Personal finance expert Dave Ramsey says his business has never had to lay anyone off in 35 years, but he also made it clear that keeping people on payroll without profit isn’t sustainable.
During a recent episode of “The Ramsey Show,” a 30-year-old caller named Brooke explained that she helps run her parents’ small-town business and sometimes doesn’t get paid. Meanwhile, all 15 employees receive their full wages.
Ramsey: Profit Comes First
Ramsey was quick to cut to the root of the issue. “This isn’t a mom and dad problem, honey. You got a Brooke problem,” he said. “A business that doesn’t make money is called a hobby.”
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He pointed out the inconsistency in paying everyone but Brooke and said it was a result of poor business decisions. “The fix for this is not a relational problem with your mom and dad. The fix for this is business acumen,” Ramsey said. “If we’re going to keep this thing open or not.”
Brooke mentioned the business avoids raising prices to avoid upsetting the local community, but Ramsey didn't accept that excuse.
Ramsey emphasized that profit isn't optional, calling it “a math thing.” He said that in any business, payroll is usually the biggest expense, and if there’s not enough money to cover it, tough decisions have to be made.
“We have 15 people getting paid and one not,” he said. “So I can fix that. We’ll have 13 people and one gets paid.”
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Coleman: It’s Time To Move On
Co-host Ken Coleman added that Brooke might need to find another job if the business doesn't improve. “[You’re] underneath it, she said. So this is a situation where you may or may not be able to fix this.”
Ramsey and Coleman stressed the emotional toll of staying in a failing family business out of loyalty. Coleman noted that working for parents often clouds judgment. “You refuse to see what you might otherwise see if you didn’t work for mom and dad," he said.
Ramsey said family or not, he would never expect someone to work for free at his company. “I’ve never asked anybody to work for free at Ramsey, ever,” he said. “If I have to cut payroll to stay open, I will, before I sit around and make no money. You’re not going to stay open eventually if you don’t make a profit.”
He ended the segment bluntly: “It’s not an altruistic thing. It’s not. Socialism doesn’t fix it. Your theory about capitalism from your communist college professor won’t fix it. The only thing that fixes it is: You have to make money.”
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