EntreLeadership - The Secrets to Making Your Company More Profitable with Dr. Hannah Stolze

Episode Date: May 24, 2021

Profit is the fuel in the engine of your business. You know this—but what should you be doing with profit to make sure your business continues to move forward? In today’s episode, we have two insightful conversations about this important area of The 6 Drivers of Business. You’ll hear from Dr. Hannah Stolze on why profit shouldn’t be your only goal. Then Ramsey Solutions’ Chief Financial Officer, Mark Floyd, will explain how to invest profits back into your business. What are you waiting for? Tune in and learn how to convert profit into growth and expand your vision!   The EntreLeadership Podcast Dr. Hannah Stolze’s website Wisdom-Based Business by Dr. Hannah Stolze Ramsey Solutions' website The 6 Financial Reports That Can Save Your Company Schedule a call with Tim, our producer.   Learn more about the offers from our EntreLeadership Partners: BELAY | Gravy | Hite Digital   Want expert help with your business question? Call 844.944.1070 and leave a message, or send an email to [e-mail]. You could be featured on a future podcast episode! Learn more about your ad choices. Visit megaphone.fm/adchoices

Hey, if you're a business owner, you work your tail off. So guess what? When you start making a profit, you should celebrate that. But I've talked to a lot of business owners that they get to the point where they're making a profit and then a weird thing happens. They start to feel guilty. From the Ramsey Network, this is the Entree Leadership podcast, where we help business leaders grow themselves, their teams, and their profits. I'm your host, Daniel Tarty, and in today's episode, we've got a couple of great conversations about what do you do with your profit. Now, certainly your profit should fuel your purpose, but there can be a lot of emotions tied to profit and making money and actually winning in your business.

And, you know, you don't have profit. All you want is profit. But you start to have some profit. You start to make some money. Then all these new feelings come up. So we're going to talk about it in today's show. So we've got two great conversations coming at you. First of all, Hannah Stolls.

Hannah is currently an associate professor of supply chain management at Lipscomb University and executive director of the, the Wheaton College Center for Faith in Innovation. She's also the author of the new book, Wisdom-based Business. And then after that, you're going to hear from our very own Mark Floyd. You guys have heard Mark on this podcast. He's a fan favorite. He is our CFO. Certainly knows how to make sure that we are making a profit as a business, but then all the mechanics of how you actually allocate the profit, the surplus, to go to the right places in terms of reinvesting into the business. You know, how much should you reinvest versus take home? And then when you reinvest it, should it go to marketing, hiring people, et cetera.

You know, so he's going to break that down with us. And George Camel, Ramsey Network host, is going to jump in there and be your tour guide for that conversation with Mark, so you don't want to miss that. But up first, we've got our conversation with Hannah. And I talked about the fact that many business owners early on become so obsessed with making a profit. And let's be honest, they should be. Because if you're not profitable, you don't get to stay in business.

But you can get so tunnel visioned on just making a profit that by the time you actually or making a profit consistently, you can look up and feel a little sense of, okay, what's the priority now? You can almost feel a little bit of vertigo. So when you finally get to that glorious day that you're making a profit and you're making it consistently, then what do you do? I think the challenge is profit has been the goal. Profit maximization has been the goal for so long. And, you know, I think you can go into a business school. You can learn the algorithms.

You can learn how to squeeze every transaction for every penny. But then at the end of the day, once you have profit margin, once the transaction, you know, the sales done, if there's no purpose beyond that, it's literally just like a wheel. You know, that's like the hamster in the wheel, you know, that's constantly just like running around just like chasing transactions. And, you know, like maybe you have customers that come back again and again. But if there's no purpose beyond just that transaction, it starts to really create a myopic space in terms of what we do in business. And it's kind of boring. It's much more exciting if you can make money, generate value. Like having continuing customers says your company has value. People come back and buy from you again and again. And when you generate value, then you have opportunity to build out your product quality. You have the opportunity to invest in employees to create differentiation in unique ways. And I think that's where, you know, that purpose and profit piece, they sometimes get, you know, they don't get told in the same story. And it's really important. Yeah. And, you know, beyond just being boring, if the team isn't bought into something that's bigger than they are, they leave. Yeah. There's something about humans that they want to be

plugged into something that really matters. Yeah. And if it's all, if the only focus is money, you're always going to be able to find somebody who will pay you a little bit more. And so that's a challenge in terms of like, how do you get employees to stay engaged? And there's so much evidence now out there in management research saying that people, you know, we went from like the Toyota production system. You know, we kind of hit that point where we shifted from the assembly line that was like, you know, I, do you know that Ford quote where Ford says, you know, I, I just need a pair of hands and I get the whole person, you know, like. I haven't heard that.

He actually said that about us. Well. It's kind of sad. Yeah. They say he said that. So we say he said it. But from that, I mean, that school, I mean, that whole generation of, you know, industry. it really was about how efficient can we make it. I mean, a lot of the Lean startup, Six Sigma, all this kind of, not Lean startup, but Lean Management and Six Sigma really was all about optimizing the supply chain and had very little to do with culture and people.

Yeah, yeah, but it got the needle moving, which is great. So you look at Ford and like full assembly line production and it was all efficiency. And so then you move into Lean. And of course, you know, it's still about efficiency and like squeezing out waste, you know, you have all the was stuff. But it was the first time Lean started saying, well, we do a, actually want people to ask why. So now you're engaging their hands and their heads, right? So now they get to bring their mind to work. And so it's still kind of, you know, squeezing it, you know,

down to the pennies and stuff. And what we've seen in more recent years coming out of, you know, the Kellogg School of Business, Northwestern, and in both marketing and supply chain, is that people need to bring their hands to get the work done. They need to bring their minds so they can ask questions and continuous improvement is dependent on it. But if you tell people not to bring their spirituality and their purpose and they're really what's tied into that is their morality, then how are they going to be ethical and how they make decisions on the job? Yeah, it sounds like you're saying you need their hands, their head, and their heart. Absolutely.

