EntreLeadership - My Employees Aren’t Happy With Their Raises

Episode Date: August 18, 2025

Today, we’ll hear about: •       A leader who is unsure if he’s giving his team the right pay raises •       A man wondering about buying a business with a silent partner and employee he can’t fire •       How Dave Ramsey manages business risk •       A son who inherited his father’s business but has zero experience   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  ·      📖 Order Dave’s new book, Build a Business You Love: https://ter.li/b4kru2   Connect With Our 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 in the trenches right alongside you. I do this stuff every day. If you have a question that you want to ask on the show, fill out the form on Entreeleadership. com slash ask or call and leave us a voicemail at 844-944-107. and we will make you a caller on the show.

That's 84494410. Blake is in Lincoln, Nebraska, to start this hour off. Hey, Blake, what's up? Hey, Dave, thanks for taking my call. Sure, man. How can I help? I'm the controller of a physical security company in Lincoln, Nebraska. We have about 100 employees, and my question is around annual pay raises.

We currently offer about a 2% or a 2% cost-of-living adjustment each year for every employee and then up to an additional 3% for merit or performance base increase. The issue I think we're running into is we really haven't clearly identified or defined what a one, two or three percent merit increase would look like. So when an employee gets less than 3%, they take it as they aren't doing a good job or we don't value their contributions. So I just kind of wanted to get your input on how we should think about merit or performance increases on an annual basis.

We don't do any cost of living. We do marketplace adjustment. and so, you know, you don't get a cost of living raise just because cost of living went up. You get raises because the position that you are in now pays more than it used to pay. That's a marketplace adjustment. Does that make sense? Yeah, absolutely. So you're just looking at the salary data for that role. Exactly. Exactly. In this region, I can hire a dev one for X, or I can hire a,

a junior controller for why or whatever, and that is the marketplace value. It's usually a range, right? But, you know, you're at the bottom end of that range, and you're doing a great job, so we're going to move you up to the mid-range of that range. And here's the comp study. We show them what the position pays in the marketplace, what the, where we got the numbers. We don't just say we made this up last night right before we met with you this morning. And it's also not random because a 2% raise and a 9% inflation.

economy is not, that's insulting. And so, and we had a couple of years there, a couple of years back from now that we did have some 9% inflation years, right? Other years, we'd have had no inflation. We've had a contraction, meaning a recession. So we haven't tried to monitor all that. That's outside variables, but that usually ends up being reflected indirectly in what it costs to hire someone for a position.

So that's the first thing we look at. And then we do not do a percentage merit to where we don't, they don't have the numbers that you're dealing with. That way I don't have any comparison issues. It's just this is what this position's worth and you're exceeding what this position's worth by doing these things. And so we're going to, you know, instead of a, it looks like, it looks like you're $5,000 to get $5,000 raised to get you to mid-range, but you're killing it. So we're actually going to bump you seven. and that's how it sounds it's a little more vague than saying well you were a 3% merit and you were a 2% merit and you know so the 2%'s pissed off you know which is what you're dealing with right

yeah that's exactly at and at different salary ranges of course that makes an impact as well a 2% for a lower paid employee compared to a 2% for a highly comped employee or you know received differently because of the dollar amount so yeah it sounds like you might have a large number in one bucket do you of type of employee or what do you mean yes yes uh we have probably five or six different buckets but you know the largest bucket is probably in the 25 to 30 head count range and then we have of course smaller yeah departments in buckets yeah and that 25 to 30 is probably where all your problems happening yeah fair amount and then and then in the admin type roles where it's you know a little more difficult there's not as much pay for performance so it really is just that salary number

yeah yeah we ran into that too because i'm i'm so straight commission oriented i mean i'm such an entrepreneur I'd put the freaking receptionist on straight commission, and I could figure out a way to structure it. But I had never done that. And so then I run into problems of how do I reward a person in an administrative role that is causing the revenue producers to be able to do their job because they're supporting like they're supposed to be, but they don't get the, you know, they don't get the pyrotechnics around their performance.

There's no firecrackers going off, right? So it's very difficult. It's more difficult for me emotionally to figure out how to build those comp structures in those situations. So what we do is we used to not even do annual reviews because it sounded corporate to me, and I hate corporate crap. But we start doing them because we accidentally forgot to give people raises because we weren't checking the calendar. And you look up and it's been two years and they're like they quit. And they went, you didn't give me a raise in two years.

You're kidding. I didn't even know that. Why don't you bring that up for you quit? And so we were stupid. So we started doing annuals because of that. But of course, we're also doing regular accountability rhythms with folks on how their job performance is all through the year. So there's not just one time a year we course correct.

