The Best Calls of 2024

Summary

The EntreLeadership Podcast: The Best Calls of 2024

Host: Dave Ramsey
Release Date: December 30, 2024

In the season finale of The EntreLeadership Podcast, Dave Ramsey compiles and addresses some of the most impactful and challenging calls from business owners and leaders throughout 2024. This episode delves into complex family business dynamics, profit-sharing strategies, partnership disputes, and high employee turnover, providing actionable insights and expert advice to help listeners navigate similar challenges in their own ventures.

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1. Gary’s Dilemma: Navigating a Non-Contributive Family Partnership

Caller: Gary from Seattle, Washington
Timestamp: [01:16 - 07:11]

Issue:
Gary co-owns a dewatering company with his father, who owns a 51% stake. Despite the business thriving with $3 million in annual revenue, Gary is frustrated that his father withdraws significant profits monthly without contributing to the hands-on operations. Attempts to buy out his father five years prior were unsuccessful, leaving Gary feeling stifled in his ability to grow the business.

Dave’s Advice:
Dave emphasizes the importance of separating ownership from active participation. He introduces a Venn diagram model comprising three circles: Family, Owner, and Team Member/Employee. Gary’s father occupies the Family and Owner circles but not the Team Member circle, leading to the current conflict.

Notable Quotes:

• Dave Ramsey [04:13]: “Your dad doesn’t get a salary. He doesn’t work there.”
• Gary [07:11]: “Now I have... my next move is to get him to the table and buy him out.”
• Dave Ramsey [07:45]: “You and your dad are. Attorneys are employees. They don't drive the bus.”

Key Takeaways:

• Establish Clear Roles: Define and separate ownership from operational roles to prevent conflicts.
• Implement a Succession Plan: Lay out a clear transition and succession strategy to avoid future disputes.
• Use Neutral Facilitators: While attorneys can assist, the primary negotiations should remain between the business owners to maintain control and understanding.

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2. Shane’s Strategy: Effective Profit Sharing in a Growing Construction Business

Caller: Shane from Myrtle Beach, South Carolina
Timestamp: [12:37 - 20:42]

Issue:
Shane co-owns a residential housing company generating $26 million annually. As the business enters its legacy stage, Shane seeks to implement profit-sharing to motivate key employees poised to take over certain operations. However, he faces challenges in structuring this profit-sharing in a way that aligns with both the company’s financial goals and employee incentives.

Dave’s Advice:
Dave suggests integrating profit sharing directly tied to the operational performance of each profit center. By assigning specific profit percentages to senior team members based on their management of both sales and construction streams, Shane can ensure accountability and incentivize growth.

Notable Quotes:

• Dave Ramsey [16:55]: “So pay them off of both streams of income then.”
• Shane’s Employee [17:05]: “Right? Yes.”
• Dave Ramsey [18:16]: “They have to show the entire P&L and have some say so over the entire P&L.”

Key Takeaways:

• Dual Profit Centers: Allocate profits from both sales and construction to ensure comprehensive performance metrics.
• Transparent Financials: Grant team members access to complete financial statements to foster responsibility and informed decision-making.
• Flexibility in Structure: Customize profit-sharing percentages to reflect the contributions and responsibilities of each key employee.

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3. Jeff’s Conflict: Resolving Partnership Issues with a Non-Contributing Sibling

Caller: Jeff from Bowling Green
Timestamp: [20:42 - 32:48]

Issue:
Jeff co-owns an HVAC and appliance repair company with his brother, each holding a 49% stake, while their father owns 2%. Four years ago, Jeff’s brother left active involvement in the business but continues to expect a regular paycheck and profit shares despite contributing nothing. This situation strains family relationships and hampers the company's growth.

Dave’s Advice:
Dave recommends a firm yet respectful confrontation to establish new terms. He advises Jeff to present clear options: buy out his brother’s stake, have his brother buy out Jeff, or dissolve the partnership. Emphasizing the importance of setting boundaries, Dave encourages Jeff to prioritize the business’s health over maintaining an untenable status quo.

Notable Quotes:

• Dave Ramsey [24:56]: “Tell him, turn in his keys for the truck, bring the truck back, and you're no longer on payroll.”
• Jeff [26:05]: “And that's going to go over like a lead balloon.”
• Dave Ramsey [29:03]: “Just fixed you, buddy.”

Key Takeaways:

• Set Clear Boundaries: Clearly define the roles and expectations of each partner to prevent abuse of power.
• Present Concrete Options: Offer structured choices to amicably resolve partnership disputes.
• Protect the Business: Make challenging decisions to safeguard the company’s future, even if it means straining personal relationships.

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4. Tom’s Challenge: Reducing High Employee Turnover Despite Rigorous Vetting

Caller: Tom from Atlanta
Timestamp: [35:49 - 48:11]

Issue:
Tom, a custom home builder and remodeler, experiences a 50% turnover rate among his office staff despite using comprehensive vetting tools like Myers-Briggs and working genius tests. New hires exhibit poor technical skills and fail to align with the company’s high standards, leading to frequent dismissals shortly after onboarding.

Dave’s Advice:
Dave encourages Tom to enhance the clarity of his technical expectations during the hiring process. By explicitly communicating the high-quality standards required and ensuring that candidates understand the specific technical competencies needed, Tom can better align hires with the company’s operational demands.

Notable Quotes:

• Dave Ramsey [43:21]: “In some cases, you're the type of guy that wants them to succeed more than they want to.”
• Shane [48:11]: “Yeah, I think I've overdone it on the personal side and that's an easier fix than the other way.”

Key Takeaways:

• Clarify Technical Expectations: Clearly define and communicate the technical skills and quality standards required for each role.
• Balance Personality and Skill Assessment: While behavioral traits are important, ensuring technical competence is equally crucial to maintaining high standards.
• Continuous Improvement: Regularly refine hiring processes based on feedback and observed performance gaps to reduce turnover.