So when you're looking at an organization that you've done all this research and you've seen these case studies that has a clear purpose, how does that show up in the way that they're communicating about that? What are the, you know, because you can have something on the wall or the founder or CEO can have that written and it's in a drawer somewhere. But what are the critical pieces of making sure that purpose is infused into the organization appropriately in a way that actually manifests as more productivity, more profit, et cetera? Yeah, this is a great question. It's really central to the research I've done for the last 10 years. So thank you for this question. Well, underhand the picture. Good. Yeah, I'll try to narrow it down to a, you know,

a less than 10-year answer. So it's so interesting when you think about how do you articulate, how do you actually execute purpose that goes beyond profit, right? What does that look like? And, you know, the older models, the focus, resources were really scarce. Money was scarce. Labor was plenty and land was plenty. And now we live in a world where, you know, thanks to Bitcoin, it seems like we're just creating new currencies. Everyone's going to have Bitcoin and live on Mars, if this keeps scaling out the way it's trending. Exactly, exactly. And we're going to have robots because labor's now scarce and land's now scarce. We need to go to Mars to get land and land. use robots for labor. Yeah, I'm not going, but they can.

My grandkids can. Yeah, I'm not going to go either. So in the meantime, I think what we can do is in order to kind of infuse purpose, you know, it's a lot of socialization. And a lot of times when we talk about like employee engagement and all of that, we think like within my company, like if you're the leader of the company, you know, how do I engage my employees? How do I get this culture, this purpose infused in my own organization? But in my book, I talk a little bit about this, you know,

profit is a starting line in business. You know, it's the standard. Profit is a starting line. It's a starting line. Meaning like permission to play. Right, right. You're not in business. If you aren't profitable in some capacity, wherever that profit comes from, you still have

to have more than you spend or you won't be in business long. And so that's kind of the starting point. But then once you start looking at branding and reputation, this is where purpose really comes into play. And I think reputation and branding, depending on like if you're more marketing oriented or supply chain, you know, you look at them differently. But so now, instead of just looking at the culture within your company and your employees, now you need to think about how does our purpose impact our customers? How does our purpose align with our suppliers and the other companies we're working with?

So this is the challenge as you grow as a company. Like you start out, maybe you're a one-person shop and you're just thinking about like, you know, how can I create this great product that's going to change the world and make some money? And then you have employees and you're like, how do I get my employees excited about this purpose, so they can make this great product that's going to, you know, make money. And then you're like, well, now it's changing my customers' lives. Now I actually have some, you know, agency to impact my suppliers, you know. And so it kind of has to grow across your entire supply chain. Talk about a company whose purpose may not be as obvious for why their purpose matters to their customers. Because, you know, with Dave Ramsey and what we do here at Entree

leadership, a lot of people go, well, obviously, you guys have this mission. You're changing lives. The very product that we're putting out is a mission purpose-driven thing that intersects in people's lives. It gives them hope. There's a very emotional side of this thing. But if you're, you know, if you're doing long care or if you're doing something that's more of a consumer service, it's like it's not as clearly missional in that way. What companies have you seen that have connected purpose to not just themselves and their team, but actually the customers in a way that shows up the way you're talking about? Yeah. This is one of the advantages of doing all applied research where I get to work with a lot of companies and explore how do you do this.

And it's been interesting. A lot of the companies we've worked with tend to be in the southeast of the U.S., you know, where there's, you know, some more overt, you know, faith and those sorts of things are a little bit more. Kind of the Bible Belt, but, you know, we've worked in mining companies. We've worked in H-FAC distribution companies. We've worked with, you know, companies that create candles and scents. And, you know, across all of those, organizations, they have purpose beyond obviously just delivering screens to mines. And really where you see their purpose come through, you know, they are delivering really quality products to the market and meeting a customer like a market need. But a lot of their purpose actually is around the

culture of the company, how they treat their employees, the things that they sew into their communities in terms of, you know, not just like philanthropy, but also building programs and developing skills and, you know, looking at where do we have value beyond just our central product that can be an opportunity to really serve and give back to people. Yeah. And so we've seen it, you know, I love, you know, I think about like the logistics industry and you're talking about your friend in the 3PL industry. I love how big you smile when you say logistics.

It is. I mean, I can't believe more people don't know all about it. It is the best. I'm happy that you're happy about it. Let's put it that way. You know, and this is the year that I get to launch a supply chain program in Nashville, Tennessee, life is good. But in the logistics industry, if you think about even the 3PL space, 30-party logistics providers,

and the service that they provide really has an awesome purpose. You think about small companies that can't get good rates, you know, if they're working with FedEx freight or UPS freight, you know, they're the smallest players. So FedEx and UPS are going to bring in their top, top companies, like 100 companies, that probably make up 90% of their revenue. So if you're the other 15,000 of their customers, you're at the bottom of the total. You have no negotiation power. You're just going to get like, you might as well be one of us just shipping a package. So in that case, a 3PL whose purpose is to help this more mid-tier group of companies, it's like they're really advocating in a way that a different,

you know, like FedEx or whoever can't. It's, there's a passion, there's a drive. It's like the founders see something in the market where these guys are the underdog and we're going to go to do something about it. Yeah, and those underdogs are making products that we want access to. So it does get, I mean, obviously, I could give you really exciting 3PL logistics examples, but where there is, you know, that obviously they need to be profitable in it, but they're also doing something that's helping other companies and really helping consumers. Say more about how purpose, you know, when you get to profit that's above operational, the bills are paid, the team's paid, we're able to do annual increases, the owners are starting to make, you know, a little bit beyond

what just their basic needs. It seems like your purpose will really, or your absence of a purpose, will really inform what you do with surplus profit. Absolutely. I love this. And there's this ancient example of, you know, what are some of the roles that excess profit can have? So there's this like really, this concept of gleaning in the agricultural world of the ancient Near East. And, you know, you have your field, you build your crops, and then at the end of the year, you harvest all the crops that you need for your household. And they would have margin around the edge of their field that was excess crops that they actually didn't need for their household. And so this would be, I like to think about it, like this is the agricultural version of profit margin today.

