Understanding Your Wealth Type: Financial Strategies with Dan Nicholson | Fractional C-Suite Series

How can deep financial expertise be leveraged to revolutionize tax planning and financial certainty for small businesses?

In this episode, Dan Nicholson, CEO of Nth Degree CPAs, shares his inspiring journey from corporate finance to innovative CPA firm founder. Dan discusses how he built a successful accounting practice that focuses on helping purpose-driven entrepreneurs achieve financial certainty, driven by his desire to provide Fortune 500-level financial expertise to small and medium-sized businesses.

Dan highlights the importance of understanding the difference between maximizing and optimizing for small businesses. He shares insights on navigating the challenges of tax planning, including innovative strategies like the Augusta Loophole and creating foundations for business growth.

As the leader of a growing CPA firm, Dan aims to redefine the accounting industry while providing high-quality financial advice to entrepreneurs. He discusses the challenges of balancing growth with maintaining quality service and shares his concerns about the future of the CPA profession due to staffing shortages and declining interest among young professionals.

Resources and strategies that inspired Dan:

  • Corporate finance experience in Fortune 500 companies
  • Self-taught approach to entrepreneurship and business growth
  • Development of proprietary tools like the Certainty App and Wealth Type assessment
  • Writing “Rigging the Game” to codify his business principles
  • Embracing micro-steps and pre-selling strategies for product development

Tune in for valuable insights on building a successful CPA firm, implementing innovative tax strategies, and creating a positive impact in the small business finance landscape.




Welcome to another edition of inspired stories where leaders share their experiences so we can learn from their successes, how they’ve overcome adversity, and explore current challenges they’re facing.

Anthony Codispoti (06:03.435)
Welcome to another edition of the Inspired Stories podcast, where leaders share their experiences so we can learn from their successes and be inspired by how they’ve overcome adversity. My name is Anthony Cotispodi and today’s guest is Dan Nicholson, CEO of Nth Degree CPAs, a team of financial experts that help you pay the minimum amount of taxes required all year long while optimizing your business or personal cashflow.

His LinkedIn profile proclaims he is a not boring finance guy helping purpose driven entrepreneurs achieve financial certainty. We’ll learn more about something called the Augusta Loophole and hear about how he helps visionary business owners stay in their lane while helping them take advantage of different legal strategies to minimize their tax burden. We’ll also hear about his book called Rigging the Game, How to Achieve Financial Certainty, Navigate Risk and Make Money on Your Terms.

And we’re going to hear about the five wealth types and a free assessment that you can take to find out your own wealth type. Before we get into all the good stuff, today’s episode is brought to you by my company, Adback Benefits Agency, where we offer very specific and unique employee benefits that are both great for your team and fiscally optimized for your bottom line. One recent client was able to save over $900 per employee per year by implementing one of our proprietary programs.

Results vary for each company and some organizations may not be eligible. To find out if your company qualifies, contact us today at addbackbenefitsagency .com. Now, back to our guest today, the CEO of Nth Degree CPAs, Dan, I appreciate you making the time to share your story today.

Dan (07:46.715)
Yeah, thanks for having me on.

Anthony Codispoti (07:49.354)
Okay, so Dan, let’s just start with, in your own words, telling us what does nth degree CPAs do and how did you first get started with it?

Dan (07:56.699)
Yeah, so I was very much that cliche kid growing up scheming on business ideas, mostly bad business ideas, and ended up getting an accounting degree and an information systems degree just thinking the combination of the two would be the best skill set to be an entrepreneur. And then I went arguably as far away as you can go from entrepreneurship, which is I did a fellowship at the board that writes all the US accounting standards. And that put me down a very specific path. I worked on this derivatives and hedge accounting standard.

Most people kind of begged me not to tell them more about that after I did the headline of it. But that sort of put me down this path where I was working in capital markets, mostly Fortune 500 companies that had $100 billion or more in investable assets and was kind of miserable doing it. So I moved around a little bit. People kept hiring me because they’d see my

resume, you did this fellowship, it’s sort of the accounting equivalent to if you were to graduate law school and clerk for the Supreme Court. So I was like, this guy’s probably pretty smart. And so I had a couple people hire me and work for a Warren Buffett backed company getting ready to go public, work for this guy, Steve Loudon, who then became CFO of Roku and took them public. And in the back of my head, I would always think you probably should not hire me. There’s going to be like 90 days.

where I’m gonna be your best employee. And then I’m gonna figure out how to do the minimum and still meet or slightly exceed expectations. But I’m gonna be kind of bored because ultimately I should be self -employed. And so I’d had this like kind of nagging conversation in the back of my head about this. But I kept kind of moving jobs, thinking maybe a different place I’ll feel more fulfilled. And finally, 15 years ago or so,

to get to the specific question you asked, I realized that there was an opportunity to do something different in the CPA space, which was taking the expertise that I had from working in a bunch of different disciplines up to that point and providing that to the small business owner, primarily in the context of showing them how to minimize their tax exposure. At the time, there really wasn’t any other firms that were leading with tax planning in the small to mid -market space.

Dan (10:21.755)
So if we weren’t the first, we were one of the first to do that in the last kind of 15 years or so. And so that was kind of the thing that gave me permission to finally become a full -time entrepreneur is marrying all that experience on the accounting and finance side and taking it to the small business.

