay out a simple, disciplined operating system for a cash‑intensive RTO model.

We get practical fast. You’ll hear why 100% bonus depreciation (effective January 19, 2025) can be a gift or a trap depending on whether you fund inventory with cash or debt. We explain the interest limitation reset from EBIT to EBITDA and how that shift can unlock deductions for leveraged operators. There’s also a timely win for teams: an overtime premium exclusion that puts real money back in employees’ pockets. Along the way, Mike and Alicia translate the tax code into store reality—inventory that comes back, cost of goods through depreciation, and the constant need to reconcile cash and tie your POS to the balance sheet so the P&L can be trusted.

If you’re thinking about valuation, this is your blueprint. We walk through normalizing earnings, converting EBITDA to free cash flow, and how risk—customer stability, management depth, documentation, bankability—drives your multiple. You’ll learn what quality-of-earnings reviews test, why clean books raise price and speed deals, and how today’s buyer universe (private equity, family offices, operators) approaches RTO cash flows. For builders and new owners, we share the first tools to buy: a reliable POS, QuickBooks Online, and daily cash reconciliation. For everyone, we emphasize KPIs, margins, and a balanced buy/collect rhythm that keeps growth funded without starving cash.

Stick around for candid talk on advocacy with APRO and FRDA, the role vendors play in keeping the industry strong, and why RTO remains resilient through economic cycles. Subscribe, share this with your team, and leave a review with the one KPI you check every day—what would you like us to unpack next?

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Chapters

• 2:20 Downtown Office, Intros, Backstories
• 4:00 Mike’s Path: Kentucky, CPA, Florida
• 8:33 Entering Rent-to-Own via Slatten Estate
• 13:17 Industry Mentors, Learning RTO Accounting
• 20:35 Shows, Vendors, Community & Access
• 23:35 The “Big Beautiful Bill” Explained
• 28:55 Bonus Depreciation Timing & Planning
• 33:50 Interest Limits, EBITDA vs EBIT Shift
• 36:45 Overtime Exclusion & Employee Impact
• 40:55 Valuations: Cash Flow, Risk & Multiples
• 49:05 Quality of Earnings & Due Diligence
• 53:05 Inventory Nuances & Learning Curve
• 56:05 Cycles, Consolidation, Banks & Rates
• 1:03:05 Online Sales, Labor, Store KPIs
• 1:08:05 Maturity, Margins, Cash Discipline
• 1:15:05 Balance Sheet First: Controls That Matter
• 1:20:05 Five-Year Outlook Under New Tax Law
• 1:27:35 APRO, FRDA, Vendor Role & Impact
• 1:34:45 Advocacy, LedgeCon, Industry Voice
• 1:40:25 Start-Up Advice, Systems, QuickBooks

Transcript

SPEAKER_03: 1:14

Hello and welcome to the RTO show. I'm your host, Pete Chao, and today we're out here in this big building all the way downtown to meet with the guys of RG Co. Look at those faces. I love you guys. You guys are amazing. So Mike Helton and Alicia, is it Holloway? Yeah. All right. So Mike was like, I don't want to do this alone. I need to bring some help. So he brought he brought the big guns out, and she's over here making sure it's going to happen, right? Mike, how are you doing today? How's everything going? Dude, I swear to you, as I came in here, this place is amazing. Like this place is seriously amazing. So I figured maybe three, four offices, you know. Like, no, this like three, four offices on this corner of the building. So we are literally an entire floor downtown on 201 North Franklin Street. And I'm not going to tell you what floor because you're going to figure that out on your own. But I come down here and I'm just telling you guys, it was amazing. As I walked through the door, it's it's absolutely beautiful. If you guys can't tell, the skyline is absolutely amazing. We're going to do a talk here and kind of pick their brains. Mike made me swear that I was going to talk about this big, beautiful bill and how it affects you. So we're going to go over that. First off, how are you doing, Mike? How's everything going? Good, Pete. Thanks for having us. Yeah, I'll tell you right now.

SPEAKER_02: 2:19

Appreciate it. I'm honored really to be here.

SPEAKER_03: 2:22

Well, I'm I'm glad you're here. I'm glad that you're here. You guys don't know. We had to twist some arts to get her over here, but she made it. She's good. So tell me a little bit, Mike. There's so much about you I didn't know. Yeah. There's a lot about you I didn't know.

SPEAKER_02: 2:35

There's probably more.

SPEAKER_03: 2:36

I haven't told you, but there is so much about Mike Helton that you just don't know, but we're going to figure it out today. First off, um, tell me a little bit about your background. Like, where do we start? And I mean, we're gonna have to figure out how we got here, but where do we start? Where does your your your prowess and professionalism come from? Where do you where do you start?

SPEAKER_02: 2:54

I grew up in Ashland, Kentucky. So my start got there, well, it started there, and then went to school in Southern Ohio, uh, Shawnee State University, and got into the accounting program at that point in time, did my first internship for a CPA firm up there locally. Um, did that for a few summers, and then they hired me full-time after I graduated. So that's how I got involved in this public accounting business. Um not long after that, I migrated to Florida. Um, I was about 26 years old, you know, a long time ago now. Um, but uh came to Florida, and uh the rest is history as far as that goes. I never really wanted to go back. Um, I love it here, you know, here in Tampa, beautiful. Um, and so thrilled to be here.

SPEAKER_03: 3:47

Well, you know how you know rent to own is is a crazy world because a lot of the people that I know in rent-town never started a rent-to-owned. They were doing something else, and somehow they migrated to the rent-to-owned industry from one reason or another, whether they had parents that were starting the business of something else, retail sales, you know, or slats, he decided to kind of stretch out what he was doing and apply it to something else. And then here comes the rent-owned industry to follow. We always kind of start somewhere else, but I've always seen accountants usually know what they want from the beginning. You usually know, like, whatever it is, I'm this is what I'm gonna do. And most of the time, accounting is not rent-to-owned's favorite thing to do, but it is so important because absolutely it's different from a lot of the other businesses that we go through. I know that you I don't know. Did you know what you wanted to do when you went to college?

SPEAKER_00: 4:35

I'm looking at her face. She knew it. I actually did. See what I tell you. I knew it. I took an accounting class in high school.

SPEAKER_03: 4:41

So now you're a you're a native to Tampa, right? Or or the area?

SPEAKER_00: 4:44

Cape Coral. So two hours from the house. No, you're not that bad. Basically, came here for college and never left.

SPEAKER_03: 4:49

Where did you go to college?

SPEAKER_00: 4:50

University of Tampa.

unknown: 4:51

Right there.

SPEAKER_03: 4:51

Right. I can't show it to you guys, but it's right out there. It's actually one of the most beautiful schools in the Florida area, in the Tambay area, but in Florida, it's like absolutely gorgeous. So you played a little basketball? I did. I I would have never got that. If you guys haven't met Mike, I'm gonna tell you right now, he is not the normal accountant type of guy. Like you are completely like you are the one that will stand out in the group for sure.

SPEAKER_02: 5:12

I've been told that before. Um, no, my background, dad was a steel worker. My mom worked in the lunchroom at the high school, you know, blue-collar neighborhood. Um sort of remember around eighth grade, probably, um, shooting basketball in the backyard. We had a goal, as everybody does in Kentucky. Right. You know, it's pretty common. Um, shooting basketball in the backyard. And the kids that day at school were sort of talking about what their parents were doing for college fund. I'd never really heard or talked about a college fund before. So I go home and I ask dad, he's grilling some burgers on the grill, you know, while I'm shooting and asking him, I say, hey dad, by the way, you know, what kind of college fund y'all put away for me and my brothers? You know, I've got two brothers. You put them on the spot. One older, one younger. I said, Yeah, just tell me what kind of college fund y'all have for me. He looked at me, said, See that basketball in your hand? He said, Keep shooting, that's your college fund. So right then and there, I sort of knew that that was going to be my path. I was not a straight A student. Um, athletics was gonna take me to college, and it did. And luckily, I had all years of school paid for. So, on scholarship.

SPEAKER_03: 6:25

Beautiful. So, in the world of accounting, how in God's name did you find rent to own back then? I mean, you know, you look at it today, and you and the progression that we were talking about, I was talking about before, is you know, there was a lot of independence, and there was only like two or three big guys. That was Rack, that was Aaron's. I don't even, you know, buddies really wasn't as big then it is it is now, or at least the name brand and you know, where it came from. Now you've got larger names like the rent roll and rent a wheel are also getting big. But how how do you guys get into the world of rent to own? Because now I I would say that you're like one of the experts as far as accounting in rent to own. I mean, you guys know this industry in and out, which is something a little bit different than what, you know, normal retail or normal accounting, period. I mean, there's a lot of factors that go into everything that we do that you know a lot more of now than I mean, than almost anybody I know. There's very few that handle the business. How did you get into rent to own? Where did that start from, you know, coming playing basketball, you know, talking to dad, and then all of a sudden here you are.

SPEAKER_02: 7:27

So I migrated to Florida, um, had a short stint at a firm in Clearwater, uh, then found this place. So just had my 26th anniversary of employment here at this firm. Wow. 26 years. That's makes me one of the old guys. Um, but when I first started here, um it wasn't long after starting, uh, slats had just passed away. And this is Norman Slatten and um the founder of Buddies. And our firm represented and worked with the attorney and was working on his estate. So Slats estate was one of the first things I did when I started working here. Um and that's how I was introduced to the Slatten family. And so from there we we did a lot of estate planning work for for Miss Slatten um and the family, and did um, you know, it started from there. And that's how I met Joe Gazzo and Jamie um and some of those guys. And it wasn't long before um they started asking me questions about the company. We did not represent the company, we were only representing the family. Um, and at some point in time they they transitioned the company work to our firm, wanted us to take over that. And that's how I got really introduced to rent to own. Um shortly after that, they basically they told me for like two years, you you really need to start coming to some of these shows. You need to start coming to some of these shows. I'm like, I didn't even know what I was they were talking about.

SPEAKER_01: 9:10

Right.

SPEAKER_02: 9:10

Eventually I made it to my first meeting of the minds out in Vegas. And what year was this?

SPEAKER_00: 9:16

Great one to go to.

SPEAKER_02: 9:17

Yeah. I it was pre-2010. I was trying to think like how long ago it's been since my first show. Um it's been easily over 15 years, but not quite 20. So it was somewhere in the the late, probably 2008, 2009, maybe 2007 period. I don't know, somewhere around there.

SPEAKER_03: 9:42

That was a hard time for rent owned back then.

SPEAKER_02: 9:44

Yeah. Well, it was it was, you know, back then I was still trying to grow a client base. Uh still am, but you know, I was really trying to grow a client base at that point in time. Didn't know a soul. And um, you know, spent a lot of time with Terry Bevel back then, who taught me a lot of the rent-to-own accounting. You know, yeah. There was nobody better to learn it from, quite frankly. Um, so I spent a lot of time with him and Joe. And Jamie literally dragged me by my arm and introduced me to everybody at these shows. Because that's Jamie. That's Jamie. That's Jamie. And everybody knew Jamie. So um that's how I got sort of baptized into rent to own. And ever since my first show, credit to this firm, you know, I came back and said, hey, you know, we really need to get more involved in this industry. I think there's a lot of work out there that we could get, and that they seem to need a lot of help. Um uh and came back and talked to the partners. I wasn't a partner at the time, you know. Um, came back, talked to the partners and see if they would support it, and they did and and continued to send me to shows where I actually had a booth and everything at that point in time. Um and we've grown it ever since.

