EntreLeadership - When Is It Too Late to Stop a Bad Decision?

Episode Date: February 12, 2024

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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 leading, just like you, in the trenches. This is what we do. If you got a question you want to ask on the show, fill out the form at entrell leadership.com slash ask or give us a call at 8449-4-1070. leave a voicemail and we'll set you up to be a caller on this show. Zach is going to start off today with Columbus, Ohio. Hi, Zach. How are you? Hi, Dave. I'm well.

And I just want to say how delighted I am to speak with you, man. I'm a long-time listener. I feel like I've learned a ton from you and the whole Ramsey network. Thank you. How can we help? Yeah, so I'm 34 years old. You know, I do food trucks. We usually have somewhere between five and 15 employees.

depending on the time of year. Our top line revenue is about 850. So for the last several years, I feel like I've been kind of straddling between the treadmill operator or the Pathfinder. But I'm finally at a point in the business where it's grown, and I definitely need some help on the operational side.

I need leaders. I need thorough breads in my stable. So I'm a big fan of promoting from within. I've got a great team, but they're entry-level food service jobs. And I know that, you know, objectively, there's no one on my team currently who has the skill set necessary to do the job that I need done. So enter my girlfriend, my better half of nine years. And we recently made the decision to bring her into the company in what is effectively a COO role.

Today was actually her last day at her full-time job where she worked as an events director for a trade association that represents my industry. And when we first met, she actually operated her own food truck business for a couple years. So, you know, by all accounts, she's qualified. We've been together for most of the time that I've been in business, and she's well known and liked by my staff. So my question is, what can we do to stick the landing on her introductions to the company as an employee, or some of the pitfalls that we can avoid so that my existing team doesn't feel, you know, skipped over or perception and nepotism or feel like dad just called mom into the

room to lay down the law. There's a lot that could go on there wrong. Or am I just asking for trouble? No, I mean, then there's a lot. And it can be done. What's running through my head, and I'll get this out so I can get it out of my head and move on with the core of your question, is I do think the team, might react differently to your wife than they would do your girlfriend.

Okay. Okay. I get that you've been together nine years, but people in society do not count girlfriends the same as they count wives. Well, now you sound like her parents. Okay. Well, so maybe it's time to paint or get off the ladder, but that's a different subject.

Okay. Nine years, dude, seriously. Okay, anyway. The, uh, that might help the dynamic, but I wouldn't get married for that reason, but were you to get married for other good reasons, it probably would help with the dynamic.

Now, moving on, regardless, whether it's your wife or your girlfriend, coming in, any family member that comes in, and we'll just call her family for purposes of this discussion, okay, any nepotism issue, they have to do a couple of things, three of them come to mind immediately. One is she needs to early and often verbalize honor to the existing team for the work that has been done before she got there and honor to you

as the founder that built this thing from the ground up. And she needs to verbalize that to deflect that she's the new sheriff in town coming in here to slap down a bunch of new rules. I'm honor. Often she needs to verbalize honor to the existing team and to the founder, number one. Okay? Doesn't cost a thing, just some humility. Number two.

And one of the ways we do that around Ramsey, we honor the people that have been here a long time and have gutted it out when it was tougher around here and we didn't have shiny stuff. you know, I grab an English pound coin, and around the edges of the English pound is an Sir Isaac Newton quote. It says, we are standing on the shoulders of giants. And she needs to say that. I'm standing on the shoulders of giants. You guys have been cooking in the heat and in the cold. You've been driving trucks that sometimes worked and didn't work.

you've been serving the customers long before I got here. And Zach is a warrior, and Zach is an amazing businessman. And I'm so honored not only to be his girlfriend, but also to be the CEO, C-O-O-O-O-to-A-C-O-O-to-A-C-O-C-E-E-E-E-Lever. And that gets it off of her. She's deflecting, deflecting, deflecting. That's giving honor. Okay? And we do that here all the time.

