I’m Supposed to Inherit the Business, But Dad Won’t Update His Will

Summary

Podcast Summary: The EntreLeadership Podcast

Episode: "I’m Supposed to Inherit the Business, But Dad Won’t Update His Will"
Host: Dave Ramsey (Ramsey Network)
Date: October 6, 2025

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Overview

In this episode, Dave Ramsey offers real-time business and leadership coaching to entrepreneurs dealing with generational succession, estate planning, and managing financial pitfalls. The central theme is the complex and emotional process of succession planning in family businesses—specifically the struggles of adult children to encourage their parents to make crucial legal updates and decisions before a generational handover. Dave draws on decades of his own leadership at Ramsey Solutions and provides hard-hitting, practical advice peppered with compassion and conviction.

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Segment 1: Navigating Business Succession & Estate Planning (00:10–10:30)

Caller: Jay from Charlotte, NC
Situation: Son and general manager of a $17.2M, family-owned business. His father, the majority owner (83–84%), is resistant to updating his 40-year-old will and formalizing succession, despite his intention to leave the business to Jay.

Key Discussion Points

• Urgency and the Emotional Challenge:

  • Jay’s siblings aren’t involved or interested, but without a clear will or plan, legal disputes and financial chaos are likely.
  • Dave stresses starting the conversation from a place of honoring the father’s hard work, but being firm about the need for clarity.

• Quote [04:48]:

  "Writing it down, Dad’s called a will … Mainly I care that you have a plan and that it’s written down and that we don’t end up having to spend, you know, $2 million on legal fees because there’s no will. That’s dishonoring to your memory and all your hard work." – Dave Ramsey

• Reinforcing the Point:

  • Remind the parent of the pain they experienced with the previous generation’s lack of planning (Jay recounts his father’s own struggle to settle his grandfather’s estate).
  • Reiterate that honoring a legacy includes not burdening heirs with unresolved legal and operational questions.

• Practical Steps:

  • Suggests transferring stock while the father is alive using the Unified Estate Tax Credit for potential tax advantages [05:50].
  • Advocates persistence—even daily reminders—until action is taken:

    "I’m doing it every six days until this is dealt with. Hey, dad. Me again. Remember that thing where I was gonna honor you and your wishes?" [09:53]

• Potential Sacrifice:

  • Jay is advised to consider giving up interest in a family farm to resolve the matter, emphasizing that resolution is more important than assets when legal jeopardy or family conflict looms [07:59].

Notable Quotes

• Dave Ramsey [06:12]:

  "My preference is we go and start transferring stock now, which he can do under the Unified Estate Tax Credit and have no tax on it, no gift tax on it."

• Dave Ramsey [07:38]:

  "I’m just gonna constantly be talking about it until he finally blows a gasket or deals with it."

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Segment 2: Turning Around Farm Debt and Sacrificing for Success (13:02–24:36)

Caller: Kirk from Phoenix, AZ
Situation: Fourth-generation farmer, stepped into the business and quickly accumulated $700k in debt mostly due to lack of experience and poor early harvests.

Key Discussion Points

• Learning from Hardship:

  • Kirk admits he wasn’t prepared for the business side and the first two years’ crops failed.
  • Dave draws parallels to his own entrepreneurial beginnings—building slowly, sacrificing comfort, and upgrading only as cash flow permits. Personal guarantees and business debt are a trap.

• Financial Advice:

  • Sell home, rent modestly, and put all proceeds ($100k) and business profits into eliminating the debt.
  • Forecasts that, with continued discipline, Kirk can be debt-free in three years.

• Quote [23:03]:

  "But next time you get ready to buy a tractor, don’t. Farming is a business. You don’t get an exception to the rules of business just because you’re a farmer." – Dave Ramsey

Memorable Moments

• Dave’s relentless and relatable tough love, using personal and practical examples, urging Kirk not to romanticize farming to the point of financial ruin.
• The encouragement:

  "In five years, you’ll be able to pay cash for nice equipment and still make serious profit." [24:36]

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Segment 3: Handling Team Disagreement and Leading with Conviction (26:59–37:58)

Listener Question: Will in Pennsylvania
Topic: How to lead with conviction when tough decisions may prompt team disagreement or resentment.

Key Discussion Points

• Clarity and Communication:

  • Leadership by conviction must be rooted in well-communicated organizational principles and core values.
  • Disagreement on mission-aligned decisions is rare if values are communicated from hiring/ onboarding through daily operations.

• Quote [27:01]:

  "There is no real leadership unless it’s with conviction. Leadership that’s done as a compromise with no backbone, go along to get along, that’s not leadership. That’s just mob rule." – Dave Ramsey

• Dealing with Dissent:

  • If people consistently resent the leader, either they don’t belong or hiring/onboarding was unclear.
  • Accountability is vital—resentment and contempt can't be allowed to fester.

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Segment 4: Family Buyouts and Business Valuation (38:12–50:15)

Caller: Ronnie from New Mexico
Situation: Co-owner (with parents) of a $3–4M revenue service & repair business; seeking to buy out his parents as they retire, but wants to avoid unnecessary debt.

Key Discussion Points

• Valuation Realities:

  • Parents estimate business value too high. Dave explains realistic small business valuations (typically 4–5x net profit) and walkthroughs the process.
  • Practical approach: Use real profit numbers for valuation, not just gross receipts or aspirations.

• Buyout Structures:

  • Pay parents out of future profits, rather than incurring debt or a large up-front payment.
  • Consider family equity/fairness with non-involved siblings in estate considerations.

