My Employees Aren’t Happy With Their Raises

Summary

The EntreLeadership Podcast: "My Employees Aren’t Happy With Their Raises"

Host: Dave Ramsey (Ramsey Network)
Date: August 18, 2025

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Episode Overview

In this episode, Dave Ramsey fields real-life business and leadership coaching questions from callers, addressing practical workplace challenges. Major topics include structuring employee raises, the complexity of buying into a family business, risk management in business decisions, and succession planning after the death of a business owner. Dave brings over three decades of hands-on CEO experience, delivering candid, actionable advice.

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Key Discussion Points & Insights

1. How to Structure Raises and Merit Pay (Blake from Lincoln, NE)

[01:27–07:30]

• Caller's Issue: Blake is the controller of a 100-employee security company. Their practice: a standard 2% cost-of-living raise plus up to 3% merit increases—leading to confusion and morale issues.
• Dave’s Advice:
  • Don't do generic cost-of-living raises; focus on marketplace adjustments—pay what the position is worth in the local market, not just arbitrary percentages.
  • Raises should be based on what it currently costs to hire for that role, with clear benchmarking and comp studies.
  • Quote:

    “A 2% raise in a 9% inflation economy is not...that's insulting.” — Dave Ramsey [03:13]

  • Avoid rigid, percentage-based merit raises—these create internal comparison and resentment.
  • Explain to team members the salary range for their role and tie changes to market data and individual value.
  • Regular 1:1s or accountability meetings should address performance throughout the year, not just at annual reviews.
• Administrative Roles:
  • Rewarding non-revenue-producing staff is challenging; keep merit/pay structures realistic and transparent.
  • Quote:

    “I'd put the freaking receptionist on straight commission if I could figure out a way...but I have never done that.” — Dave Ramsey [05:09]

  • If employees aren't performing, it becomes a matter of fit, not money.

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2. Buying a Business with Family Involvement – Cautionary Tales (John from Philadelphia)

[09:42–23:07]

• Scenario: John, president of a $13–15M construction company, is offered the opportunity to buy controlling interest. The owners’ child will be gifted the non-controlling portion, and the child's spouse works in the company.

• Concerns:

  • Silent partners who are family—potential for toxic dynamics, especially if non-performers can't be removed.
  • Deal structure: Debt-financed purchase, no personal collateral required.

• Dave’s Candid Analysis:

  • Avoid deals where you don't have the power to remove problematic employees—regardless of whose family they're from.
  • Never accept a minority position in a small business; you'll have no real power.
  • Quote:

    “The only ship won't sail is a partnership.” — Dave Ramsey [12:59]
    “If you can't get rid of her, she's going to screw up the whole thing.” — Dave Ramsey [12:19]

• Deal Structuring:

  • Insist on clean ownership. “Better to pay twice as much and own the whole thing.”
  • Structure buyout payments as a percentage of profits rather than fixed payments to manage risk and avoid default during downturns.
  • Use high-percent-of-profit payments as leverage to buy out family more quickly and own outright:
    • “How about 80% of profits until we reach $3 million? That might pry them loose from the kiddo.” [22:25]

• Family Dynamics:

  • Emotional motivations can contaminate business logic.
  • Prepare for difficult negotiations: set clear, future-oriented terms, not deals anchored in family nostalgia.

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3. Taking Smart Risks (Diane in Virginia – Written Question)

[24:44–34:31]

• Question: How do you distinguish between being bold and being reckless—especially with money, people, or your brand?
• Dave’s Principle:
  • Never take a "James Bond deal"—don’t put all your chips on the table. If you can’t survive a deal’s failure, don’t do it.
  • Quote:

    “We don’t do any James Bond deals...We don’t slide all of our chips to the middle of the table.” — Dave Ramsey [25:10]

  • Only take risks that your business can absorb without existential harm.
• Musket Balls vs. Cannonballs Metaphor:
  • Jim Collins' method: Test ideas with small, low-risk experiments (musket balls) before making major commitments (cannonballs).
  • Always “test the range” in the market before major launches.
  • Quote:

    “Don’t shoot cannonballs, shoot musket balls first.” — Dave [28:40]

  • Iteration is crucial—almost every winning product is version 6, not version 1.
• Personal Story:
  • Turned down a $10M custom product deal with a major retailer because it posed existential risk.
  • Learn from failure but avoid catastrophic, reputation-destroying mistakes.

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4. Navigating Succession After Owner’s Death (Mike from Pensacola)

[38:41–54:58]

• Caller's Story: At 31, Mike inherits a share of the family floor company ($15M revenue, $2.3M net profit) after his father's sudden death; he and his sister are 50/50 owners, while stepmom has been handling finances.

• Challenges:

  • No succession or transition plan in place.
  • Step-mom was used to "living out of the business" and faces financial uncertainty.
  • Mike and sister never worked in the business before.

• Dave’s Guidance:

  • Generosity: Help stepmom get on her feet, but don’t keep her (or anyone) in a role they're not fit for out of guilt or obligation.
  • Pay stepmom a fair market salary for any continued work—nothing more, and only as needed.
  • Leadership for Callers Like Mike:
    • Be humble, "ask lots of questions," learn the business from the team, and earn respect by being real.
    • Quote:

      “Don’t make a lot of statements…You’re not smart enough to make a lot of statements in this situation yet.” — Dave Ramsey [47:04]

• Sibling Buyout:

  • Set clear intentions early for future buyout; structure payout as a share of profits until the target is met.
  • Avoid long, emotionally charged standoffs; maintain the relationship.
  • Quote:

    “When in doubt, be generous. You won’t regret that 10 years later.” — Dave Ramsey [53:57]

• Succession and Estate Planning Lesson:

  • Failing to plan causes immense stress and complication—have clear wills, trusts, and business continuity plans.

