We’re Going to Make $600,000 but Take Home Nothing

Summary

Episode Summary: "We’re Going to Make $600,000 but Take Home Nothing"

The EntreLeadership Podcast hosted by Dave Ramsey delves into the intricate challenges faced by small business leaders striving for growth without sacrificing profitability. In this episode, released on January 20, 2025, Ramsey addresses real-life scenarios submitted by entrepreneurs, offering actionable advice rooted in over three decades of business and leadership experience. The episode primarily features interactions with three callers: Kevin, Joe, and Scott, each grappling with unique financial and managerial hurdles.

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1. Kevin's Catering Conundrum

Caller Profile:

• Name: Kevin
• Location: Baltimore
• Business: Full-service catering company
• Revenue: Projected $600,000 this year
• Team: 1 full-time employee and 12-15 independent contractors

Issue: Kevin struggles with cash flow management, where expenses for booked events outpace incoming revenue from deposits. Despite organizing events booked 8 to 18 months in advance, he finds himself paying for event-related costs before receiving full payment, leading to financial strain.

Key Discussion Points:

• Margin Analysis: Kevin reveals that his cost of goods is approximately 40%, and labor costs run about 20-25%, leaving a slim 35% margin. Dave Ramsey identifies this as insufficient, noting, “You're not making enough money on $600k. You ought to be making $100 and a half in your world.” [02:28]

• Accrual Accounting & Job Costing: Ramsey advises Kevin to implement accrual accounting and maintain separate Profit and Loss (P&L) statements for each event. This granular approach allows for better tracking of expenses and more accurate future pricing.

• Increasing Margins: Emphasizing the need for higher profit margins, Ramsey suggests revising pricing strategies to ensure a healthier financial cushion.

• Retained Earnings: Ramsey highlights the importance of setting aside a percentage of profits into retained earnings, creating a business emergency fund to smooth out cash flow fluctuations. He states, “Retained earnings in business is your business emergency fund.” [06:58]

Notable Quote:

“Your prototype is always ugly. You’re going to throw them away and start again.” – Dave Ramsey [37:09]

Conclusion: Kevin is encouraged to refine his accounting practices, adjust pricing strategies, and build a robust financial buffer to navigate the cyclical nature of event-based revenues. By doing so, he can alleviate cash flow pressures and ensure sustainable profitability.

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2. Joe's Restaurant Dilemma

Caller Profile:

• Name: Joe
• Location: Canada
• Business: Two restaurants (a QSR smash burger restaurant and a 22-year-old full-service dine-in restaurant)
• Revenue: Approximately $4 million
• Team: Around 50 staff members

Issue: Joe is overwhelmed by the demands of running two restaurants, working 65 hours a week. He contemplates selling one restaurant to free up time and pay off his personal mortgage but is hesitant due to high Canadian capital gains taxes, which stand at 66%.

Key Discussion Points:

• Capital Gains Tax Impact: The exorbitant tax rate makes selling a restaurant financially unattractive, as Joe would receive minimal net proceeds.

• Alternative Solutions: Ramsey suggests enhancing managerial structures to reduce Joe’s workload. He recommends hiring a top-end general manager with a compensation package that includes a base salary plus a percentage of profits, fostering a sense of ownership and incentivizing performance.

• Maintaining Profit Margins: Ramsey underscores the necessity of preserving healthy profit margins to support retained earnings and personal financial goals.

Notable Quote:

“Don’t be afraid for your first one. Your first stuff to be a little bit rough.” – Dave Ramsey [37:09]

Conclusion: Instead of selling a restaurant, Joe is advised to delegate operational responsibilities by bringing in experienced management. This strategy aims to balance business growth with personal well-being, allowing Joe to focus on strategic aspects without being consumed by day-to-day operations.

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3. Scott's Strategic Legal Team Building

Caller Profile:

• Name: Scott
• Location: Indianapolis
• Background: Former CEO and General Counsel of a life sciences company with 100 employees and $20 million in revenue; recently acquired by a Fortune 100 company
• Current Role: Joining a growth company with 150 employees and $30 million in revenue as the solitary General Counsel, tasked with building the legal function

Issue: Scott seeks guidance on cultivating a positive legal team culture within his new organization, aiming to support the company’s goals without becoming perceived as a bureaucratic obstacle.

Key Discussion Points:

• Proactive Legal Counsel: Ramsey emphasizes the importance of transforming the legal department into a facilitative entity rather than a gatekeeper. He advises Scott to position himself as a strategic partner by collaborating closely with other departments.

• Building Relationships: Ramsey recommends that Scott engage with the top leaders and influencers within the company to establish trust and demonstrate the value of the legal team. This involves regular interactions, such as having lunch with key stakeholders to discuss collaborative strategies.

• Cultural Integration: Ensuring that the legal team is seen as an ally in business operations is crucial. Ramsey notes, “I want the guys that are pushing products to the front lines going... your legal counsel is so entrepreneurial that Scott can see the legal dangers and figure out a way that we can still maneuver through those things and get the product to market instead of Scott's a barrier.” [35:54]

• Avoiding Bureaucratic Pitfalls: Ramsey warns against allowing the legal or accounting teams to stifle innovation and impede business growth, highlighting the need for these departments to support rather than hinder operational objectives.

