EntreLeadership - Does My Employee Deserve a Raise?

Episode Date: June 23, 2025

Today, we’ll hear about: •             A business owner considering if his employee deserves a raise •             Dave Ramsey’s advice on how to fix cash-flow problems •             A businessman struggling to decide which employee to promote •             A businesswoman wondering if buying a building is the next right move Next Steps: ·      📞 Have a question for the show? Call 844-944-1070 or send us a message: https://ter.li/ask-us ·      📚 Learn about the EntreLeadership System: https://ter.li/system-p ·      💻 Get EntreLeadership Elite for your business: https://ter.li/elite-p ·      ✉️ Sign up to receive tactical tools, advice and resources in your inbox every week: https://ter.li/enl ·      🏢 Attend EntreLeadership Summit: https://ter.li/summit  ·      🎤 Attend EntreLeadership Master Series: https://ter.li/masterseries  ·      📖 Order Dave’s new book, Build a Business You Love: https://ter.li/b4kru2 ·      📺 Watch a free sample talk today: https://ter.li/om7p3e   Connect With Our Sponsors: 💼 Go to Belay Solutions or text ENTRE to 55123 for their free resource! 💻 Visit NetSuite today to learn more. 🧾 Visit Payority for a free consultation! 📈 Grab ⁠Sales Gravy's⁠ free resource to help you hire and lead better. 📝 Use code ENTRE15 to get 15% off your first year of Trainual.   Listen to More From Ramsey Network: 🪑 Front Row Seat with Ken Coleman 🎙️ The Ramsey Show 💸 The Ramsey Show Highlights 🧠 The Dr. John Delony Show 🍸 Smart Money Happy Hour 💡 The Rachel Cruze Show💰 George Kamel   Ramsey Solutions Privacy Policy Learn more about your ad choices. Visit megaphone.fm/adchoices

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 got a question, you want to ask on the show? Well, you fill out the form at Entreeleadership.com slash ask. Or you can call. Leave us a voicemail.

We'll get back to you, make you a caller on the show. 4-44-9-4-1070. 844-9-4-1070. Chris is in Raleigh, North Carolina. Hey, Chris, how are you? Hey, Dave, I'm doing well. How are you? Better than I deserve.

What's up? So, Dave, I've owned a jewelry business for 35 years, and just within the past three months have bought an existing jewelry store in my town, taking it over. So that's your second location? Yes, sir. Second location in the jewelry business. My main store does 1.3, top line.

We're yet to see what the new store does. We're expecting to be able to do about 800 the first year out of it. And my question is, so I've kept one of the employees from the previous store. She's got about four months of experience in the jewelry business, and I'd like to work her into a management role. She's not there yet. I'm trying to figure out how to structure her payroll to keep her happy and productive and on board. Yeah, that's basically.

Yeah, so if you put a new person that was four months old on the job at the old store, how would you have structured it? So that person, if I brought somebody into the old store and they had four months experience, I would just bring them in strictly the salesperson. They would get $16 an hour plus commission, and they would, then get raises depending on the education that they had completed in the jewelry industry and those sorts of things. Why would that not work here? Well, I started her off at 18, but she was requesting 21.

What was her basis for 21? Because she is from the other store, and she knows how everything runs, and that was the amount. You know how everything runs. You run a store. That's very true. So, I don't know. I mean, you're making her an assistant manager, not just a salesperson. Is that right?

That is correct. Well, then that's a different comp than you told me you had at the other store. Well, fair. You're just a salesman, $16 plus commission, right? Right. But now we've got a manager trainee is what we've got. That's true. Okay.

So that might be 20. That might be 21. I can see her getting 21 plus commission as a manager, which with commission would put her at about 28 on average. As a manager trainee or an assistant manager, I think, I personally think 18's fair right now. And my thought was as she moved up and took on more responsibility and took over management of the store that I was going to pay her an hourly wage, and I was thinking about maybe doing a profit sharing plan with her. Okay. So what I would do is say, here's the three stages.

