199 - The Tax Credit Most Shop Owners Miss (And How to Claim It)

199 - The Tax Credit Most Shop Owners Miss (And How to Claim It) April 8, 2026 - 00:56:05 Show Summary: This episode explains how shop owners can use the R and D tax credit to recover significant money. Derek VanNess breaks down recent tax changes that allow credits from past years and shows how common shop activities qualify. He explains that labor and process improvement drive the credit, not equipment purchases. Many shops can receive ten to forty thousand dollars each year. The episode also highlights using these savings to build long term wealth.   Host(s): Jimmy Lea, VP of Business Development   Guest(s): Derrick Van Ness, Founder, Big Life Financial Show Highlights: [00:00:00] – Introduction to R and D tax credits and industry crossover [00:02:00] – New tax law creates limited time opportunity for past credits [00:04:30] – Why most shops qualify through daily improvements [00:08:30] – Labor hours drive the credit more than equipment costs [00:13:30] – Front office systems and software changes can qualify [00:18:00] – How credits turn into real cash or tax savings [00:24:00] – Tax strategy can add ten to twenty percent to profits [00:30:00] – Shop technology upgrades like alignment systems qualify [00:36:00] – Long term investing turns tax savings into millions [00:46:00] – How to get a free estimate and take action     In every business journey, there are defining moments or challenges that build resilience and milestones that fuel growth. We’d love to hear about yours! What lessons, breakthroughs, or pivotal experiences have shaped your path in the automotive industry? Share your story with us at [email protected], and you might be featured in an upcoming episode. Unlock the full experience - watch the full webinar on YouTube: https://youtu.be/TM7FyJlKDVo   Don’t miss exclusive insights, expert takeaways, and real talk you won’t hear anywhere else. Hit Subscribe, drop a comment, and share it with someone who needs to hear this!   Links & Resources:  Want to learn more? Click Here Want a complimentary business health report? Click Here See The Institute's events list: Click Here Want access to our online classes? Click Here ________________________________________ Episode Transcript Disclaimer This transcript was generated using artificial intelligence and may contain errors. If you notice any inaccuracies, please contact us at [email protected].   Episode Transcript: Jimmy Lea: My guest today is Derek VanNess. Derek is with Big Life Financial and we have a phenomenal, phenomenal amount of information to share with you today. Derek has been in the industry for quite a some time at my behest. He was heavily involved in the dentistry industry and I said, Hey Derek, you have got to come check out the automotive industry. We're having a great time over here. It is so much fun. Come check us out. And he brings with him a lot of knowledge and information that transfers between dentistry and the automotive industry. So with that, thank you Derek for being here. Good morning. Derick Van Ness: Good morning Jimmy. Excited to be here. And yeah, I'm always amazed at how similar dentistry and the auto repair business really is. Uh, if you think hygiene appointments and you think oil changes or checkups, suddenly you start to see. People come in, they do a diagnostic, you're working on cars, they're working on teeth. But it's, uh, it really has translated well over the last, last six or seven years. Jimmy Lea: Dude, that's awesome. That's awesome. And what we're talking about today is, is it, are we going into the r and d tax? 'cause that been a constant conversation that we've had over the last two or three years, but it seems like things are changing. Derick Van Ness: Yeah, there's, there's been some big changes in the, uh, research and development arena. Uh, the most people know there was a big tax bill that passed last 4th of July, and in that tax bill, it fixed the RD credits. Now, a lot of people didn't know they were broken, right? And we could go back three years. And so we were filing for people for 20 20, 20 21. But 22, 23 and 24, actually, the tax code had been changed or, or broken from the 2017 tax rewrite. Um, and people didn't know, like the credits still existed, but they weren't necessarily worth doing because, uh, long story short, it would make your income go up more than the tax credits would help. And so it wasn't worth doing now, uh, over the long term. It, it worked itself out, but it was, it wasn't worth doing for those couple of years. The tax bill in July actually fixed that. But we only have one year from that date, so this 4th of July to where we can go back using the new code and claim all of those credits for 22, 23 and 24. So that's, that's what you were talking about with expediency, is if you can get this done and in before the 4th of July, then you can get all that money coming back in one year. What broke it before was you have to take it over five years and. It raises your income. So I don't want to get into all that 'cause it's kind of technical and most people's eyes glaze over the net. Net is, um, there's an opportunity right now to go back and claim credits that you just couldn't really claim or didn't make sense to claim. And so we're trying to help as many people get that money as possible. Jimmy Lea: Nice. What qualifies the automotive industry? As an industry to qualify for this r and d tax, what is it that makes us unique or, uh, susceptible to this? Derick Van Ness: Well, I don't know if you guys know this, but you kind of have a technical industry, right? And most people, when they think of RD credits, they think of like guys in white lab coats with beakers making some sort of concoction that's gonna change the world or something. But the truth is the RD credits actually were created for the automotive industry way back in the eighties. Um, basically when the, the foreign cars came over and the US wanted to be able to compete with those, uh, Congress said, Hey, we want our people to, to experiment, to try new stuff, to be cutting edge. And we also know when you try new stuff, sometimes it doesn't work. So we're gonna give you credits to help you do that and help fuel that innovation. Long story short, fast forward to where we are today with the automotive industry, with all the changes that happen all the time. Every time you try something new and there's something called the four part test, I won't bore you guys too much with it, but if you're doing new things in your business to improve a product or process, most of what you guys are doing is process. Um, and it's based in technology. So. Computer science, biology, physical science, or engineering. Obviously you guys do a lot with computers, a lot with engineering, probably not so much with biology, but um, but anytime you guys buy new diagnostic equipment, right, which is a really common one where, hey, we want to be able to, uh, diagnose a problem. Faster, cheaper, more accurately. You know, get the solution a better outcome for the client, but also make it easier for us so we can be more profitable. They want to encourage that they being the government and so they give these credits for that. So, um, with EVs coming out, with all the self-driving stuff, with all the new, you know, features that