This Leadership Structure Is a “4-Headed Monster”

Summary

The EntreLeadership Podcast: "This Leadership Structure Is a '4-Headed Monster'"

Host: Dave Ramsey
Release Date: June 2, 2025
Podcast Description: Experience real-life, real-time business and leadership coaching from Dave Ramsey, a successful CEO, popular radio personality, bestselling author, and host of The EntreLeadership Podcast. Dave takes your calls and draws on over 30 years of experience as the CEO of Ramsey Solutions to help you overcome the challenges you're facing.

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Introduction

In this episode of The EntreLeadership Podcast, Dave Ramsey tackles complex leadership and management issues faced by business owners and leaders. The episode, titled "This Leadership Structure Is a '4-Headed Monster'", delves into real-life scenarios submitted by listeners, offering actionable insights and strategic advice to foster effective leadership and organizational harmony.

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1. Matt's Challenge: Role Clarity in a Partnered Architecture Firm

Caller: Matt from Atlanta, Georgia
Timestamp: [00:54 – 05:17]

Issue:
Matt serves as the CFO of an architecture firm with over 20 employees and annual gross revenues between $8-10 million. He manages finances across several related businesses but faces significant challenges due to misaligned expectations from five partners regarding his role. Some partners view his position as strategic leadership, while others see it as a back-office bookkeeping role. This lack of clarity has left Matt stretched too thin and hindered his ability to lead effectively.

Dave Ramsey's Advice:
Dave emphasizes the necessity of role clarity within an organization. He suggests organizing a meeting with all partners to clearly define Matt's role through an organizational chart. Ramsey states:

"If someone at your level doesn't know what their job is, that nobody else in the company does... You need to form an org chart and clearly identify your roles, get role clarity all through the thing."
— Dave Ramsey [05:00]

He recommends establishing Key Results Areas (KRAs) to delineate responsibilities and ensure everyone is aligned. Ramsey also underscores the importance of the CEO actively managing and ensuring alignment among partners to prevent dysfunction.

Key Takeaways:

• Organizational Clarity: Clearly define and document roles to prevent overlap and confusion.
• Leadership Accountability: The CEO must ensure all partners understand and agree on each other's roles.
• Implement KRAs: Use KRAs to outline specific responsibilities and expectations for each role.

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2. Peter's Dilemma: Hiring a COO in a Side-Hustle Airplane Parts Business

Caller: Peter from Miami
Timestamp: [09:33 – 30:46]

Issue:
Peter owns an airplane parts business that has grown from a side hustle to generating $5 million in sales and $700,000 in net profits annually. With three full-time employees and four 1099 contractors, Peter is considering hiring someone to manage day-to-day operations but is uncertain about the return on investment (ROI) for such a position.

Dave Ramsey's Advice:
Ramsey encourages Peter to view the hiring as a strategic investment rather than a direct ROI. He suggests creating a detailed job description and compensation plan that includes a base salary plus performance-based commissions. Ramsey advises:

"I need you to write out in great detail exactly what this person's job is... This clarity will help you cause this person to win or to identify quickly if they're not winning."
— Dave Ramsey [16:32]

He outlines a compensation structure where the new hire receives a combination of salary and a percentage of event profits, aligning their incentives with the business's success. Ramsey also stresses the importance of robust accounting systems to track profitability accurately and ensure timely compensation.

Key Takeaways:

• Detailed Job Descriptions: Clearly define the role to ensure mutual understanding and expectations.
• Performance-Based Compensation: Combine salary with commissions tied to specific profit metrics.
• Robust Accounting Systems: Implement strong financial tracking to facilitate accurate and timely payments.

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3. Todd's Issue: Handling an Employee Demanding Ownership

Caller: Todd from Dallas
Timestamp: [20:58 – 30:46]

Issue:
Todd, a 22-year-old CEO and 100% owner of an outdoor recreation event company, faces a predicament where a full-time employee managing events is requesting ownership in the business. Despite offering profit-sharing on merchandise and annual profits, the employee insists on obtaining equity.

Dave Ramsey's Advice:
Ramsey firmly advises against granting ownership to employees in such scenarios, especially in small and growing businesses. He emphasizes maintaining control to prevent future complications:

"There's not a chance. If he requires that to stay, he's gone... the only way it works is if the three get along perfectly well."
— Dave Ramsey [25:17]

He suggests alternative compensation methods, such as enhancing the profit-sharing structure to provide significant financial incentives without diluting ownership. Ramsey also highlights the importance of clear accounting practices to support any performance-based compensation plans.

Key Takeaways:

• Maintain Ownership Control: Avoid granting equity to prevent future ownership dilution and related conflicts.
• Alternative Incentives: Use profit-sharing and performance-based bonuses to reward and retain valuable employees.
• Clear Financial Practices: Ensure transparent and accurate accounting to support compensation structures.

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4. F's Concern: Transferring Business Ownership to Daughter While Considering Siblings

Caller: F from New Hampshire
Timestamp: [34:04 – 45:17]

Issue:
F, the founder and CEO of an entertainment, lighting, and installation company with 40 years of history and $20 million in revenue, seeks advice on successfully transferring the business to his daughter. He aims to preserve his estate and address the interests of two other children who are not involved in the business.

Dave Ramsey's Advice:
Ramsey provides comprehensive guidance on estate planning and business succession, emphasizing the use of trusts and clear governance structures:

"You can leave the business to her and the real estate and other stuff to the other two... If you wanted to adopt my friend's thing and go, if you don't work inside the business, you don't get to own it."
— Dave Ramsey [40:22]

He explains the importance of setting up a revocable trust and utilizing marital trusts to maximize estate tax benefits. Ramsey also discusses the necessity of defining ownership structures to prevent conflicts among siblings and ensuring the business is managed effectively by the next generation.

