EntreLeadership - Is Your Business Safe From These Landmines?

Episode Date: January 22, 2024

Today we’ll hear about: •       How to avoid convoluted family succession plans •       The best way to increase profit when your business has plateaued •       A business owner who doesn’t have a lease with her landlord (and it’s putting her business in danger) •       The three primary things that will sabotage the growth of your business if you don’t pay attention Links mentioned in this episode: •       The EntreLeadership Podcast •       EntreLeadership Summit •       Have a question for The EntreLeadership Podcast? Leave a voicemail at 844.944.1070 or submit your question for a chance to be on the show with Dave Ramsey: https://www.entreleadership.com/ask Start growing in business and leadership with the EntreLeadership Newsletter. Sign up to receive tactical tools, advice and resources in your inbox every week: https://bit.ly/3IRWnsL   Support our sponsors: •       NetSuite •       BELAY •       Payority •       Trainual Learn more about EntreLeadership Events: •       EntreLeadership Summit •       EntreLeadership Master Series Learn more about EntreLeadership Coaching: •       Elite •       Advisory Groups •       Executive Coaching •       Workshops Find out what stage of business you’re in and what you can do to level up with our Stages of Business Assessment. Listen to all the Ramsey Network podcasts anytime, anywhere in our Ramsey Network app: https://apple.co/3eN8jNq Learn more about your ad choices: https://www.megaphone.fm/adchoices Ramsey Solutions Privacy Policy: https://www.ramseysolutions.com/company/policies/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 have a question you want to ask on the show, fill out the form on Entreeleadership.com slash ask or call and leave us a voicemail at 844-944. 1070. This is a show about small business, for small business, and buy small business. John is with us in Grand Rapids, Michigan. Hey, John, welcome to the Entry Leadership podcast. Hey, Dave, how are you? Better than I deserve. What's up? Good. So, I have a question. I am currently the third generation in a residential construction company. We do about $45 million a year top line with 22 employees.

My aunt and my mom are the owners currently. My aunt is about the CFO and my dad runs the business for the most part at the CEO. And my wife and I are trying to be more active in the business. She's a designer with you in-house home designs. And I am the project manager who runs all the jobs and hires the trades and everything like that. So looking forward, my aunt wants to retire in about three to five years. We had that conversation. And my dad plans to retire in about 10.

I'm just trying to be looking forward. And I started having meetings with my aunt and my dad last year before my wife graduated from college with their second degree. And so we were talking about, you know, five-year plans and what things look like. And, you know, there's some, because of aging trades. and we self-reform a lot of our work. We have some major problems coming up that kind of need to be fixed in order for my wife and I to feel comfortable making large purchase of the business. And I was wondering how you would handle some of the family dynamics of my aunt not necessarily wanting to take my wife and I's thoughts into consideration, even though we might be planning out to where we are going to own the business at the time frame of the plan.

That makes sense. And then at the same time, there's two different entities in LLC and a corporation and how we would go about navigating the legal process of evaluation and moving those entities over towards us one day as we purchase the business, if that makes sense. How old are you? I am 23 and my wife's 24. And how old is your dad? He's 30 years older me, so he's 53. And my aunt is a couple years older than him. Okay. And so they have a 10-year timeline for this to occur.

My dad does. He would be okay with co-owning the business with me. He doesn't own it, your mom owns it, right? Right. So my mom would be okay with co-owning it with me, and then he would run it with me, kind of like you and your son do. I don't, you know, anyhow, but my aunt has no interest in owning it with me and my wife. So it would be my dad would buy her out. And then we would buy in. Your aunt has no interest in what?

My aunt is not interested in running or like owning the business with us. So it's not like. She's going to be gone in three years, you said. Yeah. Yep. Okay. So when she leaves is the plan for you to buy her out? No, because she won't sell to me.

So it's kind of convoluted. It's like, she won't sell to you. Yeah. It's like my parents have to buy from her because she doesn't want to do. she doesn't want the business to be between me and her essentially she doesn't want to do business between family other than what she's already done with that partnership does that make sense and so this is kind of the problems we've been running into is um okay so is there a plan on the table for your dad to buy her out uh not necessarily so they have a buy-sell agreement like you know if she died but what about when she retires and wants to sell to him? Right.

