Is My Office Manager Really Worth $100,000?

Summary

Podcast Summary: The EntreLeadership Podcast – "Is My Office Manager Really Worth $100,000?"

Release Date: May 12, 2025
Host: Dave Ramsey
Description: In this episode of The EntreLeadership Podcast, Dave Ramsey addresses real-time business and leadership challenges faced by entrepreneurs. Drawing from his extensive experience as CEO of Ramsey Solutions, Dave provides actionable insights to help leaders navigate complex workplace issues.

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1. Introduction

In this episode titled "Is My Office Manager Really Worth $100,000?", Dave Ramsey tackles the critical question of compensating key personnel within a business. The discussion delves into evaluating employee worth, establishing fair compensation, and fostering an ownership mentality among team members to drive business success.

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2. Listener Call: Mike from Las Vegas

Timestamp: [00:52] – [08:05]

Mike’s Dilemma:
Mike, the owner of a landscape maintenance company with consistent revenues of $2.3 million in both 2023 and 2024, seeks Dave's opinion on whether his office manager deserves a substantial salary increase. His office manager is requesting a raise to just under $100,000 annually, plus an additional $10,000 in benefits. Mike operates remotely and relies heavily on his office manager to handle sales and administrative tasks.

Dave’s Analysis and Advice:

• Replacement Value Principle ([01:58]):
  Dave emphasizes that compensation should be based on what it would cost to replace the employee. "The baseline for a comp plan is not what you want. The baseline is what can I be replaced for. And then we start from there," advises Ramsey.

• Market Research ([02:35]):
  He encourages Mike to utilize compensation comparison tools from platforms like Monster.com and ZipRecruiter to determine the market rate for the office manager role.

• Ownership Mentality ([07:09]):
  Dave stresses the importance of having employees adopt an ownership mindset rather than a job-focused mentality. "I don't want people to have an hourly, how little work can I do for how much money I can do mindset. I don't want them to have a job mindset. I want them to have an ownership mindset."

• Value Beyond Replacement ([05:30]):
  Given that the office manager has been with the company for nine years, her deep understanding of the business, customer relationships, and team dynamics adds value beyond the baseline replacement cost. "She has a real depth of knowledge of your business... that cannot be replaced."

Notable Quote:

"I don't want people punch clock mentality anywhere in any of my Organizations, I want them to have an ownership mentality."
— Dave Ramsey [07:09]

Conclusion:
Dave advises Mike to conduct thorough market research to validate the requested salary and consider the added value the office manager brings due to her long tenure and integral role. He recommends balancing fair compensation with clear expectations regarding work commitment and ownership responsibilities.

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3. Listener Call: Doug from Minnesota

Timestamp: [12:59] – [24:02]

Doug’s Dilemma:
Doug, the Director of Operations at a faith-based nonprofit with annual donations of approximately $2.5 million and 35 employees across three states, faces sudden leadership changes. Following the passing of the president due to pancreatic cancer, the COO has been promoted to President and CEO, and Doug's responsibilities have expanded significantly. Lacking formal leadership training, Doug seeks guidance on becoming an effective leader both interpersonally and technically within the nonprofit sector.

Dave’s Analysis and Advice:

• Shift from Management to Leadership ([14:59]):
  Dave differentiates between managing and leading, emphasizing that leaders guide and serve their teams rather than merely overseeing them. "Leaders show people where to go and help them get there. Managers stand in the back of the herd and crack the whip."

• Servant Leadership Philosophy ([15:00]):
  He advocates for a leadership style rooted in service, where the leader's primary role is to support and elevate their team members. "Leaders are servants. Your job is to serve them."

• Clear and Kind Communication ([17:51]):
  Dave underscores the importance of honest and clear communication, cautioning against the misconceptions of being "nice" leading to unkindness through lack of transparency. "Sometimes people, in the name of being nice are actually mean because they don't tell the truth."

• Recommended Resources ([15:00] onwards):
  To build leadership skills, Dave suggests reading materials by John Maxwell and Patrick Lencioni, highlighting books like The Motive and The Ideal Team Player to develop a servant leadership approach and foster an ideal team environment.

• Biblical Principles and Meekness ([17:53]):
  Integrating faith-based principles, Dave mentions Wiersbe's teachings on meekness as strength under control, reinforcing the idea of compassionate yet strong leadership.

Notable Quote:

"Leaders are servants. Your job is to serve them. Now, keep in mind that is not subservient."
— Dave Ramsey [15:00]

Conclusion:
Dave encourages Doug to adopt a servant leadership mindset, focusing on serving and empowering his team. By embracing clear communication, continuous learning through recommended leadership books, and integrating faith-based principles, Doug can effectively navigate his expanded role and lead his nonprofit towards sustainable success.