Notable Quote:

“Better a weary warrior than a quivering critic. This world needs more high quality leaders, so take courage and lead.” – Dave Ramsey [42:40]

Conclusion: Scott is encouraged to adopt an entrepreneurial mindset within the legal function, fostering a collaborative environment that aligns legal strategies with business objectives. By building strong relationships and demonstrating the legal team’s value, Scott can cultivate a supportive culture that drives company success.

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4. Dave Ramsey’s Core Insights

Throughout the episode, Ramsey imparts several foundational principles aimed at enhancing business profitability and sustainability:

• Iterative Product Development: Ramsey underscores the importance of viewing initial product offerings as prototypes that require continuous refinement based on customer feedback. He advises, “Your first stab at it is not even close to what's going to become successful.” [37:09]

• Financial Discipline: Establishing and adhering to a disciplined financial framework, including setting aside profits and maintaining adequate profit margins, is pivotal for business resilience.

• Purpose-Driven Leadership: Aligning business operations and products with a core purpose ensures that offerings genuinely meet customer needs and drive long-term success.

• Team Integration: Building unified and motivated teams through strategic hiring and management practices fosters an environment conducive to growth and innovation.

Notable Quote:

“We run a business here and not as small as it used to be, but I love small business people and we're here to help you with your questions, your leadership, and we want to help you go to the next stage of business.” – Dave Ramsey [00:09]

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5. Episode Takeaways

• Assess and Adjust Margins: Regularly evaluate your business’s cost structures to ensure profitability. Thin margins can lead to cash flow problems and financial instability.

• Delegate and Empower: Hiring competent managers can alleviate operational burdens, allowing business owners to focus on strategic growth and personal well-being.

• Foster Collaborative Departmental Cultures: Legal and accounting teams should serve as partners in business operations, facilitating rather than hindering progress.

• Embrace Continuous Improvement: View all business offerings as evolving products that can be refined and enhanced through iterative processes and customer feedback.

• Build Financial Buffers: Establishing retained earnings and emergency funds can safeguard businesses against unforeseen financial challenges and fluctuating revenues.

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Final Thoughts: In "We’re Going to Make $600,000 but Take Home Nothing," Dave Ramsey provides invaluable guidance to small business leaders facing financial and managerial challenges. By sharing real-world examples and offering practical solutions, Ramsey empowers entrepreneurs to optimize their operations, enhance profitability, and achieve sustainable growth. Whether grappling with cash flow issues, considering strategic business exits, or building effective departmental cultures, listeners gain actionable insights to navigate the complexities of business leadership.

Transcript

[Dave Ramsey]

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 in the trenches along with you, I was making some of these decisions today. That's what we do. We run a business here and not as small as it used to be, but I love small business people and we're here to help you with your questions, your leadership, and we want to help you go to the next stage of business. Because one of the beautiful things about small business is if you work it right, it does get easier. I promise it'll get better. But you got to work a system and you got to work a plan to get there. And we call it the five stages of business around here. If you've got a question you want to ask on the show, you can fill out the [e-mail] ask or you can call me at 844-944-1070. That's 844-944-10720. Kevin is in Baltimore. Hi, Kevin. Welcome to the Entree Leadership Podcast.

[Kevin]

Thanks so much for having me, Dave. It's really an honor to talk to you.

[Dave Ramsey]

You too. What's up, man?

[Kevin]

So I own a full service catering company. I'm a chef. We do weddings, large corporate events, and some government contracting. This year we're probably going to finish at about 600,000 in revenue. One full time employee plus myself. And I have about 12 to 15 independent contractors that help us execute our events. My question for you is that it seems that when our events actually come around because we book them 8 12, sometimes 18 months in advance, when the events actually come around, it seems like I'm paying for my events that have already booked with new revenue. And I'm struggling to find out if it's just a cash flow problem, if it is a process problem, or if it's just, you know, over 812 or 16 months. It's, you know, expenses are coming up, we're having to pay them. So I was hoping that we could talk through and see how I might be able to figure out what's going on.

[Dave Ramsey]

I'm not positive. I know what you mean by pay for this event with the last. With the next one. What do you you mean pay the expenses associated with executing the event you've already been paid for.

[Kevin]

So we'll typically take a 50% deposit up front. And again that can be, you know, 6 12, 18 months out. And then our expenses don't come until, you know, after the event is executed. And we're paying for staffing, we're paying for food costs that, you know, we purchased because we're on terms. And it just seems like in my head.

[Dave Ramsey]

So what is your margin?

[Kevin]

So on our full service events, it is about cost of Goods. Runs about 40% of an event.

[Dave Ramsey]

What does labor run?

[Kevin]

Runs about the 20, 25%.

[Dave Ramsey]

Okay. That gives you a 35% margin. What other expenses?

[Kevin]

There might be rentals.

[Dave Ramsey]

You know, you're going to be operating on a 25% margin with a 50% deposit.

[Kevin]

Right.

[Dave Ramsey]

Which leaves you with a 25% squeeze. Okay. Yeah, you got a cash squeeze.

