EntreLeadership - Major Roadblocks That Hinder Business Growth

Episode Date: May 29, 2023

Today, we’ll hear from: •      A business owner struggling to get one of his leaders to delegate •      A business owner wanting to know next steps to level up her business’s revenue •      An Instagram follower asking how to scale a business without capital •      A business owner wondering if he should pay himself more or reinvest in the business •      A business owner wanting advice on if he should buy new or used equipment for his business Links mentioned in this episode: •      The EntreLeadership Podcast: https://bit.ly/TheEntreLeadershipPodcast •      Register for the EntreLeadership Summit livestream: https://bit.ly/3wQcBfg •      Delegation Quick Read by Dave Ramsey: https://bit.ly/3UAKpYw •      Learn more about the DISC assessment: https://bit.ly/3yvkiIA •      Start your free trial of EntreLeadership Elite: https://bit.ly/3tI2fN8 •      Learn more about EntreLeadership’s Stages of Business: http://bit.ly/3yvdavv •      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: https://bit.ly/NetSuiteEntre •      BELAY: https://bit.ly/351P9AE •      Payority: https://bit.ly/3IaA5SK •      Staples: https://staplesbusinessadvantage.com/ramsey Learn more about EntreLeadership Events: •      EntreLeadership Summit: https://bit.ly/EntreLeadershipSummit •      EntreLeadership Master Series: https://bit.ly/EntreLeadershipMasterSeries   Learn more about EntreLeadership Coaching: •      Elite: https://bit.ly/3tI2fN8 •      Advisory Groups: https://bit.ly/EntreLeadershipAdvisoryGroups •      Executive Coaching: https://bit.ly/EntreLeadershipExecutiveCoaching •      Workshops: https://bit.ly/EntreLeadershipWorkshops 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 Andre 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 in the trenches. Yes, I lead a business every day. I make decisions just like you do every day. I make mistakes just like you do every day. Maybe different ones than you make. But, hey, we're here to talk about it together, and I want to help you win. If you're looking for someone that's doing a think tank and has a bunch of theory, you're in the wrong place.

I'm an actual dude that runs a business. So when I tell you something that we do, it's something we probably did today. So it's actual practical hands-on stuff. If you want to be a caller on this podcast, we'd love to have you. Call and leave a voicemail at 844-944-1070. 844-944-1070. Or fell out the form at entreleadership.com slash ad. Ask, Entreleadership.com slash ask.

And our team will get back with you and set you up to be a caller here on this show. It's Entree Leadership Summit Week. That's right, boys and girls. If you don't have your ticket, you won't be here. It has been a sellout for quite a while. Good news is there is a live stream later in the week that we can tune you into. I'll tell you a little bit more about that later in the show. But this is a big week for us.

If you're in town for the Entry Leadership Summit, welcome to Nashville. We're glad you're here. and we got quite a lineup this week with Jordan Peterson and Willie Robertson, man, it's going to be absolutely incredible. Malcolm Gladwell, Dr. John Deloney, Ken Coleman, me, Brian Buffini, many others. It's quite a lineup. So you're going to want to know more about that. And again, if you're in town for this, welcome. I'll be seeing you in person this week a whole bunch.

I'll be hanging out with you over at the Opryland Hotel Resort area, quite a complex. And you're going to enjoy being with us. we're really, really glad you're here. Justin starts off in Tulsa, Oklahoma. Hi, Justin. Welcome to the Entry Leadership Podcast. Hi, Dave. I appreciate taking my call today.

Sure. What's up? Yeah, I had a quick question about delegation. So I've got a small organization about seven employees. And one of my leaders really seems to be struggling with the idea of delegation or letting certain things go as we continue to grow. And I'm personally the kind of guy that can't wait to delegate things. probably because I'm a little bit lazy or because just don't like certain tasks.

So I'm really starting to struggle with how to communicate the value and the importance of delegation to him, not only to help him grow, but to help us grow, you know, as an organization as well. So have you talked to him about why he doesn't delegate? Yeah, so every time we have a conversation about it, it just turns into a big conversation of us trying to convince him that this is what needs to. to happen. Why doesn't he, why does he say he doesn't want to delegate? Because nobody can do it as good as he can or, you know, customer service is number one, and he seems to think that he's the best at that and, you know, we can't teach others to do it

as proficiently or as good as he can, essentially. Okay. All right. Well, there's two things going on. Number one, he could be right. The people that are his subordinates might not be good at it. in which case he's wise to not want to delegate, because he's trying to protect you from yourself.

