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Does My Employee Deserve a Raise?

The EntreLeadership Podcast

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Published: Mon Jun 23 2025

Summary

Detailed Summary of "Does My Employee Deserve a Raise?" – The EntreLeadership Podcast

Release Date: June 23, 2025
Host: Dave Ramsey, Ramsey Network

Introduction

In this episode of The EntreLeadership Podcast, Dave Ramsey addresses critical business and leadership challenges faced by entrepreneurs. Through real-time coaching and listener calls, Ramsey draws upon his extensive experience to provide actionable solutions. The primary focus of this episode revolves around employee raises, cash flow management, promotion decisions, and strategic business growth.

Listener Question 1: Structuring a Raise and Promotion for an Employee (Chris in Raleigh, NC)

Timestamp: [00:53 – 07:34]

Caller: Chris, a jewelry business owner with 35 years of experience, recently acquired a second store. He seeks advice on promoting an employee from the previous store who has four months of experience and has requested a raise from $18 to $21 per hour.

Discussion:

  • Current Compensation Structure: Initially, the employee was proposed to be compensated at $18 per hour plus commission, with raises contingent on industry-specific education and performance.

  • Promotion to Management: Chris wishes to transition the employee into an assistant manager role, which typically commands a higher wage and additional responsibilities.

  • Dave Ramsey's Advice:

    • Stage Gating System: Implement a multi-stage compensation plan where the employee meets specific milestones before receiving raises. This ensures growth is tied to performance.

      • Stage 1: Current role at $18/hour.
      • Stage 2: Increase to $21/hour upon meeting predetermined performance metrics within 3-6 months.
      • Stage 3: Transition to a managerial role with a higher salary and potential profit-sharing.

    • Performance Metrics: Define clear, measurable goals such as sales targets, customer satisfaction scores, or completion of training programs to track progress.

    • Communication: Clearly outline the path for advancement to the employee, ensuring transparency and setting realistic expectations.

Notable Quotes:

  • "People that are ambitious and that want to increase their responsibility, their value that they're adding and their income, they have to see a growth track." — Dave Ramsey [05:00]

  • "Give her a path where she controls her destiny with her performance." — Dave Ramsey [06:08]

Conclusion:

By establishing a structured and transparent progression plan, Chris can motivate his employee to develop further while ensuring that compensation aligns with her growing responsibilities and contributions to the business.

Listener Question 2: Managing Cash Flow in a Growing Business (Jorge in San Diego)

Timestamp: [09:37 – 15:34]

Caller: Jorge, owner of a frozen fruit and vegetable import company, is experiencing rapid revenue growth—from $3.9 million to an anticipated $5 million. However, he faces cash flow challenges due to upfront supplier payments and extended net terms for customers.

Discussion:

  • Current Challenges:

    • Upfront Supplier Payments: Suppliers require wire transfers before goods are shipped.

    • Extended Net Terms: Customers are given 45 to 55 days to pay, delaying cash influx.

  • Dave Ramsey's Strategies:

    • Assigning a Growth Factor to COGS:

      • Increase the Cost of Goods Sold (COGS) by 25% to account for the growth curve. This means for every $100,000 sold, allocate $125,000 in COGS to cover increased demand.
      • "Every time you sell $100,000 worth of cost of goods sold, you can buy $125,000 because you've held it out of your cost of goods sold." — Dave Ramsey [11:48]

    • Negotiating Payment Terms:

      • Secure annual contracts with suppliers to benefit from bulk discounts and extended payment terms.
      • Shift from immediate payments to delayed payments (e.g., 30 days after delivery) to improve cash flow without incurring debt.

    • Accrual Accounting Adjustments:

      • Properly account for revenues and expenses to match income with the corresponding costs, ensuring accurate financial tracking and forecasting.

Notable Quotes:

  • "You're going to pay yourself market rent." — Dave Ramsey [27:13]

  • "Real estate's a good, good investment." — Dave Ramsey [30:40]

Conclusion:

By adjusting COGS to reflect growth, renegotiating supplier terms, and fine-tuning accounting practices, Jorge can stabilize his cash flow, support continued growth, and maintain profitability without overextending financially.