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Notable Quotes

• On Raises & Reviews:

  “A 2% raise in a 9% inflation economy is not...that's insulting.” — Dave Ramsey [03:13]

• On Partnership Complexities:

  “The only ship won't sail is a partnership.” — Dave Ramsey [12:59]
  “If you can't get rid of her, she's going to screw up the whole thing.” — Dave Ramsey [12:19]

• On Smart Risk-Taking:

  “We don’t do any James Bond deals...We don’t slide all our chips to the middle of the table.” — Dave Ramsey [25:10]
  “Don’t shoot cannonballs, shoot musket balls first.” — Dave Ramsey [28:40]

• On Humility in Leadership Transition:

  “Don’t make a lot of statements…You’re not smart enough to make a lot of statements in this situation yet.” — Dave Ramsey [47:04]

• On Generosity in Family Business:

  “When in doubt, be generous. You won’t regret that 10 years later.” — Dave Ramsey [53:57]

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Memorable Moments & Practical Takeaways

• Dave’s metaphorical style shines (James Bond, musket balls vs. cannonballs), making complex advice memorable and actionable.
• Real-life scenarios highlight how lack of planning—in raises, ownership, or succession—causes predictable pain.
• Emphasis throughout on clarity, market benchmarking, humility, firm boundaries, and family relational health.

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Timestamps for Major Segments

• [01:27–07:30] Raises and merit pay (Blake)
• [09:42–23:07] Family business buyout, silent partners (John)
• [24:44–34:31] How to assess risk, personal stories (Diane's Q)
• [38:41–54:58] Succession and sibling buyouts after owner’s death (Mike)

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Tone & Style

Dave’s tone is direct, practical, occasionally humorous, and always rooted in his core values: responsibility, generosity, and honesty. He offers tough love but balances it with empathy, especially where family and grief intersect with business.

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This episode delivers practical, hard-won business wisdom, especially for entrepreneurs facing structural decisions around compensation, ownership transitions, and legacy planning.

Transcript

[A]

You say you'll never join the Navy, that living on a submarine would be too hard. You'd never power a whole ship with nuclear energy, never bring a patient back.

[B]

To life.

[A]

Or play the national anthem for a sold out crowd. Joining the Navy sounds crazy. Saying never actually is. Start your [e-mail] America's Navy forged by.

[B]

The sea 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 and leadership. I'm Dave Ramsey, your host with over 30 years of experience leading in the trenches right alongside you. I do this stuff every day. If you have a question that you want to ask on the show, fill out the form on entree leadership.com ask or call and leave us a voicemail at 844-944-1070 and we will make you a caller on the show. That's 844-944-1070. Blake is in Lincoln, Nebraska to start this hour off. Hey Blake, what's up?

[C]

Hey Dave, thanks for taking my call.

[B]

Sure, man. How can I help?

[C]

I'm the controller of a physical security company in Lincoln, Nebraska. We have about 100 employees and my question is around annual pay raises. We currently offer about a 2% or a 2% cost of living adjustment each year for every employee and then up to an additional 3% for merit or performance based increase. The issue I think we're running into is we really haven't clearly identified or defined what a 1, 2 or 3% merit increase would look like. So when an employee gets less than 3%, they take it as they aren't doing a good job or we don't value their contributions. So I just kind of wanted to get your input on how we should think about marital performance increases on an annual basis.

[B]

We don't do any cost of living. We do marketplace adjustment. And so, you know, you don't get a cost of living raise just because cost of living went up. You get raises because the position that you are in now pays more than it used to pay. That's a marketplace adjustment. Does that make sense? Yeah, absolutely.

[C]

So you're just looking at the salary data for that role?

[B]

Exactly, exactly. In this region, I can hire a dev one for X or I can hire a junior controller for Y or whatever. And that is the marketplace value. It's usually a range. Right. But you know, you're at the bottom end of that range and you're doing a great job. So we're going to move you up to the mid range of. And here's the comp study. We show them what the, you know, what the position pays in the marketplace where we got the numbers. We don't just say, we made this up last night right before we met with you this morning. And it's also not random because a 2% raise and a 9% inflation economy is not. That's insulting. And so, and we had a couple of years there a couple of years back from now that we did have some 9% inflation years. Right. Other years we had no inflation. We've had a contraction, meaning a recession. So we haven't tried to monitor all that. That's outside variables. But that usually ends up being reflected indirectly in what it costs to hire someone for a position. So that's the first thing we look at. And then we do not do a percentage merit to where we don't. They don't have the numbers that you're dealing with that way. I don't have any comparison issues. It's just this is what this position's worth and you're exceeding what this position's worth by doing these things. And so we're going to, you know, instead of a, it looks like you're 5,000 to get $5,000 raised to get you to mid range, but you're killing it. So we're actually going to bump you seven. And that's how it sounds. It's a little more vague than saying, well, you were a 3% merit and you were a 2% merit. And you know, so the 2%'s pissed off, you know, which is what you're dealing with, right?

[C]

Yeah, that's exactly it. And at different salary ranges, of course, that makes an impact as well. A 2% for a lower paid employee compared to a 2% for a highly comped employee or you know, received differently because of the dollar amount.

[B]

So yeah, it sounds like you might have a large number in one bucket. Do you.

[C]

Type of employee or.

[B]

What do you mean?

[C]

Yes, we have probably five or six different buckets, but you know, the largest bucket is probably in the 25 to 30 headcount range. And then we have of course, smaller departments and buckets.

[B]

Yeah. And that 25 to 30 is probably where all your problem's happening.

[C]

Yeah, a fair amount. And then in the admin type roles where it's a little more difficult, there's not as much pay for performance. So it really is just that salary number.

