Is My Business Too Niche to Grow?

Summary

The EntreLeadership Podcast: "Is My Business Too Niche to Grow?" – Detailed Summary

Release Date: October 14, 2024
Host: Dave Ramsey, Ramsey Network

In this insightful episode of The EntreLeadership Podcast, host Dave Ramsey tackles the pressing concern many business owners face: scaling a niche business. Through real-time coaching sessions with three distinct callers—Amy, Lincoln, and Ryan—Dave delves into strategies for overcoming the challenges associated with specialized markets. Additionally, Dave introduces essential concepts on team building and leadership that are crucial for sustainable growth.

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1. Introduction and Context

Dave Ramsey opens the episode by welcoming callers seeking guidance on various business and leadership challenges. He emphasizes his extensive 30-year experience in leading Ramsey Solutions and commits to providing actionable advice to help leaders grow their businesses effectively.

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2. Caller Amy: Scaling a Niche Consulting Firm

Profile:
Amy from Indianapolis is the co-founder of a boutique consulting firm that specializes in practice management for surgeons. Her firm assists surgeons in running the non-clinical aspects of their practices, such as business operations.

Challenges:

• Niche Market Constraints: Amy feels her business is too specialized, making it difficult to scale.
• Team Building: Struggles to find consultants with the requisite expertise in surgical practice management.
• Capacity Limits: Overwhelmed by the increasing demand, predominantly driven by word-of-mouth referrals (95%).

Dave's Advice:

• Delegation and Handoff Strategy:

  • [03:03] Dave suggests delegating client interactions by introducing new consultants with the assurance that he will oversee their work. He shares his approach of transitioning clients by personally introducing the new team member, ensuring clients feel supported.
  • Notable Quote:
    Dave Ramsey: “When they come in the door, you say, I’m going to have you work with our top person... They’re going to do most of the heavy lifting with my oversight because my calendar is full.”
    [02:16]

• Training and Mentorship:

  • Emphasizes the necessity of thorough training for new consultants, highlighting that expertise in related fields (e.g., dental or veterinary practice management) requires adaptation to the specific nuances of surgical practices.
  • [05:15] Dave explains the importance of walking alongside new team members during their initial projects, allowing them to learn the “Ramsey way” over approximately six months before granting full autonomy.

• Structured Communication:

  • Recommends establishing regular one-on-one meetings to provide consistent feedback and ensure alignment with business standards.
  • [08:31] Amy considers implementing more structured one-on-ones, to which Dave strongly affirms the necessity.

Outcome: Amy acknowledges the validity of Dave’s suggestions, noting that her current team members are performing adequately and that enhanced communication and structured training could alleviate her capacity issues.

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3. Caller Lincoln: Leadership in a Landscape Company

Profile:
Lincoln from Asheville, North Carolina is a 20-year-old owner of a landscape company with nine staff members. His business generated approximately $560,000 in revenue in 2023, aiming for $850,000 to $1,000,000 in the current year.

Challenges:

• High Turnover Rate: Difficulty in hiring and retaining the right people.
• Leadership Development: Uncertainty in effectively leading and managing crew leaders.
• Balancing Leadership and Operations: Struggles with delegating tasks and spending excessive time in the office.

Dave's Advice:

• Leadership Philosophy – Pull vs. Push:

  • [16:14] Dave introduces the concept that bosses push (cracking the whip) while leaders pull (setting the direction and leading by example).
  • Notable Quote:
    Dave Ramsey: “A boss is standing behind the cattle... A leader is standing in front, pulling.”
    [16:14]

• Empowering Crew Leaders:

  • Encourages Lincoln to train his crew leaders to lead their teams effectively, emphasizing that leaders should serve their teams by solving problems and providing support rather than dictating tasks.
  • [18:10] Dave advises that Lincoln’s role is to serve his leaders, ensuring they have the resources and support needed to perform their roles.

• Building a Supportive Culture:

  • Highlights the importance of fostering a culture where leaders act as mentors and role models, especially for younger employees who might lack stable parental figures.
  • [21:32] Dave underscores the need for leaders to be stable, godly male figures who can positively influence younger team members.

Outcome: Lincoln gains a clearer understanding of his role as a leader and the importance of building a supportive and empowering environment for his crew leaders. Dave’s insights on servant leadership inspire Lincoln to adjust his management style to foster loyalty and reduce turnover.

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4. Caller Ryan: Scaling Multiple Businesses

Profile:
Ryan from Jacksonville, Florida owns two companies:

1. Gas Line Installation and Service Company:

   • Revenue: $770,000 last year.
   • Employees: 1-2, fluctuating.
   • Current Focus: Primary source of income and time investment.

2. Patented Product for Utility Protection:

   • Revenue: $120,000 last year.
   • Distribution: Handful of distributors.
   • Operations: Manual assembly and limited marketing efforts.

Challenges:

• Time Constraints: Limited capacity to grow the product business alongside the primary service company.
• Profit Margins: Low net profit (around 20%) on the product.
• Operational Efficiency: Manual production processes hinder scaling.

Dave's Advice:

• Financial Analysis and Pro Forma Development:

  • [46:02] Dave emphasizes the importance of crunching numbers to understand cost structures and profitability. He advises Ryan to create a comprehensive pro forma statement that outlines revenue, cost of goods sold (COGS), and gross margin.
  • Notable Quote:
    Dave Ramsey: “If I want to scale this, if I'm losing 20 cents a watermelon, I don't get a bigger truck.”
    [46:02]

• Pricing Strategy and Value Proposition:

  • Suggests Ryan consider raising prices to reflect the higher-end nature of the product, positioning it as a superior alternative that offers tangible benefits over cheaper competitors.
  • [47:56] Dave encourages Ryan to articulate a strong value proposition that justifies higher pricing by highlighting the product's unique advantages.

• Sales Expansion and Team Building:

  • Recommends hiring an entrepreneurial sales professional to aggressively expand the customer base and increase sales volume. Ryan should aim for significant growth (e.g., increasing from 15 to 150 pallets annually) to achieve economies of scale.
  • [50:21] Dave advises Ryan to seek a self-starter who can independently drive sales without excessive hand-holding.

