That Was a Total Leadership Fail

Summary

The EntreLeadership Podcast: "That Was a Total Leadership Fail"

Host: Dave Ramsey
Release Date: November 4, 2024
Description: In this episode, Dave Ramsey tackles challenging leadership issues within family-run businesses, offering actionable insights and real-world solutions to help leaders navigate conflicts and ensure sustainable growth.

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1. Introduction

The episode kicks off with Dave Ramsey welcoming listeners from the Ramsey Solutions headquarters. He encourages leaders to share their business challenges via calls, setting the stage for authentic, real-time coaching grounded in his 30 years of leadership experience.

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2. Leadership Conflict in a Family Business

Caller: Sean from Wichita, Kansas
Business: Family-owned industrial construction company
Employees: 75
Annual Revenue: Dropping from $16 million to $11 million
Issue: Underperformance by the youngest brother, leading to significant contract losses.

Sean's Dilemma

Sean explains that his youngest brother has been exhibiting a consistent lack of effort and determination, resulting in the loss of a major maintenance contract worth millions. Despite multiple sit-downs involving Sean, his father, and his older brother to address the issue, there has been little to no improvement.

Notable Quote:

“...his lack of effort, causes us to get somewhere because we’re here to get together.” — Sean [01:35]

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3. Dave Ramsey’s Analysis and Advice

Assessing Accountability

Dave probes deeper into the situation, questioning whether the entire leadership team is holding the underperforming brother accountable. He emphasizes the importance of active involvement from leaders in ensuring team members meet their responsibilities.

Notable Quote:

“You don’t watch them to see that the customer is being kept happy over a period of years?” — Dave Ramsey [03:01]

Embracing Conflict for Growth

Ramsey shares his journey from being conflict-averse to embracing necessary confrontations to maintain business integrity. He stresses that allowing underperformance can act as a "cancer" to the organization.

Notable Quote:

“We embrace conflict like it’s a dadgum gift, because we don't want anyone around here to have any illusion that lack of service to a customer is okay.” — Dave Ramsey [05:59]

Separation of Roles

A critical point highlighted by Ramsey is the need to separate family relationships from business roles. He advises that loving a family member doesn't mean they should remain in an unproductive role within the company.

Notable Quote:

“You can still love your brother. You can still have good relations with your brother if you guys handle this right...” — Dave Ramsey [15:30]

Buyout Strategy

Ramsey suggests structuring a buyout agreement to remove the underperforming brother from both his ownership and employment positions. He outlines ethical considerations and emphasizes the importance of maintaining business integrity over familial ties.

Notable Quote:

“Either you’re gonna give him 20% of the profits after everyone’s been paid... or you’re gonna buy him out on your formula.” — Dave Ramsey [16:52]

Conclusion for Sean:
Ramsey advises that Sean and his family proceed with the buyout to preserve the business’s health, ensuring that ownership and employment roles are clearly defined and performance-driven.

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4. Building Team Culture in Remote Settings

Question from John in Tennessee:
“How do we create and maintain team culture when our team does not work in one location?”

Ramsey’s Recommendations

• Extra Effort for Culture: Acknowledge that remote teams require more deliberate actions to build and maintain culture compared to in-person teams.
• Annual Gatherings: Organize large, inclusive events where team members and their families can interact, fostering personal connections.
• Regular Retreats: Hold off-site retreats focused on team bonding through activities like skiing, diving, or team-building exercises.
• Consistent Communication: Utilize digital tools to maintain high levels of communication and ensure team members feel connected.

Notable Quote:

“Food creates conversation and breaking bread together creates connection and trust.” — Dave Ramsey [16:35]

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5. Managing Rapid Business Growth and Debt

Caller: Sam from New Jersey
Business: Family-owned air conditioning and heating company
Employees: 30
Annual Revenue: Projected growth from $6 million to $15 million
Issue: Concerns about leveraging debt to finance growth and the associated risks.

Sam's Growth Strategy

Sam outlines their aggressive growth plan, primarily funded through debt for truck purchases and vendor credit lines. While this strategy has enabled rapid expansion, Sam is now wary of the potential risks associated with high leverage.

Notable Quote:

“Leverage is a two-edged sword. It cuts both ways. It'll cut you down, it'll take you out at the knees, and it can build you up.” — Dave Ramsey [39:37]

Ramsey’s Analysis and Advice

• Risk Assessment: Ramsey underscores that increased debt amplifies business risk. He advises considering the potential for unforeseen challenges that could exacerbate financial strain.

• Sustainable Growth: Emphasizes the importance of steady, manageable growth over rapid expansion to maintain financial stability.

• Debt Management: Suggests limiting debt to essential needs and ensuring robust cash reserves to mitigate risks.

• Exit Strategy: Highlights that a clean balance sheet with minimal debt facilitates smoother business exits and attracts favorable terms from potential buyers.

Notable Quote:

“Better a wary warrior than a quivering critic. This world needs more high-quality leaders, so take courage and lead.” — Dave Ramsey [26:36]

Conclusion for Sam:
Ramsey advises Sam to scale cautiously, prioritize building cash reserves, and avoid over-leveraging to ensure long-term business health and facilitate a smoother exit strategy.