are happening with cars, with all the technology that's allowing people to. You know, communicate from the shop up to the office and back and forth. Automated billing, automated follow up, automated tracking, all you know, all of that. Plus of course, all the innovations in how you guys are diagnosing things and, and fixing them more quickly. Uh, all of that is technology based. So if it's new to your business, it's technology based, and you're trying to solve a problem so you can get better. You're probably qualifying for credits, and if you're listening to all that going check, check, check, it's because we've done this for hundreds of shops and there are very few that don't qualify for something. Yeah. Some of them is really big. Some of them, you know, it's, it's a little more modest, but it's pretty common for shop owners to get between 10 and $40,000 a year for this, depending on the size of the shop. Jimmy Lea: Oh, now, so that is, is that the moderate number? Derick Van Ness: Uh, yeah, I mean, yeah, I would say like, it seems like I have a lot of shops that are in that 20 to 30 range, you know, if you're, yeah. A million to $2 million shop. Right? Which is, Jimmy Lea: yeah, Derick Van Ness: pretty common for, for shops that are probably working with you guys. I know you guys take them to the moon, but a lot of them, when they come in, they, they've got it kind of figured out, but they're going to the next level, right. So like the guy who's working out of his garage, bringing in $200,000 a year of revenue and maybe only 50 KA profit, he's not paying a lot of taxes. Probably not worth it. Yeah. But I would say doing over half million dollars of revenue, then it starts to make sense. You're gonna, you're gonna get enough credits 'cause you're probably big enough to grow, try new stuff. You've got some employees. Um, yeah. So I would, yeah, I would say. 10 to 10 to 30 is really common. If you've got a bigger shop, you get into multiple shops, it gets quite a bit bigger. And we, we have some, you know, MSOs who get a couple hundred thousand dollars back so it, it can get quite large. Jimmy Lea: Oh wow. So you started with the technical and you totally had me, I was like, oh yeah, Pico scopes, OB two sensors, all the scopes that they get. And, and it's not just a scope, it's not just, uh. Had or tablet that, that diagnosis, they've got it for every make and model. Sometimes. Uh, certainly Volvo has their own software and Porsche has their own software and Mercedes and BMW. There's usually not an all inclusive, all in one. Uh, scope that you could combine that would test every single vehicle. Right? So, so you had me there. Yeah. I totally follow. And these, these scopes start at $10,000 a piece and every year you have to update the software. Derick Van Ness: So I, I should probably clarify this. So a lot of people think it's the cost of the equipment, it's the cost of the software. You, you already get to depreciate the equipment. Um, so what this actually is, is it's the labor, it's the man hours that go into this is much bigger. So what, before you got that tablet, what you did, what you did was you figured out, Hey, we need to figure out how to do this more effectively. What we're doing is too slow, not accurate enough, or we can't do it for. Porsches or Volvos or whatever. So we have a problem. We wanna solve that problem. So you go out, you spend time, or your team spends time looking at what are the solutions that are out there. There's different providers, there's different hardware there. What do we wanna do that's going to integrate into our shop? So all the time that goes into that, then you buy the equipment. Then you've gotta figure out how to use it. How does this work with our workflow? How does this tie in with all of our technology? So all the hours on that. And then once you actually start using it, you know, the first day you're using a new P piece of diagnostic equipment, you're not an ace, right? You make mistakes. You're figuring out how to be better, and you start figuring out how to do that. So all of that process of getting better. So it's actually much larger in many cases than the cost of these scopes. It's you're paying, you know, 25% of your your man hours to your. To your team is figuring this stuff out, getting it better. So it's a huge portion of your wages in a lot of cases, which is actually a lot bigger than, Hey, a $1,500 laptop. It's like, yeah. But the three people who use that laptop make $175,000 a year combined, and now it's like 25% of that. So we're talking about, you know, 45, $50,000 money. Yeah. Jimmy Lea: Oh yeah. So, okay. So you had me there. I I, I, I totally follow you on the technical and, and when they're getting this new technology, they're implementing it new process procedures, they're, they've, do they need to document that? Is, is that part of the proven process for this r and d tax that they've gotta have a book of process es. Derick Van Ness: Great question if you do, awesome. But Congress figured out a long time ago, small business owners do not have a team of guys going around documenting everything, right? Like I know a lot of what you guys do is help people get their systems documented and create duplication and all of that. However, that is not always super common. So they created what's called the alternative simplified method. So there's a, what they call a contemporaneous method, which is like what? Google and all those guys use who like have teams of people that document stuff. Jimmy Lea: Yeah. Derick Van Ness: For small business owners, they said, Hey, we're gonna do a simplified version, the the RD credits for dummies, if you will. And you don't have to have all that now you do get a little lower percentage than the guys who have everything documented to the, to the penny. But that way you don't have to have all of it. So one of the things. My team does, or if you were gonna work with your, your CPA or whatever is we do write down and the IRS RE requires all of this. You have to write down all the projects. What are the things that you've made better fixed? And you have to answer the questions for the four part test. You know, how are you improving a product or process? How are you re reducing technological uncertainty? Is it based in science and is it. Experimental meaning is it new to your business? Not Not to the whole world, just to your business. And you have to document that in a very specific way. Our team's able to do that in about 45 minutes with a shop owner. Just go through, 'cause we've done it so many times, we know the questions, we know the format the IRS wants to see. Yeah. So no, you don't need all of this supporting documentation. Is it nice to have? Sure. If you ever end up getting audited. The question comes up all the time. Is this a big audit, red flag? No, it is not. I mean, Congress literally said, we want you to file for this. They changed the tax code so you could file for this. And the fact that you are going back and amending those things is not a red flag because they told you, we realized it couldn't be done before. Now we want you to do it. So it's not a red flag. It, we have not seen over doing thousands of these. We have not seen any. Change in the audit rate that people get over people who don't do RD. 