From the headquarters of Ramsey Solutions, this is Entree Leadership. I'm Dave Ramsey, your host with over 30 years of experience leading in the trenches right alongside you. If you have a question you want to ask on the show, click the link in the description. We'd love to have you. Amanda is with us in Bowling Green, Kentucky. Hi, Amanda. How are you? I'm doing good. How are you? Better than I deserve. What's up? So I am with the, a row construction company. I'm the office manager. Um, I guess a part owner. My husband is part owner. It's in a partnership. Um, I guess I do bookkeeping, all that, all the works, HR, all in one person. Um, we have about 40 employees and we ran about 1.8 million in revenue last year. Okay, good. Um, so, and that's only our second year in business. so my question for you is i want an outside opinion um that's not got any emotions tied to it um uh this is a family business and i'm bringing in another sibling that doesn't carry any of the financial risk or much of the workload um and i can give you a little backstory of i'm sorry you just opened it how is it a family business already so no it was a family business to begin with my My husband was the money man and he went with his father and his father ran the business. So, um, your husband put up the money to start the business for his dad. Correct. Yes. How long ago? Um, it's been two years. Oh, this. Yeah. Okay. So your husband put up the money with it and he and his dad started a business. Correct. Okay. Now what was the arrangement between them on ownership? Okay. So dad is 51 and son is 49. But son put up all the money. Correct. Okay. Does your husband work also in the business? He does. Yeah. As it's complicated, he works his nine to five. Um, he will be coming over to the business full time this year. Um, but he's more or less just done. So he just put up money and got 49 and his dad was running a business and he was the money partner. Okay. That's how it started, right? Correct. And then I am the wife of, so I'm the daughter-in-law and I do all of the, correct. Yes. I do brand in the office. Yeah. So what it is, is there's, backstory is there's a lot of favoritism in the family that leans toward the other sibling. And I kind of was the one that exposed that when I come along and my husband always thought that that was the norm, that everybody was like that. The girl was always favorite and just because he was the boy. Um, and so I've kind of always just been the one that was kind of the grinder of the gears because I was like, that's not normal. You don't get treated like that just because you're a girl. Um, so keep that in mind. Whenever my husband, whenever they started to do the business, my father-in-law was went through all the other avenues to try to get the money for itself. Um, and it wouldn't, it didn't work out. Um, and my, we knew that this was, this was before we found you. So we've been doing your, your, your principles for about a year, me and my husband and I were on baby step three. Um, so I'm sorry, I'm a little nervous, but the sister's wanting to come to work there? No, not necessarily. She already is here as an employee and she works one day a week. Um, and I don't mean this, and this is why I want an outside opinion. It's not a lot of, um, it's not very competent in that area and it's kind of been thrown on her just because her parents want her involved. Um, and why do they want her involved? because they say this is one whole family business. It's never me and my son. It's always this is the family business. And whenever my husband approached his dad about, you know, here, I could give you the money to front this, and we'll do 50-50 is what the original agreement was. And then his dad come back and said, no, it has to be 51-49. So we agreed to that. or my husband, and he agreed to that. But in three years, it would go to thirds. It would go to what? To thirds. And his sister would be brought in once our money was all paid back. Okay. Has your money been paid back? It's been on track. We have another year and a half. Okay. So it looks like you're going to get your money back on schedule. Yes. Yes, 100%. Okay. So all that's clear. But in the agreement, it said that the thirds would be put into place if and when her husband worked for the business as well. Okay, here's the sticky part. They recently moved away and left for another calling in life. He took a leadership role at a church, and he has another job. However, we don't know how to approach the situation. Um, do we let it go when the three years is up and still let it go to thirds, even though they're not here and they're not really super involved or do, because that was what was said, or do we offer her some kind of buyout? What happens to the parents third when the parents die? That's not been discussed. Okay. All right. Um, we don't know how to approach that. I want it. I want to do the right thing and I don't want emotions tied to it because it's not. It's not emotions. You guys are horrible at planning. Yeah, I don't disagree. I mean, you did not begin with the end in mind, and you allowed a 5139 when you put up all the money. How much money did you all put up? $100,000. Okay. Wow. All right. Yeah. And I would say this. He with the gold makes the rules, so I wouldn't have done the 5139, and you have to lay it out. Now, then to back up and say one possible way to solve this and your emotions as well is, um, I think