EntreLeadership - I’m Supposed to Inherit the Business, But Dad Won’t Update His Will

Episode Date: October 6, 2025

Today, we’ll hear about: •             A son frustrated with his dad for not updating his will with directives for the family business •             A farmer deciding if he should sell his house to pay down business debt •             How to lead with conviction when your team disagrees with your decisions •             A son aiming to buy out his parents’ half of the business . . . for the right price   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 ·      📺 Join EntreLeadership Master Series Livestream: https://ter.li/tx6maw   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.   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 Entree Leadership, where I take calls from leaders like you about what it takes to win at any stage of business and leadership. I'm Dave Ramsey, your host, with over 30 years of experience leading in the trenches right alongside you. If you've got a question you want to ask on the show, we'll fill out the form at ontraryleadership.com slash ask. Or you can call and leave a voicemail at 844-944-1070. That's 844-944-1070. Jay is with us in Charlotte, North Carolina. Hi, Jay. How are you?

Good. How are you, Dave? Better than I deserve. How can I help? So my question is I am a third-generation business owner of a business. My grandfather started about 49 years ago. My dad is still involved in the business and majority owner. We do roughly about 17, 17.2 last year in top line sales.

And I am trying to get him. I'm trying to push him to deal with his estate and honor him while doing it, but trying to get him to move forward on getting his estate handled. And I'm just wondering. He does not have a will or an estate plan? He's got a will that's about. 40 years old. 7.2 million dollars and what percentage does he own?

He owns about 83, 84% of the business. Who owns the other 17? I do. Okay. All right, cool. And you are in what role now? I am the general manager and vice president of the company. Okay.

How many team members? Roughly about 24. Okay. And your dad still work every day? He still comes in a couple of hours. He's not involved in the day-to-day running of the business. Who's running it? I do.

From a VP seat? Yeah, he's not real big on titles. Okay. So you're basically running the business today. Yes. And he's how old? He's 72. Okay.

Is he in poor health? No. He's in good health. I'm just curious. I'm just trying to find out what's going on. It's not an excuse for not having a will, okay? Right. Everybody needs one.

Exactly. So when you say, Dad, when you say, Dad, we have a $17 million asset here. What is going to happen to it upon your death? What does he say? He wants it to come to me, but I do have siblings and we have another that are not involved in the business. We have another business that is a farm that we're. we're partners in, that he owns the land, but we're partners in the equipment and the,

and the livestock. And so I'm not even trying to get him to deal with that at this point. I want him to deal with all of it, but I'm right now trying to deal with the main business just so that I can move forward with my manufacturers and in a growth plan. I mean, we operated the business for 40 plus years in debt. When I took over running the business, I got a. out of debt in about three years. How old are you?

I'm 45. Okay. All right. I mean, you're going to have to sit down and have a come to Jesus cup of coffee with him. I mean, this has got to be dealt with, dude. And, but I mean, and you start it with and end it with and sprinkle it full of honor. Dad, you're, you know, what you built here is incredible. And if I understand you right, you.

you've told me, if I heard you right, that you're planning to leave me this business, and for you to work this hard and have all these years and have been this successful and not have a plan so that the family knows what you want us to do, we're going to end up dishonoring your memory because we don't know what we're supposed to do because you don't have it written down and writing it down. Dad's called a will. And I don't care. I do care, but mainly I care that you have a plan and that it's written down and that we don't end up having to spend, you know, two million dollars on legal fees because there's no will. Yeah.

That's dishonoring to your memory and all your hard work, and I don't, I'm here to honor you, Dad. Right. That's my main concern. My siblings want nothing to do with the business. They want nothing to do with either the business or the farm. Great. Write it down.

Right. So that's what I'm trying to do. Go ahead and transfer the story. Doc now. He did, he had this same issue with my grandfather when it passed from him and took years of my dad getting accountants and lawyers to say. Well, remind him of that. Dad, why would you, you went through hell. Why would you put me through hell? Dave, I have reminded him in that time and time again. Yeah. Where's your mother on this? She would probably agree with me, but they just see no urgency. And, you know,

getting it done. Okay. Well, you know, I'm going to involve enough people that, which is why it's pushing me. I'm going to create some urgency because this is a problem. Yeah. So, and the first conversation starts with honor. Dad, I want to honor you. I want to make sure that we do this in a way that is honoring to you.

