EntreLeadership - Is My Team Taking Advantage of Me?

Episode Date: April 22, 2024

Today we’ll hear about: A business owner struggling with compassion fatigue because her team is taking advantage of her How one-third of business owners are concerned they’ll close in 2024 and are looking to AI for help A business owner who is making $4 million a year but is trying to overcome discouragement from facing a mountain of debt and customers who won’t pay How Dave Ramsey pays his upper management team members Next Steps 💵 Learn more about Ramsey SmartDollar: https://ter.li/4imot0 🗳️ Submit your question for a chance to be on the show with Dave Ramsey: https://bit.ly/3HUgAgi 👣 Find out what Stage of Business You’re In: https://ter.li/axd39b ✉️ Sign up to receive tactical tools, advice and resources in your inbox every week: https://ter.li/y8qdo7   🏢 Attend EntreLeadership Summit: https://ter.li/fcazl2   🎤 Attend EntreLeadership Master Series: https://ter.li/wcjhpu ☎️ Learn more about EntreLeadership Coaching: https://ter.li/ycznhl   🏅 Help us make the show better! Please fill out the quick survey form. https://bit.ly/3O8fRvh   Offers from Today's Sponsors NetSuite: https://ter.li/x1t20q BELAY:  https://ter.li/yohiu6 Payority:  https://ter.li/fh2oau Trainual:  https://ter.li/a8zexl Listen to more from Ramsey Network 🎙️ The Ramsey Show   🍸 Smart Money Happy Hour 💡 The Rachel Cruze Show 💰 George Kamel 💸 The Ramsey Show Highlights 🧠 The Dr. John Delony Show 💼 The Ken Coleman Show Ramsey Solutions Privacy Policy https://www.ramseysolutions.com/compa… Learn more about your ad choices. Visit megaphone.fm/adchoices

From the headquarters of Ramsey Solutions, this is the Entree Leadership podcast, where 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, you can fill out the form at Entreeleadership.com slash ask or give me a call and leave a voicemail at 844-944-10. in 70. Kate is next. Kate is in Atlanta, Georgia. Hi, Kate. How are you?

I'm doing well, Deb. Thanks for taking my call. Sure. What's up? Well, I own two veterinary practices and have 13 employees. We do, last year, one clinic did $1.4 million, which is a little bit from the second clinic we just opened in December, the second clinic in December of 2023. Okay.

Wow. Good for you. And you're a vet by trade? Yes. Okay, cool. How many vets have you got on staff out of the 13? So there's four of us, myself included. Okay, cool.

And the rest are helpers and administrative and so forth. That's right. Got it. Okay, cool. So my question is regarding how do you deal with what feels like compassion fatigue regarding employees and what feels like endless personal struggles they have, what honestly starts feeling like a lot of excuses or there's going to a lot and they've maybe made voices with regards to how they utilize their time off and whatnot and then life happens and they have

no longer have ability to take more time. For example, I have an employee who she's a great employee but took, burnt through all of her PTO and sick time knowing she then had fertility treatment coming up. that was going to require extra time off and more time off. So she didn't bank any of her time. And while I love her and I want to care for her, that's one of the things you talk about is that I agree with and want to employ, which is that as a small business,

I can see her as a person and see her for the desire for her family. I can see her as a person who also is making stupid mistakes. Yes, but she is an example of several types of those types of situations. And so I feel a hardening of my heart coming where I just struggling and I just am curious how did you handle that as you grew. I don't think my heart hardened as I grew, but I do think I got a gut full of stupidity and I was done with it. Now, what I mean by that is I treat other people like I'd want to be treated. So I say, okay, I'm looking at this young person working on our team today and how, how would I want someone to treat one of my kids if they were working somewhere?

Okay? And I try to think of it that way rather than just think about it through the lens of what's good for Dave or what's good for Ramsey Solutions. All right. But in the light of that, if you're going to make a series of bad choices repeatedly as a pattern, you're really deciding not to work here. Okay. You can be a sweet person and do stupid things as a pattern that makes you unemployable.

It doesn't mean you're a mean person or an evil person. But if you just, you know, as a pattern, you just don't come to work one day a week. You know, that's not going to work, right? We're not doing that. It's not lacking in compassion to call somebody and hold them accountable for solid decisions. Okay. So we've had similar situations where someone runs through their PTO and then they have some kind of thing come up, okay?

So sometimes we look at that and we say as a one-off, we're going to extend grace and give some more paid time off. Other times we're going to say, okay, we're going to allow you the time off, but it's unpaid. And other times we say, you know, you put yourself in a situation where you can't work enough to keep a job. And so we can't keep you. And, you know, but it depends on obviously the circumstances and so forth.