SPEAKER_03: 11:01

Talking about going to shows, Alicia's now at the shows. I see her at all the shows now. I even see this, I don't want to say plaque, but this thing in your office where FRDA recognized RG Co as being one of the spawns, you know, just one of the big names in the industry, and they appreciate you guys doing that. How did you find the industry? Or was it like I'm I'm going to RG Co, and you know what? I'm now I'm a part of the uh RTO division.

SPEAKER_00: 11:25

So I mean, Janelle and I kind of got baptized because Kim left our firm. So we had a need to pull more people in. But it's a an industry that I like being in. I feel like the people are all very genuine and they care about like you hear at the shows, the owners, the managers, they're all saying that they know all the names of all their customers. Like you don't hear that in other industries that we're in. So it's been really good to go.

SPEAKER_03: 11:50

You know what's you know, it's eerie. The other day uh I was in one of the stores. I hadn't been there in years. And uh I forgot what we were doing. We're talking about something, selling something at the front counter or something, and this other customer walks in and he's like, Hey B, where you been? I'm like, bro, what's going on? Like it just it's crazy years later. I mean, they'll they'll call you out, you know, and I haven't I hadn't seen this guy in in years. And then it was another customer who was like, two customers that came in after that that I think that was, you know, this hey, how are you doing? Because I I used to run the store, it was actually uh the store in Armenian. It was nice to see those customers for for whatever time frame that it was, it was just like catching up, you know, it was like just just how are the kids? How's wife? How's this? How's that? And but it's a relationship business. And that's why I don't think you call them customers.

SPEAKER_02: 12:39

I think they're clients of yours. Absolutely. You know, in our business, we call them clients because of that personal relationship we have, deep knowledge of what they've got going on, both in their business and personally. Yeah, there's no different with your relationship with your rent-to-own folks. And you know, to me, they're your clients because you know them inside and out, and they know you, you know their family. It's a it's a much driven customer relationship business, as you know. I mean, we may sell different products or services, but it's it's built on relationships.

SPEAKER_03: 13:10

All of it's built on relationships. And you guys know that more than than I mean, being here 26 years, you've had some long, long-term relationships. Which kind of leads me into you start working for one of the pioneers of the RTO business. His son then follows in his footsteps of pioneering in the RTO business. So we're talking about Norm Slats, and then we're talking about Jamie Slatt, and then you're talking about some of the other names. Like, I don't, I don't know if there was a person who started working in 2015 and before who didn't know Terry Terry Beveryl was. I mean, just the names alone carry a whole lot of weight. What did they teach you about rent to own or what did they help you learn as far as what's the difference, uh just a blaring difference between the normal rent-to-own dealer industry, the way it works, and how it's, you know, how it's run as far as financials versus a lot of the other clients that you have?

SPEAKER_02: 14:02

Well, the good thing is back then, I was probably too stupid to know it was much different. Because I was pretty inexperienced. I've learned through the years of seeing other types of businesses how different it is, but I probably didn't appreciate it when I first learned it. So I was just sort of naked to everything. The just, you know, I was a sponge. Um, and Terry would sit me in my office, uh in his office and with all his Florida State stuff and everything around. And, you know, we would um we would go through um general ledgers and trial balances and journal entries, and he would walk me through. I mean, he loved it. He loved it and and did not mind spending time showing me how that worked. Um, you know, years later, I got the same sort of tutelage from Chris Cale Sr., who sat me down in his office and went through how he keeps track of things. Um, and just had that's what's always blown me away about this industry from my first meeting of the minds on how much you all share information and collaborate for the greater good of the industry and protecting that business and transaction. Um, you know, the the level and amount of of information you all share on how you do things and what works, what doesn't work, um, has just blown me away because you don't see that with other businesses at all. And and I've received the same attention from people that have helped me through my career in this. I mean, it it it takes a village, as you know, and I've had a ton of help of people trying to help us gain traction in this business um and teach us that. And you know, Bill French um uh told me as a vendor The Bill French. Bill, we love you. I just tell you. We always talk about it still to this day. After my first show, I was sort of depressed and he saw me. I was sitting over there, nobody lined up at my booth, nobody talked to me. I was like this black cloud in the room that no one wanted to speak to. And and Bill walked over, he said, he put his arm around me, literally, and said, buddy, he said, just keep showing up and it'll happen. And I remembered that. I was like, okay, I just gotta keep showing up. And it was year two, nobody came. By year three, we started talking to people. And by the end of year three, we started picking up some new business. And um so it it's very fraternal industry, you know. It is. Once once I sort of became accepted, yeah, then I once you're in. Yeah, I felt like okay, I'm I'm I'm in now. And now I I haven't stopped showing up since.

SPEAKER_03: 18:08

Well, so talking about going, because you did say it's the right place to start. Are you going to Meeting of the Minds in Vegas this year?

SPEAKER_00: 18:15

I don't know, am I?

SPEAKER_03: 18:17

Oh no.

SPEAKER_02: 18:18

She will not be there. No, unfortunately. No, though those are generally the only ones we miss because they are smack dab in the middle of tax season.

SPEAKER_03: 18:28

Yeah, I can't.

SPEAKER_02: 18:29

You know, it's usually like mid-March, and that's like our busiest time of year.

SPEAKER_03: 18:33

This one's in I think I think February, the end of February. Either way, I yeah, it's a hard time for you guys that time of year.

SPEAKER_02: 18:39

It's anything between what I say, Gasparilla, no one no one outside of Tampa knows. But but from end of January through mid-April, we're pretty, pretty busy.

SPEAKER_03: 18:49

They're booked pirate season, just so you guys know. So talking about taxes, talk to me because one of the things that I really wanted to get into was everything else. And you brought my attention to the big beautiful bill, which I appreciate you because I'm not a tax guy. I really don't know this stuff, but I would imagine that this plays a big part in our rent-to-owned lives today for a lot of people listening and for in general knowledge. What happened when this bill passed? What is the difference and what are the changes that came along with it that might stand out in RTO? Well, we were watching for a while.

SPEAKER_02: 19:24

So this didn't just happen overnight. You know, there were mumblings and grumblings for a while of what may happen. Um, and then it finally became a big push. You know, it was supposed to happen by the end of 2024. It didn't happen, you know, sort of right after, you know, then inauguration, all that stuff happened, and you know, got all that out of the way. And there were some other things that had to be dealt with with Congress. So you got all that stuff out of the way, then they could finally focus on taxes again. So it happened probably a year after when we thought it might. Um, but eventually, you know, it was going to happen during Memorial Day, and then you know, July 4th became the day that they wanted to get it all done. So they it was signed on July 4th of 2025. And the big thing for rent to own is it basically put back in a hundred percent depreciation for bonus depreciation. That's the biggest thing that it did. Um, bonus depreciation is and has been the last few years ratcheting down. So it went from 100% down to 80 down to 60. This year it was going to be 40% bonus depreciation. And where that makes a big impact is on the turn. So you've got not the turn in your world, the turn in our world, meaning that you know, with you you expense something when you buy it, and then when you dispose of it on that flip, you know, you've got to recapture that cost. So your book cost and your tax cost are very different at that point once you get involved with bonus depreciation. So um, but to be able to buy an expense as you're paying for it instead of having to pay for get the expense over time was a big swing. And that's that's helpful for small businesses, especially those that are funding their inventory purchases with operating cash. Which is usually the case. It is. Uh, you know, some people use it out of a line of credit, and so I I do throw caution out there to the folks that are buying inventory with debt dollars. It's different than when you're buying inventory with your operating cash. Um, because you still have to pay back the debt. And then eventually go away. Then eventually you've got that flip on the tax bill. You know, you get the expense going in, but then you got the recapture coming out. So um it does cause some planning inconsistencies between your books and your tax numbers.

SPEAKER_03: 21:57

Isn't if anybody's using Versaret right now, that is that little tax number up there above the book value line. You know, I don't want to get into that because Lord knows I know what I don't know much about it. But what immediate actions should these businesses take before year end to take advantage of this big, beautiful bill? Because it was signed in July 4th of 2025, which means that it wasn't an effect before that it's gonna affect this tax year, or is it coming to the 2026 tax? I don't know how that works.

SPEAKER_00: 22:26

Some of both.

SPEAKER_03: 22:27

Some of both. Okay. So what is it? Is it uh and for lack of a better term, I don't want to take this technical, but it's like a 50-50 thing. Some of it happens now, some of it happens later, based on because it was signed in the middle of the year, like literally in the middle of the year.

SPEAKER_02: 22:41

The the bonus depreciation piece, um, oddly enough, what's the date? January 19th. January 19th, yeah. Yeah. So because the bill was announced on January 19th, they made bonus depreciation effective on that day. So imagine that all your purchases between January 1st and January 18th don't qualify for bonus depreciation, but everything after January 19th does.

SPEAKER_00: 23:06

I I would have been really nice if they put it back to January 18th.

SPEAKER_02: 23:11

I don't know why that 19 days had to be included in there, but they did.

SPEAKER_03: 23:15

So I mean, could it be because the govern the the the president is sworn in on what, the 17th, 16th?

SPEAKER_02: 23:19

No, it's the day that the bill was introduced. Is it so so the um I can't imagine I've got one rent-to-owned client that purchased anything this year between January 1st and January. That's usually a dead zone.

SPEAKER_03: 23:32

January is a no-fly zone. I mean, that's one of the don't do it, don't do it, don't do it.

SPEAKER_00: 23:37

Everybody's still on vacation. Christmas hangover, yeah. They don't buy it till later in the year.

SPEAKER_03: 23:41

Yeah, the thing is it I mean, I think I think that usually the first purchases end up being around meeting of the minds because of that. Like, don't touch January, let it let it just let it sit. We've got to deal with everything that came out of the Christmas time and right.

SPEAKER_02: 23:52

Well, you do have a lot of holiday purchases. And so to mention, you know, how we're planning for it, right now we're sort of still in the middle of fall busy season. You know, September 15th and October 15th are big tax deadlines for us. Um that being said, right after the October 15th deadline, we start doing year-in tax projections for our business clients. And so that's when we'll start talking about the impacts of this bill and what that means and running tax projections for them. Already had calls from people wanting to adjust their quarterly estimated payments and things like that as a result of it. So it will be impactful depending on whether you decide to take bonus depreciation or you can actually elect out of it and not participate in bonus depreciation. Does cause some planning discussion?

unknown: 24:41

Yeah.

