EntreLeadership - How to Pay off $4,000,000 of Debt in 5 Years (The 600th Episode)

Episode Date: September 16, 2024

Today, we’ll hear about:  A business owner trying to prioritize his millions of dollars of debt  A son concerned about taking over his unethical father’s business  How to make profit without losing steam according to Dave Ramsey  A business owner looking to motivate his first sales rep     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     Offers From Today's Sponsors  NetSuite: https://netsuite.com/Ramsey  BELAY: https://www.belaysolutions.com/entreleadership  Payority: https://www.payority.com/entreleadership  Trainual: https://trainual.com/entre  Found: https://found.com/entre    Listen to More From Ramsey Network    🎙️ The Ramsey Show    💸 The Ramsey Show Highlights  🧠 The Dr. John Delony Show  🍸 Smart Money Happy Hour  💡 The Rachel Cruze Show  💰 George Kamel  💼 The Ken Coleman Show      Learn More About Your Ad Choices   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, doing the same stuff you do every day. I do it too. This is not a theory show. This is a show about what we really do. Today's a big day.

We're celebrating episode 600 of the Entree Leadership podcast. I want to take a moment to say thank you to our listeners, to our viewers who tune in weekly, to our team, who puts this together. They spend a lot of love and a lot of time making sure you guys get delivered good information. And thanks for your support over the years, all of you, to everything we do in Ontario Leadership and for the podcast. Thank you, thank you, thank you. We love small businesses at Ramsey. We are one, and we love talking with you about what's going on with yours.

If you've got a question, call me at 844-944-1070. That's 844-9-4-1070 or go to Entreleadership.com slash ask. Entreleadership.com slash ask. Hunter is in Dallas, Texas. Hi, Hunter. What's up? Hey, Dave, how are you? Better than I deserve.

What's up in your world? Hey, my wife and I own some coffee shops. We have about 100 employees, and we did $4.2 million last year. My question is, we have some SBA loans, we have some vehicle loans, and then we have some personal debt. And so we're just unsure which one is the priority to attack personal or business and what you'd recommend. Well, they're all personal. The SBA loans were signed personally. So technically, legally, they're all personal.

And we can separate them for discussion purposes between business and home. So you've got vehicle, SBA, and what was the other one? Just personal debt. On the business, just SBAs and vehicles. Oh, okay. All right. So why is a coffee shop buying vehicles? Well, we do some deliveries and things.

Oh, okay. And then we, I mean, we do have our personal vehicles in there as well. We thought we were being smart, you know, right-offs. Yeah. You figured out it wasn't. Okay. So, now, how much debt do we have on vehicles? On vehicles, we have about 270,000.

How many vehicles? Four. The bulk of that is our personal vehicles. They're very expensive. Okay. So, all right. You made 4.2. What was your net profit?

About 15% of that. And then I have a day job as well. and I make about $250,000 doing that. Okay, so you're making $250 at your day job, and then you made $500 on the coffee shops? Yeah, and it's going to be more this year. We'll do about $5.5 this year. Okay, so you got a $750,000 household income?

Yes. Last year, all right. And you owe $200,000, was it $250 on cars? Yes, sir. Okay, and then the SBA loan was how much? The SBA loans are about a million. and they're all split up. Okay.

How many different ones? Five. Okay. So there are a couple hundred each average? Yeah. Okay. And then you've got another, and then you've got other personal debt, you said.

What is that? I've got a mortgage, well, right now I have IRS debt of 55 that I'm going to have done in the next 30 days because that's bothering me. And then I have a mortgage of 1.9. I have a he lock of 200. of a flip house of 280.

I got dead everywhere. You're a busy guy. Your flipping houses run on 11 coffee shops and have a full-time job. Yeah, something like that. My wife is busy. I started and she has to finish it. When's the flip house done? Hopefully in the next 90 days.

And then we can get that sold. Stop that. Yes, sir. Quit doing that. Concentrate on your stinking business. you're making plenty of money of your business. Focus on the dance with a girl that brought you, man. All right.

So, well, the first step to getting out of debt is deciding I don't want to borrow money ever again. And so if you haven't decided that, because so far the list you've given me is you've never met a debt you didn't like. Yeah. So, yeah, the first step is you've got to go, I'm done. The way I've been doing this is driving me crazy. It's not bringing me peace. I make way too much money to feel this. broke.

Crap, man. You're even behind with the IRS. That makes no sense at all. So have you got that fixed, by the way, so that system so that the IRS gets paid on time from now on? Yes, sir. Okay, good. Because you make a boo-coo loads of money, Hunter.

You're killing it. What do you do? What's your day job? I'm a consultant. I develop commercial property. Okay. Across the country. Okay.