And so with this, yeah, it's their surplus. And they had this concept of gleaning so that the poor and the needy in the community could come in and work and glee. And gleaning. And glee, the leftover sheaves for themselves. And I love this picture because, you know, obviously, I mean, I guess they could have harvested that wheat for somebody else. I mean, or, you know, for themselves for next year. I'm not sure what else you do with leftover agricultural products. Well, I mean, if you're thinking, we just got to top off our silo. Right. Yeah. If that's topped off, we've got to build another silo. I mean, if you have kind of a horder mindset as the owner of that field, it's all about more silos getting full and you're not, it's not getting back into the community that other people

can take advantage of that. Exactly. So you don't, do you need safety stock or do you need help to people around you? Right? And so I love that, that idea, because it's been around for 3,000 years and it definitely shows up in the wisdom literature. So I think today when you look at your profit, you've paid your bills, you know, you have margin. You know, hallelujah. You get to stay in business. Which is a big feat. Not everybody makes it to that point. This is so true. I mean, we kind of like take it for granted and is business professors because we work with profitable firms. Right. Because they can pay us to come and do research with them. And so, you know, obviously they have excess profit they can share with us too. So I'm grateful for that. But, you know, we actually worked with one company and they had bigger growth than they had projected. And so they got to the end of the year and they said, wow, we have much, much more profit than we anticipated. And, you know, they had investors.

And they went to their investors and said, you know, we could just, you know, kind of pocket this. Or we could start this whole program for our employees and actually agreed together. to instead of like kind of pocketing that money or they were going to invest it in people. To be generous. To be generous and to really engage their employees. So not only does it all of a sudden make their employees feel more engaged, but then their productivity goes up. And so I think there's something about generosity that feeds generosity.

So when you're generous, it's almost like the person you're generous now has licensed to be generous with the next person. And that's a pretty cool thing to feed within companies. I want you to say a little bit more on this generosity thing. What I have observed here at Ramsey, and I've even seen it in my own life and our giving habits, getting these values of generosity in place early on matters a lot. Because there's kind of this fallacy that, okay, when I have a big surplus, then I'll figure out how to be generous. And certainly you can scale generosity more when you have more to be generous with.

But exercising these muscles early on, when you just have a big surplus, a little bit, even if it's just a small percentage of your profit, you can share with your team. And so here at Ramsey, day one, Dave and Sharon sat down and said, hey, we're going to take profit and whatever profits there apply a small percentage and we're going to share it. And it was pennies early on, but that principle of generosity was that seed was in the ground way back then. And now we're sharing millions. And I mean, we're doing profit sharing and comp plans that would blow people's minds. But we've got the success that goes with that. but we didn't become successful and then decide to be generous.

What have you found with companies who are really generous? Is this a theme? I mean, it's almost essential. So if you think about this, you start off, if your only goal starting off is to be profitable, once you scale, do you know how hard it is to change once you're already scaled? To have that line item. I mean, if we learned anything from the Suez Canal, right, small ships are easier to maneuver than big ones. And so really, if you don't start off with a business model that plans for general.

that says we're going to build in, you know, skills training, we're going to plan in a financial plan, we're going to have a product plan, that we're going to look strategically at our suppliers and the customers we target so that we have profit and space to be generous. Once you're huge, it's really hard to shift the boat at that point. You can retrofit it. Yeah, it's, I mean, you can, but you end up undoing bad things to try to do something good. And it's almost like, all right, well, I'm glad we can start from today. But shoot, I wish we could take those, that last decade back too. And so as you grow, I think that there's so much more, even industry buy-in and excitement from investors, if you have this strategy as you grow, and it's not something that

you're pivoting to once you have resources for it. A lot of business owners listening to this, I imagine, are going, okay, this is great. We've kind of got a purpose and we're trying to figure out profitability. And, you know, a lot of people we work with and that listen to this podcast are successful. I would say on both those fronts in large ways. We talk about, it a lot. What would you say to that person who's going, I want to double down on making sure that our team knows our purpose and really being intentional with what we do with our profit to connect it to that purpose. And I think oftentimes, I'm not going to call it a cop out because this isn't necessarily bad, but oftentimes it's like the easiest thing to do is say, let's just give this to a

charity or let's just do some kind of a giving thing. But there's a way you can actually bake it back into your business strategy. You know, out of the surplus and the overflow, yes, you're being generous, yes, you're sharing, but you're also thinking of all those things you just listed, think about your annual planning, think about your three to five year roadmap. Like how is extra profit actually going to fuel

the strategy going forward and the advancement of the purpose and the mission of this organization? Where do you start? Is it in the budgeting process? Is it in the kind of the strategic planning? is it putting a core value on the wall? What are the handful of practical things you tell that business owner, hey, here's, based on the research,

here's the things you really need to be thinking about right now. Yeah, all of it is going to rise and fall based on the leader. So if you don't buy into it, you can't do it surface value. Like, you really do have to buy into it as a business leader. And then I do think it flows, it starts with the value, you know, and the business leader has to demonstrate value, you know, for this purpose that gets communicated, that those values become kind of of the norms and culture of the company that then get articulated into strategy. So values drive mission, mission drive strategy. This is a soldier in me talking, right? So values are going to

drive your mission. And then you think about the mission driving your strategy. And then you have your corporate strategy, right? That is the goal of your company. Why do you exist as a business leader? But then within your company, you have different business units. So you have marketing that faces the customers. You have your accounting team that's, you know, looking at how do we balance it all? You have your supply chain, you know, your chief supply chain officer in the room. Production, service, sales. And they all, they all need to have strategies that are then aligned with those values. They're like puzzle pieces that all come together around this bigger strategy. Yeah. And so if it's going to happen, first you have to buy in and make it a value that's articulated. If there's

no language, it won't happen. Yeah, what does that sound like? What's an example of, you know, because we say value and it almost feels like this fleeting, yeah, value, that sounds like a good virtue, but when we say it's articulated in a way that's more concrete, what is, what's an example of that? Yeah, there's a lot of different examples of how companies do it. You know, there's the put it on a plaque and the, you know, the lobby, you know, have it on everybody's signature black. And, you know, I came, sciops was my starting place in the army and I've taught marketing for lots of years of my career. And, you know, you want to have terminology, language in front of people frequently, often, every day, you know, you want to start the day saying, welcome to our values. You want to sign off on

your email saying, aren't you glad we have these values and have every leadership meeting be like, you know, I'm glad you're part of these values. And, you know, in some form of inception, you want it to be in front of people all the time. And then it becomes accepted. Like when I come to this place of work, these values are going to be central. And so you can be really purposeful in how you, you know, create those values within the culture. We've been tremendous energy, time, money, resources. Here at Ramsey on communicating the values. You know, we'll take an entire staff meeting. A thousand team members, we'll sit in staff meeting.

