EntreLeadership - Is It Time for Me to Get a Business Partner?

Episode Date: October 21, 2024

Today we’ll hear about:  A man asking if he should take on investors  A woman wondering if her business is growing too fast  Dave’s take on how to balance humility and confidence  A business owner deciding how to use his profit    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   For our FREE KRA Template: https://ter.li/kra-template   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 right alongside you. If you've got a question you want to ask on the show, fill out the form on Entreeleadership.com slash ask. And you can call and leave a voicemail at 844-944-10. We'd love to have you there as well.

844-944-1070. We'll put you on as a caller. You and I'll talk and I'll try to help you move your business and leadership forward. That's the idea. Brian is with us in Fort Myers, Florida. Hey, Brian, how are you? Good afternoon, Dave Ramsey. I'm doing great in yourself.

Better than I deserve. How can we help today? Man, I love it when you say that. I am in the construction industry. I am the general contractor and owner for Minneapolis. We currently have four employees. Last year, our revenue was $1.4 million. This year, we're headed to surpass $3 million.

My question for you is, should I entertain partnering with investors? No. I do. Why? Why would you do that? Your business is exploding. I agree. Why would you bring in people?

It's so tempting. Why would you, what? What did you say? I said it's so tempting. Tempting to do what? What are you wanting to do that you can't do? Right. The whole concept of what we're doing, which is building small footprint homes,

there's a lot of obstacles in the industry when it comes to zoning and building. And we need to be constantly have capital readily available. And when it comes to taking out loans to do developments or build these homes, it gets complicated. So having somebody who we have constant access to cash helps accomplish more of this business. So that's why I've entertained that. So it doesn't help. It hurts because you traded one complication for another.

See, what we've discovered, Brian, in working with small businesses over the last 20 years, tens of thousands of them, is the only ship won't sales a partnership. And people do this stuff, and sometimes I'll do it as a joint venture on a short. term basis, but where you bring someone in and they own part of your business in order to provide capital, when you have already gone from 1.4 to 3 million without them, you are destabilizing the business because everything that goes wrong in their life now goes wrong in yours. You just got married to a crazy family. That's what happens.

And all you're seeing is, oh, I got some money. have money before. But with that money comes all of these entanglements and complications that make financing look easy. So what I would be doing if I'm in your shoes is that I would be aggressively setting aside my huge profits way to go stud. You're killing it. I'd be setting aside profits to grow the business with with cash and grow a little slower than you are dreaming of growing. Not than you are growing. You're growing fast. So 100% of Ramsey from the card table in my living room, 34 years ago to a $300 million business now has come from the profits we made here being put back in wisely, carefully, steadily. I've always wanted to and could do more than we had the money

and the people to do. I've always had more ideas than I had money. I've always had more opportunities than I had money. Crud. We get people out of debt. It's not like me and Jenny Craig and got a big job. You know, I mean, everybody's our customer, right? So, you know, you're, you, there's always more opportunity. But I've just said no, no, can't do that one. I'm going to select the good one. I'm going to take the good one. I'm going to take the good one. I'm going to take the good one. Take the one I got the cash to do. We're going to try that with cash. Oop, that didn't work, but I was cash, and so I'm not hurt. I don't know a bank and I don't have a partner screaming because we lost money. I just, we made a mistake. We didn't do that one. Okay, we're going to do that. Oh, that one made money.

at that one go here we go and we put organic cash meaning taking our profits and roll them in profits and roll them in and you need to divorce yourself gradually from even the bank where you start financing these things out of your own pocket if you had five years from now and you were sitting on a million dollars cash and it was just a slush fund to buy with and then you replenish it out of the next deal and you keep your own cash position you you would be sitting and you don't need partners No, please don't do partners. Please, please, please, please. What this is is you're trying to go faster than you should.

And you're going to fall. You're going to stumble. You're going to trip. And because people don't see the problems that you invite into your business when you bring other people into ownership because you bring all of the negatives that they bring as well as their positives. All we see when we're talking about doing this is the positives. That's all we ever see.

So, no, I please don't do it. Just grow a little slower. You're doing so good. Don't mess this up. This is the Entree Leadership podcast. If you're struggling to know what the right next step is for your team, then you're in good company. Most business owners deal with seasons of uncertainty. It doesn't mean you have to keep blindly stumbling from an obstacle to the next, though.

I know how to get you from where you are right now. to where you need to be in 10 years. It's called the Entree Leadership System. It's the roadmap that we've used and that we've led 10,000 businesses down to help them grow through the five stages of business with the six drivers of business. It's pretty incredible.

If you'd like to learn more about how to solve the right business problems at the right stage, at the right time, in the right way, go to Entreeleadership.com slash system. Entreeleadership.com slash system. Megan is with us in Charlotte, North Carolina. Hi, Megan.