SPEAKER_03: 24:43

Let me ask you a question, because this is definitely this is outside of my realm of doing. But you get a you get a bill like this, it's a huge bill, right? Something comes down the pipe, you guys see it coming, you learn a little bit about it. But when these bills are passed and they're a law, what does it take to learn about this bill and then implement it afterwards?

SPEAKER_00: 25:05

A lot of reading. How many pages was it?

SPEAKER_02: 25:08

Yeah, it was about a thousand pages. But we subscribe to plenty of sources. We spent a lot of money on research platforms that every day there's something in our inbox from each of them about updates. And as the IRS comes up with new notices and new regulations and new just here's how we're going to address these new laws, we stay on top of that. And we share that information with our with our team here. So every day there's something coming up about reading.

SPEAKER_03: 25:42

Is that the biggest so this this bonus appreciation, is that the biggest advantage that somebody in rent-town can take as far as this big beautiful bill is concerned, or is there other things that are involved in this that it's really going to affect us directly? And not just, you know, there's the broad stroke, right? It's going to affect everybody the same. If you know your tax percentage goes up, it goes up. It goes down, it goes down. Everybody's dealing with that. But is there anything else besides that that really affects the rent-to-one community where they can say, well, this was an advantage or a disadvantage of this bill?

SPEAKER_02: 26:09

There are. I mean the Yeah.

SPEAKER_03: 26:11

Go ahead.

SPEAKER_00: 26:12

Well, you mentioned a lot of RTO um businesses use debt to buy their inventory or, you know, run operations. There was a limitation in place that could disallow interest expense. Um it's still there, but they've made it a little more favorable.

SPEAKER_02: 26:29

Yeah. So the the I have no idea what we're talking about. The nerdy code section is 163 little J. But what it did was limit the ability for businesses over a certain gross receipts cap, so the bigger businesses, not the smaller, to not uh to disallow interest expense above a threshold. So let me clarify what that means. You've got taxable income for the business, and what this law does is it limits your ability to deduct interest above 30% of what they call adjusted taxable income. So what is adjusted taxable income? Well, you start with your taxable income and then you add back interest and income taxes to get to an EBIT number. The EBIT, the EBIT number.

SPEAKER_03: 27:18

Earnings before interest and taxes. That's the EBIT number, guys. I've there's an elusive name out there for it. That's it right there. The EBIT I see on every all my paperwork.

SPEAKER_02: 27:27

So they limited it to 30% for the last few years of EBIT. What this law did was it adjusted the definition of adjusted taxable income back to where it started in 2018, which was to EBITDA, EBITDA, which added back depreciation and amortization on top of that, which is huge for rent to own. Yes, that I do know. Depreciation is a huge number. So that really imp increases that adjusted taxable income threshold. So 30% of that is gonna allow a lot more interest to be deducted for that business than what was normally allowed.

SPEAKER_03: 28:06

Well, guys, I would tell you right now, if you haven't started on your tax preps or you don't understand it, please reach out to these guys because they're gonna tell you there's another way to do it, and hopefully it helps all of us out uh in the time to come.

SPEAKER_02: 28:18

So the other thing I will mention about this big beautiful bill is for rent-to-owned employees who are in overtime, there's an exclusion now on overtime pay up to twelve thousand five hundred. So now your employees who are in overtime can exclude twelve thousand five hundred from their taxable income for overtime pay.

SPEAKER_00: 28:46

Up to a threshold.

SPEAKER_02: 28:47

Now, the the the part that's excludable is when you when you think of time and a half being overtime pay, it's just the half portion, not the straight rate portion that qualifies. So they have to be under a certain gross income threshold, which is I think in the mid-150s.

SPEAKER_00: 29:07

I was gonna say 150.

SPEAKER_02: 29:08

Around 150. But for those people that are earning overtime pay, there will be a new form that will allow them to deduct some of that overtime pay on their tax bill as well.

SPEAKER_03: 29:19

I know a lot of employees are really gonna enjoy that part as much as humanly possible. Uh I can tell you right now, there's there's so much that you guys understand about this business that I just don't. And I really appreciate that you guys are even here because Lord knows this there's it's not an operational thing. And I I think that sometimes beneficially we forget. And there's guys like, you know, even like myself, that are guys out there who just want to open a business. They want to get in there and they want to get it open. But there's so much behind the scenes of understanding your business, how to run your business, how to be successful in your business that don't just it's not just counter work. You know, how you spend your money, where you get your money, whatever you do with it is just as important as saying hello when they first walk in the door and making sure that they have the greatest customer experience you can give them. And learning that over these last few years has probably been the biggest thing that I can say is there's so much in front and behind the counter that I just didn't know. And so, you know, being able to talk to you guys about that and understanding it is it's a huge advantage for everybody who does it. You got to help me out here, though. I got to stop it for a minute. I say RG Code because I just cannot say it the right way. Help me say it. Rivero, Gordomer, and Company. Gordomer. Okay, so it's Rivero, Gordomer, and Company. Yes. And where did the RG code come from?

SPEAKER_02: 30:33

So it's just their initial. So basically, we got tired too of saying Rivero Gordomer Company everywhere we went. And and you know, the person on the other end of the phone saying, Can you spell that for me? So, you know, we basically, when we rebranded logos and everything else, we just sort of shorten it down to RG and Co.

unknown: 30:51

Okay.

SPEAKER_03: 30:52

It just seems easier. You know, as I was coming through the as I was coming through the offices, I seen all the I believe it says shareholders on there. Yeah. And I see Mike's face on there. It's like, okay, well, I'm in the right spot. Um, how many, how many of their is it? We have 10 shareholders.

SPEAKER_02: 31:07

10 shareholders. Yeah. And yeah. So I'm I'm one of them. Um, you know, Alicia is a senior tax manager. Um, so she's one step away from being on that one. Oh, are you gonna be are you gonna be 11? We don't know yet.

SPEAKER_03: 31:21

She's like, I can't say I can't speak on that just yet. I mean, it it's she will if she wants to be. Let's just put it that way. There you go. That's the question. You know, we were going through uh, you know, April had done a lot of of these webinars this past year or so. There was a lot of people talking about a lot of different things. There was a part where you actually spoke on the valuations of businesses in the RTO world and and how they can vary and differ. What are some of the things and and I I'm not gonna go into like the corporate world because that's just crazy. I mean, you got you know a thousand stores. I I'm not even gonna ask that kind of question. But what are some of the biggest things that cause a different valuation from one RTO company to the next? What are some hot points that you can say this matters most? You know, whether it be, you know, you have three vehicles, this guy has one, this guy has more customers than you do. This is you have customers, but this guy has agreements or revenues. I mean, what what are the huge differences between saying this this company is worth it versus this one needs a little help before you buy?

SPEAKER_02: 32:26

So I'm gonna back up a little bit before I answer that question. Um and sort of start from where we started with that. So a few. A few years prior to this, um you know, I was asked to host a panel at RTO World with panelists that included people like Trent Agin, Michael Bennett, we had um our valuation and advisory person there as well. This may have gone back to like 2021, because I think it was when we were here in Tampa. Um that being said, the the panel was on valuation and buying and selling businesses. Um and so we had dealers and we had professionals, we had people that have done it for buy side, sell side, you know. All over. Yeah. And when I first got started in this business, um, what I learned was pretty much everyone's exit plan was Aaron's or rack. Right?

SPEAKER_03: 33:28

That was everyone's exit plan. I'm gonna make this as big as I can so that somebody buys me out in the end.

SPEAKER_02: 33:34

Yeah. Almost like a house. But there was also there was also that state of mind that I know they'll buy me. So I didn't have to really worry about how I was gonna exit. I know they'll want me and they'll take over my store if I if I want, you know, so that stopped at some point. Yeah, that stopped. And so then everyone sort of became all right, who's gonna buy me? Who's interested in buying me? What's my company worth? And so I think there was more talk about that. Um, you know, now there's still the swap stores and different things going on. Um, but but that panel sort of drove some discussion, I believe, for um for dealers about their own exit plan and and who's going, how's that going to transition? So we started talking about not just selling off to a competitor, but you can also transition your business to key employees or to a family member. We've got some second generation owners in this business, as you know, who do very well and have grown up in this business. Um so you know, it's sort of all of that is what we wanted to discuss more is how can you transition and when should you start transitioning? Not just the what's my business worth, but we also talked about the key components of how that gets built. So Charles Smitherman came to me um, you know, late last year and talked to me about doing one of these APRO webinars and said, hey, I really want to create a resource for APRO to have to where people can go on who are members and access information on valuation and on exit strategies and on that. So I want you to kick it off with another discussion on that topic, and then I want to put something into our platform that people can draw from resources, and that's where we're at now. Is he's you know, we've we've sort of taken the slides from that presentation, built out an educational draft, and we've had different iterations of it and drafts going back and forth. Um, and I think it's now come to conclusion to where Charles is basically about ready to finalize it and put it out there.

SPEAKER_03: 35:47

I'm gonna tell you right now, when he as he was talking, I I had like three pages of notes, and I was like, I can't, I cannot write this enough. I cannot, there's too much for me to put down on this. It was just so much that you covered on there, and it was it was pretty in-depth. I mean, yeah, it is. You gotta know your business.

SPEAKER_02: 36:05

It is, and it unfortunately it's pretty in-depth, but it's still very brush strokes. I mean, it's high-level discussion because when you actually get into an actual business valuation, so much more detail goes into it than what I've discussed.

SPEAKER_03: 36:19

Now I'm kind of now I'm kind of worried to find out what are those major things that make it you, you know, they're gonna be like, but that's that's not what I know. You know, is the these things that make these differences, uh, you know, and I I guess it's gonna be for a lack of a better term, a very broad coverage of what these topics might be. But there must be some difficult conversations there that must be had when you you know you have somebody who's like, I'm ready to get out, I've got you know, how many ever stores, and I think they're worth this. And well, let's just let's just kind of cover the bases because you might not be.

SPEAKER_02: 36:51

Well, the first thing I tell people is I've been through a lot of MA transactions, both buy side and sell side, not just RTO, but many businesses. Um never once have I ever seen in any purchase agreement an allocation of purchase price to sentimental value.

SPEAKER_03: 37:10

So that's not the big, beautiful bill. Hold on, hold on.

SPEAKER_02: 37:13

So I get them over the hurdle really quick that your sentimental value is worth zero to a buyer. So let's talk about what they really want to buy. They want to buy cash flow. They're buying a cash flow stream. So when you get into are they buying assets, are they really buying delivery trucks? Are they buying inventory units? They're buying all of that. They're buying a recurring revenue stream, but really they want to know how much cash flow is this thing dropping and what am I willing to pay for it? And that comes back to risk. How much am I willing to pay for it? That risk drives the multiple. So, what I try to explain in these discussions is we're gonna wait, we're gonna discuss the multiple word because that is a big word read to own.