So in your lady's situation, I agree with her desire to have a family. But she knew that while she took the other PTO. Right. And that's where I struggle. So she chose. She chose this. her desire to have a family I mean like you want her to win more than she wants to win

that's how it feels a lot of the time it's the way it is no that's a classic enabler question you know when I want when I'm working so hard to help you do to help you be smart and you just refuse to now I've become an enabler to help you do good things for yourself I've become an enabler

and so you know no, I think it does reach a point that it's not a hardening of the heart. It just reaches a point you go, okay, there's a thing in psychology called locus of control. The only thing I can control is me. I can't control that other person. I can't control that team member. I can control how I choose to react. And so I often think to myself, okay, when I'm 98 or 96 or whatever it is and I'm on my

deathbed, how am I going to feel about how I did this situation? So in that case, I'll tell you, when I asked that question, it causes me to generally be unbelievably generous with severance pay, because I'll never regret not having money. Money's easy, okay? And I will regret how I treated someone on one of the worst days of their life getting fired. Okay, so I can, that's something I can control. I don't know how they're going to act or react. I can't make them be grateful for that.

I can't make them be, well, I don't want to give it to them. They're not going to be grateful. I can't control their gratitude. I can only control what I do and how I feel about what I do. So what I do in those situations, it's not a hardening of the heart. I look at that and I go, okay, when I'm old, when I look back, well, I feel that I was weak and taken advantage of, or I was wise and kind, but had reasonable boundaries.

and I want to be the second one. And so what they're doing is they're violating these boundaries. And so, and then you're saying, well, you know, there's only 13 of us. We all have close relationships. Letting someone go is like we lose 10% of our workforce. It's an earthquake in the building when you fire somebody and there's 13 people, right? Yes. Or when they choose to quit because mean, okay, wouldn't give them time off for fertility treatments

after they already took their time off and went to sandals in Jamaica. Yes. You know, that's not mean, oh, Kate. That's stupid old girl. Okay? So using your example of generosity of either giving more PTO depending on the situation or unpaid time, how do you balance that on such a small team, it's multiple people that you're often dealing with,

and so you have to discipline one and say, okay, you can't have any more. you've maxed out everything even with the generosity we've given you. But this one over here, they've also maxed out, but I'm still going to give generosity to them. I'm still going to give it to them. How do you? Well, let's pretend. Okay, let's pretend this girl who used up all her PTO had a child had an accident

on the playground. And she needs a week off. The kid's in ICU. So, yeah, she gets PTO. Absolutely. And if the other guy doesn't like it, he can hit the road. I'm going to give that girl grace. But this one had a planned life event that she screwed up herself on.

These fertility treatments were coming for the last year and a half. They didn't just suddenly decide to do this last week. And so, you know, like I've got people that have been out months on end on cancer. And we just paid them. Complete violation of that. And if someone else who wants who has not, manage their life well, thinks that it's unfair that they don't get months on end compared to a cancer patient, well, you're not going to fit in here. You need to leave.

Okay. There's no equity between those two things. They're not the same thing. You follow me? I do. I do. It's the same, same discussion we have. And somebody that doesn't get that and calls you mean, that's somebody who's trying to manipulate you. I guess I'm just trying to, I understand fair and equal are not the same things. I just, It's just, I think, in a small team, it just feels magnified when you allow one. It is magnified. Everything, there's more drama. I mean, you feel like you're running a beauty parlor. Yeah.

Like it's just like drama, drama, drama, drama, drama, drama, drama, drama, or something. You know, it's like, it's crazy. And then they all sit around and talk about everything that they shouldn't talk about. Oh my gosh, it's awful. And so, yeah, we just had to put down our foot and go, guys, look, here's who we are. And at the point you don't like who we are, then that's, I'm sorry. I'm doing the best I can and, you know, if you don't

if you don't want to do it this way, go open you one, you know? Yeah. And so it's, and the weird thing is the people that have left that were upset over the years, nobody in a building really missed them. There was a little bit of drama,

but, you know, the, I guess we have 1100 folks now and at last count, In the last 32 years, we probably have roughly 2,000 people that no longer work here, most of which went on to do something else because they wanted to, a few of which we helped them leave. But 2,000 people used to work here. And no disrespect to any of them, but we haven't missed them.

We're still getting our work done. And they didn't miss us. They've gotten on with their life. You know, they're fine. And so it turns out, all of us can be replaced, me included. I wasn't here two weeks ago and the ratings went up, you know. So, you know, it turns out all of us can do that.

So it's, but, and my point of all of that is this, okay, you let somebody go, it feels like an earthquake right now. In 45 minutes, the rest of them are going to get on with their life. One week later, write it down. One week later, you think the world's going to come to an end. One week later, when that person's gone, because they got mad, you wouldn't extend them extra PTO, or you had to let them go because they just kept abusing your kindness. One week later, write it down, come back, send yourself an email.

