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- [00:10]
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 leading in the trenches right alongside you. If you've got a question you want to ask on the show, fill out the form@entreeleadership.com ask or you can give me a call, leave a voicemail, we'll get in touch with you, make you a caller on the show. The numbers 8449-4410-7084-4944. 1070. Dan is in New York City. Hi, Dan, how are you?
- [00:52]
Dan
Hey, Dave. Honored to speak with you and great seeing you at Entrez Leadership Summit.
- [00:57]
Dave Ramsey
Thank you, brother. Good to have you. Good to have you. So how can we help today?
- [01:01]
Dan
Yeah, so I am the co owner of our family restaurant cleaning business that currently generates 4.75 million in annual revenue and employees, about 80 cleaners. My dad who started the company is 65 and ready to retire. I'm 26 and have been working with him since 2017. Recently, a large competitor has made us an offer to acquire our business, which frankly is more money than either of us have ever seen. And they're also offering me a leadership role to run their New York City operations. My question is, should we take the deal and sell or should I keep building on the foundation my dad started?
- [01:52]
Dave Ramsey
Okay, you're 26.
- [01:55]
Dan
Correct.
- [01:56]
Dave Ramsey
Sometimes one of the decision making formulas I use is I get out of the moment and I extrapolate out decades and say when I'm there, which of these decisions will I be happy with? When you're 56 and you will get a portion of this money or your dad is taking it all?
- [02:20]
Dan
No. So it's just my dad and I'm.
- [02:23]
Dave Ramsey
Saying the money, if you sell it, do you get some of it?
- [02:26]
Dan
Yes.
- [02:26]
Dave Ramsey
Okay.
- [02:27]
Dan
Would split it 50.
- [02:28]
Dave Ramsey
50. Okay. So you're going to walk away with a chunk of change and a job.
- [02:34]
Dan
Correct.
- [02:35]
Dave Ramsey
And you're going to invest that chunk of change into something and you're going to work this job. When you're 56 and you look back on your life, how are you going to feel about the 26 year old version of you?
- [02:52]
Dan
I never really thought about that. I never thought that far out into the future. I do know that the chunk of change that I would walk away with, invested properly in some, you know, growth, you know, index funds or mutual funds, could, could be a lot more than what it Is, you know, today.
- [03:13]
Dave Ramsey
Sure.
- [03:13]
Dan
Invested properly.
- [03:14]
Dave Ramsey
Of course it is. Yeah.
- [03:15]
Dan
And that's another thing that I also take into consideration that, you know, it would be several, several millions of dollars come, you know, when I'm 56 years old.
- [03:25]
Dave Ramsey
Yeah. Okay, so it's a million dollars, your part now.
- [03:30]
Dan
So it's a $6 million valuation, four and a half million cash at closing and one to roll over in form of equity into their larger organization to I guess incentivize me to certain targets, to continue to grow the business and, and you know, increase the value of the equity.
- [03:53]
Dave Ramsey
Okay. All right. Well, I mean if you put $2 million in your pocket at 26, it's not a bad day. You can do a lot of stuff. The, yeah, the, so I, I, I just want you to think, do you, you know, 10 years from now at 36, you're going to be working for these people or you will have moved on?
- [04:18]
Dan
Correct? Yeah. The, the what? I, I've had lunch and breakfast and dinner with the founder of this larger organization on multiple occasions over the last several months just because we've known each other for about two years or so. And their end goal is essentially acquiring all of these smaller competitors, bundle it up, get to a certain valuation and then sell it to, you know, some, you know, private equity firm or a very large, large, large competitor. So their ultimate goal is to just increase the value and then sell it in five to 10 years.
- [04:57]
Dave Ramsey
Okay, so yeah, then at 36, you probably won't be working there.
- [05:02]
Dan
Probably not.
- [05:05]
Dave Ramsey
Okay. I just want you to think about it in that lens rather than woohoo, I hit the lottery right in the moment and you know, because I think you probably are selling this. It doesn't, I don't hear anything here that sounds like red flag, red flag, red flag, dum dum dum dum. I don't hear any of that. Okay. But you will have fewer regrets if you think about the long term implications, not just the moment. If you've kind of played through what's the worst case scenarios? The worst case scenario is they screw this up and they go broke two years from now and you walked away with a couple million dollars and now you got a new career ahead of you. That's your worst case. Right, Right. Your other worst case would be you worked there till you're 60 and hated every minute of it, which means you needed to leave. Right. So we don't wanna do that. So those are the kinds of things I try to think about. What are the downsides? What are the downsides. What are the downsides? Extended out into decades. And if I can handle those, versus the obvious upside, which is the moment we're in, then yeah, that's probably a go. I will tell you this, and I don't think this applies to you. Okay. But I'm going to say it for the listener that's out there on this subject of selling your business.
- [06:31]
Sam
Right.