'cause we have a whole tax firm too, right? So, so we have good data on that, so it's not a red flag. Um, so yes, there is some documentation that goes into it, but you don't need to be doing that. I mean, if you wanna be proactive, you can be writing things down throughout the year once you start to understand this. But the reality is you don't need to have binders. I've seen the binders you guys have. Uh, you don't need, Jimmy Lea: yeah. Yeah. The, the three inch, four inch binders of process procedures, which is good. I mean, there's no agenda here, Derek, but I'm gonna tell you, you just cut me off at my knees by saying you had this a CM alternative method, Derick Van Ness: simplified credit, the A. Jimmy Lea: Yeah. So I, I, and that's, that's not the point. The point is, uh, we've got a phenomenal program here that has such great possibilities, and, and you had me for the technical, and then you mentioned. The front desk Derick Van Ness: Uhhuh Jimmy Lea: intake. What if they go from handwritten to a point of sale system that is computer based or what if they switch computer based systems, then they go from one point of sale system to another point of sale system? Does that also qualify all the service advisor time, the, the prep, the research and the the going into it as well? Derick Van Ness: As long as you're looking to improve. So if you just went from merchant processor A to merchant processor B with no changes or improvement, that's not gonna qualify. Okay. But if you're saying, Hey, we have a standalone point of sale now, we want to, we want technology that's gonna integrate that because it streamlines invoicing. We're able to do follow-ups, we're able to collect more easily, we're able to API everything together so that it works better. That would qualify, right? Because you're improving a process. So if you, same thing with equipment. If you buy the same equipment, just 'cause it wore out, that's not an improvement. It's not an upgrade. It doesn't do new things or improve. You're just maintaining. That doesn't qualify. But Jimmy Lea: okay. Derick Van Ness: To your point on the, on the front desk, I know there's so much software out there right now and AI is getting integrated into everything, right? And so as you're doing those things, there's a process of experimentation and I think we've all had, uh. AI not work very well for us. Um, so all that time that's being spent to figure it out, how do we use this effectively? Is this the right fit for our shop? Is it really helping us or is it just a distraction? All of that stuff, those are hours that count toward research and development because you are trying to improve your process and even if something doesn't work, you still get credit for the hours. It's not just for the things you get successful. They really wanna help when it doesn't work. Jimmy Lea: Oh, so, so I, as a shop owner, I could be looking into changing to a different point of sale system and decide at the very end, Hey, look, no, no, no. We've got the best process procedure at the moment. This is the best system for us. And all those 20, 30, 40 hours of research, research, research that goes towards the r and d tax. Derick Van Ness: Yes. Yes. I mean, it would look weird if you did 30 of those and none of them worked, but yes, there. There's a lot of things that people try that just don't end up working out. I mean, I've heard the horror stories, right? Somebody buys, yeah, you set a scope or something and they're like, man, this thing is just a piece of garbage. We hate it. And so they just lose, you know? They get rid of it. Right. They go find another solution. Yeah. Yeah. You get credit for all the time and put into that. Jimmy Lea: Oh yeah. And there's such great programs now that, uh, there's a lot that were server based and that was big technology. Here's your CDs, update your information. They would update and update software, old school, but then they got 'em onto, onto their servers in-house so people could remote in and do the updates that way. And now they're totally cloud-based point of sale systems that Sure. Yes, the, the follow up is more streamlined, the collection, the ability to text a client and get payment, text for payment, text for follow up text for reminders, emails for reminders. There's so much more that can be done now with partnering with a great point of sale system that wasn't there before or re required you as a person to go in and do so much more information, Derick Van Ness: right? Jimmy Lea: Or so much more work. But now you found a solution that helps you to streamline that. So it it's not just the technicians in the back office or the back? No, in, in phase. It's the front office as well. Derick Van Ness: For sure. Yeah. Yeah. There's so much software that goes into all of that, right? All of the billing collection organization. Obviously, to your point, AI's going in and saying, Hey, this person typically comes in once a quarter. They've missed their time, even though they got our normal stuff. Hey, let's reach out to them with something about how they've interacted with us before, like adding those kinds of things in there. There's a lot to it that's happening. It's, it's pretty cool. I hear about new stuff. Like every week. Jimmy Lea: Yeah. Oh yeah. No, that's very cool. And I'm sure you've got stories galore of shops that came in and talked to you and, and they were able to turn around and with a few meetings, they were able to get a check for 20 or $30,000. Now do they Derick Van Ness: get Jimmy Lea: a check or is it a tax credit? Derick Van Ness: So it's a tax credit when you, when you file it for stuff that you've already, um, when you amend. Right. Already done for 22. Yeah, so when you do it retroactively into the past for 22, 23, 24, you will get a check back from the IRS. If you do it proactively, like if we do it, a lot of people are, you know, extending their taxes. They won't be filed by next week. So if you do it this year for 2025, but actually happens is it's just like depreciation or something else. You just don't pay the taxes. The difference is this is dollar for dollar. So if you get a $20,000 tax credit, you will get. $20,000 in taxes that you do not pay. It's not like a $20,000 write off, which might may save you, you know, five or $6,000. So it is dollar for dollar. Jimmy Lea: Holy cow. That is awesome. Well, yeah, shops definitely needs to take advantage of. Derick Van Ness: Yeah, a hundred percent. I mean, to me, this is. You know, I, I, as I was thinking through what I wanna do, one of the things that I see a lot, Jimmy, and this is maybe a zoom out one step, is there's so many shop owners that work super, super hard and they understand how to make money, but they don't understand how to keep it or what to do with it once they do. So they're, they're creating income, but they're not building wealth. A big part of what my company Big Life Financial likes to do is how do we create money for you? How do we find taxes? You would've sent to Uncle Sam, put them back into your pocket, but instead of you going and buying a little nicer wheels on your car or a swimming pool or something, let's put that money to work somewhere safely so that you can grow it. Because like the typical shop owner, you know, we all know guys, a lot of guys who are gonna retire before the pandemic happened, right? Yeah, they still haven't