The Stupid Reason Entrepreneurs Think Debt Is Smart

Summary

Summary of "The Stupid Reason Entrepreneurs Think Debt Is Smart" – The EntreLeadership Podcast

Episode Information:

• Title: The Stupid Reason Entrepreneurs Think Debt Is Smart
• Host: Dave Ramsey, Ramsey Network
• Release Date: December 9, 2024

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Introduction

In this episode of The EntreLeadership Podcast, Dave Ramsey tackles a prevalent misconception among entrepreneurs: the belief that taking on debt is a smart strategy for business growth. Drawing from his extensive experience, Dave engages with several business owners facing debt-related challenges, offering practical advice and insightful perspectives on managing and overcoming debt.

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Sage's Struggle with Business Debt (00:01:25 – 05:17)

Caller Profile:

• Name: Sage
• Location: Champaign, Illinois
• Business: Owns six locations (four restaurants and two convenience stores)
• Revenue: Approximately $7 million annually
• Debt: $3 million total (primarily real estate debt and $122,000 in automobiles)

Key Points:

• Current Issue: Sage is grappling with significant debt while planning to expand his business to four additional properties. He aims to avoid further debt and manage the existing $3 million.
• Financial Health: Sage's businesses yield a 20% net profit, translating to about $1.4 million, with personal take-home approximately $600,000 to $700,000 after partner shares and rents.
• Debt Management Plan: Sage estimates he could allocate $550,000 annually towards debt repayment, potentially clearing it in six years. However, ongoing opportunities for expansion compel him to consider additional borrowing.

Dave Ramsey’s Insights:

• Critique of Debt Usage: Dave criticizes Sage’s approach to leveraging debt, emphasizing that Sage’s current debt is unsustainable and indicative of poor financial management. He states, “[05:01]...That’s just disorganization and laziness.”
• Encouragement to Eliminate Debt: Ramsey urges Sage to prioritize debt elimination to establish a healthy cash position, stating, “[05:31]...you need to have some kind of a plan to go do that.”
• Long-Term Perspective: Dave advises Sage to slow down business expansion, focus on stabilizing current operations, and resist the allure of immediate opportunities that could exacerbate debt issues.

Notable Quotes:

• Dave Ramsey (02:22): “That's straight up you ball crap you couldn't afford there.”
• Dave Ramsey (05:31): “You need to have some kind of a plan to go do that.”

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Matt’s Dilemma: To Sell or Scale (10:17 – 31:38)

Caller Profile:

• Name: Matt
• Location: Los Angeles
• Business: E-commerce (Men's grooming brand)
• Revenue: Grew from $6 million last year to an anticipated $9-10 million this year
• Profit: EBITDA of $1.3 million last year, projected to reach $2 million this year
• Debt: Zero

Key Points:

• Growth Achievement: Matt’s business experienced a 100% growth this year, with potential opportunities for international expansion and entry into big-box stores.
• Personal Conflict: Despite business success, Matt seeks advice on balancing his entrepreneurial drive with personal life goals, including family and spiritual growth.
• Exit Strategy Consideration: Initially intending to sell the business for retirement, Matt now feels torn due to the attractive expansion opportunities and personal aspirations.

Dave Ramsey’s Insights:

• Balancing Ambition and Personal Life: Dave acknowledges Matt’s desire to maximize business potential while desiring personal fulfillment. He emphasizes that entrepreneurs must align their business decisions with their personal values and long-term goals.
• Delegation and Focus: Ramsey advises Matt to delegate responsibilities, hire specialists for new divisions, and focus on what brings him joy in his business.
• Long-Term Vision: Drawing from the concept of the "Infinite Game," Dave encourages Matt to think beyond immediate gains and consider the lasting impact and legacy of his business endeavors.

Notable Quotes:

• Dave Ramsey (14:20): “You are wired to be creative. You are wired to serve. You are wired to bring value to the marketplace.”
• Dave Ramsey (16:09): “What do I want to be when I grow up? What do I want to be as a new dad, as a young man walking with the Lord, as a good husband?”

Actionable Advice:

• Define Joy and Purpose: Matt is encouraged to pinpoint what aspects of his business bring him satisfaction and to prioritize those.
• Plan for Legacy: Consider the long-term vision of his business beyond immediate financial success, ensuring it aligns with his personal and spiritual goals.
• Avoid Burnout: By delegating effectively and focusing on strategic growth, Matt can prevent burnout and maintain a healthy work-life balance.

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Anthony’s Challenge: Relocating Without Incurring More Debt (33:49 – 40:00)

Caller Profile:

• Name: Anthony
• Location: Syracuse
• Business: Residential construction company
• Revenue: $1.3 million in sales
• Issue: Needs to relocate due to landlord selling the building, aiming to avoid additional debt

Key Points:

• Current Rental Situation: Anthony pays $2,100 for a 3,600 square feet garage and office space. New rentals are priced around $4,000, posing a financial strain.
• Relocation Strategy: Anthony seeks guidance on moving to a more affordable location while maintaining business operations without increasing debt.

