EntreLeadership - My Business Has Cash-Flow Issues

Episode Date: March 31, 2025

Today we’ll hear about:  A business owner struggling to cash flow projects  A leader wanting to prepare his team for an ownership transition  How a business doubled their revenue in one year  Dave Ramsey’s advice on handling credit card fees    Next Steps  📞 Have a question for the show? Call 844-944-1070 or send us a message: https://ter.li/ask-us  📚Learn about the EntreLeadership System: https://ter.li/system-p  💻 Get EntreLeadership Elite for your business: https://ter.li/elite-p  ✉️ Sign up to receive tactical tools, advice and resources in your inbox every week: https://ter.li/enl  🏢 Attend EntreLeadership Summit: https://ter.li/summit   🎤 Attend EntreLeadership Master Series: https://ter.li/masterseries   📖 Preorder Dave’s new book, Build A Business You Love: https://ter.li/4zfr52    Offers From Today's Sponsors  💼 Go to Belay Solutions or text ENTRE to 55123 for their free resource!  💻 Visit NetSuite today to learn more  🧾 Visit Payority for a free consultation!  📈 Grab ⁠Sales Gravy's⁠ free resource to help you hire and lead better. 📝 Use code entre15 to get 15% off your first year of Trainual    Listen to More From Ramsey Network  🪑 Front Row Seat with Ken Coleman  🎙️ The Ramsey Show  💸 The Ramsey Show Highlights  🧠 The Dr. John Delony Show  🍸 Smart Money Happy Hour  💡 The Rachel Cruze Show  💰 George Kamel    Ramsey Solutions Privacy Policy  Learn more about your ad choices. Visit megaphone.fm/adchoices

From the headquarters of Ramsey Solutions, this is 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 alongside people just like you in the trenches. If you want to submit a question for this show and beyond the show, go to Entreeleadership.com slash ask and type in what you're thinking about. Our team will get with you put you on the air, or you could call us at 844-944-9-44-1070. Bob is with us. Bob is in Minnesota.

Hi, Bob. Welcome to the Entree podcast. Hi, Dave. Yeah, I own a big contracting company, and we have 28 people, and we're in that $3 million your annual revenue category. And good for you. Well done. Yeah, thanks.

My question would be is getting some ideas on how to finance large projects. We run into cash flow issues when we work for a month. We get our contract. We work for a month. And then all of a sudden we start, you know, incurring the cost up front, buying the materials, getting things going. And then, you know, submit the pay request 30 days later. everybody gets approved from the engineer, the architect, and the owner,

and then the next thing, you end up usually waiting a 30 days for a check. So my question would be, is that something that you would, while we're saving up our money with our retained earnings to be able to cash flow ourselves, would we be better off to try to give a, like, a 2% 10, that 30 discount, or would we try to just put some finance charge in there and just have like maybe project financing. You know, what I would do is, yeah, you're right. The answer ultimately is to build the retained earnings to handle the cash flow fluctuation. That's a pretty standard thing in your world.

The other thing I would do is I would manage the relationship tighter. I'm going to set the terms on the front end, okay? Guys, you guys are huge commercial contractors, engineers, architects, y'all are all fancy people. I'm a painter. I need my money. Yeah. So I can't, I'm not your bank. Do I look like a banker? I'm not a banker. And so you guys dragging crap out 60, 90 days and playing around cash flowing off of me isn't going to work. I can't do work for y'all if you don't pay very, very, very promptly. Now, I understand that you have to get sign off on the quality of the work before you can release the check. But then you need to release the check. I don't need to be drug out after that. And you could type. You could type. this up by two months with some conversations on the front end at the point you take the job. And the more you've done work with a contractor, the more they're going to accept that conversation

because they like you, they want you to have the job, they like your quality of work, you're delivering, you're not causing them any issues, and so they want to be a blessing to you to keep you around. But if it's a brand new contractor, it's harder, but I'm still going to have this conversation at the beginning of every one of these jobs. And if then they don't pay me, I'm going to have the conversation again and say, guys, remember when we talked about this, I'm not your bank.

I don't look like a banker. I look like a painter. And there's a reason. It's because I'm a painter. I'm not a banker. And I'm not carrying your butt. You guys got to get these checks released. And you can reset the relationship.