If he's not right, then he's being a control freak. So what I would tell him is it is wise to not delegate until you can trust someone's competence and integrity. Now, you're not questioning the person in the sport and its integrity. You're questioning their competences. This is you talking to your guy, right? And so tell me what it would take to get them to a level of competence to where you could turn loose of some of this so that we can get

more scale. Because you understand that you're a bottleneck if we can't get scale. So we have to duplicate these efforts to more than one person. Otherwise, you're a logistical bottleneck. I mean, that's kind of common sense, right? So this is me talking to your guy if I'm you, right? And so I'm trying to get agreement. I'm trying to get understanding here rather than going, you have to learn to delegate.

No, you really don't have to learn to delegate until you have people that have their crap together enough that you delegate to them. Because if you give customer service to a dufus, you're going to screw up your company, right? Sure. So, you know, I often tell people until the person that you're going to delegate to has been trained until they are showing, have shown a pattern of competency to take your hand off the wheel and let them drive, you're asking to wreck the car.

You know, you'll toss them the keys and go, well, I, once was, I was customer service rep at this other place and great, go, go take care of that. I don't want to do it. That's not delegation. That's stupidity. Mm-hmm. So I've done that. I've done it.

Like you, I was laughing with you because you said, I don't like doing some stuff and I'm lazy. I think we all have that. That's one of the ways I delegated because it's crap I didn't want to do. That's also, you know, that's okay to choose an item. I don't want to do this. I hate accounting, for instance. I like reading the numbers, but doing accounting, just shoot me and get it over. with. I don't want to do it. Okay. So, but, but I, so I want to delegate the doing of the accounting

because I hate it, just like you said. But that, but I can't delegate somebody unless I can prove that they actually can freaking do accounting. Because that would be like they, they'd tear the place, that'd be like termites, tear the place down from the inside, right? Right. So, anyway, do you think this guy has a point? And we've said several times talking to them, we appreciate his reluctance because we're the kind of people who want to go and don't stop and he kind of puts us in check a little bit and says, all right, let's think about this a little deeper. It's just, you know, certain office administrative tasks that an operator really should not be doing. It's like, well, I don't want to give all that up. Well, it's like, well, we need to because

you need to be freed up to do what you're truly most valuable at, not punching numbers in on a spreadsheet or fielding Facebook messages, you know? So it's that kind of stuff that we're trying to, you know, work him into, all right, let's find somebody else to come in, take this off your plate so that you can truly do what your best at, which is leading our team. How old is he? And customer facing. He's 25, 26, I believe. Okay.

And I'm going to guess on the DISC that this guy is a C. He's a detail guy. Yes. Yeah. Yeah. And detail guys that are high Cs are slow to make decisions. Right? and this is a young C, so it's possibly emotionally immature C,

and so super slow to make decisions because he's scared. If he screws this up, it's going to be on him. And so here's what I'm going to do with a 25-year-old C. I'm going to take the pressure off of him if I'm you. I'm going to say, listen, here's what we're going to do. I want you to take every, I want you to take 10% of the Facebook messages. We're going to have 90% of them to someone else. And I want you to check the 90%'s responses.

And don't say anything to the person who they did the response. If you find an error, bring it to me. And if there's a mistake, it's going to be my fault, not yours. Because he's afraid he's going to be held for mistakes. Sure. Because Cs are very, very task-oriented, and they get their esteem from doing a task-oriented. properly where you're probably more of a D or an I I'm guessing after talking to you and I am too

and so we're like crap if we do it wrong let's do it again screw it up drop that one it broke let's not let's not drop the next one you know we keep going and the C's like oh god we dropped one you know it's like you know what I'm saying yeah so that I think you just it's a young guy let's let's give him some backstop where he's not look if it gets messed up I'm going to take the fall you and I want you to have you look over their shoulder and you can help me train them and you can spot check by taking one out of ten of the Facebook messages, administrative stuff, entering stuff on a spreadsheet. Man, if you want to move, if you want to do that, then I'm going to have to get somebody to be

your manager. Yeah. Because the people that do the entry work into spreadsheets are not managers. They're not leaders. That's an entry level grunt work position that since, enters into spreadsheets. And if you want to be that guy, that's fine, but just know you're getting ready to get a new boss

who's going to delegate to you. So you get to decide which of these do you want to do. Do you want to run this thing or do you want to actually do the entry? And because, I mean, my God, if you think you can't find anybody that can do data entry, that's pretty basic stuff. But, you know, honestly, there's nothing wrong being 25 years old, but 25 years old enters into this discussion.