• Quote [47:54]:

  "The best way for the company—for God’s company—to prosper is for me to not saddle the next generation with debt." – Dave Ramsey (explaining his own succession and wealth management at Ramsey Solutions)

• Legal & Fairness Reminders:

  • If parents want to gift their shares, adjust the eventual estate plan to keep inheritance fair across siblings.
  • Engage in clear documentation and regular communication.

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Overarching Guidance From Dave

• Consistently return to honoring both family relationships and the stewardship of wealth/business created across generations.
• Legal clarity and proactive estate/ ownership planning prevent family strife and ensure a smooth legacy.
• Sacrifice, discipline, and transparency are keys to healthy, generational business growth—whether avoiding debt or structuring buyouts.

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Recommended Action Steps

• Have direct, frequent, and honoring conversations about succession—don’t let discomfort or inertia put the business or family at risk.
• Seek professional guidance from estate attorneys and business valuation experts.
• Settle family compensation and equity fairly and openly to protect relationships.
• For new owners, avoid new debt and grow only as financial capacity allows.

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Memorable Quotes and Timestamps

• "Writing it down, Dad’s called a will … That’s dishonoring to your memory and all your hard work." – Dave Ramsey, [04:48]
• "Remind him of that. Dad, you went through hell, why would you put me through hell?" – Dave Ramsey, [05:19]
• "But next time you get ready to buy a tractor, don’t. … Farming’s a business." – Dave Ramsey, [23:03]
• "There is no real leadership unless it’s with conviction." – Dave Ramsey, [27:01]
• "The best way for the company—for God’s company—to prosper is for me to not saddle the next generation with debt." – Dave Ramsey, [47:54]

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This episode is a must-listen for anyone facing generational transitions in family businesses, dealing with stubborn parents unwilling to let go, or struggling to untangle personal feelings from business facts. Dave’s tough love, wit, and experience provide clarity and action steps to protect your family's legacy and your business’s future.

Transcript

[A]

From the headquarters of Ramsey Solutions, this is Entre Leadership 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 right alongside you. If you've got a question you want to ask on the show, well, fill out the [e-mail] ask or you can call and leave a voicemail at 844-944-1070. That's 844-944-1030. Jay is with us in Charlotte, North Carolina. Hi Jay, how are you? Good.

[B]

How are you, Dave?

[A]

Better than I deserve. How can I help?

[B]

So my question is I am a third generation business own business was my grandfather started about 49 years ago. My dad is still involved in the business and majority owner. We do roughly about 17, 17.2 last year in top line sales. And I am trying to get him, I'm trying to push him to deal with his estate and honor him while doing it to but trying to get him to move forward on getting his estate handled. And I'm just wondering, he does not.

[A]

Have a will or an estate plan.

[B]

He's got a will that's about 40 years old.

[A]

7.2 million. $17.2 million. And what percentage does he own?

[B]

He owns about 83, 84% of the business.

[A]

Who owns the other 17?

[B]

I do.

[C]

Okay. All right, cool.

[A]

And you are in what role now?

[B]

I am the general manager and vice president of the company.

[C]

Okay.

[A]

How many team members roughly?

[B]

About 24.

[C]

Okay.

[A]

And your dad still work every day?

[B]

He still comes in a couple of hours. He's not involved in the day to day running of the business.

[A]

Who's running it?

[D]

I do.

[A]

From a VP seat.

[B]

Yeah, he's. We're not, he's not real big on titles.

[A]

Okay, so you're, you're the, you're the basically running the business today?

[B]

Yes.

[A]

And he's how old?

[B]

He's 72.

[C]

Okay.

[A]

Is he in poor health?

[B]

No, he's in good health.

[A]

I just, I'm just curious. I'm just trying to find out what's going on.

[B]

No, no.

[A]

It's not an excuse for not having a will.

[C]

Okay.

[D]

Right.

[A]

Everybody needs one. Exactly. So when you say dad. When you say dad, we have a 17 million dollar asset here. What is going to happen to it upon your death? What does he say?

[B]

He wants it to come to me, but I do have siblings and we have another that are not involved in the business. We have another business that is our farm that we're partners in that he owns the land, but we're partners in the equipment and the livestock. And so I'm not even trying to get him to deal with that at this point. I want him to deal with all of it. But I'm right now trying to deal with the main business just so that I can move forward with my manufacturers and in a growth plan. I mean, we operated the business for 40 plus years in debt. When I took over running the business, I got us out of debt in about three years.

[A]

How old are you?

[B]

I'm 45.

[C]

Okay.

[D]

All right.

[A]

So, I mean, you're going to have to sit down and have a Come to Jesus cup of coffee with him. I mean, this is. This has got to be dealt with, dude. And. But I mean. And you start it with and end it with and sprinkle it full of honor. Dad, you know, what you built here is incredible. And if I understand you right, you've told me, if I heard you right, that you're planning to leave me this business. And for you to work this hard and have all these years and have been this successful and not have a plan so that the family knows what you want us to do, we're going to end up dishonoring your memory because we don't know what we're supposed to do because you don't have it written down. And writing it down, Dad's called a will. And I don't care. I do care, but mainly I care that you have a plan and that it's written down and that we don't end up having to spend, you know, $2 million on legal fees because there's no will.

[D]

Yeah.

[A]

That's dishonoring to your memory and all your hard work. And I don't. I'm here to honor you, dad.

[B]

Right. That's. That's my main concern. My. My siblings want nothing to do with the business. They want nothing to do with either the business or the farm.

[A]

Great. Write it down.

[E]

Right.

[B]

So that's what I'm trying to do.

[A]

Go ahead and transfer the stock now.

[B]

Yeah, he did. He had this same issue with my grandfather when it passed from him and took years of my dad getting accountants.