Wow, man, you're amazing. I'm so proud of your income. So what I would do is set the mortgage aside. It's what we call Baby Step 6, if you call The Ramsey Show. When you start talking about our financial stuff with Ramsey, we pay off the mortgage as a separate baby step. Okay. The IRS is gone. The flip house is gone as soon as it's gone.

Okay. So we're down to mortgage, $1 million SBA and $250 on cars. Did I miss something? No, sir. Okay. Mortgage drops off to Baby Step 6. And then what I would do is I would just list these cars, smallest to largest, and pay them off in that order doing a traditional debt snowball is what we would call it.

Now, if you're making $750,000 a year, how fast do you pay off $250,000 where the cars? Hopefully in a year, or less. Or less, yeah. And hopefully it doesn't start to sentence. Okay. We're going to pay this off making $750. for God's sakes, it leaves you a half million dollars, okay, after you paid it off, right? So we're going to pay it off in a year, we're going to pay it off in a year or less, not hopefully,

and we're going to get on a budget. We're going to quit buying stuff unless we pay for it, okay? We're going to budget at work, we're going to budget at home. And that's good, just financial planning. It's good, you know, you're running good P&Ls and stuff at work. You're projecting your profits and what you're going to do with them. And then I would separate off the SBAs. loans and leave them at work.

And what we teach entree leaders to do with that kind of debt is a little different than the personal debt at home. And I would say, okay, from the coffee shops, the SBA loans are all associated with the coffee shops, right? That's correct. Okay. So from the coffee shops, I'm making four or 500K somewhere in that range. And when I run my net profits, you don't need an income out of the coffee shops.

you can exist on your 250. Okay. Right? Yes, sir. At home, you can exist on 250. Especially with the car's going on everything. Exactly, exactly. No car debt of any kind, no debt of any kind except the 1.9 mortgage.

You can exist on 250 with a household budget. You and your wife put together a budget and live on your income. Does she have an income other than the coffee shops? No, sir. She runs the coffee shops. Okay. All right. So I would let her and you do whatever work you do on the coffee shops for free for now until we get these SBA loans cleared.

Now, what I would do then is say, all right, I'm going to close the books each month and say, my net profit is X for that month on the 11 coffee shops. Agreed? Now, then I'm going to take 20 to 30% of that net profit number and set it aside. in the business for retained earnings. And I don't know how strong your cash needs are or your volatility is. The stronger your cash needs are and the stronger the volatility is, the more I'm going to lean to the 30% side. If you've got this thing dialed in and there's not a lot of cash needs,

lean it down to the 20% side, I'm going to take the remaining 70% or 80% each month and throw it at the smallest SBA loan. Okay. All right. And so what that tells me is that once the cars are gone, and once we start this process, which might be six months from now or so,

before you actually start doing this, because in the meantime, you've got to get the cars cleared, okay? And I use some of this money to clear the cars. You're bringing everything home to you get the cars cleared, and just pay your minimum payments on the SBAs. Once they're done, then we're going to go back to work and quit bringing anything home. We're going to throw it all at the debt or retained earnings.

Now, if we did that, Let's just run some numbers. Let's say half million dollars, 20% be 100,000. That's 400,000 a year going towards debt. You got a million. In my calculator, that says 30 months, you're done. Two and a half years. Amazing.

And then use cash, build cash up and open new stores. Exactly. Open new stores with cash. And then guess what happens? The cash stacks so fast. I'm looking forward to that. I mean, when you don't have all this stuff hanging over your head, I mean, just think, if you're used to paying off debt to the tune of $400 or $500,000 a year,

and then you don't have any debt, you know what you got? $400,000 a year lay in there. What's it cost to open a store? About $350. Yeah, so you can open a store a year. Oh, wait a minute, it's going to get better. Then you can open a store every six months. Oh, wait, a minute.

Then it's going to even get better. You'll be able to open a store every quarter because your cash flow is going to continue to build every time you open a store and every time you don't have debt. And the stability and sustainability factors, the risk factors are incredible on this. You're going to love where you're going to. So basically, if we take six months and get rid of the cars and we take two and a half years and do the other, we've got a three-year plan here and you're debt-free but the house. That's what we laid out.

And that's the formula I would use, the different formulas I would use. And then I am going to start taking some chunks home. like to get that house paid off. That'd be a nice thing. Okay. It'd be a nice thing to own 12 or 14 paid for coffee shops and a paid for $5 million house that I used to owe $1.9 on or whatever the flip it's worth. And that's what, five, no, it's more than that. That's seven years from now. Yeah, because you've got an expensive house.