Key Takeaways:

• Use Trusts for Estate Planning: Implement revocable and irrevocable trusts to manage and transmit business ownership smoothly.
• Define Ownership Structures: Clearly delineate ownership to prevent conflicts among heirs, especially when not all are involved in the business.
• Gradual Transition: Stage the transfer of responsibilities based on the successor’s competence and readiness to ensure a smooth handover.

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Conclusion

In this episode, Dave Ramsey addresses critical leadership and management challenges faced by business owners. From ensuring role clarity among partners to structuring compensation without diluting ownership, and from handling employee ownership demands to planning smooth business succession within families, Ramsey's insights provide valuable guidance for fostering effective leadership and sustainable business growth.

Notable Quotes:

• Dave Ramsey on Role Clarity:
  "If someone at your level doesn't know what their job is, that nobody else in the company does..."
  [05:00]

• Dave Ramsey on Compensation Planning:
  "I need you to write out in great detail exactly what this person's job is... This clarity will help you cause this person to win or to identify quickly if they're not winning."
  [16:32]

• Dave Ramsey on Maintaining Ownership Control:
  "There's not a chance. If he requires that to stay, he's gone... the only way it works is if the three get along perfectly well."
  [25:17]

• Dave Ramsey on Estate Planning:
  "You can leave the business to her and the real estate and other stuff to the other two... If you wanted to adopt my friend's thing and go, if you don't work inside the business, you don't get to own it."
  [40:22]

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Resources Mentioned:

• Key Results Areas (KRA) Template: Available for download at entreleadership.com
• NetSuite by Oracle: netsuite.com
• Trainual: trainual.com/entree
• EntreLeadership Summit 2026: entreleadership.com/summit
• Book Mentioned: Building a Business You Love – The EntreLeadership System

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Final Thoughts:
This episode underscores the importance of clear leadership structures, strategic compensation, and thoughtful succession planning in building and sustaining successful businesses. Dave Ramsey's practical advice equips listeners with the tools to navigate complex organizational challenges, ensuring their businesses thrive at every stage.

Transcript

[Dave Ramsey]

From the headquarters of 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 over 30 years of experience in the trenches founding, leading and growing this successful business. If you have a question for the show, go to entreeleadership.com ask or call us at 844-944-1070. The number again, ready 844-944-10720. Matt is with us. Matt is in Atlanta, Georgia. Hey Matt, welcome to the Entree Leadership Podcast.

[Matt]

Yes, sir. Thank you for taking my call.

[Dave Ramsey]

Sure. What's up?

[Matt]

Yes, sir. So I'm the CFO of an architect firm and I manage the finances for several related businesses of the owner as well. We have a little over 20 employees. We gross anywhere from about eight to $10 million a year. And I do every all the finances on my own for all this. So I take ownership seriously and just want to lead well. But my kind of thing is that the partners aren't aligned on what my role is and actually what I should be doing on a day to day, month to month basis. And some expect strategic leadership. Others see my finance position more as a back office bookkeeping role. I've tried to propose clear solutions, but nothing really has changed. So my question is, how do I effectively lead and deliver results when leadership isn't aligned on my role and I'm being stretched too thin to do the job well?

[Dave Ramsey]

How many partners?

[Matt]

A total of five.

[Dave Ramsey]

Okay. Is there a structure among the partners as to who the CEO of the organization is?

[Matt]

Yes, sir. We have the CEO who owns majority of the shares and then we have some smaller day to day operational partners.

[Dave Ramsey]

Okay. It's his job to get the rest of them in line.

[Matt]

Yeah.

[Dave Ramsey]

And he's not doing his job. Why?

[Matt]

He's kind of taken an approach of he doesn't want to be involved in the day to day operations side of things. That's why he brought these other partners in. And he's saying, as I'm getting close to retirement, I want to see if you all have the ability to lead effectively just in the day to day operations.

[Dave Ramsey]

Okay, so who's running operations then?

[Matt]

It's supposed to be the other four, but really it comes down to the two and myself trying to help steer the ship of where we need to go.

[Dave Ramsey]

Okay. I would put them all in a room and say, guys, this isn't working. Yeah. And, and I probably, I Might try the CEO route first and say, you know, boss, this isn't working. Every. Anything with two heads is a monster. And this thing's got. It's a hydra. It's got four heads. And. And so I can't. These guys do not agree on what my job is. And so I can't win, and I'm not okay with that. It's bad leadership. It's weak leadership. And so help me by. Let's call a council, and let's come to a final resolution as to what my role is and where I sit in this org chart. I don't care where I sit. But. But put me where I sit and have everyone agree on it.

[Matt]

Right.

[Dave Ramsey]

I'm not trying to run the place. I'm just trying to make sure that one guy thinks I'm a bookkeeper and the other guy thinks I'm one of the top leadership team. And that doesn't work.

[Matt]

Right.

[Dave Ramsey]

So. And you're doing this guy's personal stuff too?

[Matt]

That, and he has about other eight other entities that I originally started working on before I was brought in on this.

[Dave Ramsey]

And how does that work, given that you're paid from this partnership and those partners are paying you to benefit him?

[Matt]

I do that, and then I get a separate paycheck for working with those other entities when I'm working there. So I split my time between the entities a lot.

[Dave Ramsey]

Okay, so he's paying you separately so that the partnership, the architectural partnership's not being ripped off.

[Matt]

Correct, sir.