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Conclusion

Throughout The Best Calls of 2024, Dave Ramsey addresses pressing issues faced by business leaders, offering strategic solutions grounded in his extensive experience. From untangling complex family business relationships and implementing effective profit-sharing models to resolving partnership conflicts and reducing employee turnover, Dave provides actionable advice that empowers entrepreneurs to lead with clarity and integrity. As the new year approaches, listeners are equipped with valuable insights to foster growth, enhance leadership, and build resilient businesses.

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Notable Quote Summary:

• Dave Ramsey [04:13]: Highlighting the importance of compensating active contributors appropriately.
• Dave Ramsey [07:45]: Stressing that attorneys should support, not control, business negotiations.
• Dave Ramsey [18:16]: Emphasizing transparency in financial management for motivated leadership.
• Dave Ramsey [24:56]: Advising decisive action to remove non-contributing partners.
• Dave Ramsey [43:21]: Pointing out the balance between wanting employees to succeed and ensuring they align with business needs.

This episode underscores the necessity of clear roles, transparent communication, and decisive leadership in overcoming business challenges and fostering sustainable growth.

Transcript

[Dave Ramsey]

You've got to be at Entree Leadership Summit this spring. And if you get your tickets this December, you'll even be invited to an exclusive Q and A lunch with me at Summit. So go to entreeleadership.comsummit today. Happy New Year. From the headquarters at Ramsey Solutions, you're listening to the Entre Leadership podcast. The show where I take calls from business owners and leaders just like you about what it takes to win at any stage of business. I'm your host, Dave Ramsey. With 30 years of real life experience founding, leading and growing successful businesses. Our team has compiled a list of top calls and best interviews from 2024 to launch you into another year of hard work and impactful leadership. First up, a call from Gary in Seattle, Washington. Gary and his father co own a business, but Gary's frustrated about his dad continuing to take home a large sum of the profits without doing any of the hands on work anymore. Let's take a listen.

[Gary]

So I own a dewatering company which is a specialty contracting business and have about 12 employees and I'm the 49% owner and my father owns 51.

[Dave Ramsey]

Okay.

[Gary]

Okay. We do about $3 million annually and this is a 15 year old success story. We started from ashes in 2009 and here we are and we're just, we're doing really well. But my problem is, is that over the last five years, in 2019, I tried to buy my dad out and it didn't work. And we've been very successful since then. However, my dad doesn't participate in the business. He just rakes in all the money. So he takes about 20,000 bucks a month and so do I. And then we split it at the end of the year if we have any profits. The problem is, is I've come to the end of my rope on allowing him to continue to take, take, take when I feel like I can't grow my business because all of my profits, or a lot of them are going to my father who doesn't participate.

[Dave Ramsey]

Okay. There's two or three elements to this process. The first thing is, is we need to break apart the idea of ownership and working at the company. You can be an owner of a company and not work there. Okay, that's a, that's perfectly fine. There's nothing wrong with that. You can be a member of the family and not work there and not be an owner. So in family business, the famous family business guy that wrote probably some of the books the longest ago is a guy named John Ward out of, I believe it's Minnesota, if I remember. Anyway, John, put together the Venn diagram that a lot of people use. And it's got three circles. One circle is family, one is owner, and one is team member or employee. Okay. You can be all three of those, which would be where the three circles interact intersect on the Venn diagram, if you can see that in your mind. Or you could be two of those. You can be a family member, an owner, but not an employee. You can be, in your case, you're all three. Okay? And your dad is just an owner and a family member, but not an employee. So when you break that apart, then you go, okay, owners get distributions of profit. So where Urals model is broken is that Gary is not being paid a salary for being the CEO. You should be getting on a $3 million business, a couple of hundred thousand dollars a year salary before we talk about splitting up profits.

[Gary]

And I do get that, but he also gets it too.

[Dave Ramsey]

So basically, he doesn't get a salary. He doesn't work there.

[Gary]

Right. Right now he does, though. My point is the profit has to stop.

[Dave Ramsey]

That has to stop. We're not going to pay someone a salary that doesn't work in the business. Now, they can get distribution of profits after the salaries are paid. So he should get. So let's say what is your. You have a salary plus the $20,000 a month.

[Gary]

No, we just call it a.

[Dave Ramsey]

That's what I'm talking about. You just call it. You've completely screwed this up. So that's where the problem's coming in. So you need to get on the payroll of the company as the CEO and president of the company. And the payroll needs to pay you a quarter million dollars a year.

[Gary]

Yep.

[Dave Ramsey]

Okay, then what is left after the CEO is paid is called profit. And the profit can be distributed not to the employees, but to the owners, of which your dad would get 51% of the profits that are distributed and you would get 49% after the CEO is paid. That's how this should be set up.

[Gary]

I agree.

[Dave Ramsey]

Now, once it's set up that way, then you could still have the complaint that your dad won't let you buy you out. And that's another discussion.

[Gary]

Mm. As a matter of fact, I just got the business valuated. I haven't got the number yet, but that is. My next move is to get him to the table and buy him out. Yeah, and tell him that I've been awful nice letting him basically, you know.

[Dave Ramsey]

No, that's not going to be good at all. Your dad doesn't feel like he's. You've been awful nice. And you saying that is not going to do anything but rile him up, dude.

[Gary]

True.

[Dave Ramsey]

Okay? It makes you feel better, but it's not going. What are you trying to accomplish here? Rile him up or are you trying to get the deal done?

[Gary]

I want the deal done.

[Dave Ramsey]

All right, then quit riling him up. Quit whining. All right, so sit down with him and just say, look, you're an incredible businessman. You and I built this thing from the ashes, and now you want to be at home. And I have to. For the sake of my manhood, for the sake of my dignity, I have to be running this thing now. And I have to work out something to buy you out. I can't do it this way anymore. I want to honor you. You're one of the founders. You know, you helped me get here. You taught me what I know, and I want to honor you. But I can't go forward with this anymore, dad. So help me figure out a way that I can buy you out in a way that makes you sm. And that. And that is not. That does not violate me in the process. And let's sit down and talk about that and not go. You know, I've been doing you a big favor, and it's over. You know that doesn't work, man.

