Our Business Growth Is Creating a Major Problem

Summary

Podcast Summary: The EntreLeadership Podcast – "Our Business Growth Is Creating a Major Problem"

Release Date: February 17, 2025

In the episode titled "Our Business Growth Is Creating a Major Problem," Dave Ramsey, host of The EntreLeadership Podcast, delves into the intricate challenges that accompany business expansion. Drawing from real-life scenarios shared by listeners, Ramsey provides actionable insights and strategic advice to help business leaders navigate growth-related obstacles without compromising their operational efficiency or team morale.

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1. Managing Warehouse Space in a Growing Commercial Christmas Decor Business

Caller: Mike from Dallas, Texas

Business Overview: Mike owns a commercial Christmas decor company specializing in leasing large-scale Christmas trees and decorations to airports, casinos, hospitals, and town centers. With a lean team of five full-time employees scaling up to 50 during peak seasons, his business saw revenue growth from $1.3 million last year to an anticipated $1.8 million this year. However, Mike faces significant challenges with storage space, operating across three inefficiently located leased warehouses, and is wary of incurring debt to build his own facility.

Key Discussion Points:

• Leasing vs. Owning: Ramsey cautions against premature real estate investments that might restrict business flexibility. He emphasizes that leasing allows businesses to adapt to growth without the financial strains of property ownership.

  Dave Ramsey [02:10]: “You don't want to get yourself in a real estate transaction that cramps your style... the business can lease throughout the perpetuation of operating.”

• Scalability Concerns: Owning a warehouse might solve immediate space issues but can lead to constraints as the business continues to grow. Ramsey advises maintaining business agility by opting for larger, strategically located leased spaces with future purchase options.

  Dave Ramsey [05:13]: “I would find a good large warehouse that is exactly what you want, where you want it, and I would lease it with the option to purchase it sometime in the next five years.”

• Negotiation Strategies: Ramsey shares his personal experience of negotiating lease terms to include purchase options, highlighting the importance of persistence and flexibility in securing favorable agreements.

  Dave Ramsey [05:21]: “I kept shopping until I found somebody that was a motivated seller... I talked him into it because he just wanted a tenant.”

Conclusion: For businesses like Mike's, Ramsey advocates for leasing as a strategic move to ensure operational flexibility and sustainable growth, avoiding the pitfalls of overextension through real estate investments.

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2. Structuring Partnerships in a Civil Engineering Firm Post-CEO Demise

Caller: Ben from Fargo, North Dakota

Business Overview: Ben helms a civil engineering firm with seven full-time employees, generating $2 million in gross revenue. Following the untimely passing of the company's CEO—a 10% shareholder and VP—Ben now owns 100% of the shares. He aims to bring a long-term co-worker into the partnership to preserve the company's legacy and retain top talent.

Key Discussion Points:

• Valuation and Share Distribution: Ramsey explores the nuances of share valuation and the integration of retained earnings in partnership agreements.

  Dave Ramsey [12:13]: “Why do you need a partner to keep the company going?”

• Partnership Agreements: Emphasizing the importance of comprehensive agreements, Ramsey outlines the critical "Ds" that must be addressed—death, disability, drug use, default, and divorce—to safeguard the business's future.

  Dave Ramsey [16:53]: “You need to make sure your partnership agreement covers... death, disability, drug use, default, divorce.”

• Financial Structuring: Ramsey clarifies the relationship between retained earnings and share ownership, advising on fair buy-in processes that reflect current business valuations.

  Dave Ramsey [15:07]: “You're going to charge him for 10%, $40,000 cash for his share of retained earnings, and you're going to charge him for his shares in addition to that.”

• Long-Term Planning: He recommends regular reassessment of share prices and clear mathematical formulas within the partnership agreement to prevent disputes and ensure seamless transitions in various scenarios.

  Dave Ramsey [17:26]: “Develop a math formula... so he knows exactly in the eventuality that he needs to leave or dies or is disabled or whatever.”

Conclusion: Ramsey underscores the necessity of detailed and forward-thinking partnership agreements. By addressing potential future challenges proactively, Ben can ensure his firm's stability and continued success.

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3. Handling Abusive Customers in an Insurance Agency to Protect Team Morale

Caller: Melissa Johnson from Midwest Insurance Corporation, Nevada, Iowa

Business Overview: Melissa leads a longstanding insurance firm with 15 team members and $2 million in annual revenue. Recently, her team has endured increasing abuse from customers, significantly impacting team morale and creating a toxic work environment.

Key Discussion Points:

• Setting Boundaries: Ramsey shares Ramsey Solutions’ approach to handling abusive clients, emphasizing the importance of protecting team members from toxicity while maintaining professional integrity.

  Dave Ramsey [23:50]: “First, we want to be kind and we want to be calm. The louder they get, the quieter you get... If they resume the screaming and cussing, just hang up.”

• Training and Policies: He advocates for clear policies that empower employees to disengage from abusive interactions, thereby preserving their dignity and maintaining high morale.

  Dave Ramsey [07:15]: “You can stop staring at that screen and get back to what you do best, growing your business.”

• Real-Life Example: Ramsey recounts an instance where he personally intervened to protect his receptionist from a verbally abusive caller, setting a precedent within his company for zero-tolerance towards customer abuse.

  Dave Ramsey [34:34]: “I said, you're fired as a customer... You don't call here anymore and be a but.”

• Impact on Morale: By refusing to tolerate abusive behavior, Ramsey illustrates how businesses can foster a respectful and supportive workplace, enhancing overall team morale and productivity.

