Even Tiff Macklem is cutting costs

I’m writing you this email on Friday night and I have a nice little story to share.

I was picking up my bi-weekly grocery order tonight at Farm Boy here in Ottawa, and I grabbed everything off the shelves.

We were doing nachos because it’s been a long week!

I'm strolling down the aisles when I see this man who looks so familiar. We happen to be in the same aisle, and he’s grabbing a discount pack of Nanaimo Bars off the shelf—you know, the ones about to expire.

By the way, I’m not judging here. I don’t even believe expiry dates are real.

It then dawned on me who this man in the aisle is that I recognize. It’s our one and only Bank of Canada Governor, Tiff Macklam. I couldn’t believe it. I live in an area with plenty of diplomats and whatnot, so its not overly surprising, but still. It’s TIFF.

I was in the same aisle as him and I struck up a conversation. I told him that I liked the recent interest rate decrease and hoped more were coming. He smiled and said they were doing their best. Then, we both agreed that Farm Boy had some of the best desserts out there.

I didn’t realize it, but he said that he’d been living in Ottawa a long time and remembered when Farm Boy first came along and now look at it.

So, if you’re looking for the inside scoop on the next set of interest rates. I feel they're moving down. He was buying Nanaimo Bars. Discount Nanaimo Bars. That must be a sign right?

Be out there meeting the people, because you never know who you’re going to meet.

The next person could be the one that takes your business to the next level.

I want to come back to that, but I first want to tell you about a meeting I had this week, because it was sooooo good and such a great lesson and story for you to use.

You might be familiar with something called Infinite Banking and/or Be Your Own Banker. I won’t lie, this strategy is being promoted both for good and for ill; to the right people and to the wrong people. Yet, I find some of these things get painted with the wrong brush and people just stray away from it.

It’s not all bad, it’s not all good.

But, I have a good story to tell you. And, it involved me closing a $100,000 premium case in about 20 minutes.

So, I met this blue collar business owner. I don’t want to share too many personal details, as they aren’t important and it’s a real person. But, suffice to say, it’s a great story.

As this business owner told me, the banks seem to be encroaching on his decisions, which pushed him to the Be Your Own Banker idea.

See, every 3 months this business owner NEEDS to meet with his bankers. It’s not his choice, it’s theirs. And, at each meeting, he is effectively told he can’t do all the things he wants to do. It will breach the covenants or something like that.

If he wants to grow his business, he can’t do it the way he wants to. Or, the bank might call the line of credit.

But then he told me this banger. He decided to have some children. And, the decision he and his wife made was that she would stay at home and take care of the kids until they were 4.

Horrible decision, right? I’m joking, just so you know. But, that’s the decision they made as a family and I can’t fault it at all (I’ve done the same thing). Yet, as part of this decision, they decided to take a few more dividends out of the company over the next few years to compensate for the drop in income.

But guess what happened?

The bank said no. It would drop some spreadsheet ratio to a level they don’t like.

So, think about this in the context of the political climate we all live in. You have a multi billion dollar international conglomerate telling this poor little business owner that he can’t take the money out to feed his family.

I’m half joking here, but this is essentially how this business owner views these ideas. And, I can’t fault him at all.

This is all to say, this business owner’s primary goal is debt repayment. Cut the banks out of his business and never go back. They stop him from doing the stuff he needs in the business.

This is where the cash value life insurance comes into play. He views that as his bank of choice. In the future, he wants to build that sucker up so that he can one day tap into the equity to fund his business or whatever he needs, but with no strings attached.

When he told me all of this, I couldn’t help but smile. Yet, it reminded me of the Walt Disney story, which I told him.

Back in the early 1950s, when Walt was building the animation kingdom that it is today. He has this bright, terrible, but bright idea. He was going to take this Los Angeles swamp land and turn it into something he called:

Disney Land

His brother Roy Disney hated the idea and forbade any investment in it. Walt had to rely on the other shareholders to get it done. So, it wasn’t going to go ahead.

But, as you know. This doesn’t stop any real entrepreneur. Just another test along the way of business.

If you know the story, you know what he did. He took the cash value from his permanent life insurance policy and got a loan, using which he built the beginnings of The Imagineers, a mock design with all the elements, and spent quite a bit of money on it.