- [06:31]
Dave Ramsey
I have known, yeah. I'm trying to think 10 people that got hundreds of millions of dollars for selling their business and the only thing they got other than that was wishing they didn't sell it. The money got their attention. But I mean, I sat with a guy who got $400 million with tears run down his face going, that's the dumbest thing I ever did. I should have kept that. I loved it. And it's lost its soul under these new people. They don't treat people right. And I traded money for. And you know, so a liquidity moment, selling something for a big chunk of change is not always something that is without regret. Okay. I don't think that's your case, Dan, and I don't think it's your dad's case either, because I think your dad is at the end of his journey. He's ready to retire. It's an excellent exit for him. It's an excellent on ramp for something else for you. You can do all kinds of stuff with this in the either stay with these guys or not. And, you know, take that last bit of equity, it goes public or rolls up into a bigger one that's got that last bit of equity is going to turn in even more money. This is going to be great for you. So I think you do this okay. But I'm just for our other people out there, sometimes we in business, we think, oh, we got a big pile of money, we won. I've talked to a lot. I talked to one guy, got $11 billion and he had tears running down his face and it was 40 years later and he's just like, still, I hate it. And he still talked about the transaction in a negative, you know, sentences about the people involved and everything else. It was just awful. And so it's, you know, it's very real. So money is not necessarily the only decision making box to check. Matter of fact, it's definitely not the only one to check. And just because you get a pile of money doesn't mean automatically we need to do it. But listening to your old story, Dan, I think if I was in your shoes, I think I'd do this deal. It sounds exciting. Good luck with it and we appreciate you calling in. Appreciate you being with us at Entrez Leadership Summit.
- [09:03]
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- [10:27]
Dave Ramsey
In a typical small business, you spend more money on payroll than any other expense. If you look at a P and L on most businesses, even not small ones, the largest item on the profit and loss statement is always payroll. Almost always your team is an investment. It's the largest investment, which means you need to get a great ROI on it. This is where Entrez Leadership Elite can help. Elite is the online platform that we have that aligns your team so you can scale your business. You use these integrated tools we've built to get your whole team on the same page page Very important to get an ROI on the payroll 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 your back even when things get tough and you're scared. My leaders use Elite every week to unify over 1000 team members here at Ramsey. And now you can use Elite to align your team to grow your business with elite. Go to entreeleadership.com elite or just click the link in the description where you're listening or reviewing. Sam's in Greenville, South Carolina. Hi Sam, how are you?
- [11:39]
Matt
Hi Dave. Thank you for taking my call.
- [11:40]
Sam
Sure.
- [11:41]
Matt
What's up own a residential remodeling company. Did a million in revenue last year with profit margins in about the 40 to 45% range.
- [11:53]
Dave Ramsey
Awesome.
- [11:55]
Matt
Yeah. Doing good. And my question is, we have all subcontracted work. And for a legacy perspective, is it smart to hire W2 employees to run the business? Because as of now, I handle all sales and administrative tasks, and if something happened to me, the business would cease to exist.
- [12:24]
Dave Ramsey
It would anyway. Because the W2 people wouldn't know what to do.
- [12:31]
Matt
Right. But there's no. I manage everything, too, so there's no.
- [12:35]
Dave Ramsey
No, you've got to fix that. It's not the. Whether they're W2 or contractors. It's the I manage everything part.
- [12:42]
Matt
Right.
- [12:43]
Dave Ramsey
From a legacy perspective. So, yeah, you answer the question of, you know what. What happens if I'm not at work for two weeks? Oh, God. Right. And you're killing it. You have taken this thing to the wall. Way to go. Congratulations. You're working your butt off. And you're very good at managing the jobs and you're very good at managing the subs, and you're very good at managing the customer's expectations, completing things on budget and on time, or you wouldn't have gotten here. And that's a rarity in the space that you're in, because most people in the space you're in are jack legs. They don't do a good. But that's why you got no competition, because you show up on time and do what you said you were going to do. Am I right?
- [13:26]
Matt
You got it exactly.
- [13:27]
Dave Ramsey
Yeah. It's an interesting world. I love that world. And so. Yeah, and I always laugh. We did a remodel on a house 30 years ago or so or 25 years ago, and we couldn't get the doofus to show up. I was wearing him out. I hired the wrong guy. It was a small remodel, but my son was like, 14. And I asked him one day, taking him to school, I said, what are you going to do when you grow up? And he goes, I'm going to go in the construction business. I said, why? And he goes, it's an easy business if you just show up on time and do what you said, you're going to have no. You're. Have no competition. He got that at 14.
- [14:03]
Matt
You know, I'm telling my sons the same thing.
- [14:05]
Dave Ramsey
Yeah. It's just amazing. So, yeah, so I think that. I think you start to bring in your first layer of leadership, which is going to move you up into Pathfinder or from Pathfinder into trailblazer at this point. And then you decide what the model is for the actual on the ground labor. I'm fine in your business model because I grew up in construction and real estate. I would be very comfortable running subs.
- [14:37]
Matt
Right.
- [14:38]
Dave Ramsey
And I like that because I don't have to manage as much crap. And if there's no business, I'm not sitting there on payroll that's twiddling its thumbs.
- [14:48]
Matt
Right. And most of the advice that I've gotten to other people in my industry who are further along than I am, say, keep it the way it is, that I'm an oddball. That, like, nobody does that well, don't mess with something that works.