[A]

And lawyers to say, remind him of that. Dad, why would you. You went through hell. Why would you put me through hell?

[B]

I. Dave, I have reminded him of that time and time again.

[C]

Yeah.

[A]

Where's your mother on this?

[B]

She would probably agree with me, but they just see no urgency in getting it done.

[C]

Okay.

[A]

Well, you know, I'm going to involve.

[B]

Enough people that push me.

[A]

I'm going to create some urgency because this is a problem.

[D]

Yeah.

[A]

So in the first conversation, starts with honor. Dad, I want to honor you. I want to make sure that we do this in a way that is honoring to you. And, you know, my preference is we go and start transferring stock now, which he can do under the Unified Estate Tax Credit and have no tax on it, no gift tax on it.

[B]

So in a conversation we had a few weeks ago, and I was pushing him to begin to deal with his estate, and he made the comment to me, if you want to end up with the farm and end up with the business, you're going to wind up having to buy something from your sisters. And I told him, I've totally understood that, but said, but my point, let's figure it out for five years and you won't sell.

[A]

Let's figure it out.

[B]

Out of the estate.

[A]

And I'll be happy to give up the farm if we can get this stupid thing resolved. I don't want to go through the hell that grandpa put you through. As a matter of fact, I'm not going to stay and go through the hell. You're going to have to deal with this.

[D]

Right.

[A]

This is not okay.

[B]

I totally agree.

[A]

You know, and so, I mean. But you don't start with that level of volume and you don't start with that level of boldness. You start with, I want to make sure that I'm honoring all the hard work of all these years and the way it sits today, if you drop dead today, dad, you've screwed us. Because we're going to spend tens of thousands of dollars on legal fees and accountants trying to get this figured out. And then some judge is going to decide instead of you deciding because you won't deal with this. That's dishonoring to you. Dad, you've worked too hard to be that. You're not that irresponsible when it comes to running the business. We wouldn't have a $17 million business if you were that irrespons responsible doing that. This is. We have to deal with this.

[D]

Sure.

[A]

And just. I'm just gonna con and I'm gonna. I'm gonna constantly be talking about it until he finally blows a gasket or deals with it.

[B]

Right.

[A]

And so it's not like once every six months I bring this up. It's every time I see him, I bring it up until we're sitting in the lawyer's office drafting the stupid Thing.

[D]

Sure, sure.

[A]

And it may be that. It may be that you give up all your portion of the farm just to get this business. And that probably wouldn't.

[B]

No. Financially, it wouldn't.

[C]

No.

[B]

But the problem is I live on the farm, and that's what I mean.

[A]

So what? It's not a problem. Move.

[B]

Yeah.

[A]

You know, but get this solved, man, because all these problems are going to be worse if, you know. Well, dad said we were getting the farm and you were going to move. Huh. Well, I never heard that.

[D]

Well, what?

[A]

Yeah, huh?

[D]

What? Huh?

[A]

And then all of a sudden, the lawyers end up with all this crap.

[D]

Sure.

[A]

Because somebody heard something over some breakfast conversation and he was too trifling to get it put into a will. It's just bad stewardship. It's a bad management of the blessings that God has brought into your life and into his life, and he needs to do a better job with it. I. You know, it's just interesting to me that people refuse to deal with this stuff after they were so good and they're so diligent on other areas of their life.

[B]

So, yeah, I want to settle it with my own. I have two kids in the business, and so I'm like, I want to go ahead and settle mine, but until I came to settle his, I don't know what I got to settle with them.

[A]

Yeah, you can begin all you need to begin some estate planning there and some transfers as soon as it gets into your name but before it becomes super. Before it becomes more valuable and gets outside the federal estate tax exemption amounts. And you're going to be outside of that soon if you keep growing.

[D]

Sure.

[A]

So, yeah, you guys got to get that done. That could be a thing. We can avoid federal estate tax generationally if we go ahead and deal with this now.

[B]

Okay, that's true. That's the point.

[A]

And that's another reason to go ahead and do it.

[C]

So.

[A]

Yeah, he needs to be sitting with an estate tax attorney 10 years ago. I agree. And y' all gotta get this done. And. Yeah, I'm just gonna talk about it a lot. And you don't have to be a jerk. You just gotta be persistent. And the problem is you feel weird about bringing it up and awkward and so you only do it once every six months. I'm doing it every six days until this is dealt with. Hey, dad. Me again. Remember that thing where I was gonna honor you and your wishes?

[D]

Yeah.

[A]

You remember that discussion last week? So when is our appointment? Do you want me to set the appointment? Can I find the estate tax attorney. Can I find the guy who's going to draft the will and you sit down with it.

[E]

I'll help you.

[A]

But we're doing this what does the future hold for business? Ask nine experts and you'll get 10 different answers. Economic growth or a recession? Business taxes will go up or down. AI will help us do work or replace us all. But there's no such thing as a crystal ball. That's why more than 42,000 businesses have future proofed themselves with NetSuite by Oracle, the number one AI cloud enterprise resource planning system. Ramsey Solutions uses NetSuite and you should too. Whether your company is 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 can help you see into the future with actionable data. And when you're closing the books in days, not just 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 Ramsey it's free at netsuite.com Ramsey this is your very last chance to get your tickets to the Entree Leadership Master Series Livestream. It's October through 24. This is a game changing event. Our executive leaders and I will walk you through the exact tactics we use to grow a $300 million business. You'll learn how we lead our teams, develop strategy, grow our profits, get our whole company fired up about our mission. Plus you'll come away with a custom plan to scale your business. This is not theory, it's practical. It's step by step tactics that you can start using in your business on Monday. Meat and potatoes baby. And you only need one ticket to stream the event for your whole leadership team. But this is your very last chance to register, so do not wait. You've already waited too long. But go do it right now. Go to entree leadership.com livestream now click the link in the show notes. That'll get you there too. Kirk is in Phoenix. Hey Kirk, how can we help?