Anthony Codispoti (10:43.944)
And so when you were working for these bigger companies, I presume then that the services that you were providing them was basically on how to legally minimize their tax liabilities, is that right?

Dan (10:57.147)
The last place, the last firm that I worked at, that’s what I did was on the tax side. Prior to that, I’ve kind of done it all in the finance and accounting space. So I worked at Deloitte where I was on. I got the fortunate opportunity. If anyone knows anything about Big Four, opportunity just means significantly more hours per week.

I got to be on both the financial audit team and the IT audit team all around capital markets. So like, Hey, we used to have four people doing this, but you’ve got this IS degree and so like, we’ll just have you do all of it. And it’ll be really good for your career. And it was a good experience, but burnout and, and hours and all that was pretty high. So I did the financial audit, IT audit.

Then I moved into a role in more of an internal accounting role where we were, part of what was pitched to me was we were gonna convince Warren Buffett to change who was managing the investment portfolio for the business. Warren was a primary shareholder in this insurance and investment business that had spun out from Safeco Insurance. What they didn’t tell me was that he owned the investment company that we were trying to find.

So, needless to say, we were not successful in convincing him to fire a company that he already owned. It’s like, yeah. Yeah, it’s sort of a, it’s like being on a escalator, but it’s a never -ending escalator. You’re never getting to the top of that mountain. So, internal accounting, then I worked in strategic finance with that guy, Steve Louden, and then I worked in tax. So, I’ve sort of got this mixed bag of

Anthony Codispoti (12:28.551)
It’s a tall mountain to try to climb.

Dan (12:48.827)
I’ve done all the sort of accounting finance stuff. Most of my competitors or contemporaries, they’ve worked in one specific domain for their career, maybe because they’re less of a masochist than I am, I guess.

Anthony Codispoti (13:08.326)
I like it. So as you made this transition from big corporations and right, one portion of your career you’re doing tax related work, did you find that that work and the knowledge that you had in big corporations then applied pretty easily and evenly to the smaller businesses that you started to work with?

Dan (13:30.139)
In some ways, yes, a lot of the tax strategies that we might employ with a big corporation can work for a small business. There’s a bit of a misnomer that you have to be a big corporation or sophisticated investor to access certain strategies. But a lot of what I learned in business school and what I learned in those big corporations just doesn’t work in the small business space. It took me a number of years to figure that out.

have clients come to me and they’re like, hey, I really want these forecasts and key performance indicators. I want all these kind of traditional finance tools. I build them for them. I check in with them and after 60 to 90 days, it’s like, hey, how’s it going? I go, we don’t look at that at all. What do you mean you don’t look at it at all? Like, well, yeah, we built it all out, but it was all based off kind of BS numbers. We were kind of.

We don’t have any actual data. We just want to grow by 40%. So, yeah, okay, that makes sense. And it was those kind of repeated conversations where I realized that in business school and a big corporation, but let’s talk about business school, you really learn one thing. It doesn’t matter what your major was, accounting, finance, marketing, whatever. You learn how to maximize shareholder value. That’s what they’re preparing you to do.

When you’re an executive at a publicly traded company, you have a fiduciary responsibility to maximize shareholder value. So it makes sense why business school prepared for that. At a small business or medium sized business, you don’t have the resources to maximize. Maximize is about half the most, most amount of clients, staff, et cetera. Small business owner resources are even more scarce. You can’t maximize, you have to optimize.

Optimize is a totally different framework. Optimize is about how do I get my number one or top two priorities and put all my resources towards that. And so once I realized that, that I need to build tools to help small to medium sized companies optimize instead of maximize, that’s was sort of the domino that then led to a bunch of unlearnings and kind of new approaches to better support those business leaders.

Dan (16:05.179)
Anthony to Alujo.

Dan (16:31.899)
Is she conspiring against me today? I can hear you now.

Anthony Codispoti (16:35.045)
Dan, can you hear me or see me?

Okay, okay, so we’ll just go with my question, which was, hang on, what were we just talking about? I lost my train of thought.

Dan (16:48.603)
I was talking about the maximize versus optimize and I don’t know if you heard it.

Anthony Codispoti (16:53.669)
yes, I did. Yep, got it all out and clear. So Dan, say more about maximize versus optimize because those sound like synonyms to an outsider. But it seems like this was a big revelation for you, so I’m curious to understand it.

Dan (17:05.307)
Yeah, so.

Dan (17:09.659)
Yeah, so maximize is about having the most, most amount of clients, most amount of revenue. And you have to, you have to maximize shareholder value because you couldn’t possibly meet with each individual shareholder, find out what their goals are, their priorities, and then tailor the business around each individual shareholders wants and needs. That’s what optimizing is. There’s a saying, first we optimize, then we maximize.

optimized getting really clear on the priority, the top one or two priorities and then allocating all your resources to achieving that. But as a small to medium -sized company, that’s exactly what you need to do because that business can be customized to your wants and needs. You are the owner. And I believe that for most small business owners, their business exists to serve them in living the life that they want. That’s what I mean by purpose -driven entrepreneur.

is that your business, your assets exist to serve you and living the life that you want. And so we can optimize, we can get clear on what we really want out of our life and from the business, and then allocate resources towards achieving those one or two priorities versus trying to simply just maximize everything constantly 10x every area of your business. So that’s sort of the contrast between maximizing and optimizing.