Dave Ramsey’s Insights:

• Lease Negotiation Tactics: Dave shares his experience with leasing options, suggesting strategies like paying an upfront option fee combined with a manageable monthly rent to secure the right to purchase the property in the future.
• Business vs. Real Estate Focus: Emphasizes that Anthony’s primary focus should be on his construction business rather than becoming entangled in real estate ownership, warning against allowing real estate constraints to dictate business decisions.
• Flexible Leasing Agreements: Dave advises negotiating lease terms that allow flexibility and affordability, ensuring the business remains the profit center without the burden of real estate obligations.

Notable Quotes:

• Dave Ramsey (35:41): “Your profit is not in the ownership of this business, a building. Your profit is in the running of the business.”
• Dave Ramsey (36:42): “You don’t have the money to buy, do you?”

Actionable Advice:

• Negotiate Lease Terms: Propose option-based leasing agreements that provide the flexibility to purchase later without immediate financial strain.
• Prioritize Business Over Real Estate: Maintain focus on business growth and profitability, ensuring that real estate decisions do not impede the core operations.
• Strategic Relocation: Consider moving to more affordable areas, accepting longer distances if it significantly reduces overhead costs.

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Key Takeaways and Conclusion

Understanding Debt's Role:

• Debt as a Double-Edged Sword: While debt can facilitate business growth, it can also lead to financial instability if not managed properly. Entrepreneurs like Sage may find themselves trapped in unsustainable debt cycles, hindering long-term success.

Strategic Financial Management:

• Prioritize Debt Elimination: Before pursuing further expansion, businesses should focus on eliminating existing debt to establish a solid financial foundation.
• Smart Expansion: Growth should be deliberate and aligned with the business’s capacity to manage additional financial obligations without jeopardizing stability.

Personal Alignment with Business Goals:

• Balance Ambition and Personal Life: Entrepreneurs must ensure that their business ambitions do not overshadow personal goals and well-being. Delegation and strategic planning are crucial in maintaining this balance.
• Long-Term Vision Over Short-Term Gains: Adopting a long-term perspective helps in making decisions that contribute to the enduring success and legacy of the business.

Real Estate Considerations:

• Leverage Leasing Strategies: Effective lease negotiations can provide flexibility and financial relief, allowing businesses to relocate or expand without incurring additional debt.
• Focus on Core Business: Real estate should support, not dictate, business operations. Maintaining clarity between business objectives and real estate obligations is essential for sustained profitability.

Final Thoughts: Dave Ramsey underscores the importance of disciplined financial management, strategic planning, and aligning business operations with personal values and long-term goals. By addressing misconceptions about debt and fostering a mindset geared towards sustainable growth, entrepreneurs can navigate their businesses towards lasting success without falling into detrimental debt traps.

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Notable Quotes Recap:

• Dave Ramsey on Debt and Discipline (05:14): “That's just disorganization and laziness.”
• Dave Ramsey on Entrepreneurial Purpose (14:20): “You are wired to be creative. You are wired to serve. You are wired to bring value to the marketplace.”
• Dave Ramsey on Business vs. Real Estate (35:41): “Your profit is not in the ownership of this business, a building. Your profit is in the running of the business.”
• Dave Ramsey on Lease Negotiations (36:42): “You don’t have the money to buy, do you?”

By addressing these critical aspects, entrepreneurs can better understand the pitfalls of unchecked debt and adopt strategies that foster both business growth and financial stability.

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 entreleadership.comsummit today from the headquarters of Ramsey Solutions. This is the Entree Leadership podcast, where I take calls from leaders like you about what it takes to win at any stage of business and leadership. I'm Dave Ramsey, your host with over 30 years of experience leading in the trenches right alongside you. If you want a professor's opinion from a college who's never made payroll, you're in the wrong place. I actually do this crap every day. So you run a small business. You're my hero. I'm one of you. Give us a call and we'll talk about how to lift yours up. It's what we do. 844-944-1070. Or you can leave us a message on the entreeleadership.com ask board and we'll get back with you and make you a part of the program here. 844-944-1070. Sage is with us in Champaign, Illinois. Hi, Sage. What's up?

[Sage]

All right, so me, I currently own six businesses. They do around $7 million a year in revenue with about 50 employees. And we currently own four properties that we want to open our businesses in, which are restaurants and convenience stores. But my issue is I'm already about 3 million in debt total, and I'm kind of tight on cash at the moment, and I just want to try to avoid taking on more debt for these four locations and also tackling on my existing 3 million in debt. So that's what I need help with.

[Dave Ramsey]

So the six businesses are not six individual businesses, they're six locations.

[Sage]

Six locations, yes.

[Dave Ramsey]

All similar format.

[Sage]

Yeah. Four of them are like purely fast food restaurants, and two of them are convenience stores.

[Dave Ramsey]

Okay. All right. And so we'll do one or the other on these other properties in the future.

[Sage]

Exactly. Out of the four to our convenience stores, two are going to be restaurants.

[Dave Ramsey]

How long you had those?

[Sage]

These I've owned. I opened my first restaurant in 2019 and been doing it since then. And before 2019, for about four years, I was in cell phone stores.

[Dave Ramsey]

Good for you. You've grown it really quickly then. Congratulations.

[Sage]

Thank you.