[Dave Ramsey]

Okay, good. That solves that part then. Or that's already been solved. Good. Okay. So I think you guys need to establish what percentage is which as a group and what your role is with the group. And, you know, we need to be in agreement about that. And this idea that this is. And I gotta tell you, if this is happening to you in a CFO role, it's happening all through the whole company. People do not know what their roles are. The guy that's the COO has not got kras on anybody else in the company. There's other people wondering what they are supposed to be doing too.

[Matt]

Yeah.

[Dave Ramsey]

Because what happens is these guys are swooping in and they're doing seagull management. They swoop in, poop all over everything, and then swoop back out.

[Matt]

Good way of putting it right there.

[Dave Ramsey]

And then the other one comes in behind them and says, oh, no, that isn't what we're doing. But, yeah, that's what the other guy just said. And he's one of the owners. So now Everybody's confused because this four headed monster is running around being dysfunctional. So yeah, you guys need to form an org chart and clearly identify your roles, get role clarity all through the thing. And this is basically trailblazer stuff. Okay, you're sitting in the trailblazer, the messy middle. And I'll send you a copy of the new book build a business you love, which will help you look at the entree leadership system and it may give you some talking points as you sit down. But if I'm you, I'm sitting down with the CEO and say, hey boss, this isn't working. It's not working for me. I don't like not knowing where I'm supposed to sit and I don't like one guy thinking I'm not doing my job because the other guy told me to do it a different way. So we need to get alignment through this company and if you try to retire before that happens, the thing's gonna fall apart because it is. And so I'll participate in the discussion, but I need you to call a council of everybody getting together and let's work on my position and then I'll help the COO and work on everybody else's position. Let's get role Clarity and the KRA. You can download the KRA template at our [e-mail] It's a free template and you know you can get a lot of stuff there and start to figure out how to put this stuff together. But yeah, I'll guarantee you if someone at your level doesn't know what their job is, that nobody else in the company does, that you just hired somebody, gave them a title and everybody thought they knew what that meant, but nobody knows what it means because everybody's got a different definition of what that title is and that's where you get into a mess. Good question, sir. Thank you for calling. I've been running a business for over 30 years and technology has changed a lot. Now the hot topic is AI. And I understand it might be intimidating, but like a lot of other tech that took some getting used to, AI is just a tool to help us work faster and smarter. So you'd better get on board, otherwise you're gonna get left behind. Netsuite by Oracle offers AI powered tools that help small businesses improve efficiency and make smarter decisions by bringing all major business processes into one platform with one unified business management suite. There's one source of truth for the real time data you need to take advantage of opportunities, then you can forecast better, scale more Efficiently and streamline manual tasks that take too many resources away from what your business actually does. So join the more than 41,000 businesses, including Ramsey Solutions. The Trust NetSuite help tackle some of their biggest challenges. And right now you can download the CFO's guide to AI and machine learning at netsuite.com Ramsey it's free at netsuite.com Ramsey in a typical small business, you spend more money on payroll than any other expense. Your team is your largest investment, which means you gotta get a great ROI on it. And that's where Entrez Leadership Elite can help. It's the online platform that aligns your team so you can scale your business. Kinda like we were just talking about. You use integrated tools to get your whole team on the same page. And our proven trainings will help you become the kind of leader people want to follow. Plus, Elite's community of business owners will have you back even when things get tough. My leaders use Elite every week to unify our 1100 team members at Ramsey Solutions. And now you can use Elite to align your team too. To grow your business with elite, go to entreeleadership.com elite or just click the link in the description if you're listening on the YouTube or on the podcasts. Peter is in Miami. Hi Peter. Welcome to the Entree podcast.

[Peter]

Hey Dave, honored to speak with you. Thanks so much for having me.

[Dave Ramsey]

Sure. What's up? Hey.

[Peter]

I have a small business in Miami, airplane parts business. I'm the owner. Last year we did 5 million in sales, 700,000 net. Got about 3 full time employees and 4 full time like contract 1099 salespersons. Basically I'm running both ends of the stick. I'm trying to figure out what kind of percentage I should give to be able to hire somebody to manage my day to day. I don't see an ROI from that position necessarily. They're trying to figure out to be able to bring somebody on to offset some of my load as this is actually kind of a side hustle for me.

[Dave Ramsey]

Big side hustle.

[Peter]

It's big. It's become huge.

[Dave Ramsey]

Yeah. Okay, so you walked away with 700 grand last year.

[Peter]

Yes.

[Dave Ramsey]

How much that are you willing to give up to get this piece back in your life?

[Peter]

If you ask my wife every penny.

[Dave Ramsey]

Well, that's not what we're talking about. I'm talking about it in business here.

[Peter]

Yeah, I understand. Yeah. I mean, I would give up a good portion of it. I would say on average though, we net 30,000amonth. That's What I kind of based my past three years off of, now I have some good months that we do a hundred thousand like last month on certain projects that I work on. So I take the 30,000 as my kind of base because if I bring somebody on, I'm very worried about not working out. Right.

[Dave Ramsey]

So half of your income is highly irregular.

[Peter]

Half of it can be highly irregular, yes. The past three years, let's just say 30,000.

[Dave Ramsey]

30,000, 360. It's not 700.

[Peter]

I agree. There's been some great months with some special projects that I work on and they are becoming more frequent. But you can't count on it.

[Dave Ramsey]

Okay, so if you hire someone to run the three full time people, what do they do?

[Peter]

They would be mostly working with the clients I work with on a day in and day out business. Day in, day out.

[Dave Ramsey]

Now what does the three full time people do?

[Peter]

They source things. So we're kind of a brokerage, but we also have our own parts. So a lot of them are reaching out to other vendors to get the parts that people need for their airplanes.