But yeah, you've done really, really good. And then curb your appetite, keep your appetite for cars and other things that you're doing, down within your cash budget. If we don't pay for it, we don't do it. Because otherwise we end up right back in this dadgum mess again, and you don't want to do that. Man, you got this thing going on. Now, take advantage of it.

I mean, you got bumper crop, man. You got a great crop coming in, you know? So take advantage of while the sun is shining. Make hay while the sunshine, the farmer said, right? That's what you need to do right now. You got all kinds of cash. Use it smart. so that when someday things aren't going quite as smooth,

you're in a much better condition. Wow, very cool, Hunter. You're stud, man. This is the Entree Leadership Podcast. Have you figured out that waiting around for things to improve isn't working? If you're done with that idea, you should be. Your business is not going to grow faster or become healthier if all you do is listen to Leadership Podcast.

You actually have to do something. You got to do something different. If you keep doing the same thing over and over again and expect a different result, that's what the 12-stepers call the definition of insanity. So you've got to change something. If you finally scale your processes, unify your team, build the business you love to run, wouldn't that be cool? The Entree Leadership System will help you do that.

It's the roadmap. And this system's how I built Ramsey, and it's how we've helped thousands of small businesses transform their lives and actually have a quality of life. It's your turn to drive your business forward with the Entree leadership system. system. It's not going to do it by itself. You've got to do it. It's not magic, but it shows you clearly what to do. And the magic is, the power is, the clarity of what to do next. Because oftentimes a business, we don't know what the next step is. Well, I've been there before, so I can show you what the next step is. Go here, go there, go there. This is the guide.

We're going to give you the Entree Leadership guide. It's the, go to Entreeleadership.com slash get started to download the free, oddly enough, described as getting started guide. I don't know where we got that title, but the getting started guide because it's going to help you get started. Ooh, serious marketing insights right there. This guide will walk you through the process. It's how we grew this business to have a $300 million business. Entreeleadership.com slash get started to download the free that I mentioned.

that it's free. Getting Started Guide. Paul is in Huntsville. Hey, Paul, what's up? Hey, good afternoon, Dave. I'm honored to speak with you. Better than I deserve, man. How can we help? Hey, I am the general manager for a home services company, specifically plumbing. We've got about 30 employees, and last year we did $4.5 million. And my question today deals with my father's business. This is his business, and he purchased it about 20 years ago.

I've been looking to retire from it for about five years now. I returned to the business four years ago with the intent to purchase or acquire the business by handoff. And the current plan is for me to operate the business as CEO until the time of his passing when I would receive the ownership of the company in his will. I will assume that position here in the next six to 12 months. It's been slow going. I've had a lot to learn, and we're cleaning up the business operations as we go. But along the way, I've seen my father make a few choices, specifically financial choices,

that I felt were more questionable, possibly unethical, if not immoral. And my question is, should I continue to operate my father's company, knowing that I don't always agree with him financially and possibly ethically? Should I try to fix the issues, pursue a buyout or walk away completely or some other option? Well, we have to have a change of plans of some kind. I don't want to burn the building down right now in this conversation. I was going to say burn the ships, but I don't want to do either one right now. Here's what flashed through my mind as you said that, and I'll just share it with you,

and then you and I'll work it out together here on the air, okay? Okay. Rabbi Daniel Lapin wrote a book called Thou Shall Shall Procedure. It's one of my favorite business and financial books. It is the 10 reasons that Jewish families have had a statistically unlikely tendency to outperform their neighbors financially. At every point in history. Anytime you go back in history, you find the Jewish community has outperformed monetarily their neighbors. As an example, 3% of the American public is Jewish, 67% of the Forbes 4%.

is. So once I start understanding that, I want to read this book. I want to know what these 10 things that the Jewish community believes that causes them to be able to win. One of those, in one of those chapters, he says it is almost impossible. He was talking about making money is moral. If you believe, this is different from your question, okay, but I'm just setting the whole thing up. If you believe that making money is immoral or having wealth is immoral, then you will be horrible at making money because it's hard for the human brain with cognitive dissonance to do something that it believes is wrong. Does that make sense? Okay. So it's going to be hard for you to run this business when you believe it's wrong. This stuff is ethically wrong. It's going to be

hard for you to do that. It's hard, I mean, it's almost impossible for you to do it so well that the business prospers. And so it's just, difficult. If you believe in your soul that everything we're doing is pure and noble and good, then you will fight to win. But when you're questioning and you're looking over your shoulder, like, I don't think we're doing this, this is not right. And why would you be enthusiastic about going, this is not right? You're not. And your creativity gets shut down and your new ideas and processes and growth and all that shuts down. So you cannot exactly. in the deal that you've got.

