In this episode of The Same Day Podcast, Mat Zalk sits down with Dan Nicholson, CEO of Nth Degree CPAs, to talk about defining financial certainty, minimizing taxes with strategic planning, and funding goals with less effort and risk. Dan outlines his “rigging the game” philosophy, explains the importance of clarity in financial decision-making, and explores tax-saving tactics for real estate investors. He also shares how entrepreneurs can reframe business spending as bets to optimize for long-term wealth.
The Solvable Problem: How Entrepreneurs Can Engineer Wealth on Their Terms With Dan Nicholson
Dan Nicholson is the CEO of Nth Degree CPAs, a financial consulting firm that helps purpose-driven entrepreneurs achieve financial certainty. A summa cum laude graduate in accounting and e-commerce information systems, Dan honed his expertise through roles at Deloitte, Fortune 500 companies, and a fellowship at the Governmental Accounting Standards Board. He has been recognized four times in CPA Practice Advisor’s 40 Under 40 list of global accountants. Dan is The Wall Street Journal and USA Today‘s best-selling author of Rigging the Game and The Solvable Problem, where he introduces groundbreaking frameworks like the Certainty Operating System and Solvable Problem to help leaders maximize cash flow, minimize taxes, and align their decisions with their goals.
Here’s a glimpse of what you’ll learn:
- [2:38] Dan Nicholson explains his shift toward protecting intellectual property in an AI-driven world
- [4:32] What “rigging the game” means and how entrepreneurs can use it to change outcomes
- [8:02] Why most small business tax strategies are overcomplicated and how to simplify them
- [11:05] Foundational tax planning moves including entity structure and missed tax credits
- [14:00] The most overlooked tax-saving opportunity for real estate investors
- [16:57] Defining financial certainty and why entrepreneurs should aim for clarity, not freedom
- [27:19] How to calculate and fund your solvable problem
- [34:10] Why buying property for accelerated depreciation is the #1 year-end move for real estate pros
In this episode…
Building wealth as an entrepreneur often feels like chasing a moving target, especially when the rules of the game keep changing. With so much advice centered around working harder, risking more, or mimicking others’ paths, how do you design a strategy aligned with your unique goals?
According to Dan Nicholson, a best-selling author and renowned financial strategist, the key is solving for what you want using a personal equation he calls “The Solvable Problem.” He highlights how entrepreneurs can systematically reverse-engineer their desired outcomes by focusing on clarity, behavior change, and strategic tax planning rather than defaulting to overcomplicated tactics. The impact? More financial certainty, less risk, and better use of your time and energy. Dan explains how applying investor-style thinking to business decisions can unlock massive returns and why protecting intellectual property is essential in the age of AI.
Resources mentioned in this episode:
- Mat Zalk on LinkedIn
- Yonatan Schmidt on LinkedIn
- Keyrenter Property Management
- Keyrenter Property Management in Tulsa | Oklahoma City | Arkansas
- Keyrenter Property Management email address: [email protected]
- Chris Lile State Farm
- Dan Nicholson on LinkedIn
- Nth Degree CPAs
- “The Entrepreneurial Spirit of Real Estate Investing” with Alex Abbott on The Same Day Podcast
- “Exploring New Possibilities in Entrepreneurship” with Chip Gaberino on The Same Day Podcast
- “Renting to Own: The Advantages of a Contract for Deed” with Brooke Reutter on The Same Day Podcast
- Die With Zero: Getting All You Can from Your Money and Your Life by Bill Perkins
- Rigging the Game: How to Achieve Financial Certainty, Navigate Risk and Make Money on Your Own Terms by Dan Nicholson
- The Solvable Problem: How To Achieve Greater Health, Wealth, and Wisdom on Your Own Terms by Dan Nicholson
- Solvable Problem ® Method
Quotable Moments
- “The biggest risk in life is not living the life that you want.”
- “Most are overcomplicating things in the tax side… there’s levels to this.”
- “You want to get jacked. You got to change your behavior, right? Do you want that?”
- “If you don’t like the results, can you change the system or change your behavior?”
- “You can’t rig the game if you’re not clear on what you want.”
Action Steps
- Clarify your solvable problem: Defining what you truly want enables you to measure progress and align decisions accordingly.
- Optimize your entity structure: Proper structuring can reduce tax liability by 10-20%, freeing up capital for reinvestment.
- Reevaluate business spending as strategic bets: Viewing expenses through an investor lens improves ROI and reduces unnecessary risk.
- Use accelerated depreciation for real estate: Cost segregation studies unlock immediate tax savings, boosting cash flow without added operational burden.