retired. Right, Jimmy Lea: right. Derick Van Ness: And, and there's a lot of that going on in the industry right now, and it's because a lot of these folks, and this is not an indictment, this is across the board for business sellers, um, they, they don't have a plan to translate business income into personal wealth. You need personal wealth to be able to sell the business and walk away. I know you guys help them make the business worth more, help them sell it, do all of that, which is awesome. It's just depending on that one Hail Mary pass at the end of your career is a little bit scary. I would prefer that people do things like these tax credits. Hey, we got 20,000 bucks a year. Let's put that to work and let's build a nest egg. You know, that isn't, stop drinking your coffee. That isn't, you can't ever buy anything new or have any fun. This is found money that you already gave to the government or would be giving to them. There's a ton of other tax stuff out there too. On top of this, I mean, we're typically able to save a lot of people, 30, 50, a hundred thousand dollars depending on what they're paying in taxes. This is just one really easy, in an hour or two a year. You could turn that into 10, 20, $30,000. You don't pay in taxes, so bang for your buck. It's really hard to beat. It applies to most shops, so that's why I wanted to bring it to the table is it's if you're gonna just do one thing and get it right, this is a really easy one for shop owners. Keep more money and then ideally take that money and turn it into wealth, you know, long term or, or sock it away for a nest egg. Because having every single thing you own inside of your business is scary. I think. I think of it like a, you know, before NIL college athletes, right? These guys run the laps. They did the work, they did the long hours, just like shop owners. And if they blew their knee out the senior year, they never got the big contract. And so many shop homes, work hard, do all the stuff. Maybe they just don't get it together, or something happens with their health or a divorce or a partner or something else and they don't get the big payoff and their whole life's work is lost in that moment. And listen, we wanna do everything we can to avoid that, but I believe it's really powerful to be able to do things like this set money aside. So you have a parachute if you need to, you know, if your, your plane starts burning, you gotta get out. You've got a safe way to get into retirement. Take care of your family, do the things you need to do. So this is like one component of a much larger picture, which is why we like working with you guys 'cause you guys help people to be so much more successful. Um, so they have the problems we solve. They, they're, you're getting crushed on taxes 'cause you're making a lot of money. You're, you've got a bunch of money. You don't know what to do with it, how to grow it, how to protect it, all that kind of stuff. Because you worked with the institute and you guys have helped them to create the much better problems of, I've got a lot of money. How do I protect it? How do I grow it? How do I turn this into personal wealth? Jimmy Lea: Yeah. You know, it reminds me there's a, a shop, two, two gentlemen that, that own the shop and they got with the institute, Wayne was their coach. They're working and working and working with Wayne, and they finally come back to him. They're like, Hey man, um, we've got so much money now. We need a personal investor. We need an advisor that can help us invest this money. So not only have they grown the business and have that as an avenue of income, they're, what you're talking about is creating a second, a third and a fourth avenue of creating wealth. So your $1 is doing more than just one thing, Derick Van Ness: a hundred percent. I talked to some guys last week, they had $3 million sitting in a bank account. First off, that's not covered by the FDIC. So that's a little dangerous. But the second thing is they just got all this money doing nothing. If they just stuck it in a high yield savings account, it would earn 'em a hundred thousand bucks a year. Um, but they just didn't know. And they were like, Hey, we, we've, we know how to make the money. We just don't know what to do with it. And they paid taxes all year. They wrote a big check at the end of the year, and then March 15th, their CPA came and said, Hey, uh, sorry we didn't get it quite right. You gotta write another $240,000 check this year. And they don't even know why, because they, they haven't been paying attention. Listen, I know taxes are the most boring thing ever, but if people get this right in an hour a month, you can save yourself a ton, a ton of money. So it's, it's a necessary evil. Just like we don't necessarily wanna get up every day and work out and eat all the right food and do all that kind of stuff, right? But if you don't, if you don't take care of, your health becomes a problem. Taxes are a similar thing. They're just way easier than your health. Um, you gotta pay attention to 'em, you know, they're part of your business and if you get 'em right, they'll add an extra 10, 20% to your bottom line every year without extra employees. No extra marketing, no extra customers. It's just more money you get to keep RD is just a very easy part of that whole bigger process. Jimmy Lea: Oh, that's awesome. That's awesome. So let, let's, uh, let's paint a picture of what it, what kind of a shop. Needs to come to you. Um, it sounds like a shop that has 500,000 in annual sales or more. Derick Van Ness: Yep. Jimmy Lea: That's a good starting point. Derick Van Ness: Yep. Jimmy Lea: What else was, what else are those qualifiers? Derick Van Ness: Yeah, I would say you probably wanna have paid at least $15,000 in, in taxes. Right? You can only get back from the tax credit that which you've paid in Uhhuh. And so if your shop's new and maybe you've got a bunch of revenue but not a lot of profit 'cause you're reinvesting in the shop. If you haven't been paying taxes, you may need to wait until you're paying taxes to do this. But if you're paying at least $15,000 in taxes, I would say yeah, you're, you're there. And then anybody, if you're doing anything new, right? If you've been doing the same thing, uh, with the same equipment, with the same software for the last three or four years, which is not that many shop owners, I feel like just to compete, you have to do more than that. But if you just haven't made any changes for whatever reason. Then you might not be a great candidate, but I, I would say it's still worth a conversation. You know, we usually do like a 15 minute assessment call just to make sure we don't wanna waste your time if it seems like, yeah, you're doing things that qualify, we want you to know that if, if you don't, it's like, Hey, Well's, keep an eye on this. And when you do do those things, we'll claim the credits. But if not, you know, it only takes 15 minutes to have a pretty good idea. Jimmy Lea: Yeah. What about conferences, trade shows, um, evenings of pizza and training? Do these types of events, do they count towards that r and d? Derick Van Ness: It depends. So if you're just doing like routine training, like, Hey, here's how we handle this, here's how we handle that. Not necessarily if you're bringing something new in though, like, Hey, we