Can My Business Survive This Crazy Economy?

Summary

Summary of "Can My Business Survive This Crazy Economy?" – The EntreLeadership Podcast

In the October 28, 2024 episode of The EntreLeadership Podcast hosted by Dave Ramsey, listeners are presented with insightful discussions addressing the challenges small businesses face in a volatile economy. Through real-time calls from business leaders, Dave Ramsey shares his extensive experience to provide actionable advice. This episode features three main callers: Penny from Austin, Texas; Colby from Louisiana; and Mike from Denver, alongside a celebratory call from Whitney in Dallas. Below is a detailed summary capturing the key points, discussions, and conclusions from each segment.

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1. Navigating Economic Downturns: Penny’s Branding Agency in Austin

Caller: Penny
Timestamp: [01:10] – [08:01]

Penny, co-owner of a small branding agency specializing in luxury hotels and multifamily residences, seeks guidance as her business forecasts a significant revenue drop from $2 million last year to an anticipated $1.75 million this year—a 10% decline. The primary issue stems from increased employee costs without corresponding budget increases from clients, leading to diminished profit margins.

Key Points:

• Economic Impact: Penny explains that multifamily sectors are experiencing reduced leasing due to increased rents, causing clients to cut marketing budgets. This downturn is more pronounced in the apartment sector compared to luxury hotels.

• Temporary vs. Permanent Shift: Dave Ramsey advises assessing whether the economic downturn is temporary or a permanent shift. Based on Penny's insights, he leans towards it being a temporary setback, projecting a recovery within 12 months.

• Strategic Flexibility: Dave emphasizes the importance of maintaining a positive attitude and being ready to seize opportunities when the market rebounds. He suggests that clients with improved cash flow post-recovery can reinvest in branding services, providing Penny’s agency with renewed business prospects.

Notable Quote:

• Dave Ramsey: “You need to manage your attitude in the process. ... Black clouds are followed by sunshine.”
  [07:53]

Conclusion: Penny is encouraged to persevere through the economic challenges, maintaining her operations while preparing to capitalize on the market's recovery. Dave underscores the importance of resilience and strategic patience during downturns.

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2. Succession Planning: Colby’s Dilemma in Selling a Family Electrical Contracting Business

Caller: Colby
Timestamp: [14:39] – [29:00]

Colby, the interim manager of his late father’s specialty electrical contracting business in Louisiana, seeks advice on whether to sell the business to a key employee or pursue an external buyer. The business, generating approximately $1.4 million in revenue last year, is divided between home standby generators and telecom industry projects.

Key Points:

• Valuation Considerations: Dave advises separating the business valuation from the real estate assets due to their distressed nature (located in a flood zone). He suggests valuing the business at $600,000, excluding the real estate, and recommends selling the property separately.

• Potential Buyers: Dave explores selling to horizontal or vertical buyers, such as competitors, suppliers, or significant customers. He emphasizes leveraging existing relationships within the industry to identify viable buyers.

• Selling to Employees vs. External Buyers: Colby contemplates selling to a key employee who has been with the company for over 20 years but lacks the necessary leadership skills to manage the business independently. Dave expresses concerns about the employee’s capability to secure financing and sustain the business growth, advising Colby to prioritize a clean break for his mother over potential long-term gains from internal succession.

Notable Quotes:

• Colby: “This is very emotional for me, as you can imagine.”
  [17:12]

• Dave Ramsey: “Better a wary warrior than a quivering critic. This world needs more high-quality leaders, so take courage and lead.”
  [26:00]

Conclusion: Dave Ramsey advises Colby to lean towards selling the business externally to ensure a clean and secure transition for his mother. He underscores the importance of assessing the key employee’s ability to manage and grow the business before considering internal succession.

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3. Celebrating Success: Whitney’s Flourishing Electrical Contracting Business in Dallas

Caller: Whitney
Timestamp: [32:50] – [36:23]

Whitney proudly shares her achievements as the president of an electrical contracting business in the Dallas-Fort Worth area. After acquiring the business a year ago, her team of 17 members (now 16) has grown impressively, with projected revenues of $1.2 million this year.

Key Points:

• Strategic Leadership: Whitney attributes her success to aligning her business values with those imparted by Dave Ramsey’s EntreLeadership principles. She emphasizes the importance of a strong company culture, focusing on team well-being, and exceptional customer service.

• Team Excellence: Whitney highlights the quality of her team, noting their responsiveness, ease of training, and dedication to serving customers effectively. This strong team dynamic has been pivotal in driving the business’s growth.

• Overcoming Challenges: Whitney reflects on the fear and challenges of stepping away from a family business and taking over a new venture. Her positive outlook and commitment to maintaining high standards have resulted in substantial business growth within a short period.

Notable Quote:

• Whitney: “We came to the Master Series event a decade ago with my brother-in-law and we got our why straight and the way we want to treat people straight.”
  [34:03]

Conclusion: Whitney's story serves as an inspiring example of how clear vision, strong leadership, and a commitment to team and customer excellence can drive significant business success, even in challenging economic times.

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4. Growth Challenges: Mike’s Struggle with Delegating Business Development in Denver

Caller: Mike
Timestamp: [39:14] – [45:46]

Mike, an engineer and consultant managing a service line within a large company, discusses his challenges with delegating business development responsibilities. His team is experiencing growth, projecting revenues of $3 to $3.5 million, but Mike finds himself as the sole individual responsible for bringing in new business.

Key Points:

• Delegation Difficulties: Mike admits to struggling with delegating business development tasks to his team, despite their technical expertise. He notes that finding qualified sales personnel with industry-specific knowledge has been challenging.

• Internal Development: Dave suggests focusing on mentoring existing team members who show potential. By developing their people skills and understanding of the business, Mike can cultivate a capable successor to handle business development.

• Sales as Service: Dave emphasizes that effective sales in technical fields like oil and gas require a service-oriented approach. He advises Mike to treat sales as an extension of his expertise, fostering trust and building strong client relationships.