[Dave Ramsey]

Okay. And the 41099 guys are just straight up, they're in the, they're on the street selling.

[Peter]

They're for anybody and everybody, not just exclusively me, you know? Yeah.

[Dave Ramsey]

So they're just like manufacturers rep type things.

[Peter]

Correct, Correct. I tried to have my own salespeople, but it's just very volatile and I've seen that this works the best. It's just to have people kind of on, on this leash.

[Dave Ramsey]

Okay, so you're running cost of goods sold of 3 million.

[Peter]

Yeah.

[Dave Ramsey]

Okay. Somewhere around there to get to the 700 after paying three people and four 1099s? That's correct.

[Peter]

I don't take anything. So this is my side business. I don't take anything from the business. I just keep reinvesting into more inventory, so on and so forth or projects I work on. And they just keep getting bigger.

[Dave Ramsey]

Right. And you're killing it. I'm proud of you. So how long have you had this?

[Peter]

It's been about three years. Five years unofficially, but officially three years. Thank you.

[Dave Ramsey]

Okay, so go back to the other part where you were answering a minute ago. Then. If you hire someone for X number of doll to come in and help you with the quote unquote, day to day, they're going to look over the three full time team members that are sourcing parts and they're going to look over the salespeople that are brokering the deals. Correct?

[Peter]

Correct.

[Dave Ramsey]

Right. What is the client connection you've got?

[Peter]

Well, they work with my team. They've gotten used to that. We have a lot of different avenues of how they communicate through my, my system. But there's a lot of logistics that go throughout the day. Right. Of parts going from here to Singapore to Brazil to New York. It just depends.

[Dave Ramsey]

Are you doing that? Not one of your three people?

[Peter]

Well, they, they, they help with it, but it comes down to me to make sure it's, it's happening. Right. So that's a big part of this management role, is making sure logistics is getting done accordingly. I'm even packing parts. Right. I mean it just, it just spins. I got racks full of parts in my garage.

[Dave Ramsey]

Okay, so don't you need to hire someone to do logistics and packing parts before you hire someone running the whole thing?

[Peter]

It's just how it works. There are high ticket items, so it's not like every day there's a sale. I would love that. I would say on average we do about 20 sales a month.

[Dave Ramsey]

Okay. So this person is going to do some packing of high end parts and they're going to do logistics for you and they're going to look over the three people and the four, 1099 people. What else are they doing?

[Peter]

That would be a big part of it. It's really just trying to get that, get the eyes that I have on this on the operation right now to be able to oversee those things. What would be the idea? So I don't feel like there's an roi except for my time street up to look for the next project.

[Dave Ramsey]

Yeah. And you'll go make more on the next project than you will on packing parts.

[Peter]

Absolutely.

[Dave Ramsey]

You know, so yes, it is. There is an roi. It's like there's not an ROI on hiring a personal assistant, but it frees me up. I'm not sitting and answering emails and booking calendar stuff. It frees me up to go do things that make money.

[Peter]

Absolutely.

[Dave Ramsey]

Same thing. It's an administrative role. So this is a COO of sorts, but of a small business. And so it's a very hands on chief operating officer. So I mean, does 100 grand not buy this person?

[Peter]

It could. So I've identified somebody and that's where they're at. And I'm just nervous being a small business operator, bringing somebody there and then, you know, say that it doesn't work out. I know I've had three good years. I don't know why I'm anxious.

[Dave Ramsey]

Well, I mean, you just tell them the truth. The truth. Is I've had three good years and if you help me and we do this right, then, you know, the stability is based on our competency. It's not based on automatic security. This isn't the freaking federal. Federal government, which is also no longer secure. So. Thank God. But the. Yeah, so I, Yeah, I mean, I, I think that the 100 grand sounds like it makes a lot of sense and maybe, maybe even bonuses above that if we raise the profits.

[Peter]

Absolutely. No, that's where I'd be. 100 grand if we continue with the net 30amonth and then, hey, above and beyond that, there's a percentage, you know. Absolutely.

[Dave Ramsey]

Exactly. Now here's what I'm going to challenge you to do because it took me a few minutes on the phone to get you to do it. And so you haven't done it. And I need you to spend some time on this, like budget, two hours on this. I want you to write out in great detail exactly what this person's job is.

[Peter]

Absolutely.

[Dave Ramsey]

Because it's still a little fuzzy in your brain and by the time it's transferred to someone else's brain, it's going to get real fuzzy.

[Peter]

Yes, I agree.

[Dave Ramsey]

I mean, I need like five really good paragraphs typewritten. I need you to really sit down and go, this is exactly what I need you to do. And so there's no discrepancy between what it is you're expecting and what it is they read on that paper.

[Peter]

Absolutely. That makes sense.

[Dave Ramsey]

That clarity will help you to cause this person to win or to identify quickly if they're not winning because they're not doing these five things in these five paragraphs or whatever it is. This is a key results area idea that we use here, but I'm expanding it in this case because I want you to write like an essay.

[Peter]

Yeah.

[Dave Ramsey]

Because I want lot. Because there's a lot going on here. You're picking up. You're the Chief Everything Officer right now. You're the CEO. You're doing all kinds of crap.

[Peter]

Treadmill.

