Next Level Pros Episode #127: Risk the $600K in His Home or Play it Safe?

Host: Chris Lee
Guest: Seth Shaner
Release Date: October 15, 2024

Introduction

In Episode #127 of Next Level Pros, host Chris Lee engages in a candid and in-depth conversation with Seth Shaner, a seasoned entrepreneur navigating the complexities of personal finance, business growth, and personal life challenges. This episode delves into Seth's journey from financial struggles to entrepreneurial endeavors, highlighting the pivotal decision he faces: risking the $600K equity in his home to propel his business to new heights or opting for a safer, more stable path.

Background of Seth Shaner

[00:12] Seth Shaner: "We're being house poor."

Seth Shaner introduces himself as a 48-year-old residing in Orange County, California. With a background in selling restaurant businesses, Seth shares his entrepreneurial spirit shaped by multiple ventures, including founding businesses that reached nine-figure revenues. His experience spans from managing large teams to navigating financial hardships, providing him with a wealth of knowledge in the business world.

The Challenge: House Poor

[00:00] Chris Lee: "You can't have her high society desires overcome what your income is. Right. Because you guys are being held back by the 600k that you have in this house."

Seth candidly discusses the concept of being "house poor," a situation where significant equity in a home restricts financial flexibility. Despite owning a valuable property worth approximately $600K in Orange County, the high costs associated with maintaining the home have strained his finances, limiting his ability to invest further in his business ventures.

Seth's Career and Entrepreneurial Journey

Seth recounts his entrepreneurial journey, starting with a failed construction-related business in 2008. Facing bankruptcy, he chose to negotiate his debts, successfully paying off around $1 million over eight years. This period tested Seth's resilience and commitment to overcoming financial setbacks without resorting to bankruptcy.

[01:02] Seth Shaner: "After 2008, my business went under. I ended up negotiating all that and paying it off over the next eight years instead of filing bankruptcy."

His career progressed as he joined GE Capital's Franchise Finance division, selling loans to restaurant franchisees nationwide. Seth excelled in sales, a skill honed during his two-year Mormon mission, assembling a robust foundation in financial services. However, the sale and subsequent layoff from GE Capital pushed Seth to explore new entrepreneurial avenues, leading him to his current focus: selling restaurant businesses.

Personal Struggles: Divorce and Family

Seth opens up about his personal life, including a challenging divorce that added emotional and financial strain. Living arrangements became complex, as he remained in Orange County to maintain stability for his three children. Balancing family responsibilities with business ambitions has been a significant hurdle, compelling Seth to consider drastic measures to achieve financial freedom and professional growth.

[06:08] Seth Shaner: "When I was 14, my parents were bankrupt. We moved to a small town in Illinois where they grew up."

This early exposure to financial instability profoundly impacted Seth's approach to risk and business, instilling a cautious yet determined mindset in his entrepreneurial pursuits.

Current Situation: Consulting and Brokerage

To sustain his finances, Seth currently engages in consulting, helping restaurant owners optimize their businesses. While this provides a steady income, it pales in comparison to his ambitious goals of scaling his brokerage operations. Seth is simultaneously navigating the sales cycle of high-value deals, some worth up to $100K, but faces challenges in closing these deals consistently.

[12:12] Seth Shaner: "I have very specific things. I can look at a set of financials and say, look, I can save you a million bucks, however much it is for sure."

Despite securing clients, Seth acknowledges that the income from consulting is insufficient to meet the high cost of living in Orange County, prompting him to contemplate more aggressive strategies to boost his revenue streams.

Discussion on Risk and Self-Imposed Limitations

A significant portion of the conversation centers on the theme of risk versus safety, with Chris and Levi encouraging Seth to evaluate his comfort zone and assess the potential for exponential growth by taking calculated risks.

[08:37] Levi: "Zero perceived risk. Is if you work for somebody, you have a job, that's stability... but if you're W2, you can't get a house loan if you're an entrepreneur."

They discuss how societal norms often discourage entrepreneurship due to perceived risks associated with being self-employed versus the stability of traditional employment. Seth reflects on how these perceptions, combined with family responsibilities, have influenced his cautious approach.