Does that make sense? Oh, yeah, for sure. Yeah. So I think this is an opportunity for you to mentor him, take some of the pressure off of him, let him have some involvement in the training, and let him know the results of his decisions are he's either going to have a new boss or he's going to figure out a way to be the boss. He's going to have a new leader or figure out a way to be the leader. It's not a boss. But, I mean, you're either going to lead this or you're getting ready to be led because we're getting ready to scale this beyond what you can do. You can't do everything and be everything in us get scale.

you're a logistical bottleneck. And a C will understand a phrase like logistical bottleneck. Yeah, so I'm appealing through his personality style, if you will. That's what I would do. And then if he can't do it, I'm just going to take it away from him. It's that simple. I'm just going to, I mean, I'm going to be as gentle as I can, but eventually now you're the incompetent one.

And I'm trying to delegate to you and you can't delegate, so I can't delegate to you because you're incompetent. So I've got to get somebody else eventually. I've either got to train you or I've got to find somebody else who can do it. That's what I'm saying. You're getting really good new leader, Bubba. And this is the plan. So step up or step over or step out.

These are your three options, really. So level up, man, level up. And, you know, we just talk it through. I'm not going to tell you don't have to do it tomorrow. And I'll give you a path to level up. That's what I mean by a training path, a gradual release. You know, you're going to turn this loose now. going to turn 80% of this loose with some training to the new person.

But we've got to scale this and we've got to cut you loose because you're too valuable to be doing data entry, dude. You have too many skills that are worth way more to you and to this team and to our customers. And you just go there all the way. So very, very good stuff. Folks, if you want to know more about what we're talking about, we're talking about the D-I-S-C model.

It's a basic personality-style model. There's lots of personality-style models out there, the Eniogram, Myers-Briggs. There's a whole bunch of them. A lot of them have a lot of validity. This is a basic one. It has a lot of validity. I've been using this thing for 42 years, roughly, and it doesn't answer all your questions, but it gives you an understanding of how you're dealing with and then going, oh, that person is a high S. They don't like conflict. They want unity. They want everyone to be, they want consensus. And so we've got to, if we're going to approach a decision with that person, we've got to approach it differently. If we're going to sell that person, we're going to sell them

differently. So we have every one of our team members when they join, take the DISC, we print out the results in a bar graph, whether they're a high D, high S, high C, whatever they are, and we put it on their workstation. So when I walk up to them, I can look at that and go, oh, that's how this person processes information. Now I can have a different kind of conversation with this person that they can relate to, that I can connect to them. Or I could walk up and not care and still have the same conversation I was going to have anyway. Either one of those is okay, but at least I've got the information is a possibility. And the tests are really inexpensive. We sell them in bulk, and we sell them as individual one-offs in the Ramsey Solutions.com store, so you can check them

out there as well. But the D-I-S-C model, one of these days we'll do just a teaching on it here. There is a teaching on it, by the way, in Entre Leadership Elite, and you can join Entree Leadership Elite for free at Entreeleadership.com for 30 days and check it out, and you'll be able to see what I'm talking about here. It's a good way, though, to learn how to talk to your folks, with your folks, guide your folks, lift your folks, and even sometimes reprimand your folks, in the right tone with the right set of language and narrative. This is the Entree Leadership podcast. Welcome to the Entree Leadership Podcast. We're glad you are with us, America. This is a podcast by small business people, for small business people, answering your questions on how to level up and do the next thing. If you're a business leader and you haven't signed up for the Entree Leadership

Summit live stream, it is this week, people. You're about to miss it. In Room, of course, has been sold out for months. You can't come. Sorry for the FOMO. But the live stream starts Wednesday. This is not a conference you can afford to miss. Malcolm Gladwell, Dr. Jordan Peterson, Manit Shohan, Patrick Linschione, Willie Robertson, so many more.