Notable Quotes:

• Dave Ramsey: “This is not selling. It's serving. And you're a good server.”
  [42:54]

• Dave Ramsey: “Serve the person that you're moving up and trust them more than you think you can.”
  [45:13]

Conclusion: Dave Ramsey encourages Mike to invest time in mentoring his team members, transforming them into effective business developers. By viewing sales as a service and fostering trust, Mike can effectively delegate and sustain his team’s growth.

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Final Thoughts

Throughout the episode, Dave Ramsey reinforces the importance of resilience, strategic planning, and effective leadership in navigating economic uncertainties. Whether it's weathering a downturn, handling family business succession, celebrating successful entrepreneurship, or overcoming growth-related challenges, the episode offers valuable insights tailored to small business leaders aiming to thrive in a "crazy economy."

Additional Notable Segment: Before concluding, Whitney shares her success story, highlighting how aligning her business practices with EntreLeadership principles led to remarkable growth. Dave celebrates her achievements, reinforcing the podcast's message of leadership excellence and perseverance.

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Closing Remarks:

Dave Ramsey wraps up the episode by emphasizing the critical role of small businesses in the American economy and encouraging listeners to share their successes and challenges. He invites business leaders to engage with the podcast community, fostering a supportive network for continuous growth and leadership development.

Notable Quote:

• Dave Ramsey: “Small business keeps on doing it. The free enterprise system is one of the best measures of actual liberty, actual freedom in America today.”
  [30:07]

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This episode of The EntreLeadership Podcast serves as a valuable resource for small business owners and leaders seeking actionable strategies to navigate economic challenges, ensuring their businesses not only survive but thrive.

Transcript

[Dave Ramsey]

From the headquarters of Ramsey Solutions, this is the Entrez Leadership podcast, where I take calls from leaders like you about what it takes to win at any stage of business and leadership. I'm Dave Ramsey, your host, with over 30 years of experience leading in the trenches, running and growing a business right alongside you. Just like you. If you've got a question and you want to talk small business, you want to talk leadership, you've got a question. We'll try to help you in this whole process. The phone number here is 844-944-1070, or you can fill out the [e-mail] Ask again, call 844-944-10 70. Leave us a voicemail. We'll get back to you. We'll make you one of the callers here. We'd love to have you. To start this hour off is going to be Penny in Austin, Texas. Hi, Penny. How are you?

[Penny]

Hi, Dave. I'm doing great. It's an honor to speak with you.

[Dave Ramsey]

You too. What's up?

[Penny]

So my question. Well, I'll start with my business. So my husband and I own a small branding agency that specializes in luxury hotels and multifamily. We'll start our 15th year in November. We have 15 employees. Last year we did about 2 million in revenue. We're forecasted to be down about 1.75 this year.

[Dave Ramsey]

Down to 1.75 or down 1.75 to 1.75? So you're talking about a 10% drop. Okay, I feel better.

[Penny]

Yes.

[Dave Ramsey]

I was about to lay everybody off. Okay. All right.

[Penny]

Exactly. So my question is about just weathering this economy. And right now I have basically no margin because employees now cost more. But my clients budgets haven't increased, so I'm kind of losing my margin. And how long do we kind of settle with weathering this economy before we start to make larger business moves to get the margin back in place?

[Dave Ramsey]

Well, I think what you have to ascertain is that is what you're working with something that snaps back, or is this a permanent shift when you say in quotes, this economy. So you're dealing with multifamily and boutique hotels, correct?

[Penny]

Yes. Not just boutique. Some of them are larger brands.

[Dave Ramsey]

Okay. And you're helping them with their branding.

[Penny]

Yes. So the brand strategy, how to get their ROI up, how to get a higher, you know, room cost, and then multifamily is basically apartments. So developing the strategy behind leasing apartments.

[Dave Ramsey]

And you've been doing this for how long?

[Penny]

15 years.

[Dave Ramsey]

Okay, so which of these two areas are down. Both of them.

[Penny]

Multifamily is definitely down. I would say larger than hotels, multifamily. It's just right now, you know, they've had the increase in rents and people are not leasing like they once did. They're kind of combining households in a way. So we're seeing kind of the apartment developments really go down on their marketing budget.

[Dave Ramsey]

Okay. What percentage of your client base or of your revenue is apartment versus hotel?

[Penny]

There's an ebb and flow to it. Right now I would say it's probably 30%, but it can go up and completely reverse and be opposite on different years.

[Dave Ramsey]

Okay, so if the increase in rents are driving people out of the multifamily is your supposition. Thus their rent base is down. And because they increased rents and now their rent base is down, the revenues are down and so they're cutting their budget. So that is what you said, right?

[Penny]

Correct.

[Dave Ramsey]

Okay, so if the real estate market starts booming again next spring, which is far from that right now, does that correct this?

[Penny]

It does.

[Dave Ramsey]

Why? Because the rents don't come down.

[Penny]

Yeah, but their budgets come up.

[Dave Ramsey]

Why?

[Penny]

And I do think, well, they'll do. What they'll do is they'll do promotional to fill their occupancy and they'll. They'll bring their costs down even though it doesn't look like it, on a month to month basis. They'll do, you know, two months free with a new lease signing and that kind of stuff. So when.

[Dave Ramsey]

Why are they not doing that now?

[Penny]

They are. They are starting to do that now.

[Dave Ramsey]

Okay, so this is a temporary downturn.

[Penny]

I hope so.

[Dave Ramsey]

Okay. All right, well, Henry Cloud, my buddy in his book Necessary Endings, and I have to look at this with business units here, product lines, actual individual products and things like that, is when you lose hope in something. Getting better is when you end it. That's what I'm asking these questions. Okay. And I haven't lost hope in this getting better based on the description you gave to me. I'm not an expert. You are. But the way you described it to me, this probably heals itself in the next 12 months.

[Penny]

Okay.

[Dave Ramsey]

Am I wrong?

[Penny]

Well, I've just been saying that for six to nine months.