[Kevin]

And I'm just trying to figure out is that, hey, it's because it's January and February and nobody's getting married, but we still have, you know, operating expenses. But I've tried to, when I get revenue in, to immediately divvy it up into different accounts. Like, hey, here's the. Here's the money back for cost of goods. Here's the money for, you know, payroll. Here's the money for taxes, and just keep it separate. But it just never fails that, you know, some months it's like, hey, well, I got to pull something from somewhere to pay the electricity or we got a problem, you know.

[Dave Ramsey]

Did you make $150,000 taxable income last year personally? Yeah.

[Kevin]

No.

[Dave Ramsey]

Then you don't have a 25% margin, okay? Your margins are too thin in your world, you're not charging enough. That's one thing. Okay, there's a couple things. There's three or four things bouncing around in my head. And so, like, a parallel in our world is that the book distributor, the largest in the world, is called Ingram. When we sell Ingram a pallet of books, they wait 90 days to pay us, maybe, and maybe they'll wait another 30. Okay. And meantime, we had to pay the printer, so we're out of pocket with no cash income with that particular account. And so what we had to learn to do was accrual accounting, which was set money aside out of the deposit in your case. But also, like you say, you had it in buckets, or you said bags or whatever. Set it aside by category. But. But what's ending up happening in your case is those bags or buckets are getting bled dry because you don't have enough margin overall. Your overall operating is sucking the blood out of those buckets before you get to them. Does that make sense?

[Kevin]

Yeah, 100%.

[Dave Ramsey]

That's what the math told me. Anyway, so one thing that will help is more accrual accounting, which is you keep each job separate and run it as a completely separate P and L and you job cost. It it's called in the construction world. And so a singular event is a job that consists of revenue coming in, food cost, labor, rentals, and some percentage for operations overhead. They add, you know, you deal with a builder, they'll add overhead to it and then they put their margin on top of those things. And that would be in the construction world, that would be a job. I mean that would be a cost plus scenario in your job. Your case, you have to do a total bid, but. And the food cost may shift on you and you may get burned on that during that time unless you leave that as an out in the contract. But anyway, all that to say if you run an estimation that'll help you set your pricing better when you go back and look and go, okay, my estimate was X, but my actual was Y. On this separate business, P and L, a profit and loss statement as if it's an individual business on this one event. You see what I'm saying?

[Kevin]

I do.

[Dave Ramsey]

So you get down in the weeds more on the accounting on the singular events and job cost, each one of them. And that'll help your estimating for the next event because you go, oh, I missed my food cost there. And I did that the last three times. So I've got to change, I got to change that. Or those rentals are bumping up on me. You, you know, they're hitting me another 10% more than I thought they were. I'm missing those. Or you know, I got a little scared at the last minute. They changed their numbers and I added some labor, but I didn't charge them anything for it. And you start to whatever it is in your situation. You know, all those things that pop up doing an event, there's things you have to be fluid and things happen on the fly, but you gotta be able to look back on the numbers and go, okay, there's a pattern here that I have to change how I'm charging or what I'm charging. And okay, that's thing one is job cost thing and that's accrual accounting. That'll help you with the buckets. Thing two, or the first thing I brought up, we'll call it thing two is more margin. I think I'm marking your stuff up a little further. Cause I don't think you're making enough money on 600k. You ought to be making 100 and a half in your world. Then the next thing is take as your profit and loss each month on the whole business, not on the individual jobs, but on the whole business. You run a P and L each month and take a percentage of your profit as an expense item and call it retained earnings. So save 10%, 15% of your profits every month into retained earnings. And retained earnings in business is your business emergency fund. It's your business slush fund, your personal own line of credit. You're not getting any of debt for a cash flow fluctuation or if you have a down, you know, everything comes in January, you get nothing in March or whatever the reverse of that is, and the month you get nothing. This is what will help you cover the cash flow fluctuations. And I had to become very disciplined about setting aside a percentage of my net profits as an expense item before I took any money home to build my retained earnings. And as soon as I did that, the retained earnings started building and I had a lot more peace. Because that's the ultimate smooth. It'll smooth out everything. I mean, if you have a bump in your world and you got 40 or $50,000 laying over in an account that you don't touch for anything except to grow the business or cover a problem, that'll smooth it out. I mean, if you have a $10,000 problem, you got 50 laying over there, all of a sudden, your anxiety level goes way down then. And part of what puts that money over there in that account, though, is the increase in margins and the accrual accounting system. So sit down with your bookkeeper, whoever you're using for that, and have them teach you about accrual. So accrual in our world, for example, is on a book sale. We have to set aside the cost of that book when it sells, not when we buy it. And that's accrual. Cash is we have to pay for the book when we buy it, 100% of the bill. And we don't get any revenue until we get revenue. So cash basis is actual reality. But accrual helps you tie things back to the actual item. It's more confusing to operate with, but it'll help you with some of the process things, the accounting process, things you're dealing with here. I think it's not going to help you as much though, as just job costing these jobs. I think running a P and L on each of these jobs is going to be the thing thing for you. I think that's going to open and changing your margins a little bit because I think by the time you factor in your expenses for operations, that's where you're where you thought you were making a margin and it's taking it away because 25% of 600k is 150. That's what you should have made. This is the Entree leadership podcast. You feel like you're running on empty. If you're leading a business, it's no wonder business is freaking hard. It doesn't mean you should let yourself get burned out, though. Join me and thousands of small business leaders in Denver next spring. We'll fill up your leadership tank, baby, with life changing insight from some of the world's best speakers, writers and teachers on the subjects of leadership. Best selling author of the book Good to Great, the one and only Jim Collins will be there. Argument expert Jefferson Fisher and leadership expert John Maxwell. The grandpa of all leadership is gonna be there. Speaking world heavyweight champion George Foreman. You'll enjoy George, CEO of Seiko Designs, Liz Bohannon and Seth Dillon, the CEO of Babylon B. That should be fun. They make a good living making fun of me. By the end of the conference, you'll be refreshed and equipped with new vision for your business. Mark your calendar. It's May 18 through 21. Get your tickets right now. EntreeLeadership.com summit. Get your seats now. There's just a handful left. Just a handful left. That's it. That's how that works. Joe is in Canada. Hey, Joe. Welcome to the Entree podcast. What's up?