So if there were merit issues going on with us, it would happen in some of those weekly or biweekly standard accountability rhythm meetings rather than in the annual review. And then when the annual review gets there, they're not shocked if they're not shocked. if they're not performing. And if they're not performing, you know, we're not really interested in keeping them. So it's not really a money thing anymore. It's now just an issue of performance.

So anyway, that's the way we do it. We don't have any percentages involved. We're looking at wage ranges, competitive salary, and or comp in general for that position. The company, our size in this region, what does this type of position pay? Here's the range. This person is they're beginning in their field, and so they're going to be at the beginning, the low end of that range, or they're seasoned and they're really super performing.

They may be at the top end of that range. They may even be over the top end of that range, and I'm fine if they're killing it, if they're being a stud and knocking it out. That's really fine doing that at that point. That's a really cool question. Sounds like you guys got a great business going on, Blake. Thank you for calling in. We appreciate you being here. These days, business as usual is anything but.

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or click the link in the show notes if you're listening to YouTube or podcast. John is with us in Philadelphia. Hey, John, what's up? I worked for a construction company for over 30 years. I'm currently in the position of president. Our top line revenue is between 13 to 15 million annually, 2016 members, and the owners are ready to retire, and they're giving me an opportunity to purchase the controlling portion of the business

with the non-controlling portion being given to their adult child. So my question is, should I purchase this business, given there will be debt involved and a silent partner? I wouldn't want to be the silent partner because you have control. You're going to own more than 51%, right? Correct, correct. Okay. So what's the net profit on the business?

generally we're around this past year we're right around gross margins are 15% net profit once it was you know our GNA overheads out were right around a million dollars okay and what percentage are they wanting to sell you in for how much the percentage would be 55% and total price would probably be a little over three million so my my portion of that would be roughly call it a million $550,000. And that would be on a 10-year loan and no collateral other than the stock of the company. So I'm not putting my personal assets as collateral against the debt. Okay.

So they want you to pay them a million dollars over 10 years for your portion of a million dollar profit and you get 55%. Why do they want the kids staying in? There's, that's kind of a long story. The long short of it is that spouse is part of the team, and so it's just a way to keep a portion of the family involved over time. So the kid's wife works there, but you can't find her? No.

Never. We haven't gotten that far into the weeds yet. I wouldn't do that deal. Never. Yeah, I wouldn't do that deal because then you really don't have control. Right. Because no matter what you do, she's going to pee on it. That's going to be bad.

If she decides to go sideways and be toxic and you can't get rid of her, she's going to screw up the whole thing. So she has to be fireable. So here's the thing. The weeds are the problem. If the only reason they want this kid to keep this is, his wife has a job, she's pretty lame if she can't just go get a job. Right, right.

That's weird. Yeah, the way I'm going to protect her is she's not really protected. I'm, yeah, I'm confused. So here's the problem, all right? The only ship won't sales a partnership. This guy doesn't, he has what's called a minority position in a small business, which means he has nothing. because you could run this thing in the dirt

and you don't need his opinion and his 45% becomes worth nothing because you screw it up and he can't say a word about it because he doesn't really have a vote. He's a minority shareholder. And so I'd never get into minority shareholder positions ever. So the only person I would consider is yours

but I don't want him in there. And I sure don't want her in there if I can't fire her if she's misbehaving. So, I want to explore further, if I'm you, the real motivation for him being left in the deal. It's like their dream of their son taking this over, died, but his wife still works there. So we're going to try to keep some portion of this dream alive by letting him still have some of it, even though he doesn't give enough about it to work there.

Yeah. There's something, it feels like that there's some unfinished business emotionally in this family that's showing up in this deal. And I just don't want that to come back and bite me if I'm you. I'm just, I'm kind of thinking out loud here with me, John. If I'm saying something's out of school, you just tell me. No, you're correct. Okay.

If I could get her removed completely and just buy the entire company outright, that's a much better structure to do the deal. Absolutely. Okay. And still put it on 10 years. Especially if it's just the collateral of the stock of the company. It's the only way you do it. That's the only way you do it.

And I'll even put one nuance on the end of that. But, yeah, I just don't, I, because otherwise, here's what you've got to deal with in the negotiation otherwise. You're going to have to deal with whether or not she can be exited. If she can't be exited, you've got to walk from the deal. that's not going to be you because you really don't have control it's a it's a misnomer you own the business but you can't do it you have controlling interest in the business except for one thing a woman that can tear up the or a man that can tear up the whole place because they can't be fired it's like a dead gum

bureaucrat or something so um right uh then then the second thing is you've got to get into what happens in all of the events that um We call them the Ds in a partnership agreement. There's all these things to start with D, the letter D, that can happen. And when they happen, what happens to his shares? Divorce, disability, disinterest, default, drug use. He's in jail for cocaine. How do I keep him as a partner?