And, you know, my preference is we go and start transferring stock now, which he can, he can do under the unified estate tax credit and have no tax on it. No gift tax on. So in a conversation we had a few weeks ago, and I was pushing him just began to deal with his estate, and he made the comment to me, if you want to end up with the farm and end up with the business, you're going to wind up having to buy something from your sisters. And I told him, I've totally understood that, said, but my point. Good. Let's figure it out.

For five years, and you won't sell. Let's get the dirt out. Out of the estate. I'll be happy to give up the farm if we can get this stupid thing. resolved. I don't want to go through the hell that Grandpa put you through. As a matter of fact, I'm not going to stay and go through the hell. You're going to have to deal with this. Right. This is not okay. I totally agree. But you don't start with that level of volume, and you don't start with that level of boldness. You start with, I want to make sure that I'm

honoring all the hard work of all these years. And the way it sits today, if you drop dead today, dad, you've screwed us because we're going to spend tens of thousands of dollars on legal fees and accountants trying to get this figured out. And then some judge is going to decide instead of you deciding because you won't deal with this. That's dishonoring to you, dad. You've worked too hard to be that. You're not that irresponsible when it comes to running the business. We wouldn't have a $17 million business if you were that irresponsible doing that. We have to deal with this. sure and just i'm just going to and i'm going to constantly be talking about it until he finally blows a gasket or deals with it right um and so it's not like once every six months i bring this up

it's every time i see him i bring it up until we're sitting in the lawyer's office drafting the stupid thing and it may be that you may be that you give up all your portion of the farm just to get this business and that probably wouldn't be a bad trade no financially it wouldn't No. But the problem is I live on the farm. That's what I mean. So what? It's not a problem.

Move. Yeah. You know, but get this solved, man. Because all these problems are going to be worse. If, you know, well, dad said we were getting the farm and you were going to move, huh? Well, I never heard that. Well, what? Yeah.

Huh? What? Huh? And then all of a sudden, you know, the lawyers end up with all this crap. Sure. and because somebody heard something over some breakfast conversation and he was too trifling to get it put into a will. It's just bad stewardship. It's a bad management of the blessings that God has brought into your life.

Right. And into his life. And he needs to do a better job with it. I, you know, it's just interesting to me that people refuse to deal with this stuff after they were so good and they're so diligent on other areas of life. So, yeah, I want to, I want to settle it with my own. I have two, two kids in the business. And so I'm, I'm like, I want to go ahead and settle mine, but until I can't have to settle his, I don't know what I got to settle with them. Yeah, you can begin all, you need to begin some estate planning there and some transfers

as soon as it gets into your name. But before it becomes super, before it becomes more valuable and gets outside the, uh, the federal estate tax exemption amounts. And you're, you're going to be outside of that soon if you keep growing. Sure. So, yeah, you guys got to get that done. That could be a thing. The way, you know, the way we can avoid federal estate tax generationally if we go ahead and deal with this now.

Okay, that's true. That's a point. And that's another reason to go ahead and do it. So, yeah, he needs to be sitting with an estate tax attorney 10 years ago. I agree. And y'all got to get this done. And, yeah, I'm just going to talk about it a lot. And you don't have to be a jerk.

You just got to be persistent. and the problem is you feel weird about bringing it up and awkward, and so you only do it once every six months. I'm doing it every six days until this has dealt with. Hey, dad, me again. Remember that thing where I was going to honor you and your wishes? Yeah, you remember that discussion last week? So when is our appointment?

Do you want me to set the appointment? Can I find the estate tax attorney? Can I find the guy who's going to draft the wheel and you sit down with it? I'll help you. But we're doing this. What does the future hold for business? Ask nine experts, and you'll get to, get 10 different answers.

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Kirk is in Phoenix. Hey, Kirk. How can we help? Hey, Dave, thanks for taking my call. Sure. So I'm a fourth generation farmer. and my wife and I, we just started our own farming business, kind of took over from my dad and stepmom about three years ago. And in that time, we've made a lot of mistakes, had a lot of bad luck, and now we've found ourselves in quite a bit of business debt that we're working our way out of.