SPEAKER_03: 37:54

I would tell you even when I was like we las learning everything, there was the word multiple that came out. And I was like, What? Whoa, whoa, whoa, what didn't I just hear? We're gonna go back to that. But but it so it fuels so all of this helps fuel the multiple of the sale. We'll talk about that. And so I'm sorry, I didn't mean to cut you out. Just that multiple word, it just it's one of those those catchphrases, one of those terminologies that a lot of people are gonna get they're gonna hit me back and go, that's where the multiple came from. Yeah, that's what it is. Yeah, Josh, just so you know, this is for you.

SPEAKER_02: 38:27

So it yeah, I mean, that's really what drives it. And so what I try to explain to them is what where to start. And it starts going back to the EBITDA discussion. You know, what is what is EBITDA? And then how do we go from EBITDA to free cash flow? And once we know free cash flow, which basically means operationally what the company is driving, once I normalize everything, so every business has different things in it that run through the company that may or may not be an expense item of what a buyer may have. So for instance, if you're an owner, you may have a very inflated salary. You may have your car on there, your wife's car on there, you know, your kid's car on there, you may be running some stuff through there. It might be more personal than business. All of those things, they sort of look at the numbers and say, well, how do we flesh out what this PL is going to look like if we take it over? And so you sort of normalize those earnings and adjust it all. Where rent to own is a little difficult is you have to account for the differences between the depreciation cost of goods, which is a non-cash item. So I've paid for it, but last year, but now it's hitting my books this year and my cost to go. Right, right. You know, so you sort of have to flesh out those differences with addbacks and subtractions for what am I really paying versus what am I expensing, and sort of normalize what that cash flow is to get to free cash flow. Then once I have free cash flow, I I basically apply a calculation to that free cash flow, which you refer to as the multiple. We refer to as an inverse of the discount rate. So it gets discounted based upon some present value of what somebody's willing to pay now for a future cash flow stream. So am I willing to pay a dollar today for the right to earn three dollars over the course of the next five years? And how risky is that dollar today? That risk factor drives the multiple. So whether it's a multiple of four or five or ten or whatever, that multiple is driven based upon their determination of how risky you are.

SPEAKER_03: 40:51

Now, when you say risk, are we talking about because I'm I'm I'm trying to put my brain around this. And I'm sorry, guys, I'm not I'm nowhere near on that level, but when you say risk, are we talking about how many customer returns that we've had in the last six months on average, how many agreements lost, or how many agreements gained, or a little different.

SPEAKER_02: 41:08

So let's start with if you were if you were gonna take a dollar and invest it into a treasury bill, very safe investment. You're not gonna lose the money. Absolutely. You're also not gonna have a big return on that money because there's no risk. Right. But it's safe. You start there. All right. So what is the risk if I invest in a treasury bill? What is the risk if I invest in a publicly traded company? Publicly traded company has a readily ascertainable market value on any given day at any given time.

SPEAKER_01: 41:45

Right.

SPEAKER_02: 41:45

I can point to Amazon stock right now and say, there's the stock. That's what it's worth. That's what it's worth, and that's what I can sell it for. You can't do that with private companies. There's no easy market out there. So they define risk with other things. How does it compare to a treasury bill? What is the the risk that this recurring revenue stream doesn't exist tomorrow? How strong is my employment base? How strong will the owner leaving influence my business tomorrow? All of those things they look at and and sort of build up levels of risk based upon safe investments versus pub publicly traded companies versus non-publicly traded risk versus now you've got an industry risk. What is the industry risk within that private industry? Who puts together this risk portfolio? Is it you? Valuations, experts. They all do it. I mean, but if you give if you give 10 business valuations, uh 10 valuation experts, a set of numbers, the same set of numbers with a three-year trailing, you know, set of books, they'd probably all come up with somewhat of a different range based upon how they determine what that risk would be. Um, and that's looking at comparable sales, that's looking at what's going on in the market, that's looking at interest rates, that's looking at all of those external forces that can drive a riskier investment.

SPEAKER_03: 43:19

Is it I'm curious because this is something that I do, right? And and I'm trying to dumb this down for myself here, but I just want to talk to you about it. So, like if I want to get my AC repaired, I'll call somebody. And they come out and they'll say, hey, 500 bucks, 1,000 bucks, whatever the case is. Okay, I'll call you back. I just did that this weekend, as a matter of fact. And I'm gonna call up somebody else, you know, and and I'm gonna tell them, hey, this is what's going on with my AC. Come on, take a look. Oh, it's gonna be 400 bucks. Oh, it's 400 bucks, 400 bucks. You know, give me a workup. This is what you're gonna do for this amount of money and yada, yada, yada, right? I'm gonna call somebody else. Usually we have the rule of three in operations. The rule of three says you take what you see out of three and you kind of figure it out. Is the cheapest price the best? Or is it a guy at 500 because he's gonna give you$100 worth more of value to not have to come out again, right? Because you got the cheap guy, you've got the middle guy, and usually you get the one guy who says, Yeah, this is gonna cost you$800. Why is that? Well, this is out now. That's gonna go out in three months. And if I have to come out here, I'm gonna charge you$175 for both visits. You can just knock it out now and be done with it, and you won't see me for another year, and I'll give you a you know, a year's warranty, right? Whoa, you just blew me out of the water now. Valuations, because they're so different. Does somebody go, hey man, this is the valuations that they're giving me? This they're saying that I'm worth$500,000,$600,000. Does somebody go out and say, hey, I want Alicia's idea of what my company's valuated at versus Mike's and then work it out in between? Or is it a company standard, whatever I go with you and you tell me it's worth, and then the buyer has their guys who do valuations, they said it's worth worth, and we kind of just kind of figure it out there.

SPEAKER_02: 44:52

Yeah, the buyer will generally hire a company like ours to do what's called a quality of earnings. So even if you had a valuation report done as a seller, said, okay, my company's worth a million dollars, the the buyer is just not gonna take that number and say, okay, you know, I'll I'll buy you for a million dollars. They might, but there's negotiation. Right. Um, they're gonna come in and do due diligence, they're gonna look at your numbers and that's and put together using a professional firm like ours, a quality of earnings, which basically looks and says, okay, what is real here? Is the revenue real? Are these contracts good? Are these customers paying? Right. And they'll look at samples, they'll look at trends, they'll look at trailing three years of activity, and so they'll determine and give a report based upon, all right, we've tested these things, we've looked under the hood, these numbers are good, these contracts are good, we pulled the contracts, they're real. So, you know, it's not an audit and it's not a valuation, it's a quality of earnings. And so it basically presents on what is the quality of the numbers that they're presenting to you based upon what you feel you're gonna take over with your purchase price. How long does this usually take? Months. Really? Yeah, yeah. It takes um 30 days minimum, depending on the records that we get. Generally, getting the information to do the work we have to do is the hard part.

SPEAKER_03: 46:30

Alicia, what's what's what's something that you when you started out and you found out about rent to own, it was like, this is this is way different than when I started. This is something this is a different way of looking at business than I'm used to. Come out of the classroom and now here we go.

SPEAKER_00: 46:45

I think the inventory is the biggest difference how you treat it.

SPEAKER_03: 46:48

Because it doesn't just leave.

SPEAKER_00: 46:50

Yeah. And it could come back.

SPEAKER_03: 46:52

And leave again.

SPEAKER_00: 46:53

Yeah.

SPEAKER_03: 46:54

So if if you over the years, now that you're here, you know, now, would you say that you have a lot better grip on rent to own than you did before? And how long did that take?

SPEAKER_00: 47:06

I mean, it's I've basically been in it for less than one year at this point. Oh, okay.

SPEAKER_02: 47:10

All right. Well then how are you 12 months later? Uh uh one year. Yeah.

SPEAKER_01: 47:14

Yeah.

SPEAKER_02: 47:14

Another month. So our RTO committee here is made up of we got about six people. Not just me, not just Alicia, but we've got others. Some tax, some audit, some valuation advisory. We meet every couple months to talk about what's going on in the industry, what we've learned, what's going on with our clients, what services we need to be doing, and we collaborate on those things. So, so that she is continuing to learn more as she goes. Um, but learn more at all. She's fairly new to it in in all respects of what we've been doing here as a firm for a while. She's only been with us four and a half years, um, but really stepped up last year to get involved in rent to own when we had personnel departure and stepped up to basically say, hey, I'll I'm willing to learn this and help out and take over some of these relationships.

SPEAKER_03: 48:02

Welcome to the RTO family. So, you know, one of the things that I've been asked, um, and I'm gonna ask you because you guys see it on a whole different level than we do. Some people have said, you know what, rent owned's fine, the economy is just going through what it's going through. It is what it is. And I've heard people say, Oh my God, the bottom's gonna fall out. Oh my gosh, what are we gonna do? Have you seen a change in in the rent-owned industry in the last few years, depending on what's going on? It's like far as maybe consolidation.

SPEAKER_02: 48:31

Sure. Um, but I've always felt that the rent-to-owned industry I won't I hate to use the word recession proof or economy change proof, but it somewhat is insulated compared to other businesses we work on. Okay. So you got to remember our firm doesn't just do rent to own, it is a very full-service firm doing all walks of life in all industries. So compared to other industries we see that very much get impacted with ebbs and flows of economy, rent to own I've seen, is impacted less. And I'll say that it doesn't mean the numbers aren't going up or down in interest rates or, you know, but generally speaking, your clients, customers, um will may change, you know, if someone has an economic shift in their life where they were a retail buyer and now they want to look at the rent-to-owned transaction, or they're just not as confident because of their job status to go out and want to buy something, they want to rent something that's less risky, going back to that word. So your business may shift a little bit, but less impacted, I think, by the economic ebbs and flows as others. Now, when you're in the rent-to-owned business and you don't see everything going on outside, you probably don't recognize that because you're like, okay, my customer counts down, they're paying slower. Yeah. You know, all of that stuff. But compared to other businesses, it's less. Does that make sense?

SPEAKER_03: 50:12

Well, I mean, you're always looking for the benefits, right? If I have a car business and there's a car boom, I'm doing well. If there's no, you know, there's no car boom, then you gotta think. So you gotta always look at the bright side and you always want to manage the risks. Uh, right now, I think that the economy is going through whatever it's going through and it's gonna be hard. Uh, one of the things that I wanted to talk about was as this looming idea of tariffs come up, does that play any difference in the taxes of a rent-owned company? Or is it just your your cost goes up with what comes in, and that really doesn't affect the tax side of it at all?

SPEAKER_02: 50:48

Your cost goes up, so should your pricing model. It has to go up. Has to.

SPEAKER_03: 50:51

Yeah, right.

SPEAKER_02: 50:52

You've got to pay for that somehow. So from an income tax perspective, it doesn't really, it doesn't drive any decisions we're not already doing. But from operations it does, because it does affect your pricing models and how you're how you're looking at what you have to price product out at and when you have to order so that it shows up when you want it to. Absolutely. All of those things. You know, the the um the industry itself, though, is you know, and I keep saying this, has shifted. You know, you guys have had to learn how to do online sales. You've had to learn to do different things post-COVID. You know, you've had to go back and learn to rent and collect, whereas a few years you just had all this economic stimulus money that was floating around out there. God, it was such good times. Good times. But you're also experiencing labor loyalty issues just like the rest of us are. Yeah. You know, and so constantly having to retrain people coming and going. Um, so you're experiencing some of those things too to run your own companies. And I see that rent to own no different than others. You've got good operators and you've got less involved operators. Yeah. And it's very much you know, you've got to be you as an owner and and a manager, you've got to be heavily involved in your business and know your numbers.