  Dave Ramsey [37:00]: “We are not going to engage in a toxic, out of control, freakazoid relationship with a customer. We hang up on them.”

Conclusion: Ramsey emphasizes the critical role of leadership in establishing and enforcing policies that protect employees from abusive customers. By doing so, businesses can ensure a positive work environment and retain a motivated, high-performing team.

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4. Developing a Reliable Sales Process for Managed IT and Cybersecurity Services

Caller: Shay

Business Overview: Shay is the CEO of a company offering managed IT and cybersecurity services, employing 11 staff members and generating $1.7 million in revenue over three years. Despite successful revenue growth primarily driven by word-of-mouth and networking, Shay struggles to establish a repeatable and reliable sales process beyond these channels.

Key Discussion Points:

• Customer Profiling: Ramsey advises Shay to develop detailed customer personas to better target marketing efforts and understand the specific needs of his ideal clients.

  Dave Ramsey [36:16]: “Develop a Persona. This is the target. And where do I find these people and how do these people shop for this service?”

• Shift to Subscription-Based Services: Emphasizing the stability of recurring revenue, Ramsey recommends focusing on ongoing service contracts rather than one-off projects.

  Dave Ramsey [39:45]: “We really want to do more of the ongoing service because it gives us kind of that, it's recurring revenue.”

• Effective Use of SEO and Lead Magnets: He suggests leveraging SEO with targeted keywords and offering value-driven lead magnets (e.g., free downloadable guides) to attract high-quality leads.

  Dave Ramsey [40:02]: “Use a lead magnet. That is a free downloadable PDF... like five things to look for when you're selecting your outsourced IT firm.”

• Leveraging Referrals: Ramsey emphasizes the power of referrals, encouraging businesses to actively seek introductions from satisfied customers to expand their client base organically.

  Dave Ramsey [39:52]: “Your best advertisement is a satisfied customer... regular system to ask the existing customers how to find more people like them.”

• Strategic Advertising: While acknowledging the challenges of B2B marketing, Ramsey recommends precise keyword targeting and exploring platforms like LinkedIn to reach the right audience.

  Dave Ramsey [39:32]: “Don't try to sell your service with these keyword buys. Instead, use a lead magnet.”

Conclusion: Ramsey provides Shay with a comprehensive strategy to build a sustainable sales pipeline, focusing on customer understanding, leveraging digital marketing tools effectively, and harnessing the influential power of referrals to drive consistent business growth.

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Closing Remarks

Dave Ramsey wraps up the episode by reaffirming his commitment to practical, actionable advice over theoretical discussions. He encourages listeners to implement the strategies discussed to overcome their unique business challenges and achieve sustainable growth.

Dave Ramsey [34:35]: “This is not a theoretical discussion. I don't mind having a theoretical discussion with you, but I'm a guy that gets it done and has for 35 years.”

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Key Takeaways:

1. Flexibility Over Ownership: When expanding, consider leasing larger spaces with future purchase options to maintain operational flexibility without incurring undue debt.

2. Comprehensive Partnership Agreements: Clearly outline all potential scenarios in partnership agreements to protect the business and ensure smooth transitions.

3. Protecting Team Morale: Establish clear policies against customer abuse to maintain a positive and respectful work environment.

4. Building a Reliable Sales Process: Develop detailed customer personas, focus on recurring revenue models, utilize targeted digital marketing strategies, and prioritize referrals to create a sustainable sales pipeline.

This episode equips business leaders with the tools and strategies necessary to navigate the complexities of growth, ensuring that expansion enhances rather than hinders their operations and team dynamics.

Transcript

[Dave Ramsey]

Hey business owners, today is the day to pre order our new book, build a business you love. Reserve your copy from the Ramsey store and get more than $350 in bonuses for free. Go to entreeleadership.com build or click the link in the show Notes from the headquarters of Ramsey Solutions. This is the ENT Leadership podcast where I take calls from leaders like you about what it takes to win at any stage of business and leadership. I'm Dave Ramsey, your host with over 30 years of experience leading in the trenches right alongside you. If you want to submit a question, email [e-mail] ask and just go to that portion of the website rather. And we can of course get you signed up there. You can leave us a voicemail at 844-944-1070. That's 844-944-10720. Mike's with us in Dallas, Texas. Hey Mike, welcome to the Entree leadership Podcast.

[Mike]

Hey Dave, it's a pleasure to meet with you or speak with you today.

[Dave Ramsey]

You too, sir. What's up?

[Mike]

Well, I own a commercial Christmas decor business that leases those big mega Christmas trees and all the big decor that goes with it. And we do the big airports and casinos, hospitals, town centers, you've probably seen a lot of that stuff, but we have five full time employees and we ramp it up to about 50 during the holidays. Last year we did 1.3 in revenue and this year we're on Track for about 1.8. And we currently have no debt on the business, but what we do have is very little space and we are busting at the scene because when all that stuff comes down, we have to store it. We're running out of space. We currently lease three different warehouses, but it's really inefficient because of the locations and we're wanting to build our own, but we don't want to go in debt to do it. And we're kind of looking for a little guidance on that aspect.

[Dave Ramsey]

Okay, well, here's the thing. The business is profitable. You're also considering going into the real estate business for no apparent reason. It's not necessary to run your business that you own the land. It's just always appealing to own real estate for most of us. I like real estate. And there's no requirement though that you own property to be successful in business. The business can lease throughout the perpetuation of operating. So the first thing I would do is don't get yourself in a real estate transaction that cramps your style, that the Real estate starts telling the business what to do instead of the business telling the real estate what to do. An example would be, let's say you bought a warehouse today and you had the cash and you paid cash for it, did it properly. That would house everything you have today, but no more. Well, the first time you get ready to grow, you're gonna have to go lease something in addition to what you already own.