• Operational Efficiency:

  • Highlights the need for improving production processes to enhance margins as sales volume increases.
  • [51:14] Emphasizes that scaling requires both sales growth and operational improvements to maintain profitability.

Outcome: Ryan is guided to perform detailed financial analysis, adjust pricing strategies, and expand his sales force to scale his product business effectively. Dave assures him that with the right approach, the business can grow exponentially beyond the current niche limitations.

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5. Key Insights and Concepts

a. Thoroughbreds vs. Donkeys in Hiring:

Dave introduces a metaphor to distinguish between high-performing employees ("Thoroughbreds") and underperformers ("Donkeys"). Thoroughbreds exhibit qualities such as humility, hunger, and emotional intelligence, making them invaluable team members. In contrast, Donkeys are characterized by entitlement, lack of initiative, and disruptive behavior.

• Notable Quotes:
  • [47:00]
    Dave Ramsey: “Thoroughbreds are hungry, humble, and smart. Donkeys are takers; thoroughbreds are givers.”
  • [49:57]
    Dave Ramsey: “Quit hiring resumes and where you went to school. Kiss my butt. Can you do stuff? Can you do stuff with good people?”

b. The People Driver:

Dave underscores that managing people is both the most rewarding and the most challenging aspect of running a business. Investing in the right team members yields high returns but requires ongoing effort to maintain standards and address underperformance.

• Notable Quotes:
  • [39:00]
    Dave Ramsey: “People driver is the most rewarding, the best ROI and the biggest pain point in all of small business.”

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6. Notable Quotes with Timestamps

• Delegation:
  Dave Ramsey: “When they come in the door, you say, I’m going to have you work with our top person... They’re going to do most of the heavy lifting with my oversight.”
  [02:16]

• Training:
  Dave Ramsey: “It's gonna be walking alongside you for the first three or four times they do it. It’s gonna take six months before you can turn them loose, even 50%.”
  [05:32]

• Leadership Philosophy:
  Dave Ramsey: “A boss is standing behind the cattle, cracking the whip... A leader is standing in front, pulling.”
  [16:14]

• Hiring Standards:
  Dave Ramsey: “Quit hiring resumes and where you went to school. Kiss my butt. Can you do stuff? Can you do stuff with good people?”
  [49:57]

• People Driver:
  Dave Ramsey: “People driver is the most rewarding, the best ROI and the biggest pain point in all of small business.”
  [39:00]

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7. Conclusions

In this episode, Dave Ramsey effectively addresses the complexities of scaling niche businesses by focusing on delegation, structured training, and robust leadership practices. Through Amy’s and Lincoln’s cases, he illustrates the importance of building competent teams and fostering a supportive culture. Ryan’s scenario further emphasizes the necessity of financial acumen and strategic sales expansion in scaling operations.

Dave’s insights on distinguishing high-performing employees from underperformers and prioritizing the people driver resonate as essential takeaways for any business leader aiming to grow their enterprise sustainably. By implementing these strategies, entrepreneurs can overcome the limitations of niche markets and achieve remarkable growth.

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Join the Conversation:
If you resonate with these challenges or have your own questions, consider sharing your experiences or seeking further advice through Ramsey’s platforms. Stay tuned for more episodes of The EntreLeadership Podcast for continuous learning and leadership development.

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 right alongside you. If you have a question you want to ask on the show, fill out the [e-mail] ask or call and leave us a voicemail at 844-944-1070. Amy is in Indianapolis. Hi Amy, welcome to the Entrez podcast.

[Amy]

Hi, Dave. Thanks so much for having me.

[Dave Ramsey]

Sure. What's up in your world?

[Amy]

Well, I need some advice. I am a co founder of a consulting firm. It's pretty boutique. We exclusively work with surgeons. We help surgeons start, grow and operate their businesses. So we do everything that's non clinical, everything to run the business side of the surgical practice.

[Dave Ramsey]

Practice management, is that what we would call that?

[Amy]

Yes, that's right.

[Dave Ramsey]

Okay.

[Amy]

And so I am just running as hard as possible on this treadmill and looking for advice on how to scale a business that I feel like it's very niche what we do. The knowledge that it takes to consult and to know the ins and outs of a surgical practice. I'm just having a hard time building a team of other consultants that can operate at that level. And yet I know I need to because I'm exhausted and can't run any harder or faster on this treadmill.

[Dave Ramsey]

Yeah, you filled up your, your slots in the day and you've hit a logistical bottleneck. So there's plenty of business. That's not the problem. The problem is creating the expertise that's trustworthy, that's going to carry the quality into those practices that's equal to you. Am I right?

[Amy]

That's exactly right. And if I can add to that all of our clients come to us, I would say 5% maybe see me speak at a conference. So I am going out and speaking at big national meetings and they connect with me there. But 95% are word of mouth. So it's other surgeons we've worked with that sing our praises. I'm saying our and we, but they're saying, amy, call Amy. That's who you need. And so I'm not only struggling with developing other consultants that have the expertise, but then how do I transition that referral to somebody on my team when I just can't physically continue to take on more clients?

[Dave Ramsey]

Well, that's easy. When they come in the door, you say, I'm going to have you work with our top person. And I'm going to hold their hand while they hold your hands to make sure that they get it right. But they're going to do most of the heavy lifting with my oversight because my calendar is full. I can't take you on. And you'll get, you know, you may lose one or two here or there, but 97 out of 100 won't bind that because you're telling them you're going to be looking at it. You know, an example is I quit doing financial counseling almost 30 years ago. One on one financial counseling. And about 15 years ago, I don't even counsel my friends if they want to come in and sit down with a financial counselor. Dave, I need your help with something. If I ascertain in that conversation that their favor that I'm doing for them. This is a freebie, right? Is more than a 30 minute thing. I bring one of our coaches in to sit with me because I'm going to do a handoff in that first meeting. I'm going to spend 30 minutes with them and then they're doing that. I've got some friends going through a divorce right now. Both of them called me and I'm helping both of them equally. And as a friend, it's not a charge, but it's an example of. They wanted Dave to help them weed through their mess and the divorce. And I'm like, no, you don't. You actually want somebody that's gonna have time to do it and do it right. I'm gonna be playing golf somewhere. You don't want me. So, I mean, you're not playing golf. But I'm just saying that that's the. It's a handoff. Sometimes you set, but it's the way you set the meeting up. So that part's easy. And the biggest. The person that is the most uncomfortable with that part is you. It's not the customer and it's not the new person that's going to be helping them because the new person that's helping them thinks they're better than they are. The customer thinks if you say it's okay, it's okay. And you're the one that has trepidation over the whole thing.

