EntreLeadership - Am I Being a Crotchety Old Boss?

Episode Date: July 1, 2024

Today we’ll hear about: A business owner trying to get his team to stop working through lunch Three signs that quickly identify someone with bad leadership skills A business owner who doesn’t know what his partners are doing with the profit Why taking on debt is not a smart way to save on taxes Next Steps 📞 Have a question for the show? Call 844-944-1070 or send us a message: https://ter.li/askus  👣 Find out what Stage of Business You’re In: https://ter.li/axd39b ✉️ Sign up to receive tactical tools, advice and resources in your inbox every week: https://ter.li/y8qdo7   🏢 Attend EntreLeadership Summit: https://ter.li/fcazl2   🎤 Attend EntreLeadership Master Series: https://ter.li/wcjhpu ☎️ Learn more about EntreLeadership Coaching: https://ter.li/ycznhl 💵 Learn more about Ramsey SmartDollar: https://ter.li/4imot0   🗳️ Help us make the show better! Please fill out the quick survey form. https://ramsey.qualtrics.com/jfe/form/SV_01hjJ6UN8mnQPNI   Offers from Today's Sponsors NetSuite: https://ter.li/x1t20q BELAY:  https://ter.li/yohiu6 Payority:  https://ter.li/fh2oau Trainual:  https://ter.li/a8zexl Found:  https://ter.li/ggwmrv Listen to more from Ramsey Network 💼 The Ken Coleman Show 🎙️ The Ramsey Show   🍸 Smart Money Happy Hour 💡 The Rachel Cruze Show 💰 George Kamel 💸 The Ramsey Show Highlights 🧠 The Dr. John Delony Show Ramsey Solutions Privacy Policy https://www.ramseysolutions.com/compa… Learn more about your ad choices. Visit megaphone.fm/adchoices

From the headquarters of Ramsey Solutions, this is the Entree Leadership podcast where we 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, just like you. This is a show by a guy who actually does it every day. It's not theory. It's not a think tank. I'm a practitioner.

And we're glad you're with us. Thanks for hanging out. You've got a question and you're running a small business. You're a hero as far as I'm concerned. We'll help you. We'll tell you the truth. And I'll do the best to can to help you move to the next stage, the next level. You can level up and move through the process and get better and better and better at this whole thing called business.

If it was easy, everybody would do it. But you have the courage to do it and we're here to help you. You're the hero. If you got a question, go to Entreeladership.com slash ask and leave the question. And we'll get back to you and make it. you a caller here on the show, or if you leave a voicemail at 844-9-4-1070, same thing will occur. The team will holler at you and get you on the air with us, and so thanks for hanging out. James is going to start this hour off from Cincinnati, Ohio.

Hey, James, how are you? Hey, Dave, I'm better than I deserve. I've been wanting to say that for years. I love it. Very fun. How can I help you, sir? I own a cybersecurity business. We've been in business about 25 years. We've got 18 employees. Last year we did just shy of $4 million. Good for you.

And the question I have, we've got a few employees that want to work through their lunch hour and leave an hour early. And am I trying, am I being in the cratchee old boss that, like, doesn't understand, or am I being realistic wanting them to work, the eight hours with a break in the middle. But what's your thoughts?

Well, I mean, there's nothing wrong ethically or morally with either idea. It's a matter of what expectations you set, and it's kind of matter of who's in charge, you know? And so, you know, an example of that also would be, like, we at Ramsey have made the decision that creativity and productivity and trust and quality of communication goes way up when we are all in the same building.

And so we work from work. Is it morally wrong to work from home? No, it's not morally wrong. We have actual data points that tell us that it's less efficient and not as much work gets done. so we have chosen to not, chosen to not do work from home. Now, I've had some people that said they wanted to work from home, and so they quit and went to work for somebody who wanted to work from home, which I guess makes me the crotchety old boss in this scenario, right?