you've convoluted. I and this agreement is part of the problem but I think you guys the whole bunch as convoluted um working there with ownership So some of the famous family business writings are by a professor in Minnesota named John Ward. He's kind of the father of this stuff. Back in the 50s, he wrote this stuff. And he did a Venn diagram, you know, the three circles overlapping. You know what that is? Yes, sir. Okay. And one of the circles is family, one of the circles is owner, and one of the circles is employee. Okay? And they all three intersect. So you could be all three of those. At this moment, the only one that is all three of those is your father-in-law. He's the only one that's an employee that works there every day. and is an owner and is in the family. You are an employee and are in the family, but you are not an owner. Your husband is not an employee yet, but is a family member and is an owner. You follow me? Okay. And so if you separate that stuff, you could have owners that share in the profits equally that don't work there. but if you're doing that the people that work there need to be paid market rate for the job they're doing and so your office manager hr of a two million dollar company you need to be paid for doing that not profits you need to be paid for your job uh little sister-in-law needs to be paid for working one day a week poorly okay that's all she gets paid right now dad gets paid for being the president and the ceo and the founder and that works there every day your husband does not get paid okay he doesn't work there except as an owner on profit distributions And so you cannot work there. So your sister-in-law, your father-in-law, your husband could own thirds, and she could work one day a week and your husband could never work there. And that would work just fine as long as you were paid for what you're doing, she's paid for what she's doing, and then what's left over after everybody gets paid is profits, and the profits are split three ways if there's three owners. If you separate ownership from employment, in your mind, it clears up a lot of this stuff. Okay. Now, then you get back to the emotions of, do I want to own a business with her with all this backstory and family dysfunction? And the answer is no, I don't. 100%. And that's not an emotional thing. it's just she's really not interested he's just interested in giving her some money and so if she wants to go be a pastor's wife and move away three towns over and not work there at all and you guys as a family decide that we're going to allow that and change the agreement that was made then they could get one third of the profits and sit over there and never show up at the office as an owner they're a stockholder so if you own stock in home depot you get the benefits of owning stock without working at home depot that's what i'm talking about okay so it's very possible you could just change the agreement and say um dad wants her to have a third and um can i ask this but what i would do personally is i would just renegotiate the deal We'll get right back to that episode, but first, for a lot of entrepreneurs, healthcare is one of the most unpredictable line items in the budget. That's why I want you to look at Christian Healthcare Ministries. 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If we did, or if she's brought in as owner, is it, should it be required that she should have the money to put in since her husband did? No, you guys can decide to give somebody a third of the business. Okay. The generation two of Ramsey's own one-third of Ramsey each, and I own 1% still. I own the only voting stock. Okay. And none of them put in any money at all. Okay. And one of them doesn't work here, and two of them do, and they get paid for what they do working here. And they get paid some percentage of profits, not a third, because we don't distribute it that way here. But anyway, so what I would do in this situation is, if I'm going to stay in this mess, I don't want her in the building. She's only there to collect the third. It's the only reason she's there, right? I would rather her go be a pastor's wife and get out of the way. We have tried that. We've tried that. And it's new. Well, if she got to keep her third, would she leave? Yeah, sure. The only reason she's over there, she wants that third. So if dad wants to give her a third, that's fine. I'm not sure I'm going to negotiate that deal, though. So, okay, if brother-in-law is not going to work there, then the deal we made is over. So we have to negotiate a new deal So what could the new deal be It could be anything we want to dream up Okay And it could be that everybody gets a third And, um, you, you know, if your husband's working there, he gets the other third when your parents die. I don't want to end up at the end of the story. So number one, first thing I want to do is I want to renegotiate the deal because, because brother-in-law is not coming. So the other deal is not being done. And so we have to come up with a new plan. And so we renegotiate. Number two, part of the renegotiation is we have to have an estate plan that when mom and dad die, we accept that episode as well. Okay. What happens to their portion when they die as a part of the renegotiation? That has to be decided ahead of time. Mm-hmm. Mm-hmm. Okay. I'm not sure listening to you, you're ever going to work there and be happy. You have a lot of resentment. Yeah, I don't disagree. That's why I called to get an outside opinion. You've been hurt by the lack of fairness in your mind, and it may be true. I think it might be true, but your perception of this is that your family has been treated unfairly, and you resent that, and you have to walk in every day and work for the guy that did that. Yep. That's very hard. Very hard. Yeah. So I think your husband needs to hear that from his wife. He feels the same way. Okay. It might be okay to collect your money and leave. 