Okay. Not and have a good life. How old is your dad? He is almost 60. Okay. When do you think he, is he in the day-to-day still? He is, yes. Okay, when is the plan for him to not be in the day-to-day anymore?

Within the next five years, probably. Okay. And so he's still down there doing things. he has the power to he's the owner the founder he bought it but he owned it for many years and it's his so he gets the right he has the right to do with his business what he wants to but the goal was for him to step aside and you be the CEO and him go home and live off the profits while you ran the business and then you got the business at his death that was the original goal right correct yes sir but he wasn't going to go home for about another five

years, about 65 years old. Depends on his energy levels, but yes, that's, it's kind of up in the air at the moment. Okay. What I would propose is that you put a timeline on it like three years from now, a hard date, and start talking to him about a hard date. I need a hard date. Okay. And that he go ahead and transfer the ownership to you.

Okay. when he goes home. And you agree in return to pay him for the rest of his life X or until you reach a number X or whatever. So what kind of profits does this thing going off? We shoot for 10%. We've been about 6 to 8% over the past few years. And that's net of administrative and everything.

Correct, yes, sir. Net, net, net profit. Net, net, net. Okay, all right. And you said it's $4.2 million. What? 4.5 million. 4.5 million.

Okay. So we're dealing with, let's call it $400,000 just for the fun of it. Okay. All right. And you're being paid before we get to that $400 grand. Is he being paid before we get to that $400 grand? He is taking a salary, and yes, I'm being paid for that as well. What is your salary?

What is his salary? My salary is 85,000. His salary, I believe, is 65,000. 65? I believe so, yes, sir. Okay. So if we value this business in a million dollars, and you paid him $200,000 a year for five years,

or 50% of the profits for five years, he would get $200,000 a year for five years. Yes, sir. That's you buying him out instead of you getting it at, that doesn't work, because you're getting it free when he dies now. Correct. But what's the deal when he goes home? How much is he supposed to be paid when he goes home?

We haven't agreed to that yet. As far as I know, he's looking to just take a salary. from now until time of death, basically just to keep the bills paid. Okay, Dad, I want to give you $100,000 a year salary until death, with a 10% raise a year until death, if you go home now. Okay. Then you can run his business. Mm-hmm.

Or he could go ahead and transfer it to you now. there's no harm in that okay he could transfer it to you now and the agreement is you pay him $100,000 a year with a 10% raise a year till death

okay you might do that for 40 years but that's yeah you know it's possible I mean he could live to 100 but you might do it for 30 years that'd be uh

be a lot of money but yeah that'd be more than the business is worth so maybe I'm making a mistake But that was the deal y'all were going to do anyway. So, and the salary stops, obviously, at his death. What about your mom? Who's taking care of her?

No, she would be, she would fall under my responsibility. Or he has a rental property that she would then manage. Okay, so if he died and his salary stops, she'd be okay. Correct. Okay. All right. Yeah, give him a little more if he'll go ahead and go home now and transfer it now.

Okay. And I'll pay you for life. But I need you to go ahead and transfer the ownership now, not at death. Because that keeps him from coming in and using the ownership to make unethical decisions in spite of the fact that you're running the day-to-day and he's at home. Because he still could come back in and throw mud on the window, right? Correct, yeah. And that's what we're trying to prevent.

I need him to go ahead and transfer it now to prevent that. And I don't know. How much discussion have you had with him about the ethics? issues? We had the main issue that we had happened about two years ago and I and my wife

at that time both worked in the company and we both almost walked away from the company at that point in time. What kept you from walking away? The issue was caused my wife was in HR and she made a mistake in the billing of our

benefits package and his solution was to back charge the employees of the company. I felt that that was wrong and said either she should or we should be responsible for the payment on that, the back pay on that, or the company should eat it, not charge technicians who had already signed on a benefits package and knew nothing about the issue. and he finally said okay we'll let you you pay for the mistake it was a fight to get there but we we did so that's I stayed on for really for the eventual business

and she just had had enough and she went home eventually yes and it was her mistake wow that's heavy okay um so let me have you this then that that sounds like an operational thing that would not have occurred if he was at home even if he was the owner okay if okay let's say he's at home two years from now and that exact same thing happened you would just make the decision he wouldn't come back in he wouldn't come back in and throw his weight around on that would he i don't i i don't know um i would be um because he would be dependent on the profits of the business, then I... Well, no, he's not dependent on the profits of the business.

We're just giving him $100,000. Okay, already. So then I guess in the current plan, without just giving $100,000, but if we spend him home, then yes, that would work. But the current setup would be that he would still be dependent on the profits of the business. Oh, I thought he was just getting a salary when he went home. Oh, you meant he wanted all the profits and a salary when he went home. and you run it for 80 grand until he dies?