[Joe]

Hey, thanks for taking my call today. Really appreciate it.

[Dave Ramsey]

Sure. How can I help?

[Joe]

Yeah. My wife and I own two restaurants with approximately 50 staff members. Our first restaurant is a QSR smash burger restaurant. It's only been around for about a year and a half. Our second restaurant has been around for 22 years. It's a full service dine in restaurant. I've been working 65 hours a week for the past 22 years dealing with all the stress and pressures that the small businesses bring in. And I'm definitely getting tired. My revenue for both restaurants is about $4 million. My question for you today is should I sell one of the restaurants to gain more time with my family or should I keep hustling for the next five years to get our personal mortgage paid off?

[Dave Ramsey]

If you sold the restaurant, you could pay it off?

[Joe]

Almost. Yes, for sure.

[Dave Ramsey]

Well, I mean, aren't you going to get money for the restaurant?

[Joe]

We will get some money, but I'll have to then get a second career and they do pay pretty well at the moment.

[Dave Ramsey]

You'll have to get a second career.

[Joe]

Well after. If I sold the restaurants, I could definitely pay off my personal mortgage, but I definitely need income to keep moving forward to add to my retirement.

[Dave Ramsey]

Okay, but if you kept. You said you were going to sell one of them.

[Joe]

I'm just wondering if it's a good.

[Dave Ramsey]

Idea and get your life back. When you sell one, can you not pay off the mortgage?

[Joe]

Not my personal mortgage, no. My personal mortgage is pretty high.

[Dave Ramsey]

Oh, okay. All right. What would the one restaurant sell for the main restaurants?

[Joe]

Yeah, I would say the issue with Canada is our capital gains tax around 66%. So the one property I own, I just paid that mortgage off. So that's going to keep in giving us income for the next years to come. The other restaurant may be 200,000.

[Dave Ramsey]

Okay. I just drove by something I'm not familiar with Canadian tax, except that it's a lot. Did you just say Canadian capital gains is 66%?

[Joe]

It's 66% now. They just passed that.

[Dave Ramsey]

Yeah, two thirds used to be.

[Joe]

Used to be 50.

[Dave Ramsey]

So if you make $100,000, your government takes 66,000?

[Joe]

Basically, yeah.

[Dave Ramsey]

I can't breathe.

[Joe]

I can't either. So that's the problem is there's no point really selling them if we're not going to gain a lot of money back.

[Dave Ramsey]

But no, it's kind of like you're giving it all to the government. That's a disincentive to sell.

[Joe]

Exactly, exactly. So I'm lost.

[Dave Ramsey]

Okay, cue the make fun of Canada jokes. Okay. But wow. Ouch. I'm sorry, man. That changes everything. What about giving up some of your profits by hiring a top end manager which gave you your life back?

[Joe]

Yeah, that's a pretty good idea. I think. I think I've been crossing that bridge as well. The problem with small businesses and it's tough, like you got to be there all the time and you wear so many hats. And it's one of these people you have to hire to put on so many hats. Accounting, plumbing, dishwashing.

[Dave Ramsey]

And they're called a general manager at a restaurant, Aren't they?

[Joe]

General manager? Sure, of course. Yes.

[Dave Ramsey]

That's what their job is. Every general manager I've ever known did that.

[Joe]

Exactly. No, that's a, that's a good point for sure.

[Dave Ramsey]