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6. Key Takeaways

• Address Underperformance Promptly: Don’t hesitate to confront and resolve issues with underperforming team members, even if they are family.

• Separate Business and Family Roles: Clearly delineate family relationships from business roles to maintain professional integrity and operational efficiency.

• Embrace and Manage Debt Wisely: Utilize debt judiciously to fuel growth, ensuring that the business can withstand potential financial setbacks.

• Deliberate Team Culture Building: Invest time and resources in fostering a strong team culture, especially in remote settings, through consistent communication and team-building activities.

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7. Conclusion

In "That Was a Total Leadership Fail," Dave Ramsey provides invaluable insights for leaders grappling with internal conflicts and growth challenges within family businesses. By emphasizing accountability, sustainable growth, and the separation of personal and professional roles, Ramsey equips leaders with the tools needed to navigate complex business landscapes effectively.

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Notable Quotes Summary:

• “We embrace conflict like it’s a dadgum gift...” — Dave Ramsey [05:59]
• “You can still love your brother...” — Dave Ramsey [15:30]
• “Leverage is a two-edged sword...” — Dave Ramsey [39:37]
• “Better a wary warrior than a quivering critic...” — Dave Ramsey [26:36]

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This comprehensive summary captures the essence of the episode, highlighting the critical discussions on leadership failures, conflict resolution, debt management, and team culture. Dave Ramsey's practical advice offers actionable strategies for leaders seeking to enhance their business operations and maintain harmonious family-business dynamics.

Transcript

[Dave Ramsey]

From the headquarters of Ramsey Solutions, this is the Entre leadership podcast, where I take calls from leaders like you about what it takes to win at any stage of business and leadership. I'm Dave Ramsey, your host with over 30 years of experience leading in the trenches right alongside you. If you have a question you want to ask on the show, you can fill out the [e-mail] ask, or you can give us a call and we'll get back with you and put you on the air. The phone number is 844-944-1070. That's 844-944-1090. Shawn is in Wichita, Kansas. Hey, Sean. How are you?

[Sean]

I'm good, Dave. Thanks for having me.

[Dave Ramsey]

Sure, man. What's up?

[Sean]

So I'm the business manager, one of the owners of a family business. We do industrial construction. Currently, we have about 75 employees. The business is made up of my parents and then me and obviously, and two of my brothers. We've been in business about 25 years. This year, we're doing about 11 million, which is down from last year, which was about 16. And I tell you that just because of an issue that we're having with my youngest brother, it's been going on for quite a while. Just kind of a lack of effort, lack of determination. You know, several times we sat him.

[Dave Ramsey]

Down and who's we?

[Sean]

You know, told him that he's got to do better hit does for a little while.

[Dave Ramsey]

Who is we?

[Sean]

Usually it's my dad and just my older brother and myself. Set him down.

[Dave Ramsey]

Mm. Okay. He's got. So if you had another team member that was doing the exact same thing, and you would sit down with them, right?

[Sean]

Correct.

[Dave Ramsey]

And you would say, you know, efforts gotta come up, competency has to come up, or whatever, right?

[Sean]

Correct.

[Dave Ramsey]

And we can. How can we help you do that? I mean, so his. I mean, you're kind of like describing somebody as lazy, right?

[Sean]

Absolutely.

[Dave Ramsey]

Okay, so what. Give me an example of an effort, a time that effort is not coming forth.

[Sean]

Well, I would say, you know, over the last probably eight years, he's been the project manager of a large maintenance contract we've had, and we just lost that contract in November. And we know just from feedback that we received because of, you know, not getting with the clients, not managing the jobs, you know, ensuring that we're doing everything to keep the customer happy and, you know, not try and gouge them on the work that we're doing, just managing it better. So we know that that was one of the Reasons.

[Dave Ramsey]

So there's no one.

[Sean]

Okay.

[Dave Ramsey]

If you have a. Do you have another contract like that with someone else inside the building? Another project manager?

[Sean]

Yes.

[Dave Ramsey]

I mean, you don't watch them to see that that customer is being kept happy over a period of years?

[Sean]

Absolutely, we do.

[Dave Ramsey]

So you were watching your little brother destroy this customer?

[Sean]

Well, we have. And like I said, we've set him down several times.

[Dave Ramsey]

No, no, no, no, no, no. Stop a minute. This is on you.

[Sean]

Okay.

[Dave Ramsey]

Okay. If I'm the leader and I have a team member that is supposed to be managing a project and we suspect that the project's not being managed well, we get really involved to make sure that the customer stays happy, and we either take the team member off of it or we get them up to snuff. But you guys just stood back and watched him crash the car?

[Sean]

Well, to an extent, yes.

[Dave Ramsey]

Was he. Was he corrected? Course corrected. During the time he was screwing up this account?

[Sean]

Yes, several times.

[Dave Ramsey]

And then he continued to cause the account to be lost with his lack of effort?

[Sean]

Well, it would get better for a while.

[Dave Ramsey]

And he lost an account that was millions of dollars.