How do I exit him as a partner? He dies. He's no, you know, I don't want to be partners with his ex-wife or his wife. for his kids. You know, what are we doing with all this? And so you've got to deal with all these negative possible outcomes and what happens to his shares in that event. For that matter, what happens to your shares in that event?

Because he's got a minority position, he's going to want to know what happens to your shares if he's got a brain. And so, yeah, this deal is really messy. And if you don't have a lot of cleanliness, a lot of cleansing to this deal before you do it, you're going to have problems. And obviously we started with the big one,

which is being able to exit her. But you've got to be able to deal with what's going to happen here. And I would just ask the question, what is the real barrier to me just taking the whole thing? Because I actually want it. Right. And I will keep her as long as she's performing. As long as she's a good team member.

I'm not trying to exit her. But I'm not going to be held hostage by her either. So, you know, I think you'd be. you better off paying twice as much and owning the whole thing. I know you would be. And that probably rings really true because you see all the function and dysfunction in this family in front of you, don't you? Yes, yes, I do.

Yeah. Yes, I do. And that's what I'm trying to protect you from. It's got to happen. And, yeah, there's no reason for them to hang around if they're not going to hang around. They need to exit. It needs to be clean. Makes sense.

I'm sorry your son didn't want to run it, but I don't want to be as well. partner. It's not because I don't like him. It's because I don't want any partners. I want to take this thing and I want to honor all the hard work we've all done together by making it very successful for the next few decades. And you guys can look over here with pride and say, I'm so glad I sold that to John because he's done such a great job with our old family

business. And I'm real proud of him and what he's done. I want you guys to be able to say that about me. And I want you to look over here and see that. There's nothing about this other deal that it talks about the future. the deal only talks about the past and that's your son and us guaranteeing your daughter-in-law a position. And I'll guarantee her a position as long as she's a quality team member. Right, right.

I'm not trying to run her off. But if she misbehaves or she quits doing her work or quits coming to work or whatever, then, you know, I won't be able to keep her like everybody else we do here. So, yeah, that's how I would handle it, John. Now, back to the other part, that instead of 10 years, let's, uh, say, okay, if it's, let's change the numbers, we have a million dollar bottom line total, correct, regardless of the percentages? Correct.

Okay. And you make what now? What's your current income? Like 85. And you make that 85 and then the million dollars occurs, correct? Correct. And I assume some of the owners also have a salary before the million dollars occurs, correct? Correct.

That is correct. All right. So that's going to mean we've got a little bit more than a million to work with because their salaries going to be gone. Correct. All right. And we're buying this for, if it's not three, if it's three million, six million. We're not buying it for six million.

That's not worth that. Okay. A business should be worth somewhere around four maximum five X of the net profits. Okay. That's a 20 or a 25 percent rate of return for an investor. If I were buying this business and I bought it for $2 million and I made a million dollars, I make a 50% rate of return. You follow me?

If I buy it for $3 million, I make a 33% rate of return. Now, was the $3 million for your $55 or the total price? That was the total price. Oh, good. Okay, $3 million. It is worth $3 million. Right. That's a $30.

So it might be worth a little bit more, actually. So anyway, somewhere around in there. And so, okay, I'm going to pay you $3 million over 10 years. that's $300,000 a year. That's 30% of profits. So what I'm going to agree to do is to pay you guys 45% of profits each year, each month, for that matter. We're going to close the books each month, and I'm going to pay you 45% of profits until we get to $3 million. That should take us a little less than 10 years.

But if profits are down, I'm not in default. If you have a fixed payment, if you have a fixed payment and profits go down and you're in the dad-gum construction business, hello? Right. Yeah. And so if you have a downturn and you have a year where you make a half a million and the dad-gum payment's 600 grand, that's not going to work. Right. So you go out of business and because you had a fixed payment. So I want your payment to be a percentage of profits and you can have the books be audited once a year.

That's fine. And what I'm going to do, if I'm you, is I'm going to pay them more than that and get to the $3 million super fast. I'm going to try to live on my $85 or maybe $100 and put almost the whole million and try to be done in three or four years. Right, right, right. So I'm going to exceed. But it's a percentage of profits, some around 40, 50 percent of profits, until we reach $3 million or until I pay you $3 million. And so then you're going to accelerate it and get out of there in about three years, four years. If you put a million a year to it and you kept your salary and you even raised your salary to include the part that they didn't collect anymore because they're not there anymore collecting salaries, then you'd be done in three years and never have changed your income.