[B]

Yeah, we ran into that too. Because I'm so straight commission oriented. I mean, I'm such an entrepreneur, I'd put the freaking receptionist on straight commission. I could figure out a way to structure it, but I had never done that. And so then I run into problems of how do I reward a person in an administrative role that is causing the revenue producers to be able to do their job because they're supporting like they're supposed to be, but they don't get the, you know, they don't get the pyrotechnics around their performance. There's no firecrackers going off. Right. So it's very difficult. It's more difficult for me emotionally to figure out how to build those comp structures in those situations. So what we do is we used to not even do annual reviews because it sounded corporate to me. And I, I hate corporate crap. But we start doing them because we accidentally forgot to give people raises because we weren't checking the calendar. And you look up and it's been two years. And they're like, they quit and they go, you didn't give me a raise in two years. You're kidding. I didn't even know that. Why didn't you bring that up before you quit? And so we were stupid. So we started doing annuals because of that. But of course we're also doing regular accountability rhythms with folks on how their job performance is all through the year. So there's not just one time a year we course correct. So if there were merit issues going on with us, it would happen in some of those weekly or bi weekly standard accountability rhythm meetings rather than in the annual review. And then when the annual review gets there, they're not shocked if they're not performing. And if they're not performing, you know, we're not really interested in keeping them. So it's not really a money thing anymore. It's now just an issue of performance. So anyway, that's the way we do it. We don't have any percentages involved. We're looking at wage ranges, competitive salary and or comp in general for that position. The company, our size in this region. What does this type of position pay? Here's the range. This person is their beginning in their field. And so they're going to be at the beginning, the low end of that range, or they're seasoned and they're really super performing. They may be at the top end of that range. They may even be over the top end of that range. And I'm fine if they're, if they're, you know, killing it. If they're being a stud and Knocking it out. That's really. I'm fine doing that at that point. That's a really cool question. Sounds like you guys got a great business going on. Blake, thank you for calling in. We appreciate you being here. These days, business as usual is anything but. Tariffs make trade policy a moving target. Supply chains are squeezed and your cash flow is tighter than ever. If your business can't adapt in real time, you're in a world of hurt. That's why you need NetSuite by Oracle, trusted by more than 42,000 businesses, including Ramsey Solutions. You need to see what's happening, what's stuck and what's costing you and how to fix it. NetSuite is the number one cloud based business management suite because it helps your business make the right decisions fast. It brings accounting, financial management, inventory and HR into one place so you're not left shuffling a dozen different spreadsheets. That gives you the visibility you need to make quick decisions based on actionable data. And NetSuite AI automates everyday tasks so your team can focus on strategy. It's one system for full control and no guesswork to tame the chaos. And right now, if your business is doing a million or more in annual revenue, download NetSuite's free ebook Navigating Global Trade. 3 insights for [e-mail] Ramsey that's NetSuite.com Ramsey if your business is growing but your stress and expenses are growing with it, well, you're not alone. I see too many small business owners grow fast and burn out because they don't build in the margin that they need to succeed. At Entrez Leadership Master Series, we're going to give you a custom plan to scale your business profitably and sustainably so your business doesn't just get bigger, it gets better. So you can join us for this event. It's four or five days long here. Frisco, Texas. It's gonna be a lot of fun at the Fabulous Omni there October 19 through 24. Go to entreeleadership.com masterseries or click the link in the show notes. If you're listening to YouTube or podcast, John is with us in Philadelphia. Hey John, what's up?

[D]

I worked for a construction company for over 30 years. I'm currently in the position of president. Our top line revenue is between 13 to 15 million annually. 2016 members and the owners are ready to retire and they're giving me an opportunity to purchase the controlling portion of the business with the non controlling portion being given to their adult child. So my question Is should I purchase this business, given there will be debt involved and a silent partner.

[B]

I wouldn't want to be the silent partner. Because you have control, you're going to own more than 51%, right?

[D]

Correct. Correct.

[B]

Okay, so what's the net profit on the business?

[D]

Generally we're around this past year. We're right around. Gross margins were 15% net profit once it was, you know, our GNA overheads out were right around a million doll. Hmm.

[B]

Okay. And what percentage are they wanting to sell you and for how much?

[D]

The percentage would be 55% and total price would probably be a little over 3 million. So my, my portion of that would be roughly. Call it a million. 50,550,000. And that would be on a 10 year loan and no collateral other than the stock of the company. So I'm not putting my personal assets as collateral against the debt.

[B]

Okay, so they want you to pay them a million dollars over 10 years for your portion of a million dollar profit and you get 55%.

[E]

Correct.

[B]

Why do they want the kids staying in?

[D]

There's. That's kind of a long story. The long short of it is that spouse is part of the team and so it's just a way to keep a portion of the family involved over time.

[B]

So the kid's wife works there.

[D]

Correct.

[B]

But you can't find. No, never.

[D]

We haven't gotten that far into the weeds yet.

[B]

I wouldn't do that deal. Yeah, I wouldn't do that deal. Because then you really don't have control.

[D]

Right.

[B]

Because no matter what you do, she's gonna pee on.

[E]

Right.

[B]

That's going to be bad. If she decides to go sideways and be toxic and you can't get rid of her, she's going to screw up the whole thing. So she has to be fireable. So here's the thing. The weeds are the problem. If the only reason they want this kid to keep this is so his wife has a job. She's pretty lame if she can't just go get a job.

[D]

Right, Right.

[B]

That's weird. Yeah. The way I'm. The way I'm gonna protect her is she's really not really protected. I'm. Yeah, I'm confused. So here's the problem, all right? The only ship won't sail is a partnership. This guy doesn't. He has what's called a minority position in a small business, which means he has nothing because you could run this thing in the dirt and you don't need his opinion and his 45% becomes worth nothing. Because you screw it up and he can't say a word about it because he doesn't really have a vote. He's a minority shareholder. And so I never get into minority shareholder positions ever. So the only position I would consider is yours. But I don't want him in there. And I sure don't want her in there if I can't fire her, if she's misbehaving. So, yeah, I want to explore further, if I'm you, the real motivation for him being left in the deal. It's like their dream of their son taking this over died, but his wife still works there. So we're gonna try to keep some portion of this dream alive by letting him still have some of it, even though he doesn't give enough about it to work there. Yeah, that there's something. It feels like that there's some unfinished business emotionally in this family that's showing up in this deal. And I just don't want that to come back and bite me. If I'm you. I'm just. I'm kind of thinking out loud here with me, John. If I'm saying something's out of school, you just tell me now.

[D]

You're correct.

[B]

Okay.