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4. Listener Call: Zach from Aerospace Manufacturing

Timestamp: [33:44] – [39:05]

Zach’s Dilemma:
Zach and his wife acquired an 18-year-old aerospace manufacturing firm generating between $3 and $3.3 million in sales with $1 to $1.2 million in earnings. Purchased via an SBA loan, the business faces significant risk due to customer concentration, with 90% of revenue tied to one major customer. Recently, there's been a 30% downturn in sales attributed to a shift in this key customer's engagement, raising concerns about cash flow and loan obligations.

Dave’s Analysis and Advice:

• Critique of Risk Profile ([35:42]):
  Dave expresses concern over the high risk associated with heavy reliance on a single customer, especially when coupled with significant debt. "I think you underestimated how much risk you took Dramatically. You overpaid for this, and you structured your purchase horribly because you've got debt up in your face."

• Urgency of Diversification ([36:15]):
  Emphasizing the necessity of diversifying the customer base, Dave advises Zach to aggressively seek new clients to mitigate the risk of losing the primary customer. "If I'm you, and it's going to cause me to work day and night to get 73 new customers, and that's your only hope to survive."

• Utilizing Fear Constructively ([36:58]):
  He encourages using the fear of potential loss as a motivator to drive relentless business development efforts.

• SBA Loan Implications ([38:05]):
  Dave warns about the consequences of defaulting on the SBA loan, including legal actions by the lender, and stresses the importance of restructuring to align with business sustainability.

• Strategic Business Reassessment ([38:18]):
  He suggests evaluating whether the specialized service can be adapted or marketed to other complementary industries beyond aerospace to broaden the client base.

Notable Quote:

"Diversification is a biblical idea. Don't put all your eggs in one basket."
— Dave Ramsey [38:22]

Conclusion:
Dave advises Zach to urgently diversify his customer base to reduce dependency on a single client, thereby lowering business risk. He emphasizes the importance of restructuring the business's financial obligations to align with its risk profile and encourages proactive business development to stabilize and grow revenue streams.

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5. Key Takeaways

• Evaluate Compensation Fairly:
  Base employee salaries on replacement value and the additional value they bring to the business through experience and relationships.

• Adopt Servant Leadership:
  Focus on serving and empowering your team to foster a productive and loyal workforce.

• Communicate Transparently:
  Honest and clear communication is essential for maintaining team trust and ensuring aligned expectations.

• Diversify to Mitigate Risk:
  Avoid over-reliance on a single client by expanding your customer base to ensure business stability and growth.

• Continuous Learning:
  Invest in leadership development through recommended literature and practical application to enhance your effectiveness as a leader.

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6. Conclusion

In this episode, Dave Ramsey provides invaluable insights into effective employee compensation, the essence of servant leadership, and strategies to mitigate business risks. By addressing real-life leadership challenges from listeners like Mike, Doug, and Zach, Ramsey equips entrepreneurs with the knowledge and tools necessary to lead their businesses toward sustained success.

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For more insights and detailed discussions, listen to the full episode of The EntreLeadership Podcast.

Transcript

[Dave Ramsey]

From the headquarters of Ramsey Solutions. This is the Entree leadership podcast where I take calls from leaders like you about what it takes to win at any stage of business or leadership. I'm Dave Ramsey, your host. With over 30 years of experience leading in the trenches just like you guys. Matter of fact, I was there today. Hey, if you want to submit a question, go to entreleadership.com ask. Leave your question. Our team will get with you and make you a caller. Or you can go and leave us a voicemail at 844-944-1070. That's 844-944-10720. Mike is in Las Vegas. Hey, Mike. Welcome to the Ramsey Show.

[Mike]

Hi, Dave. How you doing?

[Dave Ramsey]

Better than I deserve. What's up?

[Mike]

I appreciate it. My name is Mike. I own and operate a landscape maintenance company. In 2023, we did 2.3 million. In 2024, we also did 2.3 million. I should mention that I live remotely away from my company. And one of my employees is due up. She's an office manager and she's due up for a pay raise and she's asking a pretty steep amount of money at about just a little under 100,000 a year, plus another 10,000 in benefits. And I would like to know your opinion on someone that makes that type of salary in an office manager role. What would your expectations be for that person?

[Dave Ramsey]

It sounds like she's running the business for you.

[Mike]

She runs the administrative office side. I am. I am remote. I am involved daily with decision making and stuff like that. And we have another gentleman who is involved with. He gets the work done. He's the production manager and in charge of producing the work and managing the guys and things like that. She handles the sales and marketing. Well, less marketing, but sales and administrative.