SPEAKER_03: 52:13

Yes.

SPEAKER_02: 52:13

You got to pay attention to it.

SPEAKER_03: 52:15

Well, I've seen them both. I've seen guys that are, you know, at the front counter every day. And I've seen guys that they like to drive, uh, they like to drive off the lot at 12 o'clock in the afternoon and not come back to the next day. It just happens, you know. Um what when we're talking about, because you you were talking about the exit strategy. I want to, I want to build this, I'm gonna have three, four, five, twenty stores, whatever the case is, I want to get out. And now the big players are not in it. At least not the way they were. Because I remember there was a growth cycle rental center, and I'm with you on it. They bought anything that was alive. Uh, you know, I'm not that much with the errands, but I also know another couple of companies that were like, hey, we'll grow uh if it has a rent-to-own moniker on it, I'm gonna stick a couple of trucks and a few guys in there and I'm gonna see if it works out or not. They were buying anything. Fast forward to today, they're not growing like they used to be. Not saying that it's a bad thing, but they've decided, hey, we're gonna work on our own. We're gonna grow this organically. If we open it up, we're either gonna do one of two things. We're gonna evaluate and make sure this is 100% good idea, or we're just gonna open it up ourselves, right? But the exit strategy is has not gone that far. There are people that are still trying to get out of this and trying to figure out what they're gonna do. What as you guys have seen, what are the more active buyers now? Are they big companies? Are they investment groups? Like, who's buying rent-to-own today?

SPEAKER_02: 53:31

You can use the term private equity, you can use the term venture capitalists, you can use the term just regular entrepreneurs. You know, we've seen an influx of people that weren't in the rent-to-own space come into this business that are interested in buying cash flow models. Rent to own is a cash flow model business. It's not real estate where you're buying that building. Right. You know, you're buying a cash flow stream, just like I talked about a moment ago. So you've got groups out there that may be having a portfolio of real estate. They may have part of their portfolio and other franchise groups like Popeye's Chicken or Dunkin' Donuts, and they learn about this rent-to-owned business and they go to a show or they go to a franchise show and they learn more about it. And so they start looking at the numbers. And so they have made an influx of investments into this business as well, to where they may take over control, or they may take a back seat as far as how how much they're involved in the the day-to-day. Most of the ones that uh the ones that I work with and have have taken over majority control. They've basically bought the business effectively and and taken over stores or groups or chains or whatever. So um, and that's what they're doing. So you don't have the the racks and errands and different groups like that, the big companies that are just taking on everything, but you do have other investment groups, but that has slowed down with interest rates rising, you know, because those groups do come in with plenty of capital, but they also want relationships with banks. So we'll transition to that discussion. Banks don't really like this business. So I hear. So I hear. And I know you've had some other podcast people out here before and had that very discussion. But that being said, we all know that. We're we we all continue to search for banks to get them comfortable with this business. Those investment groups do the same thing. I have plenty of discussions with banks all of the time about this transaction, this balance sheet. Why is there no accounts receivable? Why is there not inventory? What's in my cost of goods sold? I don't understand this at all. It doesn't fit into my retail model at all, and I have it's broken. So we have to explain that to them all the time. And so they go through the same thing. So as interest rates rise, risk becomes heavier, banks want, don't want to lend out, especially to a business they've never lent to before. So you've seen a slowdown in those transactions the past few years too. And so it's it's causing some of your aging dealers that do want to exit to look at other things. You know, what can I do? You know, can I transition this? Can I um do I have a family member that's interested or you know, son or daughter that wants to take this over? Do I have a key employee? How do I do that? And so that requires them to start planning a little bit more in advance. You can't just wake up one morning and say, ah, you know what? I want to retire tomorrow. I'm ready to get out. I'm for sale. Let's hang up for sale. Somebody buy me. So you got to start planning in advance. And to do that, you've got to start looking at the numbers and some of the things that we're talking about to plan for that. What's attractive to a buyer? And now scrub your own numbers. Let's look at your numbers to see what can what your value is today and what you can do to improve it to make it attractive to a buyer. Or if you want to transition to someone else that can't afford to buy you out today, maybe you can do a seller note and bring them in over time to where they can buy in slowly to take you out over time. Wow. So there's all of those different things that we've had to do to plan for different types of exits depending on what someone's faced with.

SPEAKER_03: 57:31

You know, usually when I see Mike, he's just talking about the weather. You get him involved in taxes when he's just coming out. You see it coming out, right? You see it too. He's like, you know, but then he just gets into it. That's what I love about you, Mike. You really believe in this, and I and I I really appreciate that. Talking about this is gonna be your least listened to podcast. No, no, no, listen. Everybody everybody needs to know what they're worth. Everybody needs to know how to get to where they're going. I mean, the Yellow Brick Road wasn't an easy walk, but it was it was there. You know, it's something that we gotta do. We've got to, we've got to face this person at the end. And the end is always, what are you worth and what can you make happen? Uh, you know, talking about advice. You are on the uh April Vendor Advisory Committee, right? I am. And so what does that involve? Does he require help on that? What is it, what do you do there? I mean, you're you're doing this on the show, and I really appreciate it because there's a lot of there's a lot of advice that you guys are giving, a lot of knowledge that you're dropping here that some people just don't know about. And I'm telling you the truth. I can 100%. And I from multi-unit all the way down to the guy standing behind a counter, they just don't see this type of the business. Now, you are gonna have listeners gonna be like, that's very important. So many guys have listeners like, you know what? I might skip that one because I don't know anything about taxes. But if anybody wants to know, it's hugely important to figure out what is important. And as you are advising, being a part of the vendor advisory committee, talk to me about that and how does that work? APRO is a big part of our of our industry, and so are you.

SPEAKER_02: 58:53

Yeah, and so what kudos to APRO for having the vendor advisory committee. But really, what it is, it's a forum for vendors to sit down and talk about what they can do to help the industry, how they can get more involved, to become more educated about the industry and talk about what's going on, but also how to make the shows better. Because when you talk about meeting of the minds, when you talk about RTO world, it wouldn't happen without the vendors. So this is my shameless vendor plug. And here we go. All right, the money flows from the vendors that help underwrite the cost of all of this stuff. We know that. So you got it without vendors, there wouldn't be this business. Right. Right? And so whether that's product or service vendors, and so you got a mixed group of both that sit on a committee that talk about what we can do to make the shows better. And it's everything. I mean, it's everything from, you know, how do is the is the conference room gonna be big enough? Is the showroom, the trade showroom, gonna be big enough to, you know, the cost of Wi-Fi, or how do we get rugs in there or shipping and frayage and all this stuff? You know, the the the freight piece is huge when it comes into who we're gonna deal with. And are we dealing with um uh a union-based group when we get there or not? And what's the cost of all of this stuff gonna be? And so, you know, it's it's everything that the vendor advisory committee talks about to help educate um April and and even you know, Dennis is involved too and listens to those things. We're talking about Dennis Shields of the Group. And so, what can make these shows better? And um it's it takes a village, and the vendors, the voice of the vendors is a big part of it.

SPEAKER_03: 1:00:47

Well, talking about new people in the village, it's been a year. You said now it's been a year, it's coming full circle. We're gonna have a birthday celebration sometime soon. How has been your venture coming into this? Because I know for a fact that this business is not as old as some other ones, but you've got some guys that have been doing this 40, 50 years on the top of that ladder. And they know a lot of people, so it's almost like a family thing. And, you know, like Mike said earlier, I came in and it took me a couple years before they recognized who I was and they actually said my name. But now that you've been here for a year, how has that venture been for you?

SPEAKER_00: 1:01:22

I don't think I've had any issues coming in, but I also have a family member that's already, you know, been invited in, that's showed me around, introduced me to everyone. So everybody's been nice. They they come to me with questions. It's not like they just go to Mike.

SPEAKER_03: 1:01:39

Are you taking the Jamie Slatten kind of approach?

SPEAKER_01: 1:01:41

Here she is.

SPEAKER_02: 1:01:43

I I tried, but what I really want to hear her say is when she first started getting involved in this business, her mindset of this whole business was more stereotypical.

SPEAKER_00: 1:01:55

Oh, yeah.

SPEAKER_02: 1:01:55

So why don't you discuss that and how that has changed since you got to know the folks? It is different. It is different.

SPEAKER_00: 1:02:03

Yeah. So I don't remember my initial comment. Something about how I kind of feel bad for the clients, customers, um, because they're paying more for the product. But Mike educated me like this is the only way that some of these people can get that product. That's how they'd survive. Is that what where you were going with that?

SPEAKER_03: 1:02:28

Well, you well, you know, usually that comes from the operations piece. Usually that you you see that in the needs. And when you're talking to the owners who have who are who are now playing both sides of the Right. They're paying the I I've got to buy this a certain way. I've got to stretch out my funds. I've got to make sure that I'm paying the labor and the taxes and the big, beautiful bill that comes along with it. But they also know what it's like to stand in the front showroom and talk to a you know a family who just has needs. And their needs sometimes outweigh their ability to pay for those needs. And you know, it's it's that relationship and how you're working it out with your clients to make sure that they 100% are involved with you, you're involved with them. And then that transitions into a cash flow that we get RG co-involved in, right? So it's it's it's that whole runaround. And if you've only been here for a year, hold on, because there's a whole lot more coming up.

SPEAKER_00: 1:03:13

My opinion has changed a lot from the day when I heard I was gonna kind of be on this industry.

SPEAKER_02: 1:03:20

Yeah, I mean there's a there's a whole slew of of services that the rent-to-owned industry provides their clients, their customers, um, beyond just taking payments. Um, you know, if something breaks, it gets replaced. You know, all of those things that you don't get with the retail transaction. It's it's about information. So it's it's it's totally different business. And I think, you know, educating her for me has been no different than I've had to do educating banks and other people, even investors that want to get involved in the business. For instance, um some of the franchisors that we represent and work with, as franchisees be potential franchisees become interested in this business and are looking at the business, they will have them set up a call with me to talk about the numbers, to talk about that piece of the transaction and help educate them on the business as a whole, because they're coming in with a different mindset of things that they've heard or read about or whatever, and they just need to be educated. And that's where April and Trib become great, and this industry is wonderful, sharing that information to educate people and the masses about why this is, you know, this is a great business. It's it serves um uh it serves an uh probably an underprivileged group that wouldn't have access to things otherwise.

SPEAKER_03: 1:04:47

Well, you know, we just uh we're just talking to Dennis Shields about that. It's it's a billion-dollar industry. Okay, we're we're knocking on nine to ten billion dollars. There is a lot of help to go around. Yeah, it's needed. Right. You know, and we we'd love to serve our community.