[Gary]

Understood. Now I have. It wouldn't work with you if I.

[Dave Ramsey]

Did it to you.

[Gary]

Right. I agree. Now, I went and hired an M and A attorney, and. But this time, compared to last time, five years ago, this time we hired them together. See, and I think that's the key to me buying them out, is there is no Gary's attorney or David's attorney. It's our attorney, and he's got our best interest to get across the line.

[Dave Ramsey]

We need a cup of coffee. We don't need an attorney. You can have an attorney teach you how to put it together, but if you gotta have an attorney do the negotiation, you really. You're already screwed.

[Shane]

Yeah.

[Dave Ramsey]

The two of you ought to be able to sit down, father and son, man to man, and say, this is how this is gonna happen. And then you call the attorney and tell him what to do. Attorneys are employees. They don't drive the bus. Y'all gotta drive the bus on this. Now, the good news is you don't have two different attorneys, to your point, talking at each other, trying to represent you two who should have sat down over a cup of coffee and battled this out. Dad, look, here's the thing. We gotta look at this. Now, how you wanna work this through? We gotta work this through, and then we're gonna tell this attorney how to put it together, all right? And if he can advise you on some possible structures, well, that's okay. I don't mind that. But this attorney's not in charge. You and your dad are. And believe me, some of them think they're in charge. So we got to get rid of that problem, too. But, yeah, I think it's a good sign. I agree with you that you both agreed on someone to look at a merger or an acquisition. But I would. You know, it's a $3 million company. We don't need to spend a ton of money on attorney fees to transfer this thing. It should not be that complicated or that difficult. But y'all sit down and work on it together. And just, you know, I can't go forward this way. And. But. But for those of you out there listening, the way you don't get to this point is you do two things in your succession and transition plans. When you're in the legacy journey, when you're in the legacy phase of your business, the last phase, which is where Gary's is. Okay, Number one, you lay out a clear succession plan, transition plan, and here's how it's going to go down, and here's who's going to end up for it with it. Here's how it's going to be paid for. Here's how it's not going to work. Here's how it is going to work. And then two, you have to do what we talked about there with the Venn diagram. You keep the ownership portion of the business separate from the employment of the business. Now that you know. So, for instance, my son Daniel works here. We mentioned that a minute ago. He is paid as the president. His sister Rachel works here as a personality. She is paid like the other Ramsey personalities. The same percentage on book sales, the same percentage on speaking fees and so on. So she gets paid there. However, both of them are owners of this company. They also get money as owners from the profits. That has nothing to do with them working here. That's a separate issue. So owners can be absentee owners or they can be on site owners. Both are owners, you know, stockholders and publicly traded companies. None of them are on site. You own a share of Home Depot. You don't work for Home Depot, but you're gonna be distributed some of the profits in the form of dividends, assuming Home Depot did a dividend distribution. But anyway, that's how that works. So that's what Gary is running into. So you start with that and you start with succession plan, a transition plan, and then you don't get all the way up to I've had it. I'm sick of this guy milking the business. And this guy is my dad, you know, and you keep from getting there by laying this out in a much smoother, gentler grade on the transition. And that's how we do that stuff. So really, really good question, Gary. And what you're facing is fairly normal among small businesses. So you're doing a good job. You've obviously grown it to great revenues. Now we've just got to work this through. So your dad feels honored. It's always good idea to honor the founder as much as you can honor the founder. It'll help the conversation. Shaming them usually won't get you anywhere.

[Tom]

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[Dave Ramsey]

Next, let's hear from Shane in Myrtle Beach, South Carolina. Shane is curious about profit sharing practices with a growing construction business that brings in 26 million a year.

[Shane's Employee]

I am the co owner of a residential housing company that is an on your lot builder. We have about 25 employees and our top line revenue for 2023 was 26 million. So and we are in the beginning stages of being in the legacy stage and good we don't we feel like we're probably five or six years away from, you know, trying to Pull away from the business. And we don't have any obvious choices for to take over the entire company. We realize that someone will have to have some management help. And we've got two or three key employees that are really shown a lot of leadership and growth. And we're trying to figure out the best way to include them in some profit sharing to help continue to motivate them in their growth.

[Dave Ramsey]

Okay, you said you had 26 team members?

[Shane's Employee]

25.

[Dave Ramsey]

25. And two of them are what you're considering being eligible for this?

[Shane's Employee]

Yeah, we have kind of three locations throughout eastern South Carolina, Coastal South Carolina. And we have one location where kind of the sales manager and our superintendent have really, really shown a lot of growth and are at least showing potential that we could not be involved in the day to day operations of at least that one location.

[Dave Ramsey]

So you think about dividing the profits up by location and sharing them or sharing them across the whole thing.

[Shane's Employee]

Well, we sort of. We have the profits divided up by location anyway, and then so we know what our profit is.

[Jeff]

Each.

[Shane's Employee]

Yeah, we actually have it divided up in two ways at each location because we actually have our company set up as a construction company and a sales team. So our construction company gives the cost of each project to the sales team, and then the sales team gets paid and shows a profit on whatever they sell it over that construction cost. And then the construction team gets paid on the profit that they create by building it for less than what they told the sales team.

[Dave Ramsey]

So the price they're giving them includes a margin. And then the sales team's marking it up again and making theirs. And you're running that as two separate profit centers?

[Shane's Employee]

Yes, sir.

[Dave Ramsey]

Okay. All right. So how are you thinking about paying the team member, the senior team member that's leading a location that has those two different things in it?

[Shane's Employee]

Well, I know that. Well, from. From there are very numbers oriented. So we want it to be sunk. Because I've heard you talk about profit sharing in the past and the problems that you've had. And you kind of went back and sort of made it a more of a thing that could be changed, moving in time. But we also want it to be some concrete numbers that we can show them. So our thinking was to pay these two members off of our construction profit, but basing them getting this additional bonus off of this construction profit, it would also be based on them hitting some sales goals. Does that make sense?