[Dave Ramsey]

Yeah, me too. Yeah, I agree with you because I mean, like for instance, we've got the real estate, Ramsey trusted real estate agents. Right. We got two or three thousand around the nation and we send them leads. That business unit is down because the number of people going through to buy houses right now is down. Right. And so and we keep going, well, you know, next quarter this is probably going to turn. We got an election year, maybe it's going to turn well, we got to, you know, and then maybe, maybe spring it'll turn and win these interest rates and, you know, we keep looking at it going. But I do know I'm not going to end that business unit just because profits are down and revenues are down in that business unit over three years ago. Because I have not lost hope in it coming back. Because as soon as the real estate market comes back, Ramsey Trusted is a huge. It booms like crazy, right?

[Penny]

Correct.

[Dave Ramsey]

So I'm looking at it too, through that lens. But yeah, I've kind of missed my real estate predictions, like consecutively, two years in a row. I didn't think this was going to run this long. I can't believe this economy is just screwed up. But it is. It's sitting in the doldrums, the real estate market anyway. But it's good. If you're an individual out there, it's a good time to buy. If you're an individual out there, it's a great time to sell. I got a, I got a property for sale right now and it's going to go great. I mean, it's. But it's just, there's not 83 people looking now, there's eight, you know, that kind of thing. So that, what we're discussing here is when this is going to bounce back. And I don't think it's five years. I think it's, it may not be five days. I think it's going to be five months or more, don't you?

[Penny]

I would, I mean, I've, I keep hearing everything about Q1, 20, 25. We'll see it open up. And the way things run from our business cycle is all the budgeting is kind of done right now, especially for our hotels. And so we're seeing a little bit more traction than normal.

[Dave Ramsey]

Yeah. But let me tell you, if those hotels stack full and those apartments start renting like crazy because the market picks back up, you can go back to them and they're going to have an influx of cash that wasn't in their budget.

[Penny]

Right.

[Dave Ramsey]

And they can sign up mid year. They don't have to have, they don't only have one time a year, they can sign up for your program.

[Penny]

Right.

[Dave Ramsey]

If they're sitting on cash, you go, hey, guys, the sun is back out. Let's make some hay. I can show you how to do that. Make hay while the sun shines. You know the saying, right? And so we're gonna, you know, you can reactivate that if you haven't run out of emotional steam to do it. And yeah, that's the thing those of us fight is we get weary as we wait on some of these things that are outside of our control. And don't let that weariness confuse you with. Let's pretend instead that you were brand new and you said, I'm gonna start a branding company in Austin freaking Texas, which is on fire. And I'm gonna do this and I'm gonna do that. All that's great. And you have all this excitement right now in spite of the fact that there's kind of some black clouds over those two particular areas at the moment. But black clouds are followed by sunshine. I think you're hanging on. But you need to manage your attitude in the process. I have to do that too, by the way. I get mad. You know what I mean? It's like dad gummet. So, yeah, you gotta manage your attitude in the process of fighting through these things. It's like fighting through the pandemic or fighting through this doldrums of the market. Now, I will tell you this. The other thing that is bouncing around in my head since I got on the phone with you is if I'm you, I'm probably also using this to say I need to be in some complementary businesses, meaning that are inverse of this, that are booming right now and that might be down. When this is booming, you have two product lines that ride the same axis. And so you're always going to ride the up axis and the down axis on this one thing because your product line isn't well diversified. So if I'm you, I'm trying to try to have some things that are, that are, you know, recession proof, whatever. What are the types of branding you can do? Maybe it's individuals with Airbnb. What is it? What is it? I don't have any idea. But I mean, obviously you've got to do something to do with rooms. You're good at room filling up rooms and pieces of real estate. So what can I get into that? Maybe banks need to move their real estate owned portfolio off the books and down times and you can help them with the brand strategy on that. Banks have never been known to be good at brand anything or marketing anything except selling debt. So, yeah, you know, I don't know if I'm you, I'm looking to use this ouchie moment as a reason to have some other product lines that Utilize our same talents and skills that are a little bit off the same axis. That's the only thing I'm seeing. And that's not a huge criticism. That's 10% of this phone call. 90% of this phone call is, I think you're okay. Hang on. I'm okay. I'm hanging on. And I gotta watch my attitude in the process. That's 90% of this. That's how I'm going with this. Hey, you're a stud. Way to go, Penny. Proud of you. $2 million business Austin, Texas. Self employed, 15 team members. You are living the dream. Remember that. This is the Entrez Leadership Podcast. What does the future hold for business? Ask nine experts, you'll get 10 different answers. Economic growth or a recession. Business taxes will go up or down. AI will help us work or replace us all. But there's no such thing as a crystal ball. That's why more than 40,000 businesses have future proofed themselves with NetSuite by Oracle. The number one cloud enterprise resource planning system. Ramsey Solutions uses NetSuite and you should too. Whether your company's earning millions or even hundreds of millions, NetSuite helps you respond to immediate challenges and seize your biggest opportunities with one unified business management suite. There's one source of truth for the visibility and control you need to make quick decisions. NetSuite's real time insights and forecasting help you see into the future with actionable data. And when you're closing the books in days, not weeks, you spend less time looking backward and more time focusing on what's next. And speaking of what's Next, download the CFO's Guide to AI and Machine Learning at netsuite.com it's free at netsuite.com Ramsey hey, do you feel like you're running on empty? Kind of like Penny. She's running out of fuel a little bit, wasn't she? I've been there. I've been there on certain elements of this business in the last 20 minutes. If you're leading a business, it's no wonder business is hard. It's not for sissies, okay? It doesn't mean you should let yourself get burned out. Join me and the thousands of small business leaders in Denver next spring to refuel your leadership tank with life changing insight from all of our speakers. Bestselling author of the world famous book Good to Great. My friend Jim Collins is going to be with us, boys and girls. Wow. You know what the chances are you get to hear Jim Collins live? Almost zero. Jim does not come out of his cave often and if he sees his shadow, he doesn't come out for six more years. I love Jim. He is definitely an academic and an introvert. He tells me personally all the time he does not like leaving his room. But we got him to come and he's really good. He's brilliant. Argument expert Jefferson Fisher and leadership expert John Maxwell, the grandpa of leadership. My buddy John. World heavyweight champion George Foreman. I never met George yet. I'm looking forward to this. The CEO of Seiko Designs, Liz Bohannon and Seth Dillon. Ah, Seth from the Babylon Bee. He has the. He has the trademark on sarcasm font. It's fabulous. I'm kidding. By the end of the conference, you're going to be refreshed and equipped with new vision for your business. Mark your calendar. It's May 18th through 21st of 2025. Denver, baby. Get your tickets, go to entreleadership.com summit. Reserve your seats right now. They are almost gone, believe it or not. And if you're listening on YouTube or podcast, click the link in the show notes and you can reserve your seats. Colby is with us in Louisiana. Hi, Colby, how are you?