[Sean]

Yeah.

[Dave Ramsey]

It did not get better.

[Sean]

Well, it definitely didn't get better when we lost it, that's for sure. Yes.

[Dave Ramsey]

Okay. Okay. So here's the thing. One of the things I've had to learn inside Ramsey, that's been very difficult for me and by extension, for my leaders. We Learned the lesson 20 some odd years ago, but for about 10 years, and we were your size. When we were learning the lesson, the size of your organization was that we thought by not addressing things early and often, that by doing conflict early and often with team members that were not getting their work done for whatever reason, that somehow we were being kind or we were delegating or we were something and we were way too hands. And so nowadays we're the other direction. We're the opposite of conflict averse. We embrace conflict like it's a dad gum gift, because we don't want anyone around here to have any illusion that lack of service to a customer is okay. Have any illusion that lack of effort is okay or lack of competency is okay. And so we talk to you early and often. If you work here and you're not getting the job done, it feels like that y'all have been a little bit hands off like I used to be.

[Sean]

I would agree. And I think because he was an owner, he was given too much leeway. You know, we would.

[Dave Ramsey]

That's a separate issue with somebody else. Are you sure Your other non owner team members are being held accountable closely enough?

[Sean]

I would say yes. Yes.

[Dave Ramsey]

Okay. All right, then you're not guilty of what I was when I was your size. Okay, I'll take your word for it. All right, so I think then you guys have to decide if you're gonna let him be in the organization because it's a cancer. It's a cancer.

[Sean]

That's kind of where we're at.

[Dave Ramsey]

Okay.

[Sean]

When we lost that contract, you know, we had to move him out of that facility and, you know, we didn't have a lot for him to really take over because of the other managers that we have.

[Dave Ramsey]

And your dad has given the three sons ownership position.

[Sean]

Correct.

[Dave Ramsey]

So what percentage of the business do you, each of you three sons own?

[Sean]

My youngest brother has 20, I have a 22, and then my older brother has 27.

[Dave Ramsey]

And that was determined by age or.

[Sean]

To an extent, yes. Part of the reason I'm kind of in the middle is because I haven't been with the company since it began.

[Dave Ramsey]

But this is 77%. So your dad has 33?

[Sean]

Well, that's split between my mom and him, but yeah, it's like 19 and 14.

[Dave Ramsey]

Well, they're married, so. Yeah. Okay.

[Sean]

Yeah.

[Dave Ramsey]

Right, yeah. So at some point, the two remaining brothers will buy out dad. And how are we going to get junior to go on to his next career?

[Sean]

Well, and that's kind of where about two weeks ago, I had had enough and I sat him down, brought my older brother in, and basically told him he has two options. Either either we buy you out because we know you're not happy and it has affected us, or, you know, we have strict, clear goals and requirements that have to be met for you to continue with us, and those would be laid out for you by the end, and we would evaluate it by the end of the year. So my concern is that he's not going to meet those. And so how do we. How do we buy.

[Dave Ramsey]

What does your partnership agreement say about buying somebody out that is incompetent?

[Sean]

Well, it's very. It's very explicit. I mean, we have a buy sell agreement.

[Dave Ramsey]

Okay, so what does it cost to buy them out?

[Sean]

Well, we have valuations done, but the last valuation was quite a bit less. But it does say that we can basically offer whatever we want.

[Dave Ramsey]

That's weird. So we can offer him a dollar.

[Sean]

We could. Doesn't mean he has to take it.

[Dave Ramsey]

Yeah, but what if it. What? I mean, you can't force him out. Is that what you're saying?

[Sean]

Well, no, we can. We can go to him and structure it. We're gonna. We're gonna pay you this much per share, and we're gonna structure it over five years. We can do that however we want. Now he can say no, and he could get a lawyer at that point.

[Dave Ramsey]

Well, but the, but the partnership agreement dictates that you can do that, correct?

[Sean]

It does.

[Dave Ramsey]

You can get a lawyer about anything. That's not the issue. But the.

[Sean]

I would. The only thing he could do with the lawyer is our last valuation says, you know, each show is worth this much. Well, that was from three years ago, so, you know, you can justify that. Three years ago, you know, we were making $18 million more than we are now, so it's definitely not worth as much.

[Dave Ramsey]

So you're paying him a premium to get rid of him if he used the formula in the partnership agreement.

[Sean]

Correct.

[Dave Ramsey]

Okay, so what's the 20% worth?

[Sean]

You know, we kind of talked about that. I think realistically, it's worth about 40, 40,000 per share.

[Dave Ramsey]

And he owns 20 shares?

[Sean]

Correct.

[Dave Ramsey]

Okay. There's one share percentage. Okay. And you guys have the cash?

[Sean]

We do. We do.

[Dave Ramsey]

Okay. And you have the ability to do that over five years according to the partnership agreement?

[Sean]

Yes. Yeah, we could dictate or we can structure that how we want. And to me, but that's what I want to do is, you know, a larger upfront first year and then spread the rest out over the remaining four years.