- Protect your intellectual property early: Securing IP ensures long-term value and safeguards your competitive edge in an AI-driven economy.
Sponsor for this episode…
Chris Lile at State Farm Insurance:
This episode is brought to you by Chris Lile at State Farm Insurance.
Chris Lile at State Farm helps you protect your most precious assets and investments, including home and auto.
To learn more about how you can save double digits on all your insurance needs, visit diallile.com or call Chris’ office at 918-878-7771.
Keyrenter Property Management:
This episode is also brought to you by Keyrenter Property Management.
Keyrenter Property Management is a full-service property management company that helps clients buy, renovate, and operate real estate assets.
The team helps clients build wealth while taking the headache out of property management.
That’s why, no matter what rental you have — single-family homes, condos, townhomes, or apartments — they can give you the management solutions you need.
To learn more about their services, go to https://keyrenterpmc.com/ or send them an email at [email protected].
Episode Transcript
Intro 00:05
Welcome to The Same Day Podcast, where we discuss driving incremental business growth and other topics related to real estate, property management and entrepreneurship. Now to the show at hand.
Mat Zalk 00:20
Mat Zalk here. I’m the host of The Same Day Podcast, where I connect with top business experts and real estate leaders. We’ve had Alex Abbott on the show. He’s a seasoned real estate investor with a comprehensive knowledge of diverse property and deal types. Chip Gaberino a good friend.
He’s a local real estate entrepreneur and restaurateur. And Brooke Reutter talking about contract for deed versus lease to own properties. All great shows worth listening to. Today’s episode is brought to you by Keyrenter Property Management. At Keyrenter Property Management, we are a full service property management company helping our clients buy, renovate and operate real estate assets.
We help our clients build wealth while taking the headache out of property management. Whether it’s single family homes, condos, townhomes, apartments. We have the management solutions you need. Go to keyrenterpmc.com or email us at [email protected].
Today’s episode is also sponsored by Chris Lile State Farm. Chris Lile State Farm helps you protect your most precious assets and investments, whether it’s your home and auto investment, rental properties or other valuables called Chris Lile State Farm for a quick and painless phone call to potentially save double digits on all of your insurance needs, visit diallile.com or call us office at (918) 878-7771. Today’s guest is Dan Nicholson, a serial entrepreneur, best selling author and the brains behind frameworks like The Solvable Problem and the Certainty Operating System. Dan has helped hundreds of entrepreneurs cut through the noise and uncertainty and build businesses that align with their version, with their version of success on their terms. A four time, 40 under 40 global accountant, Dan’s got the Fortune 500 background and the startup scars.
But what sets him apart is how he simplifies wealth. Building into something you can actually act on without selling your soul. Or. Chasing someone else’s goals. If you’re ready to play a different kind of.
Game one that’s rigged for you, you’re going to want to lean into this one. Dan, welcome to the show. How are you?
Dan Nicholson 02:16
I’m doing really well, Mat. Thanks for having me on.
Mat Zalk 02:18
It’s good to have you. I’m excited to chat. I love I love tax, I love paying less of it, strategizing on how to do it. There’s so much there’s so much cool stuff that you’ve done in your career. Why don’t you give us, like, 30s on kind of what you’re working on right now?
And I’m going to launch into a barrage of questions if you’re okay with it.
Dan Nicholson 02:38
My main focus is on intellectual property right now, and really moving from being a company that has been primarily like, let me do everything for you to expanding to to making sure that we’re protecting a lot of our unique methods. I’ve written some books. I just put my name into an article that The Atlantic had published about how meta has pirated a lot of people’s books and ingested it into their IP. So I was both honored and disturbed when I saw that my my book had been ingested. So that’s cool.
I’m mainstream enough to be on Meta’s radar at the same point. That kind of sucks. So I’m sort of shifting to how do we become an IP company, and then how do I help my clients become an IP company and make sure they’ve captured all and protected all their, their IP? Because that’s where I believe the world is going in terms of AI. Like, you need to protect those assets and be able to monetize it.
Mat Zalk 03:42
Yeah. I just as I told you, I was in Israel and in the West Bank, I saw Stars and Bucks, which is like a clear straight up, you know, trademark infringement. And then in the Old City of Jerusalem, I saw Jerusalem Fried Chicken JFC and it was like a clear rip off. It was so funny. But I love traveling and seeing like other just no respect for intellectual property, whether it’s like a Louis Vuitton knockoff or or like a trademark deal.