Strategies for Growth

Chris and Levi propose several strategies to help Seth overcome his financial constraints and business limitations:

1. Hiring Support: Outsourcing low-value, high-time-consuming tasks to interns or affordable labor (e.g., Filipino workers) to free up Seth's time for high-value activities like negotiation and deal-closing.

   [39:25] Seth Shaner: "I need to build a database of people to go after... it's a lot of administrative stuff. I can get an intern for that."

2. Building a Personal Brand: Leveraging social media platforms to position himself as an industry expert, attracting more leads and establishing trust with potential clients through educational content.

3. Focusing on Core Competencies: Prioritizing activities that align with his strengths, such as having in-depth conversations with willing sellers, analyzing financials, and negotiating deals, while delegating other tasks.

4. Financial Planning: Developing a comprehensive five-year plan to outline organizational structure, sales strategies, and operational processes, ensuring sustainable growth and scalability.

[41:01] Seth Shaner: "The things that are the most valuable for me to be doing are having conversations with people who are ready, who want to sell their business."

Steps to Overcome Challenges

The dialogue between Chris, Levi, and Seth culminates in a actionable roadmap to help Seth navigate his current predicament:

1. Sell the House: Addressing the house equity to unlock $600K, thereby alleviating financial strains and providing capital to reinvest in the business.

   [66:33] Seth Shaner: "Sell house and then sell house."

2. Stop Consulting: Eliminating low-energy, high-value consulting work to focus entirely on brokerage activities, increasing capacity to close more deals.

3. Build a Five-Year Plan: Crafting a strategic plan that includes organizational structure, team roles, and financial projections to guide business growth.

4. Develop Systems and Processes: Establishing Standard Operating Procedures (SOPs) and other frameworks to streamline operations and ensure efficiency.

5. Build a Course and Brand: Creating educational content to establish authority in the industry, attract leads, and generate additional revenue streams.

   [68:43] Seth Shaner: "My thought was to... do a five-minute video, once a week, send it to the Philippines, have someone cut it into audio and post it."

Key Insights and Conclusions

[60:14] Seth Shaner: "I started getting crap done when I went to [coach]. After working with him, I had a lot of things that I was stuck already. He gave me tools to help me be way more effective."

Seth acknowledges the importance of mentorship and coaching in overcoming personal and professional obstacles. The conversation underscores the value of stepping out of one's comfort zone, leveraging available resources, and making bold decisions to achieve substantial business growth.

[64:11] Seth Shaner: "Having some difficult conversations about selling the house and then making my plan, my five-year plan."

The episode concludes with Seth committing to the proposed game plan, demonstrating his readiness to confront the challenges ahead and seize the opportunities for scaling his business. Chris and Levi provide unwavering support, emphasizing the potential for Seth to transform his financial situation and achieve his entrepreneurial aspirations.

Notable Quotes

• Chris Lee [00:00]: "You can't have her high society desires overcome what your income is. Right. Because you guys are being held back by the 600k that you have in this house."

• Seth Shaner [00:12]: "We're being house poor."

• Seth Shaner [08:37]: "Zero perceived risk. Is if you work for somebody, you have a job, that's stability... but if you're W2, you can't get a house loan if you're an entrepreneur."

• Seth Shaner [39:25]: "I need to build a database of people to go after... it's a lot of administrative stuff. I can get an intern for that."

• Chris Lee [64:03]: "You gotta put yourself up for the best opportunity to be able to go and build this business."

• Seth Shaner [60:14]: "I started getting crap done when I went to [coach]. After working with him, I had a lot of things that I was stuck already. He gave me tools to help me be way more effective."

Conclusion

Episode #127 of Next Level Pros offers a profound exploration of Seth Shaner's entrepreneurial journey, emphasizing the delicate balance between personal life and business ambitions. Through honest dialogue and strategic brainstorming, Seth confronts the limitations imposed by his financial situation and familial responsibilities. The episode serves as an inspiring blueprint for entrepreneurs grappling with similar challenges, illustrating that with the right mindset, support, and strategic actions, significant hurdles can be transformed into opportunities for growth and success.

For those seeking to elevate their professional trajectories, Seth's story underscores the importance of taking calculated risks, leveraging personal strengths, and building robust support systems to navigate the complexities of entrepreneurship.