Stage one is where we are now. Stage two is going to be another thing. Stage three is going to be your final destination, which is manager with profit sharing. Okay. And we're going to get there as fast as you get there. And here's what it looks like for you to stage gate to level up. in each of those things. In order to get to stage two, which is, I don't know, whatever it was,

$20, $21, $23, I don't care, and commissions, you know, I've got to get the store open, I've got to get it running, and we need a minimum of three months of that, and I need you to complete these three things, whatever they are. When you complete, when you hit these three levels, these three milestones, we're going to move you to this. no sooner than three months, no later than six months, because if you're not there about six months, we've got another problem. Okay?

Right. So I need you to hit these. I don't care what they are, things that prove her competency and value. Okay. Okay, and so it could be, like you said, completing a portion of education. It could be that we hit a certain level of profitability at the store,

or we hit some revenue goals at the store, or you help me get two people hired, or I don't care. What are some things you need for her to prove herself that are measurable, objective, not subjective? And then she moves to stage two. And then when she does the next three things, then that has proven to you that she's ready to take the manager's role

with a straight salary plus profit sharing. Okay. And then you sit down with her and go, this is your path. I'm starting you here, but you control the speed at which we get to the other place. by hitting these distinct goals. So the first thing you've got to do is you've got to get to level two and you have to do these four things or two things or six things.

I don't care what they are. You get us to there and at least three months has passed and then I'm going to be comfortable with that and I'm going to move you to $22 or $23. I don't care, whatever the number is. That's a good number, okay? But show her a path instead of slapping her and saying $18 or shut up.

Right. That's not what I want to do. Absolutely. Yeah. So give her a path, give her a path where she controls her destiny with her performance. And sometimes we call that stagegating or leveling up or whatever. But I mean, it's, you know, when you hit this, you're going to break, it's almost like gamified, right? You know, when you get to go to the next level, Mario Kart, whatever it is, right, all that kind of stuff. You see what I'm saying? So that's how I would do it in this case. and the biggest reason people leave is when they don't see a growth track.

People that are ambitious and that want to increase their responsibility, their value that they're adding and their income, they have to see a growth track. They have to see this as going somewhere. If they feel like I'm in the other, the opposite of growth track is the dreaded dead end job. That's got bought the store, $18. I can make $21.

at target and be bored, I'm going to target dead end job. But sure or future, it's bright. It's not a dead end job. That's what we're doing there. So that's the, yeah, good question. I like, thanks for let me noodle that through with you. Sounds like you got this thing on the run, dude. You're getting rid of a two, three million dollar business out of two stores. I like this. Yay, yay, yay, yay, yay, yeah, yeah, yeah, yeah. It's over to me. Yeah, very good. CEO, not the chief marketing officer. Your job is to cast a vision, lead your team, and drive growth. But when your marketing is inconsistent or last minute, your customers feel it and it can hurt your brand. Plus, if you're staying up late writing social posts or planning out your own email campaigns, your business isn't growing.

It's grinding. That's why, if you're not ready for a full-time hire, you should contact Belay about a marketing assistant. Belay fractional assistance are based in the U.S. and are matched based on your personality, tasks, company culture, and systems. Marketing assistance from Belay are more than support staff, their strategic partners, someone who can write, design, schedule, analyze, and optimize your marketing across multiple channels. That way your message is clear, your calendar is clean, and you can finally get back to leading. Because delegation isn't dumping tasks, it's about releasing responsibility to someone you trust. And Belay helps you do that.

So if marketing keeps falling to the bottom of your to-do list, it's time to delegate with confidence. Just text Entree to 55-1-2-3 for Belay's free guide, the ultimate guide to working with a marketing assistant. That's E-N-T-R-E to 55-1-2-3. If you missed out on attending summit this year, but you're thinking about coming next spring, I want to give you one of our most popular talks for free.

When you watch it, you're going to get fresh leadership strategies that will make a difference in your business this week. After you watch it, it's free, by the way, ask yourself, what would four days of content like this do for my business, my leadership? To watch this popular talk for free, did I mention it's free, go to Entreeleadership.com slash sample talk or click the link in the show notes, and you'll be ready to rock and roll. Jorge is in San Diego. Hi, Jorge. How are you?