[Mike]

Sure.

[Dave Ramsey]

Cause you'd be full even if you bought something that was a little bit bigger. When you fill it up, you're gonna outgrow it eventually or you're not growing. And so you're gonna end up at some point either making so much profit that you can just buy real estate and not think about it, or you're going to have real estate starting to the ownership, start to constrict the proper operation of the business. I'll give you another example that's not in your industry, but where I see it a lot with entree leadership, folks, the restaurant business. A person will have a good restaurant operation. They'll buy a building in the proper place, a good location, and 15 years later, it's no longer a good location. But they refuse to move to the good location for the good of the restaurant, because they own this piece of dirt and bricks and mortar. So the real estate begins to tell the business it doesn't need to move when it does need to move. So this is the kind of things you can get into when you mix real estate ownership with. With a small business operation. Not saying don't do it. I'm just saying be aware. So all of that speech to say, what would I do in your situation? Ah, there we go. Now, what I would do in your situation is I would find a good large warehouse that is exactly what you want, where you want it, and I would lease it. And I would try to find a good large warehouse, larger than what you need, and lease it with the option to purchase it sometime in the next five years.

[Mike]

So we've been exploring that. That particular scenario seems to be really tough in this area.

[Dave Ramsey]

It's tough everywhere.

[Mike]

Yeah.

[Dave Ramsey]

To find you have to find an owner who wants to lease but is also willing to sell. Usually they want to do one or the other. I found it many years ago when I bought the original building we moved into. The first time I did this, I leased a building for five years. I closed on the building at the end of that. But I had to talk that owner, he had an empty building, and we were only going to take half of it. As a tenant. But I talked him into it because of the. You know, I just kept shopping until I found somebody that was a motivated seller. And actually what he was really looking for was a tenant. But in order to get the tenant, I had to twist his arm and go, I have to have an option to purchase. I don't have the money or I would just offer you the money today. So you don't have to worry about my option right now, because I can't do it. Boy, by the time that five years went by, though, I scratched every nickel together and closed on the deal. Cause it was a great deal. And then that building, we outgrew it. And I got constricted like I was talking about earlier. So I've been through what I was warning you against. So listen, I would rather you rent the right thing at the right place and then just move every five or ten years to the right size and always be a renter, than go into debt and buy something and be trapped in it.

[Mike]

Sure.

[Dave Ramsey]

So it's just more flexible, More flexibility for the business. The business gets to do what it's supposed to do. And rent is not your problem. You got other problems that are opportunities for profit much more than doing away with the rent of the warehouse space. Right now, what you've got, you've just got a bad configuration of everything you're renting. It's in bad spots and it's split up all over the place and it's inefficient. If it was just all in one lump and you were renting it, you probably wouldn't even have bothered with this discussion.

[Mike]

I probably wouldn't. You're right. Yes, sir.

[Dave Ramsey]

Yeah. So that's what I'm going to do. I'm gonna. First, I'm gonna find the right thing to rent. Then second, I'm gonna keep shopping and shopping and shopping. And I'm gonna just. I'm gonna propose absurd things to the owner. Now, if one of the owners. If the owner of a lot of warehouses these days have been bought up by REITs, and you're not gonna get an option to buy with a reit, they're not gonna. They're not gonna do that. Not to get a tenant. They just want a tenant. But if you can shop around, all it's gotta be is safe and dry. It doesn't have where it is other than proximity to your main custom. You don't have to be in like the Rodeo Drive of warehouses. You just gotta. You could be in a dumpy end of town as Long as it's safe and it's dry and it doesn't flood, you know, I mean, it's basic stuff. It could be an old warehouse. It could be something you have to put some money into because the guy that owns it doesn't have any money. And I did that. I put 300,000 in tenant improvements into that other building. I got reduced rent for that and I got an option to purchase because he didn't have the 300k to put into it or he was too tight to do it. One of the two, probably the second one with him, but he's a good guy, but man. Wow. So anyway, that's the thing. That's how I would look at this. And a really, really, really, really good question, sir. Very well done, Mike. Congratulations on all your success. Proud of you. I'm Dave Ramsey, your host.

[Belay]

Hey, business leaders, listen up. I have some statistics that might interest you. First, the two biggest marketing challenges for businesses are generating leads and measuring return on investment. And second, for every dollar spent on email marketing, businesses receive an average ROI of $42. So what if you could find a way to generate both leads and measurable roi? It sounds great, doesn't it? But you're not quite ready for a full time marketing hire and there aren't enough hours in the day to do it yourself, so that'll just have to wait, right? Wrong. Belay can help. Belay has marketing assistance with the time to generate the content you've been dreaming about. And even better, they have the expertise to do it. Well. A Belay marketing assistant can help market your business and protect your valuable time. You guys, delegation is one of the most effective tools in a leader's toolkit. So you can stop staring at that screen and get back to what you do best, growing your business. And right now you can get Belay's free resource, the ultimate guide to working with a marketing assistant by texting ENTRE to 55123. That's ENTRE to 55123.