Look up, Kate. One week later, nobody will remember. It's already gone. People go on with their lives so fast. Their loyalty in air quotes to their friends is. it just, it's not, it's, it's, they, they quickly decide I'm either going to quit because I'm mad too or I'm not going to quit, so I'm not going to be mad. And they move on. So I, I, I completely agree with the struggle you're having. I've had it too. And I'm with you on that. I'm not trying to

diminish it at all. I'm just trying to, perspective of time and scale with me. I, I don't think I've gotten hard, but I also. think I am wiser. While I'm, we extend more kindness and more extreme kindness in some situations. We're also wiser on not getting abused now. And we don't let you just come in here and tell us that you're going to do something that's silly and, you know, we're not going to go along with it. So I don't know how to say that other than I think it's not a hardening of the heart. I think it's your compassion was probably causing you to go two steps too far and you were being taken advantage of on a couple things

and that's starting to ouch because you've got good common sense and you're backing up. The lady I'm talking to sounds very wise and very caring. Let those be your guide and know that 10 years after you make these decisions, no one will care really but you. There's very few things I look back on 10 years later, around here that I even remember. It's sad, but I don't. So that's how it is.

I mean, you're really doing probably about a thousand times better than you feel like you're doing. Yeah, it's fair to put reasonable boundaries on your compassion, and that's wisdom. It is not a hardening of the heart. That's what I'm trying to say with all of that bit jabbering I've been doing. This is the Entry Leadership podcast. If you regularly listen to this podcast, you've probably heard me or any of our callers mentioned the stages of business. But how do you find out what the stages are and what stage you're in?

The easiest way for you to figure out where your business is and for you to start understanding them is to use the Entree Leadership Stages of Business Assessment. This, by the way, is a free tool that helps you easily and accurately identify executive. where your business is today. The advantage of that is it'll tell you what to do to move to the next level. What you've got to do to level up, as they say. So click the link in the show notes or go to Entree Leadership.com and find out which stage of business you are in, and we'll begin to teach you the things you need to do to move up the process up to the next stage. Headline from Fox Business. One third of small business owners worried their companies won't survive 2024. Slack

released the results of a survey on small business owners that found nearly one-third, 32% of respondents are worried their business will not survive through the end of the year, 38% saying they are more concerned about their company heading into this year than last. While 71% of the 2000 entrepreneurs polled said they're optimistic about the state of their business, the top concerns they cited were inflation, economic conditions, the need to raise prices and increase competition. Well, welcome to being in business, boys and girls. I have never been in business in 45 years of doing it that I didn't struggle with inflation,

the need to raise prices, and increased competition. It's rough out there. More than a quarter, 26% surveyed said they used new technology, including AI, and more than one-third, 35% said they're excited to add updates to the new tech tools to their operations this year. AI will continue to capture entrepreneurs' attention with its ability to enhance productivity and optimize the way we work. AI is the thing we're spending a lot of time considering around Ramsey for a couple of reasons.

One is it's a way to get work done. Two is it's a way when you are in the business we're in of content production where everyone can steal everything you do. For instance, there's four workbooks on Amazon right now that AI produced and stole are in complete violation of our copyright. and we've got our publishers pulling them down right now. You can get a workbook for the Total Money Makeover by Dave Ramsey.

Complete theft, complete piracy, sold on Amazon. But all it is, it's these on-demand publishers that are running AI, some pirate, and they're posting the stuff up there and freaking stealing is what they're doing. So Amazon will take them down, but they're getting more of them put up than they can get took down, so they're being inundated with these pirates. And they're probably going to have to build something in their... algorithm to keep the crap down. So AI piracy is real. We've had a lot of fun with it, making fun of me around Ramsey, leaving in my voice, sensitized, sensitized. I can't even say it.

See, you probably put that on AI too, but me leaving a voicemail saying things I didn't say, completely AI created. It's kind of funny, but it also scares the bejesus out of you because somebody could say something really evil that I didn't say or nasty that I didn't say, and then some of you would believe it. And then there you would be. So it's dangerous and it's scary in that regard. It is a genie in the bottle. It is a Pandora's box when it gets open.

But it also, with principles operated by principled people, is a tremendous opportunity. It's simply technology. The technology is amoral. It doesn't have morals. It's not good or it's not bad until it touches a crooks hand. And then crooks will find a way. to use it to steal and good people will find a way to use it to create more good things. And so we're using principles where you're not going to hear an AI generated voice out of Ramsey.