And we might take an hour just unpacking one of our core values. And we're telling stories about how that became a core value, what it looks like in action. We'll celebrate when a team is exemplifying that core value. And so we kick off the week with staff meeting. And then you're talking about communicated everywhere. It's on the walls and our stairwells. When you walk out, there's a sign, you know, when you walk out to your car at the end of the day. And it says somebody's life was changed because you came to work.

day. So again, boom, it's in your face. It's a reminder of, hey, you had a crappy day. It was hard, but it was worth it because don't forget, this is why we're here. It's for the people that are outside these walls. And so I think it's one of those things. It's like you're really saying it's not just something you put on the wall. It's all over the place. Don't just pick one medium of communication. It's constant. It's ongoing. It's omnipresent. Yeah. And it's not like one of those one off things where you have one annual meeting where you're like, these are our values. And you walk away from it. And I like what you said, you know, thinking about telling stories. Because the next step, once you buy into this as a leader, is that all of your leadership need to buy into it.

And now they need to be able to articulate it in their own voice, with their own stories, in their own functional silos or wherever they work in your company. And then that can trickle down to where it actually changes day-to-day, like work and action and the decision-making, right? Which probably you have lots of decisions happening in any company every day. And so everybody in your organization needs to be able to tell their own story of what those values look like for them, obviously that aligns with the story that you're telling as a leader. The stories are really powerful. They are. It's hard to memorize wrote statements, but when there's a story that goes with it, I mean, everyone can repeat a story, you know, because there's just this thing in us where narrative

kind of captivates us, it pulls us in. There's typically good opportunities for humor. You can make it engaging and fun. And I think that's a key thing. And communicating the values, it's not just something on the wall that's kind of the one or two words, but it's the stories that are, this is what these words look like in action. Absolutely. Because you get people's emotional and mental engagement. So we want their hearts and their minds, right? We want all of them engaged. So the next step, though, once you get the language across your organization is you have to know what you're going to measure. How do you know that you achieved your values? What does success look like? What does success look like? So then that kind of goes into the strategy phase of saying, okay,

what does that look like across all of our different divisions? And, you know, if they bring a number to me, am I only, if you only reward them based on profit and revenue or cost savings, that will outweigh value and purpose beyond it. Actually, I would say that's your real value. Yeah. Right? So you can have a stated value, but whatever, whatever is your actual value is going to be what you put energy and time and money. And it's the things you end up prioritizing are kind of your true values. Absolutely. So I definitely think if you really want it to go from the C-suite to the front line truck driver, cashier, janitor, you need to think about how do we measure what we've achieved and serving people and helping people get debt-free or whatever your goals are that you have numbers and metrics and you're tracking it because even though we're not minimizing it to a number. But seeing that kind of like needle moves, seeing the numbers go up, it excites people because there are. emotionally connected to the story. And now they want to see what the impact of it is. And numbers help us measure things, right? They help us see impact. Well, I think of it like a scoreboard.

Absolutely. To say that football is all about the clock and the number of points and the first down on the scoreboard. It's like, that's not football. The game is the energy. It's the crowd. It's the smell of popcorn and beer in the air. It's the Super Bowl. It's the playoff. You know, it's like there's a feeling that is football. There's an American connection that we have to. it. But if we don't have a scoreboard, well, we don't have, we don't have football. Like, there's, there's not a way to know, did we get a first down? And is the, is the ball still ours, or do we have to give it to the other team? And it's, it sounds like you're saying, these are, these are reinforcers of this broader, more emotional thing that we're trying to

capture by having a way of keeping score. Absolutely. Because we don't just celebrate the popcorn and the hot dogs. Football wouldn't be that much fun if that was like why everybody was cheering in stands. We cheer touchdowns and points going on the scoreboard, right? That's where you start jumping up and down and singing Rocky Top. Exactly. If you're cheering for the right team. I see what you did. Yeah.

I'm not going to argue with that, but we might get some fan mail on that one, so I'll forward it directly to you, and you can reply. I don't think they're a threat right now. Sorry. Oh, I know. Okay, so we got value, mission, and then strategy is when it turns into what are we going to track, what does success look like? Say more about tracking.

I know profit is certainly one of the things we're tracking, but when it comes to key performance indicators, sometimes we get, it's like just because it can be tracked, it doesn't necessarily need to, or we can build out a dashboard with 50 things on it. And the team's going, which one is really important? And you're going, it's all important. And look how good we are at dashboard building. How do we get that right balance of we're tracking enough, but it doesn't become our full-time job to just track everything? Yeah, this is a favorite question for logisticians, because there's so many things to track. Logistician? Logisticians. That's a thing. That's like a logistics person. Logistician. Is that what you are?

I'm technically, I suppose so. Okay. Yeah. Yeah. More of a philosophical logistician. And then people you mentor like the loggai? Lojai, yeah. I don't think you're ever going to find many people in the logistics field that called themselves the logistics.

I apologize for that academic. You're geeking out again. I like it. I'm really sorry. As long as you do it with a smile, it's safe. So you, so when you talk about measurement, you're so right, you can over measure and you can drown in metrics. and never see where you're actually going, which is actually unstrategic. That's getting lost in tactics.

Or you can have it so, you know, big, you know, or you just have like five metrics, you know, where it's not quite enough to motivate. So you have to think about metrics that motivate people to action. Metrics that motivate people to action. Right. So if you look at your employees and you say, okay, you know, we have this purpose beyond profit. Let's say you really want to run an organization that.

helps employees to build skill sets to go on and have more opportunities beyond your company. And I've worked with a couple companies like this. They have a really quality product, but really at the root, they're training people for careers. Like what's an example of a company? So I worked with an organization. It's a coffee roastery. I talk about them in my book called I Have a Bean, and 100% of their employees have come out of the prison system. And it's really hard to hire people in that space because, you know, even payroll companies don't want the liability, right? And so, but Pete Leonard, and I have been was looking at it saying,

but they have amazing skills and they don't have an outlet for these amazing skills. So he's built a whole company around impacting these people's lives. Someone's got to take a chance on them if they're going to make it in the next season. Absolutely. And then I worked with this really wonderful organization in Indonesia called Tallulunas and they're a five-star private island resort. It's a really rough space to do research at. Yeah, I really enjoyed it. Surrely. for the cause. Absolutely. But they hire, you know, they hire from all the islands around them where education is really, you know, it's non-existent. And then, so their employees learn to read and write. They learn carpentry skills. And they can take all of these skills and now be viable

in the market in Singapore and all these other places around them where they would, they wouldn't have been competitive before. So there's some examples of companies that really have strategic purpose, have narrow KPIs, but KPIs that really motivate their employees. So like with I have a bean, if we're taking this, they get this purpose, they're giving people a second chance at life. What would the KPIs? You said, you want to have KPIs that motivate people towards action. So like in their world, what are examples of those KPIs?