[Dave Ramsey]

Okay, so what's your net profit look like on the 7 million?

[Sage]

The 7 million, I mean, after. Keep in mind, each business, we're. We about net. About 20% net after everything.

[Dave Ramsey]

So you're coming home with A million four.

[Sage]

Yeah, but after, you know, part because some locations have partners and stuff. Me personally take home for me after all is done is about 6, 700 per year.

[Dave Ramsey]

The partners on the debt?

[Sage]

No. So me and my business model, I personally just me buy the real estate and then I enter, I put a partner in with the business and the business pays the owner of the building rent, which is me. And I also have a share in the business.

[Dave Ramsey]

So the 3 million is all real estate debt.

[Sage]

All real estate? Yeah, I mean 2.7 is real estate and then I have like 122,000 in automobiles.

[Dave Ramsey]

Okay, all right. Which is stupid. So yeah, cash, you may be paying cash for that, there's not a question about that. The real estate thing we can back into. But I mean that's straight up you ball crap you couldn't afford there. Okay, so we'll deal with that. That one's done. You gotta, you gotta get those paid off. You make enough money, pay them off. It's just, that's just disorganization and laziness. Now once you get past that, remind me again, after all the partners and all the crap, what are you making on the business?

[Sage]

Me, I net like on my tax return, it's between 6 to 700 per year.

[Dave Ramsey]

Is that including the rents that you receive?

[Sage]

That's including the rents, yes.

[Dave Ramsey]

Okay. And so obviously you don't need $700,000 a year to live on.

[Sage]

Yeah, I look below my means. I don't.

[Dave Ramsey]

Well, I hope.

[Sage]

Yeah, no, I do. Yeah.

[Dave Ramsey]

Okay, so how much of the 700 can we put towards the $3 million in debt?

[Sage]

It's all real estate. I mean I.

[Dave Ramsey]

How much of the. You call me up want know how to get out of debt. Okay, how much of the 700 can you put towards the 3 million you.

[Sage]

Could put for living expenses? Maybe, maybe about 150 per year living expenses.

[Dave Ramsey]

Okay, so you put 550 towards it. That takes you six years.

[Sage]

Yeah.

[Dave Ramsey]

And you're debt free.

[Sage]

I mean like. But the thing is there's too many opportunities that always come up for me to purchase because I also own a lot of residential real estate as well that I rent out. But the thing is like, I. Oh, I don't know, it's.

[Dave Ramsey]

Okay, listen, here's the thing. You are so far in your career from. It's a whole five years old from 2019 to now have been successful using debt to grow your asset base.

[Sage]

Yeah.

[Dave Ramsey]

And so you're not afraid of debt and it doesn't bother you.

[Sage]

Exactly.

[Dave Ramsey]

Yeah. So you're going to stay in debt.

[Sage]

But the thing is also. And, but the thing is, I kind of something also in the back of my head, I want to get out of debt. I don't, I, I.

[Dave Ramsey]

Then you gotta quit arguing with yourself.

[Sage]

Yeah, well, that's, that's something.

[Dave Ramsey]

You're not really arguing with me. You're arguing with yourself.

[Sage]

Of course. But the only downside, like me, okay, I can. I have no issue tackling on my existing debt.

[Dave Ramsey]

So here's what I decided after I went bankrupt and lost everything. I don't borrow money anymore. So there's not any opportunities that are big enough, juicy enough, or sexy enough to make me want to go into debt. Once I got there, then I grew slower and I grew with much more sure footing so I didn't slip and fall and break my freaking face on cash flow. Cause you're running $7 million and you got no cash. Yeah, it's what you told me. You're an accident looking for a place to happen, dude. You got no liquidity. You're begging for life. To teach you a lesson, you need to get some cash position. And the way you get the cash position is you get rid of the debt. But I'm not. I don't think I can talk you into this. You're just at the beginning of your discovery that not all debt is good. And one of the things I discovered with that whole thing when I was playing with the math, because my brain works the same way yours does, Sage. I see opportunity. I'm an entrepreneur. I want to go do everything, man. And you had never seen a deal you didn't like. You're in all kinds of deals. Partners and stores and fast foods and blank real estate and investment real estate. And, man, you're in everything. And all since 2019, since you got out of the cell phone business. You move quick. I would slow down a little bit. Agree to. Agree with yourself. To grow slower with much more sure footing. Breathe. Enjoy the ride. You don't have to be so frenetic, so crazy, so aggressive. It's okay. You're going to be okay. You have the ability to make millions of dollars. You've already proven that. You're going to be okay. Once I did that, because I had this motor running inside of me, wide freaking open. Then I went, okay, I don't have to go into debt. I'm going to wait a little longer. I'm going to save up and pay cash. I can't do everything. The other thing my mind did, Sage, One last thing, and then I'll leave you alone is I extrapolated this and I said, okay, what if you took what you gave me today and you said, I'm making 70 million, I got no cash, 10x, and now I got 30 million in debt. Does that make you. Does that take your breath away? If it didn't, it should. So when you take your plan and you scale it, you see how bad it sucks. That's what I'm saying. When I put scale to it in my mind, I went, I don't want to live like that. And so that's when I said, I'm willing to grow slower. I'm willing to pay cash. It's okay. God is God, and I am not. It's okay. We'll get there. It's hard, though, because, man, you see a deal, guy like you, man, guy like me, we see a deal, we want to do the deal. We like doing deals. I'm proud of what You've grown. You've done a good job growing. I just want you to get it on much more stable ground for your sake. This is the Entrez Leadership podcast.