And what you're asking for there is not, all they're doing is either trying to ride the float on you intentionally or they're just sloppy. And they're just, you know, they're pushing paper around on the desk and it's not getting paid on time. That's all it is. And in either one of those two cases when you go, hey, I'm a painter, I'm not a banker. And I have used this myself. I'm a small business guy. I am not your banker.

You're not cash flowing off my butt. That's not, you know, you're going to do that. there's going to be additional charges here, and, you know, we're going to build some more profit into this if I'm your banker because I didn't realize I was a banker or I would have been charging you visa rates, you know? So we can figure this out. I can add 18% on top of this if you want me to,

or y'all can just decide to pay on time, whichever. I've had this conversation. I'll give you an example in the radio world when we were making a ton of money on talk radio back in the day because we're a huge talk radio show on. the Ramsey side. And, you know, we would sell an ad to a company through an ad agency. And so here's how this works. It's kind of like his situation. All right. We would bill at the end of the month the ad agency for that month's ads. They would sit on it for at least 30 days. Then they would bill the customer that we were running the ads for, who would sit

on it another 30 days. We were getting our money like four months later by the time all these people did a dance. And so we finally just said, guys, we bill you, and I don't really care where the money comes from, but it lands on our desk in 15 days. Otherwise, we're not going to run your ads. That's the terms. Well, that's not how it's done in the industry. I don't give a crap. I'm not your bank. You're buying ads from me. If you need a bank, go see a banker. If you need a loan to float something for 120 days, you're going to have to do that on your own. I don't look like a banker. I don't even like bankers. We're not doing this. And so, you know, we got to where some of the agencies, the big agencies, wouldn't do business with us because they live off of the dad gum float.

And we don't live, we don't let you live off the float on us because we're cash business, It's cash on the barrelhead. I'm going to bill you at the end of the month, and it's 15 days. You screw around with that, I'm going to start billing you in advance. I won't run your ads until you pay me in advance. If you want to really screw around with this, and here's the good news. There's only one place to buy ads on the Ramsey Show from me. It's the only way you can get on.

So I get to set the terms. Hello. And you can't buy these anywhere else. They're not available anywhere else except through me. And so, you know, we reset this and pissed off some agencies. But then once they kind of got used to it, they were okay with it. They just figured out a way to get paid. They paid up front or whatever.

And then I got my money 15 days later. But I'm not your dadgum bank. And I just go, guys, I'm a little small business. Y'all are big fancy agency in New York. Y'all are so smart. You're just brilliant, but I need a dead gum money. That's how it works. Dave's a hillbilly.

Just count on that. That's what we're going with right here. That's the overall plan. This is the Entry Leadership podcast. In a typical small business, you spend more money on payroll than any other expense. Your team is your largest investment, which means you got to get a great ROI on it or you don't stay open. That's where Entry Leadership Elite can help. Elite is the online platform that aligns your team so you can scale your business.

You're going to use integrated tools to get the whole team on the whole team on. the same page. Singing the same song off the same sheet of music. Our proven trainings will help you become the kind of leader people want to follow. Plus, elites community of business owners will have your back even when things get tough.

My leaders use elite every week to unify over 1,000 team members here at Ramsey Solutions. And now you can use Elite to align your team too. To grow your business with elite, go to entreleadership.com slash elite. or click the link in the description if you're on YouTube or a podcast. Kevin is with us in Kansas City. Hi, Kevin.

Welcome to the Entree podcast. Hey, Dave. Thank you for having me. I am general manager of a metal roofing company. We manufacture and install metal roofing, mostly residential, some in commercial. And over the years, we've gotten into the exterior of homes. doing siding and gutters. Our gross revenue last year was right at $5 million.

Good for you. And roughly the profits on that was about $800,000 to everything was paid. Very cool. Good. How can I help today? So my question is my father-in-law is actually the owner. He started the business to slow down, of course, and he has over the years. as I stepped in a little bit more,

and I really enjoy doing that. And just lately, I had some small talk about him stepping on out eventually and how that would all look and me taking on that responsibility. And one thing that I was wanting your advice on, and I assume you could help, is what could I do at the moment with the position I have that would help me once that time comes and we make that change. Just something I could maybe start doing now with the guys we have working with. How much longer you think he's going to be in the saddle?