Correct. That's the current plan? That sucks. I misunderstood. I thought he was going home and taking a $65,000 salary and you got the profits. Oh, no, no. No, I'm not running this thing for you for 30 years, and I'm a CEO and not an owner, and you're 80 and I'm 60.

Okay. No, I'm not doing that deal. That's not good for you. It's not good for the company. No, we got to figure out some I misunderstood. Okay. No, he hadn't going to take the $100 grand. I thought $65 to $100 was giving him a raise.

I was screwing up. I goofed. Okay. Wow. Okay. Now what do we do? Hey, hey, hey, hey, hey. I don't know.

Because, I mean, that's, you're going to be paying him a lot more for the business than if you bought him out right now. under that other scenario. Yeah. What the flip do we do here? Because he's thinking he's getting a half million dollars a year, $465,000 a year or $400,000 a year, whatever, yeah. Now, he has been good, and just watching for the past couple of years,

he has been good to put a lot of that profit back into the business through different, you know, capital purchases and things like that. What would make him happy if you send him home? That is... What amount of money? I mean, seriously, based on the way. you all have been talking this through, and he's been putting the money back in anyway, if he said, okay, dad, I want to go ahead and transfer it to me and I want you to go home.

What would make him happy? I think that $100,000, we've talked about changing his salary to $100,000 a year at one point in time. We didn't end up doing that, but we talked about that. But that's all he's going to get in my scenario, not 400. Yeah. Yeah. You think that would do it? I'm not sure.

That's a great solution. What we talked about if I purchased it outright. Yeah, there's no reason for you to purchase it outright if you get it free at death. Exactly, yes. So I want to just give it to you free now. But the deal is that he stays on payroll as long as he's alive at $100K plus some kind of cost living raise, whether it's 5% or 10% a year or whatever it is. I don't care.

I mean, because $100,000, 20 years from now is not going to be as much. as it is today, obviously. So we need to give him a cost of living raise. So $100,000 plus a 5% raise a year, or 10% raise a year, whatever, I don't care. That's still going to be a good deal for you. If he'll do that, I think it solves all of your ethics and moral issues if we get the thing transferred to you sooner

rather than later. That's what I'm looking to do. Okay. And if it's going to be as long as he's alive, that's untenable for you. for the reasons I described when we first picked up the phone and started talking, because it's inconsistent with who you are. And I would not do that if I were you.

And if I was coaching both of you and you were sitting both of you in front of me, I would say that's not fair to Paul. Paul does not need to wait 30 years to get this business. Okay? And so I'm 63. My son is the president of our company. and I'm currently still the CEO. He and I are running it together happily.

We're enjoying that. We don't have the situation that you've got. But still, I'm not going to stay in the CEO seat forever. I mean, it's not the goal. My retirement plan will be doing this microphone stuff only and keep working as a Ramsey personality and doing these entree of speaking events and that kind of stuff. That's what I'm going to do in retirement.

and Daniel will be running the 100% of the place. I'll have no, I'll still be the owner. And, but the last step will be, I'm going to transfer ownership prior to death or at death for free. And that's a good deal for them. So I, yeah, because we don't have the ethics issue laying on the table that y'all have got. Yeah, I think that, I think you've got to transfer it to you sooner. And so let's try that.

That's the best way to go. Wow, I missed that. Okay. Oh, well, we'll get there. Muddled through. Muddled through. This is the Entree Leadership Podcast. The Entree Leadership System is what you get with the Getting Started Guide. And the system is this. We have discovered by observation, not by forcing it on anyone, but by observation that businesses go through five stages of business. They go from treadmill operator where you feel like you're on a treadmill to Pathfinder, to Trailblazer, to Peak Performer, to the last one is Legacy Builder. And that's, we were talking to a company at the legacy stages just a few minutes ago here.

Okay. As you're going through those stages, the way you're leveling up is you're adding different skill sets and you're getting better and better and better at the six different components of running a business. We call them the six drivers of running a business. The six drivers are personal. You're the problem. You're the solution.

purpose. Business is bigger than the bottom line. People, building a unified team is the key to winning in business. Plan. Winning is an intentional act. It doesn't happen by accident. Product. Deliver excellence and the profits will take care of themselves. Profit. Profits fuel your purpose. And you start again. You grow, get bigger. Your business never going to get bigger than you are. You've got to continually to reiterate the purpose while we're here. If the only purpose, the only reason you're is just for money, you're going to run out of steam. Because money is good. Go get you some.