18 months from now you get paid out and your husband you guys gave a hundred thousand you got your hundred thousand back and you leave and just go dad it's good we don't we don't want to be in this family business and no harm done that'd be okay and if he wants to give everybody a third when he dies or something you know we'll talk about it but I really don't want to be in equal voting um with um whatever we want to name sister-in-law you know I mean but I I just um And because this thing has been pulled together and forced upon people, none of the players are getting out of this what they want except the old man. And he feels like he's doing something good for the family. But in the meantime, he left muddy boot prints all over their living room. Yeah, and it was addressed. It shouldn't have been from me, but it was addressed about the favoritism. And they admitted it. They admitted that they have give her more attention. And it doesn't make it right. I would never bring that up again. Yes, sir. I don't think that's going to be helpful for your family. Yeah. I think you just have to accept that that's there, and it kind of becomes a joke. And, you know, it's just, oh, well, whatever. But you've got to set your life up in such a way where that stuff doesn't matter much. Yes. and it may be that you take this whole thing off the table. As a matter of fact, if you and your husband sit down and talk about it and you emotionally are ready to walk away, that changes the tone of the renegotiation. At a minimum, you can say, we're either going to get these three things out of this renegotiation or we're leaving and we really probably should just leave. he's talked about that he's talked about like going and talking with his dad about when she comes in if he could since they're not here you know can we make it to where i buy her out and i offer her something since she's not involved or do i just let it go because i'll be honest with you i mean my husband doesn't want out this is his dream um is to be and and own his own business and do this. No, he could own his own business. He just doesn't have to do it with this bunch. I guess he just has to start over. This doesn't sound like a dream to me. It sounds like a nightmare the way it's unfolding because nobody's happy. You know, you, you guys are not getting from this what you want. And I don't think the price you're paying emotionally is worth the juice that you're getting out of this. I know it's not. So anyway, so let's, let's recap then on that so i i want to renegotiate in the context of i'm willing to walk away and you guys need to talk seriously of if you got everything you wanted would you still want to come to work there every day you might not yeah or maybe he goes to work there because he loves it and you go work somewhere else yeah because you're you're you're burnt on both ends i mean It comes through in your voice. And that's not wrong. It's just there's a lot of hurt here. And to get through that's going to require you guys to spend a lot of time on relationships. So the healthiest thing might be for you to not work there anymore at a minimum. And if he goes to work there, that's fine. But you need to renegotiate this. It needs to include the estate plan as well. And we need to separate what you get paid for. You get paid for ownership based on your percentage of profits after the people that work there get paid market rate for working there and being an employee, even if they're family members. So you work one day a week, you get paid for one day a week, and so on. So, hey, thanks for the call. I'll give you a 10% chance that this works out where you're happy if you stay in this. Because I don't think all the people are going to move this around enough that you feel right about it. Okay, so what happened there? If you're a family business and you're listening to this, what's your takeaway? What's going on? Well, first thing is you have to separate ownership, the splitting of profits, from the roles inside the business. The roles inside the business you get paid for what you do Rachel Cruz is a is my daughter. She gets paid on the same Schedule of commissions and royalties on books and speaking percentages and everything else that dr John Deloney Who not a family member and another Ramsey personality gets paid She gets paid the exact same Now she doesn make the same money because sometimes she sells more or less books or more or less speaking gigs, right? But they get paid the same percentages. So she's paid like any other Ramsey personality. My son, Daniel Ramsey, is the president of the company, and he gets paid to be the president of a $300 million business. what's that worth? That's what he's paid. My daughter Denise does not work here. She runs our family foundation and she gets paid by the family foundation to run the family foundation. Each of the three of them are owners and they get a percentage of the profits for being