But it is my name on the side of the building, and it is my signature in the bottom of your freaking paycheck. And I'm not arbitrary or mean about it. It's just this is the decision we've made. made based on what we know. We know things move at the speed of trust, and it's very difficult to trust someone sitting in their pajamas on a Zoom call. And so it's just, you know, we don't do it. And I'm not mad about it, but other people are angry and feel entitled to tell us that we have to do something, and we're not going to do it. And it kind of feels like that's what you're experiencing. Am I

reading too much into this? No, no, that's exactly it, right? I had a couple newer employees start to do this, and then it went to a couple more. And I'm just honestly afraid everybody's going to start doing it. And then I've got a customer service issue to that last hour of the day where we need stuff done and there's nobody here. Everybody's driving home. Yeah.

So that's my big issue with it. So I think we just sit down. It's only 18 and we just sit in a room and go, hey, guys, here's the thing. Okay. The work that you do as a group includes customer service. and so if you're not here because you went home early, then the customer doesn't get served.

And I hired you to part of your job description is to take care of the customer, which means that you can't leave early. That's what our arrangement is. Now, if you want to work for someone where customer service and being available to help the customer is not part of your job description, then you would probably have to be somewhere else.

Because here, we exist for the customer, and we're going to take care of the customer. Their needs, wants and desires, trump yours and mine. Because if we don't have a conversation with the marketplace that says, we love you customer, and the customer says we love you back, then we go out of business. And I don't want to go out of business.

So we're going to serve the customer and the proper way to do that is for you to be here to do that. And so I kind of let this stuff slide and let some of you work through lunch and then go home early, but that's leaving a gap in our customer service. And I'm sorry, I apologize. I shouldn't have let it slide because now it's going to feel like I've changed my mind or gone back on something. And I really haven't. I just let y'all get away with it.

And I've decided we're not going to do it that way anymore. And I just want to let everybody know. Okay. And, you know, if two of them quit. sounds reasonable, right? Yeah, it's very reasonable. And if two of them quit, then they're the one that's unreasonable. Well, thank you, Dave.

I appreciate that. It's not, the thing you've got to remember is when I'm dealing with the nuanced relationship issues with Gen Z and with millennials, I have to be very, very clear about if you happen to be one of the, members of those generations that feel entitled, that you're not going to fit in here. Now, I've got a building full of Gen Z and millennials that are amazing team members. I love those generations.

I think they're amazing. A whole bunch of them sitting in the booth over here doing the show right this second. And I think they do a great job because they care deeply about what they're doing and it matters a lot. But some of their fellow members of their generation have the idea that they somehow are,

because TikTok told them that their workplace activists or something, that they get to come in and tell the guy who's paying them how he's supposed to run things. And that's upside down, and you may be the first one to correct that lesson for them. And so you're not entitled. You work for me. We made that arrangement.

I give you money. I tell you what to do. Exactly. Your paycheck shows up on time. We just expect you to work your good 40 hours a week and be productive. Yeah, and we, you know, that's our arrangement. It's a fair arrangement. It wasn't, it's not a shock.

It's not a surprise. When we hired you at Ramsey, we told you we work from work. We didn't change it after you came here. You knew what you signed up for. And then, but then to have a little hissy fit because you want to work from home or because you want to work through lunch in your case, right? Isn't what we signed you up for? And it's okay if you don't want to do that anymore.

You changed your mind. You're allowed to not work here. You can not work here and go to heaven. It's okay. And same with you. So you're going to lose one or two, and it's going to teach you to be much more clear on the front end. And when something like this occurs,

also to nip it in the bud faster and have lots of clear accountability because the fact that you let this go on has given them permission and it's enhanced the entitlement and it's going to cost you probably but that's okay it's a small lesson

you'll just have to do some rehires but maybe you won't maybe I mean and I'm not suggesting you're belligerent come in though your weight around but but there is this actual fact that those of us in leadership it's a way of serving

you know I take it all the way back to parenting even folks it's a way of serving your children to remind them that mom and dad run the house the inmates don't run the asylum and i love you and i'll listen to your input and i'll empathize with your question or your pain but at the end of the day i'm the dad she's the mom we make the call and you don't get a vote at the end of the day. And we'd like to have your input. We want to, you know, where do we all want to go out to eat?