It’s just it can be hilarious. You definitely have to protect it. It’s the intellectual property is a is one of the core reasons why America is America. I guess it’s rule of law, land rights and some intellectual property. Want to ask you you talk a lot about rigging the game.
Can you break down what that actually means for a business owner and and how how someone can start doing it. Like today I want to do it today.
Dan Nicholson 04:32
Yeah for sure. So initially when someone hears rigging the game it kind of goes in, has two different reactions. One is like, hell yeah, I want to rig the game, tell me how to do that. And then there’s the other reaction, which is, this sounds really sketchy. Are you suggesting that I do something Nefarious.
Mat Zalk 04:51
All legal. All legal.
Dan Nicholson 04:53
Not in the category of anything nefarious. And it starts philosophically, which is kind of anchored in this quote from this guy w Edwards Deming, although there’s some disputes about from him or not. It’s this idea that every system is perfectly designed for the results you’re getting. So if you don’t like the results, you have three options. This is my take on it.
Option one, which is what the majority of the population does, which is they’re just a have kind of a victim mindset for me. Nothing I can do about it. Everything’s happening to me. This sucks. Yeah.
And it does suck if you’re not getting what you want out of life. The biggest risk in life is not living the life that you want. But there’s two other options, which is if you don’t like the results, can you change the system or can you change your behavior within the system? So if you’re if the results you need are immediate or very, very short term, you probably can’t change the system. But if you have a long term viewpoint, then that’s a possibility.
So let me give you a practical example. Because you let off with tax I can’t change the system. I can’t change the fact there’s deadlines, I can’t update the tax code, I can’t make Congress do anything. They’re teasing us with the idea of some tax law changes. Most of us thought it was a foregone conclusion.
Hasn’t happened yet. Hard to bet on what Congress might do. I run a CPA firm, so I like tax law changes because there’s anytime there’s a change, there’s an opportunity. And the data bears that out. We’ve had rates as high as in the 99th percentile plus had lower rates than we have now.
Average tax rate stays roughly the same plus or -1 or 2%. And that’s because those who have a lot at stake, they change their behavior. They can’t change the system, although they try and they lobby and all of that. So they have some impact occasionally there, but they’re constantly changing their behavior to pay the least amount. You want to get jacked.
You got to change your behavior, right? Do you want that? So like this whole thought exercise of do I change the system or change the behavior? Most of us are doing it already in some facets but haven’t expanded it to, well, how do I engineer systematically look at an outcome that I want and then reverse engineer it to, to to to get what I really want?
Mat Zalk 07:14
Sure. Sure do. I mean. There are a lot of different things. There’s a what do they call it, the beat it trust, the beneficial defective inheritance trust. There are all sorts of ways to put stocks into, you know, a trust. And then your your heirs can get the benefit. There’s all sorts of crazy stuff.
Does it all cost a ton of money to do, or is there anything that’s like, reasonable besides kind of what we were talking about on the front end, which is I love to have the Golden ticket, which is to be a real estate professional, and you can take active losses against active gains. That’s wonderful. Not everybody, not all of our listeners or clients can do that. Is there is there are there strategies that are not very, very expensive? I mean, in the you know, multiple five figure range to execute.
Dan Nicholson 08:02
So from my point of view, most are over complicating things in the tax side. I mean there’s there’s levels to this. If you’re making tens of millions of dollars a year, hundreds of millions plus. Yeah. We’re now we’re talking about much more complicated and expensive structures.
And oftentimes we get caught up in those structures because we saw a cool Instagram or TikTok video and some wealthy person has done this, and now you want to do it. I have an OG in the tax planning space, so when I started my firm 15 years ago, I didn’t know any other firm across the US who was targeting small business owners with strategic tax planning.
Mat Zalk 08:40
Yeah.
Dan Nicholson 08:41
Then about five years in, I met a guy who was a marketing coach who was a CPA, moved into helping CPAs market their business. I was his second client. He then this is when I wish I was focused more on protecting my IP then. Yeah, there’s a lot of what his software does is very similar to what we talked about years ago. And I watched him pivot into helping clients create tax roadmaps. So it’s become a bit more proliferated in that sense. But what I see is a commonality is that it’s the same in almost every industry, maybe every industry, which is people lead with tactics like, hey, put a bunch of money in this thing, boom, tax savings, and they can show you a quick result, but they have no strategy. There’s no strategy or no philosophy behind what they’re doing.
It’s just spray and pray. And so what we pride ourselves on.
Mat Zalk 09:36
Sorry to interrupt you. One example would be put a bunch of money into oil and gas into this oil and gas asset. Put it into real estate, put it into the stock market and harvest losses, whatever it would be. Is that a is that a fair example?