[Colby]

I'm doing well, Dave. Thank you for taking my call.

[Dave Ramsey]

My pleasure. How can we help?

[Colby]

So I am the interim manager for my dad's business after he's passed away recently.

[Dave Ramsey]

Oh, I'm sorry. What happened?

[Colby]

Cancer. Thank you.

[Dave Ramsey]

How old was he?

[Colby]

Almost 65.

[Dave Ramsey]

Wow. What kind of business?

[Colby]

Specialty electrical contracting.

[Dave Ramsey]

Were you already working there?

[Colby]

I used to work for him years ago. I worked for him for a little over five years, but kind of part of my question, you know, we decided that wasn't best for us to stay there long term and. But since he's passed, I've had to step in and try to handle the affairs to take care of what's going on.

[Dave Ramsey]

How long ago did he pass?

[Colby]

July of this year. So really a few months ago.

[Dave Ramsey]

Oh, man, I'm so sorry. How old are you, colby?

[Colby]

I am 35.

[Dave Ramsey]

Okay, all right, cool. Did you just quit your full time job and jump over there? What are you doing?

[Colby]

So I did take a little bit of time off, about a month and a half, almost two months to of course take care of some of the other things going on and to kind of step into the business to learn and kind of reacquaint myself. But I actually do have another full time position and I'm only managing the business. Part time is now.

[Dave Ramsey]

Okay. How many team members in the business?

[Colby]

Not including myself or my mother, we have five.

[Dave Ramsey]

Your Mom's down at the office. She's down at the office.

[Colby]

She's actually not actively in the business. No, she's the current shareholder, but she's not actively working the business.

[Dave Ramsey]

So she doesn't know I have any idea what's going on down there. You've had to go down there and figure it out.

[Colby]

She does have a, you know, some idea because I mean, my dad was very vocal about what he did and I was very proud of what he did. But yes, currently it's just me and we have a really good office manager that does great.

[Dave Ramsey]

Okay, I'm sorry, so again, how many team members we have?

[Colby]

5, not including myself.

[Dave Ramsey]

Okay, cool. And what's the revenue on this?

[Colby]

Last year was about 1.4 million. And it can bounce around depending upon the projects that they've had and the.

[Dave Ramsey]

Any specialty electrical contracting? Yep.

[Colby]

So there's kind of two sides. Home standby generators is a big part of the business. So the selling of new units and maintenance contracts for the ones that are in there in place. And then he's also very established in or was in the telecom industry. So cellular tower work and a few special projects around that.

[Dave Ramsey]

Okay. But Most of the 1.4 is the generators.

[Colby]

It's actually almost half and half. Oh, is it probably 70, 30?

[Dave Ramsey]

Yeah. Okay. All right, kind of got the picture now. Yeah, thank you. Thank you for filling me in. What is your question?

[Colby]

Yeah, so one of my dad's requests prior to his passing was asking for my help to sell the business, as you can imagine, to help take care of my mother in her future. And actually this is what I do professionally. I work for a business broker as a consultant. But I don't necessarily specialize or have experience in contractors. I work in a different industry and so I'm trying to get someone else's opinion on what I should do with the current scenarios that I'm looking at. I've got a key employee that has been with the business for 20 plus years. I think it's a good candidate in terms of relationship with clients and knowing the business, but I'm not fully confident in their leadership skills or being able to manage the business. And the day to day affairs or option number two is working with another business broker or someone else to help me prepare and sell to an outside party. And this is very emotional for me, as you can imagine. So I'm trying to get some other professional opinions on, you know, other people's thoughts on what I can maybe do.

[Dave Ramsey]

Yeah. So the net profits or what?

[Colby]

Well, that's another kind of problem. My dad managed it. Okay. But from what I was able to figure out, he managed it well enough to pay his own salary and a little bit of discretionary earnings. So after you take out his salary and then probably a little bit of margin, there was maybe 150,000 in net profit.

[Dave Ramsey]

But his salary was more than you would pay a manager to manage it.

[Colby]

It was right about what I pay manager.

[Dave Ramsey]

Okay, so you got 150,000. So you valued it at what? 600.

[Colby]

600. Plus the assets? Yes.

[Dave Ramsey]

Okay, what are the assets?

[Colby]

The business owns the building and the property.

[Dave Ramsey]

Yeah, that's a separate. That's a piece of real estate.

[Colby]

Yeah, yeah. So the real estate. And then there's a schedule of vehicles and trailers and equipment.

[Dave Ramsey]

Okay. All right. Yeah. They would go with the 600 probably. All right. Yeah. The real estate. Carve that off and go. We're going to sell the real estate. Just get a real estate agent. The business, I mean, if the business wants to stay as a tenant, that's fine. You may want the business to stay as a tenant and your mom keep the real estate, But I would keep those separate. What is the real estate is a specialty real estate. Is it weird?

[Colby]

It's not. It's actually also distressed. It's not a great part of town. It's in a flood zone. So that's another consideration. So there is some market value, but it's not.

