EntreLeadership - The Stupid Reason Entrepreneurs Think Debt Is Smart

Episode Date: December 9, 2024

Today, we’ll hear about:  A business owner struggling to stop using debt as leverage  A young husband and father wondering if he should sell his business and retire  Why Dave Ramsey will never sell his business  A business owner thinking about using debt to buy a building    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     Offers From Today's Sponsors  💼 Go to Belay Solutions or text ENTRE to 55123 for their free resource! 🏦 Learn more about Found 💻 Visit NetSuite today to learn more 🧾 Visit Payority for a free consultation!  📝 Use code entre15 to get 15% off your first year of Trainual    Listen to More From Ramsey Network  🎙️ The Ramsey Show    💸 The Ramsey Show Highlights  🧠 The Dr. John Delony Show  🍸 Smart Money Happy Hour  💡 The Rachel Cruze Show  💰 George Kamel  💼 The Ken Coleman Show    Learn More About Your Ad Choices   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. If you want a professor's opinion from a college who's never made payroll, you're in the wrong place. I actually do this crap every day. So you run a small business, you're my hero. I'm one of you. Give us a call and we'll talk about how to lift yours up. It's what we do.

844-944-1070. Or you can leave us a message on the Entreeleadership.com slash ask board. And we'll get back with you and make you a part of the program here. 844-944-1070. Sage is with us in Champaign, Illinois. Hi, Sage. What's up? All right.

I currently own six businesses. They do around $7 million a year in revenue with about 50 employees. And we currently own four properties that we want to open our businesses in, which are restaurants and convenience stores. But my issue is I'm already about $3 million in debt total, and I'm kind of tight on cash at the moment.

And I just want to try to avoid taking on more debt for these four locations and also tackling on my existing $3 million in debt. So that's what I need to help with. So the six businesses are not six individual businesses. They're six locations. Six locations, yes. All similar format. Yeah, four of them are like purely fast food restaurants and two of them are convenience stores. Okay.

All right. And so we'll do one or the other on these other properties in the future. Exactly. Out of the four, two are convenience stores, two are going to be restaurants. How long have you had this? These I've owned, I opened my first restaurant in 2019 and been doing it since then and before 2019 for about four years I was in cell phone stores. Good for you.

You've grown it really quickly then. Congratulations. Thank you. Okay. So what's your net profit look like on the $7 million? The $7 million, I mean, after, keep in mind each business, we're about net, about 20% net after everything. So you're coming home with $1,0.4.

Yeah, but after, you know, because some locations have partners and stuff, me personally take home for me. After all, this is done is about $6,700 per year. The partner's on the debt? No. So me and my business model, I personally, just me, buy the real estate. And then I enter, I put a partner in with the business. And the business pays the owner of the building rent, which is me. And I also have a share in the business. So the $3 million is all real estate debt? All real estate. Yeah. I mean, $2.7 is real estate. And then I have like $122,000 in an automobile. Okay. All right. Which is stupid. So you need be paying cash for that. There's no question about that. The real estate thing we can back into. But I mean, that's straight up you bought crap you couldn't afford there. Okay. So we'll deal with that. That one's done. You got to get those paid off. You're making enough money, pay them off. It's just, that's just disorganization and financial laziness. Now, once you get past that, remind me again after all the partners and all the crap, what are you? you making on the business?

Me, I not, like, on my tax return, it's between $6 to $700 per year. Is that including the rents that you receive? That's including the rents, yes. Okay. And so, obviously, you don't need $700,000 a year to live on. Yeah, I look below my means. I don't know. Well, I hope.

Yeah, no, I do, yeah. Okay, so how much of the $700 can we put towards the $300? dollars in debt. Well, it's all real estate. I mean, I, the thing is... You call me up and know how to get out of debt, okay? How much of the 700 can you put towards the $3 million? You could put for living expenses, maybe about $150 per year living expenses.