You know, where do you, what do you? Tell me about your school. I want to understand. I want to be a listening ear and take all of that into my effort to serve you. But as I serve you, it means you're going to brush your teeth. As I serve, it's not an option. As I serve you, you're going to do your freaking homework. It's not an option.

and I'm going to tell you, wants to clean your room, and then there's going to be consequences. And that's not mean. That's teaching you how to become a great adult later. And so that's what, you know, real service sometimes involves strength and people, some people aren't used to being served that way. James, you're a good man, and you've got a great business. I'm proud of you. Growing that all the way up to $4 million with 18 people, and you've been doing it for a lot of decades, and you ask the right kind of questions for a small business guy with a big heart that loves his team, it still kind of wonders, and by lost my mind in this current age, no, sir, you haven't. This is the Entry Leadership Podcast.

Do you have a company mission statement? I'm not talking about a brochure feller. I'm talking about what your real freaking mission is. and you wrote it down. It's a statement with like bugle sounds or trumpets. Mission statement, right? If not, you need to get one. Your company's mission statement is it's driving force.

It tells everyone who you are and what you're not and why you're in business. It'll unify your existing team and make it easier to know whether or not a candidate is a good culture fit. Here at Ramsey, I got about 1,000 team members on the payroll, and all of them have our mission statement memorized. it matters that much. So if you'd like to know how to write your own company mission statement, then go to entreleadership.com slash mission to download our free mission statement builder. Entreeleadership.com slash mission.

Be sure you do that. So Inc. Magazine pops this out. Three signs that quickly identifies someone with bad leadership skills. When employees don't have the right tools, training time, or support, their morale drops, and they might not put in much effort. This can happen right from the start within their first few weeks. It's important to realize that not all managers are created equally, and many must learn how to lead effectively.

Through my experience, I've noticed three common toxic behaviors in management that can really hurt a team and damage of business. Number one, failing to recognize people's work. Don't underestimate the power that comes from recognizing high performers who are intrinsically motivated by their work. Gallup surveyed more than 4 million employees worldwide on this topic, and they found that people who received regular recognition praise increase their productivity, increase their engagement among their colleagues,

are more likely to stay with their organization and receive higher loyalty and satisfaction scores from customers. Have better safety records and fewer accidents on the job. So how do you turn that around? Well, it's pretty simple. You start recognizing people. There you go. That wasn't hard.

And so I'm going to stop a second, and just sidebar, aside from Inc. Magazine here, I'm not sure who the author of this particular article is. I'm not picking on them, but we in business have, for a long time, used the phrase, leader, interchangeably with manager. I think words, I'm a word person because I do a lot of writing and books and that kind of thing, and so I think words matter. what does a manager do they manage they manipulate if you want in a positive way i don't mean

manipulate like a jerk but you're you know one guy said managers count stuff leaders are out in front saying come this way bosses push leaders pull and so once i heard that uh uh i yeah i i I don't remember where I was, some leadership conference, I'm sure. But once I heard that, I quit using the term manager. We don't have a single title inside Ramsey that says manager. Because I really don't want people counting stuff. I want them leading the way. If you're in a leadership role, meaning there are people supposed to be, you know,

following your direction, it's not you cracking a whip on their back. It's you showing the way. and in some cases knocking down stuff for them, so the way is clear when they get there. That's leadership. Leadership is serving. And so leadership would always tend to give other people credit and take the blame.

Leadership is service. Leadership would always have a tendency to recognize other people's work and say, way to go, hero. You knocked that out of the park. You're amazing. You're killing it. Your work is incredible.

You're beautiful. I love what you do. And, you know, light them up. And sometimes you need to do recognition publicly in front of a whole bunch of people. Occasionally someone, because I've got a young crew here, someone's parents will drop by to visit Ramsey and be in the lobby when I come out of a commercial break. And I get to tell them, I'm really glad that their kid is here because their kid's amazing.

