The EntreLeadership Podcast Episode Summary

Title: I Can’t Figure Out How Much to Spend on Payroll
Host: Ramsey Network (Dave Ramsey)
Release Date: April 28, 2025

Introduction

In this episode of The EntreLeadership Podcast, host Dave Ramsey tackles critical financial management questions from small business leaders. Drawing on over three decades of experience, Ramsey provides actionable insights into payroll budgeting, the distinction between controllers and CFOs, and balancing charitable giving with business growth. The episode features insightful discussions with callers representing diverse industries, offering listeners practical advice to overcome common business challenges.

1. Determining Payroll Budget for a Dog Grooming Salon

Caller: Kaylee from Portland, Oregon
Timestamp: [00:46] - [06:09]

Key Points:

• Industry-Specific Payroll Percentages: Ramsey emphasizes that payroll percentages vary significantly across industries. Rather than adhering to a universal percentage, businesses should focus on the return on investment (ROI) each employee brings.

• Direct vs. Indirect ROI Positions:

  • Direct ROI: Positions like salespeople or groomers who directly generate revenue. For example, a groomer should bring in more revenue than their cost to maintain profitability.
  • Indirect ROI: Roles such as bookkeepers or administrative staff that support revenue-generating activities indirectly.

• Sustainable Growth: Ensure sufficient business volume to keep all employees productive. As long as demand exists to keep everyone busy, you can continue to hire without compromising profitability.

Notable Quotes:

• Dave Ramsey [01:16]: “What you should be looking for is a return on investment, obviously. You’ve got to make more per groomer that you hire than that groomer costs you.”
• Dave Ramsey [05:50]: “As long as you got space, and you got enough business to keep them all busy, then you're gonna make money on every one of them.”

2. Defining the Role of Controller vs. CFO in an Excavating Company

Caller: Dusty from Topeka, Kansas
Timestamp: [07:22] - [26:55]

Key Points:

• When to Hire a Controller vs. a CFO:

  • At a $2 million revenue level, Ramsey advises hiring a strong controller rather than a full-time CFO. A controller manages daily financial operations, such as paying bills and managing receivables.
  • A CFO is suitable for larger businesses (e.g., $10 million in revenue) and plays a strategic role, offering advice on financial systems and long-term planning.

• Role Clarity and Responsibilities:

  • Controller: Executes predefined financial tasks, ensures books are closed monthly, and provides accurate P&L statements.
  • CFO: Takes a higher-level view, identifying and solving strategic financial issues, and guiding the business towards sustainable growth.

• Implementation Tips:

  • Establish monthly financial reporting to monitor business health.
  • Develop Key Result Areas (KRAs) for each role to ensure clarity and accountability within the team.

Notable Quotes:

• Dave Ramsey [08:48]: “You're doing a whole lot of CFO functions yourself and you probably still should be at 2 million right now.”
• Dave Ramsey [13:20]: “Have the groomers to grow it. So good question, good question. Sounds exciting.”

3. Balancing Charitable Giving with Business Growth in the Car Industry

Caller: Arash from Nashville, Tennessee
Timestamp: [26:55] - [32:44]

Key Points:

• Personal vs. Business Giving:

  • Ramsey recommends keeping charitable donations separate from business finances. Instead, take profits home and allocate a portion for personal charitable giving.

• Strategic Allocation of Profits:

  • Retained Earnings: Consistently set aside a percentage of profits to ensure business stability and support future growth opportunities, such as acquisitions.
  • Personal Giving: Decide on the amount to donate based on the business’s financial health and personal philanthropic goals.

• Flexibility in Giving:

  • Adjust the balance between reinvesting in the business and charitable contributions based on varying business needs and opportunities each year.

Notable Quotes:

• Dave Ramsey [28:14]: “If you need to leave money in the business to grow, then the more of that I do, the less I take home.”
• Dave Ramsey [32:44]: “If you're gonna take someone bowling, don't turn out the lights. There's a lot of noise, but you can't tell if you're winning.”

4. The Importance of Role Clarity through Key Result Areas (KRAs)

Caller: Dusty from Topeka, Kansas (Continued)
Timestamp: [07:22] - [26:55]

Key Points:

• KRAs vs. Job Descriptions:

  • KRAs (Key Result Areas): Define specific outcomes each team member is responsible for, promoting ownership and accountability.
  • Job Descriptions: Traditional listings of roles and responsibilities, which may limit flexibility and discourage proactive problem-solving.

• Implementing KRAs:

  • Create clear, measurable KRAs for each role, aligning them with the business’s overall goals.
  • Ensure each team member understands their KRAs and how their work contributes to the company’s success.

• Benefits of Role Clarity:

  • Enhances teamwork and communication.
  • Reduces confusion and conflict within the team.
  • Boosts productivity by ensuring everyone is focused on their key responsibilities.

Notable Quotes:

• Dave Ramsey [11:50]: “The controller's job is to get above the work and be thinking about where we're going, how we're billing, how we're setting up these contracts.”
• Dave Ramsey [25:30]: “Everyone on the team knows what they should work on and what's expected of them and how their work fits into the big picture.”

5. Additional Insights and Resources

• Promoted Resources:

  • Trainual Ad [06:09]: Promotes Trainual for organizing business operations and standardizing processes.
  • New Book Announcement [07:22]: Ramsey introduces his book, Build a Business You Love, which outlines a five-stage system for business growth.

• Final Thoughts:

  • Ramsey underscores the importance of continuous improvement in business practices, such as embracing AI technologies and fostering a culture of open communication and trust within teams.

Conclusion

This episode of The EntreLeadership Podcast provides valuable guidance for small business leaders grappling with financial management and organizational structure. Through real-life examples and practical advice, Dave Ramsey helps listeners navigate complex decisions regarding payroll budgeting, financial roles, and charitable giving, all while emphasizing the significance of role clarity and strategic planning in building a thriving business.

Resources Mentioned:

• EntreLeadership Podcast
• Book: Build a Business You Love by Dave Ramsey
• Trainual: trainual.com/entrez
• KRA Template: Available in the show notes