[Dave Ramsey]

It's a little past treadmill, but I mean, you're deep into Pathfinder. Confused for sure. And so. And what caused you to level up out of that into the trailblazer is the clarity of roles. And your role is so multifaceted and even has some things that are on it that are not detail, but they're spirit. The spirit of how you do this is this. Okay? Your job is to surprise and delight the customer. Your job is to come up with ways to help us increase revenue and then your job is to do these six things or three things or four things or whatever they are and just ride it out in great detail. Detail to where when they read it, they go, okay, that's what I'm gonna be doing every day. And if I'm not doing that, I'm not good at my job. And that's what a key results area does. But this is a complex because you're kind of hiring a mini me. And so it's a complex job description, a complex key results area form that we're doing here. And I wanna force you to think through exactly what you want them to do and what you are paying them for. That way they're not disappointed and you're not disapp because we're very, very clear on what this looks like. Man, that's a great business you got. Congratulations. It's very cool. You're making bank on it too. And by the way, quit dumping it all back into the business. Take some home and buy mama something. She'll be a little less resentful of all this. And you're making enough money to do that. This is the Entree podcast.

[Briston]

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[Dave Ramsey]

I'm Dave Ramsey, your host. If you want to help us out, you can do that by clicking follow or subscribe or leaving a five star review or sharing the show, telling people about it. You're our only marketing hope. And when you spread the word, the show grows. And you've been doing that. We know that because the show grows. And there was only one way that could have happened, and that was you telling people. Thank you. We appreciate that. Briston is in Dallas. Hey, Briston, what's up?

[Todd]

Hey, Dave. I'm a 22 year old CEO and 100% owner of an outdoor recreation event company. I have full two or I have two full time employees, one part time employee and a few contractors. My question is, how do I handle an employee that is asking for ownership?

[Dave Ramsey]

That's how you handle it. You've got to be kidding me. I have two employees and I just started this and I'm 22 years old. We're not dealing out equity at this point. No way. You've got.

[Peter]

What in the world.

[Dave Ramsey]

Who is this? What does this person do?

[Todd]

So this person, they go out and they organize events for me. I originally started doing this when I was 18 years old. Started with a couple hundred bucks. And over the past four or five years, we've grown it to about half a million dollars. And I learned the way to make more money is by doing more events. So I hired this person on full time to manage some of the events while I go more.

[Peter]

Like.

[Todd]

Are you asking like what their salary is?

[Dave Ramsey]

Yeah, I mean, do you pay them a salary? Do you pay them per event? How do you pay them?

[Todd]

Yeah, so I pay them a salary. And recently they were doing a good job, so I gave them 10% profits on merchandise and 5% profits in the business at the end of the year. And even after doing that, giving them a raise, they. They still insisted that they wanted ownership.

[Dave Ramsey]

Yeah. Hit the road, Jack. No, not a chance. There's not. I mean, that's ridiculous. In this situation, the last thing you need is a partner. You need somebody sell events and somebody got confused. The tail's not wagging the dog. So that's not the way it works. You're the dog man and he detail. So I mean this, you just gotta think that through, right? You. You don't go. It doesn't go that way. Now, you can be nice about it. I'm being sarcastic, but it's kind of absurd, honestly, what they're talking about now, what I would do is sit down and really spend some time discussing comp and say, I am more than willing to share some profits with you on the things that you create, but I am not going to give up ownership. We're too small a company to start giving up ownership if every time I hire three people, one of them becomes a partner. We're gonna have 73 partners when this thing grows. No, thank you. And so anything with two heads is a monster. But what you're really wanting is you're wanting to participate in the profits of the company. So, Briston, you've got to start doing detailed, in depth, perfect profit and loss statements each month and code out each of the events and the profits on each of the events. And then you can use those codes in an accounting system to create a pay structure that this person gets really good pay off of the net profit of the events that they drive. And we can, I don't mind increasing their pay and I don't mind them getting paid based on what they kill and drag home. But that's different. That's a different comp plan than becoming an owner. So I think the scratch, the itch that they're wanting to scratch here is they want more money. That's really what they're after. Not do I want to own a percentage of a very small and brand new event business that's being run by a 22 year old genius? No, thank you. I don't really want to own that. And you don't want them be an owner because you may need to fire them and then you got to buy them out and that's a disaster. So I mean, somebody comes in, a kid complains about this guy because he was doing a birthday party or something and the mother, I didn't like the way he interacted with a kid. You can't get rid of him if he's a dadgum owner. And you know, that's stuff like that's going to come up in your world before, before you know it. So the more volume you do. But I have a lot of people at Ramsey that get paid off of the bottom line profits of the area that they run. And I don't mind them making a lot of money personally because that means the bottom line profits are a lot of money in the area that they're running.

[Todd]

Yeah, I gave him 5% of our profits at the end of the year.

[Dave Ramsey]

End of the year doesn't do it. End of the year doesn't do it. If you'll close your books by the end of the month and pay him on the 15th of the month following for what he just killed. And it needs to be more than 5%. And I don't mind cutting his salary but increasing his participation to where the net of the two is greater than what he's making now. I don't mind him making more money. It's not a greed thing. But the idea of ownership is just. It's asinine in this situation. So, no, we're not doing that. If he requires that to stay, he's gone. But I think you can sit down and I have done that. I've got vice presidents in this place. I've got executive VPs, my operating board. None of them have a salary. They all get paid off of the bottom line of the company. The 15th of the month following, they get paid a percentage of what the company created in profits the month before, and they make really, really good money. And, you know, there's like 14 of them. And so over the years, I'm more than willing to share with people compensation as if they were partners, but they do not have actual ownership. That's the difference. And you can create that, but it's going to require you do a really good job with accounting. And most companies at your sides don't.

[Todd]

Yep.