Okay. So you put $5.50 towards it. That takes you six years. Yeah. And you're dead free. I mean, like, but the thing is that there's too many opportunities. that always come up for me to purchase, because I also own a lot of residential real estate as well

that I rent out. But the thing is like, I don't know. Okay, listen, here's the thing. You are so far in your career, it's a whole five years old from 2019 to now, have been successful using debt to grow your asset base. Yeah. And so you're not afraid of debt,

and it doesn't bother you. Exactly. Yeah. So you're going to stay in debt. But the thing is also, and but the thing is I kind of, something also in the back of my head, I want to get out of debt. I don't, I just get bothered. And you've got to quit arguing with yourself.

Yeah, well, that's something. Because you're not really arguing with me. You're arguing with yourself. Of course. But the only downside like me, okay, I can, I have no issue tackling on my existing. So here's what I decided after I went bankrupt and lost everything. I don't borrow money anymore. So there's not any.

opportunities that are big enough, juicy enough, or sexy enough to make me want to go into debt. Once I got there, then I grew slower and I grew with much more sure footing so I didn't slip and fall and break my freaking face on cash flow because you're running $7 million and you got no cash. Yeah. That's what you told me. You're an accident looking for a place to happen, dude. You got no liquidity.

You're begging for life to teach you a lesson. You need to get some cash position. you get the cash position is you get rid of the debt. But I'm not, I don't think I can talk you into this. You're just at the beginning of your discovery that not all debt is good. And one of the things I discovered with that whole thing when I was playing with the math, because I'm, my brain works same way yours does, Sage. I see opportunity. I'm an entrepreneur. I want to go do everything, man. And you had never seen a deal you didn't like. You just, you're in all kinds of deals. partners and stores and fast foods and blank real estate and investment real estate and man you're in

everything and all since 2019 since you got out of the cell phone business you move quick i would slow down a little bit agree to agree with yourself to grow slower with much more sure footing breathe enjoy the ride you don't have to be so frenetic so crazy so aggressive it's okay you're going to be okay you have the ability to make millions of dollars you've already proven that you're going to be okay once i did that because i had this motor running inside of me wide freaking open then i went okay i don't have to go into dad i'm going to wait a little longer i'm going to save up and pay cash i can't do everything the other thing my mind did sage one last thing and then i'll leave you alone is i extrapolated this i said okay what if you took what you gave me today

and you said i'm making 70 million i got no cash 10x and now I got 30 million in debt. Does that make you, does that take your breath away? If it didn't, it should. So when you take your plan and you scale it, you see how bad it sucks. That's what I'm saying. When I put scale to it in my mind, I went, I don't want to live like that. And so that's when I said, I'm willing to grow slower.

I'm willing to pay cash. It's okay. God is God. I am not. It's okay. We'll get there. It's hard, though, because man, you see a deal. Guy like you, man, guy like me, we see a deal. We want to do the deal. We like doing deals. I'm proud of what you've grown. You've done a good job growing. I just want you to get it on much more stable ground for your sake. This is the Entree Leadership podcast. If I ask you what your profits were and your losses were this week, would you know? The hard truth is if you don't stay on top of your

numbers, your business is going to fail. The Bible says, be diligent to know the state of your flocks in your herds. You cannot out-earn disorganization or the need to make your money behave in business. But you can use simple practices and wise decision-making to have a successful business. You don't have to be a money expert. And the entree leader's guide to business finances, you'll learn the profit principles and the key practices we've used to grow Ramsey solutions over the last 30 years to a $300 million year. company. This free guide will simplify the foundational components of managing your revenue, your expenses. Go to Entreeleadership.com slash finances to download the free guide.

Entreeleadership.com slash finances. Matt's in Los Angeles. Hi, Matt. How can we help? Yeah, so I'm a 50-50 partner in a e-commerce business. We have a men's grooming brand that we sell men's grooming tools. Right now, we have about five employees. Last year's revenues, we did about $6 million, $1.3 million on the EBITA. This year, we're on track to do about $9 to $10 million. And if we have a good Q4, I'm closer to about $2 million on the EBITA. He-ha, way to go, man. Congratulations. Thank you, sir. And also, zero debt. cash flow and financing everything ourselves.

How long you had this? We started late 2021, and we just been trailblazing, he had the ground running. Man, you guys have been frying it up. Way to go. I'm proud of you. Good job. Been blessed from the man above.