Yeah. I would pay them. I would pay them a base plus a percentage of profit that that place made. And make them, in a sense, make them invested because they make a percentage of the bottom line. And they get a good base, and that way that gives them a compensation package that gives some ownership, a sense of ownership, not actual ownership. And let that give you your life back rather than give Your stupid government 66% of your profits on a business you built. They didn't build. Oh, that's just so despicable. Oh, how horrible. I'm so sorry. Wow. Wow. Okay, I. Well, I'm so tempted, but I'm just not. I'm just gonna go to the break where I'm supposed to and just leave old Canada alone, as we say in the South. Bless your heart. Which can mean a lot of things. This is the Entree Leadership Podcast. This is the Entree Leadership Podcast. As you're going through the five stages of business, there are six things that drive any business to success. And as you get one of these, you'll move to the next, to the next, to the next, to the next. And they're like a water wheel. As you come around, you'll start again and get a little better each time in each of these six drivers. And I've gone through these six drivers in 30 years of business, gone around the wheel, so to speak, and gotten better maybe, I don't know, 20 some odd times as I went through five stages of business. So the drivers drive your business maturity, drive your business success. They are personal. First, you take care of you. You're the problem. You're the solution. Purpose. Business is bigger than the bottom line, people. Building a unified team is key to winning. Plan. Winning is an intentional act. It doesn't happen by accident. Product deliver excellence. And the profits will take care of themselves. And lastly, profit. And profits fuel your purpose. And by the way, profits are the byproduct of having served your customer well. As Rabbi Lapin says, your customers will give you certificates of appreciation with presidents faces on them. When you do a good job, they say thank you. They leave you a tip. It's called profit because you took care of them. Now, those of us that are entrepreneurs, most of the time, we skip ahead of people, plan purpose and personal, and go right to product. Like we're sitting on the back porch and we think, oh, fishing line could cut grass. Maybe I need to invent a thing. We'll call it a weed eater. Yeah, and a whole new industry is born, right? Because we're all. As long as there are garages, there are rednecks inventing stuff. I'm just saying. And tech wizards in there with their stack of computer equipment and a few musicians in there too. And sometimes they're all one and the same. So long as we got garages, there's stuff going on in America. That's the way it is. And so we go straight to product, which is a mistake. Your product should flow from your purpose. All of our products are about making people's life better. Started in the area of money. Now it's in the area of leadership with this brand. Now it's in the area of mental health and relationships with the Dr. John DeLoney brand and the career brand with Ken Coleman and so on. But it's all about making people's life better. And our products do that. So we try not to do products that are aimed at doing that. So our purpose starts there and our people drive that idea forward. And then we have a strategic thought and a plan to develop a product rather than backing into those things after we discovered that we were an inventor. Now, sometimes you can do that, sometimes you can code an app and all of a sudden you're a big deal and you have to learn to do the other things. But it's much better. Your probability of success and sustainability is much better. If you will code the app out of a purpose, a thing that's burning inside of you that you need to do. Something happened to you that was injustice and you don't want that injustice to be in the world anymore. And you want people's lives to be better in that area. That would be pretty cool. So the product driver deliver excellence and the profits will take care of themselves. So as you're building the product, a couple of thoughts I want to give you on this. Number one, your first stab at it is not even close to what's going to become successful. Your prototype. I know it's your first child and I know no one has an ugly baby, but honey, your baby's ugly. Your prototype is always ugly. When you look back on it, it's laughably bad. My first book has sold 3.2 million copies. Oh, wait a minute. That's the sixth version of my first book, you know, like revised and updated. And we actually acted like we learned to spell this version versus the last version. Like maybe the English language and grammar was something that I knew, something about which I didn't. But I had an editor by the third version that did. When I self published and typed the thing out in my living room, the first ones, it would have flunked freshman English. Your prototype is ugly, but it's yours. And you think it's perfect and you think you're done. You're not done. You're just beginning. You're going to end up putting that thing in the dumpster with great pride before you know it. And your prototype could be a service, and the way you provide the service is going to change considerably. It can be an actual physical product. And so here's a rule. Don't order 10,000 of the ugly baby. You're gonna throw all of them away. Once your customers give you feedback and the things out in the wild, you're gonna go, oh, God, my idea actually is good, but my prototype sucks. And you're gonna throw them away and you're gonna start again. So limit your losses on cost of goods sold. When you put something out in the wild, you know, let's either build it on demand, meaning no inventory, or let's buy a limited amount of inventory with a reorder set up quickly. Let's not burn these things and throw them in dumpsters. I can't tell you how many millions of dollars I have thrown in the dumpster by violating that one thing because I was so stinking excited about, oh, this is the answer. And Dave's got it. And Dave's in our smart creatives. And look at this wonderful graphics. And we put it out in the wild, and people went, you are morons. And they didn't buy anything from us, and they laughed at us. And social media made a meme out of how bad my product was. That's happened to me, boys and girls. So I'm warning you, number one rule, your prototype is not pretty. You just think it is. You're the only one that thinks this ugly kid's pretty. It's not pretty. And you're going to throw it away. And how many of them you throw away is based on whether or not you actually listen to this piece of advice. That simple. And don't be afraid for your first one. You know, your first stuff to be a little bit rough. You know, the first notebooks that you got when you came to Entrez Leadership, if you came to one of our events, we printed them on the copier here and got one of those little squinchy things to bind them. And it looked like it came from a printer. But we had little girl, her job was squinchy. I mean, that was what she did. You know, she cut those little holes and put that little thing in there, and that's what she did for part of her job. And, you know, that's a technical term, by the way, but you know what I'm talking about, y'all. I mean, you don't it's okay to start a little rough. You know, minimal functional is okay to get something out the door. And limited in volume. So don't worry about that. Take the time to do this. And, you know, one of the ways we found out whether people like something or not was we would go do an event on the subject before we'd write the book on it. We don't write a book and then go, oh, nobody wants it. And now we're screwed. And we've got all this time and money invested in this. Instead, we put the information out in the wild on a podcast, put the information out in the wild on a social media post, put it out in the wild at a live event in an auditorium. And you can tell whether people like what are connecting with or being transformed with or being helped by that product. So the best product you can make, of course, is by letting the product be built based on your purpose, based on your team, based on your own personal insights, and based on a strategic plan. And that doesn't take the soul out of your product. Pulling things out of your ear or your rear all the time doesn't mean you're a brilliant entrepreneur. It just means you're impulsive. That's all it means. And you wait till the last minute to come up with something. You're the same person waiting to do your term paper till the middle of the night, and then you found a product called nodos and kept it going, right? No, that is not how you launch products. Products should be the end of a series of systems that spit out a product that has its best chance at living in the wild. And so build a solid firm foundation. You won't see sales