So they would be looking at things like, you know, they're always looking at bean quality, you know, the roasting, the roasting process. They have this amazing roasting process. They're also looking at, you know, they look at sales like everybody else. But they also look at placement. And where do people go when they leave? I have it being. how many opportunities do they have and those sorts of things. You know, and I don't know if they

have a scoreboard that they're, you know, like ticking the numbers off, but there's that that culture and expectation. You know, I got to talk with an employee there who was interviewing for multiple. He was an engineer and he had multiple engineering opportunities now because of the time he spent with that company. And those kinds of metrics, like if I work and I invest in this company and I learn this process, you know, these are really engaged employees and they had this expectation that I'm a part of something that helps people to become, you know, who they want to be. It's pretty cool. It's super cool.

And it's important for that new team member joining. If they didn't know this, the stories, why we actually exist is to help people coming out of prison and to develop the skills and help them launch into the next season of life. And therefore, we track these metrics and we prioritize these activities that are empowering that why. You would think we're just a coffee company. Yeah. I mean, you would prioritize other things based on just being a coffee company. But for that founder to go, hey, we're actually kind of not a coffee company. We're disguised as a coffee company.

What we really do and what we really value in track is we're giving people a second chance of life. You know, and it changes the whole operation. It changes everything we prioritize what we do and don't do. And from a team building standpoint, it lets people know this is what winning looks like here. Yeah, yeah. But I'll tell you what. They have the top 1% of beans in the world that they source and their coffee is amazing. So they have, they also have a product and a business.

So it's not a, you're not going to compromise on the vehicle of the coffee. You know, it's, it is a coffee company. Yeah. You can do that with excellence. You know, I would say that makes you even more powerful in your ministry. You know, if you want to call it a mission or a ministry, we call what we do your missional, but really it's a ministry. But we know that if we do things half butt, it taints the brand to a level of go, oh, there's a faith-based organization. Of course. It's, you know, it's not at standard.

And I really think business owners need to think about if you're going to put your faith out there, you better do it with excellence. Yeah. And you don't want your past employees to apologize for having worked for you. Yeah. Because that's brand and reputation. Yeah, because in their case, it's not just a rehab program. It's like, it's a legit job. Yeah. And they're making, you said, top 1% of the beans. Yeah. Yeah. of quality. Yeah. And, you know, the Toulinus, obviously that example is so much far afield, because it's an island in Indonesia. But, you know, their tracking is really interesting in terms of the community and what they're doing, you know, like kids that now have education, because

people can read and write in their communities and wells that get dug because of guests that come into the resort and, you know, after three days of laying on the beach, decide they want to dig wells. And I'm just kidding. But all of the different things that come through it. Yeah. You know, and so there's just so many different ways that you can think beyond just bottom line revenue that really motivate and excite people to be a part of what you're doing. So once you've set up these metrics, what are the things that make sure that you keep them in front of you? You know, because I've been guilty of building a dashboard and I was super in this zone of like getting all our stuff organized and making sure I know what we're going to track. And then I get busy running the business or there's

an issue with the team, and one week turns into two, turns into half a year, I haven't looked at it. Yeah. And so how do we automate some of these things and what are the right rhythms that we can have that, whether it's meeting structures or emails or what, like, what's the right way to make sure that we don't lose sight of it? Yeah, I think it's really important that, you know, the numbers are regularly tracked. So even if you're not necessarily talking about it every week or every morning, and maybe you do have some metrics, you do talk about it every day, probably not all of them, but that they are consistently being tracked. Because track, because tracking is a huge deal, especially in a small company, if you don't have a huge internet

system, if you don't have a lot of, you know, if you're living in Excel, constant tracking will save you a lot of time and heartache, right? So you're not going back a year later like, shoot, I haven't tracked any of my KPIs. Now I need to go back through everything I've done and try to build out this huge report, right? So tracking consistently as you go really helps not only to help you focus as you go, but you don't have to talk about it necessarily all the time. And the nice thing about tracking as you go is you have a regular cadence of keeping track of the data and storing it somewhere where a lot of people have access to, that you can pull out key points when you need them when you have different challenges.

Because if those KPIs are truly the value and purpose of your company, when you have conflict, those values and purposes might be on the line. And it might be a good time to pull those KPIs up and be like, last month, we did this. We're trailing right here. What happened in this space? And, you know, we let relational things sometimes overpower, putting out fires, logistics. There's a lot of things that go wrong in a global supply chain. And you can't let the day-to-day tactics overwhelm the bigger purpose of where you're headed.

Yeah, it's like having visibility. You know, you're looking out the windshield, but then you've got this dashboard in your car in front of you. And you know how fast you're going, you know how you're pacing. I know for me early on in building entre leadership, you know, this is the days before we had a CRM and like smart systems that actually made this stuff automated for us. I did dig into Excel. I did build the budget in Excel and really had to put a lot of, I read a few books on dashboards. I put a lot of energy into what would be the best KPIs. And then how do we visualize them in a way with the right graphs and charts?

Again, not overwhelming, not too many, but enough that told a story. Yeah. And I knew myself and I said, I'm not going to update this all the time. And so I had this amazing lady on our team. She's still on the team, Hannah. I said, Hannah, you're the most diligent person I know. Every day, we're going to take our sales information, revenue. etc.

Update this dashboard and then I want you to print it and put it on my desk and the sales team's desk and this is, we call it the newspaper. And every morning it was like, it's right there. We're looking at it. And most of the time, it was just that reminder of like, okay, yeah, we're on track. It's good. But if we saw something dip, we saw it early enough that we could huddle the team up and do something about it.

