Inheriting a Family Business and Real Estate (Podcast) | Ep. #014

Mike Kelly and Elizabeth Larkin

What do you do if the family business you inherited is slightly embarrassing? And is owning real estate and renting it out a legit small business? Listen now to the Small Biz Ahead Podcast with hosts Gene Marks and Elizabeth Larkin:

Show Notes

Welcome to another episode of the Small Biz Ahead Podcast. Sign up for the weekly newsletter so you never miss an episode. Do you have a question you’d like Elizabeth and Gene to answer? Submit your question to the Small Biz Ahead Podcast.

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Elizabeth: Okay. Welcome back to another episode of the Small Biz Ahead podcast. Gene, I want to start today by talking about something that I think is very, very important, whether you’re a small business owner or you work for a small business, or you work for a small company, which is taking breaks during the day.

Gene: Yes.

Elizabeth: How many breaks do you take?

Gene: I don’t know.

Elizabeth: Too many to count?

Gene: A lot. People need breaks. It was funny, I was at a client yesterday and we had the same discussion. This guy was walking by, he came in to talk to me and he was saying, “I just walked by these two people and for like 10 minutes they were out there talking to each other” It was two employees of his, they were just out there chatting away about nonsense. He was saying to me it was driving me nuts because every business owner, and I’m going to write about this, business owners walk around calculating how much things are costing them all the time.

In his head, he’s thinking, “That’s two people, ten minutes, that’s twenty minutes at a certain rate per hour. That conversation just cost me like $75. I am really furious about that.” He came in to talk to me about how annoyed he was. Employees have to be cognitive of the fact that’s what we’re always thinking about all the time. At the same time, I think business owners all have to be cognitive. You’re not employing robots. These people, ten minutes. I know both of them. They’re good employees they’re good workers. That’s then minutes, they’re hanging out, and they’re having a conversation about what they watched on TV the night before. You have to not only give yourself breaks but you have to let your people take some breaks. That’s what human beings are designed to do. There’s no set amount of breaks that you should be taking during the day, right?

Elizabeth: You should take them. Yesterday, my co-worker and I decided to go get coffee and because I work at The Hartford which is a large corporation, we have I think two coffee shops here –

Gene: Inside the building and a gym and a movie theater and an amusement park. It’s incredible here. The roller coaster here is unbelievable.

Elizabeth: It’s world renowned. It’s in the Guinness book. We do have, I think it’s two coffee shops, two cafeterias and I just said to her, “Eh, I kind of …” Afternoon drifts, I need a coffee and of course, I only drink decaf. Psychologically, I’m like, “Oh, I need my caffeine.” We sat down, had coffee and we were chatting about what we were going to do that weekend but then we started talking about work projects and we solved something that we had been thinking about sitting in our cubical and –

Gene: You wouldn’t have done that.

Elizabeth: Yeah. I feel like taking more breaks … You’re right, it doesn’t have to be a set number but I shoot for working for 45 minutes, 90 minutes and then I take a break and I totally zone out. Even if it’s just staring at the wall and I’m so much more productive like that.

Gene: We’ve talked on an earlier podcast about millennials wanting flexibility. Remember, millennials make up 50% of the workforce so it is a big number. You want that flexibility to feel like you can get up from your cubical and I don’t know, if I want to take an hour and go out in my car and drive around, I don’t want my employer breathing down my neck. I’ll be a better employee because of that and if that’s the therapy that people need to do their best jobs … I mean, clearly there’s a line. That’s what millennials what. They want the ability to be more flexible so they can work on their own terms. I completely get that. I’m telling you, I’ve said this before because I’ve run my own business … Business owners will tell you that they do have more control over their lives. They’re not working any less hours.

Elizabeth: No, they’re working more.

Gene: Yeah, you have a little more control over the hours that you do work. You work at the Heart-ford and your kids playing at a little league game at 3:00, it’s kind of tough to break away and go and see that. If you run your own company, you can do that. You can break away. At 10:00 at night, you’ll be at work catching up but you have the ability to do that. I think we all need more of that.

Elizabeth: Yeah, definitely. All right, we’re going to hear from our sponsor and we’ll be right back with question one.

We’re back with question one. Gene, I love this question and this might be a stump Gene question.

QUESTION #1: What if the business I inherited is embarrassing (but profitable)?

Elizabeth: This is from Clint, from Texas and writes, quote,

“I inherited the family porta-john company. Yes, we make porta-johns and since I’ve taken over, we’ve grown our business by 11% in the last 6 years but everyone makes fun of me for owning and running a porta-john business. Is there any way I can tell people I run a porta-john business and have that seem cool?”

Gene: Oh, well that’s … Go ahead, do you want to start?

