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IAM1647 – Author Helps Make Entrepreneurship Paths Simpler

Podcast Interview with Mike Michalowicz

Why it was selected for “CBNation Architects”: This episode with Mike is the definition of CEO Nugget. There's so much value he provided but he also does so much for entrepreneurs and business owners and the community. This is a value-packed episode especially when Mike breaks down how to rethink and pivot in your business to drive home different streams of revenue.

Check out premium content in the CBNation Library at http://cbnation.co/library and pick up our eBook to hear some of the best lessons at http://cbnation.co/shop.

Previous Episode: https://iamceo.co/2020/06/12/iam669-author-helps-make-entrepreneurship-paths-simpler/

Transcription:

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Mike Michalowicz Teaser 00:00

This is what I call rapid growth analysis. I try to figure out over this past week what allows businesses to grow and what's the essence of it, and basically, it's an evaluation of what is working, and what is not working. So this is now our internal system. I try to boil things down to one piece of paper to simplify processes. So I think that's the secret sauce is, I think it's the natural human tendency to bring complexity when things are difficult.

Intro 00:26

Do you want to learn effective ways to build relationships, generate sales, and grow your business from successful entrepreneurs, startups, and CEOs without listening to a long, long, long interview? If so, you've come to the right place. Gresham Harkless values your time and is ready to share with you precisely the information you're in search of. This is the I am CEO podcast.

Gresham Harkless 00:52

Hello, Hello, hello. This is Gresh from the I am CEO podcast and we're doing something a little bit different this year with some of our episodes we're repurposing some of our favorite episodes around specific topics related to entrepreneurship. This month we're focusing on entrepreneurship and community. Us, we, our, together, and we're gonna look at entrepreneurship and industries in different types of entrepreneurship and ultimately what that really means. But we're also gonna delve deeper into the importance of community, networking, niche communities and how that supports being a CEO entrepreneur and business owner. So sit back and enjoy these special episodes around entrepreneurship and community.

Hello, hello, hello. This is Gresh from the I am CEO podcast, and I have a very special guest on the show today. I have Mike Michalowicz of Profit First Professionals. Mike, it's awesome to have you on the show.

Mike Michalowicz 01:39

Gresh, it's an honor to be here. Thanks for having me.

Gresham Harkless 01:41

Definitely, the honor is all ours. And what I wanted to do before we jumped in and is read a little bit more about Mike so we can hear about all the awesome things that he's doing. And Mike is the author of Profit First, Clockwork, Surge, the Pumpkin Plan, and his newest release, Fix This Next. By his 35th birthday, Mike had founded and sold two companies, one to private equity and another to Fortune 500. Today he is running his third multimillion-dollar venture, Profit First Professionals. Mike is a former small business columnist for the Wall Street Journal and the former Business Makeover specialist on MSNBC. Over the years, Mike has traveled the globe speaking with thousands of entrepreneurs and is here today to share the best of what he has learned. Mike, are you ready to speak to the I am CEO community?

Mike Michalowicz 02:20

Yeah, I totally am. Let's do this.

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Gresham Harkless 02:22

Let's make it happen. So to kick everything off. I guess I wanted to rewind the clock a little bit and hear a little bit more on how you got started, hear your story, and what led you to kind of start all the awesome things you're doing.

Mike Michalowicz 02:31

Sure. Just when you read my resume there, I read them, I'm like, ah, that sounds like a dick actually. Oh, it's so successful. So I think actually, the interesting part of my journey was I have built and sold some companies. I had built one company that was a disaster, and I wiped out all my wealth. So I sold the business to a Fortune 500. My second company was in Computer Cry Investigation. It was acquired by Robert Half International. After that I was like, oh my God, I'm such a genius. I know everything about entrepreneurship and I started letting it reign money because you know I'm worth it, and I became an angel investor. I sucked at it. I actually call myself now the Angel of death, it was so bad. Business after the business collapsed and I lost everything. I lost my home, lost my possessions. I didn't lose my family. That was my wake-up call, that I don't know much about entrepreneurship, I have a lot to learn and I'm not invincible, not Midas. I became an author and so that's why I wrote these books, really to explore what I don't know about entrepreneurship and that satisfied my own needs to simplify the journey and, hopefully, do it for others. And while I've been doing that I've been blessed to have other opportunities come my way and start new businesses, but I'm a full-time author now for small business owners to help make the entrepreneurial path simpler.

Gresham Harkless 03:43

Awesome. Awesome, awesome. So, I know I touched on a little bit when I read your bio, I wanted to hear a little bit more about Profit First Professionals. Could you take us through exactly what you're doing to support the clients there.

Mike Michalowicz 03:52

Yeah, so this was like the discovery of discoveries. There's a statistic that came out that there are 180 million small businesses in the world. I mean, it's a lot of small businesses. It is the backbone of our economy and with what we're going through now with this recession, small business is more important than ever and small business must be profitable. And that's the irony Gresh, is we start our business specifically to have financial freedom and personal freedom. Yet it seems like the two things we start our business for never happen. We, don't make money and we are working our asses off. So, what I discovered was I thought there was a flaw in us, like what's wrong with humankind? And then I come to conclude that there's no problem with us. The formula, the foundational formula we use for profit is wrong.