[Amy]

Yeah, you're not wrong. But I do.

[Dave Ramsey]

Or you should have. You should care.

[Amy]

Right? Right, I do. And that ties into. I mean, I don't.

[Dave Ramsey]

Then that comes to who we're hiring and how we're training them and how we're training them. And so you're not going to hire someone that's going to be handling a practice on their own in six weeks.

[Amy]

No way.

[Dave Ramsey]

No, it's not possible. Because even if they have done practice management in the dental world, or in the general practice world, or the pediatrician world or the veterinarian world, which are similar, there's nuances to what you're doing in the surgical world. And the way Amy does it that that person doesn't know. We just hired an expert product manager from one of the biggest retailers in the world that is an absolute expert. Stud knows what he's doing is having to learn the Ramsey way of doing things too. So he's going to be useless stud for a little while until he gets up to speed. And then he'll be amazing because he's smart and he'll catch it and he'll find the parallels between what he used to do and in this, and he'll find the way to fit it in. But you've got to train. And so you're just gonna be. They're gonna be, you know, walking alongside you. You're gonna walk alongside them for the first three or four times they do it. It's gonna take six months before you can turn them loose, even 50%.

[Amy]

Okay. And I suppose that is pretty close to what I've done. I have brought on two other consultants and they're doing fine. I have to reel myself in when they do things. Maybe not exactly how I would do it, but it's still a good result and it's still serving the client. And so.

[Dave Ramsey]

And we can have a talk. I don't mind discussing those things in my one on one with them. You did this in a way I wouldn't have done it. Here's how it made me feel. I'm not sure if it's okay. Cause I think it's okay. But I need you to know I'm kind of uncomfortable when you don't do it my way. And it's okay. You could do it your way. But I'm not gonna leave that tension in the air. Because if you do that times six of these people, that's gonna be a lot of tension in the air. And so I let the air out of that balloon. Every time I'm meeting with somebody, I'm going, you know what? You actually got a good result on that. I wouldn't have done it that way. So it made me a bit uncomfortable. But, you know, you're good. I'm not correcting you. I'm not telling you not to do that. But I'm gonna Say out loud that you scared the crap out of me when you did that. And it helps me. Cause I got that out of my system, then I can move on. I don't have to think about it again. And they know when they step outside of the set, Dave or Ramsey way of doing things, that it makes people around here uncomfortable, including me, you know, and so it's a good thing for them to know that. So instead of like, oh, I'm actually better at this than Amy. Cause I figured this out. No, that's not, that's not what happened at all. Right.

[Amy]

Yeah, yeah, yeah.

[Dave Ramsey]

Lots of communication. And it's okay. You're not killing their little creativity to tell them they did it different. And if you are, they're a sensitive flower and they're not gonna make it anyway.

[Amy]

No. Especially not with surgeons.

[Dave Ramsey]

Yeah. Toughen up, buttercup.

[Amy]

Right, so can I ask a follow up to that?

[Dave Ramsey]

Sure, sure.

[Amy]

When you said in the one on one. And I think that's probably another area that I'm, I feel like I'm communicating a lot and it's more like, join me in this meeting, let's talk about it. But maybe I need to have a more structured one on one.

[Dave Ramsey]

Yes, you do.

[Amy]

Weekly.

[Dave Ramsey]

It could be whatever it needs to be to get the communication level up. Cause you're using this for the last bit of training. Some of your training, what happens on site and you're course correcting while you're standing there or as you're driving away together in the car, you're having a post game film review and you go, no, no, don't throw the ball over there. No. But then overall, you just need to check in and go, okay, how's this customer doing? Tell me what's happening over there. What trouble have you got? How can I help you? Here's one thing I saw made me uncomfortable. I won't tell you about it. And you just, you know, it's a lot of little tiny. If you do that with a regular frequency every two weeks, every month, I don't care. At least once a month though, you're resteering only 2% if you wait and do it till you're pissed off. Now you're resetting the course 25% because the boat's gotten completely off course. So the training and it's mentoring discipling is what you're doing. You're meeting with them saying, this is how we do it. This is how we do it. This is how we do it. Oh, you just discovered something new. We're gonna add that to how we do it. Okay, that's fine. And we keep learning and keep working through discomfort and training and pushing along. And that will help you a bunch. Plus what it does, Amy, is it increases your confidence that the person is competent and that they have integrity that they're following through. The more confidence that you have in their competence and in their integrity, the more you'll turn loose of them and go on to building the next one. Very, very cool stuff. Great questions. You are an amazing young leader. You're going to do great. I'm very proud of you. Thank you for calling in. This is the Entrez Leadership Podcast.

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[Dave Ramsey]

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[Dave Ramsey]

A business owner in the Trailblazer stage of business, then you've got to invest in your leadership team. Leadership development is how you scale to the next stage from Trailblazer. You build into new leaders. You need leaders that lead people, not just you leading people, and you're about to miss the best opportunity of the year to do just that. Entre Leadership Master Series is happening in less than four weeks. I'll be there with some of the top leaders in Ramsey to teach you all the tactical leadership lessons we've learned in the last 30 years of business. Even better, when you watch this with your leadership team, you'll walk away with bought in leaders who lead like you and a custom plan to attack the right problems together. You can stream it live November 11 through 14 or watch it on demand for up to 60 days after the event. To get your ticket, go to entreleadership.com livestream or click the link in the description if you're listening on YouTube or podcast. Lincoln in Asheville, North Carolina. Hi, Lincoln. Welcome to the Entrez podcast.