We've only recently stumbled upon your resources, which have been incredibly helpful. but one of the things that we're trying to do is we're actually selling our home to downsize to live a little more modestly. And my question is, should we consider taking the proceeds from that home and putting them back into the business and renting for a time? Or should we purchase a smaller, more modest home and just stay the course with the process and the business and get out of debt? So how much of the proceeds? About 100 grand. Okay. All right.

And how, what's the, how expensive is the house? Five, we have a listed for $5.85. Okay. And we feel like that's a pretty fair price right now. And how much business debt, how much debt do you have and how much of its business debt? Well, other than the house on the personal side, we have just a few grand worth of debt that were debt snowballing, a medical bill and a $4,000 car payment. How much on the farm debt? About 700,000.

Okay. And what was that for? So about 550,000 of it is a line of credit, which part of that is getting pulled into a term loan, and then the rest of it will remain as a line of credit. And then I've got a couple of credit cards, one for an equipment, one for a business credit card, and a couple of tractors that were still paying off. Okay, what was the line of credit used for? They used for everything from, I mean, just general business expenses,

all kinds of fertilizer feed, payroll. You know, we came into this thing with nothing. So you lost $550,000 on this business since you started running it? Yeah, and part of that was, well, part of that was actually to buy the home that we're in now. And then we took the proceeds from our other home, which was not exactly how much that we had put into this home. But we sold a home, put that money back into the business, which was about, so probably net 50 to 70 grand of that total debt was probably in our home purchase. Are you still losing money on the farm? No, no.

This year, I mean, we finally feel like we're, I've got my head above water here and we're making progress. So this year will be profitable. Last year going into the season, I had $20,000 to work with. And, you know, after several hundred hour work weeks and, you know, throwing everything we can at this thing, we made it through our main growing season. And this year, I'm projecting to have anywhere between $150,000 and $200,000 to work with going into next season. So a bit of a different story than last year. What are you growing?

Uh, wheat is probably our main commodity. And how many acres? Cotton. Uh, total we do about 850 acres. We're pretty small potatoes for our area. Are you, uh, owning all of that or leasing some of it? No, we, it's, I don't own any grounds. It's all, none of this is, uh, portion.

Okay, so this is all, this is all, this is all business losses and tractors. Correct. $700,000 worth and a little bit of screw up on the house deal. Yeah. Okay. Um. why did it lose so much money in the first year? I mean, you're harvesting wheat.

Why do you lose money on that? I didn't know what I was doing, is the long and short of it. Well, I mean, you just, the crop didn't come in? Yeah, I mean, basically, the first year, yeah, I kind of underestimated how hot things would get. So your yield per acre for the first couple of years sucked? Exactly. Okay. Because the first, the first year, the yields were horrible across the board, the second,

year, I kind of figured out what I was doing with my wheat crop, my cotton, and my other seed crops I do. That was a different story. And this year, I feel like I'm finally putting it all together. So it's basically been a $700,000 life lesson that I've learned the last few years. And you're a fourth generation farmer. Yes, sir. Wow.

But something changed that much when you went into business that you didn't know how to grow the wheat. That's interesting. Well, yeah, I took over the business from my dad who had not been really involved in the day to day for several years. I kind of stepped away for a while and then came back and quickly realized that it wasn't going to work because I was managing this company as well as another company. But, I mean, I can drive a tractor by anybody in this county, but I was never really trained on how to run a business, how to call shops, how to run irrigation schedules, none of that stuff. Yeah, I mean, I could, I could plan it, but I couldn't figure out how to water it, apparently, because it all burnt up. Okay. That's what I'm trying to figure out here.

Okay, so because all of that matters in the story, it's not just to shame you for how you got here. But if we want to get out of how we got here, how we got here has to stop. And that's what I'm trying to make sure I get to the bottom of. So it sounds like you've turned the corner. I'm believing you. And so, you know, what's it take for your family to live? Right now? It takes about $8,000 a month, and half of that is my mortgage, which is why we're selling the house.

Okay. All right. So if you're renting something cheap until you get this debt mess cleaned up, what does it take your family to live a month? So the cheapest that I've been able to find for a house here in our area that's, yeah, I mean, anything that's not like in a horrible part of town, we're still looking at like $2,000. a month. Like there's not many options. So $6,000 a month is what it takes $72,000 a year? Yes. Okay. And everything above that, you can throw back into the business?