And we know that they got great parents because great parents are where amazing kids come from. So, yeah, I mean, I get to brag on them to their parents. That's pretty neat. That's a neat kind of recognition, right? And of course, you can also recognize people just by catching somebody doing something right and hand them a $100 bill and say, hey, take your spouse out to dinner this weekend. Ah, there's some nice recognition. So let's create an incentive to walk around and catch people doing something right. Ah, there we go. Okay. That's how. you turn that around. Number two, according to Inc. Magazine, in the three signs that quickly identify someone with bad leadership skills, being a control freak. A boss who macromanages

wants to control everything, making the work environment suffocating. They don't trust the team and rarely let others take on bigger tasks. This means there's hardly any room for teamwork or new ideas because the boss calls all the shots. This kind of environment can be frustrating for employees who want to feel valued and enjoy their work. If things don't change, managers might eventually lose their people to a competitor. Oh, they will pretty quickly. How to turn things around. Trust your team to do the work you hired them to do.

Shift your focus from task management to results-driven leadership. Yeah, that's leading instead of managing. There you go. Okay. This allows you to prioritize strategic responsibilities, demonstrate trust to your team. So here's the thing. As a team, if you're suffocating the entire team, that makes you a micromanager. But sometimes what happens is a person who's new,

is good at their particular skill, but they haven't figured out how to apply their skill inside of your company's environment. Because there's a unique way you guys do that thing. And there's a unique, maybe set of expectations on that skill worker, that skill team member. And so you're not micromanaging in that situation. You're training.

You're mentoring. but as soon as they have shown that they know how to do what they do the way you want them to do it, then if you keep suffocating, you're definitely a micromanager, you're a control freak. But sometimes people who just generally don't like to be trained or mentor, go, well, you're a micromanager. No, not a micromanager. I'm freaking showing you what to do because you don't even know where the bathroom is yet. You just got here.

You know, I mean, come on. and so it takes a minute for you to get what's known as a clue. And that's called a training period. That's not, you know, my boss is a micromanager. How long you work there? Two weeks. No, you don't even know what's going on yet. It's impossible for you to be micromanaged for the first two weeks of your employment

because you're not even adding the value equal to what you're being paid yet. You're useless in the first two weeks. it's impossible that you were micromanaged. At best you were being trained. So don't just throw around, it's like he's a micromanager. It's like they throw around, he's a narcissist, you know, she's a narcissist. And like they throw around psychological terms as if they know what they mean. And like everybody who disagrees with you, honey, that is not a narcissist.

Let me help you with that, okay? And everybody who's trying to train you is not a micromanager. So, but if you're taking, the way this ink makes you, magazine reads this out, I agree with it. Micromanagers wants to control everything, making the work environment. They don't trust the team and rarely let others take on bigger tasks. Now, I will tell you this, too, sometimes I've had, let me say that a different way, almost always inside of Ramsey there is a team that's not doing well.

There's almost always inside of Ramsey a team that's ringing the bell and doing excellent. Okay, guess who we're leaving alone? The excellent team that's ringing the bell. Hello, hello. If you micromanage them, that's just stupid. Let them run. The thoroughbred's out of the gate. Let them win the race, man. Here, let's go. But the team that's not doing well, they need help. And just letting them suffer and death spiral and crash the plane, no, we're going to come alongside you and help you. And so that's a time where the whole team might get some additional attention, some additional training, some additional rethink on the business model, how we're pricing, structure, our orgs chart inside that area. Yeah, you can get all of that if you're failing, because if you're failing, you haven't earned the right to be left alone. Hello. And so expect some help then from leadership, and that's not micromanaging. But, yeah, the way this is written, I completely agree with the conclusion of the author. Number three,

having the last word. Many managers I've coached over the years operate on the assumption that because they're the boss and in charge, they have to have the last word on everything. A moment of honesty. This person rides on the wheels of low emotional intelligence. When a manager doesn't solicit opinions of others, get buy-in from team members, and listen to the collective voice of the team

in pursuing a particular strategy or vision, people don't fear, cared for, respect that or valued, consequently trust erodes. Moral goes in the tank. How to turn things around. Genuinely listen to feedback. Customer-facing people on the front lines may know more than their bosses.