Dan Nicholson 09:46
Load up, put put a ton of money into this tax deferred retirement account.
Mat Zalk 09:50
Got it.
Dan Nicholson 09:51
And the problem there is with a lot of these strategies is that I oftentimes the client gets further away from their goals.
Mat Zalk 10:01
Right.
Dan Nicholson 10:02
So put a bunch of money into retirement when you’re 30 and you want financial freedom. And five years is a really crappy recommendation right. Because it’s like I want complete financial freedom in five years. But now I’m tying up capital till I’m 59.5. This sucks.
Mat Zalk 10:16
Yeah.
Dan Nicholson 10:17
I’m really worried about liquidity right now. We’ll put a bunch of money into oil and gas. You’re going to save in tax, but no liquidity out of it. You got further away from your goal. So that’s what I mean by these softwares.
Now that produce these reports they can show you a quick savings. Yeah they aren’t necessarily tied back to your goals. What you’re trying to accomplish. So we have a sort of an ethos and different levels to our philosophy. First is just capture all the stuff that at first is get your entity structures correct.
So typically there’s 10 to 20% optimization just from getting the right entities in place, optimizing your salary.
Mat Zalk 11:01
That’s S Corp that’s. Transitioning from an LLC to an S Corp or something like that.
Dan Nicholson 11:05
As an example, C Corp creating a holding company. If you’re in the real estate side, creating a management company where you can charge a fee and then increase your losses and use those fees to form pay for your health insurance or out-of-pocket costs, pay your kids, etc.. So getting entity structure correct is the first thing. Then let’s capture it’s like Pokemon I guess. Capture all the things you already qualify for that you didn’t know about.
Usually another 10 or 20% there. Then there’s what are the unrealized opportunities from your prior years? So a lot of times there’s trapped losses that they’re just not capturing. Then we get to what are the home run strategies based off your liquidity?
Mat Zalk 11:55
Yeah.
Dan Nicholson 11:56
And based off the time that you want to spend. So if you said I don’t want to spend any time on tax planning, show me how to save money as fast as possible, then we’re looking at products.
Mat Zalk 12:08
Got it. And if somebody wants if somebody wants to spend time, what sort of time requirement would you would you bracket.
Dan Nicholson 12:17
Yeah there’s levels then to the time. So you’ve got the ace car real estate professional status. So you’ve got to spend more than your half half of your working time in real estate to qualify for that. But then there’s short term rental strategy. That’s a minimum 100 hours, much lower threshold, basically the same outcomes as real estate.
So there’s kind of a range there between 100 and 100 hours to, depending on how much you work in other businesses, 1000 hours of time to be able to utilize losses. Whereas there are products out there, for example, something called leveraged depreciation, where you’re essentially getting you’re essentially buying a depreciation loss. Got it to one leverage ratio. So you put in 100,000 as an example to get $1 million of depreciation back.
Mat Zalk 13:09
That’s awesome.
Dan Nicholson 13:10
There’s some some element of our hours required there. But it’s not the threshold of real estate professional. There’s a product called medical LLC that utilizes the charitable rules, typically a roughly a 4 to 1 leverage ratio. You put in 50 grand to save to get a $200,000 write off. So there’s sort of different types of products that are out there.
None of this is financial advice to anyone that should go out and buy these things. But just examples.
Mat Zalk 13:40
When you work with real estate investors, what would you say is the the biggest tax saving opportunity that they’re consistently missing?
Dan Nicholson 13:52
It’s shocking to me because this has been around for so long, but just accelerated depreciation from cost segregation studies.
Mat Zalk 13:58
Yeah.
Dan Nicholson 14:00
It’s shocking to me the number of times that people come to us and they’ve got a large real estate portfolio, their spouse, they’ve got a full time job. Running a business or spouse doesn’t work outside of the home, and no one’s talked to them about the hour requirement and the way that they could. Access 20 to 30% of the purchase price as a write as a write off.
Mat Zalk 14:24
But then we get into this whole discussion about depreciation recapture. I mean, how bad is depreciation recapture and how do you plan for it?
Dan Nicholson 14:33
Yeah. So a great question. Depreciation recapture is basically just for the listeners is that you sell it later and to the extent to which you have a gain. So let’s just use numbers here. Let’s just say that you took $200,000 worth of depreciation.
And you have a $300,000 gain. The 200,000 is going to be subject to depreciation recapture at 25%. The remaining 100 would be at your long term capital gain rate. So basically the moral story is that when you have a gain to the extent to which you claim depreciation, you have to recapture that at 25%. And then the rest, the remainder is that long term.