That'd be pretty sweet. Right. As a matter of fact, that might be, let's think about this. I'm making this up as I go. Instead of 40%, if we said 80% of profits, which would pay them out in three and a half years, that might be. might be the leverage tool that prized them loose from the kiddo. Oh, okay, yeah. I'm willing to do this to get rid of the kiddo.

That's not what we're going to call him, but I mean. Instead of 10 years, why don't we make it three and a half because it's 80% of profits you get until we reach 3 million? And I'll just take the whole thing, and I'll do that and work for my current salary so I don't have to have any partners. You get your money super fast. Right. Right.

That's a sweetener. Yeah, I like that a lot. Yeah. Cool. This was fun. I hope it helps. Let us know if you get it, okay? I will.

Thank you very much, Steve. Hey, God bless you, man. Appreciate you calling in. Cool discussion. Cool discussion. Unless you're the kiddo. Yeah, then you're not going to like Dave, but oh, well, that's how this works.

because he ain't paying nothing for that 45% I'm just telling you. Yeah, oh well, maybe he can just get some of daddy's money since we're going to give Daddy some money. That'll work too. Did you know that one of the most common reasons employees leave a company is because of payroll errors? Late paychecks and incorrect deductions

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And Paiority tailored solutions to fit your business, not the other way around. Whether it's setting up direct deposits, managing tax filings, or handling compliance, Payority has you covered. So go to payority.com slash entree today to learn more and download their free resource 10 ideas for employee retention, how to keep your top talent engaged and loyal. That's free at payority.com slash entree. Diane in Virginia says Dave is an entrepreneur. I know risk is part of the game, but it's not always clear when

I'm being bold versus reckless. How do you personally evaluate whether a risk is wise or foolish, especially when it involves money, people, or brand reputation? Was there a risk you took early in building Ramsey solutions that felt crazy at the time, but ended up being pivotal? No, I don't have one of those stories because I started Ramsey after going broke and losing everything because I did not measure risk well because I was an idiot. And I went deeply in debt in the real estate business and lost everything.

And then when I started Ramsey, I became super risk averse because I, even though I'm entrepreneurial and even though I believe in trying new stuff all the time and experimenting, I'm not doing things that are going to ever put me back in that position again. So the main thing, Diane, that I use is I tell our entree leaders everywhere, and I tell our team this too, we don't do any James, Bond deals. Now, let me explain what that means. In every James Bond movie, there is a scene towards the end of the movie that the bad guy

that's trying to destroy the world is at the poker table or the baccarat table or whatever with James Bond. And at some point, James has to slide all of his chips to the middle of the table on one hand. if he wins the hand the world is alive if he loses the hand the world will be destroyed we don't do James Bond deals

we don't slide all of our chips to the middle of the table in other words we don't do deals that if they don't work we're broke or broken or brand damaged to the point that we can't survive we do things that don't work and it's embarrassing when they don't work and they lose money when they're

don't work. I've done a lot of things that have embarrassed me because I tried them and I failed. I looked like a fool. Ramsey looked like we were inept because we were. It didn't work. We guessed wrong. We thought wrong. We considered wrong. Whatever. And not only did we stick our nose out there in the marketplace. The marketplace laughed and shoved our nose back in the door. But we also lost the money associated with that. In every case, we did not use borrowed money because we don't borrow money, because borrowed money magnifies the size of the mistake, because you're going to borrow a lot of money to do something really stupid instead of just trying something stupid on a small scale. And you don't know it's stupid when you're doing it or you wouldn't do it. So anyway, we don't do James Bond deals.

We don't do deals where we slide all of the chips to the middle of the table, and our reputation is ruined, or our financial situation is ruined, and we're bankrupt and closed. if the deal goes bad, it takes us down. And so we always have to look at every deal and go, if this deal goes bad, can we swallow it? Or are we going to choke to death and die on this thing? And early on, we had a large retailer many years ago come to us, and they had a $10 million deal for us,

and we thought that if we could do business with this large retailer that was world-renowned, that we would have had the best deal ever in the world, and it would be a big deal for us. to be a great brand lift, to be able to say we had our stuff in their stores. And the terms of the deal were that we had to do custom products with their name on it and our name on it, to put in their stores.

And if it didn't work, if the stuff didn't sell, that they could send it all back for a full refund. In the product or book world, we call that full returns. And so we're going to ship $10 million. dollars worth of stuff over there. If they don't sell it in their stores, they're going to ship it all back, and it's all got their name on it so it has no secondary value. It all has to go in the dumpster.