Good, good. How are you, Dave? Better than I deserve. What's up? Good to speak with you. My name's Jorge from San Diego. I'm the owner of a frozen fruit and vegetable import company. We source from countries all over the world. Last year, we did a little shy of 3.9. And this year, we're definitely on track to doing over $5 million. Good for you. My question is we're running out of cash.

How do we manage our cash flow so that we don't implode? We have an interesting situation where our suppliers from other countries, they request the wire transfer before it hits the port. And once we bring it in and we deliver it to the customer, it takes about 45 to 55 days net terms. How good is your accounting system? It's pretty good. I mean, I wouldn't say the best.

You're running cash or accrual? Accrual. Good. Okay. When we, years ago, the problem you get into with cash flowing a hockey stick up into the right is that every time you sell something, if you're growing at a double rate, which you're growing at, you know, 4 million to 5 million,

so you're growing at 20% rate, you not only need to replace the item that you just sold, but you also need to cover the growth out of that item. So what we did was we assigned a 1.25 to cost of goods sold, so we're putting an extra 25% back in, and that covers the growth curve. And what that does is reduce profits temporarily because we're rolling the money back into,

In other words, you can buy, you know, 125, every time you sell $100,000 worth of cost of goods sold, you can buy $125,000 because you've held it out of your cost of goods sold. You've allocated it in your accounting system. Does that make sense? That makes sense, yeah. Yeah, to build up the cash flow, the reserves. Yeah, no, it's not just reserves. It's simply to order 25% more in the next order than you ordered in the last order.

Yes. See, I sold $100,000 worth, but when I'm going from four months, million to five million, I need $125,000 worth to come in because I got to cover the new demand that I'm creating. I got to have the stuff and I've got to have the cash to buy it. Okay. The other thing you can do, the other thing you can do is start monkeying with the terms slightly on some of your purchases. So what we would do is we would go and negotiate a year's worth of purchases.

at a deal. And so if you've got one vendor that you're buying a million dollars worth from in a year, but you're just paying it out monthly, and it's just cash on the barrel head each month, you're not getting the break that a million dollar your customer deserves. So I want to negotiate and say, we're going to contract to buy a million dollars worth from you this year. You can go ahead and set that aside out of your stuff.

But in return for that commitment, you're going to give us a further discount. Yeah. Because all we were doing, we were just ordering, we were ordering just in time, and we weren't getting the discounts for the volume. Mm-hmm, yeah. And when we did that, it changed our profitability about, I don't know,

somewhere around 18%. It really kicked our profitability up. And then we said, you know, you're going to go ahead and have that stuff ready for us, and you're going to ship it on time. And, you know, we're going to pay you 30 days later instead of in advance. Yeah.

And then that helps the cash flow too. Now, you don't want to get out there where you get, you know, six months later or something because now you're taking on debt, and I'm not suggesting that. But it's just payment terms. You're having to pay in advance before you even get the stuff now. Oh, yeah. And as much as you're spending with some of these people, that's ridiculous. Oh, yeah.

It's a lot. No, and not only want to get into the – sometimes we reject the product, and that's even a bigger, you know, bigger, bigger. problem right there, you know. Yeah. And then you've already paid for it. And we've already paid for it. Oh, geez, that's very difficult. We got suppliers. We got a credit. Oh, it's a whole, you know, it's a very interesting business. Yeah, there's a lot of moving, a lot of moving variables. But my point is, the way you handle the cash flow is you, you turn the knob on two or three of those variables. Okay. And so we move, we move the payment date out until after we get the product and

approve it. And that moves, that moves at 30 days. We get a, a discount based on an annualized purchase rate. We, uh, and we're accrual accounting setting back every time we sell a dollar's worth, we're setting back a buck in a quarter. So we're covering the 25% growth curve. Yeah. Those are the things. That's how we turned the corner.