Correct. And you made $150, or you think you're going to make $150 to $200? Correct. Yes. Okay. So that means we're going to have somewhere around $75 to $100 and a quarter to throw at this debt this year. Well, the problem is that the, I mean, just because agriculture is such a seasonal deal, like I'm not exactly sure how much I'm going to be able to, of what I make this year, I'm going to have to have some kind of a nest day. I mean, I can put it all down on my light of credit, but then I won't get a major payday until next June when we harvest our wheat. So part of that is reserving some for just business expenses for four, five, six months. So it's not as if I can just write a big check and pay down debt and leave myself with nothing. Because it's, it's No, but I'm saying over the course of 12 months, you're going to make a profit of $150,000 to $200,000. Is that correct? Yes, sir.

And over the course of 12, we have to manage cash flow, but over the course of 12 months, of that 150 to 200,000, you need 70 to live on. That would be above and beyond my current living expenses. That would be with that 150. So D150 plus if I'm all right now I'm taking home Okay honey that's not profit then Because before you take it home it has to be profit So the business doesn't get to pay your living expenses Those aren't deductible that's not a business expense

Right So are you making Are you making 150 plus 72 Or are you making 150 minus 72? It would be 150 50 plus 96, actually, is my current. Yeah, your current burn right, but you're changing that because you're going to rent. Right.

Okay. Correct. Until we get this dadgum mess cleaned up. Okay. So you have a whole 150 profit after all business expenses and personal expenses. Yes. All right. And you got $100,000 coming out of the sale of the house?

Yes, sir. So that's $250 towards your $700. It's not all at once, but it's going to be over the course of 12 months. That's how it's going to shake out. Am I right? Yes, sir. Okay. So you cut up those business credit cards.

You never use them again. You pay off the tractors and pay off the credit cards, then all you got left's the line of credit. And you start to pay it down, and every year you pay it down a little bit more, and you keep living on nothing. And you keep renting, and in about three years,

if you keep running the same level of profits, you should be dead free. Did I do that right? Right? Yeah. I think I did. And then as soon as you're debt-free, you start using that money to pile up cash to buy a house with. So you're renting for three years while you get your mess cleaned up that you made over the last two years.

And hopefully we got a bumper crop keeps coming in for the next three, and you keep making about the same or even more. Maybe you even get better at this, and maybe you make even more, right? Yeah. But next time you get ready to buy a tractor, don't. Don't. No, we haven't been buying any new equipment. I've got two. But I mean, next time you get rid to buy a tractor, don't unless you've got the money.

Stop it. Because as you have figured out, farming is a business, and you don't get an exception to the rules of business just because you're a farmer. In America, we love our farmers, and we respect you for the hard work you do. But you don't get an exemption from math because you're a romantic farmer. And, I mean, your comrades out there driving. I mean nuts because they're like Dave Ramsey doesn't understand farming. Farming's a freaking business. Dave Ramsey understands business.

And Dave Ramsey understands that when you finance $200,000, $800,000 combines, it's very difficult to freaking stay open in any business. Well, it's just that's the way it is in farming. No, it's not. It's the way you chose for it to be. So you've got to stop that and you've got to break that cycle. Because if you'll run this thing debt-free, dude, you can put a quarter million dollars a year in your freaking pocket four or five, six years from now, you're going to be sitting pretty.

You're going to be making so stinking much money. It's going to be unbelievable. And then you can cash flow equipment, good equipment. And that's what we've done here. The studio that I'm broadcasting from has 27 miles of wire in it. It cost over a million dollars to produce this one room. Okay. But we didn't start with a studio that did that.

That was after we had made some freaking money. We started with a borrowed studio at the local radio station. And until we had the dadgum money to build a, buy a little mixer board and a couple of microphones, and then we built our first little studio, which was horrendous. And then we made a little money, and we built another studio. Made a little money, and this is my seventh one in 35 years I've sat in, and it's the most glorious of all, by far. But it's cost a lot of dadgum money, you know?

But I didn't start with that and go, well, to be in Burrower, broadcasting, you have to have a million dollars. No, you don't. You use somebody else's, and you put it in a closet until then. You sat in a closet. I sat in a closet. That was the first studio. We cut a hole in the wall, and I sat in the closet. And the booth was through the hole in the wall. So this is how you guys do it. So that's the situation you're in. So you're going to sacrifice like crud to clean up for the debt that you financed because you had to learn some lessons the hard way. And I'm sorry you had that. But I'm I'm excited for where you're going to be in five years.