I'm not against money. I'm a capitalist pig. Okay? But I'm not driven by money. Money is the byproduct of doing good. When you do good in the marketplace, when you serve your customers, Rabbi Lappin that I was talking about earlier,

says when you serve your customers well, they give you certificates of appreciation with president's faces on them. Call profit. Profit is the applause that your customers give you. Yay! You did a great job. Here's some of my money.

And if you just go after money and you're not going after service and money is the byproduct, you're going to run out of steam. And you smell bad. People will smell it. They smell it on you. They smell that you're not there for them.

You're there for the money. They start to feel like a number. you start to feel like a Bank of America customer, right? We're just here to get screwed over. We're just here for you to take my money, and I'm a number. I don't really matter to you. That's how the customer starts to feel when you don't have a strong purpose. And so business is bigger than the bottom line if you're going to create a sustainable and

growing enterprise over decades, which is what we've done here. and what we coach many, many, many, thousands of businesses around America to do. So how do you do this? Well, you have to focus on several things, and these are things that when I first started and I was just trying to stay open and make payroll, I'm worried about collecting a receivable, I'm worried about getting this thing profitable, I'm worried about whether we can make our bills, right? These things all sounded very soft and corporate and theoretical to me, but I have discovered now 30 years,

in that they are actually the soul that drives a business that is sustainable. So we have to discover what our mission is. What is our mission? And then out of the mission, you start to say, okay, I've got a vision. What's our vision? And we have a mission statement, a vision statement. And then we said, okay, how are we making decisions around here? What caused us to do that versus that?

and we start writing them down and those are our core values what are your values your values give you your decisions are already made once you know what your values are because your values will tell you what the decision is especially in a high conflict high stress situation and generosity how can we be more generous and define the impact you want to make through the business so when do you start to focus on this idea of, I've got to have a mission. Well, it's really after you get out of the treadmill stage. The treadmill stage is where you're on a treadmill by yourself, all the revenues counting on you. Once you get past that and you've got some delegation going on, you've got good time management, you're hiring properly, people you can delegate to. Now you're

leveling up and you go to the Pathfinder stage. The Pathfinder stage is where you need to recommit to the mission and start to lay out what your values are. And then, then communicate them and communicate them and communicate them and communicate them over and over and over to the team. My friend Andy Stanley says the team hasn't heard it until you said it 21 times. If somebody on the team is not making fun of the fact that you're repeating yourself all the time, then you haven't said it enough. So we sat down because a friend of mine used to teach this stuff who since passed away. But when it was me and the very first team member, Russ Carroll,

we sat down and opened our Bible and prayed and said, okay, what is our mission at Ramsey? And we wrote out a mission statement. It took us three or four days to get it all wordsmith and get it where we felt good about it. Just two of us sitting in this tiny little office. And the weird thing is, is that I think we got it right.

I think God must have spoken to us to give us that mission statement. I know that because the mission statement is still the same 34 years later, except we changed one little section, but it's still the same. Ramsey Solutions is here to provide hope with common sense education and empowerment, with biblically based principles. This is what we do.

to everyone in every area of life. We used to say in money, but now we've got entree leadership, we've got mental health, we've got other things, and so we're giving hope to everyone in every area of life with common sense education and biblically based principles.

That is our mission statement. That's who we are. If it doesn't do that, we don't do it. It tells you what you aren't, as much as it tells you what you are. We're not in the apartment building, business because it doesn't do those things. Now, I might build some apartments as Dave Ramsey, but Ramsey Solutions doesn't do that.

And so we laid out that mission statement the very first time, and we have stuck to it, and that focus, not getting sidetracked with our, with 14 different initiatives that had nothing to do with the driving force of this business, is one of the reasons we've been as successful as we have. then the core values came along at the peak performer stage as well they were here all along we just didn't know they were here and so core values in our place pat linchioni our friend teaches that there's two types of core values there's core values that are aspirational meaning i aspire to that's what i'd like to be and then there are core values that are simply factual tactical that's who we are

It identifies who we are. We don't have any aspirational core values at Ramsey. All of ours are just who we are. And we have 14 of them. And they came about because every time we made a decision that we couldn't describe making that decision or making that process or leaning into it based on that one thing over there,

based on one of the existing core values, we wrote down, how do we make that decision? What's our deal? One of our core values is we have, of self-employed mentality. Everyone that works here acts like they own the place. And if you don't care about this place, as if you owned it, you don't fit in. If you're here just to collect a check and do a J-O-B, and how fast can I get out of the building

every day and not act like and think like and feel like an owner of this place, if you don't care deeply, you don't get mad when somebody talks bad about us, you don't get your feelings hurt when things don't go right, then you don't. don't fit in around here. You got to have a self, that's one of our core values. We discovered that. We kept looking around and going, why don't we respect that person and we respect that other person that works here? Oh, that one's just collecting a job. They're just collecting a check. They're working at J-O-B. So that's, we identified our core values and we wrote them out. And now they're all over the building and we remind each other what they are all the time. And periodically in staff meeting,

I will teach one of them. I taught the momentum theorem, which is one of our core values this week to our whole team. 1100 of them sitting in the staff meeting and I taught 24 minutes on the momentum theorem and taught what it was. It's what we do. So we walk through these things. So how do you maintain them? You talk about them and you remind people when we made this decision, it's because this is who we are based on this.