[Lincoln]

Hey, what a privilege is to be able to speak with you today.

[Dave Ramsey]

You too, sir.

[Lincoln]

Thank you. So I am 20 years old. I own a landscape company. We have a staff of nine. In 2023, we did about 560,000 in revenue, top line. This year, we're going to do about 850,000 to a million with about $150,000 in profit after I get paid. My question is I feel like I'm not doing a great job being a leader for my team, and I want to learn how to be a better leader at such a young age.

[Dave Ramsey]

What do you think you're doing right and what do you think you're doing wrong?

[Lincoln]

I don't really think there's anything that I'm necessarily doing right or wrong, but it's where, like, a couple issues we're having now is we do have a high turnover rate. I think that might be just because it is hard work, and I'm not quite good at hiring the correct people yet. The other thing is, I think one of the big things I actually am doing wrong is I don't know how to lead other leaders, if that makes sense.

[Dave Ramsey]

It does make sense. Yeah. How many different crews have you got?

[Lincoln]

We currently have six.

[Dave Ramsey]

Okay, so you need six crew leaders, right?

[Lincoln]

Correct.

[Dave Ramsey]

And you lead the six crew leaders.

[Lincoln]

Yes.

[Dave Ramsey]

Yeah. Okay. And they're young guys, and they're out there with a blower or a weed eater in their hand when that crew hits the ground, right?

[Lincoln]

Correct. Well, most of them are between the ages of probably 35 to 50.

[Dave Ramsey]

Okay, so they're. But they're play. But they're player coaches.

[Lincoln]

Yes.

[Dave Ramsey]

Okay. They're in the field working and leading. Like. Like that crew jumps off the truck and attacks along, comes back, gets on the truck, goes. Does the next one.

[Lincoln]

Yeah. Our crew hedger always one's first one out.

[Dave Ramsey]

Yep.

[Lincoln]

To get everybody else to work.

[Dave Ramsey]

Yep. Okay. All right. Are you on site doing any mowing anymore? Any actual work? Any. Any of the. Of the labor?

[Lincoln]

Not often. I try to a couple times a week, but I'm mostly stuck in the office.

[Dave Ramsey]

Yeah, I really don't want you to, but I was asking. Okay. All right. I think the first thing I learned, and I was probably 10 years older than you when I learned it was that bosses push, leaders pull. A boss is standing behind the cattle, cracking the whip, going, hyacks, get on here. Get that done. Cracking the whip. Right. When you do that, the organization moves at the slowest common denominator, the speed of the worst person. Okay.

[Lincoln]

Okay.

[Dave Ramsey]

Leaders walk around front of the cattle, so to speak, and. Or the people and say, guys, we're going this way, and I'm going at this speed. And here's what I expect. And if you want to be on this train, it leaves at 11:36, and you will be dressed a certain way, doing a certain thing to be on the train. And if you're not here, the train is going to leave you, because this is a big, bad boy train, and it's moving. And if you want to be part of this thing, this is what we're doing. This is what we do. If you don't do that, you're not a we. That's a leader standing in front, pulling. You see the difference?

[Lincoln]

Yes.

[Dave Ramsey]

And then your job, if you're back at the office, is to talk to your crew leaders and every so often, hit the job sites about when they do stand and watch the work walk over, Talk to the guys, talk to the crew leaders, encourage the crew leaders, brag on people. Give somebody a gift card to the local restaurant for doing a good job. Catch people doing something right. Ask the leader, the crew leader, what they need from you. How can you help? How can you serve? What problems have they got that you can solve for them? To keep the boat moving, to keep the train moving? And your job as a leader is to serve your leaders. Their job as a crew leader is not to boss and crack the whip. It's to lead. And they get off the truck and they say, young man, we're about to cut this grass or get on it. Let's go. We're about to do this. Get that. Let's move this. Got to do that, got to do that. And that's not cracking the whip. It's standing in front, pulling and pulling and pulling, and we got to step it up. We're behind on our schedule. We got to move it. Rain's coming in. Rain's coming in. Ranger dadgum enemy, isn't it?

[Lincoln]

Yes. Especially right now.

[Dave Ramsey]

Mess up, mess up.

[Lincoln]

Schedule I find so difficult is, you know, I want to be a leader, and that's why I do go out a couple days a week, and not for long, like an hour. I'll go to a job site where we have a mowing crew out There I tell them hop on the mowers, I'll weed eat everything. Because that's what the guys don't like to do. But when I get to sit in like the air conditioned office all day and they're out in the heat for 10, 11, 12 hours working their butts off, I feel like it's really hard to pull them along and not push.

[Dave Ramsey]

Them and say hey, the actual guys, that's true. But not the crew leaders. The crew leaders know your job is to help them get their job done. And so when I'm meeting with one of my guys and there's an area of the company not doing what they're supposed to do, it's like, okay, I'm not gonna crack the whip on him or her. I'm gonna say okay, how can I get down the ditch and help you get this thing out? You're stuck. What do we gotta do? What do you need from the personalities? What do you need from events? What do you need from the social media team? How can we get this up and running? What's your problem? Where's the breakdown in your model? Where's the breakdown in your revenue chain? What's going on? How can I help? And that's what it sounds like. But it also has inherent in that servant idea that we're going to move this thing along. When I realized that Lincoln, it even changed the way I negotiated and talked with my teenagers because I realized my job is not to make great kids, my job is to turn kids into great adults. How can I help you be a better man? Talking to my 15 year old daughter? How can I help you feel safe and protected and be the princess that I know God made you to be? How can I help you be that as your dad? And oh by the way, that means you're going to go to school. That means you're going to come in, I'm going to serve you by making you brush your teeth so you have some. I'm going to serve you, making you do your homework. That's me serving you because you're going to go to college someday and you're going to graduate. When you graduate you're actually going to be a useful human being. And that's me serving you because otherwise people who have horrible study habits, have horrible hygiene habits, you know, horrible whatever habits because they're parents were wusses, they didn't serve them. So sometimes serving them feels like bossing, but it's serving them okay.