Welcome to the Entree podcast. Hi, thank you for having me. Sure. What's up? My husband and I own a diesel repair shop that we opened in November of this last year. We have five team members, and in our first nine months, we gross just over 700,000. Wow. We're growing at such a fast rate that we're worried that it's going to get ahead of us.

So we want to know when do we intentionally pause that growth or slow it down a little bit so that it doesn't. doesn't get away from us. Well, I discovered a metaphor, or not a metaphor, an actual thing that the military uses, and I've adapted it to my business that gives me what I'm looking for. In the military, if you're fighting a ground battle, that you have men and women and tanks and so forth on the front lines advancing a ground battle, a line, you know, the battle line, so to speak, they do not move the battle line forward faster than they can get food, bullets, and gasoline to the men and women that are doing the fighting. If the men and women that are doing the fighting

get out past their supply of food, obviously they're going to have a problem. Gasoline, they're not going to be able to operate their vehicles, obviously going to have a problem. Obviously, going to run out of ammunition, so if the ammunition bullets don't get there, right? So what we look at in business is, okay, what are our supply lines that we have to keep the front line from getting killed, right? What are the supply lines? And around here, we decided that the three things are money. Are we running this thing so fast that we're throwing so much cash at the growth that we don't have any cash. so we're running too thin, so we outpaced our money. We don't want to do that. We don't want to

outpace our human resource, putting quality people on to do the work that we're booking. So in your case, you don't want to grow faster than you can have quality mechanics. You don't want to dumb down and put substandard workers working on people's trucks and mess up your reputation, right? Absolutely. Yeah, so we can't grow faster than we can get the right people to help us do the work that the growth represents. We can't grow faster than the money we have, the cash position we have.

We outrun that. And those two definitely apply to your situation. I'm not sure what the third one is. I'm going to guess and say it might be physical bays. That's it. Might be a constraint. You can't grow faster than you can provide base. you can't work on their stuff on the side of the road.

Well, I guess you could. You could have a mobile operation. But, I mean, you can't just start, you know, stacking up people in the neighborhood, right? And working on trucks on the side of the road. You know, you got to have a physical plant. In ours, it's not physical plant that is our holdup. Our third one is technology. We can't grow faster than our technology can keep up.

We've got to have the right computer, platforms, digital applications. if we get out ahead of the technology and we're having to do stuff by hand instead of automated or we get out ahead of our cash or we get out ahead of our people, we know we've outstripped our growth and we've got to slow down a little bit. So really, those three things are probably your constraints. Now, the good news is if you clearly identify your three constraints, which we have, over time, you could kind of build a war chest on all three and stay ahead of it. Let me give you an example of that.

I will tell you that our third one used to be physical constraint because we had an office building that was full and we had rented the office building next door and it was full. And we rented the office building a mile away and it was getting full. And it wasn't the process we were using to add humans in a physical place was not working. And so what we did was we saw that was holding us back and we invested heavily to build the campus that we're in now

and put everybody in one building, 1,100 people in one building, and we built the second building. So we can go to about 3,000 people now at Ramsey without doing any more building. So physical became no longer the constraint, a place to sit, in your case, a bay, became no longer a physical constraint, because I got so far ahead of it,

that now I had to look at, okay, what now are my constraints? Technology, we realized staying up with technology was the other one. And so, but you could get ahead of cash. You could pile up so much cash that you don't run out. You could get ahead and you could have more workers than you have work because you did such a good job recruiting and bringing on diesel mechanics. You could get ahead on the bays because you expanded. You really need two more bays, but you went ahead and built six

because you had the money to do it. Right. So you can get ahead of these things and then let the momentum run its course. But the only way you do that is to identify them. Yes. And we just got a new shop that's being built. And so we're working on the space issue. So we don't want to run out of work for when we're in the shop in two months. But we're kind of at this place where we're maxed out where we are. So we're just surviving until that point. Yeah, it's okay. That's a temporary thing, though. because in two months you'll be able to take on the work.

Absolutely. Yeah. So that's fine. And is there a place you could rent for two months? Probably not worth it. Not worth it, no. Yeah. If it was a year, I might.

But I might set up a temporary shop, right? But it's probably not worth it for too much. For two months, you just kick the can down the road and your momentum slows a little bit, but whoop-de-d-d-d-d-you-you-you-know. The problem is it's addicting because you've had such huge success so, quickly. Congratulations. Very well done. Thank you. Yeah, that's so fun. So rewarding to look up just everything you touch is turning to freaking gold.