Well, like I said, we just had that conversation. I don't think he's sure yet, but if I'd have to guess, I'd say, you know, another, you know, maybe 10 years. Oh, wow, okay. Good, good. Okay. The more gradual the transition, the easier it is on the team, the customers, the suppliers, the vendors, everyone, the more gradual it is, because you can talk about it and go, okay, you know, we're aiming down the road here. This is not today. It's not this year. It's not even next year. But we're beginning, and you, the both of you, you and him, once you have your plan laid out, then you just start talking about it. And then your job is to be so dead gum good at your job that the people that work with you are looking forward to you being the owner. Okay. That you're easy to work with. You're leading them well.

You're kind. You're taking care of the team. You're making the tough decisions when tough decisions need to be made. And one of my buddies that did a great transition, he said the best transitions are when your father-in-law announces formally, okay. next month, Kevin is going to be the owner, and I'm stepping aside, and he'll be the president. The team looks around and goes, oh, I thought he already was. Because you were already doing everything mechanically, tactically.

You were already sitting spiritually in the seat. The only thing the left was the ownership transfer, and you guys had done it so gradually, there's like an interstate on-ramp. You've got a long runway there, right? And you've got 10 years. and so this could be very gradual and very gentle. The team, they'll be going, oh, yeah, well, I kind of already thought it had happened. I mean, Kevin's already running everything.

My gosh, and he takes care of us. And so, I mean, so now he got the title and he got the keys to the building. Oh, well, okay, good. And, you know, they just move right along, and they don't think anything about it. Another friend of mine, when my son moved into the president role here at Ramsey, and we're co-running the business now as part of our gradual transition. I'm the CEO, he's the president, but one of my other buddies, I was telling him about this, has a big organization whose son had stepped in.

He said, was your son Daniel, was he elected into the position in the boardroom or the elevator? He was confirmed in the elevator. The boardroom just went along with it. So, in other words, it didn't come, it wasn't a decision that came down from on high. All the people Daniel work with every day would have been surprised had he not gone into the role. because he was walking that direction and everybody knew it, right? And so that's kind of what you're doing with your gradual handoff. You put yourself in that.

And then what that does is there's no whiplash because you're not driving along and just whip the wheel to the left and everybody gets thrown out of the car, right? And so instead we're just driving up onto the... Oh, we're on the interstate, who knew? and you got up to speed and nobody thought anything about it. So it's one of the principles of a good succession plan is the more gradual, the better. The more gradual, the less problem the team has.

The more gradual, the more you can iron out any bumps or bugs in the process. The more gradual, the higher the probability that the succession plan will be a success that you'll be holding the keys and can take this company on to the next. level because you're not having to fight through a bunch of problems by a herky-jurkey, sudden succession plan that wasn't well thought out or thought through. And that's what you're looking at there. That's the process. So that's what I'd tell you to do is go that direction. Good stuff, man. It's a good question, Kevin. And the fact that y'all are talking about it 10 years out, that's the way to do it, man. And you guys go ahead and get started. As soon as you get nailed down

kind of what the plan is, start communicating and say, this is kind of the plan. We're not sure exactly, but it's going to look something like this. That'll relieve the team today because they're already wondering. This is the Entree podcast. I'm Dave Ramsey, your host. This is the Entree Leadership Podcast. I would appreciate your help. If you're enjoying this information in this show and with the price you paid for it, how could you not?

We would appreciate the help. You are our only marketing plan. You're our only chance of getting the word out. So if you'll click on the subscribe button or the follow button, it helps the algorithms on these podcast platforms, YouTube platforms, to push this show forward in these different spaces where more people find out about us. Same thing with a five-star review.

Same thing happens when you share the show and send people directly to us. So tell people about the show. Leave us a nice review and click follow or subscribe or whatever it is that you do. out there in the world, that internet thingy that you do. All right, Chris is with us. He's in Lynchburg, Virginia. Hey, Chris, welcome to the Entree podcast. Hey, Dave, how you doing?

Better than I deserve, man. What's up? Good. Glad to hear that. I'm doing great. Yeah, in Entree Elite, and this is my second year at the Master Series, and it's been an incredible deal for us as a company, individual.