[E]

Hey Dave, thanks for taking my call.

[A]

Sure.

[E]

So I'm a fourth generation farmer and my wife and I we just started our own farming business. Kind of took over from my dad and stepmom about three years ago and in that time we've made a lot of Mistakes, had a lot of bad luck, and now we've found ourselves in, in quite a bit of business debt that we're working our way out of. We've only recently stumbled upon your resources, which have been incredibly helpful. But one of the things that we're trying to do is we're actually selling our home to downsize to live a little more modestly. And my question is, should we consider taking the proceeds from that home and putting them back into the business and renting for a time, or should we purchase a smaller, more modest home and just stay the course with the process and the business and get out of debt?

[A]

How much are the proceeds?

[E]

About 100 grand.

[C]

Okay. All right.

[A]

And how, what's the, how expensive is the house?

[E]

Five. We have it listed for 585.

[C]

Okay.

[E]

And we feel like that's a pretty fair price right now.

[A]

And how much business debt, how much debt do you have and how much of it's business debt?

[E]

Well, other than the house on the personal side, we have like just a few grand worth of debt that we're debt snowballing a medical bill and a four thousand dollar car payment.

[A]

How much on the farm debt?

[E]

About seven hundred thousand.

[A]

Okay, and what was that for?

[E]

So about 550,000 of it is a line of credit, which part of that is getting pulled into a term loan and then the rest of it will remain as a line of credit. And then I've got a couple of credit cards, one for an equipment, one for a business credit card and some. A couple of tractors that we're still paying off.

[A]

Okay, what was the line of credit used for?

[E]

Use for everything from, I mean, just general business expenses, all kinds of fertilizer feed, payroll. You know, we came into this thing with.

[A]

So you lost $550,000 on this business since you started running it?

[D]

Yeah.

[E]

And part of that was. Well, part of that was actually to buy the home that we're in now. And then we took the home, the proceeds from our other home, which was not exactly how much that we had put into this home, but we sold a home, put that money back into the business, which is about. So probably net 50 to 70 grand of that total debt was probably in our home purchase.

[A]

So are you still losing money on the farm?

[E]

No, no. This year we're, I mean we finally feel like we're. I've got my head above water here and we're, we're making progress. So we're, this year will be, we'll be profitable. You know, we. Last year going into the season I had 20, $20,000 to work with and you know, after several hundred hour work weeks and you know, throwing everything we can at this thing, we made it through our main growing season. And this year I'm projecting to have anywhere between 150 and 200,000 to work with going into next season. So bit of a different story than last year.

[A]

What are you growing?

[E]

Wheat is probably our main commodity. And how many acres cotton total? We do about 850 acres, so we're pretty small potatoes for our area.

[A]

Are you owning all of that or leasing some of it?

[E]

No, we, it's. I don't own any ground. It's all, none of this.

[A]

Okay, so this is all, this is all, this is all business losses and tractors.

[D]

Correct.

[A]

$700,000 worth and a little bit of screw up on the house deal.

[D]

Yeah.

[C]

Okay. All right.

[A]

Why did it lose so much money in the first year? I mean you're harvesting wheat, why do you lose money on that?

[E]

I didn't know what I was doing is the long and short of it.

[A]

Well, I mean you just. The crop didn't come in.

[E]

Yeah, I mean basically the first year. Yeah, I kind of underestimated how hot things would get.

[A]

So your yield per acre for the first couple years sucked.

[E]

Exactly.

[A]

Okay.

[E]

The first, the first, the first year the yields were horrible across the board. The second year I kind of figured out what I was doing with my wheat crop, my cotton and my, my other seed crops. I do. That was a different story. And this year I feel like I'm finally putting it all together. So it's basically been a 700, 000 life lesson that I've learned the last few years.

[D]

But.

[A]

And you're a, you're a fourth generation farmer?

[D]

Yes, sir.

[C]

Wow.

[A]

But it's. Something changed that much when you went into business that you didn't know how to grow the wheat. That's interesting.

[E]

Well, yeah, I took the, I took over the business from my dad who had not been really involved in the day to day for several years. I kind of stepped away for a while and then came back and quickly realized that it wasn't going to work because I was managing this company as well as another company. But I mean I can drive a tractor better than anybody in this county, but I was never really trained on how to run a business, how to call shops out of run irrigation or how to plant stuff. Yeah, I mean I could, I could plant it but I couldn't figure out how to water it apparently because it all burnt up.

[C]

But okay.

[A]

That's what I'm trying to figure out here. Okay. So because all of that matters in the story, it's not just to shame you for how you got here, but if we want to get out of how we got here, how we got here has to stop. And that's what I'm trying to get. Make sure I get to the bottom of. So it sounds like you've turned the corner. I'm believing you. And so you know what, what's it take for your family to live.

[E]

Right now? It takes about 8,000 bucks a month, and half of that is my mortgage, which is why we're selling the house.

[C]

Okay. All right.

[A]

So if you're renting something cheap till you get this debt mess cleaned up, what does it take your family to live a month?

[E]

So the cheapest that I've been able to find for a house here in our area, that's.

[D]

Yeah.

[E]

I mean, anything that's not, like, in a horrible part of town, we're still looking at like 2,000 bucks a month. Like, there's not many options.

[A]

And so $6,000 a month is what it takes. $72,000 a year.

[D]

Yes.

[C]

Okay.