And again, those metrics being, hey, these are lives changed. It's not just dollars in the door, but it's, these are the customers we're serving. And there really is something about keeping it in front of you, just like, like, football. I mean, at the end of the end zone, that scoreboard's up there. You're not staring at 100% of the time, but you need to be able to quick glance and go, are we winning? As we kind of wrap up here, and you're listening to this going, okay, I want to know the top 10 to 20 companies you've worked with. What are the habits or behaviors of the founder that I need to be doing to make sure that we're bulletproof on this stuff when it comes to making sure we have a profit and we protect it?

And then when we get that profit, we're putting it back into the right places that are going to feel our purpose. Yeah. I would say awareness of the people around them. So when you think about entrepreneurs, you know, that fail, a lot of time it comes down to relationship and the original team not working out. And so when I look at really large companies, sometimes I'm amazed at how personable a Fortune 500 CEO is, how much, like he engages in. sees you like a person and really listens and asks questions. And those are organizations where because their leaders like that, they feel valued within that organization. And they're going to show up and work and work hard. And that's really important. So I think that the one thing that has

just surprised me over the years and working with a lot of different companies is people at the top that really have an awareness of all the different people that their company impacts and they take time to be really purposeful and how they interact with them. It really is about the person. It really is. So as we wrap up, any final thoughts? I think at the end of the day, it's, you have to figure out how to make profit. You've got to do it. Otherwise, you're not being responsible with the resources if you have investors or, you know, if you have customers and you're not profitable, you can't continue delivering your product to them. And so you need to do that. But if that is your only goal, and you achieve profitability, then what?

And this is where it's exciting to understand not just a profit, but the value that your company brings to the marketplace. So I'm not talking about your personal values. I'm talking about the value of your processes, the value of your operations to your employees, the value of the product to your customers. And if you understand that value, that will sustain you and help you grow beyond just figuring out your margin, driving revenue, and, you know, following that bottom line. So track those three things, but also track things beyond that because that's going to give you more impetus and motivation to grow and scale or just sew back into your own company.

And it's way more exciting if you have those additional stories, those additional pieces that you get to add in. Numbers don't tell the story. Stories are stories because people and emotions and other things are a part of them. I agree. Yeah. Yeah. good. Well, the book is called Wisdom-based business, go figure, applying biblical principles and evidence-based research for a purposeful and profitable business. Hannah, your joy. One day,

maybe I'll have as many PhDs as you, but until then, we're going to have you keep coming back and telling people how it works. Thanks for taking your time in here and share them with us. It's been great. It was really fun talking with you. Thank you. All right, guys, great conversation with Hannah. Well, as we've talked about, you have to get to profit. I mean, profit really matters. So don't hear me wrong. We're not saying don't worry about profit. We're just saying, assuming you are profitable at that point, how do you manage it well?

We're going to talk about that right after this. All right, folks, as I mentioned at the top, we have backed by popular demand at this point, George Camel. It's an honor to be here. Welcome back. So George is a Ramsey network host, and you've been having these kind of behind-the-scenes conversations with Ramsey leaders about how does this stuff really work here. And this time, you sat down with our CFO, Mark Floyd. Tell us about it. Yes, we talked all about profits. And as our chief financial officer, this guy knows a thing or two about profits. So we talked about how do you manage it well? What do you do with it? Do you reinvest it back in the company? Do you put it in savings? Do you hire more team members? Do you share it with a team? It can get complex. You know, we've worked with a lot of business owners who have achieved the, and it's a big milestone, but like making a profit, making consistently over time.

Then you go, okay, well, what do I do with it? You know, like with it. There's all these places you can send the profit once you've established that you've made some. Yeah, making it is one thing. Figuring out what to do with it is another. And so we really got to ask the question, how do you manage profits well? First, you'd be out of business if you didn't have profit, right? You can only, whatever capital you may have raised to get the doors open,

saved if you're just a small entrepreneur, you just saved up some money so I can go open this business. Well, so clearly, let's just say. To keep the doors open, I got to have profit. So that's just kind of fundamental baseline from there. But presumably if you're a small owner, you're paying yourself some salary in your business, but that's not why you got into that. It's probably just to draw a normal salary out of it. You wanted to eventually turn it into something and make more money and make more money.

So clearly, a first level of profit would be to go, hey, can I pay myself an owner bonus outside of what I pay myself in salary? So there's a start. you'd keep, I mean, there's all sorts of things. I could go down the path of it builds value in the business in case you may not get into it with the idea of, hey, I want to build this so I can sell it, though a lot of people do. But over time, you might go, I want to do this, and then I want to move on to something else. Unless you've got profits being generated in that business, you're not building any value in that business for someone else coming along and pay handsomely for those profits. If you're an entrepreneur, these people have drive.

And so no one's good just saying, all right, let's not do better than last year. Right. No one thinks that way, right? I hope not. To do that, you've got to have more profit and more margin in your business. So what does that look like for the small business owner who may be going, I've got to pay myself, but I also have to cover the overhead and the team and the salaries and invest in some new stuff over here. What does that management look like? Well, so I was going to go to the investment.

You just use that word. Another reason to have profits is then I can plan. And so I've got some level of profit coming in, and then I can be making plans about how I ought to invest that profit because then that profit only, you know, and that investment only begets more profits. And there's an Old Testament word for you there, George Begets. I love that. Yeah, I go to Matthew and see all that, you know, lineage or whatever. So you have, you've got dollars to invest in the business to grow. And so then it turns around and it just keeps producing more.