You're going to be able to pay cash for nice equipment and still make serious profit. And then increase your productivity and make even more profit. And it's going to get better and better and better if you stick with these principles. So that's what I'm doing. I'm moving to the rental. I'm throwing $100K down on this thing. Clean up those credit cards, those tractor loans. And I'm going to cash flow that other $150 to $200 out over the following 12 months.

while I run the business, and you've got to keep the cash flowing, and you've got to manage cash to get there. But the net, net, net of it is you should clear another 150 to 200 to put on this, and that'll clear up every single thing and really take a good bite down into the line of credit, and you should be there. That's where you're going to be. So, man, you're a hard-working dude.

I'm proud of you. And I sure hope this works for you because you deserve it. You're a good man. Keep it up. Our question of the day coming in from Will in Pennsylvania, Dave, leadership often requires making unpopular decisions for the sake of the mission. How do you lead with conviction when you know the team might disagree or even resent you in the short term? Hmm.

I don't have that happening much. We lead with conviction and we lead on principles, but we've communicated so clearly what those principles were all the way back to the hiring process. so when you're onboarding you know the principles that we use to make decisions so later on we've talked about we use those principles to make decisions and we talk about it called core values and this is how we make our decisions and this is what we do and this is how we're convicted and this is who we are and then when I make a decision based on that no one is shocked they'd be quite shocked if I didn't do that they don't get whiplash because this is who we are and why would you disagree? I mean, this is what you signed on for. You wouldn't really disagree. And you might

disagree if we were doing something that was contrary to the values that we promised you we were going to use to make decisions based on. And that would be valid because then you'd be hypocritical, right? But you don't have convictions when you're hypocritical. You're just being convenient and compromising and wussified and all that stuff. So how do you lead, with conviction when you know the team might disagree. I can't think, I mean, the team might disagree about things that are not missional, but tactical. They might say, hey, the best way to do to score a touchdown here is a running play to the right, and I'm going a running play of the left, and neither one of those are a missional decision.

It's just tactical decision. And then they can make an argument for that, and I can make an argument for mine, and we can talk about it together, and then we'll decide which play to run to get the touchdown because we want to win the Super Bowl. We're both trying to agree on that. But it's not like we decided we're going to play soccer instead of football. I mean, we're still playing football. We're still trying to run the dad-gum ball into the end zone. And so we didn't change sports. It's what we're doing what we're doing. So I haven't had a time when the team, um, disagreed on something I was doing from conviction based on the principles that they knew were here

when they joined the company. That has not come up. I have had team members think that they knew something about a situation that I couldn't disclose, and so they thought I was being hypocritical, and they thought I was making a non-principled decision, but they didn't have the information, and I've had that happen. and they quit because they thought they worked for a jerk. And, you know, I was doing, I had, I had information they didn't have that I had to make a decision based on that. And it was confidential stuff I couldn't get into.

So I about that, but only like one time in 30 years or I run into that. Most of the time when we're making a principal decision, we can disclose everything around it, a decision of conviction, a decision of mission. We can talk about it. we can all make sure, is this decision aligned that's missional? And this is the mission you signed up for. So there's not a question. We're going to go clear the room. And that's what we got to do.

You know, we're going to, this is what we do. And so typically where I've had team members disagree, even on tactical things, and create resentment is where we had not communicated clearly to them why we were doing something. and the why aligned with our core convictions and the tactical aligned with our core convictions. And if you've got a different way to do this, tell me what it is. But sometimes I've had folks that were immature. But again, that was a hiring problem, right? Because then you're just being an immature child because you don't like the fact that we changed the coffee machine or whatever the flip it is, right?

and so and I have had times where we did not communicate change far enough in advance and clearly enough and then when we hit the curve hard on the change and we you know we whip around the corner on the change the centrifugal forces thrown some people out of the car they couldn't handle the change the rate of change but some of that was they couldn't handle the rate of change and some of that was we didn't communicate it far enough in advance like hold on we're hitting a corner here grab hold i mean two hands and seatbelt get a hole otherwise you're going to flip out because we're we're hooking this puppy and so um you know i've had that happen but that was just a communication issue where we didn't do a good job of selling the dream and selling the vision and um

uh the bible says where there is no vision the people perish and so you know casting that vision saying this is who we are, this is who we are, this is where we're going, this is why we're going here, and, you know, I have had that. So, but I am having trouble really coming up with a solid example to, in our experience that we've had this. I've not had, the other thing, the term in this question that bothers me is, the team might disagree or even resent you. See, I don't have people resenting me for very long.