[A]

And everything above that you can throw back into the business.

[D]

Correct.

[A]

And you made 150 or you think you're going to make 150 to 200.

[D]

Correct. Yeah.

[C]

Okay.

[A]

So that means we're going to have somewhere around 75 to 100 and a quarter to throw at this debt this year.

[E]

Well, the problem is that, I mean, just because agriculture is such a seasonal deal, like, I. I'm not exactly sure how much I'm going to be able to. Of what I make this year. I'm going to have to have some kind of a nest egg. I mean, I can put it all down on my line of credit, but then I. I won't get a major payday until next June when we harvest our wheat. So part of that is reserving some for just business expenses for four, five, six months. So it's not as if I can just write a big check and pay down debt and leave myself with nothing, because I. It's not.

[A]

No. But I'm saying over the course of 12 months, you're going to make a profit of $150,000 to $200,000, is that correct?

[D]

Yes, sir.

[A]

And over the course of 12, you have to manage cash flow. But over the course of 12 months of that $150,000 to $200,000, you need $70,000 to live on.

[E]

That would be above and beyond My current living expenses, that would be with that 150. So it would be 150 plus if I'm right. Now I'm taking home.

[A]

Honey, that's not profit then. Because before you take it home, it has to be profit. So the business doesn't get to pay your living expenses. Those aren't deductible. That's not a business expense.

[D]

Right.

[A]

So are you making 150 plus 72 or are you making 150 minus 72?

[E]

It would be 150 plus 96, actually. Is my current.

[A]

Yeah, your current burn rate. But you're changing that because you're gonna rent, okay?

[D]

Correct.

[A]

Until we get this dadgum mess cleaned up.

[C]

Okay.

[A]

So you have a whole hundred and fifty profit after all. Business expenses and personal expenses?

[D]

Yes.

[C]

All right.

[A]

And you got 100,000 coming out of the sale of the house?

[D]

Yes, sir.

[A]

So that's 250 towards your 700. It's not all at once, but it's going to be over the course of 12 months. That's how it's going to shake out. Am I right?

[D]

Yes, sir.

[C]

Okay.

[A]

So you cut up those business credit cards. You never use them again. You pay off the tractors and pay off the credit cards and all you got left, the line of credit, and you start to pay it down. And every year you pay it down a little bit more and you keep living on nothing. And you keep renting. And about three years, if you keep running the same level of profits, you should be debt free. Did I do that right? Yeah, I think I did. And then as soon as you're debt free, you start using that money to pile up cash to buy a house with. So you're renting for three years while you get your mess cleaned up that you made over the last two years and hopefully we got a bumper crop keeps coming in for the next three. And you keep making about the same or even more. Maybe you even get better at this and maybe you make even more, right?

[E]

Yeah.

[A]

But next time you get ready to buy a tractor, don't.

[E]

No, we haven't been buying any new equipment. I've got two, but I mean, next.

[A]

Time you get ready to buy a tractor, don't. Unless you've got the money. Stop it. Because as you have figured out, farming is a business. And you don't get an exception to the rules of business just because you're a farmer. In America, we love our farmers and we respect you for the hard work you do. But you don't get an exemption from math. Cause you're a romantic farmer. And I mean, your comrades out there drive me nuts because they're like, dave Ramsey doesn't understand farming. Farming's a freaking business. Dave Ramsey understands business. And Dave Ramsey understands that when you finance $200,000, $800,000 combines, it's very difficult to freaking stay open in any business. Well, it's just. That's the way it is in farming. No, it's not. It's the way you chose for it to be. So you got to stop that and you got to break that cycle. Because if you'll run this thing debt free, dude, you can put a quarter million dollars a year in your freaking pocket. Four, five, six years from now, you're going to be sitting pretty, you're going to be making so stinking much money, it's going to be unbelievable. And then you can cash flow equipment, good equipment, and that's what we've done here. The studio that I'm broadcasting from has 27 miles of wire in cost over a million dollars to produce this one room.

[C]

Okay?

[A]

And so. But we didn't start with a studio that did that. That was after we had made some freaking money. We started with a borrowed studio at the local radio station. And until we had the dadgum money to buy a little mixer board and a couple of microphones. And then we built our first little studio, which was horrendous. And then we made a little money and we built another studio and made a little money. And this is my seventh one in 35 years I've sat in. And it's the most glorious of all by far. But it's cost a lot of dadgum money, you know. But I didn't start with that and go, well, to be in broadcasting, you have to have a million dollars. No, you don't. You use somebody else's and you put it in a closet. Until then, I sat in a closet. That was the first studio. We cut a hole in the wall and I sat in the closet and the booth was through the hole in the wall. So this is how you guys do it. So that's the situation you're in. So you're gonna sacrifice like crud to clean up for the debt that you financed because you had to learn some lessons the hard way. And I'm sorry you had that, but I'm excited for where you're gonna be in five years. You're gonna be able to pay cash for nice equipment and still make serious profit and then increase your productivity and make even more profit. And it's gonna get better and better and better and better if you stick with these principles. So that's what I'm doing. I'm moving to the rental, I'm throwing 100k down on this thing. Clean up those credit cards, those tractor loans, and I'm gonna cash flow that other 150 to 200 out over the following 12 months while I run the business. And you gotta keep the cash flowing and you gotta manage cash to get there. But the net, net net of it is you should clear another 150 to 200 to put on this. And that'll clear up every single thing and really take a good bite down into the line of credit and you should be there. That's where you're gonna be. So, man, you're a hard working dude. I'm proud of you and I sure hope this works for you because you deserve it. You're a good man. Keep it up. Our question of the day coming in from Will in Pennsylvania. Dave, leadership often requires making un decisions for the sake of the mission. How do you lead with conviction when you know the team might disagree or even resent you? In the short term.