[Lincoln]

And I think most the older guys and don't get Me wrong. We have such a great team that work here.

[Dave Ramsey]

I wasn't. You, you weren't bad mouthing anybody. Everything's good.

[Lincoln]

Yeah, but most of the older guys, they always come in and they talk about how they could never do like my job or the lady who works in her office because we have to deal with clients all day. Yeah, but I guess the more the problem is with some of these younger guys, which everybody's older than me, but some of them are only older by a few years.

[Dave Ramsey]

Well, those guys, you need to teach your leaders to lead those young guys. And if they're, if they're sitting there in that 30 to 40 or 50 range and the other guys in their, in their 20s, let me tell you the number. 78% of men in America in their 20s spent some time in a single parent household. Your crew member may be their first dad.

[Lincoln]

I know that.

[Dave Ramsey]

So it's not unusual that they are looking for a stable, godly male figure that's not a twerp that hasn't got a filthy mouth that's good to his wife. And they need a model and that looks at those young guys as their little brother and is going to love them. Well, or looks at them almost as a son is going to love them. Well, I'm going to teach you that. I know that almost all the professional sports people we deal with, the coaches that are the best in the NFL, they take that role because they're well aware most of the guys on their team even know who their dad is. And so they're. I've had many of those coaches look at me with tears in their eyes and go, I'm the first dad he had. And so, and they, and they take that role as an opportunity to be a blessing to those young men. So you could teach those crew leaders that say, guys, you know, you got an opportunity here to change that young man's life, to teach him to be honest, to teach him to work hard, to teach him to have a callous. In a culture, listen, in a culture where people don't know how to work, man, you got an opportunity to be a blessing to these young guys and give them something nobody else could give them. And that crew leader, that's how I would be talking to your crew leader. You're not just there to crack the whip and get the yard cut, buddy. You're there to love these young men. That's your job. Your job is to love them like they're yours and take care of them. And if they need something, if the Equipment's half butt. We need to get the equipment fixed. If the customer's bitching, send them to Lincoln. He'll take care of the customer. That's his job. None of us want to screw with that. And, you know, whatever. And, you know, my job is to make. These are my guys. This is my little band of brothers right here. And when you start looking at it that way, rather than they are units of production, then they'll start sticking around because the first dad they ever had, and they're not leaving him, they gonna hang out with him. He changed my life. And I can tell you, I mean, I had a dad, but I can tell you men I've worked for that took that position, that had a huge influence on my life anyway, in spite of that. So that's not a bad thing. There's nothing evil about that. Nothing weird about it. Unless you make it weird. But, you know, that's what I'd be teaching those guys. You're a good leader already just because you're thinking about this stuff. Lincoln, thank you. Well done. Keep it up, stud. This is the Entrez leadership podcast.

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[Dave Ramsey]