This is how we think. It's how we do stuff. And we revisit the mission, the core values as a leadership team all the time and we revisit it with the rest of the team all the time constantly. We've never stopped in 30 years going over it and over it and over it and over it again. Now, if you've been in business for a bit and you don't have a mission statement or a core value, you probably ought to sit down and start talking about it. What are the things that drive us?

And when push comes to shove, what are our values? What do we really value here? What do we believe? you've got self-employed mentality one of ours is a no gossip we don't believe in gossip um so you you can speak up but you can't speak out i don't need freaking activists here i'll fire your little activist but let you go activists somewhere else you can speak up to leadership and say there's a problem and we'll help you fix the problem because we got problems we have disagreements we have personality confusions around here.

We have all kinds of contentious things that happen. There's 1,100 people in the building. There's 1100 chances for you to be pissed off every day. And so when you have a problem, speak up. Don't speak out. I'll sit around in the lunchroom and discuss how stupid Ramsey is or how stupid that your leader is or they don't understand or how incompetent so-and-so is over on the video team or whatever.

We'll warn you one time on that, and the second time we'll just fire you. We don't want that. And, you know, consequently, we have a virtually gossip-free environment, and it's one of the things our team loves. It's a cultural icon. It's a core value. It tells us how to make decisions. No gossip is a core value, which means we don't tolerate gossip. Hello.

You get fired for it. Isn't that weird? That's weird. But it keeps the toxic puk out of the building. because people just walk around in the, I mean, I never, Henry Cloud used to say this and it cracked me up, but it was the truth. He says, why do people pee in their cereal and then gripe because it tastes bad?

You know, I mean, that's gossip. Why are you pooping in the workplace and wondering why there's a smell? I mean, that's gossip. That's what it is. Of course, it's what's going on. And that's corporate America. Most of you work in places that have worked in places, I have one. years ago, I mean, where you're just dealing with that kind of stuff? So that's a core value.

We actually had that policy, talked about it, but never wrote it down until the time that we said, okay, we need core values. Well, what's one of our core values? No gossip. What's one of our core values? Self-employmentality. What's one of our core values? Momentum theorem. What's one of our core values? And we would just write them down. So you need to sit down and write yours down. And you need to lay out what your mission is and your mission doesn't need to be, I want to make money. because that's gross. I want you to make money. I hope you get just unbelievably wildly wealthy,

and you're wildly generous in the process of you becoming wildly wealthy, and you have a wildly wonderful life. I hope all of that happens because you serve and help so many people. What's your mission? What's your core value? You sit down and write them down. And this is the purpose driver of these six drivers. Very, very important.

business is bigger than the bottom line. And then you integrate these things into the culture of the company by adhering to them and reminding everyone that we adhere to them and that this is who we is. That's simple. This is the Entree Leadership Podcast. I'm Dave Ramsey, your host, Open Phones here. You can be a part of the Entree Leadership podcast by calling 84444. 944-1070. Britt is with us in Richmond, Virginia. Hey, Britt, what's up?

Hey, Dave. So first, let me say that I am a certified Ramsey baby. My parents found out about you when I was in middle school, and subsequently never owned a credit card. My wife and I paid off our house in three years. So stuff really works, and it does travel down generations. I love it. Very cool. So we are a small batch luxury custom apparel company. We have six employees, including my wife and I, and we are knocking on the door of a million in revenue. Our main client base is advertising agencies, retail goods for places like museum gift

stores, and apparel for TV shows and movies. Very neat. We've always grown to business. organically through referrals and website traffic. We have a nice website. We're very searchable in Google, so we have had pretty steady growth that way, but we would like to start actively growing the business through direct sales. And that is pretty unfamiliar territory for me. I feel very comfortable in a sales role at our business, but it's more because I understand the product and I understand our customer,

but not because I have a background in sales or sales training or anything like that. So my main question is we're, we just hired our first sales rep to do client acquisition sales. And what should the expectations be for additional revenue from a sales rep? And should that be pegged to a multiple of their salary? You're paying them a straight salary? For this sales rep, it's mainly commissioned because it's client acquisition sales. Yeah, that's what it should be. Okay.