[Dave Ramsey]

Okay, well, the baseline for a comp plan is not what you want. The baseline is what can I be replaced for? And then we start from there. Okay, so what would it take to replace her?

[Mike]

You know, I would be in the world of between 80 and probably 120. Pretty big range, obviously, based on.

[Dave Ramsey]

Where did you get that in the industry?

[Mike]

Where did I get that number? Out of my butt.

[Dave Ramsey]

The classic line around here. I love it.

[Zach]

Yeah, it is.

[Dave Ramsey]

Yeah. You need to find better research technique. So jump on monster.com and maybe ZipRecruiter and some other places and pull some of their comp comparison tools. They're not hard to use. We do comp research on positions around here all the time because we want to know what the marketplace is Marketplace might be 150 for this position. It might be 75 for this position. I don't know. I can't tell. Based on what you're saying. It doesn't sound like she's outrageously high at 100. But like you, I don't have a solid source of data that I'm pulling that from.

[Mike]

Can I throw in a minor caveat? She would like to work from home when her kids are off at school, including during our busy season of the summer break with the kids. She does manage a sales position under her.

[Dave Ramsey]

That's a different issue. That's a philosophy issue of if your people in the office work from home. We work from work. And so if this was Ramsey, the answer is no, but has nothing to do with the comp package. That's a different issue. We just don't do that. Now, if you have some. You work remote. So we know some people work remote because you do. But, I mean, can she get her job done to your satisfaction remotely? But I think the way you're stacking these pieces of information, it's like she was doing okay, but she's not doing 100,000 plus 10,000 plus work from home. Okay. I think that's what I was hearing.

[Mike]

She made 85 last year. So coming up with a $15,000 increase, I felt was a bit much.

[Dave Ramsey]

Where did she get that? Out of her butt? Yeah. I mean, you know, this is like, there's a pattern here. So, okay, when I sit down with folks here, or when we sit down. When we sit down with anyone here, we're looking at the baseline being the market value of this position. If we have to replace you is X. Okay, if that's 85,000 based on comp research with outside data sources, which is not a big expensive thing to go do, you can go do it tonight on the computer. Okay, but based on that, if 85 and then they want 100, then I gotta figure out why that person is worth more than $15,000 extra beyond what I can replace them for. Okay, now, they might be. And I'll give you one thing that we take into consideration. Like I keep saying, the baseline is what market value is to replace them. But if. How long has she been there?

[Mike]

Nine years.

[Dave Ramsey]

Okay. So she's got a real depth of knowledge of your business, knowledge of your growth, relationships with customers, relationships with the team, and that cannot be replaced. So she is worth more than the baseline because of these quality relationships, assuming they're all positive. Right. And so, like, my personal assistant has been with me, 23 years, Patty. So Patty's depth of knowledge of being able to complete my sentences, she sends me emails that say stuff like, you don't want to meet with this guy, do you? Meaning she's telling me not to because she thinks Based on our 23 years of experience, this guy's not a guy I'm going to meet with. She already knows. She just checking to be 100% sure. So that is different than if I had to train a brand new assistant who didn't even recognize the guy's name. But Patty's seen him 10 times in 23 years. So she knows the guy. Right? Or knows you see what I'm doing. So that has a value beyond market value, beyond replacement value. But we start with replacement value and say, okay, why would they be worth more than replacement value? They're certainly not worth double replacement value. Because for double I could put up with a lot of pain. But we're not talking about double, we're talking about 15% here.

[Mike]

Do you feel somebody in that hundred thousand dollar range, is there a quantity of hours per week that you would kind of reasonably expect or is it still a 40 and get out the door?

[Dave Ramsey]

I'm not looking for anyone that is doing either. I don't want them to have an hourly, how little work can I do for how much money I can do mindset. I don't want them to have a job mindset. I want them to have an ownership mindset. And then if I get the job done and everything's under control, I'm booking, we're going out to dinner tonight. Okay. But if there's a problem and I gotta stay and get the problem fixed because I act like an owner and that takes me to a certain number of hours, well, Whoopi, get the freaking job done. So I would expect her to have an owner mentality regardless if that resulted in 30 hours or 45 hours in a given week. And I suspect based on having run businesses and you have too, that it might vary. Some weeks you might be done in 30 and some weeks you might be done in 60. Right. I mean in the middle of the strong grass cutting season, she's gonna be in 30, is not gonna do it.

[Mike]

Sure, absolutely.