[Dave Ramsey]

I would rather just pay him one lump sum and be done and have him. And have him sign a separation agreement that he's. That he's okay with that. Okay, I want this over. Well, it meant Thanksgiving dinner is going to be awkward enough.

[Sean]

Well, that's the concern. That's a big concern, too.

[Dave Ramsey]

Yeah, it's going to be awkward enough, but so I think now the whole family sits down with him and says if he wants. It says, okay, look, here's what we can do as a buyout. We're really, really, really. We love you as our brother. We can't stand you as an employee. Okay. You know, and here's the amount that you can take and leave. Now. If you want to try to work a get out of jail program between now and the end of the year, here's what it's going to take. And honestly, I don't think you can do it. And at the end of that time, then you're going to go ahead and sign a document now that says you're going to take this much money. You can take it now and leave. Or you can try this and at the end of the year, we'll give you this much money. If you can't do it, maybe you can turn it around. Maybe you can grow a brain between now and then, but I don't think you can. I think you're done. I don't think you want to be here. The customers are mad at you, the employees are mad at you. You know, this is not good. And so, you know, have an emotional firing, we call it at Ramsey. And if you want to work a 90 day plan at the end of that 90 days, here's what you're going to get. Or you can sign now and we'll give you that right now. And either way, you're going to sign at the end of this and you're going to sign a document today that says, I'm going to work a 90 day plan. And if leadership does not think I'm competent at the end of that 90 days, then I am agreeing to accept this amount and accept their judgment. Or you can just walk out now with this much money. Whatever you want to clean break. So Henry Cloud teaches a thing. And we've used it at Ramsey for many, many years. We call it hats. And when we're at work, I am not dad, I'm Dave, and I wear a hat that says CEO on it. My daughter, Rachel Cruz, works here. She is one of the Ramsey personalities. The hat she wears says personality on it. Okay? She's not. She is an owner of the company, but the owners of the company do not have positions based on ownership. They have positions based on what they do here. My oldest daughter does not work here. She runs our family foundation. She has an office in the building, but she's not an employee of this place and she's an owner, but she does not. She's not an employee of Ramsey. So she has an owner's position, but not a position of an employee position. I'm an employee and an owner. I'm the CEO. That's my job title. Okay? And I'm an owner. Rachel's the Ramsey personality and she's an owner. Follow the difference. Okay? So your brother's ownership is a separate issue from his employment, and yet you need to clean up both at the same time as he leaves. But you. And it's also a separate issue from him being your brother. You know, I have family members that I love dearly. They vote wrong, but I still love them. Okay? I don't agree with them about everything, but I love them. I would not employ them. But I love them. There's a difference. So you can still love your brother. You can still have good relations with your brother if you guys handle this right, and if he's mature enough to walk through this process, that'll be his choice. You don't get to choose that for him. But you need to separate your brotherhood and your dad's fatherhood from his employment and from his ownership. They are three different things. We're cleaning up two of them by removing him, the ownership position and the employment position. As a matter of fact, in your case, he's losing his ownership position because he's losing his employment.

[Sean]

Okay.

[Dave Ramsey]

Does that make sense?

[Sean]

And yes, it does. And I'm sure I know what you're going to say, because one of the other things we discussed, not with him, is him not being an employee retaining his ownership.

[Dave Ramsey]

But that's possible, you know, but then he gets 20% of the profits that are distributed to the owners, right? Now. You should get paid for the job that you do at the company, Sean. Your dad gets paid for the job he does at the company. And then there are profits after those salaries, right? Rachel gets paid as a Ramsey personality like John Deloney does or Ken Coleman does. Okay? And then there are profits at our company, and she shares as an owner in the profits. But those are two separate checks, right? One is an ownership check that you're not required to be here to get, and one is a personality check that you have to be a personality to get that check. That makes sense.

[Sean]

Well, and that's that. Yes, and that's something the way we discussed going around that is, you know, rather than doing payouts from the profits out of retained earnings, we would give a bonus to the actual employees that are still working here that are owners. Then you're not offering profit disbursements.

[Dave Ramsey]

You can. You can monkey the books where there is no profit, right? You guys can take bonuses, but that's unethical. If there's real profit, it should be shared on the percentage basis after everyone's been paid for doing their real job, not overpaid.

[Sean]

Okay? Okay.

[Dave Ramsey]

So I'm not trying to cheat your brother. Y'all gave. Somebody, gave him 20% at some point. And that. That's gonna cost you.

[Sean]

Okay?

[Dave Ramsey]

You know, so either you're gonna give him 20% of the profits after everyone's been paid for doing their job, or you're gonna buy him out on your formula. Either one of those is ethical. Honestly, I think he needs to be bought out and go on his way. That's what it sounds like. I think that's a lot cleaner being tethered back. You all are gonna resent paying him 1/5 of the profits on a business you grow. With him gone and him having lost a major account, that's gonna get weird for y'all. So I really, really wouldn't go there. Hey, man, thanks for the call. Thanks for letting me walk through that with you. It's a very hard thing and a very difficult thing. But sometimes if you'll just keep the family position separate from the employment position separate from the ownership position, it helps you with good critical thinking skills on how to process this whole thing. This is the Entre Leadership Podcast.