[D]

If I could get her removed completely and just buy the entire company outright, that's a much better structure to do the deal.

[B]

Absolutely.

[D]

Okay.

[B]

And still put it on 10 years.

[D]

Especially if it's just the collateral, the stock of the company.

[B]

The only way you do it. That's the only way you do it. And I'll even put one nuance on the end of that. But, yeah, I just don't. I. Cause otherwise, here's what you've got to deal with in the negotiation. Otherwise, you're gonna have to deal with whether or not she can be exited. If she can't be exited, you've gotta walk from the deal. That's not gonna be you. Cause you really don't have control. It's a misnomer. You own the business, but you can't do it. You have controlling interest in the business, except for one thing. A woman that can tear up. Or a man that can tear up the whole place. Cause they can't be fired. It's like a dadgum bureaucrat or something. So then the second thing is you've got to get into what happens in all of the events that we call them the Ds in a partnership agreement. There's all these things that start with D, the letter D, that can happen. And when they happen, what happens to his shares. Divorce Disability, disinterest, default drug use. He's in jail for cocaine. How do I keep him as a. How do I exit him as a pardoner? He dies. I don't want to be partners with his ex wife or his wife or his kids. What are we doing with all this? And so you've got to deal with all these negative possible outcomes and what happens to his shares in that event. For that matter, what happens to your shares in that event, because he's got a minority position. He's going to want to know what happens to your shares if he's got a brain. And so, yeah, this deal is really messy. And if you don't have a lot of cleanliness, a lot of cleansing to this deal before you do it, you're going to have problems. And obviously we started with the big one, which is being able to exit her, but you got to be able to deal with what's going to happen here. And I would just ask the question, what is the real barrier to me just taking the whole thing? Because I actually want it.

[D]

Right.

[B]

And I will keep her as long as she's performing, as long as she's a good team member. I'm not trying to exit her, but. But I'm not going to be held hostage by her either. So, you know, I. I think, I think you'd be better off paying twice as much and owning the whole thing. I know you would be. And is that. That probably rings really true because you see all the function and dysfunction of this family in front of you, don't you?

[D]

Yes. Yes, I do.

[B]

Yeah.

[D]

Yes, I do.

[B]

And that's what I'm trying to protect you from. It's got to happen. And yeah, there's no reason for them to hang around if they're not going to hang around. They need to exit. It needs to be clean.

[D]

Makes sense.

[B]

I'm sorry your son didn't want to run it, but I don't want to be his pardoner. It's not because I don't like him. It's because I don't want any pardoners. I want to take this thing and I want to honor all the hard work we've all done together by making it very successful for the next few decades. And you guys can look over here with pride and say, I'm so glad I sold that to John because he's done such a great job with our old family business and I'm real proud of him and what he's done. I want you guys to be able to say that about Me. And I want you to look over here and see that there's nothing about this other deal that it talks about the future of the deal, only talks about the past. And that's your son and us guaranteeing your daughter in law a position. And I'll guarantee her a position as long as she's a quality team member.

[D]

Right? Right.

[B]

I'm not trying to run her off, but if she misbehaves or she quits doing her work or quits coming to work or whatever, then, you know, I won't be able to keep her like everybody else we do here. So, yeah, that's how I would handle it, John. Now the back to the other part. That instead of 10 years, so let's say, okay, if it's, let's change the numbers. We have a million dollar bottom line total. Correct. Regardless of the percentages.

[D]

Correct.

[B]

Okay. And you make what now? What's your current income?

[D]

Buck 85.

[B]

And you make that 85. And then the million dollars occurs. Correct?

[D]

Correct.

[B]

And I assume some of the owners also have a salary before the million dollars occurs, Correct?

[D]

Correct. That is correct.

[B]

All right, so that's going to mean we got a little bit more than a million to work with because their salaries are going to be gone.

[D]

Correct.

[B]

All right, and we're buying this for if it's not three, if it's three minutes, six million. We're not buying it for six million. That's not, it's not worth that. Okay. A business, a business should be worth somewhere around 4, maximum 5x of the net profits. Okay, that's a 20 or 25% rate of return for an investor. If I were buying this business and I bought it for $2 million and I made a million dollars, I make a 50% rate of return. You follow me? If I buy it for $3 million, I make a 33% rate of return. Now was the 3 million for your 55 or the total price?

[D]

That was the total price.

[B]

Oh, good. Okay, 3 million it is worth 3 million, right. That's a 30. So it might be worth a little bit more actually. So anyway, somewhere around in there. And so okay, I'm gonna pay you 3 million over 10 years. That's $300,000 a year. That's 30% of profits. So what I'm gonna agree to do is to pay you guys 45% of profits each year, each month for that matter. We're gonna close the books each month and I'm gonna pay you 45% of profits until we get to 3 million. Dollars, that should take us a little less than 10 years. But if profits are down, I'm not in default. If you have a fixed payment. If you have a fixed payment and profits go down and you're in the dadgum construction business. Hello. Yeah. So if you have a downturn and you have a year where you make a half a million and the dad gum payment's 600 grand, that's not going to work.

[D]

Right.

[B]

So you go out of business. And because you had a fixed payment. So I want your payment to be a percentage of profits, and you can have the books be audited once a year. That's fine. And what I'm going to do if I'm you, is I'm going to pay them more than that and get to the 3 million super fast. I'm going to try to live on my 85 or maybe 100 and put almost the whole million and try to be done in three or four years.

[E]

Right, right, right.

[B]

So I'm gonna exceed, but it's a percentage of profits, somewhere around 40, 50% of profits until we reach 3 million or until I pay you 3 million. And so then you're gonna accelerate it and get out of there in about three years, four years. If you put a million a year to it and you kept your salary and you even raised your salary to include the part that they didn't collect anymore because they're not there anymore collecting salaries, then you'd be done in three years and never have changed your income. That'd be pretty sweet, right? As a matter of fact, that might be. Let's think about this. I'm making this up as I go. Instead of 40%, if we said 80% of profits, which would pay them out in three and a half years, that might be the leverage tool that pries them loose from the kiddo.