Anthony Codispoti (18:39.397)
And you mentioned that you helped to build some different tools for your clients and you kind of had to adjust the types of tools that you were building as you understood the difference between maximize and optimize for smaller to medium sized businesses. Can you give us examples of what some of those tools look like? What a purpose do they serve?

Dan (18:55.803)
Yeah, so the first step is helping the small business owner get clear on what I call their solvable problem. And what I mean by that is that typically speaking, an entrepreneur has done or has an idea in their brain of this sort of vision board. Have you done one before?

Anthony Codispoti (19:16.901)
I have, but why don’t, for our audience, why don’t you explain a little bit about what that is.

Dan (19:18.875)
So the vision board is you’re taking your goals or what you want out of your life, your vision for your life, and you’re taking these images and you’re putting them on a big piece of cardboard or a big piece of white paper, and you’re putting all these images up, and then you hang it over your desk or somewhere that you’re gonna see all the time, and the idea is that by imagining the life that you want, that’s gonna help compel you to creating that outcome.

Does that sound consistent with the way you think about a vision board? Yeah. And my experience with that is that it’s really helpful when you first do it, because you feel really good. You get this big rush of dopamine. You’re like, I’m going to have not just a six pack, but I’m going to have an eight pack. I know that. Look at this picture of someone with an eight pack that I put on this piece of paper. And I’m going to be an amazing parent. I’m going to have this car, this second house.

Anthony Codispoti (19:53.541)
It does.

Dan (20:17.947)
You get all this dopamine rush. Did you have that experience similar to that?

Anthony Codispoti (20:24.645)
I have, yes. And then I stopped looking at the vision board and I stopped referring to it and I get distracted. That’s my personal experience, but yeah, go ahead.

Dan (20:33.147)
Absolutely. You teed me up perfectly with that because my experience and talking to hundreds of business owners is that you get the big dopamine rush. Of course, after a big dopamine hit, you have a big crash later, but maybe you’re getting up earlier for a couple weeks and you’re just putting in a lot more effort, which is kind of what I call maximizing. And then it can’t be sustained because anytime we have a – it’s called a rigid chaos model. Anytime we go from

a bunch of undefined things to something very rigid, typically not sustainable, so then we go back to chaos. Anyhow, we can’t sustain it, and that’s because it’s not what I call a solvable problem. By putting these images up on the board, it doesn’t tell you how much each of those things cost. It doesn’t put a date to it. I want the six pack absinthe 12 months, six months. So there aren’t dates, and it doesn’t tell us what

our resources are currently. So it’s like saying X plus Y plus Z equals 100. What is Z? You’re like, can’t answer that. We have too many undefined variables. So the vision board has a bunch of undefined variables. It’s sort of the equivalent of, do you have a vacation destination you really wanna go on?

Anthony Codispoti (21:57.797)
I still owe my wife a trip to Paris.

Dan (21:58.139)
Okay, so you want to go to Paris and be like you put that into Google Maps or you put it into Expedia, probably going to fly to get there, but you put it in and you don’t put a date to when you want to get there. You don’t put a method of transportation in and you’re just like, calculate and tell me how to make this a reality. It’s like it can’t Google Maps if you put in a destination, but you don’t tell it your current location. And if you don’t select, I’m going to walk or I’m going to

driving, it can’t calculate. Too many unknown variables. That’s the same thing that we’re doing with what we want out of life. We have all these unknown variables and then we just default to maximizing or kind of just a bunch of effort. We can’t figure out the most efficient path. I think there’s some parallels to what you mentioned in your ad about maybe the way you work with clients. Maybe we can connect the dots on that in a moment, but.

Anthony Codispoti (22:31.845)
many unknown variables.

Dan (22:56.475)
Once I have a solvable problem, I know what I actually want, I have the targets and dates, and I know my current resources, then I can calculate the difference. Hey, you wanna have $15 million in the next five years, you got five million now, we can calculate how much more you need to make per year to make that a reality. Once you know how much more you need to make, now we can solve for that through the context of the least amount of effort, the least amount of risk.

and least amount of obligation. Now I don’t say no effort, no risk, no obligations, but part of the success in business and when you study these things in the extreme is that if we suck up all of our bandwidth in these activities, the things that we’re doing, it doesn’t leave any space for the actual home run opportunities that are going to fund our solvable problem overnight.

We don’t have the bandwidth for it. Some great opportunity comes up, we can’t invest in it. We don’t have the bandwidth to participate, because we’re redlining as it is. So once we know the shortage and the timeline, then we can actually start to solve for what is the most efficient path to do that. A lot of times the most efficient path is to recover resources. So stop paying unnecessary taxes that you can legally avoid. Stop.

You mentioned in your ad about the $900 per employee. Maybe you can elaborate more on that too, but it’s, hey, if I could recover all these resources, that might be sufficient for me to now fund the life that I want and the timeline that I want. That’s the actual starting point before we add more on top of that.

Anthony Codispoti (24:46.625)
That’s helpful, and so that was a great description of sort of this more holistic viewpoint and approach that you take. And then are there actual, when you talk about tools, I sort of envision like are there software tools, especially like given your background in IT and IS, or are these more like systems and processes and frameworks in which to think about things?