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[Dave Ramsey]

If I asked you what your profits were and your losses were this week, would you know? The hard truth is if you don't stay on top of your numbers, your business is going to fail. The Bible says be diligent to know the state of your flocks and your herds. You cannot out earn disorganization or the need to make your money behave in business. But you can use simple practices and wise decision making. To have a successful, you don't have to be a money expert. In the Entree Leader's guide to business finances, you'll learn the profit principles and the key practices we've used to grow Ramsey Solutions over the last 30 years to a $300 million a year company. This free guide will simplify the foundational components of managing your revenue, your expenses. Go to entreleadership.com finances to download the free guide entreleadership.com finances Matt's in Los Angeles. Hi Matt. How can we help?

[Matt]

Yeah, so I'm a 5050 partner in a e commerce business. We have a men's grooming brand that we sell men's grooming tools. Right now we have about five employees. Last year's revenues, we did about 6 million, 1.3 million on the EBITDA. This year we're on track to do about 9 to 10 million and if we have a good Q4, closer to about 2 million on the EBITDA.

[Dave Ramsey]

Hee ha. Way to go, man. Congratulations.

[Matt]

Thank you, sir. Also, zero debt, cash flow, and financing everything ourselves.

[Dave Ramsey]

How long you had this?

[Matt]

We started late 2021 and we just been trailblazing, hitting the ground running, man.

[Dave Ramsey]

You guys have been frying it up. Way to go. Proud of you. Good job.

[Matt]

Blessed from the man above.

[Dave Ramsey]

Yeah, you have been. You worked your butt off too, and you're smart. Cool. How can I help?

[Matt]

Yeah, so 2024 was the year my partner and I said, hey, let's sell the business and you know, let's, let's take the money and let's, let's hit that retirement number and you know, sell off into the sunset. But we came across. So 2024 was the year we really wanted to obviously maximize our return. So we put a lot of work in and we did a little bit better than expected. So usually year over year, we grow about 20, 30%. This year we grew about 100%. Yeah. So I've been kind of baffled because right now the opportunities that we have now, we could possibly now expand internationally into Europe and UK as well as some other countries as well as right now we're only selling on one major e commerce platform. We can expand to about two to three others. And then also now we have some business deals lined up to possibly go into some big box stores. So we looked at this and we're like, wow, the opportunity, you know, we could probably do 2 to 3x in the next, I would say 3 to 4 years if we really put the work in. But my Question is, so this year we wanted to exit it, and then for me, I wanted to sail off in the sunset. But, you know, I've been, you know, looking to the man upstairs quite a bit, trying to find answers on where to go. And I came across this situation, and he led me to you. So my thing is, so me personally, I just recently got married and looking to start my family. 30 years old, and I really wanted to focus on being there for my family, my wife in the beginning, for sure, in the early years for my children, and also maybe build my relationship closer to the Lord above. But then this opportunity came and I'm kind of torn now on, you know, do I try to maximize.

[Dave Ramsey]

I'm sorry, you can't. You can't have a walk with the Lord, be a good husband and be a good dad and work. Of course you can.

[Sage]

Definitely can.

[Matt]

It's just, you know, I just anticipated that to take on this venture, it's going to take an extreme amount of effort, mentally and physically.

[Dave Ramsey]

So delegated.

[Matt]

That's what we have been doing.

[Dave Ramsey]

So right now, hire somebody to run the international division. Hire someone to run the big box division.

[Matt]

Definitely. So we've been able to do that right now where we've delegated pretty much everything. And so my partner and I, we only work maybe one to two hours a day, but we figured to get this set up, it might take.

[Dave Ramsey]

You might have to work like eight hours a day. If you didn't.

[Matt]

Yeah, there would be quite a bit of traveling involved as well, setting up things in different countries. So that's where I was a little bit on the fence with this because the other opportunity we have right now is.

[Dave Ramsey]

Okay, I don't want you to. I would not advise my son, who is your age, to look for a life under any scenario where he works two hours a day so he can be with his wife and child. I would not advise him to look for that life.

[Matt]

Yeah, yeah, definitely. I don't think I'm definitely built for that either.

[Dave Ramsey]

I don't think you're going to find happiness there.

[Matt]

Yeah, I was going to.

[Dave Ramsey]

That's all.

[Matt]

I'm kind of.

[Dave Ramsey]

I'm not talking about 80 hours a week. I'm talking about 40 hours a week.

[Matt]

For sure. The one thing I was a little burnt out with the. This business. I mean, again, this business has been very fruitful, but I was thinking of resetting and seeing what else.

[Dave Ramsey]

Yeah, I don't. I don't mind selling and taking a big liquidity event, putting whatever 20 million bucks in Your pocket each year and your partner or whatever you can get out of this thing. What do you think you can get for it if you sold it?