We've doubled our revenue. You doubled your revenue? I hate it when that happens. What was your revenue before? What is it now? It was $3.5 million at the end of last year. You went to $7 or you went from there from 1.7? No, we're going to go to seven by the end of this year.

Woo-hoo! Oh, man. Wow, that's so much profit I can't breathe. I love it. Yeah, yeah. What kind of business is this? We're a contractor, general contractor. Okay.

We do mostly commercial construction and in the central Virginia area, Lynchburg area, Charlottesville area. Cool. How long have you been open? We've been in business since 2010. Well, one of the things, those of you that might be a new listener, one of the things we invite our listeners to do is to call in with what we call because there's not many places a small business guy can brag.

And this is a place where we're your biggest church. We love you. We want you to win, and we're cheering for Chris right now. He just scored a freaking touchdown the Super Bowl, baby. Yeah, I like this. Very cool. All right, so what do you attribute your growth to? What is it you're doing that's causing this to blow up? Well, the biggest thing we're doing as a group, as a team, is from what we've learned in the first Master Series is we came away from that event with an idea of developing a core team, putting people on the right seat, going to this off-site strategic planning meeting, and developing our mission, vision, core values. All of this stuff fell into place within two months after my last master series

in 2023, which was incredible. And so after that, it just, we just went to work. And we, we We were blessed to get the work that we got and did well doing it. And so it's just the rest of history. But everybody being aligned and flying in a straight line causes the speed to kick up, right? Right. Yeah, I think your biggest comment over the last series was, you know, as leaders, we leave. We don't push. You know, I've been in the farming business as well.

I know what it's like to try to, you know, whip the cattle into place and, you know, we're not doing it. that if you're not on the bus, we're just going to get left behind. And we took a real strong approach at that. And that's kind of how we've proceeded with things. Did anybody get left at the bus station, didn't get on? We did. We had a key employee that I thought was going to be a key employee. And after about six months, we had to make a pretty tough decision.

And it was difficult. But we had some good training in our back pocket with having these uncomfortable conversations. This gentleman, good friend of mine, left with dignity, and I felt good about it at the end if that's possible. I hated to do it, but it needed to happen. He just would not get on the bus. The bus is leaving where he said what we're doing, and he didn't want to be a we.

Right, exactly. Yeah, wow. And you're a strong leader, man. You made the call proud of you. That's backbone stuff right there, man. Yeah, I've got a lot more to learn, but it's going in the right direction. being a year in elite has really helped keeping me accountable.

I appreciate you bragging on us, but right now we're bragging on you. You're the man. I mean, you took it from three and a half to seven. You took what we taught you and you went and used the tools. You took the tools out of your tool belt and you swung the hammer. You made it happen.

So proud of you, man. Very, very well done. Man, I love it. I would you like take your business from three and a half to seven million. You understand that a whole bunch of that next jump is profit. because a lot of the... He's got some of the nut covered already, right?

So that's like chah-ching right there, baby. Woo-wee! I do like it when you get to win. Winning is a good thing, man. Hey, we don't do anything. Hey, we're capitalist pigs around here, man. We believe in the capitalist system. We believe you leave the cave, kill it, drag it home.

It's yours. Shut up. This is how it works around here, baby. This is the Entree podcast. I'm Dave Ramsey, your host. This is the Onesie. Entre Leadership Podcast. We're so glad you are with us. Open phones here. If you want to be a caller on the show, call us at 844-944-944-1070. That's 844-9-4-1070. We'd love to have you.

Chad is with us, and he's in Charlotte, North Carolina. Hi, Chad. How are you? Hey, Dave. I'm doing great. Thanks for the call. It's a pleasure to talk to you. You too, sir. What's up? So I'm an owner, my wife and I are owner of a veterinary practice in North Carolina. We have 11 employees. Our top line from last year was 2.7. We should do three this year. And my question was about passing along credit card fees to the client. So I wanted your opinion on what you thought about it just in general and then how to implement it. We are currently paying about $40,000 a year in credit card fees right now. So my plan was to