Dan (25:06.811)
Yeah, so both. So I built a tool to help people calculate their solvable problem. And it’s called the Certainty App. It’s only open for private clients right now. But it’s basically a GPS for them to see how their decision making is getting them closer or further away from that solvable problem. With that, I’ve developed this proprietary algorithm that I call Readiness. And it looks at

several different variabilities, the volatility of your business, and gives you a score out of 100 to tell you how ready are you to actually take on more risk. And when I say take on more risk, some of that might be a new business endeavor. A part of taking on more risk is can I take off the two weeks to go to Paris without my business imploded? Am I actually ready to do that? And so the conventional tools don’t necessarily give you any

Like a budget and a projection are not what’s called a preventative control in a small business. So a budget does not prevent you from overspending. In a publicly traded company, it would because the accounting team develops the budget. And then if you want to spend against the budget, you submit a purchase order and they check against it and they tell you proved or not, or they give you a certain spending limit that’s within that budget.

That’s actually preventing you from overspending, but the typical small business owner doesn’t have those systems in place or the person managing their personal finances. They find out after the fact. They spend and then later they put it into quick in or quick books and they compare it and they go, shoot, I overspent. It’s detective. It told you after the fact. Now for a lot of the things you buy in a business, you can’t return it. You can’t take it back to Target or Amazon’s too late. So

The existence of a budget or a forecast does not prevent you from performing better. It might give you more awareness so that you’re thinking about it more regularly, but it’s fragile. It’s a fragile structure. So we need different tools like a readiness, like our solvable problem. And I can give you a list of several other types of tools that I’ve built as well on top of that.

Anthony Codispoti (27:35.105)
And these are all tools that are available only to your clients.

Dan (27:37.115)
Currently, yes, yep, they’re not me.

Anthony Codispoti (27:41.729)
Okay, let’s talk about one of the tools that is freely available to the public. We referenced it in the intro. Tell us about the five wealth types and where people can go to learn about their own wealth type.

Dan (27:53.339)
Yeah, so the conventional finance and recommendations will bucket you as someone you’re a saver or a spender. Have you heard that before? And then they’ll have to say, well, you get married, one of you is a saver, one of you is a spender. And intuition tells you that the generalities are often true, but also often wrong, because the person who’s a saver might also be a spender on something that they really like.

Anthony Codispoti (28:05.921)

Dan (28:21.627)
or their circumstances or context that change their behavior. Back to this sort of all or nothing type thinking that we’re subject to so often. My experience in serving small business owners and kind of doing the research is that there’s five ways, five, what I call wealth types. There’s the hustler, the gambler, the optimizer, the saver and the outsourcer.

There’s no right or wrong, there’s no judgment about what type you are. In fact, I believe that we should play to our strengths. But based off your wealth type, we’ll dictate a large degree about how you’re gonna make financial -based decisions and where you might also blow yourself up. And so I built an assessment. It takes about five minutes to answer these scenario -based questions on how you behaved in the past. And then it gives you your wealth type and then it tells you the five things

tools that I would recommend that you implement now so that you can both play into that, lean into that style, but also not blow yourself up.

So most people since I’m a CPA would assume I’m an optimizer, but I’m a gambler. Yeah.

Anthony Codispoti (29:33.665)
Which one of those do you fit most into?

Anthony Codispoti (29:41.313)
Is that right? Yeah, that is surprising. That would have been the last one I chose for you.

Dan (29:42.523)
Yeah. So it’s,

It is a blessed, like I said, there’s upsides and downsides to both of these. So I have some of the things that I’ve built knowing that I’m a gambler is how do I make sure I’m only making bets where there’s significantly more upside than downside? Because I know I want to make bets. Now I don’t actually gamble in a casino. I don’t sports bet, but I believe that business is also gambling. We make a ton of bets. Now if we left our day job and we told our family or significant other, we’re going to become a professional gambler.

we get a bunch of scrutiny and are you okay? But when we say, yeah, go ahead.

Anthony Codispoti (30:23.777)
So when you say you’re a gambler, yeah, you don’t mean a gambler in the traditional sense. You take calculated risks on yourself and on your business.

Dan (30:32.507)
Yep. Yeah. The gambler, this sort of wealth type is also prone to making bets that aren’t calculated, that it can be based off their intuition or they’re going to follow their gut. And so there’s a blessing and a curse to that. They may find themselves with a bunch of windfalls, but

They also find themselves in financial ruin. So they need to implement some structures to make sure they’re only making bets that are calculated and have significant upside.

Anthony Codispoti (31:13.537)
Gotcha. Okay. Is there anything more interesting to say about these different wealth types before we move on? Feels like there might be some threads to pull out here.

Dan (31:18.875)
I mean, I have a lot of different directions I could take that. But one thing I’ll say is if you understood your spouse or business partner’s wealth type, that would significantly improve your communication. I’ve done workshops where I take the whole audience through this exercise and they take their wealth type and then we break them off into groups based off their wealth. I give them a scenario and they share.

and it falls in line. The hustlers always finish first and they gotta let everyone know that they finished first. They gotta antagonize everyone else, like it falls as, but then we ask people to reflect. It’s like, well, my, I’m a hustler, my business partners here, they’re an outsourcer. Those are the most, those are two polar opposites. And so, and I break down the characteristics of each and they go, okay, now I realize why we have these

conflicts because we’re making decisions with a totally different framework. And so here’s how we can support each other better. So it works well for business partners and spouses to kind of understand how they make financial based decisions. If you understood your clients, your prospects wealth type, you now understand how to sell to them differently, right? The way that a gambler is going to buy versus a hustler is different than a saver.