The thing I like to call out to clients, though, is if you are in the 40% bracket and you see you got a write off and then later you pay 25, you still benefited in two ways. The 15 percentage point rate differential, but also the idea of time value of money. Better to save money now than later. Now there’s a whole host of other ways that we might. Be able to defer those that depreciation recapture or offset it entirely.
But those are kind of the broad stroke rules.
Mat Zalk 15:53
1031 or doing something else. Somebody also recently told me about a. 1031 into an oil asset. They said it’s a like kind investment. And I’m going to a presentation, I think, in a few months where a guy specializes in this, in the in the exchange of, of like kind assets from real estate into oil.
I’m really excited to learn more about that because I had never heard that.
Mat Zalk 16:15
But just something that we should probably do a podcast at some point in the future. Have you ever heard of that?
Dan Nicholson 16:20
I have heard of that. I have not, admittedly, we’ve not had any clients do that yet.
Mat Zalk 16:25
Oil still scares me.
Dan Nicholson 16:27
I’ll tell you that our approach is on any of these strategies is we want to take risk off the table. So show me the court cases, show me the legal opinions.
Mat Zalk 16:36
Yeah, yeah, yeah. Changing tack just a little bit. You love to emphasize certainty in business. How do you, Dan, define financial certainty. And why is chasing freedom sometimes the the the wrong target?
Dan Nicholson 16:57
Yeah. So I heard this. I was talking to this CEO of a large wealth management company several years ago, and he said to me that the essential question that his clients were asking is, am I going to be okay? It wasn’t. That was sort of the ultimate question.
Yeah, they’re asking about their portfolio, but really what they’re asking about is am I going to be okay? Like, can I live the life that I want?
Mat Zalk 17:25
Yeah.
Dan Nicholson 17:26
And so there’s sort of an anxiety element to that future focused question that they’re asking. And then I’d heard this equation shortly after that from this guy Chip Conley, who is the creator of this. And he says anxiety equals uncertainty. Times multiplied by powerlessness. And we’re recording this, this podcast.
And I want to know when it will air. But we’re just right in the uncertain times. The the tariffs and and we’re not I’m not going to turn this into a political conversation. But regardless of your point of view on tariffs, you’re powerless. You have no say over. Like. Maybe a couple people who can call up Trump right now and be like, hey, what’s up? But even they don’t necessarily have any power over what’s happening. Yeah. We’re powerless. And depending on your point of view, you have varying levels of uncertainty about what does it mean for the economy.
What does it mean for your business, your finances, your goals so that multiplication, you have all this anxiety about it. So I took that equation and I said, okay, well I can just add in financial financial anxiety equals financial uncertainty. Times financial powerlessness.
Mat Zalk 18:36
Yeah.
Dan Nicholson 18:36
And I’ve shared this in keynotes and otherwise and gone around the room. And some people have this very visceral reaction to it. Like I really feel that every time I feel powerless over my finances, like I can’t sleep at night. I’m just all over, all over the place. So that’s what got me interested in, well, how do I give my clients more power over their finances and give them more certainty?
Now, you probably know this, but we’re not supposed to say the word financial certainty. Fortunately.
Mat Zalk 19:07
Oxymoron.
Dan Nicholson 19:09
The. Compliance. Gods don’t like it. And fortunately, I don’t run a Ria that I’m explicitly prohibited from saying it. But I created my own definition of financial certainty, which is getting what you want on your terms without compromise.
In other words, without having to be someone you’re not. And so how do we do that? How do we get what we want on our terms without compromise? And that’s largely what my book is about. Rigging the Game is you can’t rig the game if you’re not clear on what you want.
So how do you get clear on what you want? And then how do you set the terms? So how do you deconstruct systems and have the principles and tactics to to set the terms. And then how do you make sure that you’re, you’re actually doing it without without compromise. And the reality is, is that it’s an ongoing kind of infinite game where you’re continually reassessing what you want, how you’re getting there, and ultimately, how am I taking effort and risk off the table?
Mat Zalk 20:15
Interesting. It reminds me, though, Have you read Bill Perkins book Die with Zero?
Dan Nicholson 20:24
No I. Haven’t.
Mat Zalk 20:25
It’s it’s kind of a far fetched concept where he says, if you die with $1,000 in your bank account and you work and you earn $100 an hour, then you’ve worked ten too many hours, ten hours that you can never actually benefit from. And of course, the you know, you don’t want to die with zero. You don’t want to die with a ton of money. You want to give away money while you can, while you can, you know, see it enjoyed used to your kids, to charity, to whatever else but his. His basic premise is die with as little as possible and having given away or or bequeathed it earlier in life.