Good managers will leverage this to get more. valuable feedback from the team to manage problems and create solutions. Very good. I agree with that. We'll listen and learn something from their smart and more savvy workers once they operate in an ecosystem instead of an ego system. Yeah, exactly. And so you've got to be comfortable enough in your own skin to hear out opinions and to hear out things, even if they're wrong, let them have a voice and let them finish. And then go, okay, now consider that. And here's what we're going to do and here's why we're going to do what we're going to do, and then we all line up and we go, whether it's in agreement and a direction that the team brought a different suggestion,

different strategy, or whether it's something that you, the owner, you the leader, want to do, and, you know, you listened, you at least had a listening session and heard them through. That's absolutely true. So, yeah, I generally agree with that. So, and here's the thing, too. if you've got, for instance, a sales team on the front line, and there's 10 of them, and they all come in with the same conclusion about the price point, that doesn't mean they don't know how to sell.

It means you've got a problem with the price point. But if you've got eight of them making sales and one of them's complaining about the price point, that one doesn't know how to sell. That's different. And so, you know, you can listen to the input of the one who's failing and blame it on price point while the other eight are making their sales goals. but the input, I mean, you're just being kind to listen so that you can turn around and go, yeah,

but the other eight ain't got your problem, so the problem might be you. And we've got to turn around and start working on you now and help you with your skill set because you're not ringing the bell, you're not closing the sale, as an example, okay, whatever, whatever. Maybe it's a project management issue, not a sales issue, but wherever you are in the thing,

you can listen through, and if it's a, you know, the people on the front lines have really good information about what the cost customers doing. But not a single individual gets a vote that changes the whole company because it might be the single individual's weakness that we're dealing with, not the actual customer problem. And so be careful that you ascertain between those. So what we're looking for is a trend line in the opinion that you're gathering. But yeah, listening versus just talking. Absolutely. Absolutely. That's the way to go. Well, good article. Well done, Austin. Thanks for pulling that

out. Worked out great. So be sure and check this stuff out. Nice job ink magazine. It was something to yak on today and put our little Ramsey spin on it anyway. Good stuff. This is the Entree Leadership Podcast. I'm Dave Ramsey, your host. This is the Entree Leadership Podcast. Thank you for joining us. Garrett is in Indianapolis. Hi, Garrett, how are you? I'm doing well yourself? Better than I deserve. What's up? I'm just reaching out. I'm the operating partner, a three quick service restaurant that employees, just under 200 employees with top sales, just under that 12 million mark. The reason I'm reaching out or looking for advice is I want to know to enter a good business partnership. I'm in business

with two family members. They're the main owners and beneficiaries of the company. And it's just making it, I feel like, harder for me to see a financial, positive in the future with this business model that I'm in. The three of you are equal owners? Not equal. So I am a minority partner. There are three different locations. I own 19% of just the operations in one and then 25% in the other two locations.

Okay. And how did you come by this? Did they give this to you as you rose up through the ranks and became a leader? or was this the original deal when the three of you went together and bought these restaurants? Yes. So it was throughout the moving up the company more or less. So I actually started in a different career path. I was working with them on more or less a hiring an HR function about eight years ago.