[Dave Ramsey]

Do you own your own business or is it owning you? What if I told you we have a proven system that helps you get back the freedom you dreamed of when you started your business? That's why you did it in the first place, remember? Well, get ready to transform your organization because the latest book that we've done, build a business you love, mastering the five stages of business is now available on pre order. In the book, we teach you the proven entree leadership system that we've used to build Ramsey solutions from a card table in our living room to a $250 million plus company. When you pre order the book today, you'll also get more than $350 in bonuses for free because when you pre order, it helps us. Including an enhanced audiobook. The whole stinking thing. I read it. And a copy of the build a business you love ebook two weeks before the hardcover book comes out in April. Plus you'll get instant access to a special hiring bundle so you can make better hires and start transforming your business right now. Build a business you love is the perfect way to transform a business. Yours this year and learn how to grow yourself, lead your team and scale your business. To pre order the book and get the bonuses, you must purchase it from Ramsey at the Ramsey store. Go to entreeleadership.com build and you'll get all those goodies. Click the link in the description if you're listening on YouTube or on a podcast. Ben is in Fargo, North Dakota. Hi Ben. Welcome to the entree leadership podcast. What's up?

[Ben]

Thank you, Dave. I am the owner of a civil engineering firm up here and I have seven full time employees. Last fiscal year we did 2 million in gross. Way to go and thank you, sir. About a year ago, just a little over a year ago, the current CEO of the company passed away. And I was a 10% shareholder at the time and I was the VP. He was the other only other shareholder and I became the only shareholder in the company and took on leadership. I'm at the point where I have a co worker who's been with the company about seven, eight years and I'd like to bring him on as a partner in the company.

[Dave Ramsey]

Why?

[Ben]

But I'm curious. For legacy, for keeping the company going in the future.

[Dave Ramsey]

How old are you?

[Ben]

I am 41.

[Dave Ramsey]

So why do you need a partner to keep the company going?

[Ben]

It's also to keep him in the company. Being a professional firm, it's pretty easy for him to step out and start his own firm or to join another firm as a partner. And it's a way we keep skilled engineers who are at the top of their game and keep them in the company.

[Dave Ramsey]

All right, so you bought out the family when the other guy died?

[Ben]

Yes, sir.

[Dave Ramsey]

And you own 100% and you're going to gift or sell a portion of your ownership to this one person who's been with you seven years?

[Ben]

Yes, sir.

[Dave Ramsey]

Okay, and how much, what percentage are they going to get?

[Ben]

10%.

[Dave Ramsey]

And what are they paying for that?

[Ben]

That was a part we're working on. Right now, and that's part of why I'm calling it previously. The. The amount of shares in the company has. And the value of those shares has not changed since the late 70s. And that share is what we have for retained earnings, which has become an issue for having working capital in the company. And that's where I'm trying to change that moving forward.

[Dave Ramsey]

Wait a minute. Today you own 100% of the shares. You can change the valuation to whatever you want it to be?

[Ben]

Yes, sir.

[Dave Ramsey]

And the retained earnings is yours, 100%. So why do you not have access to it?

[Ben]

I do have access to it.

[Dave Ramsey]

Okay, so why is it an issue? The retained earnings are not an issue. You have access to them. And the valuation of the stock price is not an issue. You can change your share price. Just recalculate it, recast it with your cpa. It's not hard.

[Ben]

No. It comes into handling retained earnings under a partnership. And my question comes in as to whether to have that as shares or have it sitting as cash. And I was seeing an issue with cash. It can be an issue as we get down the road.

[Dave Ramsey]

Retained earnings, by definition, is cash. It's not shares.

[Ben]

Correct.

[Dave Ramsey]

You can't have retained earnings and shares.

[Ben]

The shares end up. Putting the money into the business would end up being working capital for the company.

[Dave Ramsey]

Oh, you're saying when he buys into the business to buy his shares, that money, Is that what we're talking about?

[Ben]

Right. And yeah, just dealing with that in the future, and especially when we do profit sharing distributions and needing to increase working capital.

[Dave Ramsey]

Okay, how much in retained earnings do you have today?

[Ben]

Currently, it's the last fiscal year's revenue, which is about $400,000.

[Dave Ramsey]

So you're sitting on $400,000 cash in the business.

[Ben]

Correct.

[Dave Ramsey]

Good for you. Okay, then if he were to buy into the business, you're going to charge him for 10%, $40,000 cash for his share of retained earnings, and you're going to charge him for his shares in addition to that.

[Ben]

Correct.

[Dave Ramsey]

Okay, so then he owns 10% of retained earnings from that point forward.

[Ben]

Correct.

[Dave Ramsey]

And distribution of profits will be 10% to him, 90% to you.

[Ben]

Yes.

[Dave Ramsey]

So what's your question?

[Ben]

We're looking at increasing that retained earnings in the future and using the profit from the company to do that.

[Dave Ramsey]

Yeah, that would be normal. And if you did that, that would be 90% on your back and 10% on his back. So if you make $100,000 to the bottom line and you say, we're going to put all of that into retained earnings. Effectively, he's putting in 10 and you're putting in 100 because you didn't distribute it or you're putting in 90, he's putting in 10 because you didn't distribute it, right?

[Ben]

Yes, sir.

[Dave Ramsey]

So it's all just divvied up by the percentages.

[Ben]

Okay. Yeah. And I was just looking at a. Just making sure. I was looking at different options on how to make it make sense for any partner that was in the company for understanding.

[Dave Ramsey]

Well, each person, each person that buys in would buy into at the percentage that they're buying in would buy into the percentage of the then retained earnings. Two years from now you might have 600,000. And if a person, another person wanted to buy 10%, it's going to cost them 60 grand plus share price. Right?

[Ben]

Yeah, that makes sense.

[Shay]

Yeah.

[Ben]

That was just a, just a different way to approach the issue. I just was trying to get your thoughts because I'm sure this was something you had considered.