We constantly are passing honor to the hard work that was done 10 years before. before you came to work here by somebody else on the team. You know, and you need to honor that if you work here, regardless of Ramsey or not, regardless of whether you're a Ramsey family member or not. That's thing one. Okay, thing two is she's going to have to work twice as hard just to be respected and be twice as good. When Rachel Cruz, my daughter was 16, 15 years old, she would get in front of 11,000 people, 10,000 people in an event and do this little short thing about our kids and money books.

and she was in charge of selling the money books at the back of the room, the children's books at the back of the room at the break. And so she helped me with the commercial going into the break. It was cute, funny, good-looking little teenager kid that had poise. She would run back there and sell books. But the whole day, I told her, if she doesn't work twice as hard as everybody on live events, every book, everything, she's not on her phone, she's not sitting back there with her feet up. She has to work twice as hard just to be respected.

Because they're all expecting her to be a half-butt. Okay, so give honor and plan on working twice as hard. Give everybody else the credit. You don't get any credit. If there's ego in your girlfriend, this ain't going to work. She's going to have to be a boss. She's one of the most diplomatic people I've ever met. Good.

She's going to have to be the boss of humility to pull this off. So she's honoring them, honoring you, and she's working twice as hard and handing out the credit when something goes right to somebody else. And that's a real leader, by the way. That's a good quality, high-quality leader. And then the third thing is, you've got to, if she wants to institute a change, 100% of change is painful to people, even if it's good change. We resist change, even if it's good change.

I update my stupid iPhone to an iPhone that is a better iPhone than the other one. I hate it. I hate the change. I hate having to learn something new, even though it's going to benefit me. And so that the pain of change, the organizational pain, needs to come on your back, not hers. If she wants to do something, she gets to let you cause it to happen. If she has a great idea, it has to be your fault. Even though we're going to give her credit later, I'm not trying to steal her credit from her,

but don't let them assign negative feelings to her due to change that she brought to the organization that needs to happen because you didn't know it needed to happen and she's smart. Does that make sense? Yeah, yeah. I mean, I think we can achieve that if we are regularly doing one-on-ones and communicating. And then you're taking it up and you're the one standing up in staff meeting going, Okay, guys, we've been sloppy on the POs. I've asked so-and-so, my girlfriend, whatever name is, to help me get that stuff straightened out.

And we're going to start doing this, this, and this with the POs. And it's a little tighter, and it used to be. We've been sloppy, and we're going to tighten that up because operationally we're sloppy, and that's a change. But get used to it. It's my fault. And really, the whole idea was hers, and you never even thought of it. But you're going to take the brunt of the pain. You're going to take the blame when they're whining about the change.

Nothing new there. Yeah, but that's part of leadership. You know, it's broad shoulders. And you can do that. You can do that. But all of that is just positioning so that she doesn't get crap on her. Now, two years from now, she will have earned the right with the team to walk in there and go, we're doing something different. She doesn't need to lean on you to do that.

She'll be a C-O at that point. But even if it wasn't your girlfriend or your wife, the new C-O that's brand new on the job needs to do. what I'm talking about. The CEO needs to take their crap for a while. Because otherwise, they lose the morale of the connectivity to the team before they had a chance of turning things around. So I think if you'll do those three things,

you'll be okay. And I can promise you, her parents are right. So I'm 100% sure of that. So I think it'll make a lot of difference. But if you do those three things, girlfriend, or wife or daughter or son or cousin or nephew or even outside new leader, they're going to have to do the three things we talked about. But more so when there's a family connection because people are going to get the eye

roll going like, oh, and now that's the girlfriend. Look at what she's doing. Oh, you know. Oh, that's they brought in his wife and dad gum, man. Woman is a test pilot for a broom factory. And, you know, look at what we got here. and, you know, she's going to catch all this crap. And you don't want the eye roll coming off the team because she didn't honor them and honor you and didn't work twice as hard.