[Dave Ramsey]

So you're going to really dial the accounting and close the books and have codes. Job cost codes is what it's called. So, like, if you're in the construction business, Briston, if you have a three different renovations going, each job, each of the three renovations. If you're running a renovation company, each of the three jobs runs its own as if it's its own business, its own profit and loss. It's called job costing. And you charge things to job one, job two, or job three. So if they go buy materials for job one, it's charged to job one. Right. If we have a sub that gets paid out of job one, they get paid out of job one. And then you can run. You can look at job one and see what your actual profit on that individual job was, and then those all roll up to be the profit of the company. Does that make sense?

[Todd]

That does make sense.

[Dave Ramsey]

See how that would apply to events in your world?

[Todd]

Yeah, absolutely. What percentage would you recommend doing in that case?

[Dave Ramsey]

I would run the money out. Let's see what the money is. So how many events does he do a month?

[Todd]

He does two a month.

[Dave Ramsey]

Okay. And what do you profit on those events, do you think? When. If you run the job cost out, what do you think you're going to find on those two events?

[Todd]

We're profiting about 20,000 per event.

[Dave Ramsey]

Per event? Net profit?

[Todd]

Net profit? More like 10,000? Yeah, 10,000. 10 to $12,000.

[Dave Ramsey]

Okay, so let's call it 10 grand. So there's between the two, there's 20 grand. Right?

[Todd]

Right.

[Dave Ramsey]

Okay. And then you're doing other events that he's not doing. Because that doesn't equal 500K.

[Todd]

Right.

[Dave Ramsey]

You say, are you grossing 500K?

[Todd]

Yes.

[Dave Ramsey]

Oh, then that would be all the events. Is the whole company doing two events a month?

[Todd]

No, we do more. I'm the one going out and doing the other ones. He just does two.

[Dave Ramsey]

Okay, all right, well, run the two out that he does and figure out what the net profit on them is. And now what did he get paid last year? What was his total compensation last year?

[Todd]

I hired him on about eight months ago, but his salary is about $50,000 right now.

[Dave Ramsey]

Okay. And so let's call that 60,000, which is 5,000amonth. And so if he's making you 20,000amonth, 10,000 each on two things. Right, right. So if you paid him 25% of what he's bringing in now, that would be equal to what be a little bit of a raise on what he's making now. I just made that up. Okay. You can actually go back and crunch the numbers and find out what's real. But that's how I would back into it and say, okay, I need to replace the 50k, or if I'm going to give him some kind of salary and commission, then I'll change that out. But okay, so let's say we want him to have the opportunity to make 70,000. Okay, I don't care. Let's just use that. And so we're going to pay him a salary of 30,000. Okay. So we need to set up a commission structure on these events that produces 40,000, because 30 plus 40 is 70. And so just play with the numbers. Okay, so 40. How am I going to get him to 40? Well, that's 3,600 bucks a month. And so if we're making 20,000, then what is that, 15% or something? Right, right. And so we're going to pay you 15% of the net profits of the events, and I'm going to pay you $30,000 salary. And if you do two events a month at this, you're going to make 70 grand. And that's much like getting paid as an owner, except you're not participating in the entire business. And if you want to throw him a bone on 5% on T shirts or something, that's fine too. And the point is, I don't care that the kid makes money. I want him making money because the more money he makes, the more money I make. Right?

[Todd]

Right.

[Dave Ramsey]

So I'm not being greedy with him making money. But that's a comp plan and that's way different than an ownership position. But I'll pay you like you were a partner for the ones that you do. And I'll pay you a salary. And let's work that out. And here's an example of what I came up with. And here's the numbers I ran out. And you run them out and do a better job than I did here on a podcast, because you need to spend some time in the detail. And, dude, you've got to get your accounting to where you know how to pay him. Because if you don't know what you made on those for two months because you're screwing around with your stuff, receipts in a shoebox or something, then you can't calculate him his pay, and you're not gonna be paying him, and he's gonna be unhappy, and he would be correct. So you gotta really be on top of it on the accounting. You gotta get a strong accounting system in there and he turns in everything. You close the books. You did two events last month. Here they are. And here's the profits on those. And here's the percentage we agreed on plus your salary. And here's your pay on the 15th of the month following, and you close the books by the first of the month. So in other words, March 15, he gets paid on February's events. Okay. And you can give him his payroll salary on the first of the month. So he gets a payroll check on the 1st, and he gets a commission check on the 15th. And just calculate out some kind of a comp plan like that that lets him participate in the efforts that he's creating. But he's confused as to his value in a company your size to demand equity. And it's humorous, but I don't laugh in his face. That's not a good idea. But it's just stupid. No, we're not doing that at all. Not even a chance. Oh, man. Fun little fun business you got going. I hope it grows for you, and I hope you get 10 of him. And they're all making money off the bottom, and you're making money off the top on every one of them. Oh, that'd be fun. Maybe we have a new model here for the event business. Hmm. Yeah. This is the Entree podcast. Big news. We just launched entree Leadership Summit 2026. It's happening next May 17 through 20 at Disney's Coronado Springs Resort in Orlando, Florida. And now's the time to get your tickets. When you register this month, you'll be one of the first to lock in the best seats near the stage and you'll get first dibs on the on site Disney hotel rooms. To get your Tickets, go to entreeleadership.com summit or if you're listening on YouTube or podcast, click the link in the show notes. Thanks for hanging out with us, America. This is the entree leadership podcast where we are small business people helping small business people. The only difference is we're not quite as small as we used to be. So we're further along the five stages of business that we outlined in the number one best selling book, the entree leadership system, which the book is called building a business you love. Be sure you check that thing out. I'm proud of that book. It's a good book. I'm really proud. It was a number one. Todd is with us in New Hampshire. Hey, Todd, welcome to the show. How can we help?