[Dave Ramsey]

No, I don't have partners. I don't have any partners at all. I've not considered it for five seconds. But it's just a math equation and what you're talking about in a professional organization like a doctor, a law firm, a medical firm and yes, engineering architects do this a lot too. It is a professional partnership. It's not that unusual. Now here's the thing. You need to find a template Ben, for. And you can probably find one with some of your. Some of the. Find some best practices template for the partnership agreement with some other engineering firms. But here's the things you have to make sure your partnership agreement covers. We call them all the Ds. Okay, death. What happens if he dies? Well, you've experienced that. You got to buy the guy out. Right, but we need to spell that out. Disability. What happens if he's not able to work? Can he remain a partner? No, he gets bought out, probably in your scenario. But let's find a template and be in agreement to that. Drug use. I'm gonna fire his butt. He's doing cocaine now. How do we get him out of here? And what does that cost us? Default. He won't do his part. He doesn't show up at work anymore, but he still wants to be an owner. I just don't like disinterest. I want work, life B, I don't want to work anymore or some kind of bull crap. Right, and so what are you going to do in that event? Divorce. You get a divorce. What happens to his shares in the divorce? You need to state in there that it only can be owned by a working member of the firm. Thus the ex wife doesn't end up being your partner. God help you. Right? So you need to cover all of these eventualities in the partnership agreement. Otherwise they're going to happen and you're going to have a problem. But if it's already spelled out exactly what the buyout formula is or what the process is, how the calculation is done, and it won't be on 1972 share price either, you need to update your share price annually. You go back and recast and recalculate your share prices and reset them for purposes of executing one of the problems in the partnership agreement. He decides he just wants to leave. You want him to leave. What's the calculation? I don't want a negotiation at that point. I want a preset math formula based on a percentage of retained earnings and based on share price at the time with the agreement to reset the share price every 24 months or whatever the number is. And so he knows exactly in the eventuality that he needs to leave or dies or is disabled or whatever. Here's how it's going to be calculated. And you know, no surprises, no negotiation. I'm not negotiating with the divorce attorney. No, thank you. No, thank you. It's a bad thing. Now, the valuation of his shares may come up in the divorce, but we're going to lay out exactly what can occur here. What can't occur, who can end up being an owner and who. I have a friend who is a partner in a large architectural firm, went through a divorce and he was very happy that that large. He's a partner, it's a big firm. He was very happy that they had a very clear set of documentation of who could do what in the event of a divorce. And so it was never in play that his ex wife was going to end up with his shares of his decades of service to that professional organization. Now, the valuation did come up and enter into the split when they split the goodies up, but he didn't lose his partnership position in that. So anyway, all that to say you need to do all that stuff and then you just need to lay out a math formula with or without retained earnings. But it is fair for them to buy into the retained earnings. They shouldn't get 10% just for share price of your 400,000. And if you try to say, okay, everything after this you get 10% of, then you've constantly got this other 400,000 hanging on to the math formula along the bottom and it's always recalculating and shuffling and you're always dodging the bullet around that. So I would just have him buy into it. If it was me, that's how I would lay it out. So interesting discussion, Ben and I would avoid this as long as I can put it off. As long as I can. I wouldn't just automatically assume this is how business has to be done because as you can tell from our short discussion, this is a freaking barrel of fish hooks, dude. This is the Entree Leadership Podcast. If you want to help us out, we would appreciate it. Click Follow on this show. Subscribe Share Leave me a nice five star review. All those things help the algorithms and push things along. A bunch of you have been doing that and we really, really, really appreciate it. Our next question comes in by video. Let's check it out.

[Melissa Johnson]

Melissa Johnson, Midwest Insurance Corporation in Nevada, Iowa.

[Belay]

And how long have you been in business?

[Melissa Johnson]

We've been in business for 41 years.

[Dave Ramsey]

How many team members?

[Melissa Johnson]

We have 15 team members.

[Belay]

And what's your annual top line revenue?

[Melissa Johnson]

We are $2 million in our top line revenue.

[Belay]

Do you know which stage of business you're in?

[Melissa Johnson]

We are in the peak performer stage of business. Living the values is a big part of what we do with our culture. And our team's getting beat up day after day. And so for four years now, we've had the issues. And so if you think about your home in auto, a lot of people think insurance is just a given. Like you have to have it on your auto, you have to have it on your home. So how can people not provide you with that coverage? How can they pull out of the state? And so they're getting beat up every day and really taking the brunt of it when they're just the messenger. And so trying to have that conversation and be empathetic but also be like, I still need you to live the values and I need you to treat every single interaction as a new interaction that they don't know that. You've heard this seven times today and the last four people yelled at you. So how do you handle that? And how do you kind of help them with the tools so that they can respond appropriately?

[Dave Ramsey]