Well, so they haven't really thought that far through, and that's kind of a problem, and she's not, she's kind of conflict avoidance. So when we go to, and she doesn't like change. So when we bring it up, it kind of like doesn't compute.

So I was trying to figure out. So what is the dynamic with her and your dad? Because really this is your dad's problem. It's not your problem. Right. And no, they don't need to take your input. You're 23. You need to put your head down to do your work.

Your dad does need to go get this done, though. And before you buy it from your dad, if there's some problems you want to fix, you know, over the next five to seven years, I'm okay with taking your input on that. But at this stage of the game, she's made it real clear. She doesn't going to sell to you. She doesn't want to deal with the dynamic of you. She's going to sell to your dad. only she's not put together the plan is all, right? Yeah, so the hard part is my dad takes my input and asks for it and my wife,

and then my aunt has no interest in him. So that's kind of... Well, who runs the business? Your dad, he's the CEO. That's correct. And particularly he runs the business when she's gone and he's bought it from her. That's also correct, yeah. So all of that solves itself once your dad gets the purchase done from her.

In the meantime, you have a... one outlet for your input and that's your dad because she's not going to listen and she's not going to sell to you she's made all that real plane i think that ship's sailed dude so just keep your head down and just work with my dad exactly and uh and tell your dad to get his dad gun get the dad gum plan together with her and lay it all out and then as soon as that's underway start working your plan with your dad okay so then for my plan with my dad then um so like when they bought the business from my grandparent. They formed an LLC to purchase the land, and then with the land, they then charge the corporation

rent each year, and then part of that for the corporation kind of deal. The real estate is separate from the business. Okay, so now my aunt, well, my mom and my aunt own the LLC, and there's cash and property and outside assets that then got handed down from my grandparents in that LLC. Would you recommend that me and my wife just form our own? Then when we go to purchase it from my parents, does that make sense? Well, there's two separate transactions. There's this transaction where you're buying the business from the corporate

and you're buying the corporate stock. Yep. That's the important transaction. Okay. You can operate the business anywhere. It doesn't have to be on that land. You can go rent a building somewhere else. Okay.

It's not mandatory that you're on their site. to operate the business. We kind of have a facility, like we build walls in a shop before they go. We prefab some of the homes before they go. That makes sense. Yeah, so you need a warehouse. Yeah, I guess we could just build another one. No, you don't have to build another one.

You don't have to be in the real estate business to be in business. Well, I don't think you could rent a warehouse? It's not just a warehouse. It's like got tables and everything to build the walls by hand and everything and like cranes and other stuff like that. It's called a manufacturing facility in a warehouse, yeah. Yeah, I guess we'd have to make the manufacturing parts and we could rent the warehouse. If that makes sense. Yeah.

You would install, you'd install the equipment in the warehouse and have a plant. You've got a plant that builds stuff. I mean, hopefully you can work something out on the real estate, but there are two different transactions. Okay. It's very important for the family and for you to. separate the transactions. Okay, so here's a question then for the valuation of the business or the valuation. So basically, I've heard you recommend that you kind of consider the last four to five years of income,

the average of that and then multiply it by four, and then that's kind of the purchase price, am I correct? And saying that net profit after all players have been paid a salary. Right. Okay, so my question is then the LLC charge. It's a rent to the corporation. That's just the rent. That's an expense of the business, and that lowers the profit.

It's a separate thing. That's the thing. You guys have got this so convoluted in your head that you think the real estate is inextricably tied to the business. It's not. The business is simply a tenant. The tenant pays rent. If you're buying a restaurant and you pay a landlord rent, it's a line item in your expenses. It affects your profit.

obviously the higher your rent right and so is the rent market rent is it a good deal well so no it's not market rent really because of lower or higher managing purposes higher yeah they charge themselves more

and they charge too much so you don't want to be their tenant then if you buy the business because you don't want to pay more than market rent the LLC would we would adjust the rate at that point to be who's we you don't own the LLC at this point you just bought the business I'm trying to explain to you there are two separate things Yeah, so, but my, who I would be buying the business from would be, how I see it is it is a part of the purchase agreement of the corporation because you're dealing with the same person.