And you didn't take up the difficulties of the change and let it hit. She's going to get accused of things that are not, that are at drama that didn't need to be. And so, you know, and all of that is from experience. We've experienced that at Ramsey. for sure, for sure. And so last thing is, and this, you didn't ask about this, but when you're at work, wear the CEO hat, not the boyfriend hat or the husband hat. And when you're at work, she's the C.O. And she will talk to you like she would talk to the CEO of a company that she worked for. and you will talk to her like a C-O, not in a cold way, but, you know, how do I treat my team, my leaders

with dignity? But I don't give them my husband voice, okay? You don't give her the boyfriend voice. You know, you say this is a C-O. If the C-O was not related to me in any way, shape, or form, I would talk to the C-O this way. I would expect this. I would handle conflict this way. but she can't, you know, start going, well, girlfriend, don't do this, you know, or whatever the crap, that, whatever that sounds like, I don't know what that sounds like, but don't do that, you know. But I had a husband and wife a while back, Zach, that I was at a VIP section, an entree leadership event, and she was the CFO. He was the CEO.

And they fought like cats and dogs at work. They, like, had marital fights at work. And I looked at him, and I said, would you talk to your CFO that way? No. Well, you are. You need to stop it. I looked at her.

I said, if you talk to the CEO, the way you talk to your CEO, you'd have your little butt fired. Nobody put up with your mouth. You need to stop talking to your CEO that way at work. Y'all need to change hats. Now, if you want to talk to your husband that way at home, that's a marital discussion. That's a different discussion. But you can't have your wife voice going as the CFO. It doesn't work.

And she goes, well, I'm Hispanic. I said, that ain't got to do anything to being stupid. Don't do this. It's not a Hispanic disease. It's a, you're doing the wrong thing right. I mean, you're doing the right thing the wrong way. So you need to put on your CFO hat and address this in a business-like professional manner with the CEO, with dignity and respect so that you don't get fired. And she goes, well, he's already fired me three times.

And I'm going, yeah, you probably deserved it. But he also shouldn't be talking to you that way either. So you all got, it's the same kind of thing, Zach. So if y'all wear those hats. Like Henry Cloud talks about, you wear the CEO hat at work. She wears the CEO hat. And when you get home, you wear the husband and wife hat. At least that's my prediction in your future and so on.

I'm pretty subtle about this act, but I hope the outfit's helping. Love you, brother. Thank you for calling in, man. It's an honor to talk to you. It sounds like you've got a great business and some really fun stuff ahead of you. This is the Entry Leadership Podcast. If I ask you what your profits and losses were this week, would you know? The truth is, if you don't stay on top of your numbers, you're going to fail at business.

You can't out-earn disorganization or the need to handle your money or finances wisely. But you can use some simple practices and wise decision-making to have a successful growing business. You don't even have to become a money expert. In the entree leader's guide to business finances, you'll learn the profit principles and the key practices that we've used to grow Ramsey solutions over the last 30 years. The cool thing is this Entree Leaders Guide to Business Finances, it's free. It's a free guide, and it'll simplify the foundational components of managing your revenue

and expenses. Go to Entreleadership.com slash finances. Download the free guide, Entreeleadership.com slash finances. Hey, guys, some of you are leaving some nice reviews. I appreciate it. The five-star reviews help the show move forward. The sharing, when you click the share button, it helps people know about the show. And, of course, when you subscribe, that's a big deal.

All of those things help the algorithm. Thank you very much. One of the reviews says, Best Business Podcast on the planet. Well, we think so. This is a great podcast for all entrepreneurs, new and old, super applicable concepts that transfer to any industry. Good. Great show. Another one says, help me to start thinking about my job from a business standpoint,

making me a better leader and employee. Ooh, I like that. Last one says, makes me excited for Mondays. I love this podcast. I listen to it every week. It makes my Monday much better. I'm a small business owner about to celebrate 10 years as an entrepreneur and the practical wisdom and insight gained from listening to Dave.

The callers is fantastic. I appreciate the down-to-earth and hands-on nature of the podcast versus theory and abstract processing. We don't do abstract processing. I don't even know how. I highly recommend this podcast to anyone running a business and often send episodes. Thank you. to friends and people on my team.

My only complaint is that there's only one episode a week. Give us more. Oh, we want you to have FOMO, so we're going to keep doing it, I'm promising. Tara is with us in Cadillac, Michigan. Hi, Tara. How are you? Hey, Dave. I'm good.