And at that point, we were probably a $40 million or a $50 million business. And that, that, those changes took us from there to about $150 million. That was, that was one of the things that did it. was over through, and it wasn't just the volume. We were doing a good job marketing, but the cash flow was sucking the marrow out of our bones because we weren't managing those three different things, the payment terms, the discounts, and the accrual accounting properly. And once we learned how to do that, then we were our own bank and everything went fabulously. And I'm going with that one for sure, man. That's good stuff. Congratulations, Jorge. Proud of you. Keep it up,

Man. Bring it. Bring it, baby. Bring it. I love it. Hey, most of you didn't start out in sales. So when it comes to hiring and training a great sales team, well, maybe that's not your rodeo. That's why you need sales gravy. Sales gravy gives small businesses the same premium training that Fortune 500 companies get without the Fortune 500 price. Sales gravy was founded in 2006 by 16-time best-selling author and thought leader, Jeb Blunt. And now they're a globally recognized leader in sales training solutions. Their team training hub has over 1,500 hours of live and on-demand content for every customer-facing role, from sales to account management to customer success.

Plus, you get an easy-to-understand dashboard to track progress so you know what's working and who's winning. And if you've ever struggled to create commission plans that motivate your people without blowing up your budget, sales gravy has your back there too. They just released a free resource that shows you how to build comp plans to motivate the right behavior without overpaying, and how to reward things that actually matter, like retention, profitability, and teamwork. Download the free guide today at salesgravey.com slash entree. It's called the Small Business Owners Guide to Sales Incentives and Compensation. And it's free at salesgravey.com slash entree. Got an email question in from Seth in Wisconsin.

I've got a 10-year employee who's been with me from day one, who is an obvious candidate for a general manager type of role. However, I have a newer guy who's been with me for about two years who has shown me a lot more traits and skills that I'd like to have in a potential GM. My question is, how do I navigate that as an owner and not disappoint and lose my 10-year senior? employee, if I promote the newer employee who I think would be better in the role, probably can't. If they have the expectation that they're moving into the GM role, I don't know that you're going to be able to remove that expectation.

And so the problem happens, the solving of this problem happens before you get to this point in the problem. So I don't know that, I think the cow may be out of the bar. is what I'm afraid of. So instead, what we've talked about around Ramsey all this time is, time on the job, seniority, is not an indicator or an entitlement of the next leadership slot. Performance, competence, competency. are the indicators of who goes into the next leadership slot.

And if everyone knows that in the culture, and it's been performed that way time and time again, everyone looks around and goes, they will have seen a two-year person pass a 10-year person before. And then they don't have the expectation of getting the role unless they're the best person for the role. Now, they may raise their hand and try to make the sale and say, I'm the best person for the role.

pick me, pick me, coach, put me in coach. And that's okay. That's actually an indication of the person you want. They're eager, right? Enthusiastic, that's good. But they are not disappointed and go out and quit because we shuffle the deck and their card didn't come up on top. The next time we shuffle it, their card might come up on top.

I don't know. And so, and then you can talk to them about it if you're worried about it, but you've set the table inside the culture first. This sounds like you think, so I'm also guessing you have translated to your team, that the 10 years on the job gives them dips. It doesn't. Just because you were sucking my air for 10 years, you were breathing my air. That doesn't mean you're guarantee.

There's no seniority. It's competency and performance, baby. And so that's what gets you the job. Nothing else gets you the job. And so I've got a 10-year employee who's been with me from day one, obvious candidate for general manager type role, but not as obvious as the other guy. There we go.

And so I'm afraid that this person is going to be disappointed, and I'm afraid you're going to lose them. But I'm going to be okay with that because you put the best person in. Ten years from today, if you put the new guy in the role and he becomes a superstar general manager that you think he's going to be, and the other guy quits, are you okay? Answer is yes. You're okay.

And you start making sure with your team that everyone understands that promotions and leadership slots are based on competency and performance, not based on seniority. And so I'm perfectly fine if someone has been here 10 years and they're still in the same role we hired them in.

That doesn't make me mad at them. I don't hate them. As long as they're doing their job there, that's fine. But if they're wanting to move up, it's going to be based on them adding value over and above their current position into the next position and showing competency and performance. And then we're going to, you know, we're going to give them a shot at it. In neither case do you get a guarantee, by the way. These are human beings. So we don't know what's going to work out in the end.