I think the first time I heard it, and I've heard it several times since in different places, and I've heard it come out of my mouth for 25 years was Ken Coleman, that is a Ramsey personality was interviewing the most winning basketball coach in history, which was Pat Head Summitt at the University of Tennessee. She had almost 100% graduation rate among her students, and the vast majority of them were on the honor roll and they won national championships year in and year out. While she was at the helm of that, most of you or some of you may know she got early onset dementia, Alzheimer's and is no longer with us. And but I got to meet Pat several times. I was at University of Tennessee Advisory Board and was around a lot of the coaches and stuff in those days. But Ken was interviewing her and she told the story that in her first year she got whipped and she called her dad and her dad was like a no nonsense in your face. She figured he was going to have something pretty negative to say and he kind of hit the middle. He didn't really go negative, but he didn't really go like, oh, it's going to be okay, baby. Instead he said, so you lost? She said, yeah. He said, well, you're not going to win the Kentucky Derby with a donkey, and hung up. Turns out you need thoroughbreds to win. And I picked that up and I figured out at that time, the first time I ever heard that that was many, many years ago, decades ago around here. I figured out that donkeys and thoroughbreds in the same stable doesn't work because they don't like each other. Donkeys don't like thoroughbreds being around because the very presence of a thoroughbred exposes a donkey's donkeyness. Just the thoroughbred being there. What's a thoroughbred? A thoroughbred is somebody who's humble, hungry and smart. Pat Lencioni says. The thoroughbred is somebody that cares deeply. The thoroughbred is someone that's excellent. The thoroughbred is someone that's not only got skills, but they've got humility. They're good with others. They care deeply about the organization. They care deeply about the customer. They are just awesome to have on the team. The donkey comes in late, leaves early, steals while they're there, and wishes you would do more for them. They're entitled little spoiled brats, and that's whether they're 60 or 16. Donkeys are takers, Thoroughbreds are givers. Thoroughbreds add value. Donkeys eat you out of house and home and stir up trouble while they're there. Donkeys don't like it when thoroughbreds are in the stable because it exposes their donkeyness. When excellence stands besides. But horrible, horrible stands out. And thoroughbreds don't like donkeys around because people that work hard and care, they don't like it when other people get paid for sitting on their butt and not caring and half but mailing it in and the first one out of the parking lot and the last one to get in the parking lot. And everybody knows who they are. I mean, 4:00, 5:00. Don't let the butt hit you and don't let the door hit you in the butt. Cause you're already in the car going. And I. And I'm not doing much except checking my facebook account all day while I'm there. Everybody knows who they are except the leader, who hadn't bothered to look. So I figured that out really, really early because I had hired some people. My hiring method was, can you fog up a mirror? If you can come help me, I'll give you money. Because I was so dumb when I started. I thought when you hired people, they would work. I thought when you hired people, they would care. I thought when you hired people, they would treat the customer right automatically. Some of these people were freaking raised by wolves, man. I don't know where they come from with these manners and this process, but it didn't take me long to figure out everybody's not like me and I had made a mistake or six. And there were people inside the building. One old guy was teaching a Sunday school class, and I was taking prayer requests at the end of the class. Anybody got a prayer request? One guy raised his hand and said, yeah, I need a job. I just lost my job. And I went, well, good news. I'm hiring. Come on over for an interview. He came over. We hired him. Then I figured out why he lost his job. He was a donkey. Donkeys go to church too, y'all, so it's okay. And they dress up in the interview and look like thoroughbreds. So you gotta spend a little time interviewing them. Because if you don't spend time with them, you don't know. They kind of look like thoroughbreds when they're interviewing. They polish up everything and come marching in, strutting in like they know what they're doing. But about the fourth or fifth interview with them, you'll hear a hee haw. And you go, wait a minute, I heard that. They'll start saying something, and you go, wait, I think I just heard entitlement. I think I just heard victimhood. You're a victim, aren't you? Oh, yeah, that's what I need is another dad gum victim in the building. I don't think so. Nope. And you have to work through this. This is the people driver of the entree leadership system. The entree leadership system has six things that drive you through the stages. Personal, which Is you purpose, which is setting your mission statement in place. The people you put on the bus, the ones you take off the bus, the ones you put on different seat on the bus. According to my friend Jim Collins, the plan, which is your strategy, the actual product, which is the good or service you put out there, that results in then profit, personal purpose, People plan, product and profit. Those are your six drivers. This is the people driver. The people driver is the one that is the most rewarding in all of business. It is the most frustrating in all of business. It is the largest line item in your payroll, your payroll, on your P and L on your profit and loss statement. When you look down at almost every small business listening, by far the largest item in their profit and loss statement is payroll. You invest heavily into people and you have to get a return on investment, meaning they have to produce more than they cost. Or you go out of business or you're having layoffs because you hired a bunch of freaking donkeys. And I've done it. So I not had layoffs, but I've hired donkeys. And I had to have a donkeyctomy a time or two. It's the surgical removal of a donkey, that's called firing their butt. And you got to be kind when you're doing that because you don't want to upset the little donkey. He might turn into a thoroughbred someday. So we're trying to help him, right? But we're also going to be very clear and go, well, we don't do that here. We don't do that here. We don't do that here. We don't do that here. Apparently you're not going to be here because we've covered this with you six times and you keep doing that. And so one more time and it'll be your last. Oh, okay. Now you're gone and you have to sit down. You don't surprise people. We don't walk in, we're not angry, we don't cuss at people. When we get ready to let someone go at Ramsey, it is literally that they feel released, they feel free. You know why we call it let someone go? It's cause they were trapped. If you trap something, then you let it go. Things that are free, you don't have to let go. Things that are happy, you don't have to let go. They're staying and they wanna stay and you want them to stay. But if you had a noose around harness around them and you took the harness off and they bolt, then you let them free that you set Them free. That's what firing is. That's where it comes from. When you fire a gun, you're setting the bullet free. All of these things have to do with, you know, I got fired, I got let go. Oh, they were holding you against your will. You weren't free. Or your duct tape and handcuffs. I mean, how were you let go? How are you held against your will? But that's how it feels, doesn't it? So you've got to sit down, be very clear with people, very kind to people. Give them the opportunity to become a we. This is how we do it at Ramsey. If you're going to do it this way, you get to be a we. If you don't do it this way, we're not going to stay here. And again, we use path. Lencioni's ideal team player is one of the constructs we used to talk about around here. Hungry, humble and smart. They have to be humble and that doesn't mean they're lacking in confidence. It means they're not self centered, they're other centered. They have to be smart. And that doesn't just mean intellectually smart, it means people smart. They know how to get along well with others. And they have to be hungry. As Les Brown says, hungry. They gotta have a motor running inside of them. Get her done, baby. I care. I'm gonna push stuff around. When I push stuff around, there's friction and I know that. Good, let's get something done. And they can't be just one of those or two of those. They gotta be all three of those. And then we declare them a thoroughbred. And then when they get ready to hire other thoroughbreds, you know who I ask? I ask my current thoroughbreds, because you know who thoroughbreds run around with in their off time? Other thoroughbreds, not donkeys. And they have a pretty good donkey detector. They can see a donkey a mile away and they'll tell you, don't hire my friend, he's a donkey. Hire that friend, hire that cousin, he's a thoroughbred, he can win the race. And you'll get good referrals and good denials from your thoroughbreds. They'll help you build the team because they want to work with other thoroughbreds. Nothing's more fun than working with a hard working team full of intelligence and excellence. That's fun. And nobody wants to screw that up. Once you get it built, so that's become the easiest part. Once we built it, and then if we accidentally let a donkey in or somebody that comes in as a thoroughbred, they Just decide they're going to turn donkey. I don't care. Whatever happens, we've got to remove them. Because life's too short to hang out with donkeys. So you sit down, you start looking at the components of a good hire. What is it I'm looking for? It's not just their stinking skills. Quit hiring people because of their skills. Oh my gosh, that's dumb. Yes, they have to have skills, but that is not enough. If you hire a bunch of highly skilled crazy people, you're going to be running an institution, an asylum, a drama. Looks like a freaking daytime soap opera in there with PhDs and it's a disaster. And they're an intelligent disaster, which is even worse. So good Lord, quit hiring resumes and where you went to school. Kiss my butt. Can you do stuff? Can you do stuff with good people? Can you work with other people? Can you care so deeply that it brings tears to your eyes when it's not done right? Do you get highly frustrated when stuff's behind? I do. Cause I care. Get her done. If that's you, then you fit in at Ramsey, right? You have to tell people what your culture is. This is what I expect here. If you want to stay here, this is what you're going to be. And when you lay all that out, man, it changes everything. And then you communicate it all the time to the team. You communicate it in their one on ones, you communicate it in their updates. We communicate it on the project. We lay out clearly what the deadlines are. We lay out clearly what the expectations are. And when we don't meet expectations don't even meet deadlines. That's a problem. We're going to deal with it. We call it out. So you're looking for thoroughbreds. And then you organize them to win. And then you stand back and it'll take you years to build a quality stable full of these. And then the thing runs faster and bigger than you could have ever dreamed. It'll be the most satisfying thing you ever did. And it'll be the most painful journey because people that you love will come around behind you and try to stab you. People that you love will turn out to be donkeys. And you're gonna have to release them even though you love them, because this is a sports team. It's not a family. To use the Netflix memo, right? And you gotta perform. You keep throwing interceptions. I love you, but you keep throwing interceptions. You're like your job as a quarterback, you're gonna have to sit somewhere else on my not on my payroll. You can't keep throwing interceptions. I mean, you can throw some because everybody makes some mistakes, but this like you're throwing more interceptions and touchdowns. This is a problem. I mean, the defense is dying over here because of you. They stay on the field all the time. And, you know, you gotta have these performance standards for these thoroughbreds. And then sometimes it hurts. And sometimes people don't understand, and sometimes their feelings are hurt. And sometimes people you care deeply about are hurt. It just goes. It's hard to do the right thing when you're growing and running a business, right? It's hard, but it's worth it. Because the stinking thing will outperform anything you ever could have done on your own. When you grow this stable full of absolute studs and studettes, I mean, you can do anything with a team that'll do that. They work together. They care about each other, they care about you. They care about the customer. They care about the excellence. They care about the outcome. That means while they're at work, they actually work. Oh, it's amazing. Who would have thought? And if you don't have that time for some donkey ectomies, it's time for removal. Get you some new ones, baby. That's not cold. That's just life. That's your job as the leader. Fill your stable with thoroughbreds or quit bitching about the lack of excellence because it's your fault. It's your fault if you continue to sanction the incompetence. Fix it. That's my goal. Fix it. I've been working on it 30 years. Fix it. It's a constant thing. Fix it. It's my job. It's what people look to me for. I have to do my job. I know I don't want to deal with it. I know I don't want to deal with it either. Shut up and do your job. Suck it up, buttercup. That's how this works. That's the people driver, the most rewarding, the best roi and the biggest pain point in all of small business. This is the Entrez leadership podcast.