[C]

I.

[A]

Don'T have that happening much. We lead with conviction and we lead on principles. But we've communicated so clearly what those principles were all the way back to the hiring process. So when you're onboarding, you know the principles that we use to make decisions. So later on we've talked about, we use those principles to make decisions and we talk about it called core values. And this is how we make our decisions and this is what we do and this is how we're convicted and this is who we are. And then when I make a decision based on that, no one is shocked. They'd be quite shocked if I didn't do that. They don't get whiplash because this is who we are. And why would you disagree? I mean, this is what you signed on for. You wouldn't really disagree. Now you might disagree if we were doing something that was contrary to the values that we promised you we were going to use to make decisions based on. And that would be valid because then you'd be hypocritical. Right? But that's. You don't have convictions when you're hypocritical. You're just being convenient and compromising and wussified and all that stuff. So how do you lead with conviction when you know the team might disagree? I can't think. I mean, the team might disagree about things that are not missional but tactical. They might say, hey, the best way to do to score a touchdown here is a running play to the right and I'm going a running play to the left. And neither one of those are a missional decision. It's a tactical decision. And then they can make an argument for that and I can make an argument for mine and we can talk about it together and then we'll decide which play to run to get the touchdown. Because we want to win the Super Bowl. We're both trying to agree on that. But it's not like we decided we're going to play soccer instead of football. I mean, we're still playing football, we're still trying to run the dadgum ball into the end zone. And so we didn't change sports. It's what we're doing, what we're doing. So I haven't had a time when the team disagreed on something I was doing from conviction based on the principles that they knew were here when they joined the company. That has not come up. I have had team members think that they knew something about a situation that I couldn't disclose. And so they thought I was being hypocritical and they thought I was making a non principled decision. But they didn't have the information. And I've had that happen and they quit because they thought they worked for a jerk. And you know, I was doing, I had, I had information they didn't have that I had to make a decision based on that and it was confidential stuff I couldn't get into. So I have had that, but only like one time in 30 years have I run into that. Most of the time when we're making a principal decision, we can disclose everything around it. A decision of conviction, a decision of mission. We can talk about it. We can all make sure are we. Is this decision aligned? That's missional. And this is the mission you signed up for. So there's not a question. We're going to go clear the room and that's what we got to do. This is what we do. And so typically where I've had team members disagree even on tactical things and create resentment is where we had not communicated clearly to them why we were doing something. And the why aligned with our core convictions and the tactical aligned with our core convictions. And if you've got a different way to do this, tell me what it is. But, but sometimes I've had folks that were immature, but again, that was a hiring problem. Right, because then you're just being an immature child because you don't you don't like the fact that we changed the coffee machine or whatever the flip it is, right? And so, and I have had times where we did not communicate change far enough in advance and clearly enough. And then when we hit the curve hard on the change and we, you know, we whip around the corner on the change, the centrifugal force has thrown some people out of the car. They couldn't handle the change, the rate of change. But some of that was they couldn't handle the rate of change. And some of that was we didn't communicate it far enough in advance. Like, hold on, we're hitting the corner here, grab hold. I mean, two hands and seat belt, get a hold. Otherwise you're going to flip out because we're hooking this puppy. And so, you know, I've had that happen. But that was just a communication issue where we didn't do a good job of selling the dream and selling the vision. And the Bible says where there is no vision, the people perish. And so casting that vision, saying, this is who we are, this is where we're going. This is why we're going here. And I have had that. But I am having trouble really coming up with a solid example in our experience that we've had this. I've not had the other thing. The term in this question that bothers me is the team might disagree or even resent. You see, I don't have people resenting me for very long. They either need to not resent me or leave because I'm not giving you money, my money, to work here. If you resent me. It's kind of like part of the deal we have that we like each other, we trust each other, we treat each other with dignity. You don't get to roll your eyes and go, dave's a crazy man and he has no idea what the flippy's doing and I'm gonna cash his check on Friday. That's not something we do here. So I have a real low tolerance for that. Like zero. And so I'll be nice to you, but you're not gonna work here anymore. And so that's part of what I'm having trouble plugging into with the way your question is phrased. So we're definitely going to buckle down. We're gonna say, this is what we're doing. Very clear, very principled. Starts at the hiring process and, you know, get buy in from the team, cast a vision. This is who we are. This is a vision. This is where we're going. This is why we're changing. This is what we're doing. And. And then if they can't hang on when we make the corner, then they can't hang on. But you're. You need to. You need to be in the car or out of the car. You can't ride in the car and roll your eyes about the car. That's not how it works. So contempt is not something we, we deal with from our team. You know, we don't have contempt. I don't have contempt for the team and they don't have contempt for me. It's a fair deal. We're both like grownups and stuff. If you have contempt for someone, you should go work somewhere else because you think your leader's an idiot. And so that's, you know, pretty simple. Yeah. So. And I will tell you this, will, you said, how do you lead with conviction when you know there is no real leadership unless it's with conviction? Leadership that's done as a compromise with no backbone, go along to get along. That's not leadership. That's just mop rule. And so all real leaders have a conviction about them. They feel strongly about things. Otherwise, you're just not a leader. You're a follower in a leader's jacket and you got a little plaque on your desk, but you're not really leading anything. You're just going along. Leaders all have convictions. So it's the only way you can lead. But the way to avoid the disagreement or resentment or whatever are the things we've just been talking about. That's a great question. It's interesting to give me a little diatribe on that, but. Yeah, but I have found that over the 30 plus years of doing this, that the frustrating thing that I go back to most of the time when I've had team member problems in these areas that we've been talking about, it goes back to the hire and the onboarding process. We weren't clear to them what signing on meant, that this is who we are. And if you want to be a we, this is how we function. And we didn't do a good job at onboarding, and we didn't do a good job repeating over and over and over, this is who we are. This is our value system. This is how we make decisions. This is what convicts us, what we have conviction based on. And if we keep all of that a streamline of communication that's very, very clear about who we are, then when we act like we act, no one is shocked, no one disagrees, no one has resentment because they fully expect us to do that because it's what we have been saying since they had the very first contact with us. But when we don't keep that steady stream of communication about our values and constant teaching and constant thinking about it all the way back to the very first day you come to work here, or even in the interview process before you come to work here, then that's where we have had the most trouble. In other words, we get people in the building that thought we were playing one game and we were playing another, and that's our fault because we weren't clear. To be unclear in that situation is to be unkind. If you want to grow your business, you need a proven system that actually works. That's why you've got to join the Master Series livestream. October 20th through the 24th, my executive team and I are opening up our playbook and we'll show you the exact tactics we used to grow Ramsey solutions into a $300 million company. You'll see how we lead, how we strategize, and how we grow profits and how we build a unified team that's fired up about our mission. It's like having my leadership team in your office training your leaders for five days. This isn't theory, it's practical, step by step tactics you can start using in your business on Monday. The best part is you only need one ticket to stream the event with your whole leadership team. That's like getting 10 tickets for the price of one without paying for travel. But there's no time to sit on the fence. Go to entreeleadership.com live stream and get registered today or click the link in the show notes. If you're listening on YouTube or podcast, Ronnie is in New Mexico. Hey Ronnie, how are you?