Does that make sense? No. So you didn't. It doesn't make sense. It can be, but it is not a requirement to buy this business that you be, do a deal with this landlord. You could buy the business and move it. But the owner and the landlord and stay, you would.

want to sign a lease with the landlord. That is a reasonable term on the lease. And in addition to that, because it's also family, it'd be nice to have an option to purchase that LLC or purchase that piece of real estate from the LLC later as you've got some more money. But the first thing you need to do is get the business in your name. The second thing is move from being a tenant to being the owner of the building. You do not have to buy the building to buy the business. Period. It's not required structurally. Now, they may want to sell it to you, but there are two different transactions. They're two different assets. The real estate has a market value of this manufacturing plant that your family is built, and the business has a market value. They are two different things.

things. And if you try to tie them in together, you're going to mess this up because that's how they end up paying each other too much rent, getting all this convoluted crap, and no, you don't sign a deal where you overpay on the rent. You don't sign a deal where you overpay for employees. You don't sign a deal where you overpay for anything. You sign a deal based on market value on all of these transactions, and then that'll get you there. But that's the deal you're going to have to work with your dad. And your dad's going to have to decide how to buy your aunt out, and he's going to have to figure out how to split this LLC separate from the business that is a corporation. This is the Entree Leadership Podcast. I'm Dave Ramsey. Most business conferences are a complete

waste of time. They're fluff and a big sales pitch. That's why 10 years ago, we decided to start a world-class leadership conference, one that's so good I would actually want to go if it wasn't mine. That's an idea. I gather the best leadership experts in the world. Some of them were personal friends. Hosted the very first Entry Leadership Summit in 2013. It was incredible. It was a lot of fun. I was glad I did it. So we did it again the next year. It's gotten better every year. This year is our 10th summit, and we're going big. We're taking Summit to Texas. It'll be bigger and better than ever, because, you know, everything's bigger in Texas, right? Hey, you're going to hear from world-class leadership experts.

Connect with over 2,700 other business owners and come away with the tools you need to grow like never before. This event is about 90% sold out. We've got to be less than 10% of our tickets left. Do not wait any longer to get your tickets. Go to Entreeleadership.com slash summit. Right now, there's a few seats left for April, 21 through 24. I'll see you in Dallas. Ted is in Omaha, Nebraska. Hi, Ted. Welcome to the Entree Leadership Podcast. Hey, Dave. Thanks for taking my call today. I really appreciate it. Sure, man. How can we help?

Well, I own a contracting business, and we're not actually in Omaha. I'm about, oh, about an hour outside Omaha. And I currently have four employees, and I also utilize subcontractors on some of the projects. Most of the projects we do are smaller projects. We probably do business with about 60 to 70 homeowners per year. And the last three years, our top line sales have been about 1 million. So we're touching a lot of people here. And in the past, I've always had a pretty clear vision of what I needed to do to grow the business. But I just feel like the last year or two I've kind of stalled out.

And I'm not sure what the next move should be. What are you doing? You're contracting what? Mostly exterior stuff like decks, fencing, siding, gutters, roofing. We do a little bit of everything, but we don't build houses or any big projects like that. It's all like smaller, you know, maybe $15,000 to $20,000 projects. So, yeah, and one of the concerns, one of the areas I think I need to address. but I'm not sure if it'd be smart.

Is this like my four employees do all of the work? And currently I do all of the accounting and everything on the back end of the business, you know, from sales to payroll to ordering to scheduling. You run the business. They produce the product. Yeah, pretty much. Yep. Okay.

Yep. I've been really struggling with the last year or two, you know, the next step. I kind of think I need to get somebody into kind of take over some of the stuff that I do just so that if something were to happen where I'd have, you know, where I'd be out of the business for a while, it would still run. But my struggle has been, even with that kind of caseload, it doesn't take up a lot of my day and I don't think I could afford, I don't think I could keep somebody busy full time. So I'm just really kind of stuck. Yeah, you're going to have to change either your voice. volume or your price points or both. Because what we've got is a revenue that's stalled out.

And logistically, you all are doing all you can do. So, in other words, you'd use the same number of man hours and maybe sub some of the workout to do larger projects or do more projects. You've got to get your revenue top line to move because logistically, you guys are cranking all you can crank. Am I right? I think I could crank more. It's just we're in such a rural area.