How are you? Better than I deserve. What's up? We are a longtime Dave Vangelist, first of all. Thank you. You're welcome. Second of all, I am a vice president, treasurer, secretary doing all the behind the scene stuff because I'm also a middle school teacher of a small rural medical practice that my husband and I own and operate. Our top line last year was $697,000.

So far this year, we have $7,000 to $8,000, very committed, super hardworking employees. And my question is, how do we bonus? our team members in a way that they equate that into their overall pay package, but still incentivize hard work. Okay. Well, there's a couple of things we can talk about there. One is in a group of people where you've got 10 people or less like this, sometimes money spent on experiences and food is better than the actual cash.

Okay. So, like, we have done things over the years. You can go to the local movie theater and rent the entire theater out for 500 bucks, private viewing. And especially if you got a young crew and they got a bunch of kids, have, you know, we played, we took our Ramsey Event Center the other day and had movie night with Madagascar and had the, you know, had the kids, kids thing up there. And there was like 3,000 people there, like counting little kids running everywhere. You know, we filled up the thing. There's a thousand of us, but spouses and little kids, you know, we just had movie night. And it's, it doesn't cost a lot, and yet it shows a lot of intentionality.

Just random pizza on Thursday afternoon, you know, or Thursday for lunch. Don't buy anything. So, you know, that kind of thing. Little stuff like that, bowling night take everybody. I don't care, whatever it is. You know, so you can spend a little bit of money. it doesn't cost a lot and shows a lot of appreciation and intentionality. Number one, I would start doing a lot of that kind of stuff.

I'd make a list of 10 of those things you can try and try to do one a month for the next 12 months and see what happens. You know, just a little thing. Again, pizza. I know a guy on a construction site Friday afternoon, he brought a keg of beer over, you know, that kind of stuff. Whatever. I don't care what you do, but just something that's consistent with who you are and who they are and fits the demographic and the age group and that kind of stuff. Now, then to the other part, and this works for companies regardless of size, we use

this concept, these concepts today, and we used them back then, too. I've tried a lot of profit-sharing type ideas. I'll tell you one that didn't work. It was an object failure. We were giving, we were allocating a percentage of our net profits each month, but there wasn't a lot of money because in your case, there's not a ton of money there. It's not like there's $100,000 you're going to share out of this, okay? So we're allocating a percentage of our net profits because like you, we believe in sharing and honoring the hard work of the team. And, but it was so little that if we gave it to a monthly, it would be like buy you a cup of coffee or something.

something. You know, it was like a joke. So we did it to let it build up and did quarterly profit sharing. And then I had this horrible experience. Quarterly profit sharing got up to the biggest year it was before I shut it down was $300,000 one year, okay, which is a lot of money for me. I'm from Antioch, Tennessee, right? And so that was a lot. And it would be, it would be impossible out of $687 or $676 or whatever, right? But, I mean, it was a lot of money. And we had a lady quit who was making, we were paying her salary was market. And she had been with us a while, and her portion of the profit sharing was like $5,000 that year.

And she quit. And when her boss, who was upset that she was leaving, her lead, said, why are you leaving? She said, well, I got a raise. And he said, well, what are you making? And I forget what it was. I'll make it up right now. but say she was making 42 here. And she said, well, I got a raise to 43.

And he said, you made 48 here last year. Right. And we've had that same thing. Like last year, it was several thousand dollars. Here's what she said. This is when I canceled the whole dead gun thing. She said, it comes once a quarter and I can't, I don't know if it's going to come or not. So I don't count that.