[Matt]

So right now we've had some offers. They're offering about 3.5, 3.75 on the trailing 12, and we anticipate will be around 2 to 2.2 million by year.

[Dave Ramsey]

End, which after 3x, you're talking about 3x of EBITDA.

[Matt]

Yes.

[Dave Ramsey]

Okay, so you're talking about 10 million bucks or so. 12 million bucks.

[Matt]

No, it would be on the. So we have about 2 point. Yeah, yeah, yeah, you're right. About 3 to 4x. Yeah, yeah.

[Dave Ramsey]

And so you're talking about putting 6 million bucks in your pocket. You're not sailing off in the sunset with $6 million. Dude, you didn't get 60 million. You got 6. So, no, I mean, that's. That. All that does is set you up to go to go play in a different sandbox. And that's okay. If you want to go play in a different sandbox, start your own thing without a partner, take all this experience and so forth and go try to find something else and take a hot ride on it. There's nothing wrong with selling out. Nothing wrong with that at all. Nothing bad about it. But like you said, now where am I going to go? I'm 30 years old. I got $6 million in my pocket. You can't quit on that. You shouldn't. You should go be somebody. And so what are we going to be? What do I want to be when I grow up? What do I want to be as a new dad, as a young man walking with the Lord, as a good husband? What do I want to be as a great leader in the marketplace? What do I want to do to take the $6 million, give people employment, provide a good product or service or app or something to revolutionize people's lives? What do I want to be? You start solving that. That gives you a real reason to sell. Don't run from something, run to something.

[Matt]

Got it?

[Dave Ramsey]

That's what I would do. I like what you're talking about. If you want to stay there, what you're in is not a bad deal. You've got the thing cooking like gas now. I will add, international is tougher than you think it is in your brain. We play in that market, too. And big box retail is a complete pain in the butt. And it is nothing like E commerce. Your margins are destroyed when you start talking about the big bucks and they got full returns. You can make some money on it, but your hassle factor is going to go up 100x and your profits not. But it's okay, go do it. I'm not telling you not to do it, but I'm just telling you it's not. Neither one of those two categories or buckets that you're adding to this great ride you're on are as sweet as the one you're already on. The numbers and margins aren't there and the hassle factor goes way up. It's okay. I'm still, we're still working on our international aspects of everything we do. We're still working on, you know, we take some big box retail stuff. You'll see our stuff in Target, that great French store. You know, we screw around with these Walmart, all these people, we deal with them but they make the money. They just let you be on their shelf. It's not a, there's not a big, it's not a big woohoo, I'm in Walmart. Believe me, if I went in Walmart, it wouldn't change my life one nickel. But we put it out there because it's good marketing, it's good distribution and it's good for folks to get the books. So we try to help. And so you're going to be the same thing here, but your margins that you've got now, you're never going to see them in any other space like you see them right now. They're sweet margins. And you know, I'd live, I'd live there and grow that as much as I could while you're doing these other things. But I think you've done a great job. But don't look for a thing where you don't have to work 40 hours a week and you don't make a contribution to this wonderful world we live in. You are wired to be creative. You are wired to serve. You are wired to bring value to the marketplace. Not doing that will make you want to shoot yourself. You are made to do that. You need to have some kind of a plan to go do that. That's everyone. This idea that we can search out and find a way to sit on our butts and work two hours a week or two hours a day and be happy. That's not where you find happiness. You find happiness in service. You find happiness in helping other people and lifting up and giving people jobs and changing things and pushing things around the marketplace. Doing hard things, that gives you great joy. Doing easy things doesn't give anybody joy. Hey man, good question. I think you're impressed. Impressive young dude, man. I appreciate getting to talk to you. Thank you for joining us. We really appreciate you being here on the Entree Leadership podcast.

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[Dave Ramsey]

Hey guys, if you like the Entrez Leadership podcast, we could use your help. Click the old follow button, the subscribe button, the share button, share the link to this thing. You are our only marketing plan and if you fail, we're going to blame you. No, I'm kidding. No, I'm not kidding. But we're not gonna blame you. It's just because we suck or something. That's why we would fail. But anyway, come help us out. Spread the word, leave a five star review, share the show, tell people about the show, subscribe, follow all those unique and Internet kind of things that you people do that when you do those things that you do. Parks is with us in Greensboro, North Carolina. Hey Parks, what's up? Hey Dave.

[Parks]

Thanks for having me on the show. I'm a longtime listener, first time caller.

[Dave Ramsey]

Sure.

[Matt]

Cool.

[Dave Ramsey]

How can we help?

[Parks]

I've run my. Yeah, I've run my business for about 18 years and 100%. We do commercial clients mainly class A office space. We do data fiber, security, audio, video work. In the last five years our top line has been about 3 million with 20% net after owner benefits. And I've got a nice lifestyle business. But my challenge is what is next? I'm concerned about losing relevance after an Exit. But I'm also a little less motivated than I once was after I hit some benchmarks. So guess the question is, in your experience, what do you feel is the best way to handle fatigue and keep pushing towards. I guess after hitting some major goals that you set out for early.

[Dave Ramsey]

Has the, has the space that you're in shifted a little bit.