I'm not sure how to get those leads in. Okay, so you have a marketing problem then? Or a market size problem. Yes, yeah. It's probably a market size problem. Because like the area, we do a pretty good area, but there's just not a lot of population base. So it's not like a, you know,

okay, so you're either going to expand the area or you're going to change what you do within that area. Yeah, I think we've expanded an area to about as big of an area as we can. So now you're going to take on larger projects within that area then. That's, yes, something has to change. And I'm just not sure what you mean. I mean, you know, you don't have, you got to do something to move your revenue needle because you're doing all you can do that this marketplace. You can't get him more decks to build or fences to build. you're getting all you can get you pretty well you pretty well max that out you think you don't

think there's any well it's not like you got a competitor that's taken 70% of the market you only got 30% correct no that's not that's not the case and it's probably the other way around you probably got 80% of this market yeah well with us touching so many homeowners um you know and because we're spread out so far because we covered area probably about a 40 mile radius yeah um but with us touching so many homeowners, it's like word of mouth is the best marketing there is. But because it's so rural, it's not like I can, I don't know how to go about marketing. I don't, you know, to expand it on the marketing side, if that's something you need to get more into social media.

No, I don't think it's a marketing problem. I think you're going to have to change your offerings. I may be wrong, but I have the sense just in talking to you that you at least believe you're doing about all the fences and deck. you can do in the area. I mean, I don't think there's a lot more of them to do. So you either got to expand your radius from 40 miles to 60 miles, or you've got to say, I'm going to start doing barns.

I'm going to start doing remodels that are instead of $15,000, $20,000, I'm going to start taking $100,000 jobs. I've got to do something on that side. I've got to get a bigger, more complicated job and more profitable and higher revenue. or I've got to expand my radius and do more volume of the existing jobs. Because I don't think there's a, I mean, I don't think there's like 25% growth in decks and fences in the existing radius is what you've convinced me of. Am I wrong? Yeah, I think you're probably correct.

I think I could probably carve out a little bit more market share there if I can figure out how to market to it. But I think I think it's a lot of, it's not a lot of juice for the squeeze. I think you're probably correct. It's hard. It's hard dollars. to get those last few in. And I think instead what you've, and after you've done that, what are you going to do?

Now you plateaued for sure if you did that. So we've got to fix the plateauing issue, which means we've either got to expand the radius or we've got to change the business model and kick the revenues up, one of the two. And, you know, it may be that one of your four people become a foreman for more complicated and larger jobs or more distant jobs logistically, one of the two.

Either one's fine with me, but you're going to have to do something. You know, the old saying, you can't keep doing the same thing over and over again, expect a different result. That won't work. And that's what you're up against, and that's what you've realized wisely. Good job, Ted. Good job, man. We appreciate you being out there.

This is the Entree Leadership podcast. If you're looking for business theory, you're in the wrong place. I'm just a guy that gets up and leave the cave and kills something and drags it home. Been doing it for 30 years that way. So not a lot of theory around here. We're just somebody gets it, gets after it. And if you're wanting somebody that gets it and gets after it, you and I are on the same team. I'll try to help you. It's what we do. We've been doing it a long time. We started on a car table on my living room. There's just about 1,100 of us now at Ramsey and roughly a $300 million revenue. So we're been getting it a long time, growing every year,

changing every year. We have survived the invention of the internet and a few other things. And so of you. Thanks for hanging out with us. We're here to help you. And we'd love to do just that. Give us a call at 844-944-1070. Leave a voicemail. You'd be a caller on the show or go to entreeleadership.com slash ask. By the way, I could use your help around here. You are our only marketing plan. Help us. Spread the word on this show. Click the show. Click the show. button, click the follow button, share the show, share a link, let someone know that it's here, leave a nice five-star review, follow, subscribe, review, share, all of those kinds of things. It changes the algorithms on these old podcasts and these YouTube thingies, and it moves the needle

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We'd appreciate it very, very much. Lee is in Tallahassee, Florida. Hi, Lee. Welcome to the Ontario Leadership podcast. Hey, Dave. Thanks for having me. Sure. What's up?