Yeah, you have been. You worked your butt off too, and you're smart. Cool. How can I help? Yeah, so 2024 was a year. My partner and I said, hey, let's sell the business, and, you know, let's take the money and let's hit that retirement number and, you know, sell off. in the sunset.

But we came across, so 2024 was a year we really wanted to, obviously, maximize our return. So we put a lot of work in and we did a little bit better than expected. So usually year over year we grow about 20, 30 percent. This year we grew about 100%. Whoa. So, yeah, so I've been kind of baffled because right now the opportunities that we have we have now, we could possibly now expand internationally into Europe and UK as well as some other countries, as well as right now we're only selling on one major e-commerce platform. We can expand to

about two to three others. And then also now we have some business deals lined up to possibly go into some big box stores. So we looked at this and were like, wow, the opportunity, you know, we could probably do two to three X in the next, I would say, three to four years if we really put the work in. But my question is, so this year, we wanted to exit and then for me, I wanted to sail off from the sunset, but, you know, I've been, you know, looking to the man upstairs quite a bit trying to find answers on where to go. And I came across this situation and he led me to you.

So my thing is, so me personally, I just, recently got married and looking to start my family, I'm 30 years old. And I really wanted to focus on being there for my family, my wife, in the beginning, for sure, in the early years for my children, and also maybe build my relationship closer to the Lord above. But then this opportunity came, and I'm kind of torn now on, you know, do I try to maximize? I'm sorry, you can't, You can't have a walk with the Lord, be a good husband and be a good dad and work? Of course you can. Definitely can.

It's just, you know, I just anticipated that to take on this venture, it's going to take an extreme amount of effort mentally and physically. So. So. Delegated. No, that's what we have been doing. Your money? Hire somebody to run the International Division. Hire someone to run the Big Box Division.

Definitely. So we've been able to do that right now where we've delegated pretty much everything. So my partner and I, we only work maybe one to two hours a day. But we figured to get this set up, it might take quite a bit of work. You might have to work like eight hours a day if you didn't? Yeah, there would be quite a bit of traveling involved as well, setting up things in different countries. So that's where I was a little bit on the fence with this. Because the other opportunity we have right now is... Okay, I don't want you to... to, I would not advise my son, who is your age, to look for a life under any scenario where he works

two hours a day so he can be with his wife and child. I would not advise him to look for that life. Yeah, yeah, definitely. I don't think I'm definitely built for that either. I don't think you're going to find happiness there. Yeah, I was going to more. I'm kind of. I'm not talking about 80 hours a week. I'm talking about 40 hours a week. For sure. The one thing, I was a little burnt out with this business. I mean, again, this business has been very fruitful, but I was thinking of resetting and seeing what else. Yeah, I don't mind just selling and taking a big liquidity event,

putting whatever, $20 million in your pocket, each year and your partner, or whatever you can get out of this thing. What do you think you can get for it if you sold it? So right now we've had some offers. They're offering about $3.5, $3.75 on the trailer. 12, and we anticipate we'll be around 2 to 2.2 million by year end, which after...

You're talking about 3x of EBITDA? Yes. Okay, so you're talking about 10 million bucks or so? 12 million bucks. No, it would be on the... So we have about 2. Yeah, yeah, yeah, you're right.

Yeah, yeah, yeah, you're talking about put $6 million bucks in your pocket. You're not sailing off in the sunset with $6 million, dude. You didn't get $60 million. You got $6. So, no, I mean, that's, that, all that does is set you up to go to go play in a different sandbox. And that's okay if you want to go play in a different sandbox.

Start your own thing without a partner. Take all this experience and so forth and go try to find something else and ride a hot, take a hot ride on it. There's nothing wrong with selling out. Nothing wrong with it at all. Nothing bad about it. But like you said, now where am I going to go? I'm 30 years old. I got $6 million in my pocket.

You can't quit on that. You shouldn't. You should go be somebody. And so what are we going to be? What do I want to be when I grow up? What I want to be as a new dad, as a young man walking with the Lord, as a good husband. What do I want to be is a great leader in the marketplace? What do I want to do to take the $6 million to give people employment and provide a good product

or service or app or something to revolutionize people's lives? What do I want to be? You start solving that. That gives you a real reason to sell. Don't run from something, run to something. That's what I would do. I like what you're talking about. If you want to stay there, what you're in is not a bad deal.