SPEAKER_02: 1:05:00

And you read about that with the stories, the giveaways, the, you know, just during COVID, the the laptops that were going out to schools and the kids that had to be now homeschooled and things. I mean, it's just it's endless when you read about what's going on because of your customer relationships and how entrenched you are in your own communities. You're living in those communities. Your kids are going to school in those communities, they're going to school with those other kids. So it's it's a different relationship. And I think we've learned that, I've learned that over time, and she's sort of on the cusp of seeing all that too.

SPEAKER_00: 1:05:33

I've learned it.

SPEAKER_02: 1:05:34

Yeah. So it's it's just where we are.

SPEAKER_03: 1:05:37

So as you're part of this vendor committee, you're also part of FRDA. Now, the FRDA is a Florida Rental Dealer Association where they're there are RDAs all over the country, right? For different states. But you're part of the Florida Rental Dealer Association. Um and you guys were just recognized. How important is that to RG Co. How important is that to Mike and Alicia to be recognized for your involvement in the RDA?

SPEAKER_02: 1:06:03

Well, we um you know, we were able to become title sponsor this past year, which was which was great for us. It was great publicity. It was, I never thought I'd be able to be, our firm would be able to be title sponsor at any of these shows.

SPEAKER_00: 1:06:20

Um, but it was It was great for Mike's ego.

SPEAKER_02: 1:06:22

It just worked out.

SPEAKER_03: 1:06:24

Um Well, listen, I mean, you guys have been doing this a long time. I mean, RG Co has been around for a while. It's this isn't a this isn't a a new transition. So it it really is kind of like one of those milestones where you can say I've I've lasted here long enough, I've been part of the industry long enough to be seen as somebody to lean on.

SPEAKER_02: 1:06:42

Well, in 2021, our firm was recognized as the vendor of the year. And that was really cool because I never thought that we'd be on that stage getting one of those awards. And that was an honor. Um, and then to be become a title sponsor for any event, you know, was was to me was awesome. And to do it here, the Florida show, it's done locally. You know, we looked around the room that day, and everyone in there, every group represented in that room that day was clients of ours, except for one. It's pretty amazing. That's true. When you when you think about the the impact that we've been able to accomplish with those relationships. So when we when we identified that, it's like, why wouldn't we, you know, sponsor if we have the opportunity to? And cost and everything comes into play for it. And you know, it was it was doable for us this year, and we were glad we could do it.

SPEAKER_03: 1:07:37

Well, at least it wasn't during tax season, right?

unknown: 1:07:40

True.

SPEAKER_03: 1:07:41

True. So talking, you know, going back a little bit, we were talking about some of the things that, you know, the valuations, the even uh who's gonna buy, who's not gonna buy, things that are valuable and things that are not. What what are some of the trends that you're seeing as far as in the RTO world since you have that many people involved in RTO and and you see a lot of the back end of what's going on with the dollars, with the income, with the revenues. Uh, you know, what what right now is is kind of like that uh what's happening with the profitability and cash flow? Is it that we're that we're now we're facing, and I guess I I guess I should say that interest on taxes is actually going down, right? As of last that I heard.

SPEAKER_02: 1:08:22

Well, interest rates are interest rates are going down, right? Correct, yes. So uh that being said, I mean, you you first have to look at where each dealer is in their life cycle. You know, if they're in the first couple of years, they're probably not generating the profitability yet that they ultimately will get to. If you've been in business for eight, nine, ten years, then you've seen the ebbs and flows that we've discussed. Um, the good dealers are uh will make money no matter what. You know, they're they're just running their businesses very well. Okay. Um, do they have ups and downs? Yes, but they've generally established a pretty recurring customer base cash flow. They've got their numbers down, they pay attention to their margins, right? Um, they follow the right KPIs and those things, and and they pay attention to their business. Others that are still learning the business, you know, struggle a little bit. You know, this business is is very cash flow, capital intensive, you know. So, you know, you get into this business, you buy a unit for$500, you rent it. So you've paid$500 for the and now you rent it. You get$16 for that week and it's out the door.

SPEAKER_01: 1:09:32

Yeah.

SPEAKER_02: 1:09:32

But now you got to buy it again to replace it. So you've spent$1,000 and collected$16. That's hard for people to get their arms around, right? You know, and I'm doing this at a very elementary way. No, no, and that's exactly what it is.

SPEAKER_03: 1:09:46

But is that how the banks look at it and go, wait a minute, yeah, you've invested a ton of money and we're not seeing the return. The cash flow is way low for this. We're not getting$100 a week. We're talking about$16 to$25 a week on a on a regular stationary, and then maybe, maybe you get$35 to$45 on a on a motion, but like, what is that in comparison?

SPEAKER_02: 1:10:07

Yeah. So I and I I know I'm using very vanilla examples and numbers, but um, you know, what I've explained to people is look, you basically before your second payment, you may have bought that unit twice. Right? I mean, think about that. So you have to develop that that customer base has to build, right? You got to get that BOR out there and increased. Right. So that being said, I mean, you've you've got people that stay on top of that and some that don't. Um, it's been a little harder. You know, I hear more complaints than than the you know previous few years. You know, the last few years have been a little tougher. Um you've had to go back to some of the fundamental rent and collect training and and just getting people in the store. And and less people are going in the store these days. They're shopping online. They're so you've had to retool and retrain and develop technology and all of that stuff too. It's been it's been hard, but it's it's it still will thrive. It's not going anywhere. I don't believe the brick and mortar stores are going anywhere. There's still a purpose. People still want to see what they're buying. Um, and there there is definitely a customer out there that does not ever go into any store. Um, and that age is is there, but there's still plenty that that will and and will want to. Um, and I think the presence in the community, the the storefronts in the communities make a big difference too.

SPEAKER_03: 1:11:37

I've got to say there was we we just hit the third word, or I should say, numbers of the day. First it was the multiplier, then it was the EBITDA, and now it's the KPIs. We're hitting everything today. What do you what would you say is a mature store then? Some somebody is saying, you know what, because you you're right. You start up that there could be a lot of startup, there could be another store, part of the startup, right? I'm six months in, I think I'm doing a good job. I want to add another store, another year maybe goes by. But I mean, that's that's a lot to take on. So what would you say is a mature standpoint? This store has been here for and it does this and this on a regular basis would probably happen around this year without a lot of acquisitions and changes and such. Yeah.

SPEAKER_02: 1:12:20

I mean, what I've always heard that and I've never operated a rent-to-owned store, so you probably know this better than me, but what I've always heard, rules of thumb, you know, 500 BOR, 500 customer count, or$50,000 a month in revenue, or whatever that might be. So, you know, I don't really know. I think it goes back to how big your store is. You know, if you've got a store that you lease for$4,000 a month, it's going to be different than if you're paying$12,000 a month. I miss those days. They're not here in Tampa. No, no, they're not. They're not. And so, but it depends on where you're at, where you're located, what those, how many of those numbers you need to cover cash flow. Because again, it comes back to the cash flow. And when you're monitoring those margins and you look at, all right, my my cost of revenue should be somewhere around 35% of my revenue. So I'm dropping 65 cents to my gross margin. And then I've got 25% going to payroll, and now I've got another 10% going to occupancy. By the time you you look at those numbers and dwindle it down, how much is hitting the bottom line? So you the hard part about this business is you have to pay attention to those numbers. You can only buy for what you can afford to buy. Right. But if you don't buy, you run out of revenue run runway, right? Because your stream dies if you're not buying. So it's that yin and yang between when to buy and how much to buy that you've got to control. Like Alicia said, the inventory. Understanding the ebbs and flows of that inventory and how much can I afford to buy. And that's going to ramp up as your customer count builds up, and then your your cash flow is going to build up from there. So you have to start under a controlled growth scenario.

SPEAKER_03: 1:14:05

I mean you can't just go gangbusters. Well, right. Well, you know, there's a lot of people who've said a lot of things in a different way, but there's a curious comment, there's curious thought. It is cash intensive. I don't know anybody who hasn't said those two words when it came to opening up a rental-owned store without saying it within the first paragraph. Yeah, it's a great thing. It's cash intensive. It eats cash. It it it will, you know, you have to have a big lump sum just to start it, not let alone keep it going. But rental have people that are diehard in it. I know businesses who don't require a quarter of what it takes to open up a store, yet they love it. Is it really that advantageous to have a company that costs so much up front? And what does it give you in the back? When you see those numbers, is it really something that somebody's really like, is it the one store that can work off of 65 to 75,000? I would love 50,000. 50,000 was a long time ago. That was a long time ago. Yeah, yeah.

SPEAKER_02: 1:15:05

But you know, yeah, I mean, even a million dollar a year store now isn't what it used to be. No, well, you know, it's funny.

SPEAKER_03: 1:15:11

I was having a conversation with uh a couple of people out there. The the million dollar store now is almost like it's it's either a million five or two. Yeah. The million dollar store is gone out. It's gone. Correct. And so that's always the big question is with all the with all that it takes, with all the money, with all the finances that it takes, is it worth it? I I I would hope so, but I don't know anything about that, that side of the business to say I only know about my bonus checks and if I'm working and doing the right thing, right? Which I guess we can depreciate.

SPEAKER_02: 1:15:39

So I mean it's a val, it's a valid question. And you you're right. Most people in this business love it. They they love what they do. They they came up in the business or were uh a delivery driver, was a store manager, was an operating district manager, something, and they they've they've come up in this business, and that's what they know. No different than me. I don't I don't know what I would do if I did something else than what I do. It's you know basketball? Well, I'm still waiting on the NBA draft coach. All right. Yeah, so I don't know that that's gonna happen at this point in my life. But uh, but I think it's a very valid business, you know, from that perspective. And it does drop money to the bottom line. You just have to pay attention to it, you know. And like I said, you know, you we here take a very balance sheet driven approach. If I'm a store owner, do I just want to look at my revenue number and my bottom line number and call it a day? No, you have to look at the balance sheet. If you're not reconciling cash very regularly, daily, twice a week, weekly, don't wait monthly, don't wait quarterly. You know, you you got to do it on a regular basis. That's a little takeaway that some people should do, especially, you know, the bigger you are, the more you got going on, you have to pay attention to the cash at any level. Reconcile cash, tie out your balance sheet inventory to your POS. Make sure those ins and outs are happening and being recorded properly. Once your balance sheet is correct, you know, then you can trust your PL more. I can't trust your PL until I know your balance sheet is tied out. Right. Where we see a lot of discrepancies with the numbers we see is the POS numbers don't tie to the balance sheet.

SPEAKER_03: 1:17:25

So it's saying I'm like so nice right now, the discrepancies that we see.

SPEAKER_02: 1:17:31

Don't be late. Don't be late doing this. We see that a lot though. And so you you gotta stay on top of that. And you know, you're as you make those debt payments, you know, break out the principal, break out the interest. Um, and and so you you have to pay attention to that. And everyone's got AP, everyone's got unpaid invoices that they've got on their books that's been booked into their POS, that's hit their balance sheet, and now you've got this difference between what your accounts payable is and what your books say it is. And so again, if your balance sheet is not tied out and correct, I can't trust your PL. Right, right, right.