[Parks]

And I feel like we've been able to pivot with it. We've added some additional lines to our portfolio. So when the market has shifted, we've been able to kind of capture it as it goes. So we're nimble enough to pivot, which is great. I mean, the marketplace is great, but it's just kind of if I sell, what happens next?

[Dave Ramsey]

Okay, why do you want to sell?

[Parks]

Well, I really don't right now until I can find out the why do I want to sell? That's if I could find out that. I feel like it would give me a little bit more direction for what the next five or six years looks like.

[Dave Ramsey]

Yeah, okay. I don't know. I can reverse engineer with you for a minute maybe. I have very intentionally from day one said we are not building the cicelle. We're building it to be generational. And that changes the moves that you make and the way you view things. It changes your paradigm on every problem that comes at you, every opportunity that comes at you. Simon Sinek wrote a wonderful book called the Infinite Game. I would recommend you pick it up.

[Parks]

Okay.

[Dave Ramsey]

And his point or the thesis of the book is when you're playing a game that has a set of rules that causes an end, then you play those rules to that end. When you're playing a game that does not have an end, you play differently, you know, as if you're thinking about like a board game, you know, that, you know, there's five or six things, chess, whatever, there's a set of rules, there's an end game there a game that, you know, a football game has a timer on it, you know, so at the end of the time, who's got the highest score? There's. And you play every play to get to that 60 minute clock ticking down, right? And so if you're building something to sell, you move every. You move the players around on the chessboard, you call the plays in the huddle to create the desired result. At the end of 60 minutes, at the end of the sale, when you're playing for infinite game, you do it different. So I'm playing long ball all the time with every decision. And that's Not a criticism of somebody who wants to build something to sell. I don't have a problem with that. But for me, this business was God's call on my life to help people, to serve people, with teaching, leadership, to teach. Now we teach mental Health with Dr. John DeLoney. And of course, the whole money space thing that Ramsey is known for. And we've gotten tremendous satisfaction out of that call on our lives. Not just my life, but started on my life. And that's more than just a job. It's more than just building something. And so, like, when we're meeting with a radio company and they say, okay, when are you going to sell your radio show? And we say, we're not, they get this weird look on their face like, you know, I had one guy literally ask me, what's your end game? And I said, my end game is to toss the keys to the next generation sometime before I die. And he looked at me like a German shepherd with his head cocked sideways, you know, Right. And so. Cause it did not compute in his world. Cause at that point, as many years ago, Dr. Lara had just sold hers to iHeart for 78 million, and Ramsey would have been worth 100 million. Just the radio show alone at that point. That's many years ago. It's worth a lot more than that now. Thank God I didn't sell it. I make a bazillion more than that on it. But because I'm playing long ball. So what you gotta ask yourself is, what's your long ball equation? And here. Oh, I know. I was going. I went around the barn and almost forgot. Had an old man moment there. All right. So when I'm playing long ball, it makes me do what you're doing right now all the time. What gives me joy and what pisses me off? What do I hate about Ramsey? Well, I own it, so why don't I change it, right? You know, what do I love about what I do? Well, I own it, so I'm gonna do that. Why do I want to? You know, I love being on this microphone, so why am I gonna give it to somebody else? I gotta give it to somebody else. So if I die, there's somebody else here. That's a good thing. It's succession planning. But I enjoy this. So I'll keep doing this right here or something like this until I don't make sense and they take me off the air. So. But. But it's joy. What gives me joy? That's the question I want you to ask yourself. What are the actual Tactical things in the business that when you get to do that all day, you come home with energy left over. But what are the things that. When you have to do those all day and you come home and you're like, God, it's 5pm and I want to go to bed. I hate my life. Oh, wait, I own it. No way. I have both days. And I tell our team all the time, if I hate doing something, y'all better watch out, because I'm gonna stop.

[Parks]

Right.

[Dave Ramsey]

We're either gonna delegate. We're either gonna have an end. We're gonna close that division, close that product line, or we're gonna delegate it and somebody else gonna pick it up and run with it. Cause once I decide, I'll do it for a little while to see if I can get it working or hand it off. But I'm not signing up for 10 years of this. Sucks every day.

[Parks]

Mm. That's fair.

[Dave Ramsey]

I'm gonna sign up for 10 years of this. Gives me joy.

[Parks]

Like, I had a good friend of mine who sold his business for a nice sum of money that could be. It could be almost generational money. And now he's like, what am I gonna do? He's sitting at home, he's like, I'm bored. I got nothing to do. That's my biggest fear. I don't want to do that.

[Dave Ramsey]

Yeah. Number one, your first question was, why do I want to leave? That's a really good question for yourself. Part of that is, what gives me joy and what do I hate? That's a subset of why do I want to. You know, why do I want to leave? Okay. And then if I do want to sell it because it's run its course, I don't like it anymore. There's more of it I don't like than do like. It's a fine business. There's nothing ashamed about it. I just don't want to do it anymore. That's an okay answer. That's answer one. And then you're correct in saying, I need the next thing. Not having the next thing is going to cause you to burn the money that you get in the liquidity event, and then you're going to wake up fat on a fishing boat. You know, that's what's going to happen. It happened to several buddies of mine. They had a liquidity event, and they woke up fat on the beach somewhere. Yeah, I don't want to. And I don't like myself anymore. I eat too much, I drink too much. My mind is not engaged anymore. I'M not. Yeah, you don't want to be that guy. And that's very wise on your part. You don't want to be that guy. So find out what the next thing is that gives you joy, get you excited. If I had all the money in the world and all the time in the world, what kind of a business would I start? Well, my God, man, you're a great entrepreneur. You can go to that.