Well, we have a rule at Ramsey. We work with people, especially in the money space, many of which are struggling and they're frustrated and having money problems is a huge stress point, obviously. And so sometimes folks don't control their emotions and get confused that they can direct those at us. So we, you know, some customer Service departments and some companies. That's Greek for you get abused all day long. Nobody wants that job. And we've got, you know, Ramsey concierge, where people call in and talk to us about almost anything. And we try to help them with our different ways of serving someone that's struggling. Maybe they've got a foreclosure, they're scared. They're afraid. They're bankrupt, they're looking at a repossession, or they're just fighting with their spouse about money. In all of those cases, they're angry, but not at us. And so we've trained our team, and it's been very, very good for morale. First, we want to be kind and we want to be calm. The louder they get, the quieter you get. And at some point in the conversation, wherever you decide that you're starting to be abused personally by this frustrated, angry person, you have to stop them and say, okay. At Ramsey, we don't do this. If you want to be frustrated, I understand, but I'm a person over here, and I'm trying to help you. I did not personally cause your situation. Ramsey didn't personally cause your situation. And we'll try to help you, but you don't get to yell or scream or cuss. And if you do, we're going to end the call now. How can I actually walk through this with you as two friends working on a problem? And if they resume the screaming and cussing, just hang up. I don't have to talk to them, and your people don't have to talk to them. Just say, you know, I tell you what, you call me back when you can get control of your emotions and hang up. That simple. No one does that in corporate America. They just put up with the public's bullcrap. And the public is out of control. We call them 2 percenters. 2% of Americans should be institutionalized. They're nutty, out of control, need coaching, need counseling. And we're not, you know, spend the money you were going to spend with us on. On counseling. You have a rage problem, we're not going to. I don't care if you're my customer. If you're going to be a but and so hang up. And you can do that. Well, I don't know. Listen, no one anywhere requires you to create a toxic environment where abuse is their job all day long. That's a ridiculous scenario. And so if I'm you, I'm going to look at my team and say, I love you so much. I'm not going to require you to do that. Now, I don't want you to be mean to them. And you don't cuss back at them and yell back at them. That's not the point. We're not going to. Matter of fact, we're going to de escalate. Like I said, the louder they get, the quieter we're going to get. Ma'am, we're going to have to end the call if you can't get control of yourself. Because I'm here to help you, But I'm not your pounding board. I'm not your whipping boy. So if I can help you, let's do that. Otherwise, I'm gonna have to just end the call. You hear the dial tone, There it is. And I discovered this a long, long time ago. And I discovered what it did to the morale of our company accidentally, just because I'm a redneck hillbilly. So I was walking through the lobby where we had at that time, an old fashioned receptionist desk. And we had these things on the receptionist desk called telephones in those days. And she would pick up the telephone and talk on it with a headset. And the young lady that was our receptionist, she'd only been there about four months, was crying, talking to this guy, and tears are running down her face. And I'm like, what? I said, just, whoa, whoa, whoa, whoa. I waved my hands. Just put that person on hold. What's going on? Are you okay? You know, this is the third time this guy's called. He just yells and screams and he just calls us names. And he says, ramsey's awful, and I just can't take it. And I said, oh, okay, hold on. And I just picked up the handset and I said, hey, bud, here's the deal. You're fired. This is Dave and you're fired. He goes, what do you mean I'm fired? I said, you're fired as a customer. Whatever business you were doing with us, take that money and go by counseling. Don't ever call here again. I don't want you in my database. I don't want anything to do with you. I want you to stay completely away from our people. You don't call here and abuse people anymore. Do you understand? He said, you're kidding. I said, do I sound like I'm kidding? Don't call here anymore and be a but. And I hung up. And she looked at me with these wide eyes like I had invented fire. You know, I didn't know you could do that. I said, well, I own it. I definitely can. Do it. And I've just deputized you. You can do that too. You do not take a but on the front desk. It is not your job. It's not like chief abuse acceptor is not your job title. That's ridiculous that somebody's calling in sweet little receptionist lady sitting there just chewing her butt out because he has an emotional problem. Well, give me a break. I'm sorry. Go get your root canal somewhere else, buddy. And you know what the weirdest thing I did? That. That's the only time I've ever done it in 30 years of running this company. But that idea that you are deputized to retain your dignity spread like wildfire through our company. And our people are not mean to our customers. We're kind to them. We love them, we want to help them. But we're not going to engage in a toxic, out of control, freakazoid relationship with a customer. We hang up on them. And the morale, oh, wait a minute. Dave values us more than he does somebody that's out of control. We'd rather forfeit the money than put up with that. That's what I would do. And I think you're gonna see your morale soar and just, you know, and then you've got the ability to just be kind and sweet to the calls you take. Cause you're gonna take some bad calls in your world right now. I don't disagree with that. It's the environment you're in. And we take some bad calls. That's fine. That's part of what comes in here. Some of them are sad, some of them are angry. Some of them just rip your heart out, you know, and go through all that stuff. That's part of, you know, dealing with folks. You're solving a problem for them. So sometimes they're emotional when they've got that problem, so be kind. But at the end of the day, we're going to get to a certain point and say, you know what if we can't get your volume and your language under control, we're not going to be able to have a conversation here, and I'm not going to be able to help you. I sure hope we can do that. Please. So you want to take a minute or you want to take a minute and call me back after you have a minute to calm down? Because we don't. We have a rule here at Ramsey. We don't. We don't do abuse. And you're, you're being abusive, you know, and just. And if they just keep on and they think they have the right to, because people are entitled twerps out there, some of them. So just hit the old hang up button and it just solves all kinds of. It's like this immense power that you suddenly have. And with that power comes dignity and morale. Shoots up. I know a guy that works on automobiles, and he's kind of a. He really should be a little bit nicer, but he's really good at fixing cars and he's got a great reputation and he's not mean to people, not unkind to people, but he really doesn't suffer fools. He's got a little auto repair shop, does a great job. And I was laughing with him. One day he started telling me what he was doing. He said, I have a stack of my competitor across town's business cards and the other auto shop. And he said, when I get One of these 2 percenters, when I get one of these people that's out of control, rage a holic, I don't want to deal with them. I just say, you know what? I think this guy here can help you. And he said, I send all those nasty customers to my competitor. That's mean, but it's also funny. I don't care who you are. So that falls in the same category. Melissa, I'm sorry you guys are facing a tough time in your industry. We've been watching it. We work with pnc and we know what you're dealing with. And it's kind of ridiculous out there. Honestly, I agree, and I agree with the frustration of the customer. But that doesn't mean they have the right to abuse your team and destroy their morale and take their dignity. We're not gonna do that. This is the Entree Leadership Podcast. Does leading your team feel like herding cats? Even if your business is winning financially, a misaligned team will create new fires for you to put out every week. But with Entree Leadership Elite, you'll align your team and hold them accountable so you can stop herding cats and start scaling your business. To join elite, go to entreeleadership.com elite or just click the link in the description if you're listening on YouTube or podcast. Well, thanks for hanging out with me today. I'm Dave Ramsey. This is the Entree Leadership Podcast. If you're looking for theory, you're in the wrong place. I make payroll. In order to do that, we have to deal with actual tactical things that work. We get up, leave the cave, kill something, and drag it home. This is not a theoretical discussion. I don't Mind having a theoretical discussion with you, but I'm a guy that gets it done and has for 35 years. That's how we got where we are at Ramsey, and we're here to help you. If you want to be a caller on this show, call 844-944-1070. Leave us a note in. The voicemail team will holler back at you and get you set up to be a caller, just like Shay in Charleston, South Carolina. Hi, Shea. How are you?