[Whitney]

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[Sean]

As a financial technology company, not a bank.

[Whitney]

Banking services are provided by Piermont bank member FDIC.

[Dave Ramsey]

Have you created a strategic plan for 2025 yet? If you haven't, you're late because winning is an intentional act. Zig Ziglar said if you aim at nothing, you'll hit it every time. When you create a plan for the year in advance, on paper, on purpose, you give your team some tactical steps that they need to help you scale the business and do the plan in 2025, everybody's allowed to get on the same playbook. And to show you exactly how this is done, we're giving away Entrez Leadership Elite's strategic planning course and template for free. It takes under 30 minutes to watch the course, and the template will guide you through every step of creating your strategic plan. To get Elite's strategic planning course and template for free, go to entreleadership.com plan or if you're listening on Spotify or podcast, click the link in the description. Whitney is in Canada. Hi, Whitney. Welcome to the Ramsey Show.

[Sam]

Hi, Dave. It's a pleasure speaking with you today. Thank you so much for everything you do.

[Dave Ramsey]

Sure. What's up?

[Sam]

So my husband and I own a auto glass repair and replacement business in our local community, and we are deep in the treadmill stage of our business, and it is really growing and evolving. And we have been talking about just with everything being so busy, how do we best balance the making decisions in the business and then, you know, leaving the business at home and then coming home and being intentional about our marriage and being intentional about parenting and fostering great friendships. It's just, you know, there's only so many hours in the day, and we don't want to look up in 10 years and look at each other and say, who are you? But our business is thriving. And so with someone being so far ahead of the game than us, I'd love to hear what your advice would be.

[Dave Ramsey]

How many team members?

[Sam]

There's. My husband is one of the technicians. We have two technicians. We just hired the second one. And then myself and my husband run the business administration. Wife.

[Dave Ramsey]

Okay. And by admin and operations, you mean incoming calls from customers, scheduling, all that kind of stuff?

[Sam]

Yeah. The books, the bills, everything to make. Yes. To make the business run? Yes.

[Dave Ramsey]

Okay. All right. And so you're busy all day long with that and he's busy putting glass in all day long?

[Sam]

Yes. And then answering the phone if I'm not around. Because the. Our community loves to speak with the owner when possible. So, yeah, we both manage the phones and are kind of the customer service reps when we need to be.

[Dave Ramsey]

Okay. All right. What is the. What is one of the what if you want some hours back, you have to delegate it and hand and hire somebody, and so you've hired a tech, you've hired some more technicians to install glasses. Is one of the next steps to hire another technician and get your husband off the street?

[Sam]

Potentially, yes. Yeah.

[Dave Ramsey]

Okay. Or is it to hire a bookkeeper so that you have more margin? Who is it that's. Who's dragging work home?

[Sam]

Me.

[Dave Ramsey]

You. What kind of work are you dragging home?

[Sam]

I'm doing the reconciling the books. Any odds and ends. If we were so busy in the shop during the day, if we can't get back to vendors or sometimes respond to emails during the day, then it's done later on in the day. If need be.

[Dave Ramsey]

So you need a high quality person that can help with a few process things, including helping you with the books.

[Sam]

Right.

[Dave Ramsey]

And that would give you like an entire segment of your life back.

[Sam]

Correct.

[Dave Ramsey]

Okay. What's your top line revenue a year?

[Sam]

Top line last year was just under six. And we are on track to be at 700 at the end of this year.

[Dave Ramsey]

And you have currently two employees.

[Sam]

Two employees and then two owners. Yes.

[Dave Ramsey]

Do you and your husband are the owners?

[Sean]

Correct.

[Dave Ramsey]

Okay. One owner. All right. Our family owns the business. Okay.

[Sam]

Correct. Yeah.

[Dave Ramsey]

All right. Well, I mean, the thing you ask how we got off the treadmill, the answer to moving to leveling up out of treadmill is time management and delegating something in the business to get it off of you so you don't have to take it home. And you know, when the owner is. It's necessary for the owner to be there for the place to operate. That means the production, the marketing, everything is on the back of the owner. And if the owner takes a vacation, everything's going to fall apart.

[Sam]

Correct.

[Dave Ramsey]

And that's the definition of a treadmill operator. So how do you get rid of that? You have people in place that do the work and you're now working on your business, not just in your business, as Michael Burger says in the E Myth. And that that's the leveling up from treadmill. That's how you get up off the treadmill. Because all the revenue and all the production is not based on one person or two people in your case. And so we've got to move some things up on that. And it's sometime management and it's that. But the stuff that you're taking home, you're not able to operate your business and not do those things. They have to be done.

[Sam]

Right.

[Dave Ramsey]

So just saying, well, my kids are more important and I'm just simply not going to do this. That's not going to work. You'll lose the business.

[Sam]

Correct.

[Dave Ramsey]

So you've got to bring in someone to get it off of you so that you're not taking work home. And that has the side benefit of saying, I'm going to level up out of treadmill because the overall goal here is to be able to put the glass in the cars and do the COVID customer service and do the billing if you're on vacation.