We've made that decision. We're using AI to do background work that's not public facing and it gets work done. Well, that's going to put some people out of a job. People have always been out of a job by market disruptions. As long as there has been a free economy, there's been more. market disruptions. In 1806 at the age of 23, Frederick Tudor bought his first brig called The Favorite. He bought it to carry ice cut from his farm, father's farm, and ship it from upstate New York

to Martinique, where he decided at 23 years old that they needed ice. By the time it got there, almost all of it had melted. So the young guy figured out we have to keep the ice from melting and invented what we now call insulation. And Frederick Tudor, if you look him up on Wikipedia or wherever, was called the Ice King. Because he became a multi-gazillionaire in those days as he learned to ship ice to the south

in the southern areas. And the ice industry as a method of preserving food and increasing the quality of life in other ways was born. The turn of the century, not 1806, but 1906, saw the ice industry not having changed much. It is now being delivered in 1906 on a wagon to your great, great, great something mother's house, grandmother, grandfather's house. It was called an ice wagon. Big tongs were used to carry the big blocks of ice into their house.

There was a small insulated box with a dog. door that was in the kitchen, you set the big huge chunk of ice a foot by a foot or two foot by two foot in the bottom of that box. It was called the ice box. That's why some people still call the refrigerator in your house an ice box because that's what it originally was. Very little market disruption between the time Frederick Tudor in 1806 of 23 carved some blocks of ice out and takes them to Martinique, figures out a way to do it not melting, becomes a multi-gazillionaire doing that.

A hundred years later, basically, the technology is still running the same. Until in the 20s, General Motors decided they needed to, in their R&D lab, and the guys are in there, screwing around with chemistry, and they basically discovered refrigeration. and created the first refrigerated box in your house, and the company was called Frigdair.

So Frigadier comes on the scene. Now there are ice houses all over America that store big blocks of ice. Tongs, trucks now in the 20s, no longer horses and carriage in most areas, are delivering blocks of ice, so the ice wagon would roll up in front of houses, and all of the sudden, the frigid air is on the scene.

So as the refrigerator, as we know it today, came into being and penetrated the market and got brand penetration into the marketplace, the ice houses are quickly out of business. New technology, in our case AI, we're using this as an example, put an old technology out of business or did it.

Because you see in Dallas, Texas about that time, there was a guy named Johnny Green. Everybody called him Uncle Johnny. Uncle Johnny had one of these ice houses. And he kept, in his ice house, in addition to ice, he kept bacon and eggs and other meats and things that people needed. And they could come by the ice house and buy these things that he had kept refrigerated in the ice house,

and he also delivered ice. Well, he had a whole bunch of these ice houses all over Texas. He was in Dallas. And the refrigeration came on the scene, but Uncle Johnny had already figured out that the ice was going away, no pun intended, and decided to expand this idea of having food available as a convenience to his customers. and he named his stores after the hours that he was open. Seven to 11. The 7-Eleven was born because of a marketplace disruption of a technology. And the irony of irony is, last year they sold $80 bazillion, dollars, whatever the number is, in ice for people to go on a picnic or cool down their beer.

Wow. So is AI going to put you out of business? Yeah, if you're a victim. But if you're a victor, like Uncle Johnny, you're going to figure out a way that AI makes you more money than you ever made in your whole life because you're going to serve more people than you ever served in your whole life. So don't sit around and suck your thumb and answer Fox business surveys and say you're going out of business because somebody invented a great new technology

and a couple of pirates are misusing it. There's some awesome things you can do with this. I don't know what all it's going to do. I can tell you this, it's already a pain in the butt, and it's already a huge blessing. Welcome to market disruptions. Welcome to new technologies. When I started all of this, the Internet hadn't been invented.

We had to box up what we were saying on things called cassette tapes and mail them to you. we were piping in sunshine we didn't have anything there was no way to do this thank god the internet came along and then podcasts came along and there's like two million people doing what i'm doing right here right this second isn't that bizarre well guess what that new technology is going to put 1.9 million of those people out of business because they generally suck at what they do so we're not going to be out of business because we don't suck at what we do. We're just doing it in a different way on a new technology, taking advantage of a new methodology for delivery. We are platform agnostic, baby. We're just

here to help you. We'll put it in a printed book, an e-book, an audio book, a podcast, a YouTube short, shut up, we're going to get it to you. There's a whole bunch of ways to mess with you people and help you people and serve you people. It's what we do. So we love new technologies, but they terrify us just like you, but they also terrify us because we were afraid we're going to miss what all the good they could do. Somebody might beat us to the idea of opening the next 7-11 while we sit around whining about a Biden economy. Before there was a Biden economy, there was a Barack Obama economy. Before that, there was, God help us, a Bill Clinton economy. And there was a Biden economy. And there was a Jimmy Carter economy if you really want screwed. Yeah, interest rates were 18%. They make your

little wimpy interest rates today look like wussification. So, you know, there's always a reason to fail, boys and girls. There's always more reasons to fail than to win. And that's why we stand back and look at people who are successful and admire them, because there's a lot more reasons logically to fail than there is to win. AI is going to put some of you down. And AI is going to put some of you on the moon, or at least some version of you. We're going to be okay, guys. We're going to be okay. It's going to be all right.