So you can use it to sell to your prospects better. You can use it to inform your marketing approach in a different way. So there’s a bunch of different utilities.

Anthony Codispoti (32:59.041)
That’s interesting. Let’s talk about that one for a second. How would I go about putting a clock?

Anthony Codispoti (33:07.329)
evaluation process to know how to better speak.

Dan (33:08.091)
Yeah, well right now the whole WealthType assessment is completely free. Anyone can take it. Just go to wealthtype .com. They click on the assessment button. And so one could make that part of their onboarding or, hey, before we get on this sales call, I’d like you to take this WealthType assessment and just let me know what type you are. Eventually we may make this more open source where someone could.

build it directly into their kind of marketing funnel where they’re not going to my independent site. I’ve had a bunch of people who’ve asked me about licensing it up to this point, but we’re not quite ready for that. So you could have them go through that report back to you and then you know, okay, they’re a, they’re hustlers. So they’re going to want to, they want to know how we’re going to, like they assume effort doubling down on their effort is the answer to solve a lot of their problems.

So how can I aid them in that? If I give them a bunch of details and it sounds like a bunch of work that’s gonna distract them from what they’re doing, they’re probably not gonna be interested.

Anthony Codispoti (34:23.073)
We have to make it manageable. Dan, tell us what is the Augusta loophole? Why should people…

Dan (34:26.523)
Yeah, so the Augusta loophole has been around for years and years, multiple decades, and it basically says that you can rent your home out up to 14 days per year, completely tax -free. It gets its name from Augusta, Georgia, where the Masters Golf Tournament is. Really good lobbying efforts by the folks there. Huge population swell. People come in. They want to rent out their home.

administratively burdensome to have to try and track all of that for tax purposes. So that’s what created this structure. Now the context for a business is that a business can rent their home. You can rent your home to your business up to 14 days per year for certain purposes, like board meetings as an example, certain calls with your clients, certain events where maybe you have staff or employees over and

The business is going to pay you rent equal to what it would cost to rent a local conference room in your area, which can range from 500 bucks to several thousand dollars. And so you can do that 14 times per year. Business takes a tax deduction for the rent. Let’s say it’s 20 grand. Business gets tax deduction for 20 grand. That 20 grand went to you personally. So you paid yourself and that’s non -taxable.

So basically you got money out tax free.

Anthony Codispoti (35:58.491)

So let me play out a couple of scenarios here. I did host a meeting at my dining room table with some folks that came in town to talk business. I’ve got later this summer, that was one day that we did that, I’ve got later this summer, like six or seven days where my kids are done with summer camp, their school hasn’t opened yet, so I’m gonna need to work from home. Do both of those situations qualify for what you just described?

Dan (36:27.355)
So the business meetings qualify. Working from home is kind of a separate part of the tax code, so you can still claim the home office and do the Augusta loophole. So those days that you’re working from home may be more of the home office type scenario. The Augusta loophole is for events, board meetings, things like that where you would

generally or it would be commonplace for a business to use a conference.

Anthony Codispoti (37:05.115)
Got it. That’s a helpful delineation there. That’s a fascinating loophole to understand. Let me ask you, Dan, what are some of the most common mistakes that you see business owners make as they come to you as a new client?

Dan (37:17.275)
So on the financial side, the most common thing I see from business owners is that they want to divorce business decisions from financial decisions. So it’s like, hey, I want to hire you so you can take care of all my financial problems because I just want to grow the business. OK, well, that doesn’t work because every decision you make has a financial ramification.

So I can’t just miraculously save you money on taxes or improve your cashflow if we’re not gonna have an ongoing conversation and you’re gonna be part of the process. And it gets perpetuated where a lot of times people will label themselves as a, I’m a visionary and I need an implementer. So I’m a visionary, I just wanna go do the big picture stuff and you take care of everything else. But if you’re, it’s like,

The equivalent would be, I want you to give me a six pack because you’re a trainer and nutritionist, but I’m going to eat and drink whatever I want. And I’m expecting that at the end of these six months, that because I hired you, I will have a six pack. Right? It’s like, you know, if you’re going to be irresponsible with your and not exercise or you’re responsible with your diet.

I can’t help you get the outcome that you want. So this sort of like, I’m going to go play business but not be responsible for the outcome doesn’t work. That’s the number one thing. Part of that, if I can give a second one if it’s okay, is being able to properly compare apples to apples. So,

Anthony Codispoti (38:56.762)

Dan (39:04.123)
There’s something called the mental accounting bias and it shows it by labeling things significantly impacts the way that we make decisions, which is why simply separating your money into different accounts. So you put money for investments in a different account from money you have for taxes versus operating expenses, why people will make better decisions. It’s just simply by labeling it allows you to see things more clearly. So I will regularly have someone come to me and

and we’ll talk about tax planning and I’ll say, hey, I could, from everything that you’ve shared so far, we can save you $100 ,000 a year. And they go, how much does that cost? Tell them cost. wow, that seems really expensive. Well, they’re comparing us to maybe the one -off CPA firm or H &R block. Okay, hold on real quick.