You've got the thing cooking like gas. Now, I will add internationals tougher than you think it is in your brain. We play in that market too. And big box retail is a complete pain in the butt. And it is nothing like e-commerce. Your margins are destroyed when you start talking about the big box. And they got full returns. you can make some money on it,

but your hassle factor is going to go up 100x and your profit's not. But it's okay, go do it. I'm not telling you not to do it, but I'm just telling you, it's not, neither one of those two categories or buckets that you're adding to this great ride you're on

are as sweet as the one you're already on. The numbers and margins aren't there and the hassle factor goes way up. It's okay. I'm still, we're still working on our international aspects of everything we do. We're still working on you know we take some big box retail stuff you'll see our stuff in targey that great french store

you know we're we screw around with the walmart all these people we deal with them but they make the money they just let you be on their shelf it's not a there's not a big uh it's not a big woohoo i'm in walmart believe me uh if i wasn't in walmart it wouldn't change my life one nickel uh but we put it out there because it's good marketing it's good distribution and it's good for folks to get the books. So we try to help. And so you're going to be the same thing here. But your margins that you've got now, you're never going to see them in any other space like you see them right now. They're sweet margins. And I, you know, I'd live there and grow that as much as I could while you're doing these other things. But I think you've done a great job. But don't look for a thing where you don't have to work

40 hours a week and you don't make a contribution to this wonderful world we live in. You are wired to be creative. You are wired to serve. You are wired to bring value to the marketplace. Not doing that will make you want to shoot yourself. You are made to do that. You need to have some kind of a plan to go do that. That's everyone. This idea that we can search out and find the way to sit on our butts and work two hours a week or two hours a day and be happy, that's not where you find happiness. You find happiness in service. You find happiness in helping other people and lifting up and giving people jobs and changing things and pushing things around the marketplace doing hard things that gives you great joy um doing easy things doesn't give anybody

joy hey man good question i think you're impressive young dude man i appreciate getting to talk to you thank you for joining us we really appreciate you being here on the entree leadership podcast hey guys if you like the entree leadership podcast we could use your help click the old follow button, the subscribe button, the share button, share the link to this thing. You are our only marketing plan. And if you fail, we're going to blame you. No, I'm kidding. No, I'm not kidding, but we're not going to blame you. It's just because we suck or something. That's why we would fail. But anyway, come help us out, spread the word, leave a five-star review, share the show, tell people about the show, subscribe, follow, all those unique and internet kind of things that you people do when you do

those things that you do. Parks is with us in Greensboro, North Carolina. Hey, Parks, what's up? Hey, Dave. Thanks for having me on the show. I'm a long-time listener, first-time caller. Sure. Cool. How can we help? I've run my business for about 18 years. I own 100%. We do commercial clients, mainly Class A office space. We do data, fiber, security, audio, video work. In the last five years, our top line's been about $3 million with 20% net after owner benefits. And I've got a nice lifestyle business, but my challenge is what is next? I'm concerned about losing relevance after an exit, but I'm also a little less motivated than I once was after I hit some benchmarks. So I guess the question is, in your experience, what do you feel is the best

way to handle fatigue and keep pushing towards, I guess, after hitting some major goals that you set out for early? Has the space that you're in shifted? A little bit, and I feel like we've been able to pivot with it. We've added some additional lines to our portfolio, so when the market is shifted, we've been able to kind of capture it as it goes, so we're nimble enough to pivot, which is great. I mean, the marketplace is great, but it's just kind of, if I sell, what happens next? Okay, why do you want to sell?

Well, I really don't right now until I can find out the why do I want to sell. That's, if I could find out that, I feel like it would give me a little bit more direction for what the next five or six years looks like. Yeah. Okay. I, I don't know. I can reverse engineer with you for a minute, maybe. I have very intentionally from day one said we are not building the Cecil, we're building it to be generational. And that changes the moves that you make and the way you view that.

things. It changes your paradigm on every problem that comes at you, every opportunity that comes at you. Simon Sinek wrote a wonderful book called The Infinite Game. I'd recommend you pick it up. Okay. And his point, or the thesis of the book is when you're playing a game that has a set of rules that causes an end, then you play those rules to that end. When you're playing a game that does not have an end, you play differently. You know, as if you're thinking about like a board game, you know, that, you know, there's five or six things, chess, whatever, there's a set of rules. There's an end of game there. A game that, you know, a football game has a timer on it, you know.