[Sam]

Yes.

[Dave Ramsey]

And so you've got your first foot in the door to do that with the new technician you hired to do glass. And I think an in office admin slash bookkeeper that can do the books and can answer some of these admin emails. And that frees you up to be the face to the customer and you can take the call still. And then the next stage will be to get your husband off the street and let him be in sales only and have technicians doing the work.

[Sam]

Okay.

[Dave Ramsey]

That'll be your next hire, I think, after that. So what we're investing here is in our overall sanity and the ability to grow the business. But we're not really investing in someone that's going to make us more money right now.

[Sam]

And that's I think, where I have this stumbling block.

[Dave Ramsey]

But you have to look at it that this is not sustainable. You can't get where you want to go ten years from now. Keep doing this.

[Sam]

Right.

[Dave Ramsey]

You gotta change something. And so I brought in a bookkeeper. So I learned to delegate. I'm gonna give you a copy of my little delegation quick read. Okay. But I learned to delegate based on a couple of things. Number one, I hired people. This is wrong. But I did it anyway. I hired people to do stuff I didn't want to do.

[Sam]

We've all been there.

[Dave Ramsey]

Yeah. And that, you know, and that's okay because they're actually going to be better at it. I like knowing the numbers. But doing bookkeeping, I'd rather shoot myself. I mean, it's just. It's just. Oh God, it's so painful. So one of the first people I hired is the one we're talking about you hiring. Okay. I hired a person to come in and help with admin and help with the bookkeeping and to get the day to day nitze writing the dad gum checks off of me. I want to approve the check list. And then you write out the checks. Somebody else can print them off. Right. Somebody else can put them in the envelope. Somebody else can do the online bill pay or whatever it is we're going to do and I'll approve it ahead of time. But the actual function of accounting. Oh God, no. And you could get that off of you. You could have your evenings with your kids back.

[Sam]

Right.

[Dave Ramsey]

And then you're freed up to work with customers. Which brings you in more customers because you're not getting new customers when you're doing bookkeeping.

[Sam]

Correct.

[Dave Ramsey]

You're not growing the business when you're doing that. And so it's a little bit like, I don't cut my own grass because I'm not making any money while I'm cutting grass. But I can make money while that guy's cutting my grass. Same kind of a deal here. That's a delegation of a piece of my life in this. And that's how it's done. I love your business. I hear, and I really hear a lot of energy. And you're not whining, you're just trying to figure out how this thing doesn't kill me because you're getting a little bit tired, you're getting a little bit frayed at the edges, which always happens when you're running a treadmill. So make two moves in the next 12 months that get you to work. Both of you working on your business, not just in your business. And they're both delegation moves. Hire another technician and hire a bookkeeper, admin person. And then the two of you become the customer, facing, loving on the customer, making sure people, everybody else is doing their job. The glass is getting put in, the bills are getting paid. You're looking over people's shoulders while they're doing the work. But you're not doing the work that's getting up off the treadmill. So hang on. We'll have a team pick up. We'll give you a copy of that book, Delegation, that quick read, you'll like it. And proud of you. You're doing good work. Very cool stuff there. This is the Entrez Leadership podcast. What does the future hold for business? Ask nine experts, you'll get 10 different answers. Economic growth or a recession. Business taxes will go up or down. AI will help us work or replace us all. But there's no such thing as a crystal ball. That's why more than 40,000 businesses have future proofed themselves with NetSuite by Oracle, the number one cloud enterprise resource planning system. Ramsey Solutions uses NetSuite and you should, too. Whether your company's earning millions or even hundreds of millions, NetSuite helps you respond to immediate challenges and seize your biggest opportunities with one unified business management suite. There's one source of truth for the visibility and control you need to make quick decisions. NetSuite's real time insights and forecasting help you see into the future with actionable data. And when you're closing the books in days, not weeks, you spend less time looking backward and more time focusing on what's next. And speaking of what's Next, download the CFO's guide to AI and machine learning at netsuite.com it's [e-mail] Ramsey. Question of the day comes from John in Tennessee. How do we create and maintain team culture when our team does not work in one location? I've never done that. I've Only observed it done by others. So that most of the things I answer on this show are something I've actually done. So that's my disclaimer to this answer. But I think, number one, you have to work harder at creating culture when you're not all in one location. Location being all in one building naturally creates a culture. Some of it's bad sometimes, but it naturally creates a culture because people are there, they're going to interact with each other and we get this rhythm, this flow of behavior inside the organization and that is the culture. How we treat each other, how we look at the customer, what our core values are, how we handle conflict. All of these different things happen all inside a building. You can't keep it from happening. And that's the beauty of working from work and being in one location. So you've got to work, you got to spend some extra effort and some extra money. When you've got branch offices or whatever we want to call it out there, other locations. I will tell you, I have a good friend and they do a huge gathering now. They're making really good money and the business is very successful. So caveat that. But they gather everyone and their spouses and take them all to a huge theme park once a year for two days. And so what happens is the person at certain, certain location talks to another location person in another location, but has never met them, but they end up riding a rollercoaster together. And now they've talked and now they've met and now connection has been born, friendship has been born, trust has been developed. We have found that people, if we can do anything around Ramsey, where people play together and eat together, we spend a lot of money on food. Food creates conversation and breaking bread together creates connection and trust. And so we'll take certain teams and break them out on retreats. We'll take leadership teams and break them out on retreats, sometimes with spouses, sometimes without Our operating board. For many years, did an expensive off site retreat. Main purpose of that retreat was not planning, was not strategic thinking. That's some of the stuff we did while we were on it. But the main purpose was for us and our spouses to play together. And we would go snow skiing or we would go to the Caribbean and go diving and fishing or whatever, and to the beach, play beach games, whatever we were doing. And we've done all kinds of stuff together over the years and it has really created great connectivity with the leadership team. So breaking bread together, movie night in the old days, several times we would go, you can go again. I don't know how spread out they are, but if they're spread out all over the United States, some of this might be done digitally. But anytime we can do a quarterly or an annual gathering physically, then that's going to be a huge help. The more often we can be in physical proximity to each other, the easier it is to build culture. If that's not possible, then we're down to zooming and we're down to connectivity and we're down to just constant high levels of communication. But you've really got to get inside folks lives and love them well if you're going to create a quality culture. And the more spread out you are, the more difficult it is. It's really harder and harder to be unified, the more spread out you are. Again, one of the reasons that the productivity goes down so far when a high percentage of the team is work from home. This is the Entrez Leadership Podcast. Without our mission statement, Ramsey Solutions wouldn't be the company it is today. A mission statement clarifies who you are and who you aren't. So you and your team have clear direction for all your decision making. To get help creating your own mission statement, download my free mission statement [e-mail] mission or if you're listening on Spotify or podcasts, just click the link in the description. This is the Entrez Leadership Podcast. Sam is with us in New Jersey. Hi Sam, how are you?