You just told me you have a million dollar a year business with 10 % margin. So 10 % of a million dollars in a hundred grand. I’m just making up numbers here, just illustrative. How much would you pay to generate a million dollars in the next six months? Guaranteed, I could guarantee you I’m gonna generate a million dollars for you the next month. You can guarantee me a million dollars in revenue in the next month. I’d pay, I don’t.

Anthony Codispoti (40:20.378)

Dan (40:30.395)
half a million dollars, right? To get that million dollars in revenue for the 100 ,000 in profit. So you’ll pay a half a million dollars to generate a million dollars in revenue, but if I tell you it’s 10 grand to generate a plan that guarantees you $100 ,000 in savings, you know, like that seems like way too much. So.

Anthony Codispoti (40:55.033)
Does that help them? Does that help them wrap their head around it differently?

Dan (40:55.643)
It’s a mixed bag on that, to be honest with you. It depends on, it’s like the anchoring bias, like how much are they, but you’re an accountant, accountants cost this amount of money. It’s like, well, I am doing something different than, I’m a profit center for you. I’m not preparing tax returns, but it’s sort of like, I’m anchored to what this person does, and that’s different than generating revenue, and I put a higher,

value on revenue than cash flow. And that’s why 82 % of small business owners fail. They fail, or 82 % of small business owners fail because of cash flow problems. They’re not doing the proper comparison. They’re trying to divorce themselves from financial decisions. And that’s why small business owners have seen a decrease in their net worth over the last five years rather than the increase in their net worth.

Anthony Codispoti (41:57.944)
Dan, what would be an example or two of some low hanging fruit? If every business owner just did this one or two things, they’d be in a better spot pretty quick.

Dan (42:02.907)
Yeah. Yeah. So I have a methodology we created called the four levels of tax planning. The first two levels are what, and you can’t Google that and find it anywhere else because we made up this. We created this methodology over the last 15 years. Level one and level two are what I consider to be low -hanging fruit strategies. Level one are things that you qualify for, but someone didn’t tell you about it.

Level two are small adjustments that you can make to turn something that isn’t currently a deduction into a deduction. So Augusta loophole is a perfect example of a level one strategy, which is you’re already using your home for essentially conferences. You didn’t know about it. So you weren’t paying yourself that rent. You’re paying yourself probably distributions. Let’s reclassify those distributions as rent. Now it’s a tax deduction. You still get the funds. So we have about

30 or 40, closer to 40 these days, level one strategies of things that people aren’t aware of that they miss out on regularly. Level two, again, low hanging fruit, how do we turn things into a tax deduction? A common one that’s out there these days is paying your kids. So kids cost money, you don’t get a tax deduction for all the sports and things that you pay for, but there are legal ways that you can put them on payroll, you pay them.

essentially $15 ,000 per year or less, that’s going to be completely tax -free to them. You’re going to save at your tax rate, maybe up to 40%. And the money that you pay to them can be used to then pay for the expenses that you already have. So that’s an example. But there’s other things like the Federal Research and Development Tax Credit. There’s changing the accounting method that you’re using to

either increase the deductibility of things or defer revenue. So there’s another 2030 kind of level two strategies. That’s before we get to level three, which are our home run strategies. How do you reduce your taxes by 3 ,200 %?

Anthony Codispoti (44:14.039)
Wow, that’s fascinating. And all of these strategies, these are the strategies and the steps that you take your clients through. Somebody signs up with you, you kind of start at the top of the list and you start working your way down.

Dan (44:18.427)
That’s right.

Exactly. Yeah, so we’re going to take all the level one and level two strategies. These are low hanging fruit. They typically range from 60 to $100 ,000 in deductions, sometimes more than that. So we take your income, we take that off the top. Now we have a remainder. Then we get into the home run strategies. How can we reduce that? The remainder of the way potentially. With the ultimate focus on showing you how to grow your net worth.

A lot of people are familiar with being an accredited investor, but they’re not familiar with the advantages of being a qualified client or a qualified purchaser. Those are SEC designations that are liquid net worth tied to, and that gives you access to different types of structured investments that have more tax benefits. That’s the level four strategies. How do we make your future income non -taxable?

Anthony Codispoti (45:23.799)
Is there anybody else out there who’s listening to this that is just on the edge of their seat dying to know what those level three and level four tax strategies are? Knowing how to reduce your taxes by 30 to 100%. I mean, that’s pretty intriguing. Sure, absolutely.

Dan (45:37.115)
Let me give you one on if we have time.

So historically, foundations, forming a foundation doesn’t make sense unless your net worth is somewhere above 20 million and maybe even more than that. But about 20 years ago, Google launched this program where they give $10 ,000 a month grants to nonprofits. And once you get approved by Google, as long as you stay in compliance,

you get that $10 ,000 a month in perpetuity.

Yep, that’s right. And you can use those credits for fundraising for your foundation or for educational purposes. So, and most foundations, the way they work is when they provide education is that they don’t fulfill on those services, right? They don’t, there’s something near and dear to my heart, a board that my wife is on around infertility support. They give out grants to folks in need of

Anthony Codispoti (46:18.966)
This is like an ad credit, like a credit to apply towards advertising.