[D]

Oh, okay.

[E]

Yeah.

[B]

I'm willing to do this to get rid of the kiddo. That's not what we're gonna call him. But I mean, instead of 10 years, why don't we make it three and a half? Cause it's 80% of profits you get until we reach 3 million. And I'll just take the whole thing and I'll do that and work for my current salary so I don't have to have any partners. You get your money super fast.

[E]

Right, Right.

[B]

That's a sweetener. Three years.

[E]

I like that a lot.

[B]

Yeah.

[E]

Yeah.

[B]

Cool. This was fun. I hope it helps. Let us know how. You let us know if you get it.

[E]

Okay, I will.

[D]

Thank you very Much. Dave.

[B]

Hey, God bless you, man. Appreciate you calling in. Cool discussion. Cool discussion. Unless you're the kiddo. Yeah. Then you're not gonna like Dave, but. Oh, well, that's how this works because he ain't paying nothing for that 45%. I'm just telling you. Yeah. Oh, well, maybe he can just get some of daddy's money. Since we're gonna give daddy some money. That'll work, too.

[A]

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[B]

Diane in Virginia says, Dave, as an entrepreneur, I know risk is part of the game, but it's not always clear when I'm being bold versus reckless. How do you personally evaluate whether a risk is wise or foolish, especially when it involves money, people, or brand reputation? Was there a risk you took early in building Ramsey Solutions that felt crazy at the time but ended up being pivotal? No. I don't have one of those stories because I started Ramsey after going broke and losing everything, because I did not measure risk well, because I was an idiot. And I went deeply in debt in the real estate business and lost everything. And then when I started Ramsey, I became super risk averse because I. Even though I'm entrepreneurial and even though I believe in trying new stuff all the time and experimenting, I'm not doing things that are gonna ever put me back in that again. So the main thing, Diane, that I use is I tell our entree leaders everywhere, and I tell our team this, too. We don't do any James Bond deals. Now, let me explain what that means. In every James Bond movie, there is a scene towards the end of the movie that the bad guy that's trying to destroy the world is at the poker table or the baccarat table or whatever with James Bond. And at some point, James has to slide all of his chips to the middle of the table on one hand. If he wins the hand, the world is alive. If he loses the hand, the world will be destroyed. We don't do James Bond deals. We don't slide all of our chips to the middle of the table. In other words, we don't do deals that if they don't work, we're broke or broken or brand damaged to the point that we can't survive. We do things that don't work and it's embarrassing when they don't work and they lose money when they don't work. I've done a lot of things that have embarrassed me because I tried them and I failed. I looked like a fool. Ramsey looked like we were inept because we were. It didn't work. We guessed wrong, we thought wrong, we considered wrong, whatever. And not only did we stick our nose out there in the marketplace, the marketplace laughed and shoved our nose back in the door, but we also lost the money associated with that. In every case, we did not use borrowed money because we don't borrow money, because borrowed money magnifies the size of the mistake. Because you're going to borrow a lot of money, do something really stupid instead of just trying something stupid on a small scale and you don't know it's stupid when you're doing it or you wouldn't do it. So anyway, we don't do James Bond deals. We don't do deals where we slide all of the chips to the middle of the table and our reputation is ruined or our financial situation is ruined and we're bankrupt and closed. If the deal goes bad, it takes us down. And so we always have to look at every deal and go, if this deal goes bad, can we swallow it or are we going to choke to death and die on this thing? And early on, we had a large retailer many years ago come to us and they had a $10 million deal for us. And we thought that if we could do business with this large retailer that was world renowned, that we would have had the best deal ever in the world. And it'd be a big deal for us. It'd be a great brand lift to be able to say we had our stuff in their stores. And the terms of the deal were that we had to do custom products with their name on it and our name on it. To put in their stores. And if it didn't work, if the stuff didn't sell that, they could send it all back for a full refund. In the product or book world, we call that full returns. And so we're going to ship $10 million worth of stuff over there. If they don't sell it in their stores, they're gonna ship it all back. And it's all got their name on it, so it has no secondary value. It all has to go in the dumpster. We're gonna lose. Worst case scenario, $10 million. And in those days, that would have put us out of business. We couldn't take that level of risk. That was a James Bond deal. We were sliding all of our chips to the middle of the table in order to get this deal. It probably would have worked, but if it didn't work, we couldn't have survived it. So that's not bold, that's reckless. And so we did not do that deal. That's why I'm not naming the retailer. If it had worked, I'd be bragging, because that was one of the benefits of having done this, is that we'd done a deal with this person, these people, and they're a big deal. And weren't we cool? And aren't they cool and isn't everybody cool? And look at all this and how great we are and how great they are and we'll never know. They'll never know. And they said, well, we don't understand. No one ever does this. No one ever turns us down. And I said, well, see, now you can't say that anymore. Now you can say almost no one, because now someone did turn you down, and that would be those weird hillbillies over in Nashville. We turned you down. And so that's the thing, number one. So is it a James Bond deal? Is it gonna break your reputation or break your company if it goes sideways? Because all the deals don't work like they're supposed to work. As a matter of fact, 100% of them don't work like they're supposed to work. Some of them are better than you thought. Some of them are worse than you thought. None of them work exactly the way you think it's gonna work. The best laid plans of mice and men, baby. Go back to your English lit class. So the second thing is that we look for is we use the Jim Collins method of analysis. Jim talks about this in his latest book, and he says that don't shoot cannonballs, shoot musket balls first. And this Comes from the story that Jim tells in the book of in the old days and the wooden ship and cannonball warfare stage, like in the 1800s, a good captain of a warship that is like, think pirate ship with cannons or something like that, right? That type of naval vessel in the old days would not fire cannonballs until they had their muskets, their musket rifles on deck. And they would fire the muskets to establish range. Because sometimes on the ocean, things appear closer than they are or appear further away than they are. And so if you fire a musket ball and you miss, no big deal. You haven't burned a lot of powder and you haven't burned a lot of lead, but there's only so many much powder and so much lead you can have on a ship. You only got so many cannonballs, and you can't afford to waste them by not hitting things because you weren't in range. So you check the market by firing musket balls