roll in the way you thought if you don't have any money. And the item you put out there has to sell in two weeks or you're broke. You shouldn't have been putting something out. You weren't ready yet. Because you don't have the financial margin to let the market cycle. Because sometimes markets cycle or sometimes somebody will buy a bunch of stuff and you don't get paid for two weeks. And you thought you were going to get paid cash on the barrel head, but yet you still want to make that sale, right? So you've got to have a little wiggle room. You got to have a foundation, a little margin, and that includes the financial margin to give yourself some room. Because as much as we think this is a beautiful baby, it's not beautiful when it first hits the wild. And you're gonna polish it and polish it and iterate and iterate and change and throw away all the slack. And change and throw away all the slack. If it's a digital product, that's a natural process. No one puts out an app and five years later it's the same exact app. There's no such thing. If it is, the app's gone, it disappeared, it just dies. Because five years later it just didn't keep up with the 47 million Apple updates, for one thing. Right? So you've got to constantly make the product better. And in the digital world, it's the cheapest and easiest way to do it. So if you're putting out something like a digital product or an app, you can change that in 30 seconds or three and a half weeks, not three and a half years. And iterate, iterate, iterate, iterate, polish, polish, make it better, add tools, add stuff. Iterate, iterate, iterate, iterate, iterate, iterate, iterate. If you come from an analog world, like where I'm printing books, you don't get to iterate that you print the book. It's like print it done. The only way you iterate it is throw away all the stock and change 16 pages and redo it again. But it's super expensive to iterate on that now you can run the stock through and every so often put a new picture on the COVID We've done that, I think total money makeovers on the sixth picture or something and I've still got no hair, but it's still there. But I mean that, you know, I get progressively older. That's all that happened there. But the analog products are much harder to iterate on. But you're gonna even have to iterate those you're going to change and polish and make it better. Give yourself the room to do that. The number of times I talk to a young entrepreneur, a young entree leader, by young I mean they're new in running their own business. They could be 50 years old, they could be 25 years old. And they thought success was going to come quicker. They almost all do. And you know, there's what, three rules of business. It's going to take twice as long as you think it's going to. It's going to cost twice as much as you think it's going to. And you're not the exception. Those are the three rules of business. So give yourself the firm foundation to get your product launched to match that concept. Because no matter how much you have a product launch strategy, I've got a friend launching a cool product and just now launching it, and we're doing a launch party for him and it's a neat new product. But no matter how cool your launch strategy, you may get an initial spike out of it, but your sustained growth and profitability doesn't come out of the launch. The launch just primes the pump. So lay your marketing out for your product launch. Lay your marketing out to have a maintenance schedule after the launch and keep things moving. Keep tapping the customer on the shoulder different ways you know, if you got a launch schedule of 90 days, follow it up with nine more months of tapping on the shoulder. Maintenance schedules of whatever, whether it's your SEO, whether it's your email campaigns, or whether it's actual ad purchases or Google Word buys. I don't know whatever you're doing to push this out, but keep tapping the customer on the shoulder. But when you're in the launch mode, you're pushing it up in their face to where they're sick of hearing you talk about it, but at least by God, they know it's there. And you get, you lay the marketing out, study it, identify the problems, get it out the door. And as soon as you're able to iterate, iterate, iterate, iterate, iterate. Now in digital products, and you can do this with some analog products as well, if you can run a test on it at a low volume, that's better way before you go to launch schedule. And in the digital world, of course, we call the test the beta. Alpha is when six people are looking at it. Beta is when a handful of people are looking at it and using, actually using it. But you've not turned the product open to the public. You've not opened up the access to the app or whatever it is the digital product to the public and let that beta test give you all kinds of feedback. You can get the bugs worked out. Some of these things have more bugs than a, than a zoo has. But the, yeah, you gotta. I've had some stuff with bugs, I can promise you. I don't even like that word anymore. It gives me chills. Think about like seven figures worth of bugs. But yeah, you get the bugs out before you actually hit to do the launch party. You're still not gonna be there, you're still at prototype, but at least you've got a serviceable product that's not embarrassing to your brand. And then you hit the launch schedule with it and jack that puppy to the moon and then hit your maintenance schedule where you tap on their shoulder, tap on their shoulder, tap on their shoulder. But please, again, give yourself the emotional and financial margin for this to take longer than you think it's going to. And don't overstock on the initial inventory and overstock on something that's like digital can simply be. I'm over invested into it emotionally and unwilling to change it. You're gonna change it. You're gonna change it. You're gonna comb its hair, you're gonna cut its hair, you're gonna dye its hair. It's gonna change. And then the sad thing is, by the time you finish with it, it's not gonna look anything like the first thing you came out with. We've had 50 million people now download EveryDollar, the budgeting app, one of our digital products. 50 freaking million people. If you go back to the first app, if you could actually find it, you can't find it. It's gone. It's in our vault here. It doesn't look anything like it used to look. And thank God. I mean, we came out with that thing. We thought this was the prettiest kid on the block. We thought this one's going to be homecoming queen. And we look back at it now and you go, that wicked witch of the west has got warts. That is ugly. And it's just cause we've learned a lot from 50 million users. Hello. What they really wanted out of a budgeting app surprised us sometimes. And then we went and we delivered it and we delivered it and we delivered it. And by the way, if you downloaded everydollar four years ago and you've not looked at it, go look at it. It doesn't even look like. I mean, it's a completely different thing than it was when you downloaded it. So you got to give it another shot because it's a lot better. So iterate, iterate, iterate, iterate, iterate, iterate, iterate, iterate, iterate, iterate, iterate. Fix it, change it. You'll keep the core principles of what you have. Don't change your principles, but always change your processes. People that don't change their processes and instead change their principles are called bureaucrats. People that change the processes every day but never change their principles are called entree leaders. That's how you get a product to market boys and girls. This is real stuff from a guy who's done it a couple times. I've got a large number of formerly ugly babies. There we go. We iterated them out of the awkward stage and now they're like beautiful. And when I look back 10 years from now I'll be saying the same thing. That much I've gotten comfortable with. This is the Entree leadership Podcast. Thanks for joining us, America. If you want to help us out, you are our marketing plan. You're the only one I've got. Please help me. Yeah, the way you can help me is click the follow button and on the show, follow it, subscribe to the show, leave a nice 5 star review, click the share button and send it to somebody. Or click out the. Cut out the link and send it to somebody, tell them to listen to this show. We would appreciate it a bunch. Changes everything if you do that. Thank you for sharing with folks. Thank you for telling people that we're here. We really appreciate. Our numbers are, in all seriousness, way up. And we know that you're the reason we don't have a stadium named after us like Sofi. I'm sorry I got. Got the allergies, but the. We don't have that kind of marketing budget. It's just you and me, baby. So if you want this thing to go, you got to help us. Help us spread the word. We really do appreciate you. Scott's in Indianapolis. Hey, Scott. How can we help?