We're going to lose, worst-case scenario, $10 million. And in those days, that would have put us out of business. We couldn't take that level of risk. That was a James Bond deal. We were sliding all of our chips to the middle of the table in order to get this deal. It probably would have worked. but if it didn't work, we couldn't have survived it. So that's not bold, that's reckless.

And so we did not do that deal. That's why I'm not naming the retailer. If it had worked, I'd be bragging. Because that was one of the benefits of having done this, is that we'd done a deal with this person, these people, and they're a big deal, and weren't we cool, and aren't they cool, and isn't everybody cool? And look at all this and how great we are and how great they are.

And we'll never know. They'll never know. and they said, well, we don't understand. No one ever does this. No one ever turns us down. And I said, well, see, now you can't say that anymore. Now you can say almost no one. Because now someone did turn you down.

And that would be those weird hillbillies over in Nashville. We turned you down. And so that's the thing. Number one. So James Bond deal, is it going to break your reputation or break your company if it goes sideways? because all the deals don't work like they're supposed to work. As a matter of fact, 100% of them don't work like they're supposed to work. Some of them are better than you thought.

Some of them are worse than you thought. None of them work exactly the way you think it's going to work. The best laid plans of mice and men, baby. Go back to your English lit class. So the second thing that we look for is we use the Jim Collins method of analysis. Jim talks about this in his latest book. and he says that don't shoot cannonballs, shoot musket balls first. And this comes from the story that Jim tells in the book of in the old days in the wooden ship

and cannonball warfare stage, like in the 1800s, a good captain of a warship that is like, think pirate ship with cannons or something like that, right, that type of naval vessel in the old days, would not fire cannonballs until they had their muskets, their musket rifles on deck, and they would fire the muskets to establish range. Because sometimes on the ocean, things appear closer than they are or appear further away than they are. And so if you fire a musket ball and you miss, no big deal.

You haven't burned a lot of powder and you haven't burned a lot of lead. But there's only so many much powder and so much lead, you can have on a ship. You only got so many cannonballs. And you can't afford to waste them by not hitting things because you weren't in range. So you check the market by firing musket balls first,

and if you hear those musket balls clicking off the hole on the other side, now we've established range and now we can fire cannon balls. That's called a test market, in other words. We're going to float the idea out there. We're going to trial balloon the idea out there some way somehow without having to do a cannonball launch.

If you have to do cannonball launches because you've got no way to check the marketplace on it, you're probably going to lose your butt. And I can tell you one, two, three, four, five, six, seven times off the top of my head without even thinking about it long that I've lost over a million dollars by doing cannonball stuff because I thought it was going to work and I was so enthusiastic and I was reckless. Now, we survived the reputation hit and we survived the financial hit, but I could have avoided even the pain that I had if I'd have been a little less reckless

and shot some musket balls and check, see if the marketplace actually cared. And so you want to try the thing out at a smaller scale somehow. Because especially your first product in an area, if you've never launched a product in a certain marketplace area, not regional area, but I'm talking about a certain area of business,

a hundred percent of the time your prototype is not going to be what you end up with a hundred percent of the time your version six of the product and versions one through five are in the dumpster version six is going to be the one that catches on because the market's going to talk to you and say if you'd make that little switch their work if you'd make it that color over there if you'd carve that edge off we'd all buy it and then finally you get the sweet spot on the market but by then you've wasted a ton of money and if you go buy a hundred thousand of your version two because you because you're just so excited that's a that's a cannon ball instead of a musket ball

so just put enough of them out there that you get them move and get them moving run out of them and then iterate iterate iterate iterate iterate on the product smooth the product out file it down get it where it's working let it get the sweet spot and then get your volume up then fire your cannon balls and so because a 100% of the time. See, it's a problem with us, with us, we launch books. Okay? And you can't, the only way we can,

musketball a book is we take the content from a book and do it as a talk at one of our entree leadership events. And so this latest book that I did, this building a business you love, the five stages of business, I did that talk six times for different entree situations. And we've discussed it and kicked it around with you guys here on the podcast,

a long time before it went into a book. So it was not an accident that a book came out number one. It came out number one because we'd tested it with musket balls before we fired a cannonball. If I had just sat down and wrote that thing and the public had never seen it, and by the way, the version you all saw was version six.