And then about two years into my journey working with my family, was given the opportunity to, hey, let's go open a restaurant together. And we came to the agreement, you know, 19% of the operations was a good starting point. I was very young and naive. When I went through that, didn't ask a lot of questions, was more or less happy for the opportunity, happy that someone believed in me and wanted me to go into business and was happy to see my name on the side of the door saying owner-operator. And then over the course of the last four or five years, just learning more about business, seeing the time and effort and actually reading the operating agreement I have with them,

and seeing, you know, how they are growing. I feel like we have a little too many hands in the pot at certain times. And I just want to make sure I'm not working my life away and not going to see a financial gain in the long run. Okay. So I'm making sure I understand the other two partners are like they are family, but you're not. family so they're actually my uncles oh okay you're two uncles you're the nephew yes and they brought you along as a minority shareholder yes correct how old are you and they i just turned 32 uh two weeks okay and what is the long term plan then long term plan was just to continue to run it as a

owner operator with them um over the course of the longevity of the business the only reason I say that, I feel like it hard for me to see a financial benefit down the long road is there's just, they are growing out of rapid rate. When we joined this partnership years ago, they only had at the time seven culvers. So I was very fortunate and thankful that they thought of me, hey, let's go open a culvers together. Now they've had success with myself and the two other other business partners. Now they own and operate over 30 locations. And they have, I'm not sure how many business partners they have now off top of my head but there's just more fees into it oh and so you're not you only own part of three of 30 yes only i'm only in three of them correct okay and

but you're not getting payout due to the one-fifth ownership that you're are you getting a fifth of the profits as right now i'm not i haven't seen a distribution yet i do have a salary that I have that I take on the buy we could pay. I opened the first location just over four years ago. It's doing very well. But I haven't seen like a distribution yet. Are you seeing the P&Ls? Seeing the P&Ls, yes.

There's a profit? Yes, there's definitely... What are they doing with a profit? That's my concern is... I mean, we had a doubt. Go ahead. The operating, I mean... they should be either putting the profit back into those three restaurants or in your pockets.

We've had a profit every year. Obviously, the profit in restaurant business aren't huge, but, you know, anywhere from 10% our best year I've seen since being an operator is up to a 20. And that was a really good year. But there's, I don't see the income at the end. Where did the profit go? You don't know? As of right now, I know it's embarrassing to say, but no. Why don't you know?

Why have they not told you? Are they hiding it from you? Or you just hadn't bothered to ask? It's a little bit of both. So I definitely have asked. We have had a change in our financial team at their company. Got rid of the previous regime, got a new regime in. And the new CFO I've talked to where you had to get our retain earnings.

And the previous financial regime, let's say we're cutting corners, wasn't saving money, we were just focused on growth, growth, growth, growth, growth. How are you having growth, growth, growth, growth in the three restaurants? Well, growth, growth is them buying other restaurants, hopefully not with your profits. That's my concern, yes. Well, it's not a concern. That would be just wrong. Yeah.

And so you need to clear that up because you're basically, if they, They owe you profits and they're using them to buy them other restaurants instead of paying you out as an owner. Even as a minority shareholder, that's wrong, obviously. I mean, even if you're a minority shareholder, it's not morally, it's not ethical for them to take 100% of the profits and do something for themselves with it and not anything for you. Yes. Does that make any sense? Oh, it makes perfect sense. So I, yeah, I want to, you got to solve for that, dude.

you need to call your uncles and have a cup of coffee with them and go, hey, I need to understand this. Where'd the profit go? Because I feel kind of dumb. I don't know. Yeah. Yeah, and I do definitely feel kind of dumb. No, I mean, just ask them.

What's wrong with having a cup of coffee with them go, hey, guys, I don't know where the profits went. I feel kind of dumb, and it's bothering me, so help me with this. Yep. What would they say? They'd be happy to sit down and talk. They're great guys. Okay.

Great guys. they'd be more unhappy to sit down and talk. Then that's what you need to do. Because there may be a perfectly logical explanation, and then your angst goes away. And then your next question while you're going ahead and have this conversation is show me a path

how this is going to result in me building wealth over time because I don't want to run... Basically, for three years I've been working for this salary, and I thought I was an owner. Yes. And I want to see a path how that benefits, me because that's why I'm working my tail off over here. So show me how this works. And I just don't understand. You don't have to be accusing. You can just be asking. Be curious.

