Dave says….

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Dear Dave,

I operate a window business in a small town. I have an employee that I’ve trained for a year, but we don’t seem to share the same vision and morals. We have nothing in common and we hardly ever talk. He usually does his job pretty well, but it’s an uncomfortable situation and I don’t want to have trained my competition. How should I handle this?

Bill

Dear Bill,

I ran into the same kind of situation early on when I opened my business. It taught me really fast that you have to be super vigilant in the hiring process.

I now only bring people onto my team that I’d like to have over for dinner or spend time with my kids. If they can’t pass this test, then they definitely don’t have the character that I want representing my name.

There’s a fabulous business book by Jim Collins called Good to Great. In it, he talks about the importance of getting the right people on the bus, the wrong people off the bus and getting the right people into the right seats on the bus. In other words, having the right team members in the right positions is vital to the success of any business.

Along these lines, you need to ask yourself if you’d hire the person in question today if he or she didn’t already work with you. If the answer is no, then you need to start planning for how you’re going to move them out and replace them.

It’s an uncomfortable process, but why would you keep someone that you wouldn’t hire again? Once this happens, the person needs to either leave your team or make a change in their behavior and character so that they will be someone you want to grow your organization with.

Now, it’s always possible that you could mentor this person and train them to be the kind of person you want to have around. But if you can’t transform them—or if it’s a case where he or she isn’t willing to be transformed—then be very generous with a severance deal, move them out and bring in the new person!

—Dave

Dear Dave,

I was recently laid off due to a plant closing, and I’m ready and energized to start my own small business. The problem is I have no money, and I don’t want to borrow. What are the odds of getting a government grant? I’ve heard that they are hard to get and that very few are worthwhile.

Patrick

Dear Patrick,

You’re close on both counts. There are grants out there and they’re not impossible to receive, but they’re virtually a myth. If you asked a handful of successful small business owners how many of them found or used government grants to start their business, very few would raise their hands.

You can apply for two, or three, or 20 of them, but I would advise instead that you start small. Begin the business from your home, if possible. You don’t have to bust out at the start and create big expenditures to start a small business.

Plus, if you think creatively you can make this business pay its own way as you grow. It’s easier just to go make some money rather than spending a bunch of time hunting grants, or borrowing the money and having a bunch of debt hanging over your head from the start. Good luck, Patrick!

—Dave

Dear Dave,

I have an opportunity to buy a landscaping supply business. The current owner said he made $250,000 last year, and he’s on track to make even more this year. There are three employees, and he’s asking $390,000 for everything. The building is included in the price, but the land would be either a lease or purchase. Do you have any advice for taking advantage of a situation like this without going into debt?

John

Dear John,

I’m glad you’re looking at this venture with an eye on staying debt-free. There would be a lot more small business success stories if all entrepreneurs thought this way!

One of the things you could do is work out a deal where you take over management of the company and have an option to buy over time. You would pay the owner a percentage of the net profits, which would go toward your ownership. You’d take out enough to live on, but everything else would go toward your purchase of the company.

You said the guy is asking $390,000, but how do you know it’s really worth that much? He told you he “made” $250,000 last year. Was that how much he carried home? Or was that what he grossed? How much is he paying those three employees? Do they have contracts, or could you let them go? I mean, he could be grossing $250,000 and literally be taking nothing home, or the expenses could be $350,000 and the business wouldn’t be worth anything. There’s just a whole lot more you need to know before you do this deal.

As far as the building is concerned, I’d say no to the idea of owning a structure on someone else’s land. I’m not paying him for his building unless the dirt comes with it. You can rent the building and land from him after you become the business owner. I’d put the land and building in a separate deal, and lease them with an option to buy later—after I purchase the business. By doing this, you just lowered the purchase price of the business considerably because you took the building out of the equation.

Is the business paying him rent for the building and land now? If this guy isn’t charging any rent against his calculation of net profit, then the figures aren’t realistic. It’s also not realistic if he’s not paying himself anything to manage and run the business.

The bottom line is this: be smart, and do your research before you make a move on this one!

—Dave

Dear Dave,

My wife and I bought a franchise and are opening our own business next month. We’ve got $35,000 saved up, but my wife feels like the business is going to consume us for the next two or three years. She wants us to use about $3,000 of our savings and take a cruise before we open for business. What do you think?

Chris

Dear Chris,

Here’s a good rule of thumb for opening a new business: Everything’s going to cost twice as much as you think and take twice as long as you expect. I’m sure you’re both smart people, but you’re probably not exceptions to this rule when it comes to opening and running a small business.

Every single dollar connected with your business could mean the difference between survival and going under. I can understand where your wife’s coming from, but at the same time, I think this idea is really unwise. You’ve got to look at the big picture. You guys are going to be heartbroken if you have to close up shop in a few months because you ran out of money. On the other hand, if you work hard, stay smart, and make this thing a success, you can take a cruise and really celebrate!

Basically, right now you’re unemployed and have $35,000 with which to start a business. It’s time to rev up your engines and get to work. The time to celebrate is after you’ve won—not before you begin!

—Dave

* For more small business advice please visit daveramsey.com.

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About the Author: Dave Ramsey is America’s trusted voice on money and business. He’s authored three New York Times best-selling books: Financial Peace, More Than Enough and The Total Money Makeover. His latest book, EntreLeadership, will be released in September 2011. The Dave Ramsey Show is heard by more than 4.5 million listeners each week on more than 500 radio stations. Follow Dave on Twitter at DaveRamsey and on the web at daveramsey.com.

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