they either need to not resent me or leave because I'm not giving you money, my money, to work here if you resent me. I don't, this is, this is, it's kind of like part of the deal we have that we like each other, we trust each other, we treat each other with dignity. You don't get to roll your eyes and go Dave's a crazy man and he has no idea what the flip he's doing and I'm going to cash his check on Friday. That's not something we do here. So I have a real low tolerance for that like zero.

and so I'll be nice to you, but you're not going to work here anymore. And so that's part of what I'm having trouble plugging into with the way your question is phrased. So we're definitely going to buckle down. We're going to say, this is what we're doing, very clear, very principled, starts at the hiring process, and, you know, get buy-in from the team, cast a vision, this is who we are, this is a vision, this is where we're going, this is why we're changing, this is what we're doing, And then if they can't hang on when we make the corner, then they can't hang on. But you need to be in the car or out of the car.

You can't ride in the car and roll your eyes about the car. That's not how it works. So contempt is not something we deal with from our team. You know, we don't have contempt. I don't have contempt for the team, and they don't have contempt for me. It's a fair deal. We're both like grownups and stuff. if you have contempt for someone, you should go work somewhere else because you think your leader is an idiot.

And so that's, you know, pretty simple. Yeah. So, and I will tell you this, Will, you said, how do you lead with conviction when you know, dot, dot, dot? There is no real leadership unless it's with conviction. leadership that's done as a compromise with no backbone, go along to get along, that's not leadership. That's just mob rule. And so all real leaders have a conviction about them.

They feel strongly about things. Otherwise, you're just not a leader. You're a follower in a leader's jacket. And you've got a little plaque on your desk, but you're not really leading anything. you're just going along. Leaders all have convictions. So it's the only way you can lead, but the way to avoid the disagreement or resentment or whatever,

you know, the things we've just been talking about. That's a great question. It's interesting to get me a little diatribe on that. But, um, hmm. That, but, um,

I have found that over the 30 plus years of doing this, that, uh, the frustrating thing that I, I go back to most of the time when I've had team member problems in these areas that we've been talking about, it goes back to the hire and the onboarding process. We weren't clear to them what signing on meant that this is who we are. And if you want to be a we, this is how we function. And we didn't do a good job at onboarding. And we didn't do a good job repeating over and over

and over. This is who we are. This is our value system. This is how we make decisions. This is what convicts us, what we have conviction based on. And if we keep all of that a streamline of communication, very, very clear about who we are, then when we act like we act, no one is shocked. No one disagrees. No one has resentment because they fully expect us to do that because it's what we have been saying since they had the very first contact with us. But when we don't keep that steady stream of communication about our values and constant teaching and constant thinking about it all the way back to the very first day you come to work here or even in the interview process before you come to work here, then that's where we have had the most trouble. In other words,

we get people in the building that thought we were playing one game and we were playing another. And that's our fault because we weren't clear. To be unclear in that situation is to be unkind. If you want to grow your business, you need a proven system that actually works. That's why you've got to join the Master Series live stream October 20th through the 24th. My executive team and I are opening up our playbook and will show you the exact tactics we used to grow Ramsey solutions into a $300 million company. You'll see how we lead, how we strategize, and how we grow profits, and how we build a unified team that's fired up about our mission. It's like having my leadership team in your office training your leaders for five days. This isn't theory. It's practical step-by-step tactics you can start using in your business on Monday.

The best part is you only need one ticket to stream the event with your whole leadership team. That's like getting 10 tickets for the price of one without paying for travel. But there's no time to sit on the fence. Go to Entreeleadership.com slash live stream and get registered today. or click the link in the show notes if you're listening on YouTube or podcast. Ronnie is in New Mexico. Hey, Ronnie, how are you? I'm good.