And I went, I gave you people $400,000 and you don't. count that? Oh my God. I about had a cow right there in the middle of the floor. Not in her face, but you know what I'm saying? I mean, it was a sudden realization that my profit sharing was worthless. They did not count it. So I stopped it immediately. I said, we're not doing anymore. And then we reworked it. Now we do it monthly. So a couple of things is, number one i pay we pay market rate or above as your standard base income yeah profit sharing is extra it is it you know it's not counted in your income you're not going to count it it's it's a gravy on the biscuit it's me being generous i own the business i can take it all

home but i want to share with the people that work here it's just pure generosity it is not compensation and so i look at it that way they look at that way the second thing is is we started doing it monthly when we kicked it back in. And every single month we get up and describe to the whole team which areas made money, which areas lost money, which areas set a record, yay, which areas are struggling, boo. Here's an example of someone that did something that cut expenses. And then we say profits overall are up. and so your check this month is going to be a little bit more than it was last month with

the profit sharing in it. Yay! And everybody say it together. Here's how profits work. Profits happen when revenues go and everybody says up and when expenses go and everybody says down. And remember, you're all self-employed. We say that every month for the past 15 years, we had missed a month. And everybody knows that's where profits.

come from. So they know that if they're doing something to help expenses go down or revenues go up, they're adding to profits and they get to share in that. And it's very much in your face. That that's how that's where. So if you guys screw around and you let expenses get out of control, guess what? Profits go down and so does your check. You know? And so on. That kind of thing. So that's what we do. Number one, you got to set it up to where they count it. Number two, you set it up, you remind them all the time. And then number three, make sure you're paying a base wage that is good anyway, and regardless of what you're doing here, so that this is not, for a while we tried to make profit sharing the thing that, and we were very generous with profit sharing,

but we tried to make it part of your comp plan to get you to market, and we paid you a little bit above market, including profit sharing. Now we pay you a little bit above market plus profit sharing, and that's changed the whole attitude around the thing and making it part of being at market with the comp. No, I wouldn't do that. I think that's a mistake. It was a mistake we made. I would recommend not doing it, but screwed us up.

There you go. This is the Entree Leadership podcast. This is the Entree Leadership podcast. If you haven't heard the rumor, we love small business people. You're 54% of the gross domestic product, the total of all goods and services produced in the United States. 54% is done by businesses that have 500 or less employees.

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We'd love to have you here. Thanks for being with us. Sal is on the line. Sal is in Columbia, South Carolina. Hi, Sal, how are you? Hey, Mr. Dave. Thank you so much for all you do. You too.

How can we help? Yes. Yes. So I bought a feed and seed store in 2007 and four years ago I sold the property in order to bring my business to the farm of the eighth generation on this property. And I wanted to get out of the feed and seed because all the big box stores and we just couldn't compete anymore. And I came to the farm. So we teach homesteading. We sell seedlings. We have a greenhouse, teach gardening, all kind of do. different classes. So you closed the business? No, I did not. I just moved. I'm sorry. I thought you got out of the feed-to-seed business. Well, I did. I did. So this is what I need help with. Well, part of what I need help with. So I'm rebranding the business. I sold the property.

Yeah. And then, yeah. And then you went to homesteading stuff instead of feed and seed. I'm confused. Yes, I did. So I have a huge following. I left there with like 18,000 followers on Facebook. book and so I wanted to keep the sows all the time he feeding, well, the sows and come here. So I sold plant seeds. That was my primary business back there. And slowly I was stopping, you know, selling feed and I was slowly stopping the hardware. We had some big box stores move like four miles from us. Yeah, I know.

Okay. But you basically got out. of that business. You sold the real estate and you slowly stopped selling those lines. So you have a whole new business now. So you have a whole new business. I do. Okay. And that's hard to communicate. Yes. So thank you so much. Yes. So I've been here four years. Things are going pretty good. But my, I know you're the king of boundaries and I am having such a hard time with boundaries because this is a seasonal business. So we went to a business that was open six days a week to a business that's open three days a week

and really only busy from February to mid-June. And then depending on the weather, how hot it is in South Carolina, we're busy again in the fall for about a month and two weeks. So the other days we're producing what we sell as far as the plant, doing marketing, accounting, and except. et cetera. And I actually put a gate up because we have a community here. We've got a lot of farmers. We've got a lot of backyard growers. And I put a gate up. So that's one boundary I had. So people don't just freely walk on to the property, you know, all hours a day. I want to make it feel like home.