[Dave Ramsey]

Also not very great. Yeah, but it's not you. I would keep the real estate separate from the business. Okay. Either, if you want. I mean, evaluation wise. All right, so we got $600,000 business and we got a piece of real estate, and we can. You can either buy the real estate or not buy the real estate, or we'll have an auction and sell it. Or if you want to, you know, lease it back from mom, she could take the lease payment on the real estate. Whatever. I don't care. Any of that's fine. But that's first thing I would tell you to do. You got a good valuation on it. I'm not questioning that. So when you say plus the assets, I would separate the assets. In other words, not the. Not the cars and trucks. You gotta have those to run the business. They're part of the business, but the real estate's a separate transaction. Now, you're a business broker. You already know this. The best luck we've had with Entrez leadership clients selling a business is horizontal or vertical, meaning a customer or a supplier or a competitor. Horizontal is a Competitor, a customer or a supplier is vertical. And so if there's a customer that's, you know, big in cell phone towers that would like to own this and could absorb it into their operation, you know, they may be a player, maybe one of your current customers or a former customer suppliers, in what you're describing to me, I doubt it. But there might be a local distributor of generators that would put this on the side and go, well, not only can we be a local distributor, but we're also going to do the install and the maintenance and take these contracts on. So whoever you're buying the generators from might be a player, that kind of a thing. And then, of course, if there's a competitor, which is probably not a big line of those in this, but even if they're in a different city, you're in Lafayette, Louisiana. And so if you go to Monroe or you go to Baton Rouge or something like that and go, is there somebody up there that's a competitor that would want to have a branch office in Lafayette? Right. That kind of thing. You already know how to do all that as a business broker, right?

[Colby]

Yeah, yeah. That's not really my concern. I think my main question is because I have a key employee who I think is eager to have the conversation, and we've had a few conversations to date, just not real silly terms versus going external.

[Dave Ramsey]

What's the key employee make a year?

[Colby]

Right now they have a salary, I want to say, between 60 and 70, and then there's usually overtime. He's currently a foreman.

[Dave Ramsey]

Okay. All right. And so it sounds like I'm reading into this, so you correct me. Okay. It sounds like you don't think he has the chops.

[Colby]

I think he has some skills.

[Dave Ramsey]

He's good at what he does, but he's not well rounded enough to run the whole operation.

[Colby]

Correct.

[Dave Ramsey]

That's what I meant. Yeah. Okay.

[Colby]

Yeah. And even in the interim, I've actually brought in a consultant like myself that does know contracting businesses in this industry to kind of help me get my hands on things for a few months. And so it's possible they could stay on to help him through a transition or maybe learn some of those skills.

[Dave Ramsey]

Yeah.

[Colby]

But yeah, just signing papers.

[Dave Ramsey]

And what does the consultant make?

[Colby]

He charges about between 2 and 3,000amonth.

[Dave Ramsey]

Okay. All right. Well, what you could propose is this, like, you have to keep the consultant on and you have to give us 100% of the profits until we get to. You keep 70,000 a year, plus you keep the consultant on as an expense. And after those two bills are paid, you give us all the profits, which was your dad's old salary, plus 150 until we get to 600. And you would get that.

[Colby]

The 150 actually included my dad's salary, so it's about 100 plus 50 to 60.

[Dave Ramsey]

Oh, okay. All right. So 150. So it's going to take you four years to pay us out and then you can get rid of the consultant and you, or you can get rid of the consultant when you're able to take the training wheels off. Whatever we want to do there, but at least for a year, you got to keep them on until you get your operational guidance. And you have to agree to pay us 100% of profits above 70,000 and above the consultant until we get to 600.

[Colby]

Well, I think that's, that's one of my fears. And maybe you could maybe talk me through this too, but I'm not sure I, or my mother's willing to take the risk for four or five years for him to manage it, even with a consultant.

[Dave Ramsey]

Okay, then the only reason you would take that risk is if you don't have a better option.

[Colby]

Right.

[Dave Ramsey]

If you have a buyer that's offering you 200 cash on the barrel head, do you want to trade that for 600? You know, bird in the hand versus three in the nest. I don't know. You know, you gotta decide that. And that's really looking at that guy and going, what's his probability of success?

[Colby]

Right.

[Dave Ramsey]

If he has a low probability of success, and the more I talk to you, the more I think he does. You don't think he does. You don't think he's got a high probability of success the way you've talked about two or three times now. So I'm starting to worry about him. But if you wanted, if you wanted to bet on him because the only other offers you've got are low ball cash, then you could, that's the way you could structure it. And that would bring him into the fold. The other problem is if you bring in a. Well, it doesn't affect you. Yeah, but you gotta decide, okay. Versus what we think we could get from him, can he run it? And you know, you could put a trigger clause in there and go, if the profits drop below X, the business reverts back to us.

[Colby]

Well, that's, that's another I guess factor too, is again the emotional part of it. But my father was very proud. He did very good things and made a good living for us. But Also, I think we're looking for a clean break in part of this process, and so, you know, the sooner we could, as a family, move on.

[Dave Ramsey]

So you're ready. You're ready to take 200 instead of 600? If it's on the barrel head. Right.

[Colby]

If that's the only option, then that's possibly. It could be in it, yeah.

[Dave Ramsey]

Yeah. Okay. Because you're gonna. You're probably. I don't know where you're gonna find. You're now in the business brokerage business, and you're already there, so you know what you're dealing with. I don't know what you can get.

[Colby]

But I'm confident we could get other extra offers. But again, we're just trying to figure out, does it make sense to give the employee the consideration to see if he'll.

[Dave Ramsey]

Doesn't sound like it. Doesn't sound like you believe in it.

[Colby]

Right.

[Dave Ramsey]

He doesn't have the ability to go get 600 grand, does he?

[Colby]

That's. We haven't engaged with the bank yet. Or if he's thought about getting a partner or an investor, but we haven't had that conversation yet.

[Dave Ramsey]

If he scrapes together a good offer, cash, he certainly could do it.

[Colby]

Sure.

[Dave Ramsey]

But what you're saying is I don't believe him in enough to finance this?

[Colby]

Not seller finance, no, sir.

[Dave Ramsey]

Yeah, that's what I mean.

[Colby]

Yep.

[Dave Ramsey]

And so I think. How long you been doing business brokerage.

[Colby]

Intentionally? For about two years, but I've been similar space for close to 10.