Every time I did the talk, we read the feedback notes on the talk, and each of us would gather around and go, that point didn't hit, that doesn't work. We've got to change the way we'd communicate that. It didn't work, and we change it to where all the, lingo that's in the book is all proven lingo. So you guys got a premium product when you buy that

book because it's a tested, polished book. It's not a prototype. And so that's how we don't screw up. We don't launch a lot of books at Ramsey, but almost every one of them are number one bestsellers when we launch them. Huh, wonder why? You think that's a freaking accident? No, it's using this process. Okay, it's a process here. We test the material out. We, We don't test it out in many books. We did that with John Deloney's book. We did do a mini book. We launched redefining anxiety as a chapter book, a one chapter book, 37 pages long.

We sold 150,000 of them, to our great surprise, honestly. We were all a little shocked that all of you had that much anxiety. But you did. And so we redefined anxiety like 37 pages a bunch. But we knew, hey, marketplace is singing. They love, they have a needy. for this. This is a felt need. This is a visceral need. So guess what? You know, building a non-anxious life, the six keys to uncode and build a life where you fight anxiety, a full-on hardbacked book?

Well, duh. Of course it launched number one, because we had a musket ball out there that it was his little brother that hit a bunch of ships, okay? So that's what we're doing. So we're doing musket balls versus cannon balls. We're not doing James Bond. A lot of metaphors being mixed up here in this talk. But, but, but, that's the answer to your question, Diane. Yes, you keep trying things, but you get wiser, and wisdom helps you to be bold without being reckless. And those are the two main things that we do around Ramsey to keep us from getting there. So I love that question. Thanks for letting me get up on my soapbox. I like it. Good stuff. If you're working 60 to 70 hours a week just to keep your

business running, you're headed for burnout. The only way to grow without running on empty is to stop working your business and start working on your business. And that takes advice and accountability from people who actually make payroll. That's why you need to join an advisory group. You'll get a coach and a circle of business owners like you who will help you stay focused and grow without sacrificing your nights and weekends. Find out if advisory groups are right for you at entreeleadership.com slash advisory groups. Or click the link in the show notes if you're listening on YouTube or podcast. Thanks for hanging out with us.

Hey, if you want to help us out, we could use your help. Click the subscribe button, the follow button. Share the show. If there's a share button on your platform, click share or send somebody the link. I'm going to tune in and hang out with us. We'll give you some information that's actually freaking usable. There's not a lot of theory around here. This is actually stuff I do and have done for 30 years and our team does and I've learned

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And a bunch of you are telling people about the show in different ways. We thank you for that because our numbers are up ridiculously, considering you guys are our only marketing plan. So thank you for all your help. We appreciate you a bunch. Mike is in Pensacola. Mike, what's up? Hey, Dave.

How you doing today? Better than I deserve. How can I help? Hi, well, I was calling because I've had a lot of life changes. I'm 31, and my dad has actually passed away about two months ago. Oh, my gosh, I'm sorry. What happened? Yeah.

Pretty much just kidney shut down and then just everything else followed. How old was he? He was two weeks away from being 60. Wow, young. Okay. Yes, sir. Sorry. So you got the business dumped in your lab.

Right. Well, kind of it's between me and my sister right now. My stepmom runs the financial side of things. And I was just wondering, so the past four years or so, my dad really has not been in the day-to-day's operations. He's kind of, he grew the business the past 30 years or 25 years. I think it was. And so he's kind of stepped away and just living their life.

And it's kind of been dumped in my lap. But I'm wanting to step in and try to make sure the company. So you've been running it for the last three years or so? I have not. I've just gotten into it the last two months. Who's been running it? He was semi-retired. We have one guy that ran all the operations.

He took over at the flooring company. So he did all the. carpet, tile, wood stuff. And my stepmother did the remote, from remote, she did the books, the financials, the payroll, all that kind of stuff. And then the team is 10 people on our team. Was there anyone that was the boss, the president, the CEO? Just my dad.

But he wasn't working. Well, he wasn't there day to day, but everybody was always able to call an email. and pretty much it was everybody knew if it got to him, you know, it was going to be a big deal. But he put people in place before him. It definitely wasn't set up how it should have been. There was no named girls. There was no plan for afterwards. And that's where it kind of gets confusing for me wanting to come in and help,

but not really having a set role to step into. Man, what a horrible thing. I'm so sorry. Thank you. It's heartbreaking. Okay, so he passed away who is now the owner of the business. Right now it's actually a probate, so we did find the will and trust, and we're in the process of appointing a...

What does the will say? Who's going to get the business? The will and trust say that me and my sister will get it 50-50. And does your sister already work there before all this happened? No, sir. of us have had any time in the business. What does your stepmother get? Technically, she gets nothing, but according to the pre-op.

Now, we have tried to work the deals out to make her the CEO, allowing her to keep the household income and training me to run things one day when she's ready to step away. We have had a great relationship, but I also know these kind of events can bring out the best and worse than people. That's a good point. And is she okay otherwise as far as housing and income and all that kind of stuff? Yes and no. She could be if they listen to you.