SPEAKER_03: 1:18:08

Uh, so you know, going back to the big beautiful bill, because we were talking, we're talking about money today. We're talking about where you are, paying your bills, making sure that you're understanding your PL, your GNL, and everything in between. Was this bill helpful? What does the outlook look like an RTO in the next five years because of the changes of this bill? Is it a better? Is it not it's no big deal, it's not a not a big change. Is it, oh my god, run for the hills, find some investment company to buy it, call RG Co for your valuations, and boom, get out from get out from under it. I mean, what do we see in five years?

SPEAKER_02: 1:18:46

It it's helpful. It was helpful. It's helpful. And but again, I I throw a little caution out there that um, and I've had this discussion with clients, is you don't have to take bonus depreciation. Some of the biggest tax problems I've seen with RTO dealers in this business is they took bonus depreciation and now they've got a big tax bill on the back end. You know, they're and so they they want to exit, they want to sell, they want to get out, they want to do something, and now they've got this. And hear these lingering bills, big re this deferred tax liability that's out there that bonus has created. Bonus is beautiful if you're paying for it with your operating cash. If you're using debt dollars to fund inventory purchases and driving losses to your tax return that you're offsetting other income with, now when that turn happens and now you're generating the funds on the backside, you've got the taxable income and you're paying off the debt. So you have no cash to pay the taxes. It that's where it becomes problematic. You have to monitor and plan for that flow.

SPEAKER_03: 1:20:00

And then that changes the valuation.

SPEAKER_02: 1:20:02

Not necessarily.

SPEAKER_03: 1:20:03

No, no, no. See, you see you see how you see how it is? I I I just don't know.

SPEAKER_00: 1:20:08

Uh you know, they and these changes are only permanent for as long as you know certain governments are in place. Yeah, so it's it they say it's permanent, but it could change the next election.

SPEAKER_02: 1:20:19

I will tell you, buyers love this bill because buyers are gonna look at this like, look, I can buy this RTO company. I can get all this bonus depreciation in year one that's gonna help underwrite basically the cost of this business for me right out of the gate. I'll deal with the taxes on the back end. I'm not worried about that. When I sell, I'll have enough cash to pay the taxes. I'm not concerned. So will that help MA potentially happen? Yeah. Is it is it good for the industry? Yeah. Do you have to go into it with a mindset of understanding that bonus depreciation creates big differences between your book numbers and your tax numbers? And the people that elect out don't really have that volatility. Their tax numbers are pretty similar to their book numbers. So planning for taxes is pretty easy for them. They look at their PL and say, okay, that's where I'm made. When you've when you're in bonus depreciation and you're looking at your cost on your books, that doesn't even come close to representing what your cost may be for tax purposes. So it's it it requires basically keeping track of two separate two sets of books. It becomes a little more costly. It's it's it's harder to track. It's more work on our end to deal with that. Not saying it's a bad thing, it just is what it is. And so you have to plan for that business decision.

SPEAKER_03: 1:21:42

Is this is this bill too good to be true? Is this one of those bills that are too good to be true? Somebody else comes into the office later on and goes, Yeah, that was wild ride. Let's get back to normal business. Or is this something that can actually be worked with with the economy and the American people and say if somebody else comes, and this is just this is thoughts. I'm not saying that this is or it isn't. But if somebody comes in and says we should just keep working with that. Because, you know, sometimes some things are too good to be true.

SPEAKER_02: 1:22:07

I'm not going to get into politics. But I can tell you uh to Alicia's point, if if the office is changed, would would I expect some of this stuff to go away potentially? Yeah.

SPEAKER_03: 1:22:20

That's that's kind of what I expect. Just a thought, you know. Uh and you know what they say. I mean, you can't please everyone all the time. It just doesn't happen. Hopefully, um moving forward, regardless of who's in the driver's seat, we stay on a course for pushing the economy for growth. We need that. I don't care who you are in the world, we need that. Uh especially in America with the American dollar under under fire as it is right now. We need it in any way, shape, or form. But we won't get into that part. We're not going to get into that part.

SPEAKER_02: 1:22:51

I mean, one piece of this bill I will mention that they did make permanent to use her term with air quotes, permanent. Nothing's permanent.

SPEAKER_03: 1:22:57

As permanent as Congress allows it.

SPEAKER_02: 1:22:59

But it's not cliffing, because this one was supposed to go away after next year. Um, the the qualified business income deduction, QBI, Section 199 CAP A, which is basically 20% deduction for your pass-through entity income. So basically you're taxed on 80% of your pass-through entity, which is an S-corporate partnership, instead of 100%. So RTO businesses qualify for that qubit deduction. And so this was made permanent. It's not going away. It's only permanent until the next change, but it has been extended. Let's just say that, which is a great thing for this industry as a whole.

SPEAKER_03: 1:23:38

Alice, I just want to ask you a question. If you ever do anything, does he refer back to the manual on page 49, subsection 3D? This is what it says that you should.

SPEAKER_00: 1:23:47

He probably could.

SPEAKER_03: 1:23:49

I love it. So listen, I you guys have been amazing and kind of just being able to put this in a perspective that I think I or other people that are listening to this can understand because uh there is a whole lot more that I'm sure we can get into. You didn't see it last year, but so Mike comes into the the the RTO live event, and uh, you know, we have some people talking. It's nothing real big. It was a there was a lot going on, right? So they stick us in this back room, which is okay. We're talking about it. And then uh Mike comes to the mic and he just drops us a couple lines on this. We weren't ready for all that, Mike. He has a he has a way of doing it. We loved it though. It was great. So, real quick, I got some rapid fire questions for you guys. Should we go, should we go one at a time or should we do them? Should we do them both and you guys answer them both, or should I go one and then one? Oh you got some answers ready. Whatever you want. All right. So, Mike, what's the most surprising thing you've learned about the RTO industry in the last 17 years?

SPEAKER_02: 1:24:49

Oh, the camaraderie, as I mentioned, just how everyone interacts and talks. That's the most surprising thing I've learned about.

SPEAKER_03: 1:24:57

We've talked about every almost every time I have a podcast with somebody who's been here for a long enough time to say it, they always say that. Yeah, whether it be Tissett, Shields, uh Charles, everybody.

SPEAKER_02: 1:25:07

They all say that. They've all got mentors, and everyone should have a mentor in this business with another dealer, another operator, somebody that they can talk to, and they do and they share, and it's it's amazing.

SPEAKER_03: 1:25:20

Yeah. Yeah, but you know, uh, the legends that I've talked to so far, and they'll be coming out on the podcast later. But, you know, Kathy Windsor, Lynn Leach, Gary Ferp, they all say the same thing. They've reached out to somebody at some point in time in the industry who's technically really understand they're your competition. I don't care where they are, they're your competition. But because we're local and we're in local towns, you know, you don't deliver that. I don't deliver into the next state. They have these conversations of this is what you should try with your business, this is what I've come across, this is what you can learn, this is what you can understand. Call RG Code because they know what the heck they're talking about. There's something, and it and the camaraderie is unbelievable because I've seen the pioneers, I've seen the the people who have started these businesses, all the way from you know, from Daryl uh to Norm to all the guys that they've talked about, Larry Sutton, they all have this kinship that they just they they have talked and gone over again and again and again the ideas of this business. And I agree with you 100%.

SPEAKER_02: 1:26:18

Speaking of Larry Sutton, uh I I gotta share this before we ever had any level of professional relationship. So imagine someone not even having a relationship. I went up to Larry and asked him if he would just mind having lunch with me occasionally so I could pick his brain. And he always did. Never batted an eye. So, yeah, let's do. Let's do it. Larry's great for a conversation. And he talked to me about the RTO industry, his background, a little bit about what he's doing, and just shared with me things that you know you wouldn't think anyone would ever do without having a relationship at all. Just some guy that he didn't he barely knew just asked him to pick his brain, and he was more than willing to sit down with me and have lunch.

SPEAKER_03: 1:27:03

He's such a unique guy. Have you ever met Larry Sutton? They don't call him the Reverend for Nothing. So if you ever ask him to lunch, you better be prepared for a sermon. But I mean, he is amazing. He's amazing. So Alicia. And it's it's gonna be I might have to be for both on this one, but biggest change you've seen in the RTO financial management.

SPEAKER_00: 1:27:21

That might need to be your question just because I haven't seen enough yet.

SPEAKER_02: 1:27:24

I would I would say online selling and and just virtual RTO competition. Oh, yeah, absolutely. Absolutely would be my answer.

SPEAKER_03: 1:27:30

There's two there's two letters that come into play, and it's AI for everything. I'm hearing AI for everything.

SPEAKER_02: 1:27:36

Well, it's the new thing. It's it's what's coming now. You know, that's what everyone's talking about, yeah, including your podcast.

SPEAKER_03: 1:27:42

Absolutely. We talk about a lot. So then we'll direct this one towards you. One financial habit that every RTO owner should develop.

SPEAKER_00: 1:27:49

I think Mike hit on it before, you know, checking your balance sheet, making sure everything ties out.

SPEAKER_03: 1:27:54

Every day, every two days, every week. Well, we what would if it and I know you're an accountant, so I mean, try not to get too far into weeds in that, but if it was you, how often do you do it?

SPEAKER_00: 1:28:05

I would do it every day, but I'm very should I use the word that I use.

SPEAKER_03: 1:28:10

You're just very detailed on that, right? There you go. Mike, best investment an RTO owner can make in their RTO business. Their time.

SPEAKER_02: 1:28:18

Uh uh they've they've already put all their money in. Uh it's important that they give their time to the business to do exactly what she's talking about. Spend time every day in your numbers. Pay attention to them, you know, reconcile cash daily. So to give their time to their business so that they learn their business. Remember, many of these people have transitioned to be owners that were used to be employees. Being a good employee does not make you a good owner. Yeah. It does not. Yeah, that's well, so you've got to learn.

SPEAKER_00: 1:28:48

I think you also need to keep in touch with your employees too.

SPEAKER_02: 1:28:51

And you know, but being an owner does not mean now I'm I don't have to go to work every day. It means more. I've got to work more. I've got to pay attention to this stuff day and night and weekends and look at it. And it's just part of being an owner. So yeah, their time.

SPEAKER_03: 1:29:04

All right. Biggest takeaway. This is both of you guys, biggest takeaway from the 2025 Tax Act for RTO owners.

SPEAKER_00: 1:29:12

Bonus. Bonus.

SPEAKER_03: 1:29:14

The bonus. Bonus depreciation. Bonus. And that wasn't one of my key words, but I'm saying it is today. And their bonus depreciation is going to make it happen. So what's next for you guys? What's next for you guys in the RTO industry? What comes up next? What do you guys foresee in the next few years that you're going to be a part of?