But you ask yourself, what I do is I project it out, not the short-term. pain or the short-term tears or the short-term heartburn that you have feeling bad that the 10-year person didn't get it because you like them and you appreciate the fact they've been around 10 years and you don't want to disappoint them. I'm not trying to hurt their feelings. It's not my goal. I want them to stay. In the next general manager job, we might open up another branch and, you know, they might get that one. I don't know. But the temporary heartburn of all of that is better than the 10-year heartburn of having put the wrong person in because you felt guilty. Yeah, let's choose to not feel guilty.

I mean, I'd rather feel guilty and not create a situation where I've done the wrong thing out of guilt-tripping myself kind of an issue. That's what I'm facing there. So anyway, that's some thoughts on our question of the day from Seth. This is the Entre Leadership podcast. You can't hold your team accountable to expectations you didn't set. When you try, everyone's confused. You need a way to clearly define roles and responsibilities for every member of your team

and our free, that I mentioned, it's free, key results area template will make it easy. Go to Entreleadership.com slash KRA right now to download it for free. or if you're listening on Spotify or podcast, click the link in the description. I'm Dave Ramsey, your host. Thanks for hanging out with us America. This is the show where an actual practitioner, not a professor with theory, someone who is a CEO, someone who has grown a business from a card table in my living room to 300 million and 1100 people, actually answers your questions and tells you what I think.

I've been doing this morning here. I was in that meeting today here. And then I turn on the microphone and I'm here for you guys. So thank you for joining us. We appreciate you being here. The phone number is 844-9-4-1070. If you want to leave a good message and we'll get back with you, make you a caller on the show.

That's 844-9-44-1070. Mary is in Charlotte, North Carolina. Hi, Mary. How are you? Hi, Dave. I'm great. Thank you for taking my call. Sure.

What's up? Well, I own a law firm. We have 24 team members, and our revenue is about 3.5 million. It might be a little higher this year. And I'm wondering if buying a building is the next right move for the business and really how I should go about evaluating that decision. Great question. Well, here's some things I have learned, some of them the hard way, and some of them by watching other people learn them the hard way. You have to be very careful and conscious of it, even if you know about it, you still have to stay on top of the emotion of letting the building dictate the business. The business instead needs to dictate the building.

Let me give you an example. We bought a 55,000 square foot office building 20 years ago, probably. all right and within four months of buying it it was full and i ended up renting out 28,000 feet right behind us and then i bought an office condo next door and then we've ended up renting out 60,000 feet a mile away because our growth we spilled out of the building into adjoining properties you follow me? Right. And I had to be real careful that I didn't let the building dictate the size of our growth. And so if you bought a building for 24 people and five years from now, you had 50 and you don't want to move because it's your building and you don't want to go be a renter now for 50, you're now

letting the tail wag the dog. Is that making sense? Yeah, it does make sense. So how long has this firm been open? Ten years. And we moved up in space. We're in our third office. So just like, you know, we started off in one little room and then moved to a larger suite and then a larger suite. And now we really need double the space that we have.

Yeah, and you need another 25% of that for future growth. You need double the space to house what you got today. I think we could fill it. Yeah, we're functioning, but where we could definitely use more space. No, I'm saying if you went into the space you need today, tomorrow you're already short. Right, right. So I'd have to project a little bit into the future and maybe buy a bigger space than I think today. At the growth curve you're on, you need to buy double.

Yeah. What you need a day. Yeah, and so if I do that, how do I, let's say I felt comfortable, you know, buying a big building. How do I really evaluate whether actually buying it where I'm going to see an ROI, whether that's a right business decision? Because I... It's not a business decision. It's a real estate decision.

Okay. Separate the two. Buy the building at a good purchase rate, at a good price, and pay yourself market rent, and that should give you a good rate of return on your real estate investment. And then if the firm outgrows that property at some point, move it. Okay. Don't let the fact that you own the building limit your growth. That's what I was talking about a few minutes ago.