Brian Buffini, me, Dr. John Deloney, Ken Coleman. Just think, how much better would your business be this year if you have leadership insight from business and thought leaders like that, baby? Hey, probably more than you think. It's going to be worth every penny and every minute. minute of time you spend doing it. Listen, you do not get better unless you have new information, new inspiration, new and fresh vision. And it only comes from doing stuff like this. I've done stuff like this my entire career. I read like crazy and I watch and attend stuff like this like

crazy. Any chance I get. But you only got until Friday to join us. It starts Wednesday. We're going through Friday. Period. After that, your next opportunity to experience summit will be a year away. and we'll be telling you about that real soon too. So, Entreeleadership.com slash live stream and get your live stream ticket and you can be part of the program. We'd love to have you, man. Hey, Abby's with us in Topeka, Kansas. Hey, Abby, what's up? Hi, Mr. Ramsey.

I appreciate your time today. Certainly. I'm honored to have you. How can we help? So I have owned and operated a wedding and event venue for almost six years. Our annual revenue is around $650,000. We have three full-time employees and 20 seasonal associates who help us throughout the wedding season. And I feel like we've almost reached our max revenue for this space and curious what the next steps are to continue leveling up our revenue.

Okay. So you're booked out. You logistically don't have any days left. Correct. Or not reasonable days. I mean, you're weird days left, but they're not bookable, really. Yep, correct. Okay, I mean, like you're not, like what's a night you would never book?

Like Thanksgiving night, right? That'd be weird. Well, you actually might be highly popular. I don't know, but. Yes, correct, correct. And there are some days that we need for rehearsals and some days that are just booked out logistically to host the other events on the weekends. Okay, so I meant like you're doing host other events other than weddings? Yes, so during the week, we hold business events and other types of training events.

So we rent it out during the week as well. Do they make as much as weddings? We have implemented an all-access package where we work with other vendors. And so they do get us a good profit, not as much as a wedding, but we do book it out for that day. So would you rather sell a wedding that night than a business event, can you? For Mondays through Wednesdays, it's harder. We do have some weddings, but we usually have a smaller crowd, so it would be more of a micro wedding are wanting those types of days. And so a business and a micro wedding are very

comparable. Okay. So you've already explored the idea of shifting your business mix a little, and it really doesn't make sense. It's going to be one of those. It's going to be micro or business fills in those weekday dates. Your weekend is your big number, and that's the wedding number, and particularly in wedding season, it's bizarre. Okay. Do you have seasonal pricing? We do not. We have daily price, or different days. Why would June not be a whole lot? more than the worst month? What's the worst month? I would say February, January and February are the worst month.

Really? Valentine's? That is engagement season. Yep. Engagement, not wedding season. Yeah. Okay. Yeah.

Oh, interesting. Okay, so then what I would do is go through and say, what are the hardest months to book, and I would leave their pricing alone, and I would raise my premium months. Perfect. get my revenue up. And so what I want to do is max out this thing before I start talking about. And that's why I was poking around on the business mix as well. Do we change the business mix during the week? Sounds like you don't. But I think June and July should be a lot more

than February. Yes, definitely. And September and October. The fall weddings are prime right now. Yeah. And is December a big month? It is, we do host weddings, but we charge a premium for larger business event, so larger holiday parties. Yeah, okay. So you don't do like the tax wedding. Like if I get married by the 31st, I get a tax deduction, right? Correct, correct. I think I'd advertise that one in the last week.

But anyway. I like it. I know nothing about your business, so don't listen to me, okay? That's dumb and correct. All right. But it's just, I know people that do get. married. The second marriage is in particular by the end of the year because they want to make sure they get the tax. All right. Yeah, first thing I would do is max out all. And it sounds like you've explored a lot of them,

but I would look to where I can fine-tune my pricing schedule. You probably have as much as, you said you did a million dollars top line. No, $650. I'd like to. That's my goal. I'll bet you got another $150,000 to $200,000 top line you can add by messing with your seasonal pricing. That's my guess. And we've got a couple of product lines we do that with that we have to, that we have to shift around how we charge because of their seasonal stuff. And so, hmm, that's one thing. And then your question was what again?

Restate that after I poked around on this. Yes, just how to level up our revenue. And kind of just when do you add another revenue stream? Kind of what you're hitting at. Yeah, okay. The first thing I would do is let's do the tweaks we were talking about. then once it's full again and June is 25% more in February or whatever the number is, okay, that you find that sweet spot and you go, okay, then I'm going to raise all my prices 10%

and just see what happens. So there's a thing like in property management, there's a correlation to this, a metaphor for this. If you have an apartment complex that has 250 units and you're 100% full, your rent is too low. Sure. You should have healthy apartment complexes should have a 5% or 7% vacancy rate because they're leaving because you bumped them out. That makes sense. You kept it right on the edge. Because the only way you can keep it 100% full is be too cheap.