[Parks]

Yeah.

[Dave Ramsey]

It's like you can do anything you want to be in business in America. You just do anything. It's not Russia. We get to decide. Wake up. Tomorrow I'm going to start a business. As long as there are garages, there will be new businesses. Right.

[Parks]

It's a beautiful place. Yeah, I agree with you.

[Dave Ramsey]

So you can do anything. So I'm gonna fish around in that. Let me give you Ken Coleman's Get Clear assessment. It's a career assessment for people looking at jobs, but I want you to use it for an idea of what my next business venture is. If I leave this or do I look at the things that I don't love and I delegate those or close them as a part of your business, and the things that give me joy and do more and more and more of them and start playing long ball with this existing thing and take it from 3 million to 30 million to 300 million.

[Parks]

Right. That's perfect.

[Dave Ramsey]

And that's okay, too. That's okay, too. There's.

[Parks]

Well, I love your advice all the time you give us. I listen to you often, always. A lot of good thought processes, your inspiration. You've done a great job with your business, so thank you for all you provide to us.

[Dave Ramsey]

Well, you're very kind. The other thing I want to do is I want to sign you up for Entrez Leadership Elite, and I'm going to give it to you for a year for free. And it'll help you. It'll also help you walk through this process of making your decision on which one you're gonna do. A, what gives me joy? B, what pisses me off that I can delegate or quit doing, completely shut that part of the business down? C, where am I gonna go if I sell it? These are the questions on the table, and they're really good questions. Really good questions. Parks, you're an amazing young dude. You're gonna do great. You're inspiring. Thank you. Thank you. Thank you so much for calling and being part of the program today. Are you spending too much time in your business and not enough time on your business? If so, you need to join the thousands of small business leaders who are coming to Entrez Leadership Summit to work on their small businesses. And if you get your tickets this December, you'll even be invited to an exclusive Q and A lunch with me to join us in Denver next May, go to entreleadership.comsummit to reserve your seats today. Or if you're listening on YouTube or podcast, just click the link in the description. Thanks for joining us, America. This is the Entree Leadership podcast by a practitioner for practitioners. If you want to deal with corporate leadership theory, you're in the wrong place. I actually was in those meetings today. Not the theory meetings, the get her done meetings. And it's what I do here. I'm the CEO of this place. I also happen to turn on a microphone so you're getting to talk to somebody who is just facing some of the same crap you're facing or I did 10 years ago when we were a little bit smaller. And I can show you how to get where we are. It's what we do here. Thank you for being with us. The phone number, if you want to participate, is 8449-441078-44944, 1070. Anthony in Syracuse, how are you? Good.

[Anthony]

How are you doing?

[Dave Ramsey]

Better than I deserve. What's up?

[Anthony]

I own a residential construction company. I do about a million and three in sales. My landlord is selling the building and I have to move and I'm trying to do it without going into debt.

[Dave Ramsey]

Okay. What kind of a building do you have that you're renting?

[Anthony]

3,600 square feet. It's more. It's a garage and office space.

[Dave Ramsey]

Yeah. What are you paying in rent?

[Anthony]

I pay 2,100 currently. And every place that I look for now, they want around 4,000, so it's going to be considerable more.

[Dave Ramsey]

Okay, well, in the real estate business, what we call your business is a destination business. Meaning that people don't accidentally stop in to see you. Correct. If someone's coming to see you, they set out from home to come see you. Translation, it doesn't need necessarily need to be in the. In a high traffic area, a retail area, there's no value to you for impulse. For instance, a fast food would be the opposite of you. Needs to be on franchise row with a high traffic count, preferably a right turn coming out of town during traffic so they can stop in and pick up a Big Mac on the way home from the office with the skyline in their rearview mirror, suburbs in their windshield. And that's how we pick out a franchise Row, fast food location. You're the opposite of that. Nobody gives a crap where you live, where this business lives, except you. Okay? So all we've got to do is have it close enough to you to survive. How far is it from your home now?

[Anthony]

About 10 minutes.

[Dave Ramsey]

Okay. What would happen if you went 20 minutes directly out of town towards the country, the boondocks, from your home?

[Anthony]

It would definitely get a lot cheaper when we're working. We would have to go a little bit farther to go back to the warehouse to get stuff. But, yeah, it's not that big of a deal.

[Dave Ramsey]

But for $2,000 a month, I can make that drive a lot.

[Anthony]

Exactly.

[Dave Ramsey]

Oh, and let me help you with this. Your work's going to move towards your new building because the building, the city's growing that way. It's not growing the other way.

[Anthony]

That is very true. How would I. So once I found a place, I do want to buy, but I just.