How are you, Dave? Better than I deserve. What's up? In 2002, my dad and I started a service and repair business serving our local farmers. We started as an S-Corp with four officers, my dad, my mom, myself, and my wife. Last year, we did about $3.9 million in billing, and this year we've billed about $3.9,000. $3.5 million. We have 12 employees, including the four officers. And how do my parents step out of the corporation and retire without doing a stock redemption plan and my wife and I incurring

business debt? What's the profit on the $3.5 million? Um, $600,000. Are you $5050? Yes. We started 50-50 and have been the whole time. Okay. So what would you value 50% of the business at if they own 50%? We did an evaluation and we evaluated the whole business being about 4.1 and so half of that would be 2.25. Who did the valuation? My mom. One of the partners. Okay. She's wrong. So that was just done off of an average of our billing and our net profit.

over the last... Yeah, your net profit is $600K. The most the business is worth is four times that. Four to five times that. That's the most it's worth. So she's overvalued it by about a million dollars. Okay. No one is going to buy a small business at the cap rate that she's got this at.

Right. You could not sell that business for $4 million in a million years. Right. Right. Okay. So the first thing we've got to solve the valuation problem. Then we get back to, okay, so 600K times 4 would be 2.4 times 5 would be 3 million. So it's worth between 2.4 and 3 somewhere in there.

So if we call it 3 and you could buy that, what does it take for you and your wife to live at home? What's your living expenses? Living expenses, probably 4,000 a month. Okay, so 50 grand a year. So are you guys pulling any salaries out of this, or are you just living off the profits? Yes, no, we're pulling salaries. How much of the salaries? About $8,500 a month for each, for me and my dad.

Okay, so you're pulling $100,000 of salaries. And now does the $600K occur after each of you pulled $100 or before? After. Okay, so it's actually making. if the owners took nothing, we've got $800,000 to play with here. Okay. All right. Well, the way I would do it is, I would say, all right, if dad and mom are at home and they're retired,

and we are buying them out as fast as we possibly can, that now adds $100,000, because your dad's not there anymore, to the equation. And so instead of 600, I have 700. I'm still getting 100 to live on. So I've got 700,000 if dad's at home retired to buy him out with. Is that right? Yes. If you give him the whole 700 for three or four years, you would be done.

Right. Right. But what kind of tax implications would that put on them? he's making a profit of $2 million. He sold a business for $2 million. He's going to be taxed. Right, right. Yeah, you know, taxes every year on that.

That's income. Because I assume your basis in this is zero. You started with a truck and some tools, right? Yeah, well, we started with a $50,000 loan to build the shop. Yeah, so you're, you know, his base, he probably doesn't have a basis against it, right? Yeah, and that's, that would be true if it was an LLC and it would be true if it's a sub-S. It doesn't matter on that part because the bottom line is he's selling a business that he's having a liquidity event of $2 to $3 million. And so he's going to pay taxes over a period of time, in this case, on $2 to $3 million.

There's no tax-free way to do this because just like the $100,000 that you're paying yourselves. And for that matter, the $600 has passed through. You guys are paying taxes on the 600, too. Yeah, we're paying a ton of taxes. Yeah, you're getting killed. Welcome to small business, yeah. Right. So when I buy the amount, do I need to change this over to a different, like a C-Corp or something?

No, you don't want a C-Corp. No, C-Corp's horrible for small business. No. S-Corp or LLC is the way to go. I've moved to West from S-Corp's because of Tennessee law. I don't know New Mexico law, but LLCs are more favorably true. treated in Tennessee. S-Corps can get a franchise and excise tax in our state.

So I don't do them anymore. I had an S-Corp at one time. I don't have any of them now. I only have LLCs now. But you can learn from a tax pro in your area there what you guys are facing in New Mexico. But you don't need to get in a sea. A sea is a nightmare. You get stuff trapped in there.

I talked to a guy that they's got $20 million trapped in a sea and you can't get it out. It's a bad idea. So let's revisit. So 2.400, 2.7.3's 2.1, 10 4 is 2.8. So if we call it 2.8, oh, wait a minute, that's the valuation of the whole stinking business. 600 is the whole profit. That's not half the profit. So the whole business is worth 2.8.

So half is going to be 1.4. you're going to pay him out in two years. Right. That's how you're going. Okay. That's even better. Yeah. Yeah.