want to have a better way to do this, then yes, if you're going to conferences. For exactly what we talked about. Like, hey, we need to figure out a better way to solve this problem in our shop, right? We need, we need better technology, better communication from the front end of the back end. We need better diagnostics or better ways to figure out, um, how to, how to fix particular problems on particular vehicles or whatever. And you go, and part of that, the hours that you're spending there, that you're paying your guys to be there or that you're there yourself, those would qualify. The cost of the conference itself? Not necessarily. Um, but the But the man hours, yes. Jimmy Lea: Oh, so, okay. So even in that scenario, it's not the scope, it's not paying for the tickets for the conference or trade show. It's the amount of hours that your man or woman was in coaching and training, teaching, learning, because maybe they're, they're trying to discover how to better service, uh, fuel injection for. Ford vehicles or fuel injection for Chevy vehicles, if that's their focus, that's what they're going there to learn. Now they've got in three hours, four hours, eight hours of training on fuel injection for euros. That helps them in that RD tax, correct. Derick Van Ness: Yeah. Yeah. If they're learning how to make the outcomes you get in the shop better, then it's probably gonna qualify. If you're just doing routine training, like how do you change the transmission? I know I'm being really generic here, right? How do you change a transmission? That would be considered like routine training. You're not adding a new business component or improving a business component, so it wouldn't, but if you're looking at things that could change the way you do things in the shop, then yes. Jimmy Lea: Okay, so if we went, and I'm gonna use your basic scenario here, changing out a transmission. If we go to a conference trade show and we're taking the basic level class of how to remove a tire and change a tire on a wheel, and okay, this is how you remove a transmission. And we discovered that they've got a new lift because our old way of holding it by hand. And unscrewing it so Bubba can take the transmission and put it on the floor and then put it back up when it's done. So now we've got a lift, A table lift that is able to hold the transmission. Does is that in the arena of r and d, that helps our shop be better and proves our process, improves our procedures, helps Bubba not go to the hospital so much for back pain. Derick Van Ness: Yes, a hundred percent. Because at that point you're saying, Hey, we just realized we have a problem. We're way too slow at changing wheels or transmissions, right? And we're looking at, okay, these, there are lifts out there that make this a lot more ergonomic, a lot faster, a lot more efficient, less injuries, all of that kind of stuff. Then you go, oh wow, we have a problem. We need to find a solution. You may not just buy the lift they were talking about in that class. You might look at the other lifts that are out there to see what fits into space and what the types of vehicles you work with. Um, and then maybe you do go out and purchase that, and then you start figuring out things like what height, how do we do this? Um, you know, what kinds of cars is this optimal for? All of that kind of stuff. So yes, that, that wood camp, Jimmy Lea: oh man, it's fascinating. I'm it just opening up a whole new world of awesome possibilities here. I'm even thinking like alignment equipment. A lot of shops might have equipment that's 30 and 40 years old, but the new vehicles, they're all wheel drive. So being able to only align the front wheels or just align the back wheels, you need to be able to get new equipment to do all of that. Plus. Hunter's got equipment, you just are able to drive across it and it will tell you in about 30 seconds where you are in alignment or out of alignment, what needs attention. Then you pull it onto the big alignment machine. I mean, this is like $140,000 machine. Derick Van Ness: Yeah, Jimmy Lea: that is definitely an improvement over the archaic dinosaur you used to have. Derick Van Ness: Yeah. All of that kinda stuff. Right? Because it's so much faster. Hopefully more accurate, so you're able to move more cars through the shop. And so you're improving your process. Yeah, so all of those kinds of things definitely create credits for you and, and that's, that's the whole thing is shop owners just don't realize that you're already doing all this stuff, right? You have to, to stay in business. If you own a shop, I'm sure you're obsessed with how do we get better? How do we get more efficient? How do we make our numbers better? A lot of the stuff you're doing. The, the, the stuff that doesn't count is the stuff that's not based in science, right? If you're just running spreadsheets and analyzing numbers and some of that, that may not count. But every time those numbers turn into, okay, we realize a problem spot, we need to fix that, here's what we need to do. Um, if it involves technology at all, you're probably gonna qualify. So, and you'll notice, I keep saying probably, I don't wanna make promises about things, and you make a a guess. But the truth is, in today's world. Technology's changing so fast for shop owners that you are probably doing this stuff and you don't even think about it because it's just part of what you do to try and compete and get better. Otherwise, you get left behind. So you, that's why so many shops qualify. Jimmy Lea: Yeah. Yeah. You have to. You have to. You have to keep reinvesting in your company, into your business. Lucas Underwood. It was just on Facebook or one of the social medias talking about how as shop owners, we work so hard in our business just to get a 4% net return. Derick Van Ness: Yeah. Jimmy Lea: And that's so low. We, we, we need more. We, we should be operating at a higher level. That's where the institute can help you as a shop owner to get you to that 20, 22, 20 4% net profit. I I, I'm thinking of a few success stories that happened within the last year or two. With the institute, they came in and said, Hey man, we just can't break 7% net profit. What can you do? How can you help us? Well, where do you need help? Where do we start? Well, if you're gonna talk to us about car count or average repair order or charging soft supplies, we're done. And, and they were right. That's not what they needed. We needed shop efficiencies. So we went in and met them there with shop efficiencies, help them to improve their process procedures internally. And what's the net result? Car count went up. Average repair order went up. Their efficiencies went up. They had more availability for production and, uh, record, record breaking months. Derek, they went from 7% net profit to 23% net profit in November and 24% net profit in December. Derick Van Ness: Amazing people think that stuff adds up. It actually multiplies up. Because if you have, it's like Jimmy Lea: compounding Derick Van Ness: per car, right? It it, people, it's really easy to underestimate the value of that. Um, so that's awesome work. That's what, that's what people need and that's why we love you guys. 