first. And if you hear those musket balls clicking off the hull on the other side, now we've established range and now we can fire cannonballs. That's called a test market. In other words, we're going to float the idea out there, we're going to trial balloon the idea out there some way, somehow, without having to do a cannonball launch. If you have to do cannonball launches because you've got no way to check the marketplace on it, you're probably going to lose your butt. And I can tell you, 1, 2, 3, 4, 5, 6, 7 times off the top of my head, without even thinking about it long, that I've lost over a million dollars by doing cannonball stuff because I thought it was gonna work. And I was so enthusiastic and I was reckless. Now, we survived the reputation hit and we survived the financial hit, but I could have avoided even the pain that I had if I'd have been a little less reckless and shot some musket balls and checked see if the marketplace actually cared. And so you want to try the thing out at a smaller scale somehow, because especially your first product in an area, if you've never launched a product in a certain marketplace area, not regional area, but I'm talking about a certain area of business. 100% of the time, your prototype is not going to be what you end up with. 100% of the time, you're version 6 of the product, and versions 1 through 5 are in the dumpster. Version 6 is going to be the one that catches on because the market's Going to talk to you and say, if you'd make that little switch there work, if you'd make it that color over there, if you'd carve that edge off, we'd all buy it. And then finally you get the sweet spot on the market. But by then, you've wasted a ton of money. And if you go buy 100,000 of your version two, because you're just so excited, that's a cannonball instead of a musket ball. So just put enough of them out there that you get them moving, get them moving, run out of them, and then iterate, iterate, iterate, iterate, iterate on the product, smooth the product out, file it down, get it where it's working, let it get the sweet spot, and then get your volume up, then fire your cannonballs. And so. Cause 100% of the time, see, it's a problem with, like, with us, we launch books, okay? And you can't. The only way we can musketball a book is we take the content from a book and do it as a talk at one of our entree leadership events. And so this latest book that I did, this Building a Business yous love the five Stages of Business. I did that talk six times for different entree situations. And we've discussed it and kicked it around with you guys here on the podcast a long time before it went into a book. So it was not an accident. That book came out number one. It came out number one because we tested it with musket balls before we fired a cannonball. If I had just sat down and wrote that thing and the public had never seen it. And by the way, the version you all saw was version six. Every time I did the talk, we read the feedback notes on the talk, and each of us would gather around, go, that point didn't hit. That doesn't work. We've got to change the way we communicate that it didn't work. And we changed it to where all the lingo that's in the book is all proven lingo. So you guys got a premium product when you buy that book because it's a tested, polished book. It's not a prototype. And so that's how we don't screw up. We don't launch a lot of books at Ramsey, but almost every one of them are number one bestsellers when we launch them. Huh. Wonder why. You think that's a freaking accident? No, it's using this process, okay? It's a process here. We test the material out. We don't test it out in many books. We did that with John Deloney's book. We did do a mini book. We launched Redefining Anxiety as a chapter book, a one chapter book, 37 pages long. We sold 150,000 of them to our great surprise. Honestly, we were all a little shocked that all of you had that much anxiety, but you did. And so we redefined anxiety like 37 pages a bunch. But we knew, hey, Marketplace is singing. They have a need for this. This is a felt need. This is a visceral need. So guess what? You know, building a non anxious life. The six keys to uncode and build a life where you fight anxiety. A full on hardback book. Well, duh. Of course it launched number one. Cause we had a musket ball out there that it was his little brother that hit a bunch of ships. Okay, so that's what we're doing. So we're doing musket balls versus cannonballs. We're not doing James Bond. A lot of metaphors being mixed up here in this talk, but that's the answer to your question, Diane. Yes, you keep trying things, but you get wiser and wisdom helps you to be bold without being reckless. And those are the two main things that we do around Ramsey to keep us from getting there. So I love that question. Thanks for letting me get up on my soapbox. I like it. Good stuff. If you're working 60 to 70 hours a week just to keep your business running, you're headed for burnout. The only way to grow without running on empty is to to stop working in your business and start working on your business. And that takes advice and accountability from people who actually make payroll. That's why you need to join an advisory group. You'll get a coach and a circle of business owners like you who will help you stay focused and grow without sacrificing your nights and weekends. Find out if advisory groups are right for you@entree leadership.com or click the link in the Show Notes if you're listening on YouTube or podcast. Thanks for hanging out with us. Hey, if you want to help us out, we could use your help. Click the subscribe button, the follow button. Share the show. If there's a share button on your platform, click Share or send somebody the link. Tell them to tune in and hang out with us. We'll give you some, some information that's actually freaking usable. There's not a lot of theory around here. This is actually stuff I do and have done for 30 years and our team does and I've Learned from some of them. And I'm gonna share it all with you. But we're just practical people. We're practitioners. This is not a theoretical thing. And of course leave those five star reviews, they're helpful. All that stuff moves the Internet stuff around and causes the show to be pushed out in front of other people. And a bunch of you are telling people about the show in different ways. We thank you for that because our numbers are. They're up. Ridiculously, considering you guys are our only marketing plan. So thank you for all your help. We appreciate you a bunch. Mike is in Pensacola. Mike, what's up?

[E]

Hey, Dave, how you doing today?

[B]

Better than I deserve. How can I help?

[E]

Hi. Well, I was calling because I've had a lot of life changes. I'm 31 and my dad has actually passed away about two months ago.

[B]

Oh my gosh. I'm sorry. What happened?

[E]

Yeah, pretty much just kidney shut down and then just everything else followed.

[B]

And how old was he?

[E]

He was two weeks away from being 60.

[B]

Wow. Young.

[D]

Okay.

[E]

Yes, sir.

[B]

I'm sorry. So you got the business dumped in your lap, right?

[E]

Well, kind of. It's. It's between me and my sister right now. My stepmom's runs the financial side of things and I was just wondering. So the past four years or so my dad really has not been in the day to day's operations. He's kind of the built. He's grew the bill, the business the past 30 years or 25 years I think it was. And so he's kind of stepped away and just living their life. And it's kind of been dumped in my lap, but I want to step in.