Dan (46:46.779)
funds so they can go through the infertility journey, but they’re not doctors. They’re not giving the fertility treatment. They’re just giving the education and treatment. If you need help, they have vetted a bunch of providers that they would refer you to. So there’s a handoff. So you can do the same thing. You can form a foundation, apply and get it approved. So you’re getting $10 ,000 a month in Google grants in perpetuity. And you could provide, for example, financial education.

to the small business owners and give away free information, maybe give them whatever it may be related that your core business provides. So you’re doing social good, you’re helping provide the education, all of that’s being funded through, again, these Google grants. And then if somebody wants to actually implement any information, then they get handed off to your for -profit business.

Essentially the Google grants funds the whole and then some the whole creation of this foundation and Again, you can do some social good But also grow your business simultaneously and now that you agree sorry go ahead

Anthony Codispoti (48:06.773)
What would be a specific, sorry go ahead Dan, go ahead. I was just gonna ask what’s a specific example of maybe a non -profit that’s set up that is then funneling business to a for -profit? I’m kind of curious to see how those dots connect.

Dan (48:22.107)
Well, if you think about like the leukemia lymphoma society as an example, they provide a lot of resources and education around treatments and diagnosis. They’re not the actual doctors who would provide any of those treatments. So they hand off, they provide all the education and support, but they’re gonna connect you with doctors, which are for -profit businesses that fulfill on them. That’s an extra kind of example of more.

mainstream nonprofit just to illustrate the point that you could, for example, have a client who is working with neurodivergent kids. There’s so much need to help educate the parents on finding resources for kids who are neurodivergent. So she does coaching and one -on -one for -profit business, but can also

Anthony Codispoti (48:50.228)
Gotcha, that’s helpful.

Dan (49:19.515)
have a foundation that provides the education and free resources to help these parents and collect their email address and give them the free resources. Now, if they want actual one -on -one help, her for -profit business would be the recommendation to tend to those folks who want the one -on -one. So essentially the…

It’s a home run to me because you get $120 ,000 a year in Google Ads that more than funds the initial cost of to justify forming the foundation. And now you have a foundation where you’re allowed to, you can contribute to that foundation and take contributions to a private foundation that you control up to 30 % of your income per year. You can take its write -offs for contributions to a charitable foundation.

Anthony Codispoti (49:48.372)
That was helpful. Thank you.

Anthony Codispoti (50:17.524)

Can this strategy be applied to most businesses or is this somewhat limited in its scope? Could you use it to help drive new awareness and new business for your own practice?

Dan (50:31.451)
Yes. Yeah. Financial education for small business owners. I mean, there’s a bunch of nonprofits. Score. Score .org is an example. They provide resources to small business owners for education. They’re the ones who publish the research around 82 % of small business owners fail due to cashflow issues. So there’s already some existing examples of nonprofit providing small business resources.

And so, you know, I could do the same thing, for example, with wealth types. It’s a free resource providing education. And I may move that under a foundation.

Anthony Codispoti (51:15.059)
This is fascinating. I’ve learned so many new things here, new strategies to think about. Dan, I want to make sure that we get some time to talk about your book, Rigging the Game. You’re a busy guy, lots of clients. Why take the time to write a book? What was the inspiration behind this?

Dan (51:28.347)
Yeah, just a forcing function to get it out of my, the concepts out of my brain and onto paper in a way that, that I could then train my staff better and kind of get clients on board with how we, how we are tackling these issues with clients. And I used my own principles I teach in the book to develop the book. So.

I have a concept called micro steps. Basically this idea of risk wave. So the tendency is just to go out and build something. And then it’s like, if they, if you build it, they will come. But if you’ve been in small business for long enough, you know, that’s not true. You can spend a ton of money and they don’t cut it. They’re like, where are they? I was, I built it. I don’t see it yet. Maybe I need to spend more. So micro step is what’s the smallest action you can take to get data to inform your next decision. So I took a step.

Anthony Codispoti (52:20.019)

Dan (52:27.515)
I said, if I were to write this book, would anyone be interested? Put people onto a list. Now I know people vote with their money, so they might go on a list, but it doesn’t mean they’re gonna buy. So one of my other principles is set rules in advance. So I said, I need at least 100 people that say yes to this. Or I think I said I need 500 people who say yes and go on the list. I need 100 people who are gonna pre -order. If that happens, then I’m gonna take the next step.

Ultimately, at the end of the day, I pre -sold 5 ,000 copies before I started writing the book. And so, through that process of micro steps and getting feedback and then combining it with a certification program and the Solvable Problem app that I kind of mentioned before. So, essentially, I combined the book with the certification and a couple of other things.

Anthony Codispoti (53:08.339)
How’d you do it?

Dan (53:26.395)
and the pre -sale of the book funded creating the app and creating the certification program.

Anthony Codispoti (53:37.203)
That’s pretty slick. Dan, I’d like to shift gears here for a second. And every entrepreneur in the course of their career, they’ve had a personal challenge, a professional challenge, something big that really knocked them down. But coming through the other side, there were some powerful lessons that were learned. I’m curious to hear if you can think of any examples of a life experience that you’ve been through like that.

