“…the majority of our business is actually helping entrepreneurs seed their own business by using their retirement assets as investment capital.”

Mike: Hi, everyone. I’m Mike Sullivan. This is MO.com. Joining me today is David Nilssen of Guidant Financial. David is one of our subject matter experts and his company has a unique way of helping entrepreneurs fund their startups. David, thanks for joining me today. Can you tell us what path led you to co-found Guidant Financial?

David: So a little bit about my background. My background is in developing real estate, so I in the early part of the 2000’s started developing real estate over on the peninsula over in Washington State because when they reactivated the Navy base there due to the war on terror there became an increased demand for rental properties. Through that process I found that you could actually invest your retirement assets into a piece of real estate or small business and other alternative assets.

Both me and my business partner saw that as a tremendous opportunity, because as we were doing our research, we couldn’t locate any company that really created a national footprint around investing your retirement assets in something other than stocks, bonds, and mutual funds. So if you fast forward to today, the majority of our business is actually helping entrepreneurs seed their own business by using their retirement assets as investment capital.

Over the course of the last three or four years our offering has actually matured into a full suite including SBA loans and even unsecured financing so to date we’ve helped more than 7,000 people in all 50 states invest nearly $3 billion into small business and franchising.

Mike: Can you tell me the advantage that this approach to funding has for a business?

David: Sure. Because of this particular case the individuals investing their own retirement assets into this business, it certainly doesn’t come without risk but I think entrepreneurs themselves love this because it allows them to invest in something that they own and control and I think people that go into business for themselves typically have a pretty high self of confidence in their ability to lead or build an organization. So I think the opportunity to invest in yourself is clearly one of those.

The other is that instead of getting a loan and actually investing somebody else’s money into the business, they’re investing their own so the transaction is debt free. So as the business starts to generate cash flow, whether it’s new or existing doesn’t really matter, but as it starts to generate cash flow, they’re able to take that cash and reinvest it in the business instead of sending it off to the bank in the form of interest payments. And then I would also say that having this retirement plan in place allows them to continue to contribute to a retirement plan on an ongoing basis, so it’s a phenomenal opportunity to build more wealth as an entrepreneur and providing ongoing employee benefit to the people that are working for your organization.

Mike: I didn’t even know this was available. I was surprised to learn this and I think it’s a great thing that using Guidant’s services aspiring entrepreneurs are able to take their 401(k) investments, their retirement funds, and use that now to help fund their new startups or their businesses. Can you tell me more about how that works?

David: Yeah, I mean this is something that I think probably as an organization our biggest obstacle is the fact that there’s just a general lack of awareness around this particular opportunity. But if you think about it, people invest their retirement assets in stock or in businesses all day long through the stock market. This is just taking a publicly traded model and actually allowing individuals to invest their retirement assets without taking a taxable distribution or getting a loan and investing it in their own business.

So the basic process is we set up a business, a corporation, and then that business is going to have a 401(k) plan. Then we simply just roll their existing IRA or 401(k) or other retirement plan into that new 401(k) plan and then it just simply invests in the stock of the corporation. So it is like what you do all day long.

I’ll give you an example. One of the stocks that I own, actually I won’t even say the name but I own obviously stocks in my retirement plan. I send money to them, they get to use my retirement assets to go build their business, and I hold shares in their company as collateral for that investment. Same thing is happening here except for investing in publicly traded companies, they’re investing in the stock of their own business.

Mike: With the business that you’re in, obviously you come in contact with a lot of entrepreneurs. Have you picked up on any traits that successful entrepreneurs seem to have in common?

David: I would say that across the board I think people’s skills and motivations are certainly different, but I think the things that I’ve seen that most entrepreneurs have in common, the first would be just they’re self-motivated. They’re people that want to own and control their own outcome. Two, confidence. They’re investing in something that they’re ultimately accountable for the success and failure of so I think, again, ties in with the fact that they’re confident in their ability to lead and grow an organization.

Owning a business is hard work. Anyone that tells you that if you’re going to buy or even build a business that it’s pretty simple and you can be very passive, I think that’s the exception not the rule, so I would say people have to have strong work ethic. But ultimately, I know what’s true for me and I think I’ve seen across the board with the entrepreneurs that I’ve come in contact with is that they have a general fear of being mediocre. They look at small business or entrepreneurship or even buying a franchise as a way to help them stay away from being just that.

Mike: You co-authored the book “Making the Jump into Small Business Ownership.” It currently has a five star rating on Amazon. What will we learn or pick up from this book?

David: It’s interesting, the book actually was inspired because I was asked by an individual at an event; I was doing a speaking engagement, I was talking about entrepreneurship, and afterwards somebody said, “I appreciate what you said. I’d love if you could recommend a couple of books that would help me kind of investigate all the items that I addressed about what you should consider before you go into business.” I told him I couldn’t give him a recommendation off the top of my head, and of course then I got on the internet later that night and started looking around for something.

There are great books out there that teach people how to run a business or how to grow a business but there really wasn’t any that I could find that did a great job of talking about some of the obstacles that new entrepreneurs go through, the fear and anxiety that can come with evaluating a small business, looking at your strengths, and then of course, some of the fundamentals like legal structure and finance and what have you. So we tried to wrap that together into one book, and as you said just a second ago, the reviews have been phenomenal. That’s what they should intend to get out of that is, what do I need to think about before I even start this journey?

Mike: What’s one area where you’ve seen business owners struggle and how can they overcome that struggle?

David: For me, personally, one of the biggest struggles was even though I had a business partner, it’s very lonely at the top, and I say at the top regardless of how you view the hierarchy within an organization. Owning a small business, you have unique challenges and unfortunately a lot of the people that are in your traditional peer group aren’t going to relate to that so I think the challenge is where do you go when you realize that you do have blind spots, because we all have them.

All of us don’t know what we don’t know, and so I would say that the things that I would recommend to new entrepreneurs would be find peer groups. There’s great organizations out there like the Entrepreneurs’ Organization and WPO and YPO and The Alternative Board. There’s these places where you can go to meet people that are like you and like minded who have similar challenges in different industries.

The other thing is just the simple go get yourself a business coach or a mentor or someone that’s already been through some of the challenges you’re dealing with so that you don’t have to pay the same expensive lessons that they have.

Mike: Any parting thoughts for new entrepreneurs?

David: Not really, I mean I think if I’m a new entrepreneur, or considering going down that path, I think the things that we covered are really important. My recommendation would be do a lot of research beforehand. The goal of our book was not to tell people they need to own a small business, but instead let them evaluate whether or not that’s the path they want to pursue or not. So I commend you guys for what you’re doing.