But at the same time, I can't keep getting interrupted because we've got to produce the seedlings. We've got to get ready for classes. I do marketing. We're doing YouTube. A lot of other stuff. But the people coming through the gate are where the money comes from. Well, they do. Are you doing a bunch of online money?

Yes, yes. So that's growing. So what percentage of your revenue is online and what percentage comes through the gate? It's been growing, so it's about 35% now. Online? Yes. So you're closing the gate on 65% of your revenue. revenue? Well, the problem is, well, the big problem is that we need to plant the seedlings

in order to sell. So we need the Wednesday and Thursday. I get that, but nobody's, you said the season is shut down. If there's a very low number of people coming through the gate, they're not interrupting you that much. Well, everybody likes the place and a lot of people come up and ask questions, which I love. I love talking to people. At the same time, I've got to sit down here and take care of the accounting. I've got to take care of the marketing. What's your top line?

What do you mean by that? I'm sorry. What are you going to, what's your gross revenue is going to be in 23? So we did 150 gross. $150,000. Yes, sir. Okay. Now we're only busy about five.

I have another business, and then I also do a lot of other jobs, too. But my passion is really teaching people how to grow, you know, selling them high-quality seeds, plants. Yeah, but your money's coming from people coming through the gate and buying stuff from you. They are, but it's not enough to hire somebody to be here. Well, we're only busy for five months, too. Then they're not bothering you the other months. Well, but we're also, on those days, we're now teaching classes and we are,

don't they have to come through the gate? Are you teaching classes online or they coming through the gate for the class? A little bit of both, not live online. So teaching classes going out, setting up gardening beds. So pretty much the business almost shut down, except for the farm store for Tuesday, Friday, Saturday, the rest of the year. where we're, it's down a little bit of seeds here and there, a little bit of jam, you know, talking to people pretty much on Tuesday, Friday, Saturday when we're not busy on the off season, I'm trying to keep myself busy on the marketing side. But on things that I can, like, actually stop and then go talk to people with, not something that takes, like, a humongous amount of brain power or, you know, a huge thing where I have a lot of volunteers and we sit there planting. and also videotaping on the gardening.

Okay. But I... So here's the thing. When the customer comes in the front door of your online or they come in the front gate of your farm, you need to set your mind set up and your hours up to where they're not a bother. I don't like talking to you and hearing that your customers are bothering you. No, no, no.

That's their job to bother you. job is to take care of them. No, they're interrupting your little class. They're interrupting your little video shoot for your little YouTube cameo appearance, and I don't give a crap about that. I want you to take care of your customer. And the only reason you're doing YouTube has caused somebody to come through the front gate or come online and do the deal. We're not doing YouTube for art. We're doing it for business. It's a marketing ploy. You're not trying to become a YouTube star. You're trying to sell stuff. And you need to get back in the business selling stuff. And the way you sell stuff,

as you interact with a customer and you love the customer. Their customer is not an interruption. Everything else is an interruption. The customer's job one. So if you need to set, okay, we're open in the mornings from 9 to noon, except on Fridays and Saturdays, and we're open all day, or whatever it is, you sit business hours, that's fine. There are some restaurants that aren't open on Monday night.

That's fine. I got no issue. There's some restaurants that aren't open on Sundays. That's fine. I got no issue. I'm not mad as the customer on that, and they're not destroying their business model on that. But you got hours all over the place, back forth, sideways from Sunday. I've been talking to you for 10 minutes.

I still can't figure out when you're open. And I guarantee your customer can't figure it out either. So you've got to get yourself dialed in here and say this is the, in the off season, we have two sets of hours, off season and on season. On season, this is when we're open. Off season, this is when we're open. Post those hours online and on the front. gate on a really nice sign and close the gate when you're closed. But don't close the gate, be shooting a YouTube thing when customers would have been standing out there giving you money.