- [15:01]
Dave Ramsey
Yeah, I would keep subs. Now, I do think you need to have some on staff people. That's gonna increase your over, but it's also gonna increase your ability to do more jobs. So it's gonna increase revenue. So I think you need to. Have you got a W2 foreman or supervisor, job manager, whatever we wanna call them?
- [15:26]
Matt
No, I have no W2. I run all the crews, do all the sales. Everything is.
- [15:32]
Dave Ramsey
Yeah, yeah. I think that's your next step is you put somebody on to help you do the things you do not swing a hammer.
- [15:41]
Matt
Right. And I thought about that, and me just staying in sale at the sales position. But get someone to actually run the cruise themselves.
- [15:49]
Dave Ramsey
Yeah, well. And they're not going to do it instantaneously. You're going to run them together with them for six months to get them to run them the way you want to run them. Because I don't know where the person you hired was trained, but they probably don't do it as well as you do it.
- [16:01]
Matt
Right, right. And that's some walls that I've hit before.
- [16:05]
Dave Ramsey
Yeah, you've got it. You got to get them in. They got to do it Sam's way. Because Sam's way is fre. You know, they got to be able to finish the sentence of what would Sam do? Not what a supervisor or a foreman does. So, you know, I'm gonna bring you in, but your delivery of this on budget, on time. You're managing the subs. If they don't show, you replace them. Because we've got to finish this job. We told this homeowner. And you know, all those kinds of things you do every day, you keep the heat on. And you know, it's not okay that the stinking appliances weren't delivered on time. So we're on the phone with who going, get the crap over here. You know, this is what they do. They light a fire, they manage a project. And so it's a good job. It's a good job for somebody. And if you had somebody doing 70% of that and you're doing the other 30%, you could probably increase your revenue three or fourfold what that person costs.
- [17:09]
Matt
Yeah. And that's the metric that I've heard that they should bring in about three or four times.
- [17:13]
Dave Ramsey
Well, in this case, it's freeing you up and you're going to bring it in.
- [17:18]
Matt
Right.
- [17:18]
Dave Ramsey
That's true too, because you're not on the job busting somebody's chops over the appliances that weren't delivered. Instead you're over here making a sale. Right. And you're making sure the bills are paid in the accounting and you're managing some of the metrics, which is the spreadsheet on the job, you know, the job costing on each job and the schedule on each job. And so you're watching is this thing progressing while he's in the. While he's got dirt under his fingernails, pushing the stuff around actually on the job. And so the jobs are going to get more efficient and your estimating is going to be more accurate when you do this because you're not going to be bogged down in the day to day.
- [17:54]
Matt
Sure, yeah.
- [17:55]
Dave Ramsey
Yeah. I think that's, that's the higher. And I'm probably not doing. I don't think I want W2s if I'm in your world. As far as the actual work getting done. You may end up with a. A person that kind of is. Is the, the grout that fills in the gaps where a sub. You know, there's always on a job, it depends on the size of it. But when you're building a home, it's the same way. You need somebody who's going to just do the five, six little things that's not. Don't really fall under a certain sub.
- [18:26]
Matt
Right.
- [18:27]
Dave Ramsey
They can. It's almost like a jack of all traits. And they can sweep and they can tighten up a faucet and pay them.
- [18:35]
Matt
25 bucks now or whatever.
- [18:36]
Dave Ramsey
Exactly. You probably do need that. The more jobs you run, the more you can justify that. But in terms of your big trades, the electricians, the plumbers, the carpenters, the painters, the drywall, I'm going to leave them on their own.
- [18:52]
Matt
Got it?
- [18:53]
Dave Ramsey
You do what you want, but I'm just thinking through it with you. Because you can grow or shrink the business at will. You could double the size of the business and Hardly change your actual payroll. Yeah, because the subs are not a payroll item in that sense. And so you've not taken on the risk of I've got to pay these people. But all the, all the work, all the work dried up. That's that, that's all that risk is off the books with the way we're talking about doing this. So good job, Sam. I love what you're doing, man. And I can tell you're a stud. This is very cool. Very cool. Good stuff. Thank you for being a listener. This is the Entree Leadership Podcast. These days, business as usual is anything but. Tariffs make trade policy a moving target. Supply chains are squeezed and your cash flow is tighter than ever. If your business can't adapt in real time, you're in a world of hurt. That's why you need NetSuite by Oracle, trusted by more than 41,000 businesses, including Ramsey Solutions. You need to see what's happening, what's stuck and what's costing you and how to fix it. NetSuite is the number one cloud based business management suite because it helps your business make the right decisions fast. It brings accounting, financial management, inventory and HR into one place so you're not left shuffling a dozen different spreadsheets. That gives you the visibility you need to make quick decisions based on actionable data. And NetSuite AI automates everyday tasks so your team can focus on strategy. It's one system for full control and no guesswork to tame the chaos. And right now, if your business is doing a million or more in annual revenue, download NetSuite's free free ebook, Navigating Global Trade. 3 insights for leaders@netuite.com Ramsey that's netsuite.com Ramsey. Matt is in Lansing, Michigan. Hey Matt, welcome to the Entree Podcast.