[Commercial Voiceover]

Without our mission statement, Ramsey Solutions wouldn't be the company it is today. A mission statement clarifies who you are 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.

[Dave Ramsey]

This is the Entree Leadership podcast. If you like what you're hearing, spread the word for us. Click the share button, the follow button, the subscribe button. Leave us a nice five star review. Mama said, if you ain't got anything nice to say, don't say nothing. Trolling is for children. Children troll. Billy goat cruff. Just go look it up. It'll be good for you. Help you too. Thank you, guys. Thank you for all the positives and all the five star reviews and all the shares and all the likes and all the subscribes. The numbers on this show are way up because of you. We really appreciate you. Ryan is with us in Jacksonville, Florida. Hey, Ryan, what's up?

[Ryan]

Hey, Dave. Hey. Thank you for having me on. I'm a big fan and a longtime listener.

[Dave Ramsey]

Thank you. How can we help?

[Ryan]

Yes, sir. So I have two companies, both of which I own and been running for about three years. I'm in the treadmill operator phase for both. My first is a company that I make my living off of and pull my income off of. It's a gas line installation and service company. We install gas lines and gas appliances for propane and natural gas. Top line revenue for that company last year was $770,000. And I fluctuate between one and two employees. And this company takes up most of my time, most of my effort to run and operate. My second company is a product I invented and have a patent on that protects underground gas line and different underground utilities. Top line revenue with that company was $120,000 last year. This company, the way it works is I have a handful of distributors that use the product and sell it. It sells through well, but I just don't have the time to put into it to grow it that I would like. You know, I do maybe a trade show a year and do what I can to keep up with the orders that come in on 120,000.

[Dave Ramsey]

What was your cost of goods sold?

[Ryan]

I have like a. As far as like net profit, I have like, it's about 20%. So cost of goods sold. I'm not completely dialed in on that number.

[Dave Ramsey]

You're producing an item, are you not?

[Ryan]

Yes, sir. Yes, sir.

[Dave Ramsey]

So out of $120,000, how many units did you sell?

[Ryan]

Let's call it, you know, I'm sorry, I can't put an accurate number on it. I sell it by the pallet and like I said, I've just been looking at overall net profit.

[Dave Ramsey]

Okay, well, how much. How much is. How many of them is on a pallet?

[Ryan]

30 to a pallet.

[Dave Ramsey]

30 to a pallet. How many pallets did you sell?

[Ryan]

Let's call it close to 15 pallets for the year. Let's say that.

[Dave Ramsey]

Okay, so 450 units?

[Ryan]

Yes, sir.

[Dave Ramsey]

Okay. Do you have any idea what you paid for those 450 units?

[Ryan]

Well, it's, you know, it's a product that we kind of like assemble and manufacture of a machine that I made for it.

[Dave Ramsey]

Are you making them with your hands?

[Ryan]

Yes, sir.

[Dave Ramsey]

So you're machining them and assembling them?

[Ryan]

Yes. Yeah.

[Dave Ramsey]

So you. I mean, all you've got right now is raw material cost, then you haven't factored in your labor yet?

[Ryan]

Well, when I. When I tell you the net profit, it factors in labor and everything. Just because I use the one employee from my other company to help me make this product as well.

[Dave Ramsey]

Do you physically make the product?

[Ryan]

Yes, sir. We have a machine that we make it with.

[Dave Ramsey]

Okay. All right. So you and the employer in there making them and assembling them together.

[Ryan]

Correct.

[Dave Ramsey]

Okay. So you factored in part of the labor cost because you didn't pay yourself labor in that.

[Ryan]

That's correct. I don't pay myself.

[Dave Ramsey]

So you made $20,000 for the labor you put into it. So you broke even. You haven't made a profit yet.

[Ryan]

Yes.

[Dave Ramsey]

If we paid you minimum wage to build 450 of these dad gum things, you and another guy, you hadn't made any money yet.

[Ryan]

Just to be clear. I don't. I haven't. The last year, I really didn't make any much myself. I more or less paid. I paid the employee to make it. As far as the duties that I did is going to be the invoicing, the shipping, you know, more of the, you know, just the logistics of it.

[Dave Ramsey]

Okay. What I'm trying to figure out is if I want to scale this. If I'm losing 20 cents a watermelon, I don't get a bigger truck.

[Ryan]

Gotcha.