SPEAKER_02: 1:29:28

I just rolled off being part of the board. So I was as part of the vendor advisory committee. Um, I was lucky enough for the last five or six years to be part of the board as one of their board liaisons. Um I I've just now been voted off the island, so to speak. So I'm no longer on the April board. Um, but that won't change anything. We'll continue to be involved. You know, we go to these things because we become just as educated as we're educating while we're there. Um, and you know, there's only a few of us CPAs that show up to these things, and we know who they are, and um they're we're all there. Dan we're talking about you. Dan, Dan, we're talking about you.

SPEAKER_03: 1:30:09

I'll see you at the next one.

SPEAKER_02: 1:30:11

Um, but you know, he does a great job showing up, and he's very well respected. And and we we show up to learn and and not just to see the clients that we have, but also to learn about what's going on in the industry. And I think that means a lot. It means a lot to the industry that we do that, and um we'll continue to do that.

SPEAKER_03: 1:30:29

Well, now that now that he's seen the off ramp, is there any chance that we're ever gonna see Alicia part of a board?

SPEAKER_00: 1:30:34

Maybe.

SPEAKER_03: 1:30:35

Maybe also we're not we're not against it. All right, that's what we talk about.

SPEAKER_00: 1:30:39

Or Janelle, you never know.

SPEAKER_03: 1:30:40

Possibly, we're also trying to get away. Where is she today where she she did not show up for the tax? That's people, you know.

SPEAKER_00: 1:30:47

She's not in the office, she's remote.

SPEAKER_03: 1:30:49

She's remote, yeah.

SPEAKER_00: 1:30:50

But she's amazing for the city.

SPEAKER_03: 1:30:52

Oh, that's that's good. So coming out of what you do, because this is a big part of it. I I can't emphasize enough how much this plays a role in a successful rent-to-owned industry, a successful business. What does RG Co's legacy look like in the next 10, 20 years? Is it Mike finally being able to step back a little bit and have some of the uh younger talent here take over and be a part of April and be a part of the FRDAs or the RDAs period? Is it, you know, we keep it streamlined and we just do what we do and make sure that we hunker down and give everybody the best tax advice that we can, the best valuations and EBITDAs that we can? I mean, what does it look like in the next five, 10, 20 years?

SPEAKER_02: 1:31:34

We just came out as a firm of our strategic planning where we talked about the next five years. And we'll have some of our partners that that roll out of here in the next five years that are ready to retire themselves. I'm not. You know, my youngest is still in sixth grade, so I'm not going anywhere. But as far as the the rent-to-own industry goes and our commitment and loyalty to it, it's not going to change. We're going to continue to grow, stay involved. Our committee shows that. The fact that Alicia is here shows that. Um, I want people to know us in the industry, not just with my name attached to it, but others. And um, you you only do that by showing up and becoming educated. So we're not we're not going anywhere and we plan to continue to stay involved as a firm. We are also going through the challenges of learning how to use AI and what to do with that and what that means as far as what our ideal clients are, training our people properly, um, and and basically going out and and dealing with technology and what kind of innovation we have to use so that we. We can train to serve our ideal clients, and rent to own is squarely within our ideal client. So yeah, that's that's what's on next for us. The challenge, not just within this industry, but as a firm and all of the clients that we serve is how to better serve them and continue to stay on top. Our firm size is very niche. You know, we're not a big firm, and we're not a sole proprietorship either, as you've mentioned with our office space. We're about 85 people top to bottom. So um we can serve small clients, we can serve large clients, we compete with the big firms on a regular basis. We don't serve publicly traded clients, and so the closely held, privately held company is is well within our wheelhouse, and that's what we're gonna continue to build on.

SPEAKER_03: 1:33:25

Well, you know, he says that so nice.

SPEAKER_01: 1:33:27

He does.

SPEAKER_03: 1:33:28

I know that in the beginning, the only thing that I was really thinking is his daughter's gonna say, Hey dad, what do you what do you do for my college tuition? So I gotta stay here. I gotta stay here.

SPEAKER_00: 1:33:39

I'm sure he's got that well taken care of.

SPEAKER_03: 1:33:41

You know, I I I met your wife.

SPEAKER_02: 1:33:44

She plays basketball, but she, you know, she can't score in a gym by herself. So you know, she's more of a defensive uh weapon.

SPEAKER_03: 1:33:50

Well, listen, there's a lot of scholarships out there. We're not gonna put it down. She's great. Uh your wife's amazing as well. We've seen her last time that we went to uh to Washington for LedgeCon. Guys, just to let you know, if you can ever do LeggeCon, it's a great thing to do. Are you gonna go to LeggeCon eventually? Are we gonna see Alicia's face in the in the halls of the White House? It's pleasant.

SPEAKER_02: 1:34:10

So um yeah, I think this year it's literally starting on the April 15th, which is the tax deadline. So we we have supported it and uh will continue to support it, whether the dates will drive whether we can attend it or not. But I try to even this year, it was like April 8th through 10th, and I was there. Um, so it's important to this industry, it's important to us, it's important to see. And so if you haven't attended, whether you're a vendor, dealer, or a manager or just an employee in the business wanting to learn more, um, it's a time where we all show up and and and fight for this industry and talk about it. And it's great not having troublesome issues to discuss. Oh, God, yes. Um, but they still love hearing the stories, and it's important that we continue to do that.

SPEAKER_03: 1:34:58

I think I think the podcast this year is going to try to be a part of the fellow program and see if I can get one person up there with me. Uh, I know that it changed my thought process of seeing everything, not only the process of just being involved and saying I've actually advocated for my industry. I can say that out loud. I mean, a lot of people, how long have you been in industry? You know, have you ever done anything for it? No, I clock in, I clock, you know, I go home, I spend the money that they give me. No, but to say that there was a clear advocation for the advancement of the industry or to stay where it is and make sure that it isn't changed in any way or form, like, you know, the things that are going on in New York right now that have a lot of implication on what can happen in the future. So it's it's great to see that. And uh, I'm definitely thinking about bringing somebody with me because that opened my eyes completely as to what you know, what we were about and what the camaraderie is on a whole different level. It's one thing to see it at uh meeting of the minds, it's one thing to see at RTO World, it's another thing to see it that everybody gets together under this same one banner to walk the halls of you know DC and say, hey, as a one voice, we're we're here as an industry. We're doing great for our communities, for the people, for our not only for just the communities that we serve, the employees that we have. I mean, there's a lot of employees in there. There's a lot of things that happen, the vendors that we support, the areas that we support, like you said, the schools that we support. It's so important. You know, on our way out, on our way out, as we talk about this and we've we've kind of settled on everything, you know, we have talked about the the big guys, we've talked about some of the small guys. What would you say is some advice to a new company, a new owner coming up that doesn't have a CPA at this point in time? What is something that you would say, if I'm doing this and I don't know what I already know, because Mike's got years and years and years of service and he's got an Alicia, but how do you say, you know, this is what you should be looking for in your CPA? If you're looking for somebody or this is the benefits of having a CPA at this point in time of your business, and I wouldn't go without it, these are my words of wisdom.

SPEAKER_02: 1:36:57

Spend the money on a good POS system that you can trust and an accounting system. Um the taxes will come later. Generally, these businesses don't make taxable income in year one. So tax planning and things like that aren't something that you focus on out of the gate. It's cash flow. Talk to them about how to manage cash flow, how to pay attention to the things we've discussed today, um, and and understand that transaction, control their spending, but spend enough to build your cash flow, your recurring revenue. That's what you want. Your your par, your smur, your potential, whatever you want to call it. Your ideal. You got it, your ideal. You gotta grow that, right? But you got to grow it in a way that you can afford. And so I talked to them about that. Uh, all these new dealers that that are coming in this business that I that I get the opportunity to talk to, that's what we discuss is understanding that. And taxes come later when you start making the money. But first it's controlling the spend and understanding your cash flow management.

SPEAKER_03: 1:37:59

Do you have any uh, you know, tax softwares that you would recommend?

SPEAKER_02: 1:38:03

The I mean, we have our internal stuff that that we have. Um, the accounting software that's out there, you know, QuickBooks Online. I'm sorry, that's what I meant to say. The accounting software. I figured that's what you were talking about. You know, QuickBooks Online is perfectly good. You know, it's easy to use, it links, it pulls in bank statements and transactions. Um, you know, it memorizes transactions. There's some other things out there too that that work. Um some of the POS systems are trying to figure out ways and have to talk to some of these accounting systems too, which is also good. Um, you know, it costs a little bit more to have that privilege and ability to do that. Um so uh QuickBooks, 90% of our clients are probably using QuickBooks. And so it's perfectly acceptable.

SPEAKER_03: 1:38:49

Well, at least it doesn't cost a million bucks, right? You just need to know where your dollars are going and coming from. That's right. That's the important part. So if somebody says, man, that was an amazing show, and for some reason, I'm not using RG Co. What's some information? How can they reach out to you guys and say, hey, listen, this is what we want to do. We want to start using you guys for our evaluations and our EBITDAs and everything else that falls in between.

SPEAKER_01: 1:39:11

And audits.

SPEAKER_03: 1:39:12

And audits, right?

SPEAKER_02: 1:39:14

How do they reach out to you guys? Yeah, I mean, to her point, I mean, we do uh auditing services and things as well because banks require it once you're at a certain lending level. You've got to do the compilations or the reviewed financials or the audited financials. So yeah, we have a whole auditing department that does that when banks require it. Um but that being said, our website, you know, www.rgcoc.com is a is a great way to learn more about us. Um my phone number is 813-2021612. As he remembers. Yeah. Yeah, that's my direct line is a good way to reach me and our email. You know, our email is is on the website as well. Both of us are listed there. Um, so that's the best way to find us.

SPEAKER_03: 1:40:04

So go online, check you guys out. You can call Mike directly, or you can go online and find an email, send you guys out, and you guys reach out and and kind of connect there. Absolutely. Well, I tell you, I really appreciate it.

SPEAKER_00: 1:40:14

Casey got his number wrong, by the way. There is the main office line that you can call as well.

SPEAKER_02: 1:40:18

Yeah. 813-875-7774.

SPEAKER_03: 1:40:22

Mike Helton, Alicia Holloway. Thanks guys for being here today. I am actually, I appreciate you allowing me being here today. The site is amazing from this office here. I just want you guys to know this is the uh the ebor room. Is that what I say? It is the ebor room. The ebor conference room, and there's a reason for that. We are looking out at Tampa Bay, and it is absolutely beautiful today. Thank you so much for guys being here. I tell you guys again, please hit me up, Pete at the RTO ShowPodcast.com. You can email me there. You can also go on the website. It's www.thertoshowpodcast.com. You can feel like free to go buy some swag on there, find out how to be a somebody who can help out the podcast and be a sponsor, just like RG Co has. It's been amazing to be here. Uh want to tell you guys always, hit us up on Facebook if you want to do the DMs, Instagram, LinkedIn, and where you're gonna see this on YouTube. Make sure you subscribe. And I will tell you guys as always, thank you so much for being here. Thank you for having us. I am so glad that I got a chance to work this out. I've been trying to get a mic for a long time, but I tell you guys as always, make sure to get the lesson below to get your sales high. Have a great one.