The robots are not taking over. Will Smith was wrong. We're going to be okay. It's going to work out. It's going to work out. Just remember, Uncle Johnny and Frederick Tudor, they survived Frigdair. So think it through it. It's all going to work out.

this is the Entree Leadership Podcast. I'm Dave Ramsey, your host. This is the Small Business Leadership Podcast for real people who do real business. This is not a theory. It's not a think tank. It's not an academic exercise. You're talking to a guy who's done this stuff today, and we'll do it again tomorrow. We're what's known as practitioners.

William is in Atlanta. Hi, William. Welcome to the Entree Leadership. podcast. Hey, Dave. Thank you for having me. How are you doing today? Better than I deserve. What's up? So I'm 26 years old. I own a land clearing business. We work as a subcontractor for many grading companies. Most of the developments are for some of the largest home builders in America with some warehouse and commercial work as well. Last year we did just over $3 million. This year we're projected to do $4 million. And my team size is about $17.

employees currently. Okay, great. Good job. So my question is, is it worth being in this business or not? It's very capital intensive. I'm not getting paid on time, and I feel burnt out and discouraged. Okay. So what's your profit on $4 million?

Not a ton. We're usually around 8 to 10 percent. So, 28-year-old William in Atlanta, Georgia, paid taxes on $400,000 last year, or this year? That'd be 10% of $4 million, right? Yes, sir. Yes, sir. Okay. So you made $400,000 in your 28 years old and you own your own business.

Yes, sir. And how many years, how long ago did you start it? Six years ago. Okay. Because nothing you're describing there sounds bad. Maybe the methodology to get to the $400,000 is what's killing you, and you can change some of that. You own the dead gum thing.

Yes, sir. That's been the biggest hurdle is waiting on payment from a lot of our customers. How many customers do you have? We've got about seven to eight customers that we work for pretty, regularly. So about a half million dollars a piece average? Yes, sir. On a $4 million year?

Yes, sir. And let's say customer A with a half million dollars as an example, that represents how many jobs you would do for them in a year? Typically, four to four and a half. So the typical job size is 100 to 150K? Yes, sir. Okay. All right. Here's what I want. So it's, most of these are large companies. And so I definitely would not close this. The second thing is you said, let me go back before I leave that, I'm going to come back around to that whole thing in just a second. You said it's capital intensive, meaning you buy expensive equipment to clear the ground. Okay. And so how much an equipment do you own?

When all the assets combined, it's about $3.5 million. And that's all land clearing equipment? Yes, sir. You don't own any real estate in $3.5 million? Not included in that, no, sir. So you have tractors and, it's not tractors, but... Excavators, loaders, grinders. And how much debt do you have on all that?

1.6 million on three and a half million worth of equipment? Yes, sir. Okay. So let's pretend for a second that you had half as much equipment, no debt, and you only made $3 million, $2.5 million, but you made $400,000 on that. and everybody was paying on time. No debt, everybody's paying on time, and you're paying cash for your equipment from this point forward,

and you've got half as much equipment right now in my new scenario because I just sold the one that you're in debt on. Just bear with me for a second. I want you to breathe this in because I'm trying to figure out your burnout, okay? Your burnout's from fighting debt. You feel like you're fighting a losing battle, and you can't get these goobers to pay you,

and yet you're making $400,000 a year at 28 years old just a few years into owning your business. That's pretty dead-gum successful, and yet you're burnt out. So to me it sounds like the debt load, the idea that there's no light at the end of the tunnel that I'm going to constantly be in debt the rest of my life, and the bad customers are taking the fun, the bad customer payment history is taking the fun out of your business.

Is that what you're telling me? Yes, that's correct. Okay. because you're a sharp dude, man. All right. So what I would do is begin a process gradually, and it might take two years, it might even take three, to either paying off the equipment

and or selling equipment to become debt-free. That's step one. That won't keep you from being burned out until you deal with, and you can start this tomorrow with your customers. You said you had seven or eight customers, right? that's correct okay i want you to pick out the two worst ones on payment and let them know that if they can't prepay you starting now on the jobs because they're so bad at paying that you're not going to be able to do business with them anymore i want you to fire them can you breathe now because you

sound like you choked it's just so one no really you have some customers that own your business. You need to own your business again. And these people are a complete pain in the butt, and you thought because they're big and they're loud and they have big, shiny signs that you need them. You don't need them. You need them to go away. They are stealing your piece and they're stealing the fund from your business. You need to fire them if they can't learn to behave. Yes, sir. Period. They're not worth dealing with. Typically, about, About 15 to 20% of our customers aren't worth screwing with, and certainly 2% of them aren't.