[B]

So you've been running it for the last three years or so?

[E]

I have not. I've just gotten into it the last two months.

[B]

Who's been running Mom?

[E]

We have one guy that ran all the operations. He took over, it's a flooring company. So he did all the carpet, tile, wood stuff. And my stepmother did the remote from remote. She did the books, the financials, the payroll, all that kind of stuff. And then the team is 10 people on. On our team.

[B]

Was there, was there anyone that was the boss, the president, the CEO.

[E]

Just my dad.

[B]

But he wasn't working.

[E]

Well, he wasn't there day to day, but everybody was always able to call an email and pretty much it was. Everybody knew if it got to him, you know, it was going to be a big deal. But he put people in place before him. It definitely wasn't set up how it should have been. There was no name girls. There was no plan for afterwards. And that's where it kind of gets confusing for me. Wanting to come in and help, but not really having a set role to step into.

[B]

Man, what. I mean, horrible thing. I'm so sorry. It's heartbreaking. Okay, so he passed away. Who is now the owner of the business?

[E]

Right now it's actually in probate. So we did find the will and trust, and we're in the process of appointing a.

[B]

What does the will say? Who's going to get the business?

[E]

The will and trust say that me and my sister will get it. 50. 50.

[B]

Okay. And does your sister already work there before all this happened?

[E]

No, sir. Neither of us have had any time in the business.

[B]

What does your stepmother get?

[E]

Technically, she gets nothing, but according to the prenup. Now, we have tried to work the deals out to make her the CEO, allowing her to keep the household income and training me to run things one day when she's ready to step away. We have had a great relationship, but I also know these kind of events can bring out the best and worst of people.

[B]

That's a good point. Okay, and does. Is she okay otherwise, as far as housing and income and all that kind of stuff?

[E]

Yes and no. She could be if they listen to you. The income salary is insane, but the amount of properties they own and owe is just the same. There was not much of a savings for them, so it was really just. They were. He was the sole owner. So they were using the company kind of as a checking account.

[B]

Yeah. All right.

[E]

And I think I forgot to mention the company. Last year the revenue was around 15 million. The year before that was 14, and then pretty much averaged about 9 before.

[B]

So what does stepmother say the net profit was?

[E]

The net profit, that's the.

[B]

After Taxable income, everything. Yeah, taxable income.

[E]

Taxable income was 2.3.

[B]

Dad gone. And she got nothing.

[E]

No, I mean, she's still getting everything. So they're still going through the process for the 20, 24 taxes?

[B]

No, I mean, she's not getting any in. She doesn't get any piece of this company that made $2 million. How long were they?

[E]

Not with the way he left, 18 years. Gee, yes. That's why it's. Me and my wife, we've been married eight years. We're big fathers. We already have a will for our kids, mainly so our kids don't have to go through any type of state process. But that's what kind of hurts us.

[B]

Where is this going to end up? When it. Let's say everything went perfectly and we had a dream. What do you and your sister want to do with the business that you now own?

[E]

I would like to take my role and step into the business and grow.

[B]

It so you would become the CEO.

[E]

I would like to one day. Yes, sir.

[B]

It's not one day. You freaking own it.

[E]

Well, right.

[B]

You got to have the team come around you and teach you the nuances of it. But I'm the new owner, and I don't know what the flip I'm doing, so you guys got to help me, and you're it, if that's what you're going to do. What's your sister want to do?

[E]

Right now, she's just wanting to hold her shares until about two or three years and then possibly sell it to you. We've. Sell it to me? Yes, sir.

[D]

Okay.

[E]

We've always been told the company's always for sale, but it's never on sale. And after the death, it would be considered on sale. So we know, you know, kind of hold on to it.

[B]

And I mean, do you want to run it for 15 years?

[E]

I would. I would run it. I would want to run it for 15 or more because to me, it's a great vehicle for my family. And so what.

[B]

What I would do is begin to address, first, what you're going to do with your stepmother, and then second. But that's just a matter of generosity. Okay.

[E]

Right.

[B]

And that's you. You may be stepping in and helping her with her finances, showing her she needs to sell off these pieces of property and get. She has a sustainable life without this company.

[E]

Yes, sir.

[B]

I don't want her. I don't. I don't need her hanging around as an act of charity. That's not healthy for your organization.

[E]

Right.

[B]

Okay.

[E]

Right.

[B]

At pay. At being paid double what you pay somebody in a $15 million business to do books.

[E]

Right.

[B]

She gonna get. She's gonna hang around at a salary. It's going to be a competitive salary for a controller or a miniature CFO of some kind for a $15 million business. And I don't think she needs to do that, but if she does, that's the most she gets paid. And then you guys go help her in her personal life, just as an act of love towards her, get her other stuff organized to where she has a sustainable life without living out of this business, because she's not going to get any money out of this business after this will is probated.

[E]

Right.

[B]

That's the way it should Be. And no, she doesn't really need to train you. She needs to turn the. Either handle the books and train you about the finances because she's the cfo, not because she's a stepmother. And. And your team, your leadership team, your ops guy that handles the flooring and the tile and everything's going to teach you about that, and then you can figure this out. This is not rocket science. You can really get in there and figure it out. And probably within 30 days, you're gonna have your arms around most of these numbers. If you get neck deep in the weeds, and you gotta get down in the weeds and understand the business and how it operates, and then it'll take about a year for you to get completely acclimated and start growing it.

[E]

Right? And I've definitely seen that the past month, being down there and learning and.