It's impossible otherwise. So you're not pushing the edge of the market value of the apartment complex if you're 100% full. And that's what I'm looking for here. You're close to 100% full. So the first thing we'll do is to bump the seasonal. The second thing I'd do is I would bump across the board once I'm full again. Because you're obviously good at selling this. And it sounds like you are stellar at executing the actual events.

Like you guys are event ninjas, right? Yes, yes, correct. I mean, you just knock this out, right? And so, I mean, you're killing this. I mean, you guys, it's obvious you're because we do a. events and I can smell it in the way you're doing this, the way you're talking about it. You know exactly how to execute this with excellence. You have very few complaints after the event is closed except by somebody who's just an unreasonable person. Correct. Yep. Yeah. I suspected that.

So it's time to raise your prices. Yeah. First, let's do it. First, it's a seasonal and then let's do a 10% and if you still don't have any vacancy, raise it another 10. I want you to have trouble selling it out. Perfect. And then that tells you. That tells you. you've maxed the location out, then you've got a model that, yeah, we start looking for another location then. We start going, okay, we've got this thing where it's ROIing. We've got to, we're milking as much of this cow as possible. Let's get a new cow.

We've got to get another one. Awesome. And then you're doing that. So, yeah, you're really, how long have you been doing this? So we've owned it for six years. So I've, yep, about six years. How much was the revenue the first two years? Oh, a hundred.

Yeah, that's what I thought. Yeah. You're on a really steep growth curve here. You've learned to delegate. You've learned to grow. I mean, you went from treadmill operator to Pathfinder, and you're probably sitting at the trailblazer stage, I think. Oh, man, you just made my day.

Thank you. I think that's where you are. You're really, you see the hockey stick in the revenue, but we also see it in your learning curve because that's causing your revenue to happen. So you're amazing, Abby. Well done. I'm so proud of you.

Very cool. I'm honored to talk to you, honored you in an audience. You call me anytime. I'll help you anytime. I want to hear more about your success. And again, don't take my advice on whether to do a tax wedding or not. That won't work. This is the Entree Leadership Podcast.

This is the Entree Leadership Podcast. I'm your host, Dave Ramsey. I have a Ph.D. In D-U-M-B. If you've done stupid, well, I got you beat. I've done more of it than you have. That's why I'm more successful. A pile of the gleaming mountain of success is a pile of trash.

You just happen to be standing on it instead of laying under it. I've been doing this for 30 years and freaking survived all of my stupidity and some of my team's stupidity. I've even survived some of my genius and some of their genius. And so will you and so have you. Welcome to the land of small business where real people get real work done. We know how to get up, leave the cave, kill something, and drag it home. No corporate asin. BS here. We're getting it done, baby. We're glad you're here. If you want to be on the show,

leave us a message at 844-944-1070. We'll make you a caller. This comes in from Instagram, The Grims. How do you scale or grow a business without capital? I did this one. I never put in, I've never put in any outside capital into this business. It started on. a card table in my living room. And it's called organic cash flow. You make money, make a profit on your business, and you buy some food and pay the light bill at your house, and you put the rest of it back into the business. And you buy some food, and you pay the light bill, and you put the rest of it back into the business. It is limiting, and here's what's interesting. If you do, don't have the money, you won't be able to do some of your stupid ideas that would cause you to go broke.

I have avoided some really large-scale stupid ideas simply because I didn't have the money. Not because we knew they were stupid. We only knew they were stupid five years later when we looked back and went, oh, I'm glad we passed on that. That would have killed us. Yeah, I'm glad God didn't give us the money to blow this thing up with because we couldn't afford the dynamite. Yeah, so organic cash flow is how most privately held family businesses grow. The idea that bank loans or debt of any kind has caused small business in America to prosper is absolutely factually inaccurate.

It's a lie. There's just not that many small businesses that borrow money. Number one, you can't get a loan. you're not bankable most of the time and the number of small businesses that prosper because they bring in an angel investor is very small very few can attract an angel investor

because no one believes in your idea like you do and no one executes on your idea like you do and venture capitalists nobody does it just it doesn't have you know you got to get a business to a certain size before you attract those kinds of people, number one, and then number two, by the time you get it to that size, you don't need them. And if you go down to bank and borrow $200,000 to start something, you're going to screw this up if the bank's dumb enough to loan it to you because you have other assets.