- [21:03]
Sam
Hey Dave, thanks for taking my call.
- [21:05]
Dave Ramsey
Sure. What's up?
- [21:07]
Sam
So I am 24 years old. I own a remodeling business doing about 6, $750,000 a year with 6 full time employees. But I have $260,000 in super crappy debt and I don't have enough cash to get the projects done that we've got on the schedule right now that we've taken deposits for. So I'm trying to figure out a way to kind of get out of this without filing bankruptcy or taking on more debt just to. Just to survive.
- [21:40]
Dave Ramsey
Okay. So, wow, have you been losing money on these projects?
- [21:49]
Sam
We have.
- [21:50]
Dave Ramsey
So your estimating sucks.
- [21:52]
Sam
Estimating. Estimating did suck in the past three months since I started diving into this We've increased our gross profit from an average of 18% to like 35.5%. And we're still going up from there, but we're kind of drowning in the past mistakes.
- [22:10]
Dave Ramsey
Okay, what kind of debt is the $260,000 in debt?
- [22:15]
Sam
Yeah, so we've got about 185,000 in debts to the bank. So that's going to be credit cards, merchant cash advance term loans, lines of credits, a couple of trucks. Then we've got about 72 and a half thousand dollars in vendor debts.
- [22:36]
Dave Ramsey
Okay. Okay, so how many jobs are underway.
- [22:49]
Sam
Right now we have five jobs underway as we speak.
- [22:55]
Dave Ramsey
Okay. And they've all given you a deposit and you've begun work?
- [22:59]
Sam
They've all given a deposit. We've begun work. But I made some super silly decisions and didn't have a lot of financial clarity when I took these deposits. And so a lot of those deposits went towards kind of cash flowing the business and making up for losses on past projects. We're starting these ones from behind the eight ball.
- [23:19]
Dave Ramsey
Okay, so you don't have the money coming in unless you add a new project to pay payroll, right?
- [23:32]
Sam
Yeah, we've taken, we've taken between 30 to 50% up front for all the projects we're working on now. We've got a few more in the pipeline, you know, after we learned the lesson, stop taking deposits up front and using them for other stuff. But we'd have to, we'd have to rearrange a schedule to put, push, push those projects ahead to actually make any money to, to really get to the other projects.
- [24:01]
Dave Ramsey
Wow, what a mess. All right, so unless you take other projects, you can't make payroll and you can't buy supplies to do the current stuff under way.
- [24:12]
Sam
Yep, yep.
- [24:20]
Dave Ramsey
Okay. Because I'd be fine with not paying the bank and I'd be fine working the vendors. So the 260, I can just stiff arm that if I can get these jobs completed. What do the six people do?
- [24:39]
Sam
So they are, we've got five that are field labor, installers, carpenters, and then I've got one project manager.
- [24:49]
Dave Ramsey
Okay, do you have access to any micro four day projects that you could put one of these guys on that turns some cash right quick?
- [25:01]
Sam
Yeah, we've got, we've actually got a couple on the schedule. We just, we pushed one up last week that we got knocked out so that helped us, you know, make payroll for this week. So we're trying to secure some more of those. But a couple of these projects we're going to be probably $60,000 short on as far as, as far as labor material goes after those deposits were gone. So we'd have to, we'd have to do quite a few small projects in a short time period.
- [25:26]
Dave Ramsey
Yeah, you're going to have to. And, or you're going to have to take supplies on credit.
- [25:32]
Sam
Yep, yep. Which, the struggle with that is, you know, we've already done that and you know, we've got, I know these big vendor bills that we can't pay.
- [25:40]
Dave Ramsey
So they're not likely to let you go pick up a bunch more stuff. Yeah, they're going, they're going to put you on code pretty quick.
- [25:47]
Sam
Oh, yeah.
- [25:50]
Dave Ramsey
Okay. So one of the five projects, the smallest of the five projects. How much was the deposit and what's the total size of the project?
- [26:00]
Sam
Yeah, so that, that project, we're going to wrap that one up today. But that one was an eighteen. Eighteen and a half thousand dollar project. We took half up front about four months ago.
- [26:09]
Dave Ramsey
So you're going to get the other nine right today.
- [26:14]
Sam
Right.
- [26:14]
Dave Ramsey
Hopefully. Okay. All right. And that's going to help you make payroll.
- [26:18]
Sam
Yeah.
- [26:18]
Dave Ramsey
So now we're down to four projects.
- [26:20]
Sam
Yep.
- [26:21]
Dave Ramsey
Okay. Because my, my, the way we turn this is we survive the stuff that's on the books that you screwed up the deposits on the remaining four. And the way we survive those is we generate enough cash from micro projects and side projects to make payroll and complete the existing projects. What's the largest of the four?
- [26:47]
Sam
The largest of the four. And this one is absolutely ridiculous that I did this, but it's a $256,000 home addition. We took half up front for that and used that to float the business for the past six months.