'cause you guys help them do that. And then they have the problems that we do, we solve, which is, holy crap, why am I gonna owe $150,000 in taxes? And we're like, well let's cut that number way down. Because now you're making money. And truthfully, most people, the first year they work with with you guys, like if they make a bunch more money, they don't even realize and they're probably not saving for taxes properly, and they get that punch in the nose of like, Hey, you know, especially if you're in a high tax state, you can, I mean, if you're killing it, you can be paying nearly 50 cents on the dollar for taxes. Um, so you guys help him make it? We help him keep it. And, and that's what I love because a shop owner making 50,000 bucks a year, like, he just, he doesn't need what we do. Um, so that, that's why it's a good one, two punch. Jimmy Lea: Oh, I love it. I love it. Derek, this is taken to the next level. So what, what's, and then, uh, remind us what I know July 4th is the deadline. Yeah. There's tax code that goes in with it. What, what is the July 4th that says. If you're gonna do this, you gotta do it by July 4th. Derick Van Ness: Yeah. So if you're going to amend into the past, you know, it's not that you can't still amend your 22, 23 or 20 fours, you just have to do it in that way. I was saying was broken. So they're giving us until the 4th of July to go and amend and they call it immediate expensing, which means you get all the credits at once. Um, so there we have until that time to, it's just like in April 15th, right. If you've got the postmark. July 4th, which actually is the sixth because the fourth is a Saturday this year. Um, then I know crazy stuff. But anyway, uh, if you have that, then you can, you can have the amendment where you get your full check back versus getting it over time. Um, and, and we just think that's really important. I mean, truthfully, for the people on the, you know, on the cast right now. Knowing this is available, even if you didn't go back and get it, but just doing it proactively. You've got between now and whenever you retire to get this money every single year. You know? And if, if you're, uh, I know a lot of shop owners are 50 plus, but God, if you're in your forties, you can do this for the next 25, 30 years. And it's, if you just took this money, like I'll, I'll teach you guys a quick little math trick. If you save $20,000 a year and you invest that at 7% in 30 years, 20,000 a year turns into $2 million. Just, just over $2 million 30,000 turns into about 3,040,000, turns into about 4 million. So if we look at that and go, okay, when I get to retirement age, if I'm 40, when I get to 70, this 20,000 a year or 30,000 a year is gonna be worth two or $3 million without me having to. Cut back or, or have a conversation with my spouse about why we're gonna spend less or not enjoy life as much. You know, 'cause I'm all about enjoying life. Um, it's a huge difference and for most shop owners, it's more than they would save on their own. Like you're doubling or tripling what you were saving for retirement without having to do really anything. Right. Just save it in taxes and then put the money to work. So it's a, it's a huge win. And this is something that multiplies, just like you were talking about with, um, with each of the different metrics. When you put them together, they multiply. Same thing here. When you don't pay it in taxes, then you put it to work and you give it time, that multiplies over time. It, it can really move the needle. So. Jimmy Lea: I love it. I love it. And you know, in, in your math equation. Derick Van Ness: Yeah. Jimmy Lea: Talking about 30 years down the road, if a guy's 40 right now, so that's 70. Let's back that up a little bit. What if a guy's 20, he's opening the shop, he's starting to hit 500,000 a year. He's starting to hit a million a year. If he invested, was it 20,000 a year? Derick Van Ness: Yes. Jimmy Lea: At 7% to get 2 million. Derick Van Ness: Yep. Jimmy Lea: Now imagine that he's now 50, has a couple million in the bank. Derick Van Ness: Yep. Jimmy Lea: And can retire on a couple million, or maybe he started at 20,000 a year, then he went to 30,000, then he went to 40,000. Now he's got somewhere between three and $4 million at 50 years old. And can retire and live very comfortably doing whatever else they might want to do. Or you, yeah. Derick Van Ness: Yeah. Jimmy Lea: Here's the math you probably aren't gonna do in your head, and if you do, I'm totally impressed. What if that same person at at 20 investing 20,000 a month, 7%, 50 at 50 years old, so that's 30 years. What if they say, Hey, you know what? I'm 50 years old, but I've still got another good 10 years in me. I'm gonna start the process, getting things ready to sell, but I'm not gonna sell yet. I've got 10 years to work this out. If he goes another 10 years, 40 years total at 7% doing 20,000 a year. Are you doing a calculator? You're not doing it in your head, are you? Yep. I'm, Derick Van Ness: I'm, I'm doing a calculator right now for you. Let me just do it. I do this stuff all, all the time. Uh, okay. So. 40 years instead of 30 years Jimmy Lea: Yeah. Derick Van Ness: Would turn into, um, instead of turning into 2 million in 40 years, so the extra 10 years, you go from 2 million to, to 4.2 million. And if you went 50 years, let's say that guy really loves it and he wants to do it, uh, all the way to retirement, then you're looking at $8.7 million. They, Jimmy Lea: and Derick Van Ness: that's just doing Jimmy Lea: 20. Derick Van Ness: Yes. Yep. An easy number. Uh, generally is once you have a sum, so let's say at 50, this guy had $2 million, let's say he just retired and just said, I don't wanna do anything more, I'm just gonna let that money grow at 7%. Your money will double. About every 10 years there's something called the rule of 72. Um, yeah. So, you know, 10 years from that, he would go from two to four, another 10 years, from four to eight. Um, so it's, it's pretty significant. Once you get the, once you get the snowball growing, it's, it's really weird. It's like a hockey stick, right? It seems like in the beginning it's really, really slow and then it gets going and there's a point, like I usually think it's like a race to a million dollars. 'cause once you get to a million dollars, if you're earning six, seven, 8%. Then even if you don't put any more money in, it's earning 60, 70, 80,000 a year to compound. Right? And it gets faster and faster. Faster. It feels like at that point, like let's say you've been putting in 30 or $40,000 a year trying to push this thing uphill, but once you get to that million, it's doing a lot more pulling and you're doing a lot less pushing. But there's no way to get to the million unless you start at the zero. So it's, it's definitely a, the best time to plant a tree was 50 years ago, but the second best time is right now, if you don't have a tree, you gotta get the seeds in the ground and get them growing, even if it's not. Life changing and, and people look at the the mountain to climb toward retirement. And you have to remember every mountain is made of grains of sand. You have to do them as you go. If you just try and climb the mountain in one leap, it's not gonna happen, right? Unless you're Superman, like Jimmy Lee here. But the rest of us, the common man, we have to do it one grain at a time. And a lot of that is efficiencies. You make more in your shop, you do all the things right? You keep