[Dave Ramsey]

Yeah, yeah. But it's. It's messy. It's messy because they also are managing the sales team if they're managing the whole area. Right, Right.

[Shane's Employee]

Yeah, they're managing their sales team and basically the sales office.

[Dave Ramsey]

Yeah.

[Shane's Employee]

And so we want to take that.

[Dave Ramsey]

And they're managing the building team. They're melding the whole location. Right. Both. Both streams of income.

[Shane's Employee]

Right.

[Dave Ramsey]

Well, pay them off of both streams of income then.

[Shane's Employee]

Right. Okay.

[Dave Ramsey]

That's how you get paid.

[Shane's Employee]

Right? Yes.

[Dave Ramsey]

You can make them a partner without giving them stock. If they were a partner and as a general partner of that location or an operating partner at that location, they got X percentage of the bottom line of those two income streams. Maybe different percentages for the two different income streams. I don't care. Might be 3% on one, 5% on the other. It might be 22%. I don't know. Whatever it is to get them back to income level, you kind of got to back into it to get them to at least where they are now. Right, right. And so what does the guy at one of the locations make now as an example?

[Shane's Employee]

They're. They're both able to. They're both right around that 150 a year mark.

[Dave Ramsey]

Okay, and what percentage. Okay, and if I took the. The sales profit at that location and the builder profit at that location, what were those two things add up to.

[Shane's Employee]

As far as percentage?

[Dave Ramsey]

No. Total dollars. Total.

[Shane's Employee]

Okay. I believe last year at that. At this particular one, it was like one in about 1.5.

[Dave Ramsey]

Okay. So right now they're making 1%.

[Shane's Employee]

Right.

[Dave Ramsey]

And so. So if you gave them one and a half percent of the bottom line and they could see the entire P and L and had some say so over the entire P and L, meaning they can create the revenue and they can help manage the expenses and keep them down, which are probably already doing. They're running that location, then they are controlling their own income.

[Shane's Employee]

Okay.

[Dave Ramsey]

And they get a raise.

[Shane's Employee]

You don't think that. Well, my only concern that we had with that was, you know, sometimes people can get. Well, we're doing all of this and we're getting this one and a half percent, and y'all are just kind of watching us do it and.

[Dave Ramsey]

Well, there's that part where I own it.

[Shane's Employee]

Do what?

[Dave Ramsey]

There's that part where I'm the owner. You know, you are, right. I mean, come on. I mean, you know, if you want to. If you want to go own something, go own something. But this is. Right now, you're making 150. I'm offering you two and a quarter on percentages. But part of that is you have. Have the emotional maturity to Realize you're going to be living off of 1.5% of the net profit for now. We might make it more later, but one and a half percent of the net profit gives you a raise, dude. And so the first thing you need to be doing, Smiling.

[Shane's Employee]

Okay.

[Dave Ramsey]

And if the guy doesn't have the maturity to run the numbers and see his part in the numbers, then, you know, maybe that's not the answer.

[Shane's Employee]

Right. So it sounds like we were trying to make it probably too difficult in order to not show them the full books.

[Dave Ramsey]

Well, if you want them to run something for profit, they got to see the books.

[Shane's Employee]

Right. Okay.

[Dave Ramsey]

So I've got 14 people on our operating board here. They all are paid off. The bottom line of the whole company. Everything at Ramsey goes into a pot. You know, eventually it's split up all over the place, but eventually it ends up landing in my pocket. Right. And so once it comes down, through all the different gyrations and everything, so they get paid off the same line I get paid off of. And it's not a huge percentage, but it's a huge amount of money.

[Shane's Employee]

Sure. Okay.

[Dave Ramsey]

And they are. They see every detail of the books. Their job is to help me run this large and complicated business and keep all the dad gum toggles toggling.

[Shane's Employee]

Right, right, right.

[Dave Ramsey]

And so, yeah, because if I'm going to call someone a. You know, if they're at the level where I. If I. That I might want to have actually shared ownership with them, then I need to at least be able to share the books with them.

[Shane's Employee]

Yeah. Okay.

[Dave Ramsey]

And if they're not, then they're not. That's okay, too, because not everybody can make it, you know, can be on my operating board because some of them can't handle looking at the numbers and going, well, that's only what I make. Yeah, well, you weren't here when I started and you weren't here in those 16 hour days before I lost my hair and all that stuff, you know, I mean, there's all that thing. So it's a good question. It's very interesting. And it might not be that that's the right model for y'all. You may want to just say, you know, we're going to pay you off of this, and you just start showing certain numbers. I don't care what it is, that create the same situation, but I still want them motivated to run the business, keep expenses down and revenues up. That's running the business. From an accounting standpoint, I want to make a profit, and that's keeping Expenses down, revenues up in your area. If you're not doing that, you don't get to be here. If that's your job. I mean, your job is keep expenses down, revenues up, and everything that that entails. That means all kinds of different things, but that's what it comes down to. And that's what I have to do. If I don't do my job, I get to go home because we're broke, you know, so that, that's how the whole thing unfolds. So, yeah, I think. Yeah. What I would encourage you to do is, number one, nothing's in stone forever. Number two, I have, you know, have them sign non disclosures and non competes. If they're going to be at that level. If they sign those two things, then we can talk about all kinds of stuff. Stuff. Now it's time to revisit a call from Jeff in Bowling Green, whose brother quit the family business but still wants a check. Take a listen.

[Jeff]

I talk about partnerships. I've got a family business. I'm part owner. It's an H Vac and appliance repair company. We've been in business for 30 years, have 10 team members. Last year we did a little over 1.2 million in revenue.

[Dave Ramsey]

Cool.

[Jeff]

I am 49%, my brother's 49%, and my dad is 2%. And for 30 years, our division of duties, I pretty much handled the H Vac and business stuff and my brother handled the appliance side of it. And when Covid hit and the shutdowns happened that March of 20th, my brother came in one day and said, cancel my calls. I'm going home. And he did. And he has not been back to work in four years.