So every time, I mean, he gets paid or she gets paid a percentage of their order, correct? Yes. And that's where most of their income comes from, right? That's correct. Okay. So every time they make an order, you make money, even after paying them. Yeah. So I hope they get rich because you're going to get richer.

Yes, me too. I want that sales rep to make a million dollars, which would mean you made $10 million, right? Yes. Well, the way that we have our current deal structured with that sales rep is that they have a base pay of $300, which is just to kind of cover their minor expenses. And then they make a 50% commission on the first sale of a new client, and then they get a 25% commission on the second sale. from that same client.

Wow. And then the commission stops at that point. Oh, they don't get the third sale. They don't get sales beyond that. The way that we figured out the math of it was that our average order cost for first and second order is around $1,200. So they would be making about $1,000 per customer brought in. Is that a bad way to structure?

It's not bad. There's nothing wrong with it. I mean, there's not a thing that's immoral. I think the thing you want to do is the thing I've discovered about comp structures in general is no matter what you say people are going to do what creates their pay. Right. And so what you're saying to this guy with this structure is that him bringing in first and second orders is everything because it's the only way he gets paid.

Yeah. And so if he does unrealistic something to get just those first two orders and then the client can't, you don't really want them to stay because of the deal that was made with the client. You know, you don't get to, you're assuming that you, after the second order, that this is going to be a wonderful client. But it's not going to be if he set the whole relationship up wrong because he's not paid for it. So I probably would like for him to get a small residual on all orders after the second one, but big hits on the first two like you've got. So I might put him on a little residual to where he could have an incentive to help.

If he built up a huge book of business, like over a five-year period of time, brought in 500 or 1,000 clients, and he was getting 3% on all of their orders after those first two, he could have built himself a really good living. Yes. And he gets to help you manage and maintain those relationships that he initially formed, or she initially formed. So I would like in your situation to, you want to retain the customer after the second order, I assume. Yes, we do.

Yeah. Of course. And so let's pay him something to ensure. that that happens because what you pay people to do is what they're going to do. Well, I can walk you through the logic of how we came up with that, and you can tell me if this is a bad way to think about it. But the way that we work with our customers is we build them a password-protected store on our website that's all of their products. And so we found that once we got them across the doorway with the first couple of orders, it's pretty much automated

with them just logging on to their own page and placing their own orders. You don't go back and talk to them and maintain the relationship. You don't spend any time with them. You just put it on set it and forget it. We have a virtual assistant that checks in with them periodically through email. It seems like people only need the handholding of phone conversations and stuff like that for the first couple of orders. And then after that. So how long do you maintain it?

Once you put somebody in that automated thing, how long do you keep them usually? We have a really high customer retention rate. So most of our clients have been clients of ours for five, six years. Okay. All right. I'm wrong. Because you don't need him to cause that to happen because of your system. So you're not going to lose them because of their lack of contact with their initial sales guys,

what you're telling me. Yes. Yeah. That is the way our system is set up. And our customer is tend to like that. Okay. Yeah. That's okay.

Yeah, that's fine. Yeah, I think I don't disagree. I mean, I think my suggestion was wrong, given your new piece of information. I think you're right. So it was logical. Yeah, I would stick with it. I think you're doing a good job. Very cool.

Do you think the math is good math on that commission? I have no idea. I mean, the question is, can the guy make some money? Or can a gal makes some money? Because a good salesperson can make six figures. But if they make six figures doing this, how much are you making? Are you happy with that? because I want them to,

I want them to sell people a lot of prosper because it keeps them motivated. You know, they like, human brain likes to see traction. And that traction is, I get a check because I made a sale. I get a check because I made a sale. And if those checks are not small,

are so small they don't get my attention, then it's very difficult. So can they make a living doing this. Are they going to make $25,000 a year and make a bazillion dollars for you? If that's the case that's structured wrong, you know, if they're making $100,000 a year and you're going and you're not making a profit, well, it's structured wrong. Okay, that's the other way. So somewhere in there, you know, I, but if you put somebody on 10% commission and you're making a profit of 10 or 15% after they are paid, I want them to become wealthy because I'm going to make more

they make. So this is a good deal. That, that's the acid test. Is it a win-win? And is there a motivated thing that's set up here? That's what you're after. Good stuff. Well, thanks, ladies and gentlemen. We appreciate you guys being with us. Again, it's our 600th episode here on the Entree Leadership podcast. There we go. Remember, better or 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. Now, y'all clean this mess up.