an owner whether they work here or not. So Denise gets the same amount on that that Rachel and Daniel gets. exactly the same because they own the same percentages okay so that's how that works the second lesson that you need to take away from something like this is begin with the end in mind dr stephen covey talks about that or talked about that and that that means that you need to say okay the end is when the old man dies what's going to happen that's the estate plan Okay? So there are four stages then to this business of theirs. There's the entry point with the money, and are we going to be okay with $49.51? Don't recommend that ever. Okay? I'm not putting up the money and someone else has control. Not a chance. Okay? I put up the money, I got control. If it's $51.49, I'm the 51 if I put up the money. You work for me, by God. I'm the guy with the money. You didn't have the money to do it. So all you had was an idea. Everybody's got a dadgum idea. Okay, so no. But you got to negotiate that stage. And then you go, okay, then what's going to happen? Then if you sign up for when brother-in-law comes, that's what you signed up for. Shut up. That's what you signed up for. When the deal started, that's what you signed up for. And he didn't come. So that's what he signed up for. he got called by the Lord to go be a pastor. Cool. He didn't come. You get nothing. That's the deal we signed. You don't want to do that? Well, I guess the judge is going to have to tell you we're going to do that because that's what the deal says. You don't get to just change this. You can give away some of your percentages if you want, but you can't just divvy up my third. I own 49%. That's the deal. He didn't come. I still own 49%. That's the starting point for the renegotiation here. Lastly, no family business is more functional than the family. Family is dysfunctional. Family business will be dysfunctional. Whatever weaknesses there are in the Ramsey family will show up in the Ramsey family business. whatever strengths there are in dealing with and mediating conflict will show up in the ramsey family business strengths and weaknesses are all going to show up just exactly that so you can't take a bunch of crazy people and have a functional business so if your family's crazier than a bean and you go in business with them and you think that it's going to be anything but crazier than a bean you're going to have crazier than a bean i hope you sell beans because you're going to have lot of them that's what you're getting into so you're not going to be more functional than your family is that's how this works and so in amanda's case they've got this weird thing where they treat the little girl like a princess and like she walked she walks on clouds and and the little boy's got mud under his nails or whatever it is i don't know what's going on but they're uh treating her unequally among the two children. And that dysfunction now shows up in a stinking partnership agreement. Well, no kidding. Of course it did. So this is what you can expect. So if your brother has always been treated the best because he was the golden child and you want to go in business with the family, expect your brother to always be treated best because he's always been the golden child. Don't expect the family to suddenly change his stripes. it's who they is and and you just gotta go that's what's going on that's what we're walking into or you got to talk about it ahead of time and go look you guys have always treated her a little different we're not doing that in this business in this business here's the numbers and here's how it's going down and nobody gets any side kicks or side bets or nothing else this is what's going on or we're not going to be involved and you cut that deal on the front end and then you go okay do I want to be in business with her and her pastor husband when the old man dies? And you decide that up front before you start the business. And that's what you're getting into here. So, yeah, this is two guys who, a guy who had a little extra money and he always wanted to do something with his dad, and they went and did it and they didn't think it through. And then all this other stuff shows up, And she's in there running day-to-day ops. So she's seeing every bit of it and she's getting, getting hurt and hurt and hurt and hurt and hurt. And that, that, this is how this thing goes down. So, you know, you, you've got to back up and say, this is how it, this is what we're going to do. So work ethic. We have one brother that doesn't work much. He smokes pot. So we'll put him in shipping, right? No, he, you wouldn't hire him because he doesn't work much and he smokes pot. He doesn't need to be on a forklift. Hello. Hello. You know, I mean, the drug test, you know, so we're, no, he doesn't get a job at all. Just cause he's family doesn't mean we overlook his drug use. So, well, somebody has got to give him a shot. I hope it's us. No, you don't. No, you don't. You have to separate these things and go that you, you have to pull your weight in your role in order to get paid like any other team member or you get what's known as fired. And that's how this works. So those are your takeaways from that call. If you're a family business person, something to think about. So if you enjoyed today's episode, be sure and like, share, and subscribe for more real world leadership content. I'm your host, Dave Ramsey, and this is Entree Leadership.