[F]

Thank you. I am the founder and CEO of an entertainment, lighting and installation company that's been in business for 40 years with a top line revenue of 20 million and 42 full time employees. My question is, how can I successfully transfer my business to my daughter while preserving my estate and considering my other two children who are not involved in the business?

[Dave Ramsey]

A lot of different variables there, brother. So she operating with you now?

[F]

Yep, she's been here about two years and she's doing fantastic.

[Dave Ramsey]

Okay, so we got leadership and succession plan kind of in. In mind and heading off. What are the other two kids doing and what's their status relationally?

[F]

Great. I mean, just, they're just in different fields. You know, one of them is in it and the other one has her own jewelry business and they're all. They're both doing great and very happy. So.

[Dave Ramsey]

Okay. And do you have other assets?

[F]

We do our whole estate, I think, including our businesses. 22 million and I think it's 10 million. The business is estimated at about 10 million and 12 million in a mix of real estate and cash.

[Dave Ramsey]

Okay, so the business is estimated at 10 million and then there's 12 million of other stuff.

[F]

Yep.

[Dave Ramsey]

Okay, well, if you do. Are you married?

[F]

Yep. My wife is part owner. She, you know, we share the ownership.

[Dave Ramsey]

Yeah. Okay. Have you been working on estate planning from a tax perspective with an estate planner yet? So.

[F]

Not really. We've talked to some estate planners. They've suggested things like idjits and you know, we looked at that.

[Dave Ramsey]

You don't need any of that.

[F]

Okay.

[Dave Ramsey]

Your estate's not big enough.

[F]

Yeah. Okay.

[Dave Ramsey]

I mean, Today you have 14 million 13.99. And your wife has 13.99. So you've got 28 million you can transfer with zero federal estate tax between the two of you with a simple ab. Marital trust, it's called. That's a very simple, very simple transaction. Now, when you get above today, 28 million, then. Then you've got a problem. So is your business growing?

[F]

Yes.

[Dave Ramsey]

How old are you?

[F]

I'm 63.

[Dave Ramsey]

Are you healthy?

[F]

Yes.

[Dave Ramsey]

Okay, so we're going to get into a whole bunch of weeds here. You ready for the Weed eater?

[F]

Okay, before you go to the weed eater, I just want. I want. I think I might have misspoke. We do have a revocable trust set up that's pretty, pretty current right now.

[Dave Ramsey]

Okay. Have you moved the business into the trust yet?

[F]

Yes. Okay, so you and the businesses in the trust.

[Dave Ramsey]

Oh, okay. All right. So you've already frozen that from an estate planning standpoint. So you're not going to have an estate tax issue.

[Peter]

Right?

[F]

We have the cash in there, too, like any. Any extra cash, you're not going to.

[Dave Ramsey]

Have an estate tax issue because you've already moved it. And if it grows beyond 28 million, it doesn't matter the value of the real estate or the value of the other. The only thing that you'll pay taxes on is on the basis, and there's no taxes on the basis because it's under 28 million, assuming you've done a simple marital trust to go with your revocable trust. So the marital trust is that your 14 million, if you die before your wife, is left to her in trust upon your death, her 14 million she can leave to the kids, and then she can leave your 14 million to the kids upon her death. In the meantime, she can live off of the 14 million that was in your trust. So that's in simple AB trust. That's how that works. Okay. That make any sense?

[F]

Yes.

[Dave Ramsey]

Okay. Then on top of that, if the stock of the LLC and the ownership of the real estate has moved into a trust, the value at the time you moved it into the trust is frozen in time forever on the irrevocable trust, which keeps. In other words, if the real estate goes up in value or the business goes up in value, to breach that 28 million, it doesn't matter because it doesn't count. It's not in your estate anymore. You've already moved it out of your estate. I moved 99% of Ramsey out of my name 16 years ago for that reason.

[F]

Okay. See, I'm in a revocable trust right now. You have an irrevocable trust?

[Dave Ramsey]

Well, I have a children's trust set up that owns Ramsey.

[F]

Okay.

[Dave Ramsey]

99%. I own 1%. I own the voting stock.

[F]

Yeah, that's smart. One of the lawyers told me to split off 4 voting shares, and then I can set that to my daughter that's in the business, and then she could control it when the time comes.

[Dave Ramsey]

Yeah. Then that brings you to the other question that you guys have to answer as a family. And you can answer this one of two ways. I have a friend who is Gen 2. He's in his late 50s, and the company's probably worth $50 million or maybe 100 somewhere in there. I don't know exactly, but it's doing really well. And his dad dictated that unless you work in the business, you don't inherit any of the business. So his brother, who's not in the business, has no ownership in it after his dad passed.

[F]

Okay.

[Dave Ramsey]

I, on the other hand, did it the other way. I left it to my three kids to own it regardless of whether they work here, and then to the grandkids to own it regardless of whether they work here. So there's two different hats they wear. They wear an owner hat, and then there's the leadership team hat that takes direction from the three owners. And so when I'm gone, the gen 2 of the 3. The three gen 2 Ramses will dictate to the leadership team how Ramsey is run. And at this stage of the game, one of them is Daniel, and he's the president, so he works for his two sisters and him as an entity. Does that make sense?

[F]

Yes.

[Dave Ramsey]

And then they can. And as there are profits, they'll be distributed to the owners of the business beyond the compensation packages for the people that work here. So, for instance, your daughter could get a percentage of profits in the future as the CEO when you're gone, and then the profits that are left over after she gets compensated for her CEO package could be distributed to the three ways.

[F]

Right. Yeah. We have it set up third, third, and the third right now in the trust.

[Dave Ramsey]

Or you could leave the business to her and the real estate and other stuff to the other two.