[E]

Hi Dave, how are you?

[Dave Ramsey]

Better than I deserve. What's up?

[E]

So I run an air conditioning heating company out here in New Jersey with my family. We did about 2.8 million last year. This year we'll hit about 6 million. We're at 4 and a half so far for the year.

[Dave Ramsey]

Way to go.

[Sean]

Thank you.

[E]

Thank you. We've grown the business substantially over the last couple of years. I actually just graduated college in May, so I've taken, I've taken, you know, more, more of a, more of a hands on approach this year and we're really trying to grow.

[Dave Ramsey]

Cool.

[E]

What's your degree in? Finance and supply chain.

[Dave Ramsey]

Well, good for you. Excellent.

[Sean]

Yeah.

[E]

For Rutgers. Yes. So, you know, we're about 30 employees now. We're about half that last year and we're looking, you know, my goal is to really grow this company and hopefully plan for an exit in about four years, five years. And our goal is to obviously grow as fast as we can without taking on any massive debts. And we've done pretty well so far at least in my opinion. We do utilize debt. So that's really the point of question here in my call today is to see if you would think that we're in a risky position with the way that we leverage our debt. So the only debt we've used in our growth is really for trucks and we use vendor debt. But our vendor debt pretty much goes against our accounts receivables and the truck payments. You know, we wouldn't be able to grow as fast if we had to buy all our trucks for cash. We would just, you know, we would limit our growth very, very rapidly, you know, very, very drastically. And so, for instance, if we want to hit about 15 million next year, which is our goal, we would have to buy about 20 more trucks, which.

[Dave Ramsey]

Is double the 4 million this year.

[E]

We're going to do 6 million this year.

[Dave Ramsey]

6 million this year and you're going to almost triple it next year.

[E]

Yeah, we grew about two and a half times. We'll grow about two and a half times this year. Six million is more on the conservative side.

[Dave Ramsey]

When you say vendor debt, do you mean 30 day payables?

[E]

Yes.

[Sean]

Yep.

[Dave Ramsey]

Okay, so that's not, that's not, you're not carrying debt with debt payments. You're just vendors bill you and you pay them.

[E]

Correct? Correct.

[Dave Ramsey]

Yeah, that's a standard business practice.

[E]

Okay.

[Dave Ramsey]

That's like paying your electric bill. It's not dead, it's just a, you know, I bought something, they sent me a bill, we paid the bill. We've got, you know, I just wrote a check for hundreds of thousands of dollars to Google for dad gum adwords. Okay, yeah, but, and I didn't prepay for those. That's just, you know, we used it, they sent us a bill, we paid the bill. So that's just, that's just ongoing payables. Now if you're carrying something over 30 days or you're setting it up on a payment plan, now that's debt.

[E]

So some, some of our debt with our, so our main vendor is Ferguson. We buy all our equipment there. It's, you know, the largest supplier. And so we have about a half a million dollar credit line with them. Some jobs, we do a lot of larger projects. Some projects, if we're not getting paid for 90 days, 120 days on there, then they extend those same.

[Dave Ramsey]

I got you.

[E]

Yeah. So I don't know if that quantifies as debt. Yeah, yeah.