start surcharging, which is where we charge 3% for credit card use. That fee would be passed along to the clients. And then the clients would have debit cards, cash or check as an option to pay with no fees. If you run a debit card like a credit card and still gets you with a merchant fee. The only way a debit card works is if they run the PIN number and treat it like an ATM. Okay. Yeah, so I think our percent would drop to 1 to 1.1.5 percent if we covered the debit card. fees ourselves. Okay. All right. So 40,000. So out of your three million, are you only running

only a million dollars worth of credit card fees? I'm not sure the exact. I know that sounds low. Yeah. I would have guessed most people walk in and pay for their vet bill with their card. They do. We're a little bit more out of out of the city a little bit. So, you know, the country folks tend to carry a little bit more cash. And we do a lot, a lot more debit. we still take checks. It's not a lot, but, yeah, it's definitely lower than you would expect for our gross revenue. Yeah. I mean, yeah. So, okay, so you've got a large animal practice, too, then? No, we're strictly small. We're just outside of the city.

Okay, I got you. Okay. Hmm. Well, I mean, there's two approaches you can use. I'm thinking about, like, our website, we don't take credit cards, but we do take debit cards, and we get charged a merchant fee just like you do for running. a credit card. When you use a credit card or a debit card on a website, it's processed through the visa system and we still get hit with the two, two and a half, whatever it is, the merchant fees. Okay. So in a situation like that, a vendor or a retailer like me in that situation, we just build, that's just one of our cost of operation. There's virtually no way to buy on the

website except that, right? So I'm almost 100% of my transactions are that. if you're buying a book on the Ramsey Solution site, right? And that kind of thing, okay? So I'm going to get hit with that. So I just have to build that into my pricing. And so you could just say, all right, you know, we have a $40,000 cost associated with these stupid cards. And so we're going to raise our prices by the equivalent of $40,000 out of $3 million,

which is not much. I mean, it's, you know, 1% or something, right? Yeah, I haven't done the math. But that, yeah, that was the two-scrifice. You can go that way or you can do a surcharge. If you're trying to dissuade them from using them, the surcharge will do that. And in your case, in your space, it wouldn't be as unusual. But if you went to a restaurant and they did that, it would piss you off.

Yeah, so that's my hesitation in doing it is that we, you know, we don't sell widgets. We're very much, there's emotions involved in the human animal bond and we're dealing with clients who are trying to make decisions for their pets. So I don't want them to fill nickel and dime, but also raising the prices kind of hurts everybody as opposed to the people that are paying with credit cards versus that are paying with cash. And you would prefer them not to run it on a card,

and you're saying that. So a place where I see that often is like buying on an online auction site, like a classic car site or a gun broker site type thing, you'll often see price plus a credit card fee if you're going to run it on a credit card. Okay? That's not that unusual on those sites. So it's not offensive then.

Because you know that's a small broker of some kind, or it's an individual, and if you're going to run a card on something like that, it's going to cost them a chunk, and they're saying you're going to, if you want to run it on a card, that's fine. And so I bought some ATVs for the farm the other day, for the grandbabies to ride on.

And those guys are friends of mine. They're great customers of us, and we bought stuff for, them and I call them up and then I'm like hey you don't want me run this on a card in my case it's a debit card but they're still going to get hit with that exact same fee and they're like oh no no no we'll send you the wire information just wire it but now that's a little larger transaction that's not a it's not a two hundred dollar transaction right so uh right you know on a two hundred dollar transaction, you do feel kind of nickel undimed.

I don't know. I think you've got to gauge how your customers are going to react to a surcharge and just go, you know, as of June 1, when you use a card, we're going to attack on 3% or 5% or whatever it is. And you could just try it and see what kind of pushback you get. Yeah, I'll figure out if it's worth some of the pushback, which we may not know. Well, you know, if it's two people, you know, if it's two people, and they're loud, well, so what?

Maybe you didn't want them anyway. Yeah, right. And, you know, if this, okay, if they're running a thousand dollar surgery on their cat, okay, and it costs them 50 bucks or they could just pay for it, right? Yeah. That's not punitive. You know. Yeah, I thought if we explained it to the fact that we didn't want to raise prices on everybody,

so we're implementing this ahead of time. They know ahead of time. So they have other options. This is a cost that we're not making money on this transaction. Right. This is a cost that when you use your card, it costs us. And so we're going to let you pay for it. Yeah.