[Dave Ramsey]

Why?

[Jeff]

He's. He has no interest in coming back. We do have some real estate together, and he does do some of the managing of that. And that's kind of his excuse for. For not coming back to the service company. He still expects to get a paycheck, and he still expects to have a company vehicle. He still expects to get half the profit. So four years later, I'm kind of tired of that setup. And my question to you is, what's there that can be done about it? I intend to reach out to him. And is it just the two of.

[Dave Ramsey]

You involved who owns the other 2%?

[Jeff]

My dad.

[Dave Ramsey]

Is your dad still involved?

[Jeff]

Not much. He's. He's about 90 years old. So he was just the 2% to kind of break disputes and break ties and that sort of thing.

[Dave Ramsey]

Yeah. And so what's he say about all this?

[Jeff]

Well, since my brother hasn't been at work for four years, he's been spending a lot of time with my dad, so. My dad thinks he hung the moon. So whatever he says, my dad's pretty much on board with him.

[Dave Ramsey]

Okay, so who makes all the operational decisions on paychecks and so forth?

[Jeff]

I do.

[Dave Ramsey]

Okay. All right. Okay. So you ready to force everybody's hand? Because I think it's time.

[Jeff]

I think it's more than time.

[Dave Ramsey]

So just tell him, turn in his keys for the truck, bring the truck back, and you're no longer on payroll. No work, E. No payee. And yes, you own 49%, and yes, you will get 49% of the profits. And the profits will occur after we pay my increased salary because I'm now the CEO of the whole freaking place. You guys are out. None of you have access to the business. I'm running the business. If you don't like that, buy me out. Okay, you and pop go over there and have your player gin rummy. And y'all figure out how you're gonna send me some money, because I'm done doing this. I'm done supporting your dead butt weight. I'm over it. So no more paychecks. And the profits will be distributed according to the partnership agreement, which is 49% of the profits. But there's not gonna be a lot of profits warning because after you pay my salary that's increasing, there's not gonna be a lot of profits left because I'm going to convert profits into my pay and there won't be anything getting to the bottom line. Ding, ding, ding, ding, ding, ding. Just fixed you, buddy.

[Jeff]

And that's going to go over like a lead balloon.

[Dave Ramsey]

Yeah, well, guess what? Anything you do is going to go over like a lead balloon other than continuing this madness that you're doing now.

[Jeff]

That's true.

[Dave Ramsey]

Anything you do that stops giving him stuff that he doesn't deserve is going to piss off this dead weight parasite, isn't it?

[Jeff]

I agree.

[Dave Ramsey]

Okay, so you got a choice. You either keep doing it to keep him happy. God help us, we want him happy. But, you know, at some point, I'm you. I don't care anymore. So I would, you know, if you want to, before you do that, sit down and go, okay, guys, the three of us are going to meet and we've got to decide something different because I'm not okay with this, and sit down in person and try to work it through. I'd love to maintain relationship with your dad. I'd love to maintain relationship with you, brother, but this is unreasonable. For you to continue to get a paycheck in a truck when you don't work there anymore. If you want to work there, that's fine.

[Jeff]

I was going to offer a buyout to them.

[Dave Ramsey]

That's fine.

[Jeff]

I would prefer to do that. But I was kind of wanting to get set up for the plan B because I don't know how well that's going to go over. Because they like the way, especially my brother likes the way it is.

[Dave Ramsey]

Yeah, it's okay. So here's the thing. Sometimes in a negotiation, you have to establish the rules. Here's the rules. It's not going to continue like it is. Something's going to change. Now we get to decide together what's going to change. Because I'm not going to continue the way it is. So you can buy me out. I'll buy you out, or I'll shut you out. These are our three options. Shutting you out is the most violent and harsh of the three. But I'm kind of at that stage right now by the fact you've been taking advantage of us, of me and my family with no conscience whatsoever for the last few years. But we don't have to go to step three. But we can escalate to step three. No, I like it the way it is. No, you don't understand. The way it is is no longer an option. There's three options and the way it is is not one of them. I buy you out, you buy me out. Or we get violent with the reset. You decide which one do you want to play? One of these three things is going to happen, starting now. We need to decide that in the next two weeks. I'm done.

[Jeff]

And that's the time frame I'm looking at. Yeah, but I can't keep them out of the business, can I? I can't tell them to stay away from them.

[Dave Ramsey]

Why not? Why not? You're the guy running it.

[Jeff]

But they've got part interest in it.

[Dave Ramsey]

So what?

[Jeff]

Good.

[Dave Ramsey]

So what?

[Jeff]

I just thought that that would give them legal right to at least do what?

[Dave Ramsey]

They don't. No, they don't have legal right to do that. All they've got legal rights, too, is 49% of the profits and 2% of the profits. There's not any profits. They don't have any rights to anything. But there's nothing. Do you ever. I assume you guys don't have any written agreements, right?

[Jeff]

No.

[Dave Ramsey]

I figure, yeah. This is a train wreck.

[Jeff]

It Is.

[Dave Ramsey]

Yeah. So, I mean, there's nothing that says. There's nothing that says you're the operating partner. So I just changed the locks.

[Jeff]

Okay.

[Dave Ramsey]

I got control of the checkbook. Good luck with this. Sue me. This just got violent. I'm cutting you out, dude. Bring your truck back or I'm gonna turn in a report for theft. On it. Grand theft auto. You want that one? We can do that.

[Jeff]

Seriously? That would go.

[Dave Ramsey]

I don't know.

[Jeff]

Okay.

[Dave Ramsey]

I'm just kidding. The point is. That's not the point. We're not gonna get there. The point is you gotta jostle this thing loose with a personal in person conversation with the. And leaving it the way it is is no longer an option. You got to take that off the table. So something's going to change. I'd love for us as three grown men to decide what that is reasonably. Because I'm not going to continue the way it is. I can buy you out. You can buy me out or I can shut you out. Which one do you want to do?