- [27:07]
Dave Ramsey
Okay, wow. All right. If we take that one off the table, that leaves three. So what I'm trying to do is choose my pain. Okay. Because those people are probably gonna sue you before this is over. Because I don't, I don't think you're gonna finish that one on time anyway. They're gonna go ballistic at some point. And rightly so, actually, but yeah. Okay. The other three projects, what size are they? Because I'm going from 18 to 256. You're all over the map.
- [27:54]
Sam
Yeah. So then we had another. We had a kitchen remodel that was 90,000. We took half up front for that same thing, used it to make up for losses on past projects. That one we're going to wrap up next week. We've taken progress draws throughout that project. So we're going to get that one knocked out. But that one comes with a vendor bill of $45,000 for the cabinets. My fear with that one is if I, if I, if I don't pay this vendor, they're going to go ahead and put a mechanical lien on that client's house.
- [28:25]
Dave Ramsey
And you don't have 45 more coming because you've already taken other draws against the second half.
- [28:31]
Sam
Right.
- [28:31]
Dave Ramsey
Okay. All right, so how much do you have coming on that one?
- [28:36]
Sam
So that one, we've got 9,000 outstanding, which will cover the remaining payroll to get it knocked out.
- [28:47]
Dave Ramsey
Yeah, probably not. You're probably going to give a lot of that 9,000 to the vendor and work a payment plan with them on the balance, telling them what's going on. You got any more cabinets? You're buying from them?
- [28:59]
Sam
Well, we're supposed to buy cabinets from them for this home edition that we've got also. But we actually found the same cabinets at a different vendor for about $8,000 less. So we're going to switch over to a different vendor anyways.
- [29:12]
Dave Ramsey
Yeah, okay. But I'm just saying. Yeah, you're probably not going to get any more business out of them.
- [29:16]
Sam
No.
- [29:16]
Dave Ramsey
Once you put them on a payment plan and give them five grand towards their 40 and go, hey, I'm trying to save this and I'm trying to keep from filing bankruptcy, so work with me here and I'm going to send you money as quick as I can. I know I got to get this cleared, but. And you add them to your 72 vendor list, basically. And. But you work out a deal with them so they don't file the mechanics lien. All right, so that gets us down to 256. Plus two other projects. Oh, my gosh. What are the other two?
- [29:44]
Sam
The other two is one of them is a bathroom. We just started that one this week. That's going to be another four weeks left at that one. We should actually have enough coming in from the project. We only took 30% up for that one.
- [29:57]
Dave Ramsey
And you started this week and you spent the deposits this week?
- [30:02]
Sam
No, we spent the deposit. We took the deposit for this one about two months ago. So that deposit was gone. We just started it this week.
- [30:09]
Dave Ramsey
Why did you wait two months to start?
- [30:12]
Sam
We were just booked up that far with bad projects.
- [30:15]
Dave Ramsey
Okay, okay, so that one's how much again?
- [30:19]
Sam
So that was a $45,000 bathroom. We took 30% up front on that one. But the remaining draws on that will cover all of the costs for materials and things.
- [30:29]
Dave Ramsey
So you can run that one out. You can run that one out. So then that only leaves one more.
- [30:35]
Sam
Yep.
- [30:36]
Dave Ramsey
Because the 18's done, the kitchen's done, the bath you can run out. You got the big 256. What's the last, what's the number? 4 1.
- [30:44]
Sam
The last one. That one's a whole house remodel. It was $186,000 project. She's mostly paid up. She owes us about six and it's going to cost us about nine to finish it over there.
- [30:54]
Dave Ramsey
She's almost done.
- [30:56]
Sam
Yep, this one's almost done.
- [30:59]
Dave Ramsey
So you're out except for the 256.
- [31:03]
Sam
Right.
- [31:03]
Dave Ramsey
And some cabinets.
- [31:06]
Sam
Right. And a few other vendors.
- [31:10]
Dave Ramsey
Yeah, I mean you got the 72,000 worth of vendors, you told me that. But I'm talking about we're adding cabinets to that or we're adding a portion of that $40,000 cabinet bill to that. And then you got the 256, which is a freaking disaster. And the rest of them you're done with.
- [31:25]
Sam
Yeah.
- [31:26]
Dave Ramsey
And you're finishing all of these projects. They're all coming to a head.
- [31:29]
Sam
Yep, we're going to finish all those. The cabinets that you.
- [31:31]
Dave Ramsey
So why not take new projects and run them properly?
- [31:38]
Sam
Right? Yes. I mean, once, once we, once we clear these last. These last few. And we've just got the big one.
- [31:46]
Dave Ramsey
No big ones. I want you to take. I want you to kill rabbits, not elephants. I want you to turn stuff in two week turns and let's just start generating cash at 40% margin. Two week turns. Don't take anything else big and long. You can't afford it right now. You can't handle to sit on the deposit and you need to take a deposit, but you don't need to take a deposit. But in your business you should take a deposit. But yeah, so you're out. You've made it through except for the 256 is what we're saying. And some cabinets. So yeah, go take a bunch of short term projects and then prioritize where the. As you finish those and you clear, you know, you take a $20,000 thing and you clear six grand, eight grand. What are we doing with that? What are our priorities? Well, our priorities are payroll and truck payments and then vendors and bank is last.