And I just can’t wrap my head around this concept that that, he says, because there’s so much uncertainty. You don’t know how long you’re going to live. You don’t know how much you’re going to need in your last life. But he provides all this. All the actuarial data that suggests that as you age, you don’t.
You need much less money. That if you gave a 95 year old a private jet and said, go anywhere in the world, the 95 year old would probably say, I’d rather just stay here in my room. And so you can’t use it later in your life. You should give it away. But it’s it’s but there’s so much uncertainty about finances.
And to your point, I mean, the reason we measure and I think the reports coming out anytime now, consumer confidence is because our ability to spend today is the net present value of future cash flows, anticipated cash flows. It’s so but it’s so it’s so visceral. It’s so raw. The feeling of having money or not having money.
Dan Nicholson 21:59
I have several reactions to what you were sharing, and so I’ll try to be concise and not not go off in too many tangents. The idea of give away as much as possible before you die. Like it sounds great. Like cool. Yeah, I want to be around to see the the impact Act, and you can use data to support any point of view.
So I haven’t seen the data, but what I do know is that data is one of those things where it can be wielded to to make your point, regardless of what your point may be. Yeah. Where I kind of typically have issues with things that are overly cliche, I guess, or maybe overly hyperbolic in this case of like give away all your money before, or as much of it is that it doesn’t acknowledge that each person has their own unique preferences.
Mat Zalk 22:54
Sure.
Dan Nicholson 22:54
And when I talk about something called Solvable Problem, which is helping clients turn what they want out of life into an equation where we can actually measure, are we getting closer or further away?
Mat Zalk 23:07
Amazing.
Dan Nicholson 23:08
I have these two components, and if people are interested, they can go to Solvable Problem method comm and see more details about it. Or I got a book called The Solvable Problem. But the what I found is that there’s two components. Here’s what I call the core core priorities. And these are the things that I think everybody can agree on.
And it’s basically the conventional definition of financial security, which is you can pay off all your your debts, you have a certain amount of cash reserves, and you have enough where you can be retired or stay stay retired.
Mat Zalk 23:40
Yeah.
Dan Nicholson 23:41
The third being Core capital. Some might also call core capital. I’ve yet to have someone say I don’t want those things. But then there’s the second level, which is the preference based priorities, the things unique to you where there’s no right or wrong. You want them because you want them.
And that’s where there’s the most amount of arguments and judgments about it. And when someone tries to just give you a, well, this is how it’s supposed to be done is immediately I’m like, but not really because a person has their own wants and needs. And so depending on your preferences would dictate how much you could give away. But you would never want to cut into the financial security which is enough to stay retired, be retired, stay retired, pay off debts, and have any sort of excess cash like emergency fund. So that’s where what you need to stay retired could be one tenth of somebody else’s or ten times somebody else’s.
But we got to get really clear on. Those. Those are the sort of core priorities but also the preferences. Otherwise we’re just throwing out stuff that sounds good. But doesn’t actually lead to having a sense of certainty.
Mat Zalk 25:07
So I read my dad. Just a paragraph from this book, and it basically highlights one guy who founded a well-known company that I don’t remember, and he had billions and billions of dollars, and he, at 86 year old years old, kind of. Snaps to his 86 year old self, and he now has $2 million, and he lives in a rented apartment, and he’s giving away all of his money. And he did it in his own lifetime. And my dad was like, that’s just insane. Do you see that? That’s insane.
Like that’s not I wouldn’t want to do that. I wouldn’t want to do that. And it speaks to your idea like one man’s flaw is another man’s ceiling that you just can’t. The same thing doesn’t apply. But how do you on your on your solvable problem concept?
How do you break it down. So it applies specifically to tax planning for real estate folks, for real estate professionals.
Dan Nicholson 25:56
Yeah. So the idea so my overarching philosophy is let’s figure out your solvable problem, what you want out of life. It’s going to change. But let’s get get it down on paper now. Let’s not maximize this optimize.
optimized as clear as you can. Now let’s order it based off priority. Because you’re not going to be able to fund everything simultaneously. Yeah, there’s a bunch of math behind that points out how inefficient it is to try to fund ten things at once. So let’s get clear on that and then let’s do it in the least amount of time.
Everybody wants to do that. But where I differentiate is with the least amount of effort, the least amount of risk, and the least amount of obligation. I say that’s where I differentiate because entrepreneurs live in the like, I got a ten x my effort and burn the boats and go all in. Yeah, that’s not how the billionaires operate, by the way. You study those folks, they don’t burn the boats in Goa and they take bets that have way more upside than downside.