The income salary is insane, but the amount of properties they own in O is just the same. There was not much of a savings for them. And so it was really just, he was the sole owner, so they were using the company kind of as a checking account. And I think I forgot to mention the company last year, the revenue was around $15 million. The year before that was $14, and then pretty much averaged about nine before. So what does stepmother say that net profit was? The net profit, that's the after. Taxable income.

Everything. Yeah, taxable income. income. Taxable income was 2.3. Dad gone. And she got nothing. No, I mean, she's still getting everything, so they're still going through the process for the 20, 24 taxes. No, I mean, she's not getting any, she doesn't get any piece of this company that made $2 million. How long were they married? Not with the way. He left 18 years.

Gee. Yes. That's why it's... Me and my wife, we've been married eight years. We're big fathers. We already have a will for our kids, mainly, so our kids don't have to go through any type of state process. But that's what kind of hurts us. Where is this going to end up when, let's say everything went perfectly,

and we had a dream. What do you and your sister want to do with the business that you now own? I would like to take my role and step into the business and grow it. You would become the CEO. I would like to one day, yes, sir. It's not one day. You freaking own it. Well, right. You've got to have the team come around you and teach you the nuances of it,

but I'm the new owner, and I don't know what the flip I'm doing, so you guys got to help me, and you're it, if that's what you're going to do. What's your sister want to do? Right now, she's just wanting to hold her shares until about two or three years and then possibly sell it. To you? We tell it to me, yes, sir. We've always been told the company's always for sale, but it's never on sale.

And after the death, it would be considered on sale. So we know, you know, kind of hold on to it. Do you want to run it for 15 years? I would run it. I would want to run it for 15 or more, because to me it's a great vehicle for my family. Okay. So what I would do is begin to address. address first what you're going to do with your stepmother and then second but that's just a matter

of generosity okay right and that's you you may be stepping in and helping her with her finances showing her she needs to sell off these pieces of property and get her where she has a sustainable life without this company yes sir i don't want her i don't i don't need her hanging around as an act of charity that's not healthy for your organization. Right. Okay? Right. At being paid double what you pay somebody in a $15 million business to do books.

Right. If she's going to hang around at a salary, it's going to be a competitive salary for a controller or a miniature CFO of some kind for a $15 million business. And I don't think she needs to do that. But if she does, that's the most she gets paid. And then you guys go help her in her personal life, just as an act of love towards her, get her other stuff organized to where she has a sustainable life without living out of this business

because she's not going to get any money out of this business after this will is probated. Right. That's the way it should be. And no, she doesn't really need to train you. She needs to either handle the books and train you about the finances because she's the CFO, not because she's a stepmother.

and your team, your leadership team, your ops guy that handles the flooring and the tile and everything's going to teach you about that, and then you can figure this out. This is not rocket science. You can really get in there and figure it out, and probably within 30 days, you're going to have your arms around most of these numbers if you get neck deep in the weeds. And you've got to get down the weeds and understand the business, now it operates. And then it'll take about a year for you to get completely acclimated and start growing it. Right. And I've definitely seen that the past months being down there and learning and shadow. You can figure it out.

It's not that complicated. You're not nearly as inept as you might feel like you are initially. But, you know, and just be humble and ask questions. Lots of questions. Help me with this. Show me how to do this. I don't know how to do this. Show me how to do this.

And the team is not going to resent that. They're going to love you for that. Right. Just for being real. And we're going to do this together, guys. but y'all got to get me caught up to speed, so I'm not a doofus and a problem around here. I've got to be helpful because I'm owning it now.

I'm your new owner. And I got to, you know, you don't want a stupid owner, guys. You've got to have me helping you. So get in here and help me, and let's do it together and just build a teamwork atmosphere. And guys, y'all show me what I'm doing wrong. It's okay. You're not going to make me mad.

I don't know. And just humble, lots of questions, questions, questions, don't make a lot of statements. You're not smart enough to make a lot of statements in this situation yet. So that's your leadership model. And then you've got to, you really need to sideline her stepmom as quickly as possible for her own good and for the toxicity in the business.

Because they're all going to want to, they're all going to want to bow to her in respect to your dad's memory. Probably in an unhealthy way. That's what I'm saying. And so I want to love her in other ways other than propping her up in the middle. of this business. And I'm not giving her $2 million either. Okay? Your dad should have done that.