I am the owner of a private mental health counseling practice and we do about 850,000. dollars a year in revenue. I have 10 subcontractors that are therapists in my employee, and then I have two administrators. So my question is, my landlord has increased my rent and other expenses significantly and suddenly, and she refuses to send assigned lease back to me, and so I don't trust her. So my question is, should I stay where I am, rent elsewhere or buy my own place. Wouldn't buy my own place unless I had the cash to pay for it, do you? No.

Okay. Then I would rent. Well, I think just like in the relationships that you're coaching your clients on or your subcontracted counselors are coaching your clients on, the only time our friend Henry Cloud says the time we have a necessary ending to any relationship, whether it's a personal relationship, a romantic relationship, a marriage, a job, a business of relationship, is when we lose hope that things are going to get better.

You know, so if the husband is drinking and we lose hope that he's not going to be anything but drinking, then the wife ends the marriage, right? Right. And so if you lose hope that this landlord is going to be reasonable in any stretch of the imagination, you know, in terms of getting assigned lease or, you know, being reasonable on pricing and so on, then it is time to end the relationship. It is time to leave. I don't lie.

I'm not going to deal with something that leaves my entire business vulnerable because I can't get signed documents back. That forces me to move on. Because she could put you out of business. You said it's a she. Did I say that? Did you say that? I did say that. Okay.

She could put you out of business by, you know, giving you 30 days notice and then you're going to spend all your time run around trying to find a place, right? Instead of you being in control of the calendar on this exit. Now, when she increased the rents and the expenses associated with the renting this space, are you now feel like you're being charged more than market or you had a deal before? Well, I did have a deal before and what she's done is now make it a triple net lease, which I did not have before. I've been there probably 20 years. She raised my rent 50 percent and then added the expenses of the real estate and the CAM cost.

Yeah, net, net, net, net, when all the, everything's said and done, is she trying to charge you more than you can go rent something else for? Well, I'm paying about $3 a square foot more where I am now than things that are available, but there's not much inventory, and there would have to be some build-out costs if I went somewhere else. Well, generally there is some TIE, tenant improvement that's associated with signing a three-year lease. I own properties like that, and as the landlord, I generally provide most of, if not all, of the tenant build-out. What kind of tenant buildout do you need? Offices for counseling?

Yes, offices for counseling. The person that we've talked to that's in our area, he has nothing in the second floor with walls. And he said he would give us about a third towards the buildout. But everything else we've looked at, people have said in commercial real estate like you that he should do most or all of the buildout. Yeah, so you need to find a different one.

You still hadn't found it. No. When both of your options suck, it means you don't have enough options. It's right. You have some brilliant idea. No, more options. I'm going to keep shopping.

I'm going to find something else. I'm going to think differently. Because basically you're saying that your current landlord is when you pay all of the triple net expenses and the rent, then you're paying way more than market. She's lost her mind. Yes. She's somebody like talking in her ear because she's never been like this. Well, that doesn't, I don't know where she got.

crazy, but, but yeah. Right. So, yeah, well, I don't want to sign a lease. I'm glad she hasn't sent one because the price is too high. Right. You wouldn't want to agree to these prices, would you? Well, I did graduate the rent so that I gave myself, I gave myself six months to get to the double. She originally gave me three weeks. So I will be paying the double rent in February. and then she went back on our word when she said I wouldn't have to start paying the real estate taxes until 2024, and then she went back and said, no, pay them in 2023. So that's the part of that I don't have anything in writing now. Well, we do.

She sent over a lease that didn't have all the right information. So I had my attorney fixed the information and we sent it over, signed, and she never signed it back. But you do not have a written agreement that both of you have signed. Exactly. Yeah. Yeah. So you don't have a, you don't have a lease. Yeah.

You're not obligated at all. You can walk. Yeah, but I have no place to go. You need to go find a place to go. That's what we're looking for. We've looked at homes that maybe we could, you know, turn into offices. I've looked at a synagogue that's about two blocks from where I am now, which is huge. But I think God can do anything.

So, you know, nothing is too big. ask for. So we're trying to think out of the box. Yeah, it's, I mean, Tallahassee's big enough that you should be able to find a commercial space to hold 10 people. I mean, should be the operative word. Yeah. Offices are, you know, it's doable.