We deal with the public. You're dealing with businesses, but we're dealing with the public. We're firmly convinced 2% of the public should be institutionalized. They're crazier in a bean. And so, you know, we run into one that's just nuts. We're like, that one's just crazy. You didn't keep them away because they'll take up all your time.

2% of your people will take up 98% of your time. You know the rule, right? And these two customers out of eight are stealing $400,000 of your joy. Mm-hmm. And it's because they're high maintenance, they're jerks, and they don't even pay on time. And you already have in your mind which two I'm talking about. And we've only been talking about this three minutes. Right.

Yeah, no, this I do. So one particular customer has, we've been aware. awarded about a million dollars for the work for this customer. They're supposed to, like, one project starting this week and the others in the next month. And this year, we've already completed about $500,000 for the work for them. So they've just kind of shifted where last year we did around half a million dollars for them, where I'm getting a lot of eggs in this one basket, if that makes sense. So here's the thing.

Here's how it sounds. when you have a collections and terms problem, which is what you have, you're not collecting your money on time, and they've set the terms to be, I'm going to pay you whenever I want, 60 days, 80 days, 90 days. You're now a tiny little guy with a bunch of equipment who is playing bank to these big, big companies. You're their freaking bank, and they're not even paying you interest. So that's your fault. That's the bad news. the good news is you can fix it you're going to now give them a choice going forward that here's how it sounds

hey guys i really like working for y'all i really have enjoyed the huge jobs you've given me thank you for that but i'm going out of business you're putting me out of business i think i'm going to have to close down if i don't change some things because i'm just a tiny tiny little business and I cannot carry you guys. You way too much. You're breaking my back. And so if we're going to do any more jobs for you, the terms for today forward are 50% up front

and 50% when the job is complete, the day it is complete. I need payment. If you can't abide by those terms and you want someone else to be your bank, I completely understand. It's going to break my heart because I really want the jobs,

but I can't carry you anymore. I'm going to go out of business if I keep doing this. And you're not even going to have me available because I'm just going to be gone. So you're going to lose a couple of the eight when you do that. And what I'm saying,

what you don't understand, but I understand from 32 years of doing this is good riddance. See you, wouldn't want to be you. because in the real estate business, there's one thing we know. Developers are going to go out of business. All of them. They don't make it.

And then guess who's going to be holding the bag? You. Because when this market turns down, and it just did turn down, but when it turns down again next time, I don't know when that's going to be, they're going to go out and you're going to be sitting there with a payable that's worth zero because they're going into Chapter 11 or Chapter 7, and you're going to be sitting there and you can't pay your equipment bills

because they owe you a half million dollars and you can't absorb a half million dollar hit. You only make $400,000 a year. So I would rather, if I'm you, have the piece of being paid a little bit up front, like half, and the balance due on completion of the job the day it's completed because I'm really small.

So you have to make special exception for me and you have to cut me a check right then. I'll be over to the trailer to pick it up. You got to help me out here, guys, because I'm a little bitty guy, and you're a big old company, and I can't carry the weight of you. I need your help, guys.

I really want to do this work. Please help me. And if you can't, gosh, I'm just so sorry. It's going to break my heart. We're going to have to go somewhere else. And that's how we've changed the terms on almost everything we do in this building. We had some people that were paying us after 90 days.

An example, I'll give you one, and you're a young William, so you won't remember this. But when the internet first started, there were all these companies that popped up that were called dot-coms, and they were big technology boom, and they all went bust. And we were advertising on the Ramsey show big money, like a million-dollar contracts. And these dot-coms would come in and buy ads from us, and then they would go bust and never pay us. And so I changed our terms. If you have dot com in the name of your company, to this day, if you want to be on the Ramsey show, you have to prepay us

because I figure you're going to go broke. And so if anybody's going to get money out of your deal, it's going to be me. So up front. Oh, well, we're not going to advertise. Our ad agency, your ad agency could kiss my butt. You're not advertising on this show unless you prepay if dot com is in the name of the title of your company because you're unreliable in a volatile industry.

and I can't count on you. I don't really... Well, industry standards, I don't really care what your industry standards are. I am the only way you're going to get on the Ramsey show, and if you want on the Ramsey show,

this is how we do it. And now that's a little different and not quite as nice as the one I told you to use. The script I told you to use was much kinder. But I had to change the terms because I was getting screwed, William.