Yep. It's fair to be curious. It's not a fair to be accusing. And if you don't go get the answers to those questions, it's your fault. Yes. So yeah. I agree. Yeah, you, you know, you are in a, I would not have signed you up for this trip, okay? You're in a disadvantaged situation. anytime you're a minority shareholder in a small business, you have absolutely nothing. There's nothing you can do. You have zero power. Your vote doesn't count.

And so whatever they decide, if they want to put all the money back into new equipment, you don't get a say. You just kind of have to go along with it, right? So, you know, minority shareholder positions in small businesses are worthless. Now, the other question I've got then is, if you decided to exit, is there a payout for your position? Yes, yeah, yeah, there is.

We do have a valid operating agreement. That gives an exit strategy? Yes. An exit formula. Yes. Okay. So you know what that is. So what would you get if you left?

Well, that was the other concern that has me anxious. You know, my shares, say, we sold the whole business, all three of us got out. No, that wasn't what I said. If you exit. If I exit, so I would get my equity in the business, but my shares are discounted at a 60% rate. Yeah, okay. Which says that you don't have 20%, it says you have 12%. Yep.

No, you have 8%, 8%, I'm sorry. Like just under 8, yep. Okay. And so, but we don't know what shares your value, what value they placed on your shares either. There is a value of per share. Okay. So you know exactly what you get. How much would you get then?

You probably run the numbers. Yeah. For, you know, there's a little bit different for each restaurant. I know. How much money would you get if you quit? If I quit right now, you know, I'd get around $700, $800,000? Yeah. That's pretty sweet.

Yeah. Okay. I'm, wow. I'm shocked. I'm aghast. and now I'm confused about what you're dissatisfied about. Not dissatisfied. I guess I...

Your discounted shares are worth three quarters of a million dollars. Yeah. Oh, darn. I hate it when that happens. I've always... That you paid nothing for except your sweat. No, I had to, I did put in money. How much?

So it'd be 75, 350. Okay. So you doubled your money. with your sweat. Yeah. Wow. Okay. Pretty good return on investment.

I think you need to figure out where you could do this well, where else you could do this good. And it may be just some discovery and some clarification of the vision of where we're going and where the profits have been going that brings you back down to earth and satisfies you. Because I'm not hearing it. I don't like a minority share position, but I don't hate yours because you're making. some stinking money, man. I mean, it's pretty incredible. In three years, you've doubled $350,000. And, yeah, so I think you should go ask questions with curiosity about the future and about where the profits went, and then that should give you enough to satisfy you and work your butt off. This is the Entree Leadership podcast.

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If you want to say thank you to us, that's how you do it. We appreciate you hanging out. Mike's with us in Lynchburg. Hey, Mike in Lynchburg, Virginia. What's up? Hey, Dave. Thanks for taking my call. Sure.

I run a, I'm basically in charge of a lumber operation and we have about 15 employees. We do roughly 5 million in sales. Purchase the building back in 2019 and we are looking to grow again. We've grown about five times so far and the aspect we're struggling with now is we would like to pay cash for a building. However, as the company has become a little more profitable and gotten large, We're trying to avoid a very large tax burden as we save compared to possibly financing and wanted to kind of get some of your thoughts on that. Hold on, hold on, okay.

So you made a lot of money and it's taxable. Yes. And you think by financing the warehouse instead of paying cash for it, it's going to help you with your tax problem. How? So this year we're at about a 35, or 35. 4% tax rate. Yeah.

And the initial idea was, you know, basically save 600 over a course of four years, five years to pay for, you know, a $3 million billion. Yeah. And then I looked at the amount we paid taxes and I was like, oh, man, that's just a lot. Yeah. And how does financing get rid of the taxes? It doesn't. I thought so.

Yeah. Not even close. There's no write-off on debt. I mean, you write off the interest, but that's all. I mean, no, but I mean, the interest is all this deductible, right? So if you borrow, you're talking about it, like a million bucks, right? Right. Okay, so let's just pretend.