You're getting ready to burn some of your other assets to the ground. So the way you scale or grow a business without capital is you create capital called profit, and you start small and you snowball. Every time the snowball rolls over, it gets a little bigger. when we built, we just finished a Ramsey event center. We just had our first public event sold out there. It's a $50 million building. When I started on a car table in my living room,

I didn't have $50 million dollars to build a $50 million building. If I needed to have an event, I rented one from someone else. I rented their $50 million building for $10,000 for that day. And we sold tickets and we made $100,000 and we took that $100,000, and we hired some people. and we sold some more tickets, and we have never had our own event center in 30 years. We've used someone else's until now. So, you have to have an event center if you're in the event business.

No, you don't. There's event centers everywhere. They're all over America. You have to have a printing press. No, you don't. There's printing companies. Just hire one of them, make them vendors. You can rent all this stuff, or you can hire someone else that has all this stuff and let them do it for you.

You do not have to be in all these business. businesses and capital intensive is just ridiculous. It's absolutely ridiculous. So no, grow small, reinvest your profits in things that make profit quickly. We at Ramsey, until the last five years, have not done, have virtually done no investing into product lines unless they would return the capital plus a profit within 12 months. We don't do five-year programs. We just, because our mindset has always been, we need to make money by Friday because we're going to make payroll.

We've always been that way because we're cash basis. We don't borrow money and we reinvest the profits and we reinvest the profits. And if the profits aren't coming for five years, this is a problem, boys and girls. So we're at a position now. we have enough cash that we can actually do that and get away with it. But when you're in the early stages, you can't do that stuff. So not an option.

It's not an option. Or it's called organic cash flow that you make the money and you put the money you made back into the business. And every time you do that every year, it'll be a little more and a little more and a little more and a little more. And our revenues in 2023 will exceed 300 million. So a little more. It's a little more. But it wasn't that one.

I was on a cart table on my living room. It wasn't $300, man. I mean, a week, I mean, it wasn't, you know, what I mean, it made more than $300, but not much. It felt like, it felt like $300. But, I mean, we're watching where we're buying copier paper, for God's sakes. All right, we're going to go to Canada and talk to Dawson. Hey, Dawson, welcome with the Entree Leadership podcast. Hey, Dave, thanks so much for having me on.

I started listening to the Ramsey show when I was 18, five years later. me and my now wife have stayed out of debt completely, and that has been an insane blessing for us. So thanks for all that you guys do. Well, thank you, brother. How can we help today? So I run a small landscaping company that I started about two and a half years ago. Last year, we did about $220,000 in revenue. On that $220, we netted about $100,000 total, bottom line. And out of that $100 throughout the year, I paid myself a $60,000 salary. So now we have a $1,000. you know, we're two and a half years in, we have about $40,000 in retained earnings. And I'm just curious about your thoughts on how I might balance two desires, one being

taking that $40,000 and reinvesting it into the company, or taking that $40,000 and all future other year retained earnings for that matter, or taking that $40,000 and investing it into some of the larger ticket personal financial goals that me and my wife have, such as paying off our mortgage, you know, over the next five years or something to that effect. You need retained earnings a maximum of six months of business expenses. Okay. And if you get that, if you get anything more than that, take it home and do something with it. And then before you get to that point, what we have done, and I've never gotten there,

by the way, I don't have six months of operating expenses and retained earnings now. I mean, that would be hundreds of millions of dollars, right? I don't have that. I've got really nice retained earnings, tens of millions, but I don't have hundreds of millions of retained earnings sitting in the company, and not with a $300 million company. So I've never gotten there. What we do, though, is we say, before I get paid, before the operating board, which also gets paid off the same line I do as if they were partners, although they are not technically, before that line item, we take out a percentage of net profits each month and add the retain earnings. So you pick a percentage that you want to put to grow retained earnings steadily, say 10%, 20%, 15%, something like that, right, of your profits.