[B]

I'm good.

[F]

How are you, Dave?

[A]

Better than I deserve. What's up?

[F]

In 2002, my dad and I started a service and repair business serving our local farmers. We started as an S corp with four officers. My dad, my mom, myself and my wife. Last year we did about 3.9 million in billing and this year we've billed about 3.5 million. We have 12 employees including the four officers. And how do my parents step out of the corporation and retire without doing a stock redemption plan? And my wife and I incurring business debt.

[A]

What's the profit on the 3 and a half million?

[F]

600,000.

[A]

Are you 50? 50?

[D]

Yes.

[F]

We started 5050 and have been the whole time.

[A]

Okay, so what would you value? 50% of the business at if they own 50%.

[F]

We did an evaluation and we evaluated the whole business being about 4.1, and so half of that would be 2.5.

[A]

Who did the valuation?

[F]

My mom, one of the partners.

[A]

Okay, she's wrong.

[F]

So that was just done off of an average of our billing and our net profit over the last.

[A]

Yeah, your net profit's 600k. The most the business is worth is four times that. Four to five times that. That's the most it's worth. So she's overvalued it by about a million dollars. Okay, no one. No one is going to buy a small business at the cap rate that she's got this at.

[D]

Right.

[A]

You could not sell that business for $4 million in a million years.

[D]

Right, Right.

[C]

Okay.

[A]

So the first thing we got to do is solve the valuation problem. Then we get back to. Okay, so 600k times 4 would be 2.4, times 5 would be 3 million. So it's worth between 2.4 and 3 somewhere in there. So if we call it 3 and you could buy. What does it take for you and your wife to live at home? What's your living expenses?

[F]

Living expenses. Probably 4,000amonth.

[A]

Okay, so 50 grand a year. So are you guys pulling any salaries out of this or are you just living off the profits? Yes.

[F]

No, we're pulling salaries.

[A]

How much are the salaries?

[F]

About 8,500amonth for each for me and my dad.

[A]

Okay, so you're pulling 100 grand in salaries. And now does the 600k occur after each of you pulled 100 or before? After. Okay, so it's actually making. If the owners took nothing, It's. We've got $800,000 to play with here.

[C]

Okay, all right.

[A]

Well, the way I would do it is I would say, all right, if dad and mom are at home and they're retired and we are buying them out as fast as we possibly can, that now adds 100,000 because your dad's not there anymore to the equation. And so instead of 600, I have 700. I'm still getting 100 to live on. So I've got 700,000 if dad's at home retired, to buy him out with. Is that right?

[D]

Yes.

[A]

If you give him the whole 700 for three or four years, you would be done.

[D]

Right, Right.

[F]

But what kind of tax implications would that put on them?

[A]

He's making a profit of $2 million. He sold a business for $2 million. He's going to be taxed. Right?

[D]

Right.

[C]

Yeah.

[A]

No taxes every year on that that's income. Because I assume your basis in this is zero. You started with a truck and some tools, right?

[F]

Yeah, well, we started with a $50,000 loan.

[C]

Yeah.

[A]

To build the shop.

[C]

Yeah.

[A]

So you're. Yeah, you're, you know, his base. He probably doesn't have a basis against it right off. Yeah. And that's. That would be true if it was an LLC and it would be true if it's a sub. S doesn't matter on that part because the bottom line is he's selling a business that he's having a liquidity event of 2 to 3 million dollars. And so he's going to pay taxes over a period of time, in this case on 2 to 3 million dollars. There's no tax free way to do this because just like the 100,000 that you're paying yourselves and for that matter, the 600 has passed through. You guys are paying taxes on the 600 too?

[F]

Yeah, we're paying a ton of taxes.

[D]

Yeah.

[A]

You're getting killed. Welcome to small business.

[C]

Yeah.

[D]

Right.

[E]

So.

[F]

When I buy them out, do I need to change this over to a different. Like a C Corp or something?