Let's pretend you borrowed a million bucks at 10% to make the math easy, okay? I don't know. Let's call it 6%. Okay, you borrowed a million bucks at 6%. That's $60,000, right? In interest. Right. So you have a $60,000 tax deduction.

So you give the bank $60,000 and you lower your income by $60,000. That's what a tax deduction does. So it takes away taxes on $60,000. In a 30% tax bracket, you save $20,000 in taxes. Does that sound right to you? Right. So you give the bank $60 to keep from giving the government $20. Where is this smart?

It's not. Okay, so where's the massive tax burden avoided by financing? Not. Okay. I didn't think so. So, welcome to the world of I'm pissed at the government because they take a third of my freaking earnings that they use as legalized theft. Now, I'll go with you on that. But, wow, but going to the bank is not going to help you with this problem.

It just turns 60 into 20. Right. from the very beginning, you just got crushed from a tax perspective? Yeah. Yeah, I've never been able to avoid getting crushed as long as I made money. Yeah, I don't. There's no, you know, this thing that, this crap in the media that the rich don't pay any taxes is absolute horse durs, man.

It just is not true, okay? Because they did. I mean, you make, you know, you guys made a million bucks. You're giving up $300,000 for you even get to breathe. and your small business people run in a lumberyard in America where we need houses built because we have a housing shortage but Washington loves small business

bull they screw them every day Congress screws small business more than anybody else with this dadgum tax laws and there's nothing you do you save money in a small business you take it home in a small business either way you get taxed there's nothing you can do about it other than you know and there's not even because there's not even

because any tax right off is always a deduction unless you get some kind of weird credit but even with a credit it's a one for one it hasn't saved you you know you're giving up a hundred thousand to save a hundred thousand it doesn't really do anything you know so it's still a swap and spit but uh oh god it's so maddening i'm with you mike it aggravates me but it doesn't force you to finance your warehouse when you have the money to pay cash for it. Net of tax, you've got to do it. And then you're going to continue.

What's going to happen when you do that is you're going to control more and more of the variables in your life because now the landlord is you. And now on your expansion, if there's a slowdown in the marketplace and you're not able to sell as much, your rent is not going to put you out of business because you is the rent, right?

Right. Yeah. If you have to. I kind of jumped into this thing without even really paying attention when it was purchased and as I've gotten deeper and we've grown a lot larger. You know, now I'm like, oh, man, I start to learn. Yeah, it's, you know, so sub-s, LLC or sole proprietor, all are taxed on retained earnings every year.

So that's what I mean by Congress screws for small business people. We do not have a, we do not have a tax loophole or a tax protection. for the small business owner to hold money to grow their business. They didn't take it home and consume it. And so it's not in that sense income, but under the current tax code, every money you pull back, every dollar you pull back to put in retained earnings

is taxable as if you took it home and went to Florida with it, you know? So, you know, or wherever it is you went to spend money. I don't know what Florida. But anyway. But the, yeah, it's just, I, share your aggravation. And every April 15th, I'm pissed off perpetually around that two-week period of time. Nobody wants to be around me.

Because I know how many zeros I'm sending those bozos up there who can't find their butt with both hands. And it just, you know, it aggravates me to no end. And so I empathize with you, but I don't have a solution because there's not one in the tax code. The only thing. And what happens is entrepreneurs get confused. They go, oh, I'm going to buy a bunch of crap I don't need.

and business expense it, well, then you're trading $60,000 for $20,000. Or I'm going to give the bank some interest because that's deductible. But then you're trading $60,000 for $20,000. And it's a dumb trade. You're trading dollars for quarters. We don't want to do that. So, no, we don't want to go that way. Man, I'm so sorry.

I wish I had a great answer for you to avoid massive tax burdens. The only one I got is vote. That's it. So stir up trouble and vote. Legalize trouble. don't do something illegal. I never recommend doing illegal stuff, except speeding.

But other than that, you know. So that's how it works, boys and girls around here. Man, oh man. Hey, 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.