Yeah, that’s a separate, separate conversation. But we get clear on where you want to be in the most simplistic way. So clear on that. Where are you at now. And let’s calculate.
Can you actually achieve it based off where you’re at now given the timelines we’ve set.
Mat Zalk 27:07
And if you can’t you just say you need to reduce either your core priorities or your preference based priorities. I guess. Presumably.
Dan Nicholson 27:12
I wouldn’t say that at all. I’m not the guy who’s like, don’t buy the Starbucks every day. Don’t.
Mat Zalk 27:18
Interesting.
Dan Nicholson 27:19
What I say is, okay, now, step one to accelerating funding your solvable problem is recover resources. And that is specifically can we get your taxes to zero, or at least to the average from all taxpayers of 15%? If you’re at 40 to 50, that delta is hundreds of thousands to millions of dollars for some folks for $50,000 a year. When we look at it in revenue terms, it’s like you got a 10% margin business. I can save you 200 grand.
That’s the equivalent of you having to make $2 million more in revenue. Yeah, people will go after the revenue kill themselves. That’s what I mean by more effort and more risk. Yeah. Every new client is more risk.
So let’s recover that first. Then let’s recalculate based off what we’ve recalculated. Can we hit the timeline? Yes or no? If the answer is no, then we’re going to go through all the bets that they’ve made in their business.
So I have a approach that we call cash flow engineering. And and the most simplistic level, I think of business owners as professional gamblers.
Mat Zalk 28:27
Yeah.
Dan Nicholson 28:28
It’s just that if you said that if you were like, I’m leaving my day job to become a professional gambler, you get.
Mat Zalk 28:34
Just about the risk adjusted return, though.
Dan Nicholson 28:36
That’s what your business has two types of expenses. This is my language core or required expenses and not required not core. So tax business. I got to have tax software. I got to have QuickBooks or some other.
Right. You have to have these tools. Are they the best tools? That’s a separate discussion. But there are certain expenses that are required.
Everything else is a bet. So there’s only a certain number of employees, maybe that your business has to have to keep the doors open.
Mat Zalk 29:08
Yeah.
Dan Nicholson 29:09
The incremental hires are a bet. The marketing vendor is a bet. Having paying some company to book me on podcasts is a bet that I’m making. That there’s going to be some return later. Time.
Money. Energy. Reputation. So let’s take all those bets and then let’s look at what is the ROI that you’re getting on those bets. Most of the time the client says, I have no idea.
I have no data. Okay, well, let’s see how we can get some data. But anything where it’s zero, then we’re having a conversation. Should we cut this or is it negative? But fundamentally, for all those bets, you got to get more than 10%.
And I say 10% because ignoring the last week, that’s sort of the we should expect that if we just put it in the S&P. Yeah I’m looking through I’m him like you’re spending 80 grand a month in bets that are getting less than 10% that aren’t core. Ton of effort. Ton of risk. You could be putting that in the S&P and getting 10% 10% and you’re keeping the principal.
Mat Zalk 30:16
Yeah.
Dan Nicholson 30:17
So that’s not that’s never what actually happens. But it’s a thought exercise for people to go like I’m working way too hard taking way too much risk. I need to get a 30% return to hit my goal. I got to take all these bets and do something different. And that’s a method I have called the investor frame, where we reevaluate all these bets and basically go through, based on what I know today, would I reinvest?
If not, what would have to be true? What would have to change to turn this into a yes and? And am I willing to do that? And that’s where we recover the remaining cash and reallocate it to start getting better returns to grow the enterprise value of the company, but also create the cash that they need to fund all those goals.
Mat Zalk 31:03
Yeah. I mean, it strikes me as. Difficult, simple, but difficult to do. I mean, it’s just about maintaining focus. It reminds me of the EOS framework. I don’t know if you’re familiar with that entrepreneurial operating system.
Dan Nicholson 31:15
We use it.
Mat Zalk 31:16
Yeah, yeah. I mean, it’s not none of that stuff is rocket science. It’s just about having the discipline to execute on it. So you have to take a hard look at your books and go, what is discretionary spending in your business where you cannot calculate an ROI? And if you if it’s 10% or less, in your words, reallocate it to something that’s more effective, more efficient and use of that capital.
Dan Nicholson 31:36
I have some clients who there’s a guy named Dan Barrett who runs a company called SEO. SEO nerds. I’m blanking on the name. Hopefully he doesn’t listen to this, but anyhow. He’s got in his calendar once, once a week.