[Dave Ramsey]

That's what I'm trying to figure out. And I think you gotta do some numbers crunching to get to the bottom of that. So let's see, 10,000 would be 12. So you're selling these things for how much a piece? You're selling them by the pallet?

[Ryan]

Yes, sir.

[Dave Ramsey]

And how much does a pallet bring?

[Ryan]

It's right around like $5,500.

[Dave Ramsey]

Okay. All right. And. All right, 5,500. Okay. So that's what you gotta do. Start backing into some of these numbers and going, okay, If I get 5530 of these and I sold 15 pallets. Did I get those numbers right?

[Ryan]

Yes.

[Dave Ramsey]

Okay, so 15 pallets at 30. So I just take the 30 and the 15, the 5500 and the 15 and I start looking. Okay, if I do that and my raw materials cost is X and my labor cost is Y, that gives me my cost of goods sold, which is called gross margin. Your revenue minus your cost of goods sold on the item before there's any overhead, commissions, business expenses of any kind. That's called gross margin revenue minus actual cost of the widget. And the cost of your widget is labor plus materials. You got it?

[Ryan]

Yes.

[Dave Ramsey]

You need a pro forma that out, Lay that out. And then figure out, okay, that's my gross margin. And I put a little effort into it. I help some in the shop. And even with counting that at zero, I only made $20,000. And so I've got about a, probably got about a 10% net profit running on this right now is all. Which is pretty low.

[Ryan]

Got it.

[Dave Ramsey]

Okay. So I'm probably raising my prices for one thing. Is there anything you can do to the quality or the attractiveness of the item? Or does any of that matter?

[Ryan]

It's really kind of. It's more of a higher end product as it is the competitor. The competition for this product is like a cheaper version of it. So it's more for, hey, this has like a utility of actually protecting the line versus the other product that only warns. And it doesn't actually physically protect the line in the ground, but they're paying more for it. So cost is actually like the main obstacle to the product, you know, as far as selling it and getting the customer.

[Dave Ramsey]

Well, that's because you're not competing with the other thing. Because you're not the other thing. You have a complete brand differentiator already. You already told me what it is. And so then you've got a value. You got to lay out your value proposition for your marketing and that say, okay, the value of doing this is a certain amount and it only costs this amount. And so anytime someone's buying something, they put the item on, they put the cost and the time it takes to do the purchase and deal with the situation on one side of the scale. And on the other side of the scale they put the benefit of buying it. And they only buy if the benefit tips the scale over the cost of the item and the hassle and the time it takes for the item.

[Ryan]

Right.

[Dave Ramsey]

And so that's what, that's a simple sales mechanism right there. So you're trying to say on the right side of the scale where the benefits are. I'm going to put a value proposition that's so heavy that it looks like they would pay 55,000 for this instead of 5,500 because they're so excited. They can't. This is the best thing since sliced bread. I've got to have this. And that's called selling. And it's not lying. You're showing them the true benefit of doing business with you and doing this thing. This is exciting, man. I think it's a cool idea. So what I would do next is bring in an upper tier person. Not a top person, but an upper tier person. And I would want their job description to be developing new markets, selling. Okay. And you're going to need to sell more than 30 pallets of this. I keep getting this backwards. Was it 30 pallets or 15 to the pallet?

[Ryan]

It was, yeah, around 15.

[Dave Ramsey]

15 pallets, but 30 items on the pallet, right?

[Ryan]

Yes, sir.

[Dave Ramsey]

Okay, so you're gonna need to sell more than 15. If you sell more than 15, you're gonna bring in more money than I'm already bringing in. And I will share a goodly portion of that till we get you up to making a living. So go get us a bunch of new customers and let's talk through how to do that and I'll. And if you need some help or you need somebody to go with you to talk to the customer, or you need whatever, let's get this thing up and running and let's get some volume up because only then can we make the adjustment on price and on production and put a full time person in there building them. Because you know, you don't need 15 pallets, you need 150 pallets.

[Ryan]

Right, right. And I will say too, I think once production does go up, my margins will also go up.

[Dave Ramsey]

Always.

[Ryan]

Yeah, yeah, I could buy more, you know, my efficiencies would be greater, you.

[Dave Ramsey]

Know, and so, well, your machinery to build it, everything, it gets more sophisticated, faster. The people doing it will get faster. You clean it up, you clean up your production line, Your production lines. Right now it's kind of like a big old batch of prototypes.

[Ryan]

Exactly right, exactly. So I think that's gonna be the key, you know. So I think my margin is the weakest it'll ever be. As long as I can grow it.

[Dave Ramsey]

Well, only if you're careful about it. Because people don't watch inventors get all romanticized about selling this stuff and then they get Excited and then they realize they're using losing 20 cents of watermelon and all we did is get a bigger truck. Don't do that. Make real sure you're running the business side of this pro forma two while you're doing it. But I think you're right. I think I'm raising my price to 8,000 and I'm going to bring somebody in and pay them 2,000 a pallet. And I want you to go sell me 100 of those and make 200,000 next year. And oh, by the way, you're going to net more with that price raise and bringing that person in than if they do that. And you'll get all your efficiencies of volume going with it. The economies of scale will go with it. So, yeah, you're right on track to do that. But it's going to be bringing in someone that's a little bit entrepreneurial, a little bit scrappy. They don't have to have somebody hold their hand to make a sale. This is somebody almost that was in the same kind of business but failed and they just want a new target. They're going to go off. So you need to aim them at something. This needs to be a self starter, a lot of initiative. You can't babysit them. They got to go get it, they got to leave the cave, kill it and drag it in. You put that person in there and they go sell you 100 pallets. Now we got a business running that will outperform that other business a thousand times over because this scales quick and easy. Once you get the sales model down, the production model down, and your pro forma laid out for actual margins, now you can just turn up the heat, baby, and go. And that's your next step. I definitely would be doing that if I was in your shoes. Right here. Very, very, very well done, sir. Proud of you. That's neat. That's exciting. Hey, let us know how it works next year. We want to hear from you. Remember, better a wary warrior than a quivering critic. This world needs more high quality leaders. Take courage and lead. I'm Dave Ramsey, your host. Thanks for listening to the Entre Leadership podcast.