Then, he pitched his idea, including mock-ups, design, and future plans, to the board. Even his brother Roy Disney, upon seeing the pitch, fell in love with it.

This would become one of the biggest businesses in the world—Disney reported this week that the Parks division just cleared a profit of $2.5 billion just this quarter. Far from a stupid idea in my books.

Now, had Walt not owned a life insurance policy, would we never have had Disney Land? Who knows, because he did own some.

The point here isn’t actually about life insurance. It's about owning assets that allow you the freedom to make the investments and decisions you need, which is what I told this business owner.

I then closed with my favourite Buffett line of all time:

“Trust in God. All else pay cash.”

He laughed and he said, let’s do this.

The point is you cannot rely on the goodwill of people to get the things you need. Never rely on the goodness of other people for the things you need. Repeat that as many times as you need until it’s etched into your cold, dark sales heart.

As a side note, did you just see that Buffett liquidated a good chunk of his stock portfolio and now sits on more than $300 Billion of cash, crazy times indeed.

You might be asking if you’ve been following along with my story (which I’ll admit is a little all over the place, but that’s how I think):

How is this business owner going to both buy a life insurance policy and pay down his bank debt?

If you’ve been with me for a while, you probably know what I’m going to do.

The primary goal of the business owner is to pay down his bank debt. His secondary goal is own a nice cash value life insurance policy.

Here is what I proposed to him.

1. Buy the permanent life insurance policy with the cash.

2. We will arrange an Immediate Financing Agreement (another form of debt)

3. He will borrow back the maximum - probably 85% of the cash value in year 1 (assuming no additional collateral), growing to 100% by year 4.

4. He takes those borrowings and pays down the bank debt.

5. He gets the deduction for interest and Net Cost of Pure Insurance

Here’s why this works:

He wants a permanent life insurance policy. If he waited until he has paid down all the bank debt, he will lose out on all this growth. So, we can do both and as he gets increased cash flow into the business, he can snowball down the debt. And, then he can work on the IFA debt (if he wants). But, in the meantime he’s got all this cash value life insurance growing, which is what he wants.

And, now he takes back control of his finances, especially after the bank is out of the picture. And, this business owner will one day be incredibly wealthy, so he’s going need plenty of life insurance one day down the road anyways.

I feel so blessed to be able to help out in such a great way. Sometimes my job is just amazing!

I loved the meeting and I loved the story. It just went too well, and it made so much sense. Sometimes, working in sales is just about helping.

So how about them apples?

I can see that this email is already running quite meaty in terms of content.

As I’ve been talking about the last few weeks, you need to build more referral sources. But, one of the things I want you to think about this week is:

What kind of client appreciation event can I run that will drive more referrals back into my business?

And, just some thoughts that I came up with this week.

• If you work with business owners, why not run a client appreciation event that includes the next generation and call it “Bring Your Future Leader To Work”? These younger family members will one day take over and it’s important for them to build a good social network of next generation leaders (and they’re proabably all dealing with the same issues) and you could arrange it?

• Rent out the whole movie theatre and screen one of the next big movies. I see Moana 2 is coming out at the end of November. You could rent out the whole movie theatre, give everyone popcorn and a drink for less than $1,500 (for 70+ seats). What do you think the return would be on that investment? Is that something that will return you more than $1,500 back into your business. I’m going to go out on a limb and say yes.

• I’m planning a VR Event for my little day job. But, you can run a client appreciation event at a location like this for less than $1,000 and give people the experience on a lifetime. Take a look at this short video of one of the experiences:

These are all events that are “memorable and meaningful” and can lead to long-lasting impressions. This means that when people think about you, they refer you.

So, give a think to what kind of events you can run for your people.

And, one final thing before I go.

I’m going to be in Toronto on September 3rd, and I’m hosting an event in the Distillery District between 6:30-8:30, and I’d love to meet you. If you’ve been on my email list for years and you want to meet up, please come out, as I’d love to meet you - face-to-face.

If you want to join, send me a message and I’ll add you to the invite list with more details.

As always, have a great weekend and we’ll see you next week.

Andrew