That was his job. So anyway, let's help stepmom get sideline, let help her get set up in a sustainable life. And that's just you coaching her as an act of love. And if you leave her in the CFO role at CFO rates for a $15 million business, which is a lot less than she's used to getting, it's for a period of time until she gets acclimated and gets stable and until you guys get acclimated and get your proper CFO in there, okay?

But she doesn't really need to be there three years from today unless this is a very unusual woman, and I don't smell that in this situation. Right, well, that's where it gets hard, because before she came to help my dad, she was in purchasing for some of the bigger builders in the nation. and so she brings a side of it whenever it comes time for us to do bids and pricing, she's able to help us out a lot with that side.

But like you said, I don't know if it's worth that. You can get somebody else to do that, I promise. But I don't care how long you leave her, but just be aware. The second part of the, then the next stage is talk to your sister now and say, right now we're grieving dad. It's fresh. It was just two months ago. right now we're trying to get our feet, our arms around this stuff.

I'm going to come in here. My goal with your permission, your 50% owner, and I want to talk to you if this is okay with you, is I want to come in and run this thing. And I also want us to begin to talk sometime within the first 12 months about what it takes to buy you out and how we can structure that because you don't want to be in here 15 years and I do. And we don't have to do that today.

but I want to set the table emotionally that when we all are crying a little less over dad, when we get a little bit past some of this two-month-old grief, that I do want to sit down and start talking about this, and we really need to, by the end of this year, come up with a game plan that you and I can agree to. Yes, sir. And it might take three years to do it, but we need to have our game plan. Right. Okay.

And it probably sounds like, okay, the business, is making $2 million a year. And so it's, you know, it's probably worth six or five or eight or whatever. And so I need to get you $4 million to buy you out. And I can do that over this many years. And I'm going to do it out of the profits. And I'm going to give you, you know, your profits plus other profits. Or I'm going to do a deal today and I'm going to buy you out today on a set dollar amount

and then pay you out over a few years. out of the profits. So I'm going to give you $4 million, and I'm going to give you, you know, 50% of the profits, 60% of the profits until we get to $4 million, or 80% of the profits until we get to $4 million. And that kind of thing. And then you can buy her out very, very quickly

within just a couple of years that way if you do that. And I'm making those numbers up, but they're probably not far off. Right. Yes, sir. Based on what you told me. Sorry, man. This is a hard thing to go through. Yes, sir. It's definitely

interesting. And since you're a car guy, one of the things we got to... He does have is a half a million dollar Rolls-Royce. So you're kidding. No, no, sir. He has a... It's a leased luckily, because we can just send it back, pay the fee, and stop making the payments on it. Oh, he didn't have it. He just leased it.

He fleeced it for a fully electric one. that, which I never understood. A fully electric, half-million-dollar Rolls-Royce. And your business is a $15 million business. Yeah, you can't make that one up. No. I'm like, we sell that. That's half my salary recovered for the company.

Easily, probably. Goodness gracious. So there's a lot of cleanup that needs to happen. So over in their personal life, while you're trying to coach stepmom up, you're going to find some more of that crap, aren't you? No, yes, sir. there's going to be a good bit, I feel. Going to be a big shovel.

Oh, my gosh. I'm sorry, man. How is your sister dealing with all this? I mean, is this, are you and her okay relationally in this? Yes, we are. I mean, we have our, you know how it is with grief. You have your flare-ups of certain different emotions, and we have our times, but we've always been able to sit down,

work everything out, and be on the same page for everything. Yeah, yeah. Well, I think it would be real important that you love her well through whatever transition you come up with, too, okay? Yes, sir. And when in doubt, be generous. Right. You won't regret that 10 years later. Yes.

And so, you know, don't argue over Nichols and Dimes and lose a relationship, in other words. Because you've got the opportunity to do this right because your dad left you guys in a mess because he didn't have a good plan. and but you've got the opportunity to play it all the way through and take your time and do it right and with wisdom and gentleness toward both your stepmother and your sister but but do not keep people on long term out of an obligation to the past right only as as they can contribute to the future without being toxic and that includes both of them in terms of how you structure this. But, you know, in the application of that strong statement,

you're still going to be gentle and kind and generous, okay? Yes, sir. Amen. Thank you very much. You're a good man. You're going to handle this well. I'm very, very proud of you. Man, what an incredible.

Wow. That was a tough one, y'all. That tells you that you've got to have your succession plan in place, and you've got to have your estate plan in place, and you've got to have your wills in place, and you've got to have all that stuff in place, ladies and gentlemen. That's how it works. Folks, remember better a wary warrior than a quivering critic.

This world needs more high-quality leaders, so take courage and lead. I'm Dave Ramsey, your host. Thanks for listening to the Entree Leadership Podcast.