[Dave Ramsey]

How many. To go into the other question then, how many, how much truck debt are we talking about on the vehicles?

[E]

I would say about 400,000.

[Dave Ramsey]

450,000 profit on the 6 million was what?

[E]

It's about 20%. About a million too.

[Dave Ramsey]

Okay. All right. Well, I mean, you learned this in college and you're just out of college, so you should still remember it that, you know, debt does equal risk. If did you do like a standard business case class, probably senior year, where you had to analyze the stock price on something and you look at one company that carries a lot of debt, another company that doesn't, and you devalue their stock because of risk?

[E]

I did.

[Dave Ramsey]

Okay. That's a pretty standard thing in senior year in finance class. Okay. Has been for 30 years or 40 years, I guess it was ago I did it. But that's, you know, that's kind of common sense in a way. But actually when we're, when we're taught the way you're taught academically and the way I was taught academically, that when we're placing a value on a publicly traded company's stock, we, we reduce the value of the company if they're carrying too much debt because more debt equals more risk. And that stock is, you know, it's more gonna be more volatile because that company's taking more risk than a non. Than a company that has no debt and has virtually no risk of that type anyway. They have other risks, but not that type of risk. So more leverage equals more risk, more leverage equals more upside. And Sam, as we all heard in our very first finance class, leverage is a two edged sword. It cuts both ways. It'll cut you down, it'll take you out at the knees, and it can build you up. And when you're looking at it the way you're looking at it, you know, we have a tendency when we're small business people, we're optimists, and you've done really well to grow the business. So why wouldn't it go on to 15 million if I just went into debt and bought some trucks? We never think about, oh well, we could have Covid, or we could have some outside variable come along and challenge this idea. And then once your profits drop, oh, you know, if your profits dropped away, this debt would cause you to get in the red faster than if you didn't take out the debt. So that's the consideration to answer your question. And the same thing's true when you take out a large job. And I grew up in the construction business, and so I've watched heat and air guys go broke my whole life as subcontractors. When the contractor goes broke, contractor gets too leveraged out there gets too stretched and they look up and decide not to pay the vendor on time. And then Ferguson comes knocking on your door.

[E]

Yeah.

[Dave Ramsey]

And that's your. That's your.

[E]

That's one of my. That's my other. Yeah, that's one of my other concerns is because like our accounts receivables.

[Sean]

Yep.

[E]

Is about $1 million now.

[Dave Ramsey]

Yep.

[E]

And it's one of the scare. And a lot of that money, a lot of that money is guaranteed because it's coming from the state. It's through state sponsored programs that we work with.

[Dave Ramsey]

It's also guaranteed to possibly be delayed by some idiot bureaucrat.

[E]

Yes. That definitely does get delayed. So we, you know, thankfully we've been, you know, me and my dad work side by side for most years until we decide to grow it a couple years ago. And so we did have, you know, we had a good amount of reserves, but we thought we're good enough reserves. About, you know, we have about like half a million six hundred thousand in accounts, but when our run rate is, you know, we did about a million dollars in July, it feels like we don't have enough cash at all.

[Dave Ramsey]

Yeah. So the problem is this. Okay. That you've increased your probability of complete atomic failure meltdown with. As you increase the Ferguson line of credit and as you increase your vehicle debt, every time you add a dollar to that, you've increased your risk of meltdown. Because if a perfect storm hits and a bureaucrat kicks you and three vendors out there don't pay timely on the Ferguson stuff and some of your other consumer stuff slows down, you get about three of these elements at one time coming at you. You've. You've messed up your margins with these debt payments. And that's the risk. That's the mathematical result of risk. And to the point you want to choke that down to make this thing hockey stick. The way you're talking about, that's completely up to you. I have chosen to grow slower and have very little stress. I would rather have a pile of cash, no debt, and my risk level is way down. And I want to be the tortoise rather than the hare. But I'm not trying to take something up 3x in one year or two years either. Now I might take something one of our divisions or departments or product lines up 3x, but we're running about 300 million. I'm not trying to get to a billion in one year. And if the only way I could get to a billion in one year was to borrow money, I wouldn't do it. I would just go. I would take a few more years. I got some time. It's okay. You have time. You're just getting started, man. You have time. And you know, if you're planning an exit, you know, a real clean balance sheet makes an exit easier. A cloudy balance sheet with a bunch of lines of credit and vehicle debt, it makes the whole process a little harder on the exit because they're going to see that as risk to the buyer and they're going to say, I got to come in and clean that up to get my margins up and to lower my risk. And that's what a buyer is probably going to look at, especially if they're a well funded buyer and they're not living on the edge. But you guys do whatever you want to do. You ask me, I don't borrow money. And so I would have cash reserves to cover my Ferguson line so that I was not bleeding past 30 days. And I would buy a few less trucks and I would grow from 6 to 12 million instead of 6 to 15. And then the next year I would have even more cash flow because I don't have payments. Huh. And then I could grow again and I just pay for it because I got money and I sleep really good. Thanks for calling, Sam. Sounds like a cool thing you're doing. I'm proud of you 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.