[Dave Ramsey]

Yeah, well, you check me if I'm wrong, but I think a banker might look at him the exact same way you're looking at him.

[Colby]

That's the reason I'm trying to get other people to help talk.

[Dave Ramsey]

I mean, isn't that your experience in the business brokerage world?

[Colby]

It is.

[Dave Ramsey]

The guy has to go in and sell himself to the bankers, being competent to make the payments, correct?

[Colby]

Yes. Not just about the numbers and the P and L. Yeah.

[Dave Ramsey]

I doubt he's got a 600,000 or 500 or $400,000 asset he can pledge either.

[Colby]

Not that I know of.

[Dave Ramsey]

Yeah. And if the real estate's not worth much, if you want to roll it in, give him a mortgage on the. Let the bank take a loan on that real estate. That might help him get the financing since the real estate's kind of weird and floodplainy and low into town, all that kind of junk. So, yeah, you got a lot going on, dude, I'm sorry I don't have a magic wand for you. But I think you're down to, I think we've, we have analyzed in this phone call that you don't want to carry seller financing with this guy, period. So now we're down to, can he bring in an investor? I'll give him a shot. But we're also putting it on the market first. Guy here with the money wins the deal. And I'm not waiting around for two years while you run this thing and you lose your whole business, brokerage career. And of course, the other thing you can do is just sell off the assets and try to find somebody by the client list, sell off the inventory, collect the receivables, pay the payables, close it, and that's book valuing the business. And you again, as a business broker, know you can do that. That's your worst case scenario. I'm putting it on the market or I'll give him 30 days. And after that I'm putting it on the market and say, hey, you need to go get an investor or a bank. We can't sell. Her mom wants a clean break. Sorry. Sorry, man. And so if you can get a bank loan or you can get an investor or you can scrape the money together from your mama, I don't care where you get it, but you know his mama, not yours. And so you know that, just go and tell him, you got 30 days to hook or crook. Put this together. And if you can, I'm putting it on the market. And it's not that I hate you or something. I've just got to clean this up for mom and I'm trying to take care of her dude. And, you know, just have real clean, clean, kind, clear conversations with him. Hey, good question. You're a good man for stepping in, helping your mama way you go. Good. Good job, Colby. Good job. This is the Entree Leadership Podcast.

[Whitney]

This episode is brought to you by Trainul, the official software of being home for dinner. When you're running a business, the day never seems to end. You're onboarding new hires, answering repetitive questions, and getting everyone on the same page. It's hard to leave on time because, well, it feels like there's always more for you to do. That's why there's Trainual, the app that makes it easy to document and organize processes for every role and responsibility in your company all in one place. Trainule helps automate employee training, delegate those daily to do's that you shouldn't be doing anyways, and make sure that everyone is up to date on sops. Giving you back precious hours every day with trainee Will. Your team has everything they need to do the job right. Cut training time in half, reduce the number of questions coming your way, and create a systematized organization that runs like a Swiss watch whether you're there or not. So stop staying late to keep things running. Visit trainule.compre for a demo and get 15% off your first year. That's T R A I N ual.compertrez.

[Dave Ramsey]

54% of the American economy as measured by the gross domestic product, the gdp. The total of all goods and services produced in the United States of America, 54% of it is produced by small business people with 500 or fewer team members, largely, mostly, almost totally family owned. These are families that get up every week, leave the cave, kill something, drag it home and make payroll. Most Americans work for a small business. They don't work for Ford, they don't work for Amazon. Name whatever big conglomerate you want to name. Put all of them together. They don't equal small business. Small business is the backbone, literally, mathematically, economically, of the United States economy. And Congress continues to just piss on us with every possible way with their tax changes and tax laws. We love small business. Yeah, none of us that pay your taxes believe it because we watch how you do us, how you treat us. But in spite of that, small business keeps on doing it. The free enterprise system is one of the best measures of actual liberty, actual freedom in America today. If you want to become a success, you can just decide you are, open your computer or your garage door and go do something. These are the kind of people I talk to every day. These are the kind of people that I love and the kind of people that listen to this podcast. Thank you. The other thing that happens to us is we get some people running their own businesses, don't keep enough other warriors in their lives, and it gets a little lonely. You're the only guy out there fighting by yourself, it feels like. And I'm here to remind you, you're not. That's why I'm giving you these numbers. But also, there's nobody to really talk to when things are going good because if you brag to your broke relatives, they think that, you know, you're just, you know, you're just a bragger. And all you did is you just wanted somebody to be proud of the work you've done, proud of the fact you were successful. So we decided when we started this podcast, we're gonna have some people on and brag. So if you Run a small business. You wanna call in here and brag? We want you to do it. Cause we're proud of you. We're one of you. And we like when people win. We like when people make money. We like when people take care of their employees and their team members. We like when they love their customers well, which is what small business does. So this is your place to brag. Whitney's going to do that in Dallas. Hey, Whitney. Brag a little for me.

[Whitney]

Hi, Dave. I'm the president of an electrical contractor here in the Dallas Fort Worth area. We purchased this business about a year ago after listening to you 10 years ago tell us we needed to get out of my husband's family business. So we finally did it and have a business of our own. This year, we're on track for 1.2 million in revenue.

[Dave Ramsey]

Wow. What was it last year?

[Whitney]

Well, last year we. For the, you know, the last three months, I think it was 300.

[Dave Ramsey]

Oh, you opened and one year later you're doing a million. Yep. Way to go.

[Whitney]

We are working hard. The business, it was a preexisting business, but it came with seven and 17 members and only one of them has traded out. We replaced one, but they are fantastic. Dave, I've got to tell you, they are the best people. They are easy to train. They are responsive. They do. They love people. They love serving.

[Dave Ramsey]

Sounds like they got a good leader to me.

[Whitney]

Well, I just inherited them, but they are fantastic. And I am, you know, trying to do our best not to screw them up.

[Dave Ramsey]

Way to go. Way to go. So cool. So cool. So two years ago you decided to leave the family business, and then you step into this one and a year later it's at a million two.