[Shay]

Hi, Dave. How's it going?

[Dave Ramsey]

Better than I deserve. What's up?

[Shay]

Not much. I got a question for you. Let me give you a little background on my business. First, we do managed IT services and managed cybersecurity services. So kind of outsourcing those functionalities for different companies. I'm the CEO. We have about 11 employees, and our revenue from this past year is about 1.7 million.

[Dave Ramsey]

Good for you. How long you been open?

[Shay]

Just about three years. A little over three years now.

[Dave Ramsey]

Way to go, man. Congratulations.

[Shay]

Thank you. I appreciate it. So my question is about sales, really. So we've been doing, you know, obviously pretty well, but most. Most of that stems from either people coming to us or networking, word of mouth, that. That type of stuff. We've. We've tried different outbound sales services and, and. And some. Some on our own as well, like reaching out via email campaigns and stuff like that. You know, I've. I've tried learning as much as I can about it, but so far, we've. We've been fairly unsuccessful. Most. Most recently, we've. We're doing a search engine optimization campaign as well as a cold calling service. And those actually seem to be doing a little bit better, but still no actual conversions into. Into business. And so I'm just trying to figure out how do we make a repeatable, reliable sales process that we can really, you know, put our. Our pedal to the metal on?

[Dave Ramsey]

Very good question. Love it. Okay, so you come into a firm. What's your typical customer look like? What size of a firm is.

[Shay]

Varies. I'd say from like 50 to 300 users. Like technology users. It could be more employees, but people who are actually, you know, laptops and what have you.

[Dave Ramsey]

And where are they located physically? In the Charleston, South Carolina area or what?

[Shay]

Actually, so we have probably about 30% of our customers here, and the rest are kind of United Stateswide.

[Dave Ramsey]

Okay, so you do a lot of remote work.

[Shay]

Yes. Yeah.

[Dave Ramsey]

You're not physically traveling all over the United States to work on people's IT and cybersecurity Right.

[Shay]

No, we do occasionally fly out, but not very often.

[Dave Ramsey]

Right. Only when big relationship or retain one or something like that. But I mean to do in the actual day to day wrench turning, you can do that remote. Your guys can, they can check the security, they can log into their server or their cloud or whatever it is and make sure everything's going. I got it. Okay, and so you have in the 1.7, about how many customers do you have?

[Shay]

Probably maybe 10 to 12, something like that.

[Dave Ramsey]

So these folk are paying you a couple hundred thousand bucks a year.

[Shay]

Yeah, you got it.

[Dave Ramsey]

Okay, so they're big sales. Yeah. That's not necessarily an SEO thing. All right. SEO is much better for consumer stuff than it is B2B. You can get some stuff B2B, but that's a big ticket item. So. Okay, so you have, let's call it six or seven customers at 200 to 300K. And what I'm developing here is what we call in marketing a Persona. What is the demographic look of the customer? And so it's a customer with 50 to 300 team members anywhere in the United States one third of the time they've been in our immediate area. But we can service them adequately and excellently anywhere in the US and they're paying us 250,000. So that means that they're either have a lot of profit margin or they've got a lot more team members than the 50 to 300 that are non technical. Because I mean if they're paying you 250,000 and they're still profitable and they only got 50 team members total, that means they have a highly, a huge margin on whatever they're selling. Does that make sense?

[Shay]

Yeah. Can I throw one thing in there?

[Dave Ramsey]

Sure. Help me. Yeah.

[Shay]

So on that revenue, I'd say, you know, maybe 40% of that, maybe 50% even is projects. And those customers do span much larger organizations.

[Dave Ramsey]

Ah, okay. So it's not, it's not necessarily all ongoing contracts. Maintenance contracts.

[Shay]

Exactly. Yeah.

[Dave Ramsey]

I thought you had maintenance contracts on the IT and on the cyber that were ongoing. Instead you've got some one off projects. And what percentage of your 1.7 is one offs?

[Shay]

I'd say probably close to 50% of it.

[Dave Ramsey]

Oh, okay. That does change the numbers then. Okay, yeah. Okay.

[Shay]

Sorry about that.

[Dave Ramsey]

That's okay. What is it you're wanting to sell? Projects or ongoing service?

[Shay]

That's the thing. We, we really want to do more of the ongoing service because it gives us kind of that, it's recurring revenue.