That's a bad trade. The reason that you do YouTube is not for the artistic expression of it. It is for marketing. It is to get people to buy your stuff so you can serve them and they give you their money. That's the idea. So customers are not an interruption. And so just set your hours up clearly. You've not been clear. I know that because you can't be clear with me. I can't understand what you're doing. And so you've got to have very distinct hours off season, on season, certain days, this is what it is, and then don't move it around 63 times. Let them get used to the rhythm of when you're open and when you're not. Like, all of us that walk the planet are sure chick-fil-a's not open on Sunday. We're used to that rhythm. They're very clear. Okay. Jesus

Chicken can't get it on Sunday. We all know that. Okay. It's a done thing. We're not mad about it. We get it. We get what they're doing. Okay. Sal's not open on Tuesdays because she's filming and doing classes on Tuesdays. Tuesday, she's shut down.

We all know that. If she's shut down on Tuesday all the time. And it's not, well, I don't know because sometimes I'm doing this. No, it needs to be set. A set of hours on your internet site, on your website and on your front gate as well. And then spread the word in the community and be very, very, very clear of what you're doing and where you are. That's what you've got to do. Don't run your customers off by being inconsistent or by treating them as a bother. That's a bad plan. Wow. This is the Entree Leadership Podcast.

This is the Entree Leadership podcast. You small business people are heroes and we're here for you. We love you so much. We're going to tell you the truth. We're going to help you win. We're going to coach you up, baby. Thank you for being with us. We're honored. Thanks for being here. Jamie is with us. Jamie is in West Palm Beach, Florida. Hi, Jamie. How are you? Hello, Dave. How are you? Better than I deserve. What's up in your world? Well, first, thank you so much for having me on. I'm honored. So I own and operate a small business, but we are a cake shop like no other. Yum. We are an experience from the moment that you step in front of our door before you walk. into our shop. We're very Instagrammable. And then obviously when you open the door, the smell of

the bakery is just amazing. But we also serve daily cupcakes, cupcakes, cookies. We have party items and so much more that we have every day. I've already gained five pounds. Just listening to this. This is amazing. I love it. Well, our store is very special. It's only 600 square feet, but we're small, but we're very mighty, I think. Just for reference last month, we sold a little over 4,000 different items. I started this business out of my house 10 years ago. You are amazing. Because of the demand, I quickly, or not really quickly, in between that time, I had two babies.

I was still running the house. I wanted to be home with them, but I can't ever sit still. So I continued to run the business, and it kept growing and growing. So what was your gross revenues in 23? What were you redo this year? Last year? Well, we're pretty good. We hit 443 last year.

So you're making a half million dollars a year top line. Okay, good. That's a lot of cake. Well done. It is a lot of cake. So we are growing and growing. We're continuing to grow. What's your profit on?

What's your profit on a half million dollars? Oh my gosh. I'm sorry? I said, oh my gosh. I mean, we're doing great. Well, when you did your taxes, what did you pay taxes on? That's your profit. Like, I'm not the numbers, the numbers.

My husband runs that. Did I mention I run this with him? I mean, we've done well. We have money in the bank and we're still going. We started with four employees. Now we have nine women in the back front running business. And then like I said, my husband who handles all that money side finances. Thank goodness.

I'm the creative mind and it all. So how can I help you today? Wanting to grow. We feel like we've gotten the business to a really good point. And we're kind of in the middle of what do we do next? Do we try and open another location or do we go down the franchising route? And my question for you is, you know, how do you know when it's time to grow and how do you know the direct, like the best direction to go in for that growth? I don't think you're franchisable yet.

You don't make enough money and you don't have enough systems dialed in yet to be franchisable. We have a lot of systems. You don't even know your numbers, okay? You're a tiny little operation in 600 square feet. You're doing wonderful work. It's beautiful. It's a great experience. you're not franchisable yet.

You need to have done this on a little more scale to franchise it. I would open a couple more locations, one to start with, and then another one after you get that one operating properly. When you get up to three, then you can see that this can operate without you in the building and still have the magic. Then, and you've got systems that are dialed in that are repeatable across three different locations, and then you're making $300,000 or $400,000. Maybe you've got your profit margins up per store even, which wouldn't be bad at all.

you may not be charging enough for these cakes in this experience. And once you get all that going, then you might have a franchisable operation. The problem with franchising is it's not as simple as just duplicating the one store because you've got huge legal expenses to get to meet the franchising law. Right. We've already started the process. I mean, we've been... Well, then why did you call me?