[F]

Right.

[Dave Ramsey]

You happen to have numbers that allow that. Okay.

[F]

Do you think it would be safer, as far as just relationally, between the kids, if we kept them separate from, you know, my daughter just owning the business and the other two just owning other. Or inheriting other parts of the estate? So it's not. I mean, I'm just concerned that possibly, you know, my daughter might want to.

[Dave Ramsey]

I'm Gonna sit and talk to them about it and go, listen, here's the thing. I mean, because the two that don't work there could gang up on the one that owns it and works there. Right.

[F]

That's what I was concerned about. Like, if they have different thoughts about, oh, I'd like to get, you know, like to do different things with business or the.

[Dave Ramsey]

Well, now, the operation of the business is not up to the owners. The owners are picking up only major decisions of the business, including giving, you know, direction to the CEO.

[F]

Right.

[Dave Ramsey]

But the CEO doesn't have to come and ask them whether they're going to hire somebody or whether they're going to buy a piece of equipment. They run the business.

[F]

Right. But I was just thinking more, if they wanted to get their share out just for whatever reason and they're putting pressure on it and you can't.

[Dave Ramsey]

Yeah, you got to dictate exit strategies on that. And part of the trust, if you're gonna. Ours aren't allowed to take theirs, Period. You can't take it. The only thing you could do is get thrown out. That's it. But you can't liquidate your share at Ramsey because we don't own it. We manage it for God. It's not ours. So that's the way we're looking at it. So if you're gonna allow them to sell their share, then you need to put terms on it under which you could. One of them could buy the other one out, or can an outsider buy or not. All that kind of stuff you gotta get into, but Happen to have $10 million worth of business and $12 million worth of the other. If your daughter that got the business and the other two got 6 million or some change each, that's not unfair, right?

[F]

Yeah.

[Dave Ramsey]

If you wanted to go that way, it happens to be with your numbers. Or you could adopt my friend's thing and go, if you don't work inside the business, you don't get to own it. That's not unfair. It's not unethical. It's just a different way of looking at it. I chose not to do it that way just because of the way I've worked it through. But I don't have a big problem with that. That's not a bad idea because at least they're not sitting. And the other thing you can do is extrapolate this out $60 million in 25 years and another generation and try to anticipate who's going to misbehave then.

[F]

Right.

[Dave Ramsey]

And then that kind of tells you what your weak spots are. If you magnify this thing, it kind of points out what the weaknesses of your system are. Because if you got it, the only way it works is if the three get along perfectly well. That doesn't work for the next gen because there might be 19 in gen 3. In my case there's 8 engine 3 already. And that's supposedly all that we're getting. But.

[F]

Yeah, so.

[Dave Ramsey]

But anyway, you follow. So I mean it's, it's a great discussion and you're very wise to have it ahead of time. There's not a right or a wrong. The only wrong is not dealing with it now.

[Peter]

Right.

[F]

I have other thoughts. Like if I was to. How do you. How do you set out a timeline like for me to transfer it over to like her running the business, like being the GM in my seat and then me being out of it? Like, do you go by your energy level and like, you know, I go.

[Dave Ramsey]

By her energy and competence level. I stage skated off of their competence.

[F]

Okay.

[Dave Ramsey]

And as long as they are competent, we can move them up and put more weight on their shoulders. But they have to have the muscles and the shoulders to hold it. And then I'll put a little more weight on and then we'll put a little more weight on. A little more weight on. So three and a half years ago we moved Daniel into the president's office and he and I are co running the business. 50. 50. But I've dialed back during that three years and it's no longer 50. 50. I'm not as day to day in the operations as I was three and a half years ago. But so it's gradually. Gradually. And as long as he carries it, I'm going to continue to gradually click it off. Not because I don't want to do it, but because I've got to be able to turn it over to him. I've got to be able to turn it over to them, to the next gen. And I've got to build in them the character and the intellectual strength and spiritual strength to carry a load this heavy.

[F]

Right? Yeah. So you kind of go by their readiness, you know exactly about the responsibility as they are able to take it.

[Dave Ramsey]

Exactly. Because there's two things that don't bless your kids or the business. Thing one is if you give them something to run before they're competent, well, that hurts everybody, including them. And thing two is when they are competent, you don't give it to them.

[F]

Right.

[Dave Ramsey]

That hurts everybody involved because you end up with A guy I talked to the other day, he's 85, his son's 65. And the old man still running the freaking place. He basically neutered his own kid.

[F]

Gotcha. Yeah.

[Dave Ramsey]

You know, he's 65 years old. He's never run anything. My God. You know, that's pitiful. And so all that is ego. And so he should have turned that stinking thing over 20 years ago is what he should have done when the kid was in his 40s and the old man was in his 60s. And then they had a good steady flow of conversation. And now what you've got is all this weird nepotism garbage going on. And I don't think the business is going to make it. I think they're going to fail because of their personal weaknesses. But that's what you're facing, is those kinds of decisions. But you're brilliant, Todd, for being proactive in this and making the decisions. There's not really a wrong decision except giving it to them too soon or too late. By not being proactive, there's not a wrong decision. Whether you give it, make them run it together, or you split it off and let her have it and you split the other assets off to the other way. In our case, Sharon got nothing out of the business. When I die, the kids get it that day. The next gen 2 gets it. Sharon's got other assets to live on while she's alive. Plenty of them. So, you know, and she's not. She doesn't continue to run this. And so that sets her up. And since all of my estate planning is presupposed on, I die first. I am watching over my shoulder. I can just tell you that. So that's fun stuff. Hey, guys. This is great. Great discussion, Todd. 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 pod.