Now, you know, and the good news is that you're a destination site, meaning that your customers are not coming to you because they saw the sign and decide to stop in for. counseling on impulse, right? So you're, you're, you know, they're going to come find you because they have an appointment and they need, they got, you know, some kind of, some kind of dissonance, some kind of anxiety that they need some help with. So they're, they're going to find you. Um, yeah. And the good, listen, it's very, the faster you can find something that is reasonably priced, the faster you can have a life-changing conversation with your old landlord. It is possible that her brain will grow back when presented with the option of her property being

empty. It's possible. I'm not going to guarantee it. Right. It won't in the current status because currently she thinks you need her. Right. When you no longer need her and she needs you, well, now the conversation changes. Yes. So we leased a building, gosh, many years ago, 15 years ago. And the guy leasing the building didn't want to spend a dime on TI. I did have the money to do the tenant improvement. And I went to him and said, okay, since you're not furnishing any TI, here's the rent on three other properties in the neighborhood that are furnishing $200,000.

thousand dollars of T.I. that you're not furnishing. And their square foot price is cheaper than yours and they're furnishing TI. And their building's not kind of old and tired like yours is. So if you got an old tired building and you want to compete with these numbers and you're me, what would you do? And he goes, well, I think I'm overpriced. And I said, well, I was trying to tell you that, but here's the facts. Yeah. I'm not trying to just negotiate with you for the sake of negotiating trying to explain to you that, you know, the market rate on this, if I dropped 300k of my money in here for a tenant improvement, is going to be a per square foot rate of, that's, you know, 80% of these other per square foot rates, right?

Right. And he said, well, that's logical. So I rented it. Okay. And I rented it at 80%. But when he, but he had it on the market competing, tried to compete per square foot with everybody that was providing tenant improvements. and had nicer buildings.

So we went in and shined up the old tired place and made it nice and ended up buying it years later. And we were in it for, gosh, I guess 15 years, 14 years or something where we were in our offices out of there. I still own the building. It's a great building. But the way I negotiated that deal was I found other options and sat down and put them right in front of him and just said, what would you do?

And he's faced with, well, you know, I can't. You're not going to ask me to be. illogical, are you? If you want me to be illogical, you're confused because I'm not, I'm not marrying this. It's a building. Right. There's no illogical about it. I'm not in love. It's a building, right? And so this is how the, and this is how the negotiation with your current landlord sounds after you get this. You want to be quite as caustic and sarcastic as me, because it's not your style. You're nicer than me. But you could sit down and just say, look, I found these three other things, based on the current situation, I'm afraid I need to make a move. I think

you're telling me you want me to leave because you're telling me that with a high price and erratic business practice of not getting me a lease. You've changed your word. You promised me one thing. Then you took back on that. The price increases are not logical. They're over the marketplace. And here's how I know that. Here's what the marketplace. I can go rent this other thing for for X and you're wanting. Why? Why would I do that? Why? Why would I do that? Why? Why? would I stay? And she's going to say, well, my friend, well, you just tell your friend to rent the space then.

Because I'm not going to be here. And that's the opportunity. But right now you're negotiating against mythology. Yes. And also, you're in the business you're in, and I have, you're in. and I have, you know, work with folks in similar situations over the years for 30 years. I'm just sitting here right now off the top of my head. I'm going to ask you as a counselor, is something going on with this woman in her personal life?

Something's weird, right? Yes. Something's broken. It's not just somebody in her ear. Something slipped. Because it's not been her pattern up until this year. That's right. And I think a lot of it is her displaced anger.

She's really anger with herself because she has been, you know, hasn't raised the rent for a while. And now she's like drinking out of a fire hose to me. Could be. So something did happen for sure. It could be. But something, you know, she could be hurting financially in another area. And it's caused her to thrash around here rather than do this smoothly.

Sometimes when people jump around on money stuff back and forth like this in a negotiation, change their deal, go back and forth, it's because they're desperate. Like I built, you know, when I was a kid in 22 years old, we were running, I worked for a home builder that did custom homes. And the people that were the hardest to work with were the broke ones. Yep. The people who had a lot of money were erratic. Change their minds 63 times and everything was somebody else's fault. Right. And it kind of smells like something like that's going on.

Could be. Yeah. One way to flesh it out, you need better options, though. You've got some work to do. You got some shoe leather. Whoever you've been talking to on real estate has not done the job yet. They've not helped you find what you need. You've got to go find more options.