And so it sounds like you made $100,000 last year, so let's say you're making $8,300 a month. Let's say you did 15%, so that's going to be like $1,500 a month. okay so we're gonna we're gonna we're gonna say 15% of retained earnings that's 1500 bucks a month we're gonna grow this and anything past that that's a profit i'm taking it home in addition to my salary so pay my salary i take out the percentage for retained earnings and what's left over i take it on home because you're growing retained earnings at a very good rate a good clip it's not shrinking you're not going to run out of money at the company you've got the money to grow with at the company you've got the money to protect a downturn at the company,

and then the rest of it you're going home to build wealth with. And that's exactly what I have done for 30 years. That is very clear and very helpful. And yeah, thanks so much for that framework. I sincerely appreciate that. Sure, man. It's a simplistic system. It's fairly primitive, and it has worked beautifully.

And so, and by the way, again, I have never, with the percentage of our bottom line, going to retain earnings every month, I have never achieved a full six months. If I ever did, I would stop any percentage going to it. I take all of it home because it's big enough. You don't need to be awash with cash down there. That's a bunch of cash, by the way.

That's a bunch of cash. This is the Entree Leadership Podcast. This is the Entree Leadership Podcast. I'm your host Dave Ramsey. Thank you for being with us. Hey, we need your help out there. If you hate this show, listen to something else. If you love it, help us out.

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You're our only advertising. And so if you don't do your job, we're going to have to get new listeners so follow subscribe leave a review we love you we're glad you're here Dan is in Philadelphia

hey Dan welcome with the Entry Leadership podcast Hey Dave thanks for taking my call sure what's up so I own a landscape design to build company and we're entering our fourth year in business and we're really starting to achieve

some good growth. As I grow the business, I'm wondering what your advice is on purchasing new versus used vehicles and equipment. I know your rule for purchasing personal vehicles is to buy used until you're a millionaire and obviously always in cash. So it's wondering what your guidance is when it comes to business purchases of that type. you know um um the difference and new and used has to be service meaning that you're going to get a lot more use without breakdown uh and you have to be able to actually find some actual data points on that not just in your head go well it's not going to break as much because it probably is going to break as much in your world it probably you're probably not going to get substantially different

service out of new versus you i mean versus i'm not saying when i say used i don't mean worn out i mean slightly used i mean and and so if you're saving 50% on the purchase and it's one year old or two year old it's still got a lot of life in it depending on what it is right right so what i'm looking at here the let me tell you what happens it happens here to it happens with these guys in the booth right here that i'm looking at because these guys like to buy electronic crap I've got so much electronic crap around me right at this moment that costs millions of dollars. And if I don't watch, they will spend tens of millions of dollars just because they like to buy stuff.

They like their boys and girls that like toys. And they just like to buy stuff. And they think I'm Santa Claus. They're all laughing at me right now. But we all are that way. Okay. If we're going to buy a piece of equipment, we have to be really careful that we're doing a pure business analysis. on it, that there's no, like, I'm bad because I have a new bobcat versus a used

tracko, you know, right? Yeah. And I was looking at trackos the other day, and I mean, that's not what you call them. What's a bobcat? What are they called? Skid steers. Skid steers. Yeah, skit steers.

I was looking at skid steers from my farm, and I'm looking at the new ones versus the used ones. And so I'm looking at right now. I have absolutely no need for this except it's a toy, right? but I'm still looking at, you know, sticking things, 95,000 bucks, okay, for a new Caterpillar, right? Which is like a Bentley in that world.

Or I can get a used half-worn, I can get a completely destroyed one for $20,000. That's useless because it won't start when I go to start it, and then I'll be mad at my toy. That won't work. So the same kind of stuff you're doing here. You've got to look at that, okay? What's the, what kind of,

it's got to be dependable. And so the way we analyze stuff around here, here is if it is such a small percentage of our overall budget that it doesn't matter, we just buy the best and we buy brand new. Okay? So, for instance, if we're buying a computer, one computer out of 1,100 people that have computers, it's a small percentage of our overall budget. It won't matter one way or the other.

But you're talking about a large purchase as a percentage of your world, I'm guessing, correct? Yes, that's right. Yeah. So in that situation, what we do is we say the proper business question is, what is the least I can spend and reasonably with reliability get the job done? Because everything else is an ego purchase. What's the least I can spend and reasonably get the job done with reliability? So if you're buying a skid steer or you're buying a mower or you're buying a backhoe or whatever it is in your world,

those might be things you would purchase, right? Then you're going to look at that and go, okay, with the use I'm going to get of this thing, how am I going to get an ROI on it? If we only use the thing twice a month, we probably ought to just rent one. But if we're using it every day or three times a week, then maybe it starts to make sense. And we're probably going to get an ROI on this. but what's the least I can spend and get the job done reliably. And then you look at it and you go, okay, the least I can spend and get the job done reliably is $60,000 for a used one.