- [32:46]
Sam
Right.
- [32:47]
Dave Ramsey
Credit cards can jump in the creek. I don't care if your credit goes bad, screw it. You need to clean up that mess. But. And then you, you know, so if you do a million dollars, that's going to make you 400k in the coming 12. You could clear all of this in 12 months. But you're going to have to learn to do short term stuff and you're never going to manage cash the way you did because this is way stressful. I'm stressed out and it's not me.
- [33:11]
Sam
Absolutely.
- [33:11]
Dave Ramsey
It's no fun. I mean, really, you're not having any fun, Matt. Whoo. Yeah. So you have learned your lesson. You'll never do the misuse of the deposit again, right?
- [33:24]
Sam
Absolutely not. Absolutely not.
- [33:26]
Dave Ramsey
Yeah. You run these jobs as separate standalone businesses. They're Separate P&LS your job cost everything back to the job and you keep all the money in the job that's on the job until the job is done. And only then if there's money laying there do we clear it and move it onto general fund.
- [33:43]
Sam
Yeah, that makes perfect sense.
- [33:45]
Dave Ramsey
Yeah, you've already, you already learned that lesson though, I think, haven't you?
- [33:48]
Sam
I, I did. I did. We did, we did start job costing and treating the funds as separate.
- [33:53]
Dave Ramsey
Yeah, yeah. And so. Yeah, you gotta run. You gotta run. Yeah. I think you're in the quick turn small ankle biter stuff where you make 40% and you just do a whole bunch of them. And if you can't get enough of those really fast, you may not be able to keep all six people.
- [34:18]
Sam
Right.
- [34:19]
Dave Ramsey
You'll have to look at and force rank those guys. But if you can get enough to keep them busy and you're making 40% on everything they're doing, you're not only making the payroll because that's part of the cost of the job, your job costing their hours, but you're making a 40% profit. And so yeah, if you go make half a million dollars, that's 200 grand. 200 grand gets you out of this mess because you could clear your vendors and you can finish the 256. The bank is still going to be sitting there looking at you, but you got to wear and you're going to have to work through them. But that's a longer term issue.
- [34:56]
Sam
Yeah, they're kind of aware of the situation actually and they've been super cooperative. The bank already?
- [35:02]
Dave Ramsey
Yeah. Because they're screwed.
- [35:04]
Sam
They don't have a, they don't have a choice.
- [35:05]
Dave Ramsey
They don't have a choice. Yeah. The only thing, the only thing that proactive they could do is pick up your trucks.
- [35:10]
Sam
Right.
- [35:10]
Dave Ramsey
But other than that they're just screwed. And so. Yeah. And don't factor any more of your receivables to Them, they don't get any more liens on your stuff. Yeah, they're sitting on the sidelines. They get paid after we stay open and move our way through this 256job and then after we start clearing those vendors up, cabinet people included. And then bank is last on the list. Credit cards are last on the whole list. Trucks would be at the top of the bank list. Following me.
- [35:43]
Sam
Yes, sir.
- [35:44]
Dave Ramsey
Yeah, because it's gonna take them longer to get to you and screw up things than the other people we're talking about. So. Yeah. Can you line up $500,000 in the coming 12 months, five to $800,000 in the coming 12 months of small jobs that are three week turns.
- [36:01]
Sam
Yeah. In the next 12. Yes.
- [36:02]
Dave Ramsey
Yeah.
- [36:03]
Sam
You know, obviously we learned that I am not good at managing large projects and we lose money on them every time, so.
- [36:08]
Dave Ramsey
Well, you can manage them, you can learn how to manage them. But I don't want any more. I don't want any projects of any size I lose money on. This ain't a hobby, so. But you need the quick cash turn that the large job, even managed well does not give you. I don't need you taking draws on that large job in addition to the deposit and redeploying those draws. That's what got us here. So instead I just want completion, profit in pocket and profit then applies to mess. Is that working?
- [36:44]
Sam
Yeah. Makes sense.
- [36:45]
Dave Ramsey
One more time. You think you can get 5 to 800k of two three week jobs?
- [36:51]
Sam
Yeah. In the next 12? Yes.
- [36:52]
Dave Ramsey
Yeah. And then if you want to go stick your toe in the water on larger jobs 18 months from now, you can pick one up maybe. But there's a lot of money to be made in those small bathroom jobs and the three week turns on a paint job or, you know, whatever, without taking on a complete rebuild.
- [37:11]
Sam
Yeah, absolutely. They're historically their highest gross profit projects anyways. We should have been focusing on them from the start.