[Dave Ramsey]

You know, when things are slow and you know she wants to go home and make the kids dance recital at 4 or grandkids dance recital or whatever at 4 o' clock in the afternoon. So what? Head out. I don't care. I don't want people punch clock mentality anywhere in any of my Organizations, I want them to have an ownership mentality. You know, that's what I demand of her is, is the work done? Is it done with excellence? Or did you drop the ball because you just headed home and didn't want to work anymore? That's not cool if I'm paying somebody a hundred grand and if I'm paying them to lead and run my business. And so I think that that's some stuff you've gotta reset. Cause I think she started with an hourly mentality and now she's looking at how much she can get rather than how much she can give. And you're feeling like, well, she's coming in and holding me hostage here. And I don't get held hostage. I just say, hit the door. You start coming and telling me what you're gonna do at my business, then you don't get to stay. Cause that's a confused position. So. But I didn't hear that kind of belligerence from her. But she's the one brought all this up, not you. So anyway, dig up your comp, sit down, talk to her. Say, here's what I. I think you make a trip into the office. This is an in person conversation. You're very important to this organization. Your history here, your experience, your relationships with the team, your relationships with the vendors, your relationships with the sales team and with the clients is very important. And here's some data, hand it to her in person that says that this position is worth $75,000. I'm willing to go and get you way above 75, but I mean, that's what I can buy in this market. I can buy. Or this position's worth 120. And so your hundred's wrong. I'm gonna go ahead and bump you to 110. Cause I really want you in this role. But here's what I'm gonna require. Not figuring out how little you can work. Figure out how much work you have to do as an owner mentality to get all the work done. And instead of figuring out how little I can work and how much I can work from home. Because honestly, if you start looking at the research that's coming back on work from home, it's coming in more and more every day. That what it means is I'm not working when I'm at home. It means I'm doing something else when I'm at home. That's why I wanted to be at home instead of working. So, I mean, I want to spend more time with my children. How are you spending time with your children, you're supposed to be working. That's stupid. I mean, what you're telling me is you're not working. That's okay if that's okay, but it's not okay. I've been running a business for over 30 years and technology has changed a lot. Now the hot topic is AI, and I understand it might be intimidating. But like a lot of other tech that took some getting used to, AI is just a tool to help us work faster and smarter. So you'd better get on board, otherwise you're going to get left behind. NetSuite by Oracle offers AI powered tools that help small businesses improve efficiency and make smarter decisions by bringing all major business processes into one platform. With one unified business management suite, there's one source of truth for the real time data you need to take advantage of opportunities. Then you can forecast better, scale more efficiently, and streamline manual tasks that take too many resources away from what your business actually does. So join the more than 41,000 businesses, including Ramsey Solutions the Trust NetSuite to help tackle some of their biggest challenges. And right now you can download the CFO's guide to AI and machine learning at netsuite.com Ramsey it's free at netsuite.com Ramsey as a small business owner, it's your job to set expectations for each role in your company and make sure those expectations are met. But you can't hold your team accountable to something you didn't communicate. Our free. Free. Did I mention it's free? Key Results Area Template will help you set expectations and create role clarity for every member of your team. And you have to do this. So if you feel confident that everyone is working on the right things to drive your business forward, you won't feel that confidence until you've got everyone on a Key Results Area template and everybody's in agreement, this is what winning looks like. Go to entreleadership.com roleclarity to download the template for free and start setting these clear expectations for your team. Zach is with us in Minnesota. Hi Zach, welcome to the Entrez podcast. What's up?

[Doug]

Hey Dave, Hoping you have a blessed day. I work in a faith based nonprofit as the Director of Operations. We bring in about 2.5 million annually in donations and have 35 employees across three states. I joined this nonprofit in 2018 in an entry level position and worked my way up into essentially middle management. However, this last few months our president was diagnosed with pancreatic cancer and just about two to three weeks ago passed away. So there's been a little bit of a leadership shift that's been kind of happening rapidly. My boss, the coo, was, was appointed to the board as the president and CEO. And my position went from managing five families here in Minnesota to essentially the 35 families across the three states as director of operations. So my question is, in a shift like this, I don't have a lot of formal training in leadership, nor in the nonprofit business side, how to just equip myself well to lead both in the interpersonal aspect as well as the technical areas of the nonprofit world and just be a strong leader.

[Dave Ramsey]

Good for you. Well, I mean, you're gonna have to go to summer school and night school immediately, right? So I think there's a stack of books on your nightstand that have leadership and the title, and you're gonna be reading all of them as fast as possible and then internalizing the concepts. So we can talk about a couple of things just for the audience sake and to give you a starter kit. But the first thing is, is that we quit using the word manage around here. We use the word lead. Leaders show people where to go and help them get there. Managers stand in the back of the herd and crack the whip. And you will hear mooing.

[Doug]

A common sound out here in Minnesota.