So it's all the more reason to try to be driving profits so you can be thinking about the business long term as opposed. to just short term. And when we talk about investments, we're not talking about mutual funds here. We're talking about, are we looking to make a new hire this year? Do we need a new building? Those kinds of things? Exactly. Investing in the business. Because if I've got two salespeople, and that's when I can afford today, I go make more profits. I might be able to employ two more next year so that they can drive more. And so I'm not talking about taking money outside of that business. And clearly that's what you should do with what that owner, you know, in salary or bonus, whatever they take out of the business. But inside of that business,

stick to your knitting in that business and but be looking for ways where you can drive growth within that business and you need profits to invest in those areas. We do that around her all the time. You either invest in plant facility like we are with buildings or you invest in people. And those are the two places where we're mainly investing dollars. So it's the physical objects like buildings and we need new computers and it's people if we need more help. We need this guy to, you know, the sales role to drive more revenue to create more profit. And so it's the cyclical nature of it is what it seems to me. Absolutely. And another thing that that business owner ought to be thinking about is, hey, what if I got into this

from a missional standpoint? I mean, they think this is a product that I've got that I want the community and the world to have. If you don't have profits, then you can't continue into that business to do that. So it could also be just that, not that I want to invest in the business, but I got to keep my doors open so I can go do what I was put on and start to do kind of mentality or thinking. So that's another reason to have the profits. And then clearly, eventually you want to reward yourself, reward your leaders, and reward your team if you can through some sort of profit sharing or something like that. We can come back to profit sharing. But ultimately, out of a generous spirit as an owner, if you're making plenty of money, then you can

go, hey, now I can share with my team in some fashion. And there's a lot of ways. You're talking about all kinds of ways what you do with the profit. It goes to invest in your team, invest in new stuff. You can share it with your team. You've obviously got to make payroll and all the overhead. So is there a certain kind of formula or filter that you use when it comes to managing profit?

Every business would be different. So if you're managing your profit and you had any kind of seasonality, or to your business, then managing that profit, meaning you're probably setting dollars aside that I need to save because I see something coming. Or you're in a business that requires large capital expenditures. I'm earning a business that I know I'm going to have to buy two new trucks next year. I'm in landscaping business. I've got to have equipment and I've had the same stuff for five years.

It's breaking down. And so how am I managing my profits? I'm going to be setting aside enough money. Again, that's really just the same thing as investing into your business. But in that case, I'm kind of thinking of it as replacing and trying to keep your business, you know, up to par, up to speed. So just like in a personal budget, if I know I need a new car next year, we're going to create a sinking fund and say, all I'm going to save up $200 every month to get me to my goal by next year. Right. And the same thing needs to happen in business.

You've got to make a list of all those things that are coming down the pipeline and go, okay, how much do I think this is going to cost and start put away that much before you do anything else other than pay yourself and pay all your payroll and all that. Right. So specifically identified those items. And then in general, you probably just want to be, it's no different than what we teach on the personal side. You're going to want to have an emergency fund as well, you know, to try to have six months' worth of expenses to cover. If the, you know, I don't know if you're in a business that the well would completely dry up where the customers would go away. But in a pandemic situation, if you were in a restaurant business, that may have been what was the case. So you, that was an absurd example. but, boy, that ought to teach a lot of people a lot about what happened in the past year,

about the reason to be driving profits and then taking some of those in reinvesting into the business, but at the same time setting some aside in what I would call an emergency fund for your business. Well, reminds me what we did last year during the pandemic is we kind of took that route of, all right, we got to kind of buckle down here. We're going to have a hiring freeze. We're going to kind of make sure we're putting away some money so that we can keep the ship afloat. So just talk to us through what that looked like for our business and how that applies to the small business. Back to the concept of profit sharing that I spoke of, like if an owner had

enough that he could share with his team and share with his leaders. In that case right there, we just, we stood up as leaders and said, hey, we're going to take less because we don't know what's coming. And by the way, you're going to get less. We're not going to cut your pay, but we are going to take away profit sharing for a couple, however we didn't know at that time. How long it takes? Yeah, it turned out to be, you know, about three months that we just set that to the side. and everything was kind of okay, but we still didn't pay it until we felt like we were completely out of the woods. But that was just managing to your bottom line, manage your business, managing your profits for something that was unforeseen. We didn't know about it.

So I don't know what's around that corner. So let me plan for that and set stuff aside. Yeah, and not a single layoff to be found during that time for us, which was absolutely incredible. The way that you and our leadership team guided us through that, you know, it was a turbulent time where we didn't know what was going to happen. Is this going to affect the profits? is going to affect our payroll and hires and all those things. So it was just proving that our plan works when it comes to money, whether it's personal or business. Right. I agree. So what can a small business owner do tomorrow to manage their profit better? Let's say that

they're kind of feeling all over the place with it. They're paying themselves a little bit. They're making their payroll, but they feel like they can do better. As a CFO, I always have to say this. This is like a disclaimer that you have to say. Like if you're a lawyer. Like a lawyer or a bad pharmaceutical, you know, whatever. I've got to say this. You better know your numbers. You, how can I be planning to set aside profits if I don't understand my income statement, my P&L?

And so you better know your actual numbers. You better be budgeting so that you know when I'm off track because am I off track because of something I'm not investing in. You've got to let your numbers speak to you. And so that's the first place to start. We can talk profits all day long, but if you're not managing your business through the numbers and just not. You've got to be in reality. Yeah. Can't be in law, la, and you can't be off.

I know everybody that most entrepreneurs that get into business aren't excited about, hey, I have a P&L to run at some point in time. No, they're excited about the business opportunity that they've got, whether they're selling something, their interaction with their customer, whatever might be. But if you neglect the other side of the business, the other side of the business, the other side of the business, being running that P&L, you're not going to be doing that very long, whatever it is that you're doing. So, again, know your numbers, know your actuals, know your budgets, and be, you know, constantly on top of them. And we talk about if you aim at nothing, you'll hit it every time. The old Zig Zig Ziglar quote, it seems like the same happens in business.

You've got to have some goals and some vision, and you've got to know what the upcoming Q3 budget's going to be. And I know we do a lot of that around here where all the leaders have to go, all right, submit your budgets, because we got to know what's coming up and we've got to aim for that and track it and make sure that we're on target. And that's a big part of your job is to go, hey, you're not on target. What's going on here? And to help all of the different business units within our organization. So is that part of it is as tracking and kind of going, hey, are we on par? Are we in the green?

