When Outdoor Prolink owner Gareth Richards first contacted Chief Advisory Officer Ernie Villany, following the recommendation of a friend and fellow entrepreneur, he was facing several major business concerns.
To start, he was unfortunately stuck in a poorly structured partnership that would be costly to get out of, given the company’s future potential. He was also seeking guidance on issues that were beyond the scope of what his current CPA was able to provide.
“My former CPA was good,” Gareth explained, “but she couldn’t handle all our finances. My company was aggressively growing at a rate of 30% year-over-year. Ernie looked at the big picture and told us what we needed to do to keep up with that demand. He had a vision and knew exactly where to spend money to support the volume we were doing.”
And so, Ernie and Gareth’s relationship began.
Job one – ending the partnership
The first major objective was to help Gareth to gracefully buy out his legacy partners in a way that was beneficial to the other owners without revealing the company’s full long-term potential.
MILLIONS IN TAX-FREE CASH
Following Ernie’s advice, Gareth was able to structure a buyout for just $500,000 when the transaction could have cost him millions. During the process, our firm also recommended he restructure the business entity and convert from an LLC to a C-corporation. This change would enable owners to enjoy millions in tax-free cash when exiting.
Cleaning up Outdoor Prolink's tax strategy
Prior to engaging with Accountability Services, Outdoor Prolink was only filing their taxes once a year, which led to a large tax bill that was stifling growth. Ernie helped Gareth to estimate and pay quarterly taxes, which alleviated cash flow concerns and kept the business in compliance.
Ernie also introduced Gareth to a health insurance agent to select a plan and start offering health insurance to his employees. In addition to creating a happy workplace and boosting morale, setting up a Section 125 premium-only plan (POP) delivered tax saving benefits to the company that significantly reduced payroll expenses.
Ernie convinces Gareth to invest in real estate
Part of any business owner’s long-term wealth building strategy is to diversify outside of the business. Ernie urged Gareth to purchase an office building and rent out spaces not occupied by Outdoor Prolink to other tenants. While reluctant at first, Gareth went forward with the plan and is grateful for Ernie’s foresight.
“ERNIE MADE THIS HAPPEN”
“He explained to me that my tenants would pay most of the bills,” Gareth said. “And sure enough, tenants’ rent has more than adequately paid for my mortgage. The building is now, more or less, free. Ernie made this happen. He has been instrumental in my success and our relationship has gone from business to personal. He’s so incredibly helpful, meaningful and trustworthy. He’s going to tell you things that you don’t want to hear, but things that are pivotal to meeting growth.”
Navigating the COVID-19 pandemic
Following a red-hot start to 2020, up 16% in sales year-over-year, the COVID-19 pandemic threw a wrench into Outdoor Prolink’s plans. After informing staff in March of that year that they would work remotely indefinitely, Gareth endured many sleepless nights wondering if he should lay off staff when sales dried up.
He called Ernie for guidance, looking to tap into his steady hand and knowledge surrounding e-commerce. Following Ernie’s recommendation, he kept his team intact. Not making a hasty decision soon paid off, as the demand for gear accelerated with people looking to get outdoors during the pandemic. Despite the health crisis and economic downturn, the company finished up with 15% growth for the year.
CHALLENGES
- Outdoor Prolink founder was trapped in a poorly structured partnership
- Poor tax planning led to financial difficulties
- Opportunities for tax savings and other business investments were not being taken advantage of
- Company faced uncertainty during the first stage of the pandemic
SOLUTIONS
- Carefully structure a $500,000 buyout while converting the company’s entity structure from an LLC to a C-corporation to maximize tax-free cash at exit
- Guide client to streamline tax filings with accurate quarterly estimated payments
- Recommend company provide group healthcare coverage to employees
- Persuade Gareth Richards to purchase an office building
- Hold steady and focus on e-commerce potential before laying off staff during COVID
RESULTS
- Gareth Richards was able to take over full ownership of his company with minimal financial outlay
- Improved tax efficiency and tax return protocol
- Significantly reduced payroll expenses while improving employee morale
- Tenant rent sufficiently covers office building mortgage
- Outdoor Prolink is now worth $20M+ and continues to grow, connected to roughly 130 premium outdoor brands
- 15% sales growth in 2020
Outdoor Prolink is a membership-based gear provider that connects qualifying outdoor industry professionals to receive big deals to use and represent equipment from top brands.