[Dave Ramsey]

Yeah. And what you'll get there is the organization moves at the speed of the lowest common denominator, then the slowest human on the planet. And so instead the leaders down around front saying, the train's leaving, I hope you get on. Cause it leaves at this time and you probably ought to get your butt up here and get on. Here we go. Here we go. That's casting a vision. Where there is no vision, the people perish. But this is service oriented leadership. So I'm looking at them going, how can I help them? Be the best version of them so that this work all gets done. Because we're here to serve the people that this nonprofit is designated to. And so, you know, and we talk about the blessings that we have inside the organization and how we're blessed to be a blessing. So we're trying to create people who are adding value, as John Maxwell says, rather than extracting value on the team. And, you know, you pretty much set the standard that we are all engaged in serving. I'm serving you guys so that. And I'm here to help you get to where you're supposed to go. And if you can't, I'm here to help you do something else. And so I'm gonna love you and I'm gonna care about you, and I'm gonna treat you with dignity. And I'm also gonna be very clear. The second thing I would add to that then. So, number one, leaders are servants. Your job is to serve them. Now, keep in mind that is not subservient. That is, I served my children when they were small by requiring them to brush their teeth. So when they were adults, they had some. Right. But I served them. They didn't feel like I was a servant when I made them brush their teeth. Right. But I didn't have to be unkind or yell or steal their dignity. We just got our teeth brushed. It's simple. Okay? That's an act of service. Agreed. So this is the type of service I'm talking about. But I'm concerned about them. It's not me. It's not that I'm worried about having toothless children. It's that I'm worried about them gumming their food when they're 30. So we've got to help them. How can I help you? Well, I'm going to make you do the things that are good for you. But that's a leadership thing, not a manager thing. I'm not a boss. I'm a leader. I'm pulling. Bosses push. Leaders pull. So I'm pulling you into this, showing you why we're doing it, how important it is, and I'm here to help you get it done. I'm here to knock down any blockers, anything that's causing you problems, bring it to me. I'll help you. If somebody in the organization's holding up the project, let me jump in, I'll help you with that. All that kind of stuff. Right. Then the second thing is to be unclear is to be unkind. And if you're in the nonprofit world, you better write that one down.

[Doug]

Oh, you gotta. Yep. Write that down right now.

[Dave Ramsey]

Because everyone in the church world and the nonprofit and the ministry world, we're all taught to be nice. And I'm from the South. And so when you're nice in the south, you say like, bless your heart, which can mean I'm gonna slit your throat. Right. But it's passive aggressive, in other words. And so when you're being nice and you're not telling people the truth because you think it's too harsh to tell them the truth. That is actually being unkind. Because they're not getting their work done, they're progressively incompetent, and you're getting progressively frustrated with them as their leader. So I have to Sit down in gently and be very clear. I don't have to be mean. I don't have to be nasty. I don't have to be loud. I just got to tell the truth. The truth is you're struggling to do your job. And how can I help you? We've got to get you to where the job that you're getting paid to do gets done. Because you're struggling to get the job done. And I'm worried about you because I'm worried that you're not going to be able to work here if we don't get this fixed. And you start with that. Very clear. But again, that's to help them. This is not you being mean or nasty or toxic environment or something like that. This is just simply a clear communication about facts and about reality. This is what we're facing. Sometimes people, in the name of being nice are actually mean because they don't tell the truth. And people are getting in trouble and they don't even know they're in trouble. And so you gotta be real careful, especially in the environment you're in on that. I think I struggled with that early in this. Cause I wanted to run a business the way God would run it. And I thought that was just being super nice to everybody all the time. And I confused that with being clear. And so we developed that saying. Cause it partly was for me. I have to remind myself I love people and I don't want to hurt anybody's feelings. Da, da da da da da da. And then I would get frustrated and I'm like, well, they don't even know I'm frustrated. That's not fair to them. And so, okay, so that's a couple things to get you started then. Pick up John Maxwell Books. He's one of the best writers. He's speaking at Summit this year. One of the best writers on the planet on leadership. Anything Pat Lincione writes. His latest book would be ideal for you. It's called the Motive. What is your motive while you're in leadership? And your motive needs to be what I just told you to serve your team. Not I need a corner office. And everybody look at me. I'm the boss, okay? And look at me. I just got a big promotion, which you did. Congratulations. You're a stud. I'm proud of you. But nobody gives a grip. So how can you go help somebody with that? And God said, feed my lambs. And so this is not about what you're gonna get out of this. It's about what you can give in this. And so you'll love that book. It's great. The other Lencioni book I would tell you to read and you can start to pass this around to your team is the ideal team player and we use that in hiring here and we use that in communication when there's some substandard behavior going on. The ideal team player is three things. They're hungry, humble and smart. And the smartest people smart hungry is they're ambitious, they're a go getter, they get the work done. Humble is not I hate myself. Humble is I think about others more than I think about myself. That's all it is. The C.S. lewis quote, right. And so, you know, I want people that are humble, I want people that are getting it done and I want people that are people smart. They don't walk all over everybody while they're trying to get the work done and destroy, you know, we have to get the work done and then pick up the body after we're done. No, that's not what we want to do. So we've got to get those things on the same page. And you know, so Pat Liancione, I'll send you a copy of our latest book build a business you love. I think there's some nuggets in there as you work through the stages of a business growing and that's a non profit as well that I think it'll give you some hints how to be a leader. But the thing I would tell you is this. Wiers be said and this goes with you asked me how can I become a strong leader? Here's the let's use some biblical verbiage on this. Warren Wiersbe, a theologian, said meekness and Jesus said, blessed are the meek. Right? Meekness is not weakness, it's power under control. That's a strong leader. That's an attractive leader. It's someone people desire to work with, to be on a team with, to get things done with and to spend their life pouring into an organization like yours that does good work and that matters. So congratulations. I'm proud of you. Proud for you. And I think you're going to be a great leader. And you know what I'm basing that on is the fact you're smart enough to ask this question and so get leadership hungry. Once I figured out that leadership was something I had to learn and I didn't know anything about, I have spent the last three decades consuming everything I could get my hands on anything on this subject. And in the process I've become A leadership teacher. And in the process, I've become a world class leader. But buddy, I started as a bad boss and you're already ahead of where I started. So I had a lot of work to do. Long way from that kid that started this company, the one that runs it today. Long way. And that's the growth track that you are on for the rest of your life that you call yourself leader. So very good stuff. Well done. Very, very good stuff. Love it. That is a good question from a young leader right there. I love it. Really good. This is the entree. But cash.