This is amazing. Absolutely. Yeah, it's very good. I mean, I've been in that situation. I'll take that one over anything else. Me too. I'm thankful that's where we are. Such a problem to have. But yeah, yeah. So just make sure you're managing your cash and you don't, you always have that war chest of cash. make sure you're now looking out five years in advance on Bay needs, on physical needs,

and we're always going to be looking at the people thing. Today, of the three things, between technology, humans, and cash at Ramsey, we got plenty of cash, physical space, as I told you, no longer a problem. Technology is in great shape. We can grow. All we need to grow, we've got no issue there because we've stayed ahead of it. Our current thing that has us bridled more than anything else is just, and it always has been since day one, is adding high quality, high character people to our team and people that fit our culture and that want to be on this crusade.

And because not everybody wants to work here because we actually work. And not everybody wants to work here because we actually care. And so it's kind of a hard place to work. It's kind of a hard place to get on, for that matter. and it's pretty demanding, not because we yell or scream at each other, but it's just, man, we're getting after it. We're trying to win a Super Bowl. And so that's our constraint today, just to be open about it.

But I think if you just give yourself that analogy, it gives you permission to go, okay, two months, I got the physical. Where are we on the catch? Where are we on adding the quality best diesel mechanics in Charlotte, North Carolina? Let's put them on the floor with us because we can ROI on that. They can make good money. we can make good money. And I'm loving every bit of that. Well done. I'm Dave Ramsey, your host. If you ever want to send us a video question, you can do that. Just email it to us or drop us a line at

Entradeleadership.com. And we'd love to have you. You can participate with us any way you want to do that. And Atradeleadership.com slash ask, and we'd love to do that. Aisha did that. Hey, Aisha. Let's see her video question. My name is Aisha, Queenie Taffera, and I'm from Virginia, and my business name is Ultimate Care. How many team members do you have? 80 plus. What's your top line revenue? Revenue wise, about six, you know.

I struggle with too much humility. I'm very humble person. I don't want to be out there. How do you balance that, you know, to be able to be out there by the same time, maintain humility. Well, you can maintain humility and still be very confident. C.S. Lewis said it well. He said humility is not thinking of your, thinking less of yourself. It's thinking of yourself less. It's being other centered rather than self-centered.

Errogance is what you want to avoid. But you can be very powerful and be a lot. other centered. You can be very out there and be other centered. You've not lost humility at that point. Humility does not require one to be a shrinking flower that hides behind, you know, some veil or something. That's not humility. That's just lacking in confidence. And that's false humility if you're doing it to try to appear humble. But again, CS Lewis's definition is the ultimate definition as far as I'm concerned. It's just being other-centered rather than self-centered. And that is humble.

And so I meet people that are very confident, very courageous, very out there, but are very humble because they're other-centered. I'll tell you one place I run into them pretty regularly. We do a lot of work with the military. We have financial peace universities, has been taught on military bases all over the world. And there are exceptions, but most of the time that I run into top brass,

a colonel, two-star general, somebody that's top brass has been to a military a long time, they will catch you off guard because they're so unassuming, they're not impressed with themselves. They're not impressed with the metal on their shoulder or on their chest. And they're there for their men and for their women. They're there for their soldiers.

We see that because we're on base, we're brought on base to speak to and help their men and women by them. They bring us there to serve them. They serve their servant leaders in that regard. But they're not all pomp and circumstance. They're not all narcissistic

and throwing themselves around out there in front of you. They're the opposite of a politician in that regard. But there's no question who's in charge. There's no lack of strength. There's no lack of courage. And they are willing to put themselves out there. They'll put on their full dress uniform and walk right up to a podium,

and do what it takes to, you know, to lead from that level. And that is not lacking in humility. Now, again, occasionally you run into one, and military people will tell you that there's an occasional officer that is not what I'm describing, that in other words, they're a twerk. But humility is just saying, I'm going to use everything that God gave me the position, the power, the money for the good of others. And that's why I'm here.

I'm other-centered rather than self-centered. And I can even be boisterous about that. Now, I got a feeling Aisha is going to be sweet and kind and nice no matter what she does, just because that's who she is, you can just tell from the video, right? And it'd be a little different than if I'm doing it. but that's okay. That's okay. You can have different personality styles.

Personality style, though, is humility is not a personality style. It's a character quality. And so you can have that regardless of your style. Some people are quieter, calmer. Some are more loud, more gregarious. That's not humility. One's not humble. One's not.

It's other-centered versus self-centered. Humility, again, is not thinking less of one's self. it is thinking of yourself less. It's all it is. Very simple. And you can do that and be a leader, and you need to do that and be a leader. Because leaders should be,

my friend John Maxwell says it all the time. They should be servants. You ought to be a servant leader. You're there to serve. That's the whole idea. Good stuff. That's a great question. Thank you.