And you're just going to get out there and drive around, look for rent signs. You're going to look at an empty building. Look it up on the tax record. See who owns it and calls them. Go, hey, why is your building empty? Do you want to rent it? you're going to scratch and claw and turn over rocks until something runs out. You need some other options.

And either God's going to give you an excellent place to move or a great negotiating tool to get your landlord to behave one of the two. This is the Entree Leadership Podcast. Thank you for joining us, America. This is the Entry Leadership Podcast. It's all about small business. We love small business. Listen, if you're a big business and you want to listen for the leadership input,

you're welcome. We'd love to have you. Maybe for the sheer business. entertainment value because the guy's caustic and sarcastic. But either way, we're glad you're here. If you're running something on your own, I'm here for you. It's what we do. Yeah, the phone number if you want to be a caller is 844-944-1070,

and we'll take your call and try to help you out if we can. Idaho is up next. Jorn is on the line. Hey, Jorn. What's up? Hey, Dave, honor to speak with you. Thanks for taking time to take my call. My honor too, sir.

How can I help? My wife and I run a roofing and gutter business two years into it. We have about 10 team members and a team of subcontractors. Year one last year, we did $1.6 million in revenue. This year, we will finish right around 4.2. Dad, gum, man. What in the world? You must have been in the business for a long time before you opened this. No, I'm 27.

I moved from Canada a couple of years ago. to come to North Idaho where my wife What's the deal? Nobody there had a roof? How in the world? I'm so impressed. This is amazing. You came out of the shoot like a badgum Kentucky Derby thoroughbred.

Yeah. We just did the things that a modern business does. We answered our phone, did some of the online stuff. We had a Google listing. And, yeah, again, no offense to the older crowd. A lot of the roofers here are on the way out the door. they're shutting their businesses down. And it wasn't why we moved here, but it was a great opportunity for business to flourish.

Wow. We just kind of took the opportunity. So a few basic modern marketing techniques and business processes, and you go from 1.6, year 1, 4.2, year 2, and 10 team members on guttering and roofing. Dude, you're a stud. I'm impressed. Well done. Thank you. Appreciate that.

Yeah, we did about $20,000 with marketing last year, so just a few pennies. It was very little, and we're starting to do that. that now. But yeah, so I'll get to my question. My question is really kind of the next step. We're on that rocket trajectory and doesn't seem to be slowing down. We're expanding into kind of another market, very close by to us. Most people would call it their regular service area, but about an hour south of us and trying to get some wisdom maybe from you on both personal and from the business side of things of like how much growth is too much growth, what's sustainable? What should we be thinking about to, I mean, I got,

horse blander's on sometimes and want to just make sure that we do a good job of honoring our team honoring the Lord and his blessings and also I got two little kids at home and a wife and do good there as well good for you well the things that I've run into with the businesses we've coached and the dumbest things we've done around here all come around this one metaphor the military when they are running a land battle and a ground war, have discovered that they have to keep things, three things going. The guys and gals fighting on the front line, they have to keep a steady stream of gas, gasoline, food, and ammunition coming.

If the supply lines of those three things, if the battle line moves faster than the supply lines, the people get killed because they run out of gasoline, bullets, and food, or any one of those three will get them killed, right? So the battle can only advance as fast as the resources is the metaphor. Around our business, the resources we look at that are, if we get out past, if we get out over our skis, if we get out past our abilities on these three things,

we immediately, or sadly, not even immediately, it may be a 12-month delay, start feeling the pain. If we get out past our cash, our money, we run out to the edge of the money, we're running right on bleeding edge of the money, if we get out past our technological abilities, our website, our programming, our digital capabilities, our, in your case, you're going to be doing some like you said, you're probably doing some, some SEO work. You're probably doing some paid ads on Google and Facebook and so on, that kind of thing. You've got the ability to reach people there. Nobody else in your space is probably doing that.

Sounds like you're tinkering in the edges of it, but you can spin out past that. You can go past your technology. If your internal systems cannot handle the growth, you've moved out past those. A ridiculous example would be if you had one laptop you're running the whole thing on, and all of a sudden it was a big operation and then you needed 25 computers, right? And you needed a network where those computers all talking to each other. That's a ridiculously simple, primitive example, but that's an example of you outran your technology in a small business. Okay?