[Jeff]

And just tell them that up front.

[Dave Ramsey]

I would.

[Jeff]

Okay.

[Dave Ramsey]

I'm getting ready to do one of these three things. So I'm forcing you to decide to decide one of the good options so I don't have to go to number three, which is the violent, bad option. Okay. I'm going to pick up the truck, put it back into our fleet and start using it again to make money. I'm going to change the locks and I'm going to raise my salary and stop your paycheck to where profit distributions are going to equal close to zero. That's the violent third option. Y'all don't want me to do that. It's not good for you. It's going to hurt our family. It's going to hurt our relationships. But my relationship with y'all is already hurt by the way you all are treating me.

[Jeff]

That's exactly right.

[Dave Ramsey]

And so now we're going to change that so we can begin a healing in the relationship and we can begin to move forward. Now, does this partnership that doesn't have any written documents, does it have a name? I guess it has a name.

[Jeff]

Yeah. It's an S Corporation. Yes.

[Dave Ramsey]

Oh, okay. And does it own real estate?

[Jeff]

It does not. We have a separate llc, just my brother and myself that owns real estate. We've got about $2 million in real estate.

[Dave Ramsey]

Okay. All right.

[Jeff]

So that'll be the next.

[Dave Ramsey]

Yeah.

[Jeff]

Issue probably.

[Dave Ramsey]

And then the next. And the way you do that one is very simple. If it goes violent, is you're going to have to go before the circuit judge. It's going to cost you about ten grand in court costs and attorney's fees. And the judge is going to demand the disillusionment of this partnership, which means this real estate is going to be liquidated, and everybody gets their part. If we don't voluntarily sell it off or buy each other out or split it up. How many pieces of real estate is it? Can you all split it off? The pieces? 50. 50?

[Jeff]

We could probably work it out at least close, I would think.

[Dave Ramsey]

Yes. If I were you, I'd take a hit. Or as a matter of fact, you could shovel some of the real estate his way in return for the 49% of the company.

[Jeff]

Right, I could.

[Dave Ramsey]

You could do some trading that way. If this guy wants to be reasonable, once he understands clearly we're not going to continue as it is not an option. I'm not going to do that. I'm going to blow this up if you don't. If we don't, with good conscience and as two adults or three adults, figure this out together. So I'll shovel you a bunch of the real estate in return for your 49% of the company, and we can call this a day. And then you go make your money on real estate, I'll make my money on the business and the little bit of real estate I got left, and we'll split that LLC up, but we're not going to continue the way it is. You not working here and getting paid is bull crap.

[Jeff]

That's the. That's a nice way of putting it.

[Dave Ramsey]

Yeah. Yeah, that's pretty clean.

[Jeff]

Yeah, it's. Yeah, it's gone on too long.

[Dave Ramsey]

Yeah, it has. It has. And. And the problem is, he waits until you get so angry about it that you're ready to sever your relationship with your own brother because he's being such a putz.

[Jeff]

And that's where it's come to. I mean, that's. Yeah, I don't like that.

[Dave Ramsey]

I don't either. I hate it. I hate it. But it speaks to his lack of character.

[Jeff]

It does, but it affects the whole. The whole family.

[Dave Ramsey]

Yeah. Thanksgiving dinner sucks.

[Shane]

Yeah, you're right.

[Dave Ramsey]

Yeah. So anyway, I would sit down with them and say, guys, look, I'm sorry. I should have come to you all sooner before I got this frustrated, but now I'm really, really, really frustrated, and I'm at the end of my rope, so we're not going to continue the way we are. I think the best scenario is that Brother, you and I, I end up with the company, you end up with more real estate than half. And we'll figure those numbers out. I'll set some of the real estate in the LLC over to offset your 49%. I'm going to buy you out at the company. You're going to end up with a pile of real estate. I'm going to end up with a company and a little bit of real estate or whatever. The numbers work out and we're going to call, and then you can go on and I can go on, and we can still love each other and be kind, and Thanksgiving dinner will be great. I sure hope we can sit down and work that out, because I need you to really understand I'm not going to go forward with this. Or if you want the company, you can come over here and run it, and I'll take a bunch of the real estate, we can reverse the process. I don't care whichever way you want to do it. But it sounds like he didn't want to run the company, and so there you go. And. And if you don't, if we cannot come to some kind of reasonable, fair distribution of this stuff, I'm going to blow it up. I'm going to blow the whole thing up. It's gonna get nasty. Let's don't do that. Please don't do that. Please don't do that, because we're not going to continue the way it is. You just got to take the thing off the table. You're gonna tell him like six times because he's not gonna hear it. That's what. That's why I'm doing this. Because I can tell you, this guy, he's not. He think. He thinks he can blow you down and you're just gonna. This guy, this guy thinks he can keep this in deal intact. And you're gonna have to remind him there's hand grenades all around your belt. You're getting ready to drop them right there on the floor. This is gonna blow up. 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. Now it's time for caller number four, Tom in Atlanta, who's disappointed in 50% of the people he hires. Let's hear what he has to say.

[Shane]

Hey, Dave. My question is, why do I end up letting go half of my people? 50%. They're not team players. They lack technical or human skills. The emotional intelligence that Pat brought up, we also. Part of my question is, you know, we look for hungry, humble, and smart. But I can't seem to get the smart part down. They're qualified. I give them the Myers brick test. They score great. Disc test, working genius test. I even got certified as a working genius coach. And I hire these guys, I vet them, we interview them, and then two or three months later, it's like, what have I done?

[Pat]

Wow. Well, I want to sit down and spend some time with you to help you figure this one out, Tom, but I think there might be. I'm going to channel some Dave Ramsey here, and there might just be some inconsistencies about the way you're interviewing people and the way you're managing them. In other words, because if you're doing all those things and you're vetting them, and good for you, but if that many of them aren't working out, I don't think it's the vetting. I think it might be the reality of what's happening once they start there. But I don't say that glibly. I want to help you figure this out.