So at the end of the time, who's got the high score, there's, and you play every play to get to that 60-minute clock ticking down, right? And so if you're building something to sell, you move every, you move the players around on the chess. board, you call the plays in the huddle to create the desired result at the end of 60 minutes, at the end of the sale. When you're playing for infinite game, you do a difference. So I'm playing long ball all the time with every decision. And that's not a criticism of somebody who wants to build something to sell. I don't have a problem with that.

But for me, this business was God's call on my life to help people, to serve people with teaching leadership to teach. Now we teach mental health with Dr. John Deloney, and of course the whole money space thing that Ramsey is known for. And we've gotten tremendous satisfaction out of that call on our lives, not just my life, but started on my life.

And that's more than just a job. It's more than just building something. And so, like when we're meeting with a radio company and they say, okay, when are you going to sell your radio show? And we say, we're not. they get this weird look on their face. Like, you know, I had one guy literally asked me, what's your end game?

And I said, my end game is to toss the keys to the next generation sometime before I die. And he looked at me like a German shepherd with his head cock sideways. You know, right? And so, because it did not compute in his world because at that point, as many years ago, Dr. Laura had just sold hers to Iheart for 78 million. and Ramsey would have been worth $100 million,

just the radio show alone at that point. That's many years ago. It's worth a lot more than that now. Thank God I didn't sell it. I make a bazillion more than that on it. But because I'm playing long ball. So what you've got to ask yourself is, what's your long ball equation?

And here, oh, I know, I went around the barn and I almost forgot. Had an old man moment there. All right, so when I'm playing long ball, it makes me do what you're doing right now all the time. What gives me joy and what, pisses me off. What do I hate about Ramsey? Well, I own it, so why don't I change it? Right. You know, what do I love about what I do? Well, I own it, so I'm going to do that. Why do I want to, you know, I love being on this microphone. So why am I going to give it to somebody else? I get to give it to

somebody else. So if I die, there's somebody else here. That's a good thing. It's succession planning. but I enjoy this, so I'll keep doing this right here or something like this until I don't make sense and they take me off the air. So, but it's joy, what gives me joy? That's the question I want you to ask yourself. What are the actual tactical things in the business that when you get to do that all day, you come home with energy left over? But what are the things that when you have to do those all day and you come home and you're like,

God, it's 5 p.m. and I want to go to bed. I hate my life. Oh, wait, I own it. No way. I have both days. And I tell our team all the time, if I hate doing something, y'all better watch out because I'm going to stop.

Right. We're either going to delegate. We're either going to have an end, we're going to close that division, close that product line, or we're going to delegate it and somebody else is going to pick it up and run with it because once I decide,

I'll do it for a little while to see if I can get it working or hand it off. But I'm not signing up for 10 years of this. This sucks every day. That's fair. I'm going to sign up for 10 years of this gives me joy. I had a good friend of mine who sold his business for a nice sum of money that could be, it could be almost generational money.

And now he's like, what am I going to do? He's sitting at home. He's like, I'm bored. I got nothing to do. That's my biggest fear. I don't want to do that. Number one, your first question was, why do I want to leave? That's a really good question for yourself.

Part of that is what gives me joy and what do I hate? that's a subset of why do I want to, you know, why do I want to leave? Okay. And then if I do want to sell it because it's run its course, I don't like it anymore, there's more of it I don't like than do like, it's a fine business, there's nothing ashamed about it. I just don't want to do it anymore. That's an okay answer. That's answer one, and then you're correct in saying, I need the next thing. not having the next thing is going to cause you to burn the money that you get in the liquidity event and then you're going to wake up fat on a fishing boat you know that's what's going to happen it happened to several buddies of mine they had a liquidity event and they woke up fat on the beach

somewhere yeah i don't want and i don't like myself anymore i eat too much i drink too much my mind is not engaged anymore i'm not right i'm yeah you're You don't want to be that guy. And that's very wise on your part. You don't want to be that guy. So find out what the next thing is that gives you joy. Get you excited. If I had all the money in the world and all the time in the world, what kind of a business would I start?