I mean, what did you need me for? Because I just feel like, you know, I feel like we're there and we do have a lot of systems in play. Okay. So you're already, how much money have you spent on the legal fees on franchising so far? Well, we haven't had to do all. We're at the very early stages of all of that. You're going to drop 100K to get ready to franchise. Yeah.

So we do have some really good systems in play. Like, I know that I can, I can leave and that shop is going to run. And we have, you know, we have a customer can come into our bakery and say, oh, I need a cake like today. Okay, can you come back in 20 minutes? Sure. My girl's in the back can lift up the cake and the customer can come back. And all the magic that is in the air doesn't leave when you leave the building? No, it does not.

Okay. Because that's what you sold me on early in the conversation that was the, that there's a magic thing happening in the 600 square feet. and I'm buying that. I believe that. Yeah. And if you've got it where it's delegatable, that's a first step. I personally would not spend the money on franchising until I had a couple of different branches that were making money, though.

You do what you want to do. Some people do that. And if that's the direction you all want to go, it's fine. We'll still be friends. But what people don't know about franchising is that it costs a lot of money to become the franchisor. in preparing the proper legal documents, the FDDs, the whole thing. It's a stack of paper two inches thick to get ready to be a franchise.

And you have to have something that the franchisee sees that they can't figure out on their own. It has to be a system, a proprietary methodology, a brand, something that they can't do on their own, that you can do for them. and I haven't heard that yet here. So I think you got a little work to do to get ready for that. That's my opinion. You called and that's my opinion, and I'm an expert on my opinion, so I'll give you that.

But I think you got something special going there. But personally, I would scale it a little bit before I'd spend the money to franchise it because franchising is not always a dream come true. I'll just sidebar on that for the rest of you out there. franchising seems to come up a lot these days. It seems to be a thing on TikTok. Everybody's talking about it.

And I want you to, here's what happens, okay? Let's say you have an actual operation, whether it's Jamie's or somebody else's. And you have something that's very different and it's very sellable. And you even have a name that people are starting to recognize. And then you franchise that. A franchisee buys your systems because they don't have them. They buy your name recognition because they don't have. it to open the store.

And in the early stages, the franchisee, the franchisor is real sure that the franchisee is successful because of the franchisor. After it's been running for five years, the franchisee starts to think that they're successful because of them, because of their hard work, not because of the specialness of the franchise. And so there's always a love-hate relationship that. can develop and usually does between franchisees and franchisors. It is a very difficult thing to scale without creating that love-hate relationship because the franchisor always feels like that the franchisee is successful because of their systems and their name and their specialness.

The franchisee always feels like they're successful because of their hard work, their ingenuity, not because of the specialness of the franchise. And they begin to resent paying the royalties. you know typically the franchise is a price up front plus a percentage of gross revenues as a royalty and they begin to resent paying out that for that specialness and for that name because they think they are the one that created the success and the truth is both of you needed to be there to be the success the truth is it's a little of both of you if you're running a successful franchise it's partly because of your franchisor not in spite of them and it's partly because of your hard work but these guys, there's this constant thing.

The franchisee feels like they did it by themselves more than with the franchisor, and the franchisor feels like the franchisee doesn't appreciate all that they did for them. And it's a problem, y'all. It's a problem. I know several people that own that are franchisors of, you know, 60 locations, 100 location, 30 locations, and they kind of just wish they had branch offices. be much easier to hire and fire. It'd be much easier to run the business and delegate,

and a lot of people that get into it wish they didn't. But they're in it, and once you're in it, you're there. So that's the thing. Anyway, all that to say, Jamie, you're going to spend a lot of money up front that you have not anticipated yet, or you're going to end up being in violation of one of these 73,000 laws

that the Federal Trade Commission has for franchises. You need to be real careful that you're legally compliant and to become legally compliant is expensive. So be careful with that, guys. That's how that works, boys and girls. We appreciate you being with us. Remember, better-aware 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.