[Scott]

Hi, Dave. It's an honor to talk to you.

[Dave Ramsey]

You too, man. What's up?

[Scott]

So I am a former CEO and general counsel of a life sciences company with about 100 employees, and we did about 20 million revenue.

[Dave Ramsey]

Wow.

[Scott]

We were actually. We were actually acquired a couple years ago by a Fortune 100 company.

[Dave Ramsey]

Wow.

[Scott]

And if you can imagine, I. I was excited to maybe leave that larger company and. And join a smaller company. And so recently I've joined another growth company that about 150 employees. They do about 30 million in revenue. And I'm going to step in as the general counsel and build out the legal function for this company. And my question is, how do I best build a new team culture within this new organization and help support this company achieve its goals?

[Dave Ramsey]

Wow. What industry are they in?

[Scott]

Similar. So it's also a life sciences company.

[Dave Ramsey]

Okay. All right. So you're asking about the legal team's culture and 150 employees. How many people are on the legal team?

[Scott]

Yeah, it's just me right now. So it's a team of one. They've used kind of outside legal counsel up until this point.

[Dave Ramsey]

Are you adding to your team?

[Scott]

I hope so. Probably the back half of 2025. I'd look to add a contracts person.

[Dave Ramsey]

Okay, so you're talking about the rest of the company, not the legal team culture then, because you Are the legal team. So if you want to change the culture, you just look in the mirror.

[Scott]

Yeah, exactly. That's. You're right. As it sits here today, it'll just be me.

[Dave Ramsey]

It's more how you interface with the rest of the company and how the legal side of this company is perceived.

[Scott]

You're right. Yeah, that's my current question.

[Dave Ramsey]

Okay. I'm making sure I got my hands around what you're asking. Okay, good. That's a great question, by the way. Thank you. Well, I sense from listening to your journey and even your question that you're more entrepreneurial than the typical person in your role.

[Scott]

Absolutely. Yes.

[Dave Ramsey]

Yeah. Which is, I think, going to be a tremendous advantage to answering the proper way to handle your question, the proper way to implement what's handling your question. So my experience watching companies when they get to this size or even our size, which is larger, that if you're not careful somewhere along the way, and sometimes it has to do with the venture capitalists coming in, sometimes it has to do with the founder getting tired, the Generation 3 letting their foot off the gas. Whatever it is. Whatever it is. That happens that when the CFO and the accounting team, paired with the legal team start driving all the decision making, it's the beginning of the end. It's death to an organization. When the bean counters and the lawyers take over, it's death to an organization. And I'm excluding you from that insult because I don't think you're that guy. You follow me? But have you seen what I'm talking about?

[Scott]

Absolutely, yeah.