[Whitney]

Right.

[Penny]

Wow.

[Dave Ramsey]

Good for you. What do you attribute that to?

[Whitney]

Well, like I said, we started listening to you decades ago. And we came to the Master Series event a decade ago with my brother in law and we got our why straight and the way we want to treat people straight. And then we learned that we can use. I don't know much about electricity at all. That's my husband's. He's the product. Right. But my job is the people. And if you raise a team and treat them right and make sure I have the best place to work, then I'm going to have a great team who serves our customers well.

[Dave Ramsey]

Yeah, yeah. It changes everything. That's called culture. Right. And yeah, you change the whole world when you change your culture. I'm proud of y'all. Way to go. Way to go. So Basically, you reached a point that you guys didn't have the same values as the. As the brother in law and entrez. Leadership kind of gave you that clarity and you said, okay, we want to do it that way. And so we're going to have to go off on our own to be able to do it that way.

[Whitney]

Right?

[Dave Ramsey]

Yeah. Good for you. Way to go.

[Whitney]

Terrifying move, but it's been fantastic.

[Dave Ramsey]

Yeah. I mean, I. John Johnson, the editor of Ebony magazine, used to say, the entrepreneur is the only person can go from sheer terror to sheer exhilaration and back every 24 hours.

[Whitney]

Right. Several times.

[Dave Ramsey]

Like a freaking roller coaster. It makes Disney World look tame. Yeah, that's just. That's just today, Right?

[Whitney]

Since lunch.

[Dave Ramsey]

But how fun. How fun. I mean, you're sitting there in Dallas, Texas. Life is good. Cashing a million dollars worth of checks. Yeah, baby.

[Whitney]

Yep.

[Dave Ramsey]

I like it.

[Whitney]

Vacation. We went away for a week.

[Colby]

Whoa.

[Whitney]

Still rolling.

[Dave Ramsey]

You know, it's called delegation, man, you're amazing. Well done, well done, well done. I am so proud of you. Thank you for calling to brag. Hey, listen, I gotta tell you, she did a couple of things that were terrifying. Three things that were terrifying. One, stepping away from family. That can be. Oh, that can be sticky. Then she opened a new business or bought into a new business that she'd never done. Oh, that's sticky. Then she took over seven team members, and you don't know if they're donkeys or thoroughbreds. Turns out she got six thoroughbreds out of seven. That's pretty good. Stable. Pretty good. Only one donkey ejection. Not bad. Hit the eject button. There he goes. Right, that's. He's gone then. Yeah, that's how this works, man. Way to go, Whitney. So proud of you. Very, very, very well done, guys. Call up here and brag anytime. The number's 844-944-1070. I don't know about you, but people like Whitney inspire me. This is the entree leadership podcast. Without our mission statement, Ramsey Solutions wouldn't be the company it is today. A mission statement, Clarif, and who you aren't. So you and your team have clear direction for all your decision making to get help creating your own mission statement. Download my free mission statement [e-mail] mission or if you're listening on Spotify or podcasts, just click the link in the description. I'm Dave Ramsey, your host. This is the entree leadership podcast. If you like what you hear, you could help me. I would appreciate it. A lot. If you'll do the old Internet thing there and follow the show or subscribe to the show. You know that stuff, right? That Internet stuff? Yeah. Click the subscribe button, the follow button. There might be a share button. Or you might like paste and copy the link and send it to somebody. If you don't know how to do it. Either way, whatever it is, let people know we're here. You're our only marketing plan, so you're the only hope we got. Help us by following, subscribing. Leaving a five star review. If you want to leave a one star review, you can. That's just dumb. Don't take up your energy to do that. Go piss somebody else off. I don't care. So. But I do need the help with the algorithm. So leave a nice 5 star review. I'll smile and be nice and. And, you know, be sure you share the show. Thank you. Thank you. Thank you for doing that. Mike's in Denver. Hey, Mike, how are you?

[Mike]

I'm doing well, Dave. How are you?

[Dave Ramsey]

Better than I deserve. What's up?

[Mike]

So I am an engineer. I'm not a small business owner, but I wanted to let you know I've still gotten a ton of value out of listening to this podcast, so thank you for that.

[Dave Ramsey]

Thank you.

[Mike]

I've been working with the same company for almost 15 years. I started with them right out of college, actually. And I am a consultant. So my role includes combination of technical project execution, business development and sales, quality control, leadership, mentoring, that sort of thing. So over the past, say, five or so years, I've been managing a service line. I kind of think of that as my own little small business. And we've been successful. We're definitely growing this year. We're going to end up doing around three to three and a half million. I've got four other team members that I work with. So as we continue to grow, I'm observing that we're kind of reaching the capacity of how much business I personally am capable of bringing in. I am right now pretty much the only one bringing in work to the group. So I'm able to successfully delegate the project execution to my teammates. But I'm starting to struggle with delegating the business development responsibilities to my team.

[Dave Ramsey]

If you double the amount of work coming in, can your team execute it?

[Mike]

Yeah, to a point, maybe not. So I said, right now I've got four other team members. We've kind of seen the writing on the wall and the growth and my team is expanding. So, yeah, if we double the Amount of work that comes in. Yes.

[Dave Ramsey]

You'd have to staff up a little maybe, but you could pull it off.

[Mike]

Yes, definitely.

[Dave Ramsey]

Okay, so this is a, it's what you're calling development, marketing, sales, right?

[Mike]

Yeah, yeah.

[Dave Ramsey]

You're going to, you're going to the. Out. Leaving the cave, Killing them. Killing it. Bringing it home.

[Mike]

Exactly. Yeah. I'm, I work, I spent a lot of time working with our clients, developing those relationships, talking with them, understanding what their problems are.

[Dave Ramsey]

And how many, how many clients do you all have to do? Three and a half.

[Mike]

Oh, I'd say a handful, maybe 15 to 20. Ballpark.

[Dave Ramsey]

Okay. And what type of business are the client? This is a B2B operation.

[Mike]

Yeah. So I mean I work in the oil and gas industry dealing with, helping them maintain their equipment integrity.