more of it, you put it to work safely, you grow it over time and it compounds. So it is, uh, it is just a different skillset. It's, it's similar in the sense that you just can't build a whole business overnight. You can't build wealth overnight. Um, but it is attainable if you show up consistently and have systems in place. We have. Just like in your business, you have systems for how do we market, how do we do sales? How do we fulfill, how do we bill, how do we collect? It's the same thing. It's how do you, um, of course you make the money first. How do we save on taxes? How do we put the money to work? How do we create systems and automations that make all that as easy as possible? How do we build the team just like in your business? So we've got experts that can help us in the key areas. Um, and all of a sudden you have the same machine running in your personal life as you do in your business life. And the truth is, the, the personal wealth side doesn't take near the amount of time. Like I said, I, I think in, in an hour a week, you can stay right on top of that stuff and absolutely crush it, whereas your business can have the other 39. Jimmy Lea: Yeah. Yeah. It's so true. And, and I think a lot of us as shop owners, you're, you're gonna identify with Atlas and just feel like the weight of the world is on your shoulders. Yeah. And in the beginning, yeah, you're right. You are Atlas and it is the weight of the world on your shoulders. And, and at some point, you're gonna feel like CFUs pushing that rock up the hill, pushing that rock up the hill, pushing that rock up the hill. You wake up the next morning, it's back at the bottom of the hill again. Now you gotta keep pushing it up the hill. But I, I love what you're saying about that, Derek, at some point, CFUs is now chasing the rock up the hill because there's the, the, the machine, the unit, the interests, the compounding interest is reinvesting more than what you are putting into it. So that rock is rolling up the hill and you're chasing it, Derick Van Ness: but more or less, yeah, you're just helping it to push faster as opposed to move it all. Jimmy Lea: Yeah. Oh, that's phenomenal. And you know, for, for the people that come and work with the institute, for those shop owners, men and women that come and work with the institute, we're gonna help you to build your kingdom. Whether that is optimizing a single location, like the example I was sharing just a minute ago. They are optimizing a single location to the multimillions and the family is heavily involved in this shop. The success or failure of the family depends on the success or failure of the shop. Of course, we want it to succeed, so that's, that's where they are. We'll help build the kingdom. Is it one single location or is it multiple shops? You wanna have multiple shops and you want to grow that because you, you, if you go to multiple shops, you've gotta have process procedures in place and managers to reinforce it. So at some point, and maybe when you turn 50. You've got these process procedures in place where you can go around and rubber stamp it and you add it in the location every other year. You add a location every other month. These process procedures go into place and your job of working is maybe coming into the office once a week to do payroll, but then maybe you hire somebody else to do payroll. Derick Van Ness: Sure, sure. Once you can get to the point where you have an operator, right. Someone who really has ownership. Yeah. And I don't mean like like stock, but like really has taken ownership and has paid to run that for you. Yeah. It becomes an investment for you. It's no longer your identity. And this is a real shift for business owners. I'm sure you guys go through all of that, but it is a real shift from I operate this business. It is who I am, how the business is, is how I am. Um, versus this is just something I own in a bigger portfolio of companies. And it could be a bunch of auto shops, it could be shops and parts and towing and all the other related things. It could be unrelated, right? But ultimately, um, it's a real different way of looking at it as a, an asset that you own versus a business that you run that takes all your time. One is quite frankly, a, you know, a high paying job and the other is an investment. Jimmy Lea: Yep. So let's invest in your future more than a 4% net profit. Derick Van Ness: Yep. Jimmy Lea: Let's get bigger than that. And then let's compound that interest. Definitely reach out to Derek VanNess with Big Life Financial. Derek, how do people reach you? Derick Van Ness: Well, our, our website of course, is big life financial.com, but we do have a special link for, uh, institute people who want to get the r and d credit estimate. We'll do it for free. It'll probably take you in total, probably an hour and a half of time, 15 minutes for a first phone call, a short if, if you're a good qualifier. Uh, maybe a 30 to 40 minute call. And then at that point we just gather all the documents and we give you your estimate for free. Um, and if you wanna move forward, we'll, we'll take it from there. So if you go to, uh, big life financial.com/auto shop as one word dash credits. That will take you to, uh, a place where you can get a free estimate and, uh, we'll know that you came from, from Jimmy and the institute here. Jimmy Lea: Oh, that's awesome, Derek. Uh, thank you. Thank you. I, I appreciate you doing this. And, and it's not just for the institute and not just for the institute clients. This is for everybody. If you're in the automotive industry and you're listening to this, you're watching this, or maybe somebody has told you you need to watch this, this is for you, follow that. Link, follow it to Derek's, uh, big life financial.com/automotive-auto Derick Van Ness: Auto shop, dash Jimmy Lea: auto shop dash credits. Credits, plural, Derick Van Ness: yes, mm-hmm. Comes worse. You can go to Big Life Financial and you can look for credits and you'll find your way through. We just won't know that you came from the Institute Jimmy Lea: or Derick Van Ness: from Jimmy. Jimmy Lea: Well, and, and, and that, and that's okay. It doesn't matter. We are here to help build the industry. You know, the, the motto with the institute is, better business, better life, better industry. The better we can help you in your shop and in your business to be the best business that you can possibly be, the net result is you will have a better life. You'll have more opportunities, you'll have more freedom to be able to. Be with the family, to have dinner at home every night of the week to go to the kids' plays, to go to their races, their cheerleading expeditions, whatever it might be, you'll have a better life. And the net result of that, and working with the institute, we think is going to be a better industry. So we're gonna help build this industry to be the best it could possibly be. I love it. And guys like you, Derek, you are really helping us to move that needle. Derick Van Ness: Yeah, I, I believe in a big life you're talking about a better life. I would say those are the same things. 'cause that's the real game. It's not necessarily just about more money. Only if that money serves you having a better life. Right. If you make more money and your life isn't as good, I would suggest maybe you trade back. 