Dan (54:01.339)
Yeah, it’s a great question. And I share these anecdotes of these strategies and selling all those copies from rigging the game. And everything in that book and all those strategies come from me screwing something up, getting punched in the face or feeling like I got punched in the face and then having to reflect and go, well, how did that happen? So.

book has these 12 principles, so there’s at least 12 failures just from the book that led to these principles. But to give you an actual specific example, so years ago I bought a smaller CPA firm practice. And they were in the same building in downtown Seattle, they were on floor three, they’re on floor 10, and I bought a smaller CPA firm.

bought this practice because he had a group of clients that I had exposure to in the previous firm that I had worked at. And so we work out all the deal and he’s like, okay, I want this little transition period. I’m gonna be around for three months or so. Can I have a little space in your office? Just so I can put a couple of things and I’ll have a space so if and when you need me to meet clients, I’ll be available.

No problem. Like I said, he’s in the same building. It’s like, I’m going to move a couple things in over the weekend. I give him a key. I come in. He now has brought in this huge bookcases, sofa, massive desk. It looks like an office from like the 60s or 70s, big desks, like complete opposite. And it was, he put it in the corner conference room. So now he has the big corner office.

three times the size of my space, because he filled this entire thing. And he has a message to all of the clients that we’ve acquired that essentially, like he merged with our firm. So it kind of contradicted the letter that we had sent out. So everybody had the impression that he was the managing partner of this

Dan (56:22.939)
newly formed firm. And he had a just show up when you want to show up policy with his clients. So for the next four months, people are just showing up whenever, like, hey, where’s my tax return? I, you know, when I, whenever I dropped off my stuff before you, he’d have it ready in three days. I didn’t know any of this. So it came to a critical junction in my career where I

I thought about giving up and how did I possibly end up in this situation? And ultimately I had to kick him out of the office and on his way out he’s like, well, you bought my firm so you bought everything. All that stuff in the corner office is, you know, your stick. It’s like, well, I can make an agreement. I just bought your clients. I didn’t buy.

the entire tax code from 1983. I don’t even know why you still own that in paper form. Like it’s 40, almost 40 years stale. So a lot of lessons on deal structure, on setting boundaries, on realizing how much of a people pleaser I was. It was a kind of period of self crisis and a lot of, again, unlearning that I had to go through to not repeat that.

Anthony Codispoti (57:53.552)
And it was probably a difficult conversation to eventually have with him to say, hey, this is it, you gotta go. You gotta get out of here.

Dan (57:58.779)
It got to one of those points where you put yourself in a position where you feel like a victim for long enough, or you’ve been people pleasing, where it turns to anger. So instead of having a productive, healthy conversation around boundaries and reassessing that I needed to have the day I came in and he had the corner office, instead it was a more of a, you got to get out of here right now. I’m tired of this. It’s like.


Anthony Codispoti (58:28.432)
You’ve reached a breaking point. At that point, the months of suffering had been enough and it was just the natural conversation.

Dan (58:32.667)
Exactly, yes. It’s like anytime you leave that critical conversation and you put it off for too long and then you have a meltdown and you overreact when in reality it’s because you put it off for way too long. So it did expose all of these people pleasing, nice guy tendencies that I’ve had to work on.

Anthony Codispoti (59:02.959)
Dan, I’ve just got one more question for you. But before I ask it, I want to do two things. If you’re listening today and you like today’s content, please hit the subscribe, like, or share button on your favorite podcast app. Dan, I want to tell people how to get in touch with you. What’s the best way to make that happen?

Dan (59:16.123)
Yeah, two paths. One, you can go to nthdegreecpas .com and learn more about our CPA services. Or go to wealthtype .com and take your free assessment and there’s ways that we can get in touch that way.

Anthony Codispoti (59:35.375)
Okay, last question for you, Dan. How do you see your industry, the space that you operate in, evolving in the next five years? What do you think the big changes are that are coming?

Dan (59:41.243)
The 75 % of CPAs have hit retirement age. That happened a couple years ago. Accounting enrollment, depending on the program, is down 30 to 50%. And enrollment in the CPA exam is down 20 to 30%. And first time pass rates are down two to three percentage points, which is another roughly 20%. First time pass rate has historically been 12%. So we are at a kind of critical, critical

junction as a profession at CPAs around the staffing shortage and that as a profession, young people don’t want to join the profession. So in some respects, AI and machine learning and some of those automations come for us at a really important time because of staffing shortages. We’re going to have to really get

I have a, as a profession, a heart to heart around how we treat people in terms of the industry is pretty known for long hours, staff feeling unappreciated by clients. So there’s a lot of kind of systemic issues that have to be addressed. And there aren’t a lot of easy answers to it because it’s gone on for so long. But one of the reasons why

Our vision as a firm is to redefine the accounting industry. And a lot of why we lead with planning and why we’ve developed some of these other tools is because of the trends in our industry and that we’re going to have to rely on being able to work with clients without necessarily having everyone be a CPA.

Anthony Codispoti (01:01:43.853)
Dan, I want to be the first one to thank you for sharing both your time and your story with us today. I really appreciate it.

Dan (01:01:46.618)
Yeah, my pleasure. Yeah, and thanks for putting up with me all the tech challenges I had before this that the audience didn’t see. So thanks for letting me go from my webcam in my office instead of my normal setup. I appreciate it.

Anthony Codispoti (01:02:04.589)
As far as we’re concerned, nothing ever happened. Well folks, that’s a wrap on another episode of the Inspired Stories Podcast. Thanks for learning with us today.