Are we in the, you know, what's going on? Yeah, absolutely from our standpoint. And we spend a lot of time at each month in walking through, you know, here's where our actual results. And so we talk about what may be affected some of those actual numbers. but we're going to compare it to budget to know where we are off. And most importantly, from the standpoint of when we're this topic of managing our profits, we're doing that so that we know how that's affecting what our profits are out there. What's coming down the road that's affecting what we were planning on for profits for, say,

the next 12 months? Is there anything in there that's going to then take us off task of being able to invest? Are we not being able to make the hires today that are going to affect our profits for tomorrow? Are we not setting aside enough money to go buy some piece of capital item so that we can grow our business? It's looking at the current state, but it's also with the future state in mind as to when we're trying to manage those numbers. Yeah, we're juggling the present and the future. Exactly. Seeing where we're at and making sure we're on track for where we want to go.

I love it. Well, we do a lot of profit sharing around here. We're known for it. It's something that I've had. I've got the pleasure of enjoying. my eight years here. So if a business wants to start doing that, they go, I love the way that Ramsey does profit sharing.

How can a business owner listening take a first step towards that? I've had so many conversations over the years when we do some events, and I end up meeting with people. And that's one of the very first questions. They love the concept of profit sharing. And boy, can I do that? And my first question always is, so do you make profits today? That's the first step.

It's the first step. And you'd be shocked that on occasion has been like, well, you know, I'm either not sure or not very much. And so you've got to make enough profits. And I'll go back to the very beginning when you've got to make enough profits to share. But you need to make enough profits that as an owner that you're rewarding yourself for your blood, sweat, and tears. And then you eventually go, okay, now I feel like I've crossed some threshold where I do feel like I have enough to share with the team. You've got to ask a couple of questions. one of those questions would be when I share this profit with that team, however many team members divided by whatever it is I'm talking about, is it enough to, is it going to get their attention?

Is it enough to matter? Or is it, I'm giving them a $5 chick-fil-a, you know, shout-out chip. You might as well just get them lunch at that point. Yes. Don't build it up to be something that is going to be a disappointment. So make sure it's enough where you go, they're going to feel this, you know, if it's $100 a month or whatever it is, They're going to feel this and they're going to love it. Yes.

But if it's going to be a wah-wah, don't do it. Don't do it. Wait. Just be patient. Build your business. Reinvest those profits instead of, and it sounds awful instead of into the team, but invest them in the business so that then eventually you can get to that point

where you got enough profit to share. You got to have enough margin. Yeah. Don't try to, don't try to, don't squeeze, don't hamstring the business, I guess is the best way of saying it. Don't hamstring the business. by getting all eager about a profit sharing plan that then will take money out of the business

that you could have used for growth or it just didn't do the thing that you thought it was going to do and incentivize the team. You want them to feel like they're a part of this too and when they see waste over here they go, hey, we need to cut that expense. This is affecting my profit sharing, right? It kind of gives you that self-employed mentality

which is one of our core values is, hey, if you're the owner of the business, how would you do it? And that usually leads you to a good result there. So when it comes to profit sharing, you get up there on our stage once a month and let the entire team know how we did in profit sharing. Are we up? Are we down year over year? All the numbers. And you say something at the end that I want you to say right here on the Entree Leadership podcast because I think we can make profits complicated.

It sounds big. It sounds stuffy. But it comes down to one simple sentence. So share that with us. Hopefully, I'll do it right, because I've butchered it up on stage before, right, George? It's always entertaining. Either way. Either way. We always say, hey, everybody, you know how profits happen, right? is when revenues go up and expenses go down, remember you're all self-employed. I've had so many team members come up and say, I love that. That's my favorite part. That's my favorite moment of the month. A, they're probably getting some extra money, so that's why they really like it.

But B, they're reminded of, you know, we're here to make a profit. We're here to serve others, but we get those certificates of appreciation, as Dave likes to say, in the form of that. And so why not give those certificates of appreciation to your team? because they've helped generate those profits. So let's share with them in that case. Well, Mark, I love your spirit, your personality, your attitude, and of course your talent and passion when it comes to the numbers. So thanks for keeping the ship here at Ramsey running well, a well-oiled machine, as we like to say, and keep those profits coming. Hey, my pleasure, and it's always good being with you, George.

All right, thanks, George and Mark. Guys, I got to tell you, when I became a VP here and I was first responsible for a business unit, this whole end of the business, the budgeting, the accounting, the profit management stuff, I was very overwhelmed. You know, I didn't know exactly what to do with it. And Mark sat down with me and he's very patient. He spent a lot of time answering all of my very naive green questions on this stuff and really mentored me and a lot of the VPs around here on how we do this stuff in a way that we can

operate with excellence. Forecasting and being able to see what our profitability and cash flow is out in the future, this is a skill you can learn. Trust me, if I can learn to do it, I'm a college dropout, struggle to math all through high school. If I can learn to do it, you can do it too. And to give you guys kind of the cheat sheet on this, if you're going to start somewhere and say, okay, I'm not sure I'm in the upper stratosphere of the accounting space, but I know as a business owner I need to do some of this stuff, where do I start?

Well, Mark has put together, along with our coaching team, a free resource for you that's going to give you guys that cheat sheet, that pathway into the reports that you need to be looking at consistently. They're going to help you stay on track in your business. So six financial reports that can save your company. It's a free guide. All you got to do is just click on the link in the show notes. Well, I hope you enjoyed today's episode of the show. If you did, please subscribe, leave us a review.

We're always grateful for that. And thanks for helping us get the word out. That's how this thing grows. Also, if you're a business owner between about two and 200 employees, We'd love to have a live conversation with you to find out how we're doing for you. We want to improve the podcast and we want to do it based on your feedback. So if you want to help us out with that, click on the link down on the show notes and our producer Tim will get on the phone with you. And we really appreciate you helping us out there.

As always, you can follow us on social media at Entree Leadership, Facebook, Instagram, Twitter. We'd love to have you jump in the conversation. This episode was produced by Tim Hull, edited by Zach Bennett, mixed and mastered by Will Rudder. I'm your host, Daniel Tarty. And on behalf of the entire Entree leadership team and George Camel, thanks for listening. Until next time, keep learning and keep leading. If you enjoy this podcast, you should check out other great podcasts from the Ramsey Network, like The Ken Coleman Show.

Are you doing what you were born to do? I'm Ken Coleman, host of the Ken Coleman Show, where I give you practical advice to help you discover your purpose and then map out a plan to get you there. From accounting to advertising, from plumbing to production, you were created to fill a unique role and the world needs what you have to offer. Join me on the Ken Coleman Show wherever you listen to podcasts.