'cause the better life is the goal. Jimmy Lea: Yeah. Yeah. The better life is the goal. We all want to have a better life. We all wanna have a better existence here on earth. What does money provide more options. Derick Van Ness: Yep. More options, more choices. I totally agree. Yep. Jimmy Lea: Yep. Well, that's awesome, Derek. Thank you very much. Brother. Any final words of wisdom to depart upon our automotive shop members? Derick Van Ness: Yeah. You know, if you're, if you're on the, the fence about these credits, I think it's at least worth a phone call. It, it has transformed a lot of people. It really opens people's eyes. I'll, I'll just let you know, if you do an RD credit estimate, a lot of times we already have your. Your data. So we'll do a free tax review as well and look at everything. Um, but the, but the big thing is whether it's with us or with someone else, taxes are worth figuring out. They don't have to take a ton of time. You just have to find the right people who will, who understand this stuff that can help you. For most shop owners, it's worth at least five figures a year for the bigger shop owner, six figures a year. This is, this is real money. That goes straight to the bottom line. And you know, Jimmy, you're talking about shops that have a 4%, 7%, 10%. Like if you can just take and cut taxes out of a ton of that, you can probably almost double that. Um, and the shops that are doing, you know, 20, 25, 30%, obviously it's massive. So, uh, this, this is an important thing to figure out. I know it's not exciting. I know nobody loves the IRS. You only have to figure it out once. It doesn't change that much year to year. So once you know it, you get the benefit for the rest of your life. So whether, like I said, whether it's talking to us or your existing people or someone else, this is a game worth figuring out because it will pay you every single year. Jimmy Lea: So now I have a final question here, Derek. And, um, I'm, I'm scratching my head here on this one. So. CPAs are, are you guys, CPAs, are you replacing the CPAs or are you an addition to a CPA? Derick Van Ness: Great question. So we, when we do the RD credits, we let you work with your CPA on that. We do, I do own a part of a, a, a tax firm, right? Where we file taxes, we do tax strategy and all of that sort of stuff. We're not trying to take you away. If you've got a great CPA. Great tax preparer. We're not trying to take you away, but if we find out or you find out that, Hey, I really do need some help with this. Maybe the person you have isn't the best fit. Maybe they're not super proactive, maybe you've outgrown them, then that is something that we can do. We have a firm that does that. Um, so that wasn't my point to promote today, but Jimmy Lea: yeah, Derick Van Ness: we do have that. Yeah. Jimmy Lea: So, so, uh, you could be the CPA for an automotive repair shop. But certainly you would work with their CPA 'cause. I, I think a lot of CPAs don't understand the r and d tax. It's, right. They're more, I, I've seen a lot. Not the CPAs that we work with. Kaizen is, is phenomenal. We work with them really well. They know the automotive industry and they do a great job. There are other CPAs that are really glorified bookkeepers and r and d tax is so well outside of their realm of comfort. Derick Van Ness: Yep. Jimmy Lea: They don't, they don't know anything about it. So automatically, oh, it's a red flag. Don't do it. You're gonna get audited. No, you're not. You gotta have business built on. Derick Van Ness: Yeah. I mean, I don't, I don't want to ever tell you you won't get audited 'cause you can get audited for anything at any time. But we have not seen it cause audits. Um, and I, you know, I know Eric over at Kaizen, actually I think I was the one who even introduced him to the RD credits. When they looked into it, they were like, holy cow. This is legit. So I think they do it for people. So if you work with them, you can definitely ask them, um, about it. We've done it for a lot of people who work with Parus, uh, which is another automotive group, right? But at the end of the day, you just need someone who's proactive looking at these things on your behalf, if you're being the tax pro in the relationship. It's probably time to upgrade, right. Just being honest with you because you're not even a tax pro. So, uh, you know, but I think a lot of shop owners are underserved. Like you said, they've got someone who basically is what we call a tax recorder. Glorified bookkeeper may not even be telling you what your books are saying. They're just keeping them. So you have a way to file taxes. But ultimately it'd be great if you had someone who was meeting with you at least a couple times a year proactively telling you. What's going on, how much you should be saving, what to look for, um, how to create opportunities and, uh, makes a big difference over time. Especially if you make a lot of money. Jimmy Lea: Yeah. Oh yeah. For sure. For sure. It sure does. Well, that's awesome. Well, thank you Derek. Really appreciate it. Appreciate you being here and sharing with us the r and d tax. Uh, I think shops everywhere need to take advantage of it. It's a 15 minute phone call. Give Derek a call. See if he can do something for you. If he can, great. And if he can't, that's okay too. At least you know you're on the right path. Go in the right direction, doing the right things. Derick Van Ness: Yeah, you Jimmy Lea: gotta explore. That's phenomenal. Yeah. Well, my name is Jimmy Lee. I'm with the Institute for Automotive Business Excellence and the information you've heard today, if you've found it interesting, if you found it enlightening, if you found it compelling, we do a lot more than just. Phenomenal webinars and podcasts. We work with advisors, managers, owners. We work with you to help you optimize your business, to build a better business, a better life, and a better industry. So if you find this information interesting, get out your smartphone because in about 30 seconds you're gonna see a QR code come on the screen. Scan that QR code. One of my guys is gonna reach out to you. And have a conversation. And I was just reminded today, Don was like, oh, hey. Remember that one guy? We were talking to him? Yeah. And he was doing like 80, $90,000 a month in in revenue. We gave him some advice. He told him one thing, Derek, do this one thing, and it increased his business by $30,000 the very next month. And the guy's like, oh my gosh, that one thing. It made all the difference. Phenomenal. Absolutely. Everybody needs to do it. Scan the QR code, meet with the Institute for Automotive Business Excellence. Let us help you to make your next $30,000 from doing just the one thing. Derick Van Ness: Amazing. Jimmy Lea: Did it cost him anything except for our phone conversation with Don and, uh, you know, yes. Did he join the institute? Yes. Yes he did. And he has grown exponentially since then. So let's do it and let's do it together. Derick Van Ness: Let's do it together. Jimmy Lea: Thank you so much you guys. I'll talk to you again soon. My name is Jimmy Lee with the Institute for Automotive Business Excellence, and you're listening to the Leading Edge podcast. My guest today, Derek Vanes from Big Life Financial. Derek, thank you very much, brother. I appreciate it. Derick Van Ness: You got it. Loved it.