[Dave Ramsey]

I don't want you to buy. You're broke.

[Anthony]

I'm not.

[Dave Ramsey]

I want you to rent. I want you to rent again.

[Anthony]

Okay.

[Dave Ramsey]

You don't have the money to buy, do you?

[Anthony]

I have about 150 to 200.

[Dave Ramsey]

Yeah. That won't buy. That won't buy a place, will it?

[Anthony]

I could probably put down the down.

[Dave Ramsey]

Payment, but you'll be in debt.

[Anthony]

I could find something for about 250 if I get.

[Dave Ramsey]

Really?

[Anthony]

Yeah.

[Dave Ramsey]

Wow. Okay. So could you find a place like we're talking about the Boondock place, 15 minutes from your home, straight out of town for 250?

[Anthony]

I could, but I don't have. So I have a limp. I have to move within 14 months. And I'm trying to save and save and save so I don't have to.

[Dave Ramsey]

You got 150 now, right?

[Anthony]

Yes.

[Dave Ramsey]

Okay. All right, here, I'm gonna work you through this. Okay, here's what I did. I leased a building. A little different numbers, but it's still the same concept. That was 55,000 square feet. The value of the building at the time I leased it was about 3 million. I leased it for five years with the option to buy it at any time for $5 million.

[Anthony]

Okay, how do you get them to do that deal? Because I've asked.

[Dave Ramsey]

Not everybody will do that deal, but it's somebody that wants to sell it. Let's just take it to your deal. Okay? You went up and you said, okay, I'll give you $20,000 cash for an option, and I want to rent this place. For $2,000 a month for three years. And I have the right anytime during that three years to buy it for 250,000. And you've already got 20,000 of that, so it's 230,000. We'll apply the option money to the purchase.

[Anthony]

Okay, so the incentive is that during.

[Dave Ramsey]

The three years, you scrape up the difference, which you can do.

[Anthony]

Yeah.

[Dave Ramsey]

And you close on the building.

[Anthony]

Okay, that makes sense.

[Dave Ramsey]

That's how I did the other deal, by the way. The end of the story is by the time I closed on it at 5 million, it was worth 14 million. The building went up faster than the option price because I locked in the option price five years earlier. If you lock this in at 250 today, when you close on it in three years, it might be worth 450, but you get to buy it for 250 because that's the deal.

[Anthony]

So that $20,000 option, that kind of like that. So that's an incentive for them to.

[Dave Ramsey]

To do the deal.

[Anthony]

Okay.

[Dave Ramsey]

This might be somebody that has it for sale, but says, okay, I'll give this young dude that's cooking with gas on his construction company a chance. I'm gonna take the 20 grand. If he doesn't ever. If he just is a tenant, I put 20 grand in my pocket. But at the end of three years, I'll put it back up for sale, right? Yeah, but that's the landlord. But he also says, or maybe he'll bring me the other 230 and we'll close on it. Okay, Yeah, I will tell him, look, I'm almost there. I've got 150. I'm going to be able to get to your 230 before three years, but I don't know exactly when that's going to be. So I need a little bit of grace here. I'll rent for three years with the right to buy it for 250. If they've got it for sale, not for lease, they might do that deal.

[Anthony]

Okay.

[Dave Ramsey]

It just means they're going to get their money a little bit later than March, you know? Right.

[Anthony]

Yeah, yeah, yeah. I've heard you talked about that story all the time, but I never realized that the incentive in the beginning to get them, to make it worthwhile for them.

[Dave Ramsey]

Yeah. In my case, I did not give them any money up front, but I did do all my own tenant improvement. He didn't have to put any money into the building, and I took half the building as a tenant and I paid $300,000 to renovate the building, which was the same thing as your option money, in a sense, right? Yeah, but he didn't actually have any. He just had an improved building because he, and he, he was cheapskate and he didn't want to put any money into it and he'd run the building down to nothing. So just be watching. Now, all of that said, let me back up two more steps before we go execute this plan, okay? You make all your money in the construction business. It doesn't matter if you're a tenant the rest of your life. Your profit is not in the ownership of this business, a building. Your profit is in the running of the business. If you buy a building and the building starts to tell your business what to do, instead of your business telling your building what to do, you've trapped your business, that is the profit center, into a bad deal because the landlord's stupid. You okay? Our business, we outgrew that 55,000 square foot building. We moved into another building out back and another building out back and another building out back. And we had six different locations in a two mile radius was driving us nuts. All because I was trying to stay in my building and the real estate was telling the business what to do instead of the business building out what it needed, building the real estate that it needed. And that's when we made the decision to build this thing, this campus that we've got that we can expand into for the next 10 years. And so be careful that your real estate is not telling your business what to do. Real estate's side gig, side hustle, it's not the main play. That's what we're looking for. You got a good thing going with a construction company. Concentrate on that. If you just move and become a tenant, that is not a bad thing at all. Just pay some rent, go make some money. Because you're not in the real estate business, you're in the construction business. Different thing. Don't get confused about that. That's where people, they get all hot and bothered about owning their building. And you don't necessarily have to to become very, very successful. So don't, please don't get caught up in that. Hey, folks, 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. Sa.