[Dave Ramsey]

It's Like a subscription. It's brilliant software as a service, in a sense. Yeah, yeah. Much, much better for you. You don't have to go and get a new customer every morning.

[Shay]

Yeah, you got it, man.

[Dave Ramsey]

Yeah, I like that. I'm with you. All right. I love subscription recurring revenue. When we can make it work. Number one, let's say out loud, these are two very different products with two very different goals. The project driven product is. The goal is short term revenue until we can get so much subscription revenue that we don't want to do those anymore. So that you probably can SEO into a lot easier than you can into a subscription. The subscription stuff is probably going to come more from referral. So I would go to my existing customers and regularly have a system to ask the existing customers how to find more people like them. The subscription ones. Okay. The ones buying the ongoing service and you know, who else in the business can you refer me to? I need some referrals. I'm small guy. I'm trying to grow this thing. Would you help me out? You know, I'm not gonna pester them. I just, you know, if you'll just introduce me to two people, it would be a huge favor. We would really, really, really appreciate it. If you have one that ends up giving you three or four customers, send him and his wife on a cruise. Yeah, for sure. Because it'll make you a zillion times more than the cruise costs. So say thank you if you get somebody that enthusiastically does that. But sometimes they'll just kind of go, yeah, you know, I never thinking about it, but thanks for bringing it up because I was just talking to my buddy at lunch and he was griping about he got hacked. And you go, wow, you need to call Shay. Okay. And increase the word of mouth by making it top of mind and by asking for the referrals. That's a sales system that I would lean into first and foremost. Because your best advertisement is a satisfied customer. It's much better than a banner ad. It's much better than a random email system or a follow up or whatever else. Okay. That's the first thing. The second thing I would do and I would use SEO for this. And I think you'll get a good roas on it. I think your return on it will be sufficient, especially if you do it carefully. I would do some Facebook, but more importantly, I'd probably do some keyword Google purchases that help me fish exactly in the pond where this size fish is. I'm not trying to get companies that have 15,000 employees, that's not your target. Okay. And I'm not trying to get solopreneurs that are working in their living room and don't have any employees. That's not your target. So you're very specific with your keyword buys. And don't try to sell your service with these keyword buys. Instead, use a lead magnet. And that is a free downloadable PDF. The top 10 things mistakes people make when it comes to their cybersecurity or the four myths that cost companies millions of dollars in cybersecurity. Or the customer is interested in this and is going to download this thing that gives them some information, but it also tells you they are a white hot lead because they are concerned about the subject. And so like for instance, in the real estate business, residential real estate business, 1,000 years ago, when the Internet was first started, we taught real estate agents to do a lead magnet that was like 10 things to do to get your home ready to sell. And if you download that PDF, you're probably thinking about selling your house. Hello. So that's a white hot lead then. That's not a warm lead. It's not a, that's like, you know, who downloads how to get your house ready to sell? Not me, I'm not selling mine. So it's got to be somebody's thinking about it. So the same thing in your thing. Somebody's got a cybersecurity problem, they've been hacked. Top four things to do immediately when you've been hacked or whatever if you got a phishing scam going, here's what we're going to do. Or anything that's a buzzword in the cybersecurity world or in the IT breakdown world. You know, what happens when this, you know, I don't know, whatever the common problem is that this size firm would face with an IT problem that you can service instantly and you go, okay, here's three things you could do immediately that relieve some of the pain and then call the doctor now that you stop the bleeding, or the doctor. And also in order to get the free download, of course they're dropping you their email, that's what it costs them. And then you've got the ability to follow up. And obviously they have to have spam opt out and all the things to be legal on all that. But yeah, that kind of thing. You need to be fishing in the pool with something and giving away something that is in the area. We're not giving away candy bars. That's not the business we're in. We're giving away something having to do with that subject. Here's another one. Five things to look for when you're selecting your outsourced IT firm or outsourced cybersecurity firm. And if you look for these five things, you'll get a good one. By the way, you fill all of those five things so you know you already found one, but you know how to properly. We do it with like six things you ought to consider when you're interviewing your financial advisor. And we'll put stuff like that out there and man, it just lights it up, you know, and so lead magnets with SEO that way. But you've got to be very careful with where you're fishing or you won't get a roas on it, you won't get a return on it. And so, and it occurs to me in your world, it's probably not Facebook. Facebook very consumer driven. We run some Facebook ads on some of these things, but they're direct to consumer issues. And you may want to try to, you know, LinkedIn might be a place to land some of this stuff. Actually, it is a place to land some of it if you can figure out a way to run some of it in that. But that's the type of thing we're always looking at doing. So develop a Persona. This is the target. And where do I find these people and how do these people shop for this service? And the first place you go is to your existing satisfied customers. And then after that you go from there. And I would build some testimonial videos and put them on your website of going, man, we got hacked and we were so screwed. And Shae's guys came in and they not only cleaned up the mess, they locked all the doors. And the cybersecurity team was amazing. It took, you know, 48 hours to stop the bleeding and it took another four weeks to get it in place. And then they, they stay on top of it. There are, they're our Internet cops and we love them and you know, have somebody like me that doesn't know squat about what they're talking about, say that stuff to the camera and then just post a bunch of those on your, on your website and you know that that's another place, another way to get started in that. So I don't know, it's just some ideas off the top of my head. Maybe not all good ones, but you can pick and choose as you want. And that's what we're here for. So very, very cool stuff. Love what you're doing. Man. It's a great business. Congratulations. Really, really like it. Very cool. Hey, folks, remember, better a worry 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.