- [37:17]
Dave Ramsey
Yeah, I agree. I agree. Well, it's okay to have a product mix five years from now that includes one department or area of the company that does the large stuff. While we've got the other thing over here making bank on these small turns. The small turns are also a lot more front office work per dollar. So I mean, it takes as much effort to sell a small job as it does a large job, for instance, almost. So, yeah, that's what I'm going to do. I think you can turn this. You've got to prioritize where every dollar goes and you've Got to start generating some cash. And so what we did while you and I were talking was we just said, okay, this is an elephant. It's a mess. How do you eat an elephant? A bite at a time. And I start going through. I started going through every detail and said, okay, here's a bite. Oh, that job's done. Oh, that job's done. Oh, that job's done. Oh, and we can get there. And we got this one problem with the kitchen. Oh, okay. And now we've got the 256 is the only thing left outstanding. Plus the 72 and the cabinets and the 260 or the 185 bank stuff. So you can get there, dude. But that's what you've. That's how you've got to approach it. Because if you look at the overarching thing like I was doing at the beginning of our conversation, it's overwhelming. It was overwhelming me. I couldn't figure out how you're going to make it. I just about told you to punt, but. But you're not punting. You're going to make it. You can turn this. But you're going to work your butt off and pay for your sins by having no life for the next eight months. You're going to just. And you're working for everybody else. You ain't working for you. You're working for the mess you made and you can clean it up, though, and you'll be glad you did. And it's going to take you. This is a very profitable business when run right. Second remodel call in this show. One highly successful one almost bankrupt. There you go. But right, remodel's got. Both of them had the potential to make a 40% margin. Don't you just wish in some of your worlds you could do a 40% margin? Hello. So there we go. Yeah. So you can do this, Matt. But it's going to be a lot of work and you're going to be very focused on every little detail and not let someone else reset your priorities. Once you put them in place. You force rank who gets money when and if somebody doesn't like that toughies. They're going to get their money when they get their money. Maybe you lose a relationship with a vendor permanently, but that's different. You're going to lose it when you file bankruptcy anyway. So you might as well take pick your pick out who's going to be mad, decide who's going to be mad and why and what power they have and you know, mechanics, lean or take the trucks or what? You know, what's the downsides? Wow. Very, very interesting, dude. Very interesting. I think you can do it. Hey, holler at one of our coaches. And if you need some help as you're weeding through this, I bet one of them can walk with you through this.
- [40:14]
Sam
Wow.
- [40:17]
Dave Ramsey
Does leading your team feel like herding cats? Even if your business is winning financially, a misaligned team will create new fires for you to put out every single week. But with Entree Leadership Elite, you'll align your team and hold them accountable so you can stop herding cats and start scaling your business. To join Elite, go to entree leadership.com elite or just click the link in the description. If you're listening on YouTube or on podcast. Allison is in Charlotte, North Carolina. Hey, Allison. Welcome to the Entree podcast. What's up?
- [40:56]
Allison
Thank you. Thank you for sharing your wisdom and taking my call. I own a small consulting business with nine employees. Last year, our profit was 2.1 million with. I mean, I'm sorry, our revenue was 2.1 million with a profit of 535. My son, he will be a freshman in college in the fall, has expressed interest in owning and running it one day. It's one of college to study business. My question is, at what age or phase would it be appropriate to let him see the business financials?
- [41:31]
Dave Ramsey
What are you trying to accomplish by him seeing the business financials?
- [41:37]
Allison
My thought was that eventually, if he is learning business in school, that it would be more enjoyable to see real life financials and, you know, what can be done to improve this, and it would be a learning experience. On the flip side, obviously don't want to give too much information because it's also our personal finances. But as a. As a potential business owner, I thought that it would be exciting for him to see the potential that the business has and apply it to what he's learning in college.
- [42:18]
Dave Ramsey
You said he's a freshman.
- [42:20]
Allison
He will be.
- [42:21]
Dave Ramsey
So he just come out of high school just the other day.
- [42:23]
Allison
Right, Right.
- [42:24]
Dave Ramsey
Okay. All right. How many kids have you got?
- [42:30]
Allison
I've got two.
- [42:31]
Dave Ramsey
And is he the oldest?
- [42:34]
Allison
He is the oldest.
- [42:35]
Dave Ramsey
Okay. All right. And how emotionally mature do you think he is?
- [42:43]
Allison
He is. He is very emotionally mature, but we live well beyond our means. So I don't know if that would be too much information to give him, you know, until he live.
- [42:55]
Dave Ramsey
You said you live well beyond your means. Below. Below your means. Okay.
- [43:01]
Allison
Below our means.
- [43:02]
Dave Ramsey
Okay. All right.
- [43:03]
Allison
So, you know, it would. I think it would be a lot for him to wrap his head around. But he is very mature for his age.