Well, my God, man, you're a great entrepreneur. You can go to that. It's like you can do anything. You want to be in business in America. You just do anything. It's not Russia. We get to decide. You wake up tomorrow.

I'm going to start a business. As long as there are garages, there will be new businesses, right? It's a beautiful place. I agree with you. Yeah. So you can do anything. So I'm going to fish around in that. Let me give you Ken Coleman's get clear assessment.

It's a career assessment for people looking at jobs, but I want you to use it for an idea of what my next business venture is if I leave this. Or do I look at the things that I don't love and I delegate those or close them as a part of your business and the things that give me joy and do more and more and more of them and start playing long ball with this existing thing and take it from $3 million to $30. million to 300 million. Right. That's perfect.

And that's okay, too. That's okay, too. There's nothing wrong with that. I love your advice all the time. You give this, I listen to you often, always a lot of good thought processes, your inspiration, you've done a great job with your business. I thank you for all your provide to us. Well, you're very kind.

The other thing I want to do is I want to sign you up for Entree Leadership Elite, and I'm going to give it to you for a year for free. And it'll help you, it'll also help you walk through this process of making your decision on which one you're going to do. A, what gives me joy, B, what business, me off that I can delegate or quit doing completely, shut that part of the business down, see, where am I going to go if I sell it? These are the questions on the table, and they're really good questions. Really good questions, parks. You're an amazing young dude. You're going to do

great. You're inspiring. Thank you. Thank you. Thank you so much for calling and being part of the program today. Thanks for joining us, America. This is the Entree Leadership podcast. by a practitioner for practitioners. If you want to deal with corporate leadership theory, you're in the wrong place. I actually was in those meetings today, not the theory meetings, the get-or-done meetings. And it's what I do here.

I'm the CEO of this place. I also happen to turn on a microphone, so you're getting to talk to somebody who was just facing some of the same crap you're facing, or I did 10 years ago when we were a little bit smaller and I can show you how to get where we are. This is what we do here. Thank you for being with us.

The phone number if you want to participate is 844-944-1070. 844-944-1070. Anthony in Syracuse. How are you? Good. How are you doing? Better than I deserve. What's up?

I own a residential construction company. I do about a million and three and six. My landlord is selling the building, and I have to move, and I'm trying to do it without going in the debt. Okay. What kind of a building do you have that you're renting? 3,600 square feet. It's more, it's a garage and office space. Yeah. What are you paying in rent? I pay $2,100 currently. And every place that I look for now, they want around $4,000, so it's going to be considerable more. Okay. Well, in the real estate business, what we call your business is a destination business,

meaning that people don't accidentally stop in to see you. Correct. If someone's coming to see you, they set out from home to come see you. Translation, it doesn't necessarily need to be in a high traffic area, a retail area. there's no value to you for impulse. For instance, a fast food would be the opposite of you. Needs to be on Franchise Row with a high traffic count, preferably a right turn coming out of town during traffic.

So they can stop in and pick up a Big Mac on the way home from the office with the skyline in their rearview mirror suburbs in their windshield. And that's how we pick out a Franchise Row fast food location. You're the opposite of that. Nobody gives a crap where you live. where this business lives, except you. Okay? So all we've got to do is have it close enough to you to survive.

How far is it from your home now? About 10 minutes. Okay. What would happen if you went 20 minutes directly out of town towards the country, the boondocks from your home? It would definitely get a lot cheaper. When we're working, we would have to go a little bit far. rather to go back to the warehouse to get stuff, but it's not that big of a deal.

But for $2,000 a month, I can make that drive a lot. Exactly. Oh, and let me help you with this. Your work's going to move towards your new building, because the city's growing that way. It's not growing the other way. That is very true. How would I, so once I found a place, I do want to buy, but I just... I don't want you to buy.

You're broke. I want you to rent again. Okay. You don't have the money to buy, do you? I have about 150 to 200. Yeah. That won't buy a place, will it? I could probably...

Put down the down payment, but you'll be in debt. I could find something for about $250 if I get lost. Really? Yeah. Wow. Okay, so could you find a place like we're talking about, the boondock place, 15 minutes from your home straight out of town for $250? I could, but I don't have...