[Bethany Rose]

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[Dave Ramsey]

All right, video question incoming.

[Bethany Rose]

I am Bethany Rose. I'm from east Tennessee and our business is Buchanan pump service.

[Dave Ramsey]

Great.

[Bethany Rose]

And how long have you been in business?

[Dave Ramsey]

50 years. 50 years.

[Bethany Rose]

Long time.

[Dave Ramsey]

How many team members do you have?

[Bethany Rose]

Around 90.

[Dave Ramsey]

Okay. And what's your top line revenue?

[Bethany Rose]

30 million. How do I get my man, my branch managers to focus on a company mission instead of their branch so we can make them eligible for a seat at the table in our C suite.

[Dave Ramsey]

Great. How many branches do you have?

[Bethany Rose]

We have three branches.

[Dave Ramsey]

That's a really cool question. Let me think about that for a second. All right, how do I get the guys running the branch to think about something other than the branch and think about the good of the entire company, which gives them the opportunity to be at the leadership team table at home office. You tell them every day that that's the requirement. Look, you got confused when you took the branch. You thought that meant you had to make the branch work. No, that's just part of your job. Your whole job includes now thinking about the good of the whole company and thinking what we call at Ramsey, we call it globally. Meaning you think about more than just your area. We think about the whole company. And so how does this affect the, you know, when you take this action at the branch, how does it affect the whole company? And oh, by the way, look at the whole company as if you're an owner, stick your head up out of the silo and look around at the other areas and start asking yourself, what are they doing better? What could we as a whole company do better? What could we as a whole company do worse? What, what, what are we doing in the branch that everybody could learn from other than just our branches? Let's just start talking about this until they're sick of hearing you talk about it. And about the time they're sick of hearing you talk about it. They heard it until then. They never heard it. Cause right now what you've got is you told them to go run those branches and kill it. And they did. They did what you told them to.

[Mike]

Do.

[Dave Ramsey]