Yes, sir. And you're getting screwed by these big companies. They're jacking you around, dangling you on a string, like last week's worm looking for a brim. I agree. I greatly appreciate it. Definitely go forward with that. If you get out of debt, you sell off some of this equipment,

and your business is 25% or 30% smaller, your profits are going to go up, you're probably going to make about the same amount of money, you're going to work a lot less, and you're not going to have a freaking ulcer. You take control back with the terms and how you're selling your customer, and part of the way you sell them is

our terms are this. You have to pay. So one more story for the rest of you out there. Construction world, I've been in the construction world my whole life. Mom and dad were in their real estate business. They built houses when I was growing up. And there's a rule. You don't pay a sub until he's done.

Okay? And so my wife decides about 20 years ago, this fancy Brazilian wood porch, she's going to put on the back of this house. And there's one company called the something company. I won't name them, okay? They're really, really good at what they do. They're a little expensive, and they do an incredible job.

Their quality is amazing, and they built porches all over our neighborhood. Everybody had a blankety-blank porch from this company, and my wife gets one drawn up, and I'm like, okay, number one, that's too much money for a porch. Number two, these people want 50% up front. What if they just take off to freaking Jamaica with our 50% deposit? closet. And I sat down with a guy and I'm going, look, I grew up in construction. We don't pay subs up front. And he goes, well, you know, we're not going to be able to build your porch. You know what I did? My wife made me put up 50% up front. I bent to that guy's terms and I bought that

porch. Now, he did a good job and he did finish it to his credit. I didn't get screwed. But you just don't do that in construction. You don't prepay somebody to put a porch on the back of your house, 50%. I did. It worked out, but it's in violation to everything I believe. Because that guy said, you don't own my company, Dave. This is how my company operates. If you want my company to build your porch, these are the terms. And I get to decide then if I want to do business with his company or not. And he was willing to walk away. And you know what? He doesn't get screwed by consumers that don't pay him either, bless his heart, because I'll help with the numbers, okay?

If you're building a freaking porch, 50% covers your, you probably got a 50% margin in the thing, but it sure covers all your materials and a lot of your labor. So even if you don't get the other 50% off the back because something bad happens, you're not going to go broke with his model.

His model's excellent for him. But, boy, did I have to eat some crow because I'm a complete lover of my wife, and she just said, we're doing this. It was SWI, Sharon, wants it, which is a financial rule at our house, by the way. But that guy, to his credit, man, he's doing exactly what I just told William to do. And he builds a good porch. He did a good job. It was a long time ago. Portch is still on the back of that same house. I still own that house.

It's a rental house now. But oh my gosh, with Brazilian wood on the porch. God help me. This is the Entree Leadership Podcast. Thanks for joining us on the Entree Leadership podcast. If you like this show, you can help us out by clicking the subscribe button, the follow button, or the share button, share the show with someone. Maybe cut out a link or click it open and send it to somebody. Tell them this is how you can listen to Old Dave on the Entry podcast. We'd love to have you. Thank you for doing that and thank you for leaving a five-star review.

Both help us a ton. Simon is in Canada. Hi, Simon. Welcome to the Entree Leadership podcast. How can I help? I am the co-owner of a portable building manufacturing company we build garden sheds, garages, cabins, we did 2.75 million in sales last year and we have a total team of nine that includes my brother and I

who own the place my question is this how do we compensate our leaders so I am starting to hand over actively actually handing over responsibilities of what I used to do being an operations manager to one of our good guys. And I've given a lot of thought. How do I pay him? Because he has so many things to do. You know, we're a small business, so he has to wear many hats. I want him to feel like an owner. He used to run his own show. He understands that he can go out into the real world and make good money. I'm trying to incentivize him to do their right things, but do it as efficiently as possible. do we just pay them salary? Do we pay them off the bottom line? How do we do this?

How many units are you developing a year? How many buildings do you build a year? So we actually manufacture them in a shop and so we last year we did 330 buildings that we built in our manufacturing shop and delivered them on the back of a semi-truck and trailer. Wonderful. Good for you. Well done. Well done. All right. So this is one way of looking at it is this guy's helping you run a factory. Okay. And are you, you're actively working in the business still

when you hand off some of your old operational responsibilities? Correct. The idea is to make myself replaceable and then I can go and fry larger fish. Like what? Well, like developing a new product line that in terms of tiny houses, that could potentially sell across Canada and the United States, things like that.

Okay. And testing the tiny house market is a full-time job for you? No, no, but there's other things. So the other things, I mean, obviously I have multiple hats as well, which include backup sales when my brother is out doing dealer relations and setting up new dealers. and then if my operations manager is out, then I back up for him, et cetera. I see. Okay.

And so there's three of you leading and six of them helping to build the buildings. Correct. That's it. And or doing administrative work in the office or whatever. Yeah, that's right. Okay. And what was your net profit on your 275? So, the middle of June. but we are running profit margins of closer to the 12 to 15%.

Okay, so 300,000 bucks, after you and your brother were paid, or that's all you made? That's after everyone got paid. We are employees of the company. Right, and what do you two get paid? We take home 30 bucks an hour, no overtime. What's that equate to annually? 60 grand. Okay.