Because we're only buying half of it. You already own half of it. Right. I did the math wrong. Sorry, I screwed up. But, yeah. But yeah, if you value it at 2.8 and you give them 700 a year for two years, they're done. And what I would do is just say, we're going to give you all of the, I wouldn't, I wouldn't

set a 700 figure. I'm going to say, I'm going to give you 100% of profits. after I make a hundred thousand salary until you hit your number. So then if profits dipped, you're not in default. Right. They get 100% of profits until we get to, in my example here, 1.4. And I don't care what you settle on. You can settle on 1.4, 1.5.

I don't care. But you get 100% of profits, and I'm going to pay you monthly. You know, close your books once a month and whatever the profits are. Send them right over there. Do you have a calculation for retained earnings of any kind? No, not in front of me. Okay. I mean, do you put money in retained earnings each month, or do you?

We don't necessarily put something in retained earnings, but we just make sure we have a generous operating account that we operate out of. Well, if you start closing this books monthly and you take 100% of the profits out, that's going to starve your funding of retained earnings if you don't have that built in the formula too. You follow me? Yeah. Yes. Yeah. So I might say I'm going to pay you 90% of profits and I'm going to put 10% in retained earnings and I'm going to take 100K until we get to your number.

So that gives you some slush for operating. So the other night while we were having our meeting about this, Um, you know, I, I turned around and I asked my dad, I said, so what, uh, what's your opinion on all this? And this was when we were talking about the 4.1. And he said, I, I'd just soon give it to you. And, uh, what's he going to eat with in a retirement then? Well, they, they have, they have a retirement fund that's funded. What's that mean? Um, they got $20 million? Well, 2.1. Okay. So if he wants to give it to you, that's okay, too?

You got siblings? I do. I have one sister. All right. If he did that, you know, it might be like you need to put a valuation on it for fairness. Right. So that reduces your part of the, of the future estate by that much. You've gotten an advance on your inheritance.

And so your poor. portion of the estate would be reduced by the 1.4 or whatever it is, okay? Right. Or I don't care if you call it, too. I don't care. Whatever y'all call it. But, yeah, I would do that. And that's good.

That means he's done a great job managing his life. What a great guy. That's awesome. Yes. That's what we're doing at Ramsey. Sharon and I are set, and 99% of our stock has already moved to the kids 10 years ago. It's in the Children's Trust now. I own 1% of Ramsey, and it's the only voting stock, so I'm still in control.

So, and I'll transfer that whenever I want or on death. And Sharon gets nothing here. She's got hundreds of millions of dollars worth of other stuff, so she's fine. So, but the company itself has been operated for God, and the kids now operate it for God or will when I'm gone, and the grandkids will too, and so on. Because we've already set the whole thing in trust to where it will never be accessed by, and destroyed by estate taxes. Because we set that up 10, 15 years ago. So that's, in a sense, what we did.

But we looked at it like God owns the company. I don't own it. And the best way for the company, for God's company to prosper is for me to not saddle the next generation with debt. And so we built our, like your dad did, we built our own wealth on the side away from Ramsey. And that put us in a position to do all that. So your dad's cool.

I like that. That's very neat of him. And then you just, if you do that, you've just got to figure out how to make that equitable with your sister in the whole estate plan. And I would want to do that. I'd want to make sure all those eyes were crossed, I were dotted T's were crossed. And I love that your dad is addressing all of this. How old is he? He's 70.

Perfect. Wow. He's very wise. One of the biggest things we fight is getting people to do this. And so you guys are addressing it. You're having very clear conversations, kind conversations. There's not a dysfunction, a bunch of greed. You guys are really stellar people, both of you.

This is very neat. We just don't want to get in a mess, you know. And you will if you don't do that. If he dies tomorrow or, you know, if he dies tomorrow, we're in a mess. Yeah. But, you know, so we're just trying to. Yeah. Trying to.

Well, either he gives it to you or you buy him out over the next two, two and a half years by giving him 90% of the profits and all 10% back and you live on 100. Right. That's a formula that'll work. And then profits go up, profits go down. Profits go up, you buy them out faster. Profits go down, you buy them out slower.

Right. You guys are amazing. That's very well handled. Good work. Folks, remember better a wary warrior than a quivering critic. This world needs more high-quality leaders. So take courage and lead. I'm Dave Ramsey, your host.

Thanks for joining us on Entree Leadership. Yeah.