And then you went, oh, we probably ought to do this. Yeah, well, you need to add that to the plate now. Okay, I want you in the C suite. I want you to someday be one of the top leaders in this company. And you cut your teeth in the branch. And the way you get there, the path to get there is to think globally, think about the good of the whole company, not just your branch, and be talking about that and asking questions about that and personal growth in that area so that you become qualified to make the move up. Otherwise you're stuck in the branch because, all, you know, I do is run the branch. You're stuck. And I don't want you stuck. You're too valuable to get stuck. It's not a one time conversation like every week. We talk about it all the time. In 2012, we formed an operating board and put our C suite and our business unit leaders on the operating board. There's 10, 11, 12 people in the room at that time. And we told all of them, your job is to do your day job, meaning run your business unit or run your C suite and as a group run this company. So if you're the chief financial officer, your job is to ask questions about what the marketers are doing. Because you're on the operating board. That means you have to think globally. And your job if you're in one of the business units is to be looking at the chief marketing officer, the CMO and say, why are we doing that in marketing? I don't understand. Or I looked over there at so and so in marketing and they're not, they don't seem to be working. They seem to be sitting on their butt. And you help run the whole thing, even though it's not your thing is part of your job description. Your kra, when you're at that level, you think globally and you get your day job done and you just got to communicate that to them over and over and over and over again. Oh, by the way, I started that in 2012 and it was pretty probably five years before it was doing it. And these are top level, world class executives. These aren't starter boys and girls, these are getters. But it was hard to get them off of their thing and to back their eyeballs up and look at the whole thing and quit just managing their area, quit just leading only their area. It took five years and we talked about it out loud every. All the time. All the time. But they were so good at their particular discipline in their particular area that it was very hard for them to let their foot off the gas even a little bit to change some of their calorie burn over to something else. And look at the whole good of the whole company today. It's almost gone too far the other way. They spend all their time on the whole company and not enough on their individual areas. It's almost shifted too far. It's not. But that's kind of what we're talking about right now at our place. So you're not going to fix this in five days. The problem wasn't created in five days. It's going to take months before they start recanting it back to you because you say the same thing over and over and over again until they get frustrated hearing it and then they actually do it because you've got to reset their brains. You've got to do the wiring in the brain that you set up to run the branch again. We start with honoring the quality of work they're doing in the branch. But for that reason I think you're valuable beyond just the branch. And so I want to teach you how to get to the big boy table, move from the kids table into the parents table. It's Thanksgiving. Right. And so how do you get to the big table? Well, here's how you get there. You got to think about the whole thing, not just your branch. Oh, by the way, it's now a requirement for you to think about the whole thing, not just your branch. Oh, have I mentioned that you have to think about the whole thing, not just your branch? Oh, yeah, you remember the whole thing. You got to think about that, not just the branch you're going to. Yeah, it's all the time. And you become the Chief repeating officer, the CRO. And. And you'll get there. You'll get there. The other thing you could do, and I don't think you should, but I'll throw it out as an idea in the mix. You could change their comp. If they're compensated off the branch only, then they're gonna keep working for the branch only. But if they start getting compensated 80% on what the branch does and 20% on what the whole company does, then they start to be concerned about the whole company and how people's wallet gets fed keeps their attention, I'll tell you that. So you could do that? I might not do that initially. You may want to get there eventually. But initially I'm just going to start it with the CRO. The chief repeating officer. That's a cool question. 30 million bucks, three branches. Good job. 50 years, I think she said. Wow. Pretty impressive. This is the Entre leadership podcast. You can't hold your team accountable to expectations you didn't set. When you try, everyone's confused. You need a way to clearly define roles and responsibilities for every team member on your team. And our free key results area template will make it easy. Go to entreeleadership.comkra right now to download it for free. Did I mention it's free? Or if you're listening on Spotify or podcast, click the link in the description. If you want to help us out, follow. Click the follow button. The subscribe button. Leave us a five star review. Share the show. Please tell your friends, neighbors in the highways and byways about the show. You're our best hope for marketing and you have been because our numbers are way up. Thank you for that. But spread the word that you're getting something from this 30 minute to an hour podcast that we throw out there to help you guys. I'm a practitioner. It's what I do every day. This is not theory around here. If you hadn't heard. So we'd love to have you. If you want to be on the show, call us at 8449-4410-7084-4944, 1070. Doug is in Charleston, South Carolina. Hey Doug, what's up?

[Zach]

So I have a. My wife and I purchased an aerospace manufacturing firm last year in June. 18 year old business. It's been doing between 3 and 3.3 million in sales with about 1 to 1.2 million in earnings. We purchased the business with SBA loan. And my question is, we knew the risk of this business was customer concentration. And my mission as somebody in sales and business development is to diversify this business as fast as I can. And in the last few months we've seen kind of an unprecedented downturn in sales. It's been a very consistent business historically, but we've seen a drop in about 30% of the business. Not because we're losing the business, but because just a shift in our major customer. So my question is, if this shift in business continues and we run into cash flow issues with a SBA loan and a note to the previous owner, what should our next steps be?

[Dave Ramsey]

How many customers do you currently have?

[Zach]

I'd say about 90% of the revenue is tied to one major customer that we've been with for 18 years.

[Dave Ramsey]

And aerospace. Without divulging too much, what do y' all do?

[Zach]

A very niche service to this manufacturer. That was the reason this whole business was founded. And so we have very limited competition and the barriers to entry of what we do were pretty steep.

[Dave Ramsey]

So is there anyone else that needs the service? That's your development idea, right?