[A]

No, you don't want C Corp. New C Corp's horrible for small business. S Corp or LLC is the way to go. I've moved west from S Corps because of Tennessee law. I don't know New Mexico law, but LLCs are more favorably treated in Tennessee. S Corps can get a franchise and excise tax in our state. So I don't do them anymore. I had an S Corp at one time. I don't have any of them now. I only have LLCs now. But you can. You could learn from a tax pro in your area there what you guys are facing in New Mexico. But you don't need to get in the sea. A C is a nightmare. You get stuff trapped in there. I talked to a guy that they got $20 million trapped in a sea and he can't get it out. It's a bad idea. So, so let's revisit. So 2.47. 100 times 3 is 2.1, times 4 is 2.8. So if we call it 2.8. Oh, wait a minute. That's the valuation of the whole stinking business. 600 is the whole profit. That's not half the profit. So the whole business is worth 2.8. So half is going to be 1.4. You're going to pay them out in two years.

[F]

Right.

[A]

That's how you're going to. Okay, that's even Better?

[D]

Yeah.

[C]

Yeah.

[A]

Because we're only buying half of it. You already own half of it. Right. I did the math wrong. I'm sorry. I screwed up. But, you know, if you value it at 2.8 and you give them 700 a year for two years, they're done. And what I would do is just say we're going to give you all of the. I wouldn't. I wouldn't set a 700 figure. I'm saying I'm going to give you 100% of profits after I make 100,000 salary until you hit your number. So then if profits dipped, you're not in default. They get 100% of profits until we get to. In my example here, 1.4. And I don't care what you settle on. You can settle on 1.4, 1.5, I don't care. But you get 100% of profits, and I'm gonna pay you monthly. Close your books once a month, and whatever the profits are, send them right over there. Do you have a calculation for retained earnings of any kind?

[F]

No, not in front of me.

[C]

Okay.

[A]

I mean, do you put money in retained earnings each month or do you.

[E]

We.

[F]

We don't necessarily put something in retained earnings, but we just make sure we.

[E]

Have a.

[F]

Generous operating account that we operate out of.

[A]

Well, that if you start closing this books monthly and you take 100% of the profits out, that's going to starve your funding of retained earnings. If you don't have that built in the formula, too. You follow me?

[E]

Yeah.

[F]

Yes.

[A]

So I might say I'm gonna pay you 90% of profits, and I'm gonna put 10% in retained earnings, and I'm gonna take 100k until we get to your number. So that gives you some slush for operating.

[F]

So the other night, while we were having our meeting about this, you know, I turned around and I asked my.

[E]

Dad, I said, so what?

[F]

What's your opinion on all this? And this was when we were talking about the 4.1, and he said, I. I just soon give it to you. And.

[A]

Well, what's he going to eat with in retirement then?

[F]

Well, they. They have. They have a retirement fund that's funded.

[A]

What's that mean? They got $20 million.

[F]

Well, 2.1.

[C]

Okay.

[A]

So if he wants to give it to you, that's okay, too. You got siblings?

[D]

I do.

[F]

I have one sister.

[C]

All right.

[A]

If he did that, you know, it might be like you need to put a valuation on it for fairness, so that reduces your part of the future estate by that much, you've gotten an advance on your inheritance, and so your portion of the estate would be reduced by the 1.4 or whatever it is.

[C]

Okay.

[A]

Or I don't care if you call it two. I don't care whatever y' all call it. But, yeah, I would do that. And that's good. That means he's done a great job managing his life. What a great guy. That's awesome.

[D]

Yes.

[A]

That's what we're doing at Ramsey. Sharon and I are set. And 99% of our vote of our stock has already moved to the kids. 10 years ago. It's in the children's trust now. I own 1% of Ramsey, and it's the only voting stock. So I'm still in control, and I'll transfer that whenever I want or on death. And Sharon gets nothing here. She's got hundreds of millions of dollars worth of other stuff, so she's fine. But the company itself has been operated for God, and the kids now operate it for God or will when I'm gone, and the grandkids will, too, and so on. Because we've already set the whole thing in trust to where it will never be accessed by. And destroyed by estate taxes, because we set that up 10, 15 years ago. So that's, in a sense, what we did. But we looked at it like God owns the company. I don't own it. And the best way for the company, for God's company to prosper is for me to not saddle the next generation with debt. And so we built our. Like your dad did. We built our own wealth on the side, away from Ramsey. And that put us in a position to do all that. So your dad's cool. I like it. I like that. That's very neat of him. And then you just. If you do that, you just got to figure out how to make that equitable with your sister in the whole estate plan. And I would want to do that. I'd want to make sure all those eyes were crossed. I were dotted, T's were crossed. And I love that your dad is addressing all of this. How old is he?

[F]

He's 70.

[C]

Perfect. Wow.

[A]

He's very wise. I have. One of the biggest things we fight is getting people to do this. And so you guys are addressing it. You're having very clear conversations, kind conversations. There's not a dysfunction, a bunch of greed. You guys are really stellar people, both of you. This is. This is very neat.

[F]

We just don't want to get in a mess, you know?

[A]

And you will if you don't do that.

[F]

If he dies tomorrow or, you know, if he dies tomorrow, we're in a mess. Yeah, but you know, so we're just, we're just trying to. Yeah, trying to.

[A]

Either he gives it to you or you buy him out over the next two, two and a half years by giving him 90% of the profits and old 10% back. And you live on 100.

[D]

Right. Okay.

[A]

That's a formula that'll work. And then profits go up, profits go down. Profits go up, you buy them out faster. Profits go down, you buy them out slower.

[D]

Right.

[A]

You guys are amazing. That's very well handled. Good work, 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 joining us on entree leadership.