So I have a limit, I have to move within 14 months, and I'm trying to save and save and save, so I don't have to buy money. You got $150 now, right? Yes. Okay. All right, here. I'm going to work you through this. Okay.

Here's what I did. I leased a building, a little different numbers, but it's still the same concept. That was 55,000 square feet. The value of the building at the time I leased it was about $3 million. I leased it for $5,000. five years with the option to buy it at any time for $5 million. Okay? How do you get them to do that deal?

Because I've asked people... Not everybody will do that deal. But if somebody that wants to sell it, let's just take it to your deal, okay? You went up and you said, okay, I'll give you $20,000 cash for an option. and I want to rent this place for $2,000 a month for three years, and I have the right any time during that three years to buy it for $250,000, and you've already got $20,000 of that, so it's $230,000. We'll apply the option money to the purchase.

Okay, so the incentive is that. During the three years, you scrape up the difference, which you can do. Yeah. And you close on the building. Okay. that makes sense. That's how I did the other deal. By the way, the end of the story is,

by the time I closed on it at $5 million, it was worth $14 million. The building went up faster than the option price because I locked in the option price five years earlier. If you lock this in at $250 today, when you close on it in three years, it might be worth $450. But you get to buy it for $250 because that's the deal.

So that $20,000 option, And that's kind of like, so that's an incentive for them to. To do the deal. Okay. This might be somebody that has it for sale, but says, okay, I'll give this young dude that's cooking with gas on his construction company a chance. I'm going to take the 20 grand. If he doesn't ever, if he just as a tenant, I put 20 grand in my pocket. But at the end of three years, I'll put it back up for sale, right?

Yeah. But that's the landlord. But he also says, or maybe he'll bring me the other 230 and we'll close on it. Okay. And you tell him, look, I'm almost there. I've got 150. I can, you know, I'm going to be able to get to your 230 before three years, but I don't know exactly when that's going to be.

So I need a little bit of grace here. I'll rent for three years with the right to buy it for 250. If they've got it for sale, not for lease, they might do that deal. Okay. It just means they're going to get their money a little bit later than March, you know, right? Yeah, yeah. Yeah, I've heard you talked about. that story all the time, but I never realized that the incentive in the beginning to get them

to make it worthwhile for them. Yeah. In my case, I did not give them any money up front, but I did do all my own tenant improvement. He didn't have to put any money into the building, and I took half the building as a tenant, and I paid $300,000 to renovate the building, which was the same thing as your option money, in a sense, right? Yeah. But he didn't actually have any, he just had an improved building, and he was cheap-scape,

and he didn't want to put him money into it. Okay. And he'd run the building down to nothing. So just be watching. Now, all of that said, let me back up two more steps before we go execute this plan, okay? Mm-hmm. You make all your money in the construction business.

It doesn't matter if you're a tenant the rest of your life. Your profit is not in the ownership of this business, a building. Your profit is in the running of the business. If you buy a building and the building starts to, tell your business what to do instead of your business telling your building what to do you've trapped your business that is the profit center into a bad deal because the landlord's stupid you okay our business we outgrew that 55,000 square foot building we moved into another building out back and another building out back and another building out back and we had six

different locations in a two-mile radius was driving us nuts all because I was trying to stay in my building and the real estate was telling the business what to do instead of the business building out what it needed building the real estate that it needed and that's when we made the decision to build this thing this campus that we've got that we can expand into for the next 10 years and so be careful that your real estate is not telling your business what to do real estate's side gig side hustle it's not the main play that's what we're looking for you got to good thing going with the construction company. Concentrate on that. If you just move and become a tenant, that is not a bad thing at all. Just pay some rent, go make some money because you're not in the real

estate business. You're in the construction business. Different thing. Don't get confused about that. That's where people, they get all hot and bothered about owning their building. And you don't necessarily have to to become very, very successful. So, please, don't get caught up in. that. Hey folks, remember better a weary warrior than a quivering critic. This world needs more high-quality leaders. So take courage and lead. I'm Dave Ramsey, your host.

Thanks for listening to the Entree Leadership Podcast.