Listener Question 3: Promotion Dilemma Between Long-term and New Employees (Seth in Wisconsin)

Timestamp: [16:59 – 24:00]

Caller: Seth, a business owner with a decade-long employee and a newer, two-year employee exhibiting strong leadership traits, is conflicted about whom to promote to the General Manager role. He fears promoting the newer employee may disappoint the long-term staff member.

Discussion:

  • Primary Concern: Balancing loyalty to long-term employees with the need to promote individuals based on merit and potential.

  • Dave Ramsey's Guidance:

    • Merit-Based Promotion:

      • Emphasize that promotions should be based on competence and performance, not tenure.
      • "Seniority is not an indicator or an entitlement of the next leadership slot." — Dave Ramsey [19:07]

    • Cultural Consistency:

      • Establish and communicate a company culture where advancement is tied to measurable performance metrics.
      • Ensure all employees understand that promotions are earned through demonstrated abilities and contributions.

    • Managing Expectations:

      • Address potential disappointments by having open conversations about promotion criteria and future opportunities.
      • Encourage long-term employees to develop their skills to align with leadership roles.

    • Risk Mitigation:

      • Accept that not every valued employee will be promoted and focus on long-term business success over individual sentiments.
      • "Choose to not feel guilty. I'd rather feel guilty and not create a situation where I've done the wrong thing out of guilt tripping myself." — Dave Ramsey [23:50]

Notable Quotes:

  • "Performance competency are the indicators of who goes into the next leadership slot." — Dave Ramsey [19:07]

  • "It's better than the 10 year heartburn of having put the wrong person in because you felt guilty." — Dave Ramsey [24:13]

Conclusion:

Seth should prioritize the skills and performance of employees when making promotion decisions. By fostering a transparent and merit-based culture, he can make objective choices that benefit the business while minimizing personal biases and maintaining team morale.

Listener Question 4: Evaluating the Purchase of a New Building for a Law Firm (Mary in Charlotte, NC)

Timestamp: [24:00 – 30:45]

Caller: Mary, owner of a law firm with 24 team members and $3.5 million in revenue, is contemplating purchasing a new building to accommodate expected growth. She seeks advice on evaluating the decision to ensure it's beneficial for her business.

Discussion:

  • Considerations Before Purchasing:

    • Business Needs vs. Real Estate Ownership:

      • Ensure that the decision to buy property aligns with the firm's growth trajectory rather than being driven by current space limitations.
      • "Don't let the ownership of real estate dictate the size of your growth." — Dave Ramsey [24:22]

    • Future-Proofing:

      • Purchase a building that not only meets current needs but also anticipates future expansion, typically an additional 25% space.

    • Financial Evaluation:

      • Separate business operations from real estate investments to maintain flexibility.
      • Prefer paying cash for property purchases to avoid the complications and liabilities of a mortgage.
      • "Always pay cash. If you're not paying cash, don't buy a building, period." — Dave Ramsey [30:40]

    • Flexibility and Scalability:

      • Owning property can limit the ability to relocate or expand quickly if the business outgrows the space or market dynamics change.
      • "Let the business dictate the building, not the other way around." — Dave Ramsey [27:12]

Notable Quotes:

  • "Don't let the ownership of real estate get in the way of that skill because you're burning a bunch of calories over here trying to be a good landlord to yourself." — Dave Ramsey [28:55]

  • "Nothing wrong with being a tenant when you're in business." — Dave Ramsey [29:58]

Conclusion:

Mary should carefully assess whether purchasing a new building aligns with her firm's long-term growth and operational flexibility. By treating real estate as a separate investment and ensuring it supports rather than restricts business expansion, she can make a strategic decision that fosters sustainable growth.

Final Thoughts

Throughout the episode, Dave Ramsey emphasizes the importance of structured growth, merit-based decisions, and strategic financial management. By addressing each listener's unique challenges with practical solutions, Ramsey reinforces foundational leadership principles essential for thriving businesses.

Notable Closing Quote:

  • "Better a weary warrior than a quivering critic." — Dave Ramsey [30:31]

For more insights and detailed discussions, visit The EntreLeadership Podcast.

No transcript available.