- [43:12]
Dave Ramsey
The way that we did that was not just business, but the overall net worth and everything was. We unpacked when the youngest got to college and unpacked with the two new in laws, Rachel's husband Winston and Denise's husband Bill. So we sat down, five of us. Daniel wasn't married at that point. He was in college. And the way I set the table was, you know, we've always lived our life below what we make. You guys have not known what we made. We also have an additional problem in that we're celebrity status or whatever bull crap that is in the spotlight, right? So everybody wants to know your business or thinks they know your business or acts like they know your business and all that stuff and they don't know squat. But you know that kind of stuff, right? So that's an added component. But the. So the way I set the table was we're people of faith. I said, okay, number one, you're gonna see some numbers in a minute that are gonna be hard to emotionally digest. The proper way for you to see these numbers is not that you hit the lottery. Cause you didn't. But instead God owns everything. As for me and my house, we serve the Lord. And so God owns all this. And someday it's going to be your responsibility to manage it or if you come into the business to manage it in that way as well. But these assets, this net worth, this amount of money is if you choose to take the responsibility to be a steward for the Lord to manage this money for him, then you're going to see this as a responsibility. You're not going to see this as woo hoo, I just hit the lottery. The DNA lottery. And to their credit, having set the table that way their whole life and having reset it that night together, they were very somber and almost a little bit worrisome that that was going to be a heavy thing to carry, right? Instead of like, oh God, I can go, I can go spend money, I can go get a car. It's going to be great. Mom and dad are rich. You know, it was, it was none of that. Okay, it was quite the opposite. But that had to do with spiritual maturity, emotional maturity, how they were raised. And we set the table that way. Okay, so. And that night as we unpacked it, and then their eyes were rather large. They're like, holy crap. Well, I mean, you've been taking nice vacations, boys and girls. I mean, you had to know that was coming from Somewhere, but no. So your son may have a little bit of that. But. So I would set the table with him of number one. I think this will be interesting to you as you're studying business. By the way, his first year in college, he's not going to study any of this.
- [46:16]
Allison
Right.
- [46:18]
Dave Ramsey
So you might be a year early on this discussion.
- [46:21]
Allison
Is it? I was thinking that now is too early, but you know.
- [46:25]
Dave Ramsey
Yeah, but you know, his sophomore year would be fine.
- [46:29]
Allison
You think it would be.
- [46:30]
Dave Ramsey
I'm fine. I'm fine. While he's in school. Yeah. But I'm going to set the table.
- [46:35]
Allison
Working in the business now, I'm just.
- [46:37]
Dave Ramsey
Going to say, okay, it's very important that this is super confidential. Oh, by the way, I did say that too. You know, you can't, you know, you can't talk about this to anyone ever, except to each other. The people at this table are the ones that can talk about it. That's it. Nobody else. Because people can't. They can't figure, they can't. Other people cannot avoid envy and jealousy when they think they know something. And so, you know, it's like no one should ever, you know, hear all that. You start hearing all that stuff. So, okay, so anyway, I would set the table and say in the name of you learning business, I think this would be interesting. It has to be super confidential. And you're gonna have to emotionally and spiritually understand. This ain't yours, it's mine.
- [47:29]
Allison
Right?
- [47:29]
Dave Ramsey
And you have no rights to it just because I'm telling you about it. So, you know, this cannot allow you to become unmotivated because mom and dad will support me because we're not going to correct. You still gotta go get your grades, you still gotta have work ethic, you still gotta do all of that. And if you wanna work in this business, you gotta be twice as good as everybody else that works here because you're not gonna be respected. Otherwise they're gonna think you're a doofus child that got the job.
- [47:58]
Allison
Correct?
- [47:58]
Dave Ramsey
And so you gotta lay all that out and then do it. But if you just splash it out there, you do run the risk of a 20 year old not emotionally grasping this or coming to wrong conclusions because of it. But I think you just preempt those wrong conclusions and go, I'm concerned about doing this, but I'm gonna do it anyway because I want you to have this stuff. But here's the danger. The danger is that you don't think you have to work. The danger is you tell somebody about this this is family confidential information. The danger is that you become emotionally overwhelmed with this because it's a large number. These are dangers, and you need to. I'm counting on you being a man, not a little boy, my son, in order to accept this information and do with it what we're hope. And the information being a blessing to you. And when you set the table that way, I think you'll be fine.
- [48:51]
Allison
Thank you very much.
- [48:53]
Dave Ramsey
Now, if you told me he's got a drug problem, he doesn't like to work, and he cusses his mom out all the time, you know, no, we're not doing this.
- [49:00]
Allison
He's great. And, you know, I wouldn't even be considering.
- [49:05]
Dave Ramsey
I know, I know. But I'm just saying I assumed, the way you described this kid, that this kid is a solid kid. Yeah. And that's what I was going on. And so obviously, we're not sharing it with dysfunctional people because they're going to do dysfunctional things with it.
- [49:22]
Allison
Right.
- [49:23]
Dave Ramsey
The information and come to dysfunctional conclusions. And so that's the thing. So it's kind of like if you want to take it weird. It's like sometimes when people hit the lottery, they don't tell anybody because of their family.
- [49:39]
Allison
Right, right.
- [49:40]
Dave Ramsey
It's that kind of thing. So that's what you've got to be careful of. But, yeah, I think it's good training. Spiritually, emotionally, mathematically, business acumen. All of that is good training. And it's worked out well for the Ramses. We haven't had any major upheavals with that. And it's a wonderful question, by the way, and congratulations on all your success. You've got great margins in your business and sounds like you're running a wonderful, wonderful thing. Very proud of you. Good stuff. All right, folks, remember, better a wary warrior than a quivering critic. This world needs more high quality leaders, so take courage and lead. I'm Dave Ramsey, your host. Thanks for listening to the Entree Leadership Podcast.