And that's all it is. If you don't want to use a card, it's okay. You don't have to use a card. We're not encouraging one way or the other. But if you run on a card, it costs us, and I'm not going to raise prices on everybody because of that. Yeah, I think you could try that. You just need to message it

to the customers to where you feel good about it, what's the narrative that feels right, that I feel ethical in how I'm doing it. And the way you've talked it through with me, Chad, makes a lot of sense. I'm trying to think if I walk in there with my dog, what am I going to think? And I'm not going to think boo about it. I'm going to, you know, I'll just pull some Uncle Benjamin's out of the dad gum wallet

and pay you, but I'm a cash dude. I'm more like one of your country customers. I'm more of that guy. I'm that redneck, right? So, you know, I've always got money in my pocket, so real money. So it wouldn't bother me a bit. If I look up and go, it's $1,000, I can save $50 by not, I'll reach in there and pay you. Yeah.

And like you said, the ones that will make a fuss are probably our fee and declines anyway. Yeah, and they may be clients that it's okay if they didn't come back. Right. They may take up a lot of your calories anyway. Yeah. And, you know, sometimes that's okay. But, again, you don't want to lose them because you hadn't thought through it, which is smart to make this call and kind of talk it through together here.

So I would make sure you think through it. You have like one person more than anybody else that's going to be having this conversation because they work the front desk and do the checkout. Yeah, that was my other hesitation. Our TSR's up front. It's going to be a lot on them. No, not if you get their buy-in on it. Well, they're going to take the brunt of the ones

that are complaining. Well, you know, no, no, no, no, no. No, I'm going to tell them, listen, if someone is getting hot about it, just call me out of the back. I don't want you to have to handle that. Yeah. Come get me. Because that's going to be 1% of your people.

You're not going to have much of that, okay? But don't, don't ask them. And guys, this is what's going on. It's going to affect profitability, so it affects my raises with you. And you guys help me run this business well, and this is just a good business move. And I just need you to feel comfortable with it so you can explain it without a, I don't want them explaining it apologetically.

I just want them to be matter of fact. Yeah. Yeah, that makes sense. And to do that, I need their emotional buy-in. And part of that is you've got to take the slack on the hot ones. They don't, don't ask them to take the hot ones. Yeah. What are your thoughts on having some sort of, I guess, a bonus or something for the staff to say,

hey, I know you're, you know, we got this big transition. Here's a little something extra. You know what? I think it's a bigger transition to you than it is anybody else. you've already burned more calories thinking about this than everybody else in the whole discussion put together will they'll look at it and they'll make a nanosecond decision and go whatever here's cash you know and they're just going to move right on because it's not the only time they've ever seen this in their life right yeah it's becoming more common we've just discussed that i've seen it other places and how would i if i am your customer and i'm walking in there

the persona of your customer how are they going to feel let me tell you if you're a person you're who's going to gripe. Somebody's broke. They got no money, and the only way to fix their animals is going debt, and they're putting it on a credit card. And they're already broke, and they're already pissed about money, and now they've got to fix an animal, and so now they're super pissed, and that's who's going to gripe. It's broke people. Yeah. But people that have money, they're not going to think about it twice. Does that make sense? Yeah, yeah, it does. We certainly have a wide wide range of con till. Yeah, yeah.

But, I mean, that's, it's going to be the money stress thing to go with the animal stress thing. You know, I'm already broke. I'm already living paycheck to paycheck. I've already got credit card debt. And then the dadgum cat got out in the road. You know, I mean, what, you know, it's just that, that's, that's who it is. And, and then somehow that's going to be your fault, right? So, I mean, if you go to the dentist, the people that gripe at the dentist are the ones that are broke, you know, they don't have the

to get their teeth fixed. And so they're having to figure out a way to finance their teeth. You know, and it's the same thing. And that's another place, by the way, you'll see something like you're doing right here as a professional situation like that. It wouldn't be, I wouldn't be surprised at all if I walked into a dentist and they said, okay, you can run it on a card. We can bill you and not, you know, or whatever.

And if you pay cash right now, here's the price. And that wouldn't be an unusual transaction at all, I think, in today's world. So cool stuff, man. Interesting, interesting discussion. Good luck with that. Just make sure you got good communication and you're not doing it apologetically. That'd be my thing. 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.