[Zach]

Yes, that's exactly it is that we want to diversify the industries that we're servicing, but also the types of customers. The previous owner really didn't make any sales calls at all for many, many years.

[Dave Ramsey]

So even outside of aerospace, does the service work in other complementary industries that aren't aerospace?

[Zach]

Yes.

[Dave Ramsey]

Okay. Yes.

[Zach]

Yes.

[Dave Ramsey]

Okay.

[Zach]

That was the whole reason why we felt comfortable investing in this business is that we knew we were able to diversify as fast as we could, provided that this one customer just kept on rolling along as it has been for a long, long time.

[Dave Ramsey]

Yeah. So they have the ability to put you out of business tomorrow?

[Zach]

Absolutely.

[Dave Ramsey]

There's nothing you can do about it.

[Zach]

Right.

[Dave Ramsey]

The only way to save this is the only way to drop the risk down on this. And the risk profile on this is astronomically high. I think you underestimated how much risk you took Dramatically. You overpaid for this, and you structured your purchase horribly because you've got debt up in your face. As soon as this one customer comes along, they're gonna bankrupt you. So the risk profile of this thing scares the bejesus out of me. But we're there, and the only thing you can do is use that fear in a healthy way. If I'm you, and it's going to cause me to work day and night to get 73 new customers, and that's. That's your only hope to survive. And, you know, we can't count on a single customer growing us or keeping us in business. That's just. Yeah, because the SBA doesn't care and the former owner doesn't care. They're both going to sue your butt when you go into default. And if the guy cut. You know, if that single customer cuts you to 50%, you can't make your payroll and you can't make your notes and your. Whoa. I'm scared. So. I'm so scared I'm going to be working all the time. Everybody's job in the place. That isn't anything we can do to keep that current guy as happy as we can. Fine. Why did it drop 30% or 20% or whatever?

[Zach]

That's what I'm trying to ascertain right now. So this is not. We're not losing the business. We've been assured of that. I think this is largely some cyclicality that we haven't seen historically.

[Dave Ramsey]

That doesn't make sense. Cyclicality you would have seen historically.

[Zach]

Right.

[Dave Ramsey]

This is an anomaly.

[Zach]

It is an anomaly.

[Dave Ramsey]

That's the opposite of cyclicality. So, I mean, what in the flip happened? The guy flipped the switch over there. I mean, what they do.

[Zach]

That's what I'm trying to ascertain.

[Dave Ramsey]

I'm over there in their office looking at the eyeballs, saying, what in the flip? Because I'm scared. And I'm going to. When I leave his office, I'm going to make 73 sales calls because I want to make these people unimportant as fast as I can.

[Zach]

That's exactly what I'm doing right now.

[Dave Ramsey]

Yeah, that's your. That's your only shot. I mean, you already knew what to do. I'm not giving you any news you didn't have. Except I'm going to fuss at you for your risk profile on this. And then you amplified. You magnified the risk profile with the debt.

[Zach]

Yeah.

[Dave Ramsey]

If you didn't have any payments right now, or you had a different structure with the former owner, that was based on profits, not based on I want my money. If the profits were here, he got paid. If they didn't get weren't here, they didn't get paid, then you wouldn't be over a barrel. But right now you're over a barrel with knives in it. So, yeah, this is scaring the p. Jesus out of this. Wow. But yeah, I think you're sharp. Talking to you. You're obviously got great business training and you're observing this clearly. So you already knew the answer to the equation even before you bought it. You knew that it needed to be diversified. So I'm agreeing with that. Ecclesiastes says spread your portions to seven, yes to eight, for disaster may come upon the land. Diversification is a biblical idea. Don't put all your eggs in one basket. The investment people say, right. And so customer base is the same thing. And you knew all this. I'm not telling a single thing you didn't already know. But yeah, I'm just. The urgency for me, if I'm you, is not panic, but it's real close on getting a customer base that's diversified and spread out. Because my goal is in five years for this current guy to be paying me the same amount of money and he's 1/10 because I got 30 million coming in top line and $12 million bottom line instead of three over one. And then if that guy bails, it's just sad. But it didn't put me out of business and bankrupt me and lose my house to the SBA lien that I've got on my house. So. Ouch. Ouch. I wish I could give you a magic answer, but you already knew the answer before you call me. And you're sharp. You're not going to have any having trouble figuring out what to do. I just hope you can get it done before the tail wags the dog here. And that's kind of what you set up. Ouch. Wow. I'm rooting for you, man. I'm rooting for you. Make the turn, call me back and tell me you did it. I'd love to hear the success story. Remember, better a weary warrior than a quivering critic. This world needs more high quality leaders, so take courage and lead. I'm Dave Ramsey, your host. Thanks for listening to the Entree Leadership Podcast.