Elizabeth: I mean, –

Gene: First of all, I have so many jokes to make but of course, your compliance group is going to make me say them all over again so I’ll just leave it out.

Elizabeth: Oh my goodness. 11% growth in six years, that’s awesome because I feel like it would be kind of hard to grow a porta john company. I mean, I would just think, “I run a company, we’re a growing business. I don’t care if people think I’m cool or not.” People need porta potties. You’re providing a real service to people.

Gene: Yeah, of course. First of all, I would embrace it. I think it’s hilarious. I think it’s funny. I mean, how many scenes have we seen in movies where people have had porta john disasters or porta … It happens all the time. It’s a necessary service for events and all that. Nobody’s going to deny that. I just think it’s funny. I would embrace it. I would bring some humor to it. If you’ve already got your brand, it’s not like you can change your companies name or branding, that’s fine. When people ask about it, you should stand up tall and say, “Yeah.” Again, I have so many jokes Elizabeth; you’re not going to let me say them. Let’s just say, you can all think about a lot of funny things that you could say about the porta john business that I think would make it a lot of fun. The other thing is, it’s a fast-thinking business. If I was interviewing Clint, I have a million questions to ask that guy.

My experience with those porta johns is not so hot. Questions as to how they can be improved and he must have a lot of stories to tell.

Elizabeth: Yeah, I think it’s a really interesting business and I really think, Clint, you just need to change your perspective on this a little bit. You’re successful, period. It really doesn’t matter and other people, maybe they’re just jealous that they’re not running their family porta john businesses.

Gene: Absolutely right. Absolutely right. The other thing I’ve also found is that when you … I meet a lot of people that want to start businesses because of the romance of starting a business. There are a lot of really cool businesses, don’t get me wrong. It’d be awesome to be the CEO of Tesla, it would be great to be the CEO of the Saint Louis Cardinals. There are a lot of really cool businesses out there but there are 28 million small businesses in this country and trust me, 27.9 million are not cool. They’re boring as you know what but they’re providing a service or product or a need. None of us are running companies or any kind of hip or jazz or whatever. My company is no better or cooler than the porta john company. I just think it’s cool if you’re making more money than me. I think that’s cool, that’s for sure.

Elizabeth: Which you may be.

Gene: That’s right.

QUESTION #2: Is Real Estate a Real Business?

Elizabeth: All right, we’ll be right back with question two.

Question two is from Tanya from Virginia and she writes,

“I’m 46 years old and I own one condo that I live in but I’m planning to purchase a larger one to move into. Then I’m going to rent out the old one. Would you consider renting a property to be a business ownership? My goal is to have about four properties in total by the time I retire at around 65 years old. Do you think this is a good plan?”

Elizabeth: There are two questions here.

Gene: Sure go ahead.

Elizabeth: Is being a property owner a business? Yes. Two, is it a good plan?

Gene: Yes. I like it. I personally … We actually own a few investment properties and we rent them out, my wife and I and it’s not clearly my full business, but number one, it certainly helps to diversify your money. You never want to have all of your savings in stocks and whatever because the markets are what they are. It’s nice. Wealthy people, they always buy land. They always buy property. It is a thing that wealthy people do because it gives you ownership and it gives you stability and it’s something you can knock your hands against.

The issue with property ownership though is if you want to treat it like a business … Ours is more of an investment for a nominal return on a business. A business means that you’re actually putting some resources into it. For example, I live in Philadelphia. There are parts of Philadelphia, particularly near where the University of Pennsylvania and Jackson University are having huge building programs there. It is a no brainer that there is going to be a lot of big need for housing for students.

Elizabeth: Definitely.

Gene: There’s a bunch of housing around there in west Philadelphia as well. If I really wanted to make a business of it, I would go in and purchase … I’m speculating a little bit but I would purchase properties and then rehab them as cheaply as possible and then bring in students or academics or whoever would be living there. Then monitoring them and obviously managing those properties. That’s a job, that’s a business and it could be a profitable business like the porta potty guy, I mean it’s like anything else.

Elizabeth: It can be but you always wonder with renting properties out. Let’s say you’re not handy and you’re a landlord –

Gene: You’re so right.

Elizabeth: You’ve got to pay someone to go in and unclog the toilet or they find asbestos in the ceiling. You do have to spend some money.

Gene: You do, and you have to then consider as to whether or not that’s going to make it profitable for you. Not only are we not handy, but the couple of properties that we own, we don’t even manage the properties. We don’t even collect their rent. We have a property manager. We’re making nothing on it but the value of the property is hopefully increasing so it’s more like an investment as opposed to having it in stocks. As a business, to be generating profits every year, Elizabeth, you are 1000% correct. The more that you can do, either yourself or negotiate for a low, low cost for the handy man type of stuff and plumbing and contracting. That’s going to determine whether or not you can be profitable.