[Dave Ramsey]

Because I mean, if everybody's. It's not in the budget, which you need to have a budget and you need to stick to your budget. But if the whole thing coming from the accounting team is the accounting team is here to screw things up and slow things down, then who the heck, you know, wants to submit anything to the accounting team? They're a barrier. They're an internal barrier to getting crap done. And instead, the accounting team ought to be entrepreneurial and coming alongside the business unit and figuring out a way to get the business done. I did a contract with a. I won't name them, but a large known network to try to do a show on that network. And we made an attempt and it was a horrible attempt and I was bad and they didn't use it, thank God. But in negotiating the contract, I had outside counsel. I didn't have internal counsel at that time. It was years ago. I hired a major guy in that space and I was paying him like 1200 bucks an hour to get this contract wrapped up. The president of the network and I had a term sheet. The deal was done. Getting the contract to match the term sheet took 90 days. And my attorney that I had hired that was working with his network, he said he works with him all the time. And the people that work inside that network call the legal team the business interruption department. And so if I'm in your shoes, what I want to be is the exact opposite of that. I want to be the business facilitation department. I want the guys that are pushing products to the front lines going. Our legal counsel is so entrepreneurial that Scott can see the legal dangers and figure out a way that we can still maneuver through those things and get the product to market instead of Scott's. A barrier. Every time I try to do something, all he can come up with is all the reasons it won't work because you're actually not that guy. You just got to figure out a way to communicate that.

[Scott]

Right, Exactly. You're right. I do not want the legal team to be seen as the prevention department. To your point.

[Dave Ramsey]

Yeah. The business interruption department. It's just horrible name.

[Scott]

Exactly.

[Dave Ramsey]

Yeah. So their job is to screw up Christmas, and they're really good at it. Next they're going to work on Easter, you know, so it's just like, oh, my gosh. So, yeah, I think. And we've got about a five, six person legal team here out of 1200 folks. And, you know, it was weird here. Our senior legal counsel is so entrepreneurial, like you are. He didn't have any trouble with this. Where I had trouble with it was some of our leadership team that had worked at other places felt like they had to get legal's permission to do stuff. And we've never asked legal's permission to do anything. We told them what we're doing and told them to figure out how we were doing it. Unless they just want to stand and go, wait, Bridge out. This is really stupid. We're all going to get sued here. Don't do this, okay? I mean, there's. Sometimes they need to stand in the road and stop the truck, but most of the time they just go, hey, turn left up there. The road's smoother, okay? And we're gonna figure out how we're gonna do this together. But I had to break our team from going, the legal team is not your gatekeeper. The accounting team's not your gatekeeper. They are there to figure out a way to get stuff done, not keep stuff from getting Done. And don't you give them more power than they have inside this company? Cause they don't have that power inside our company. But we had to say that out loud, especially some of our people that came from dysfunctional, toxic teams that were run by the bean counters and the legal beagles. And so I think you can do that, but I think it's just going to take a little while for them to get confidence that you've got their best interest internally at heart. The only thing I want to point out is there's a bump in the road over there. You probably ought to turn a little bit. Right. And dodge that. But I still think we need to go forward with this because I see all the profit margin in what you're talking about. Yes, there's some risk, but there's risk in getting up in the morning.

[Scott]

Exactly.

[Dave Ramsey]

And that's how. That's the kind of way you need to facilitate this. And I think you just go on a campaign as soon as you get in there, sitting down with you said there's 150, I'd sit down with the top 15 to 20 leaders and influencers inside the company, have lunch with them and say, I want to form a different kind of legal department maybe than you've ever worked with before. I want to form a partnership with you on how we can get stuff done the fastest and the easiest without getting all our butts sued. And let me look at the contracts and help you do that and keep you from tripping over a trip wire where one of these companies is trying to slit our throat. But also, let me help you, but. But don't let me keep you from getting stuff to market. I want to be the guy that helps you. I want to be the. I want to be seen as your advocate rather than your problem. Help me do that. And I would have a lunch with 15 or 20 of them, one or two at a time, and get that word out and then follow that back up about six months later and do it again.

[Scott]

Perfect. I will do that.

[Dave Ramsey]

Is that kind of what you've got in mind? Am I hitting the nail? Is that what you're talking about?

[Scott]

You are definitely hitting the nail. Yes, exactly. I want to be that strategic partner. And I think they, you know, I know many of the team members and I think they understand that, but it's still to your point. There's probably a lot of history with past legal departments that that may not be the case. And I just want to help them, you know, enable their success and support their growth.

[Dave Ramsey]

I think it's rare enough that you will have achieved something cool when you do it. I think we're achieving it internally, but we've actually had to pay attention to it and work on it and because we're in the exact same. Having those exact same discussions. And it's accounting and legal. Accounting and legal. And I just don't have many traffic cops inside the building other than them. And you need them. Cause they keep you from running into each other. But yeah, I think we've said enough about it. You're the right guy for the job, man. And if you just play that through, then they're going to start to see you as an asset, as a. You're going to be a guy they want at the table when they're forming an idea. Because you add value instead of being the roadblock. It's that simple, you know, and that's a unique position to be in. And the beautiful thing about that is, as you know, there's so many tripwires in the legal world that. And we're in such a litigation oriented society that you can add tremendous value by taking that position rather than the bureaucratic position. So very, very cool stuff. I'm proud of you, man. Sounds like a cool gig. They're lucky to have you. 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.