[Dave Ramsey]

So what kind of industry are you in?

[Shane]

I'm sorry, dude, I'm a custom home builder and remodeler.

[Dave Ramsey]

Okay. And how many team members?

[Shane]

Right now I have six.

[Dave Ramsey]

Okay, so you hired, like, two or three people that didn't work out?

[Jeff]

Four.

[Pat]

Oh, okay. This helps me. I was, amazingly, going into the dozens or hundreds.

[Dave Ramsey]

Okay. And yet the four people were doing construction work or doing office work or what?

[Shane]

Office. Office work.

[Dave Ramsey]

Okay. Are you in the field with your pickup?

[Shane]

Couple of project managers and a couple office people.

[Dave Ramsey]

Okay. Are you in the field with the pickup managing the jobs?

[Shane]

No.

[Dave Ramsey]

You're in the office, so you got custom work going on, and you have superintendents or project managers on each of those jobs physically, and you're not physically on the job.

[Shane]

Correct.

[Dave Ramsey]

Okay. And so they get there and they're having relational trouble inside the office because they're not people smart on the hungry, humble, smart model. Is that what you're describing?

[Shane]

That's part of it. But also, they don't. They're not. They're not. They're posers. They're not really qualified to do what they're doing. And I. I ask Them questions, we take them out in the field. I let them spend time with the other project managers. Everyone gives them a thumbs up. But when they get down to business, they're. It's like perplexing, like, what are you doing?

[Pat]

And. And you're even using the working genius.

[Dave Ramsey]

You, you. Oh, yeah.

[Shane]

Oh, yeah, yeah.

[Dave Ramsey]

So, yeah, but that's different than you're saying they don't have the skill. So you're hiring a project manager don't know how to manage a project.

[Shane]

Yeah, they don't, they don't understand construction as well as they. As they let on. I mean, one thing we try to do is, is we're using tranual and I'm getting all of the positions and we're doing all kinds of training videos and those types of things with testing. That'll help. But it just, it just seems like an awful lot to go through. It used to be you could just, you know, somebody would come in the door, they'd. Someone. I've had people that have been referred to me by, you know, other trades that I've known for years, and they're just, I don't know, they're just not, they're not, they're not. To speed, I'm spending so much time, I think, trying to vet them.

[Dave Ramsey]

On the personal side, how quickly, okay, a new person starts, how quickly do you turn them loose in the wild without training wheels?

[Shane]

Typically they're with me or with one of the other guys for about six weeks.

[Pat]

Are you noticing the problems during those six weeks or is it after that?

[Shane]

No, no, it's after that. It's when they get. It's when they get let go on their own and they start doing just really dumb stuff.

[Pat]

Tom, first let me back up a little and say, since this is a relatively small sample, you know, applying the percentage is like 50% or whatever else. So you've had a hard time hiring a handful of people and getting them to stick.

[Dave Ramsey]

Yeah, that's all it is. It's not a, it's not like you're a 50% failure. It's like you screwed up on three.

[Pat]

Right.

[Dave Ramsey]

You know, that's different. I agree with Pat on that. So because I screw up on three a week. So, I mean, you know, it's, that's just. But we're running with larger numbers.

[Shane]

But three for me is a lot more.

[Dave Ramsey]

I know I'm just a serious problem, but it's a, it's a problem because it carries so much weight percentage wise, inside your organization. But to indicate that somehow what you're doing is 50% off. I don't think that's the indicator. So I agree with that. So it feels like that when you are walking with them during their training period, you suck. Yeah, it feels like you're not doing a good job getting them to do the job the way you want it done. Because we've got, like, a Ramsey way to do things. So if you come in and do sales and you're a good salesman, that's different than doing sales at Ramsey. And so you're gonna walk with one of our salespeople for a little while, and you gotta learn the Ramsey way to make that sale. And it took us a while to get good at that. We sucked at it at first. And so we would have salespeople doing sales five different ways. And we had all these inconsistencies and different kinds of complaints from different kinds of customers, depending on who their rep was. And so, yeah, somebody can function within their personality. But we've got some core tenants on accounting or some core tenants on project management or some core tenants on sales that if you're going to do it the Ramsey way, if we're going to do it the Tom way, you got to do it this way. And I don't think you're doing a good job of transferring that.

[Shane]

Well, there's two things, Dave. One is the actual processes that we use to manage the project. Record things, you know, change orders, purchase orders.

[Dave Ramsey]

They ought to be able to understand.

[Shane]

That they do all that stuff. Great.

[Dave Ramsey]

Yeah.

[Shane]

Actually, it's the technical knowledge of, you know, this is how a piece of trim is supposed to look. We don't leave drywall looking like that. You know, we cover floors.

[Dave Ramsey]

That's what I'm talking about.

[Shane]

Just basic.

[Dave Ramsey]

You're a custom home builder. You may be hiring somebody in this build. Built. Built mass homes. And they don't. They're not as hard on quality as you are.

[Pat]

You know what's interesting, Tom?

[Shane]

That's it.

[Pat]

Well, so many people would call in and they'd say, I'm hiring these people. And their technical skills are so good, but they don't fit on the team. And behaviorally, you are so indexed on the behavioral stuff, which is great. But there is a point at which they might not be technically as good as you need. Can I ask you a couple questions, though, Tom? What's your working genius?

[Shane]

Galvanizer and discerner.

[Pat]

Okay. Okay. And what is your Myers Briggs? Do you know?

[Shane]

It's not good.

[Pat]

It's not good.

[Dave Ramsey]

They have that. I Didn't know they had that.

[Pat]

There's no such thing.

[Dave Ramsey]

I didn't know they had that.

[Shane]

There's no such thing. Okay, well, see, the Myers Briggs, I use this construction, this company that. That vets people and gives them a test and that sort of stuff. And. And I'm looking for. It's. It's all the personality qualities, the, you know, the blame and honesty and those types of things. And. And it pretty much gives me the, you know, they're. This percentage of a good hire tenacity is. Is. Is my working frustration. So really get in the weeds. I'm. I'm like, I'm the big cheerleader. You know, It's. It's. I get everybody fired up and it's go time, and let's do it.