And so, yeah, just give yourself room to expand and then also give yourself the mental permission to move beyond that building and sell that building or keep it as an investment and put someone else in there. By the way, that 55,000 square foot building I'm talking about, I still own it. It's a wonderful rental property. but no Ramsey product is in it. Mm-hmm. Because we moved out here on 70 acres

and started building a campus. And so now we're in 600,000 feet. But so that, you know, and, you know, someday, well, I'll grow this, hypothetically, you know. And so hopefully it's a minute, but there you go. So, I mean, that's what you're looking at. And so you don't want to burn brain calories managing the real estate instead of running the business. Okay.

Because you're good at running a law firm. You've proven that. Don't let the ownership of real estate get in the way of that skill because you're burning a bunch of calories over here trying to be a good landlord to yourself. Okay. So what I'm kind of thinking is, you know, if we find the right bill, for the right price and the numbers work out, do it, but just mentally have the mindset of we don't have to be here for the next 20 years. Right. You won't be. Unless you don't grow. Yeah. Well, I hope that doesn't happen. Yeah. You won't be. I mean, because if you grow

anywhere near the percentages that you've been growing in the first 10 years, 20 years from now, you'll definitely be out, even if you buy double. That's what the math says. So I don't, I don't know. You may reach a point of diminishing returns and say, I don't, want any more lawyers. I have enough of them. That could be possible. But, you know, but I mean, and, you know, you may end up, you know, having some branches in other cities or whatever else as a larger law firm, a regional law firm, that kind of thing, rather than simply local. I don't know. I think that's probably very likely. I think we're a regional firm, so I could see us, you know, opening an office in a nearby city.

Yeah, exactly. And that, you know, you're in Charlotte, and so, you know, you go over to the, you know, the Durham market or something, the Raleigh Durham Market or something like that and get some other things going. That's very possible. And then, you know, then you're not straining the actual piece of real estate at that point. But I would rather you have rental, be a tenant in every one of those cities and run the business well, then let the fact that you own the real estate cause you to make bad decisions. about how you run the business. Okay, that makes sense. Yeah, and because the amount of rent that you pay is not what's killing or causing you to grow. No, our rent is really pretty reasonable. It's a small percentage of our expenses. Yeah, I mean, payroll is your problem. You know, it's not in terms of your P&L.

It always is with small businesses. So, yeah, so, you know, you manage payroll and then rent should be, you know, five, six percent or something. something like that of probably your top line or whatever it is, maybe a little bit more. But I mean, and then you don't have to think about anything. You don't have to think about air conditioners going out. You don't have to think about windows being cleaned. That stuff just happens automatically because you're a tenant. So there's an advantage to not having to burn brain calories on your real estate portfolio

while you're running a business. But I love real estate. And so I have bought the properties and I have moved into them. I'm not against that. But just make sure that you're not locked in. I'll give you another example for the sake of our listeners. It's not for you, but where I see people make a huge mistake is like the restaurant business. Restaurants move because cities move.

What 10 years ago was a cool area is an area that's not safe to go in. What 10 years ago was not safe to go in is now the cool area. And if you own the stinking building and you don't move your restaurant to where it needs to go to because you're the owner, then the, again, the real estate's telling the restaurant what to do instead of the restaurant telling the business what to do. But if you were a tenant, the lease run out, you're going to move out there on the cutting edge and be in the cool neighborhood again. And so that's the problem with these kinds of things. And especially when you've got something that is very retail driven. Now, you're not, you're a destination site. We're a

destination site, so we don't struggle with that as much. But, you know, be careful to be you know in the area go ahead and be in an area that's a little green that the market is growing towards and go ahead and buy something a little bigger than you need and that's for most of us out there and always pay cash if you're not paying cash don't buy a building period you don't need the problems that were that you know owing a mortgage creates I'd much rather be a tenant much rather be a tenant there's nothing wrong with being a tenant when you're in business nothing wrong with that. And buying the real estate does not fix all of your business problems. It adds business problems.

But you can make more money on in the real estate. So that's good. Real estate's a good investment. And again, I've done it. I love real estate. So I think you're on track to do that. Good question, Mary. Sounds like you got it on the run.

I'm proud of you. Very well done. Hey, folks, remember better a weary warrior than a quivering critic. This world needs more high-quality leaders. So take courage and lead. I'm Dave Ramsey, your host. Thanks for listening to the Entree Leadership Podcast.