If you get out past your money, you get out past your technology, and here's the big one. This one has bit my butt. I got teeth marks on my butt from half my life. for this. People, the human resource. If I get out past quality people on my team, I don't have the people, the quality people to execute the work, lead the work, cause the customer to be happy. Instead, I've hired some duffices that will fog up a mirror because I got in a hurry. Oh, God, so much pain. Totally. You let the, I got too fast, I let crazy in the building.

And dad gum, man, you can't get nothing done with crazy in your building. You know what I'm talking about? Oh, absolutely. We've had them this year. It's real easy to do. We got all this work to do, and all we're doing is roofing. So by God, you strap on a hammer, let's go. Who knew the guy was an absolute psycho, you know, with a hammer now?

Oh, my gosh, you know? And it's just like, oh, God. And, but they're there. They're there everywhere. There's more of them than they're all. us actually. So, you know, people that will actually work while they're at work. That's an amazing idea. People that actually care and treat each other with some reasonable level of relational interface. I'm just talking about not pissing everybody off every day. I mean,

the basics, you know. So if you go too fast in your hiring, you're going to get the opportunity to do all your hiring over again because you screwed it. it up and you're going to mess up some of your customer base. They're not going to like you anymore because you don't serve them well because you send some dupus over to their house. You didn't mean to, but you expanded faster than your quality human resources. Quality humans on your team are probably going to be the thing that slows you down, not opportunity in the marketplace.

We work with a consultant and they did a bunch of coaching for me on how to hire and The last three people we've hired have been absolute just rock stars. Just learning how to interview how to make job posting properly has helped us a bunch. Makes a big difference. On the cash side of things, we run a very... You should be flushing cash. We're dead damn revenues. Yeah, we run around a 28% net profit margin right now is where we're floating.

You ought to be sitting on some money. I don't think cash is going to be your problem. Cash hasn't been our problem for 20 years. We've got plenty of cash because we've made money. That's not been the question. Our problem has been we have an unbelievable hiring process and an unbelievable recruiting process

and still, I mean, we went through, I guess the last batch was probably, well, it showed up in the pandemic is when the crazy showed up. So it brought crazy out in a lot of people. But that's when I, you know, I looked up and we'd hire, I could tell.

We'd heard people that all they cared about, was a J-O-B. They didn't care about this place. They didn't care about our customers. They didn't care about their tribe. And, you know, and so I, then they got to care about working somewhere else because we fired them, you know, and it just, God, it was awful. And it was just bad hiring.

And we're known for good hiring. We're really good at it. But we were just blowing and going. We were growing. And we just let up just a little bit, just a little bit. And boom, man, I had, you know. A group of folk in here. I wish I'd never met.

And, you know, and it wasn't a bunch of them, just enough of them to cause me consternation. But there you go. Look that one up. But anyway, yeah, just, anyway, be careful on that. But as long as you can put good quality people in that fit your culture, and these aren't just people that are good at roofing, they can do relationships with the other people. they tell the truth they're kind they don't piss everybody off

they come in contact with you know their actual you know they have actual relational skills with each other and so because you can find people this is what most people

make the mistake of in corporate America you're not going to make a mistake I don't make it very often but you can find people that are actually very skilled at their job but they just don't know

how to exist with other human beings and so it makes them useless as a team member. They're emotional, their EQ is so low while their IQ is very high. And so they're excellent, you know, computer programmers, web designers, they're excellent salespeople, they're excellent whatever. But when it comes to working with other human beings in the building, they're an absolute freaking nightmare.

And so you make the mistake of hiring somebody's quality at their talent, I mean, you watch it on a football team. You know, you've got a guy over is the best of catching a football in the world, but he pisses everybody off. Nobody wants to throw him the football, you know? And if they do, they kind of hate it when they have to. You know, it's the same thing inside of business. You know, you just got to work past that.

So that's my pitch, and I'm sticking to it. It sounds very simple and very primitive, but it's the biggest violation of small businesses have. Hey, folks, remember better a weary warrior than a quivering critic. This world needs more high-quality leaders. So take courage and lead. I'm Dave Ramsey, your host. Thanks for listening to the Entree Leadership Podcast.