[Dave Ramsey]

And then you're shocked that they don't know what quality looks like.

[Shane]

That's right.

[Pat]

But his tea is down here with mine. So here's the deal, Tom. I want you to feel good about this. What you just need is somebody close to you that has tea, because you have good discernment, but you're, like, ready to go. Let's go. Yeah, I can see this. Come on. But you can't cheerlead a person who doesn't understand.

[Dave Ramsey]

In some cases, what I think I'm hearing is you're the type of guy that wants them to succeed. In some cases more than they want to.

[Shane]

Yes, I cast on them what I want them to be. I mean, you said in your book, Dave, that, you know, you don't hire people anymore because you're terrible at it, because you spend more time selling them on the company, which I do the same thing. It's like, this is such a galvanize work. We're such an awesome team, you know? Yeah.

[Dave Ramsey]

Yep, you're right. So my only suggestion is, from my. And I'm just looking at this through the practitioner's eyes only, is I'm probably going to change some of my interview questions that you're using. I think you're asking them how many years of construction experience they have, and you're assuming based on that, that they know how to put up a piece of trim the way it looks in an expensive home, not necessarily a cheap home. And so I'm going to be saying, okay, our values are extreme detail and quality because we're dealing with rich people's houses, and they are pissed when things aren't excellent. So how do you feel about that in the construction world? And they go, well, I ain't never done that. I Mean, all we did was just put some nails in the board, you know, and that's, you know, you, all of a sudden you got a 20 year guy who's not qualified to work for you.

[Shane]

Yeah.

[Pat]

And Tom, I want to say, nobody out there, I want to say to you, okay, because like when you came in, you said the 50% stuff. You're probably kind of tough on yourself and you're feeling bad about this. So get rid of that because you've learned stuff. You've learned stuff.

[Dave Ramsey]

I think you're making more progress than you realize.

[Pat]

Right. So now based on what you've learned, just take that going forward and say I have to be more tenacious. Hopefully somebody around you can help you with that. About making. You can now check and take somebody into a place of work and say, what do you see here? See if they notice the stuff that the other ones didn't.

[Dave Ramsey]

Yeah, you've done a fabulous job for a company your size on figuring out the character qualities and the personality pieces of who's gonna be involved. I don't think I've ever talked to anybody with six or seven people that does as much assessment as you guys do. That's amazingly good. But probably where you are is reaching over into your values and communicating out of those values what that looks like on a technical application to do this this way. And so, you know, you, you, you know, you can't do it the way it's done over at those other place, just, and still call it nailing a board. It doesn't work because we are in a completely different world here.

[Pat]

Hey, I have a question for you, Tom. How long did those people work there before you got, they left.

[Shane]

So I had a guy that worked for me for three and a half years and just broke my heart. I even gave him two months severance. He was, he tried so hard. He tried so hard. He did, he did everything right, but he just made bad decisions and he was insecure and he was, he was a burden to everybody because he called everybody, because he didn't want to call me because he, he just didn't want to bother me. So finally I let him go. And then the other, the other, the other guys. One lasted for about, let's say after his initial, you know, startup and training, everything else, he probably lasted for about four or five weeks. And then another fella lasted for about five or six months. And I tried really hard to get him to, to work out. And then I had a, I had a cat operator and he, he just, just wouldn't engage with anybody ever, it was quiet and just withdrawn.

[Pat]

And how long did that one take to fix that one?

[Shane]

But that when I, when I let his direct supervisor go, who was doing estimating and project, assisting with project management, essentially estimating, I let him go. And then after he left, probably about three weeks later, I let the episode.

[Pat]

So one thing congratulations for some of those people moved out quite quickly because if you made the wrong hire, the worst thing you can do for them and for you is to keep them around for a long time while they're suffering and you're suffering and you're trying to do that. The guy that was there three and a half years sounds like you loved on the guy and he's a good person and all that. And you finally realize you just couldn't do it. I think you go forward just with your eyes wide open and learn the things you've learned and, and realize you're probably. I can't believe I'm saying this. You're probably over indexing a little bit on the, on the behavioral stuff. I think you're right and that's okay.

[Shane]

I've been to two summits and I've listened to what you've said and I've listened to your stories and it's like the technical side everybody wants to go to and they don't want to do the person side. So I probably. I think you're right. I think I've overdone it on the.

[Pat]

Personal side and that's an easier fix than the other way.

[Dave Ramsey]

Also, let me just tell you, after having done this for 30 years, hiring people and at varying degrees of years or violence, they work out or don't work out. Right. I mean, you're probably a whole lot better at this than you think you are right now. Now that I've talked to you a little while, I do think there's something about the way you're communicating your expectations of how to execute the technical thing that probably could use some work. I think that's probably there, but I think you're probably better overall than you think you are. You're being pretty hard on yourself to pass point. But. But yeah, it's, it's this. It is the hardest part of business. Business is easy till people get involved. That's the title of the chapter on hiring and firing. Yeah, I mean, it's just, it's hard. So I'm not going to tell you it's going to get easier, but you're going to get better at it and it is going to get easier. And it's not gonna rip your heart out as much every single time as it does right now either. Cause you'll get better at that process too. Not calloused, but just better. Be explicitly clear about the quality of work you expect. The right employee should meet company standards in both behavior and skill. Well, it's been another fantastic year of helping you grow as a leader and win in business, and there's no better time to level up than at the start of a new year. So join us in 2025 as we do it all again. A huge thank you to all of our brave callers, our guest hosts who take the time to invest in the next generation, and every viewer or listener who tuned in this year. We appreciate your support and your desire to lead. Well remember, better a weary warrior than a quivering critic. This world needs more high quality leaders, so take courage and lead. I'm Dave Ramsey, your host. Thanks for listening to the Entree Leadership Podcast.