A piece. All right. And so, and the other guys being. paid what salary currently? Well, he is getting paid the same amount, but he is due for a backpaid till at least the beginning of January, and we've had

conversations around what that should look like, and I have not reached a conclusion. I'm sorry, he gets $60,000 plus you're going to try to figure out some way to bonus him. Correct, and I suspect that should be looking closer to the 80 mark, but I'm not certain. Okay. And so

I mean, it could be just as simple as you say, we're going to start sharing profits with you. And right now, based on our current rate of profitability and production, it looks like it's going to be another $20,000 or $25,000 a month in addition to your 60. And if you just said that, and you don't actually have a formula, and then you just go about that and you take $25,000 out of your 300. I think you came out way ahead. If you want to get really down in the weeds, but it's a bit much for one guy to do this,

I mean, you can open up the books and show him what you're making and say, we're going to give you 10% of our net profits in addition to your 60, which will be 30 grand as an example, okay? Or we're going to give you 8% of our net profits, and your job is to hold expenses down and profits up and sales up. You've got to get volume up and expenses down, including cost of goods sold, including labor, including everything in the company. Your job is to run the business well, like my brother and I run it.

Well, you're just now there to help us, and, you know, we're going to share. And I honestly, in your case, I'd probably just be generous. I'd probably say 10%. And that's probably 30,000 bucks. and you could go back and say in January, we made this much profit. You should close your books once a month, right? Correct. That's what we do. And you could pay out the 15th of the month following January.

So February 15th, you would have paid January's profits. March 15th, you would have paid February's profits. So you're due both of those. April 15th, you would pay and so on, right? March's profits. And that's what we do. We have our operating board. board. There are 14 operating board members that run this company with me, and they're all in the seat

profit-wise of a partner in that they get paid off the bottom line of the whole company. And their job is to do not only their day job, but also help us run the whole company in such a way that the profits are increased because they don't get anything. They don't have any base. Got it. All they get is bottom line. But their income is a lot different than what we're talking about, much higher than that. But, the um but but but that's how it started now i will tell you this let's say that you went with that plan and said okay we're going to open up the books let you see the books and you're going to help us manage expenses and keep them down and raise that that means you really trust this guy because

he's going to know your numbers and that can be used against you later in all kinds of ways if he decided to go be a competitor or work for a competitor or anything like that so you got to really love this guy to do that this guy's I mean, you're almost making him a partner. He doesn't have any ownership, but he's got information that only the owners have. Fairly sensitive information. I would have him sign NDAs on all of the internal and all the information that he's getting if you're going to do that. We do.

Everybody here signs that. So I like that model. Then the other downside to it, other than you're exposing everything in the company to him, is if the thing explodes, you need to tell him up front, we might not always be at 10%. Uh-huh. So let me give you an example. The volume goes up a few years from now, 10x of what it is now.

You're doing $30 million a year. Well, this guy is no longer doing one-tenth or one-ninth of the work. Uh-huh. at that point there's going to be seven of him. And so he may not be at 10%. We'll always be generous with you and will always give you a fair share of the profits, but the percentage may change as the situations change. But for the foreseeable future, 10% sounds really good.

Or whatever number you come up with. I'm just using that as an example. I like round numbers that everybody can keep up with. So, yeah, I think that'll work for you. but always said give yourself an exit to, otherwise your integrity's in question, and you go, yeah, well, back when we were, he promised me 10%, but now that he's a big dog

and making 27 million gross, now he cut me out. And that's the kind of people old Simon is, that's the kind of crap you'll hear if you don't give yourself an out. Because it sounds like you violated your integrity. Instead, you go, look, and put it in writing in his comp agreement.

We're going to pay you 10%, and when we get ready to change that, we'll give you some notice and we'll let you know what the different number is, but 100% count on that number changing. 100% count on it changing. Absolutely. My operating board percentage that each one of them get has changed every two years for the last 15 years.

We've changed the percentage that each person gets. And we've discussed it with them. They've been involved in the decision. They're looking at the numbers, with us. They see the reasonableness of our judgment. And it's, you know, we're adding more operating board members or we're not. We've got profit is up or profit is down. We're looking at all these variables. And then in the middle of all of that, we decide. So that's a good way to do it. Because basically you're making him a partner without making him a partner. It is a bit of an accounting

lift for a company your size, but you ought to be closing your books once a month anyway. So you might as well use those actual numbers to get you where you need to go. That's how it works. Hey, good move. Good stuff, Simon. Hey, remember folks, better a weary warrior than a quivering critic. This world needs more high-quality leaders. So take courage and lead. I'm Dave Ramsey, your host. Thanks for listening to the Entree Leadership Podcast.