[B]

Shadowing, you can figure it out. It's not that complicated. It's just you're not nearly as inept as you might feel like you are initially. But, you know, and just be humble and ask questions, Lots of questions. Help me with this. Show me how to do this. I don't know how to do this. Show me how to do this. And the team is not going to resent that. They're going to love you for that. Just for being real. And we're going to do this together, guys. But y' all got to get me caught up to speed so I'm not a doofus and a problem around here. I got to be helpful because I'm owning it now. I'm your new owner, and I got to. You know, you don't want a stupid owner, guys. You got to have me helping you. So get in here and help me, and let's do it together and just build a teamwork atmosphere. And guys, y' all show me what I'm doing wrong. It's okay. You're not gonna make me mad. I don't know. And just humble. Lots of questions, questions, questions. Don't make a lot of statements. You're not smart enough to make a lot of statements in this situation yet. So that's your leadership model. And then you've gotta. You really need to sideline her stepmom as quickly as possible for her own good and for the toxicity in the business, because they're all gonna wanna. They're all gonna wanna bow to her in respect to your dad's memory, probably. Probably in an unhealthy way. That's what I'm saying. And so I wanna love her in other ways. Other than propping her up in the middle of this business. And I'm not giving her $2 million either. Okay. Your dad should have done that. That was his job. So, anyway, let's help stepmom get sidelined, help her get set up in a sustainable life. And that's just you coaching her as an act of love. And if you leave her in the CFO role at CFO rates for a $15 million business, which is a lot less than she's used to getting, it's for a period of time until she gets acclimated and gets stable and until you guys get acclimated and get your proper CFO in there. Okay. But she doesn't really need to be there three years from today, unless this is a very unusual woman, and I don't. I don't smell that in this situation.

[E]

Right. Well, she. That's where it gets hard because before she came to help my dad, she was in purchasing for some of the bigger builders in the nation. And so she brings side of it whenever it comes time for us to do bids and pricing. She's able to help us out a lot with that side. But like you said, I don't know if it's worth it.

[B]

We'll get somebody else to do that, I promise. But I don't care how long you leave her. But just be aware, the second part of the. Then the next stage is talk to your sister now and say, right now we're grieving, dad. It's fresh. It was just two months ago. Right now, we're trying to get our feet, our arms around this stuff. I'm going to come in here. My goal, with your permission, you're 50% owner and I want to talk to you, if this is okay with you, is I want to come in and run this thing. And I also want us to begin to talk sometime within the first 12 months about what it takes to buy you out and how we can structure that. Because you don't want to be in here 15 years and I do.

[E]

Right.

[B]

And we don't have to do that today, but I want to set the table emotionally that when we all are crying a little less over dad, when we get a little bit past some of this two month old grief, that I do want to sit down and start talking about this. And we really need to, by the end of this year, come up with a game plan that you and I can agree to.

[E]

Yes, sir.

[B]

And it might take three years to do it, but we need to have our game plan.

[E]

Right.

[B]

Okay. And it probably sounds like, okay, the business is making $2 million a year and so it's, you know, it's probably worth six or five or eight or whatever. And so I need to get you $4 million to buy you out. And I can do that over this many years. And I'm going to do it out of the profits and I'm going to give you, you know, your profits plus other profits or I'm gonna, we're gonna do a deal today and I'm gonna buy you out today on a set dollar amount and then pay you out over a few years out of the profits. So I'm gonna give you $4 million and I'm gonna give you 50% of the profits, 60% of the profits until we get to $4 million or 80% of the profits until we get To $4 million and that kind of thing. And then you can buy her out very, very quickly within just a couple of years that way. If you do that. And I'm making those numbers up, but they're probably not far off. Right, Based on what you told me. I'm sorry, man. This is a hard thing to go through.

[E]

Yes, sir, it's definitely be interesting. And since you're a car guy, one of the things we gotta. He does have is a half a million dollar Rolls Royce. No, no, sir, he has a, it's a lease, luckily, because we could just send it back, pay the fee and stop making the payments on it, but.

[B]

Oh, he didn't have it. He just leased it.

[E]

He, he, yeah, he fleeced it for a fully electric one at that, which I never understood.

[B]

Fully electric, half million dollar Rolls Royce and your business. $15 million business. Yeah. You can't make that one up.

[E]

No, I might. We sell that. That's half my salary recovered for the company easily, probably.

[B]

Goodness gracious.

[E]

So there's a lot of cleanup that needs to happen.

[B]

And over in their personal life, coach, stepmom up. You're going to find some more of that crap, aren't you?

[E]

Oh, yes, sir. There's, there's going to be a good bit, I feel.

[B]

Gonna be a big shovel. Oh my gosh. I'm sorry, man. How is your sister dealing with all this? The, I mean, is she, is this, Are you and her okay relationally in this?

[E]

Yes, we are. I mean, we have our, you know how it is with grief. You have your flare ups of certain different emotions and we have our times, but we've always been able to sit down, work everything out and be on the same page. For everything.

[B]

Yeah. Yeah. Well, I think it'd be real important that you love her well through whatever transition you come up with, too. Okay?

[E]

Yes, sir.

[B]

When in doubt, be generous.

[E]

Right.

[B]

You won't regret that 10 years later.

[E]

Yeah.

[B]

And so, you know, don't argue over nickels and dimes and lose a relationship. In other words, because you've got the opportunity to do this right, because your dad left you guys in a mess, because he didn't have a good plan. But you've got the opportunity to play it all the way through and take your time and do it right. And with wisdom and gentleness toward both your stepmother and your sister. But do not keep people on long term out of an obligation to the past.

[E]

Right.

[B]

Only as they can contribute to the future without being toxic. And that includes both of them in terms of how you structure this. But, you know, in the. In the application of that strong statement, you're still going to be gentle and kind and generous. Okay?

[E]

Yes, sir.

[B]

Amen.

[E]

Thank you very much.

[B]

You're a good man. You're gonna. You're gonna handle this well. I'm very, very proud of you, man. What an incredible. Wow. That was a tough one, y'. All. That tells you that you got to have your succession plan in place, and you got to have your estate plan in place, and you got to have your wills in place, and you got to have all that stuff in place, ladies and gentlemen. That's how it works, folks. Remember, better a wary warrior than a quivering critic. This world needs more high quality leaders, so take courage and lead. I'm Dave Ramsey, your host. Thanks for listening to the Entree leadership Podcast. Sam.