[Dave Ramsey]

So how do you find a new client?

[Mike]

Well, a lot of it comes through existing relationships within my larger organization. So, you know, I work, I've been working with a company that's relatively large. They're about, you know, they do about 150 million in revenue a year, about 500, 600 employees. And then we even have a larger parent company that's gigantic. They're 20,000,045.

[Dave Ramsey]

If you hired someone to come along and learn what you do to bring more business in, what would they do?

[Mike]

Yeah, so that, that's a good question. I mean, I'm kind of indirectly answering your question, but you know, hire an external hire. In the past we've struggled with it. So you know, we haven't had a lot of success with like hiring like a full time salesperson or you know, when we, when we have people come in, it takes them time to kind of understand the business and the work that we do. Our work is very technical. You know, our clients, our other technical.

[Dave Ramsey]

Sales needs an expert salesman. It doesn't need a salesman.

[Mike]

Yes, I agree.

[Dave Ramsey]

Yeah. And that's a problem. So if you're going to sell laser guided metal lathes, you need to hire somebody that knows something about laser guided metal lathes. Not somebody sold cars last week.

[Mike]

Exactly. Yeah. And so finding those people externally is difficult. I'm not saying it's impossible.

[Dave Ramsey]

The oil and gas business is huge.

[Mike]

Yeah, I mean it's a pretty tight knit kind of area within oil and gas, you know, integrity.

[Dave Ramsey]

Where would you source the person? Because you got to staff it up because you're logistically bottlenecked. You told me. Yes, so we got to staff it. How are we going to staff it then?

[Mike]

Well, I mean, in my mind the solution is either to look externally, like we've been talking about a little bit, or internally. So, you know, the people who I'm working with, my team members, are great, bright, smart, good engineers. But it takes, you know, I'm trying to kind of go down the road of, you know, leadership mentorship, kind of developing them into supporting more of that role. But that takes time. You know, that's. But that. I mean, that's kind of what I'm calling about is maybe there's something I'm missing here because I can see, you know, it's an external hire. There's challenges.

[Dave Ramsey]

When you started doing this, what was the size of the revenue? How many years ago?

[Mike]

So when I took over this specific kind of service line, it was just me and, you know, maybe one other direct report. And we're just coming out of COVID I mean, we. It was less than a million. We were, you know, during COVID it was just.

[Dave Ramsey]

Okay, so you tripled it in three years. Had you ever been selling before?

[Mike]

Not in as large of a capacity. The selling is kind of what put me into this role as an engineer. I'm not naturally somebody who wants to sell, but I found out I'm pretty good at it.

[Dave Ramsey]

No, this is not selling. It's serving. And you're a good server. A good salesman is a good server. And so what you need is a junior version of you, Mike. And don't look down on them, because just 36 months ago, you were them.

[Mike]

Yeah. So it sounds. I mean, I think long term, is.

[Dave Ramsey]

That guy on your team and you're just not giving him enough credit. I don't want him to start making 3 million. I want him to make a million.

[Mike]

So I have a person on my team who I'm kind of eyeing for that role. And he's, you know, we're working towards getting him to the point where he can talk and interact with clients more directly more often.

[Colby]

Yeah.

[Mike]

And he's getting there.

[Dave Ramsey]

And you got to walk with him for 12 to 14 months, which you didn't have anybody. You just got thrown in the fire.

[Mike]

Yeah.

[Dave Ramsey]

But at least you got you to help him walk, to give him some people skills, give him some reading to do. You know, here's. Here's how we handle this. And, you know, yes, you have to have the technical skills. Absolutely. That is 80, 85% of this role. But 15% is people skills still. He's still got to be able to get along with others. He can't. You know, he's actually got a smile and, you know, that kind of stuff. And so, you know, it's, it's not, it's not glad handing or some kind of checkered coat sales or something, but it is, it is a thing where you're making, you're building trust in our expertise and in the quality of humans that we are. And that's what gets you the business. And so, yeah, you got to get that guy in and start mentoring him and bring him up. The thing I have struggled with and I've had, I've had this discussion not long ago with a couple of our leaders here is I was having to. We've got some positions they needed to roll some people up into and they're like, well, he's not ready. And I don't know. And I'm like, dude, he's so much more ready than you were when I put you in the role, so quit being such a snot, you know. And that was me talking to my guys. I'm not telling you that, Mike, but I might. No, I think, I think you got a guy on the team that is probably more ready than you think. But I don't want you to turn him loose. Well, keep the training wheels on for a while. You walk along beside him, hold the, hold the back seat till he gets his balance. If you do take the training wheels off. But you can, you know, and you have a reasonable expectation. The first year you didn't bring in three and a half. It took you three, four years to do that in a business development or sales or whatever we want to call this or serving. So yeah, get them, get them in the saddle, man, and be excited about it. I think it's a, it's an opportunity. You have found great listening to you talk. You are confident and competent at what you do and you found great satisfaction in delivering the product, the high quality product to these customers. And you serve them well. And you just want to make sure somebody else does it the way you do it. And the only thing you can do there is just walk with them. And when you trust their competence to the extent you trust their competency and their integrity, both of which take a little time, is the extent that you can let go of the backseat and let the bicycle take off on its own. But until then, we're out of breath, we're running along beside them trying to get the four year old to get his balance and that's okay. Everybody's a 4 year old once. You were 36 months ago. I was 36 years ago. So there you go. And yeah, it's you're. You're. Serve them. Serve the person that you're moving up and trust them more than you think you can. And they'll. They'll live up to it. They'll step into those shoes. You're a good guy. You really are. You're. You're really doing good work. I can hear it. I can tell by the way you're forming your sentences, putting this together, the quality of person you are. Serve the people you're leading. Serve your customers. If you do that, you'll find a way to move this guy up. And he does need to move up. He's ready, folks. Remember, better a wary warrior than a quivering critic. This world needs more high quality leaders, so take courage and lead. I'm Dave Ramsey, your host. Thanks for listening to the Entree Leadership Podcast.