He’s got 15 minutes investor frame. He just goes over the decisions he made for the last week. Once a month, he goes over the decisions he made for the last month. And it’s just, do I opt back in or not? Because if you were a day trader, you would look at your bets like multiple times a day.
If you were a gambler at the casino, you were not just like not looking at your pile of chips. Yeah, I want these bets to pay off. I don’t want to work harder than I have to work. Yeah, so it’s discipline for a while, and people read my stuff, they’re like, oh, Dan, you must be very linear. Like, I’m not.
I have these tools because I’m not. I know I’m impulsive. I built this persona test.
Mat Zalk 32:37
I need to create a framework for myself so I know.
Dan Nicholson 32:40
Exactly I gotta create guardrails so I’m not my own worst enemy. I created this test called the five Wealth Personas, and it tells you if you’re a hustler, gambler, optimizer, saver, or outsourcer.
Mat Zalk 32:53
Is all this available on your website.
Mat Zalk 32:55
Yeah. Yeah.
Dan Nicholson 32:57
It takes three minutes to take the test. But basically, people assume I’m an optimizer, which is the person who’s got all the spreadsheets, and I like a spreadsheet, but I’m actually a gambler. And that’s why I need these tools, because it works in my favor. I’m constantly looking for asymmetric bets, but if I don’t have the guardrails, I’m going to blow myself up. Yeah.
And I want to stay in the game as long as possible. I want to keep going back to back to zero.
Mat Zalk 33:24
Yeah. Super interesting. I’m going to go on the website and I recommend everybody else do the same. How do we get there? For those that that don’t know how to use Google.
Dan Nicholson 33:34
They can go to nthdegreecpas.com I also I think I’ve got a fancy link I can send you if you, if you do show. Notes that can put it in the show notes for.
Mat Zalk 33:43
Sure. I’m going to go check it out and see all the stuff that’s on there. I want to ask one final question before we before we wrap up, you mentioned kind of timelines. What’s the a timeline that a potential client will be looking at for tax savings? And then you’ll kind of define the the the the methodology the strategy.
What what’s one move a real estate pro should be making before the end of the year to lower their tax bill?
Dan Nicholson 34:10
Well, if you haven’t done cost segregation studies that that’s the lowest hanging of of lowest hanging fruit. You can reverse engineer how many more properties you need to buy to get to zero. So that would be the move. The next move.
Mat Zalk 34:27
Love it. Buy more property, take more depreciation. Tried and true. Tried and true. Rules from Dan Nicholson. I 100% agree with that, by the way.
I mean my dad, my dad sometimes accuses me of like tying myself up in knots for tax savings. I should just pay my tax, move on like.
Dan Nicholson 34:42
I well. The fundamental tenet of our philosophy, the first preference is can I turn cash flow into assets that have a tax benefit. I’m going to bias that first. So can I buy something a business real estate that’s going to give me a tax benefit or fund a goal. Like if I wanted to buy a second home, how would I buy as a short term rental for the first year and get all the tax loss, get most of my down payment back and bias those? And then to the extent to which I have a remaining tax liability, that’s when I look at financial products where I’m getting a tax savings, but that’s what I’m getting.
It’s not necessarily an ongoing asset. So that would be secondary. So take all the stuff you already optimize your entities, take all the stuff you already qualify, buy some assets, cash flow permitting. And then to the extent to which you have a remaining liability, then we look at financial products.
Mat Zalk 35:35
I love it. And if somebody wants to reach out to Nth Degree CPAs, how would they how would they do that.
Dan Nicholson 35:43
Yeah, best way would just would just be to go to nthdegreecpas.com and click contact us.
Mat Zalk 35:48
And Today’s. Guest is Dan Nicholson, a serial entrepreneur, best selling author, and the brains behind frameworks like The Solvable Problem and the Certainty Operating System. Dan has helped hundreds of entrepreneurs cut through noise and uncertainty and build businesses that align with their version of success on their terms. Dan’s a four time, 40 under 40 global accountant, and he’s got the fortune 500 background and the startup scars. But what sets him apart is how he simplifies wealth, building into something you can actually act on without selling your soul or chasing someone else’s goals. If you’re ready to play a different kind of game, one that’s rigged for you, you’re going to want to listen back to all the little nuggets that Dan shared. Dan, I appreciate you being on the show. It was a pleasure chatting chatting with you.
Dan Nicholson 36:33
Yeah. Thanks, Mat. This was fun.
Mat Zalk 36:34
Take care.
Outro 36:38
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