There are companies that manage properties, there are companies that buy and rehab properties and sell them. Look at Trump. Trump’s organization manages property all around the world and because of his size, they have a list of vendors and suppliers and they’ve got negotiating skills in management to get the best prices possible. It’s not like he’s going out and fixing toilets, but they’ve got people who are doing that.

Elizabeth: I would love to see that.

Gene: That would be an interesting look.

Elizabeth: Tanya, one piece of advice I have is if you’re going to be buying up, I think you said you want around four properties, I would buy them as close together as possible because that way if you were going to be doing the work yourself, you’re not going to be running all over the place. If you can find a good handyman or  some service provider and you can keep them all in the same area, I think that would save you some money.

Gene: I think that’s great advice. My only caveat to that is if you invest too much in one area, and that area runs into trouble. It’s still very, very good advice. To keep it as local as possible so that if you need to get there, you get there and also buy where you know. I could never buy … Tanya is from Virginia? I wouldn’t buy property in Virginia because I don’t know anything about Virginia. When we bought our properties, we bought them in Philly because I’ve grown up in Philadelphia so I know the city very well.

Elizabeth: What about vacation properties?

Gene: I mean vacation properties are another, timeshares and other types of properties that you might own and then rent out. We have a lot of friends that own houses in the mountains or own houses down on the shore, they’re a commitment and they are a cost. Everyone I know that owns a vacation home, just like people that own boats, they don’t make any money on them. They might appreciate in value and they certainly provide a place where families can go and have a great time but as a business, you have to own multiple of those homes and turn it into an operation.

Elizabeth: My best friend from high school bought a vacation home in South Carolina and she and her boyfriend thought, “Well we’re going to retire there” so they bought when they were 35 and they love going there. They rent it out now year round and they can’t go to their vacation home –

Gene: Of course.

Elizabeth: People come in and they say, “Hey, we want to rent it out for 6 months”.

Gene: They’re going to want to rent it out, of course.

Elizabeth: Vacation homes, it’s much more expensive. It’s really funny, I have a couple friends who … when I was living in New York, didn’t want to buy in Manhattan because the real estate market is insane, it’s just crazy. They bought cheaper vacation homes in Vermont, ski houses and stuff and regret it now because of AirBnb.

Gene: Yeah.

Elizabeth: They say it would be so much easier to just rent a home via Airbnb for a week than have to service a house that they live 5 hours away from.

Gene: There are many people that are running businesses on Airbnb for that very reason so it gets back to Tanya’s question. Is this a good idea for a business? Sure, it really is a good idea for a business but it’s like any other business. You’re going to get out of it what you put into it.

Elizabeth: Exactly. All right great, we’re going to be right back with words of brilliance.

Gene: Words of brilliance.

Elizabeth: We need a cow bell or something.

WORD OF BRILLIANCE: Breakfast

Elizabeth: Alright.

Alright, we’re back with our words of brilliance and this week, we’re going to change it up a little bit. I’m going to ask Gene a question.

Gene: Questions of brilliance.

Elizabeth: Gene, what did you have for breakfast today? Do you have the same thing for breakfast most days and how soon after you wake up, do you have breakfast?

Gene: This is the secret habits of business owners. I do not have breakfast, ever. I never eat breakfast. I have two meals a day. I get up every morning at five, and I write until about seven. I will have one or two cups of coffee during the course of the morning but I will eat my lunch somewhere between 10:30 to 11:30 in the morning. It’s almost a brunch, is when I eat. It’ll be a regular lunch, tuna sandwich, or chicken sandwich, or a hoagie, or whatever is. Oh, I’m sorry, sub. Hoagies are in Philly but it’s between 10:30 and 11 is when I’ll have my lunch. Then dinner is usually around dinner time and that’s it. Different people have different habits. My wife nibbles all day long like you do. You don’t have lunch do you? Do you have a full blown lunch?

Elizabeth: I have small … I would love to be like a French person, have three meals a day and that’s it but I do better … I have blood sugar issues, I just eat –

Gene: You eat throughout the day?

Elizabeth: Yeah, every like three or four hours, I’ll have something small and my co-workers love it when I have Brussel sprouts because they smell awesome when I take them out.

Gene: Sure.

Elizabeth: You always read about how breakfast is the most important meal of the day but it’s interesting that you’re a successful small business owner and you –

Gene: I don’t know. It depends. Nutritionists will give you different stories, whether it’s important or not. I think it just depends on what you’re used to doing. That is what I’m used to doing. I can go for a lot hours without eating believe it or not but then I love to eat so when it’s time to eat, it’s a good thing.

Elizabeth: All right. Thanks for joining us this week everyone; we’ll talk to you next week.

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