But I can buy a new one for $65,000 and I don't have to think about maintenance right now. I'm probably doing that one. Okay. But if I can buy the used one for $60,000 and the new one's $90,000 in your world, that $30,000,000. Yes. You're probably not getting an ROI on that 30. That's probably ego purchase. Am I reading your mail or not?

You are. So specifically, I'm thinking about buying a new truck. So I'm wondering, is there... Pick up truck or a truck that pulls a trailer? The latter, a dump truck. A dump truck. I wonder if there is a dollar amount you would even put on, like, brand image. So a nice new...

None. truck that looks good. Zero. Zero. No one has ever hired a dump truck because they like the way it looked. They just wanted crap hauled. Zero. That's completely bogus.

None. Just wash it off, keep it clean, but no one went, oh, I'm so happy I bought, I got my dirt hauled by a $150,000 truck versus a $50,000 truck. I couldn't care less. I just wanted to stink of dirt hauled. I'm the customer. No, zero, zero. We just moved, we just did a million and a half dollar earth moving contract with a local

earth moving firm on a piece of commercial real estate that we're developing here. And I did not look at any of their trucks, not one. All I wanted was the freaking dirt moved, on time, by the way. You know? And so, no, that's, that's ego for sure, for sure. And construction guys do this with their truck. on the site all the time. They'll buy a $65,000, $80,000 pickup truck and pull it up on a construction site, and they're the brokest guy on the site. The richest guy on the construction site's driving

one that's beat on every side, and he's laying bricks over there, and you think he's a worker and he owns the company. That's the guy who's the richest. He's got a $1.2 million net worth, and the broke guy's got a $750 F-150 payment. But he's looking good. You know, it's just, it's so, ego-based. It's so ego-based. And so, yeah. No, I would buy the minimum truck that would haul the stuff. And here's the thing. Your primary business is not earth-moving. Right. That's a secondary piece of equipment. It's not a primary piece to get your job done, correct? Well, the truck would be used daily.

For what? For getting to the job, executing the job, hauling material. A dump truck? Yeah, yep. dump truck with a toolbox attached into it. Not a full-sized CDL dump truck. Okay, I got a different thing in my head. So it's like a flatbed that dumps. Exactly, yeah. Okay, so this is like a one or two-ton truck.

Four or six, but yeah. Yeah, okay. All right, but this is not a multi-axil diesel Peterbilt looking. Okay, all right, a different thing in my head. Okay. Yeah, just the same, though. Just the same. So the dump function on it is not the,

the main function. The main function is the toolbox and get into the jobs. Transportation, correct. Yeah. So again, minimum truck that will get the job done. And you compare a used with a new and say, really, okay, let's just play that. Let's play it out. What would the used one cost? What do you think? Yeah, use my area going between 40 and 50. Okay, and a new one's what? 90 plus. Okay. So tell me where you're getting your extra 40 grand back. if you buy the new one. I don't see it. No.

You get a good used one and call it a day. It's function. It's utilitarian value. That's all it is for business. All you're trying to do is get the job done. We're not trying to make a statement with prestige. If you want to make a statement with prestige, get rich and buy a Ferrari, okay? That's your prestige.

But it's ain't your freaking dump truck. You know, no, I'd save my 40 grand and I'd buy two trucks. right because I can get twice as much work done that's your utilitarian function that's the direction to go okay I should have just gone straight to the real question that was dumb on my part I had to go around the barn twice but we got to discuss a lot of fun things like my skidsteer lust that I have right now so there you go yeah any of you that have one no I'm kidding if you want to donate it to Dave's Bahama fund it's a non-profit skidsteer organization no I'm just kidding Absolutely, I'm kidding.

I don't have a Bahamas fund. I have a Cabo fund. All right. The Entree Leadership Podcast, boys and girls, thank you for listening. Remember, better a weary warrior than a quivering critic. Leaders serve. Leaders are active, not passive.

Leaders act on principle, not appearances. This world needs more high-quality leaders. So choose to lead. I'm Dave Ramsey, your host. Thanks for listening to the Entree Leadership Podcast.