This is the Entree Leadership podcast. Thanks for joining. Morning as America, if you want to help us out, we could use your help. If you will share this show, share a clip of it with someone, just click the share button if you're watching this, subscribe or follow the show, leave a five-star review on the show. It really helps us. And a whole bunch of you have been doing that. I've been in this seat taking this particular podcast over about 18 months ago, and the numbers are way up, and it's because of you guys. Thank you. Thank you for that. I appreciate it very much. And I'm thoroughly enjoying getting to work with you guys that are small businesses and leaders. I just think you're amazing. James is in Toronto. Hi, James. Welcome to the Entree podcast. Thank you, Dave. How you doing?

Better than I deserve. What's up in your world? I own a home medical equipment store in Toronto. We have eight employees, including, including myself and have a revenue of $2.5 million. Wow. I purchased this business on a loan three years ago. Since I purchased the business, I have doubled our revenue. And in the next three months, I'll be paying off my business loan in full three years ahead of schedule. Mike drop.

Way to go. Whoop, whoop, who, who, who, who, who. My question is whether I should continue to invest the majority of my profits in my business, as we are in a strong growth business, or and continue to gain market share, or should I increase my own wage and start to invest more in my personal goals, such as long-term investments and eventually a home?

Wow. Well, I don't think there's a wrong answer. It's just a matter of where you want to wait it. I wouldn't do all of one and none of the other, right? I mean, I wouldn't take everything out of the business and stagnate the business, and I wouldn't leave everything in the business and make no progress at home, right?

Right. So all or nothing would not be a plan. But then the question is just how much you want to wait it. And what we do is these days is we budget for growth in the budget. And so like, okay, we need to do, you lay out a project a thing you want to do. You want to add some people. You want to add a store. You want to add a product line. I don't know what it is in your world. But you lay out a thing you want to do and say, okay, what's that going to cost? All right. And out of the profits, I'm going to save up what that's going to cost, or I'm going to save up a large portion of it over the next X number of months and build a war chest to go do that project.

And I just put that in the budget. Because I'm setting that savings aside, so I don't really have the cash. And then the profit after that budgeted cash is taken out for savings to do this. the profit that's left over is what I can talk about taking home. Now, you can't budget so many projects that you take nothing home. That's obviously not the plan either. That's what we just said earlier. But now, and the reason that's the way that is today is I've got vice presidents,

senior vice presidents and operating board members running these business units and their standalone profit, they're like standalone businesses within the business. And so each of those businesses is tasked with cash flowing its own growth. So they have to build into their budgets within the group here. Okay. Now yours is one single P&L. So it's just you looking, instead of a P&L doing it, a separate company doing it, you're, you know, per company, you're just saying,

all right, I've got these three things I want to do. I'm going to do them in this order. And the first one I'm going to do costs $25,000. I'm going to set that $25,000 aside before I bring it home. The next one is going to be $160,000. and I'm going to set that aside, you know, over a period of four months, 40,000 a month, whatever the number is, right? And you just project your cash needs out in the budget.

And the mathematical effect of that is that you are actually leaving money in the business and growing the business. But you did it with a system and a pro forma rather than just generally going, okay, I'm going to leave 10% of the money in the business. You could do that if you want to leave a percentage. but and the rest of it's going home. And then the other thing we've done in the early days of Ramsey, like we were back at your size,

is that we would look and do the same thing at home. We'd say, okay, Sharon needs a new car. I remember this one distinctly. She was driving a 1984 bird egg blue, god-awful astrovan that was covered with cheese bits and goldfish on the interior from raising toddlers, and it had 500 million miles on it,

and it was nasty. And she needed a new car. And she's like, I have this suburban picked out that's two years old. We're going to get a suburban. And I'm like, no, I got this thing down to office I want to do. And so both things were good things to do. We just had to decide which one we're going to do first, and you can guess which one we did first.

Happy wife, happy life. So we bought the suburban, and then I did the thing down at the office, about four months later. So you could have a project at home, like you said something about buying a house, right, or paying off your house or whatever. You can have a project at home that goes, okay, I'm going to starve the business down just a little bit until I hit that little thing at home. And I'm going to bring it all home and do that. So it can ebb and flow. It doesn't have to be the same every quarter or every six month or every year or certainly even every month. You can

change it around. Now, I like setting stuff up to try to just say a certain percentage and do that. But what we've ended up doing is we've been project-oriented for cash management rather than set percentages. Now, growing retained earnings is a separate discussion. That's just retained earnings are a slush fund. They are not designated to a project. That's just savings for emergencies, savings for uncertainty, savings for some growth that we did not plan for, that just drops into our lap and that kind of stuff. So that's, you know, that's what I would do is I would put a percentage of net profits going into retained earnings. And in a debt-free business, when you get there, we recommend, you know, 15, 20%, something like that going in, and then the rest of it is

available for the other things we've been talking about for the past five minutes. So very, very good. Way to go, man. You knocked this loan out. in no time, you've doubled the revenue. You've got to be walking around feeling like you did this. Way to go. That's awesome. That is so well played. Good, 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 listening to the Entree Leadership Podcast.