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We're told that sales minus expense equals profit, and that's wrong because profit comes last, meaning we don't think about it. We wait till the end of the year and say, oh my God, not this year, maybe next. So I teach in Profit first is to flip the formula. Sales minus profit equals expenses. And in practice, every time revenue comes into our business, we pay ourselves. We pay the business first. We take a piece out and allocate it toward profit. So Profit First Professionals is a collection of accountants, bookkeepers, and coaches who use this method I teach in the book, but just take it to the next level. They, become the ultimate trainer. Like if you join a gym, you can work out on your own, but you may hurt yourself or do the exercise wrong, or you can get a trainer that is gonna keep you accountable to the process and make sure you do the exercises right.

Gresham Harkless 05:14

Yeah, that makes so much sense. So many times, as you said, when you're running a business, we don't think that we have enough profits or any profits to be able to pay ourselves and even pay the business. And I think to our detriment, it kind of handicaps the business so it's not able to grow. Then, of course, we're frustrated and angry and all those things happen because we haven't focused on that, that methodology.

Mike Michalowicz 05:35

Yeah. That's totally right. That's totally right. And I just want your listeners to know that it ain't you. It's not. And you're not the one with the problem. This is a systemic problem, meaning it's the system that's the problem and it's global. But when you start taking your profit first, your business will start to adjust and it almost seems too good or too easy to be true. I'm happy to say we have over 350,000 businesses successfully doing this right now. So, we now have the empirical data. It works because it's a behavioral system, it's not an accounting system. It manages our cash. But our behavior, just when a thousand dollars comes in, we used to say we had a thousand dollars to spend. Now a thousand dollars comes in and 200 bucks is set aside for profit. The remaining $800, now you know what you really have to work with what you do

Gresham Harkless 06:18

Yeah. And it makes so much sense. And I don't know if it kind of speaks to like that the idea of constraints. Because I think that you have the opportunity to really create and be creative as we are as entrepreneurs and business owners. We have those quote and quote constraints and you're not using a thousand, you're using the 800 instead.

Mike Michalowicz 06:33

Now that's exactly what it is. It's a natural psychological response that we work within the confines of what's available. And it's also normal psychology that as a resource expands and its availability, we consume more. The day you make more money, you start spending more because I got the means now, if you have a small house, you live within that small house, if you have a big house, all of a sudden you have shit everywhere because you have a bigger house. So we expand into the capacity of what's available. So by intentionally constraining how much money is available to spend, we'll work within it.

Gresham Harkless 07:06

Right. Absolutely. It's extremely powerful and, I love that you've devoted obviously the book to it, but definitely helping out so many entrepreneurs and business owners. So, I wanted to ask you now for what I call your secret sauce. And it could be for you personally or your business, but what do you feel kind of sets you apart and makes you unique?

Mike Michalowicz 07:20

So, I think what it does is really this focus on simple. So everything I write about and everything I do in my business is simple. Like funny, I just hold this piece of paper for anyone watching on video. This is what I call rapid growth analysis. I try to figure out over this past week, what allows businesses to grow and what's the essence of it, and basically, it's an evaluation of what is working, and what is not working. So this is now our internal system. I try to boil things down to one piece of paper to simplify processes. So I think that's what the secret sauce is, I think it's the natural human tendency to bring complexity when things are difficult, and it actually just makes things more difficult. What if we can boil it down to the raw essence, these systems aren't the panacea, they don't make everything work, but they make big steps forward. So what are the fewest things you can do that have the greatest impact? That's the secret sauce we use here, and I try to teach through all my books.

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Gresham Harkless 08:13

Yeah. That, extremely powerful. And I think that so many times I've heard the quote from Steve Jobs, he's more focused on design, but he says, to get to simple, you really have to work at Simple to be able to get there.

Mike Michalowicz 8:24

Yeah. Yeah. It is not easy. Yeah.

Gresham Harkless 08:26

Exactly. But it is the fact that you have that experience and that empirical data that you spoke too, where you're able to get to the simplicity and you're able to teach so many people how to do that. Because it sounds like you've been able to kind of distill that.

Mike Michalowicz 08:38

Yeah, totally. And you know what's so funny is, it's hard to believe that simpler things are more effective. It's just, almost contrary to how we think. It's like, no, it can't, it can't be that easy. And I think then the way to convince ourselves is to test things out. So just back to profit first people hear profit, take your profit first. That's a shell game. That's not gonna work. And I encourage people, I mean, I, get the skepticism cause I felt that way. Just take us, just start with 1%, try a small amount, and see how it works for you. And if it does work for you, amplify it. If it doesn't, abandon it. And I think that's how simple things work, is let's dip the toe in the water on these things just to prove to ourselves it's working or not. If it's not, it's not for you and if it is, go with it.

Gresham Harkless 09:22

Awesome. So I wanted to switch gears a little bit and I wanted to ask you for what I call a CEO hack. So this could be like an app, a book, or a habit that you have, or what's something that makes you more effective and efficient?

Mike Michalowicz 09:33

Oh, you know, there's a really simple technique when it comes to introducing new offerings, particularly actually in times like this right now, where what we used to do isn't as easy to sell. What's the new thing? I call it the one-step-back technique. So what I do is, I look at the final offering and I start rewinding step by step to see if there new offerings in there. Ultimately, a final offering is a culmination of a lot of steps that are actually offerings, it's best explained through an example. There are restaurants right now that are obviously really struggling, and a restaurant by law has been shut down. You can't do your final offering, which is putting food on a table. So we simply start asking what happens one step back. So a restaurant, right? One step prior to putting food on the table, they carry the food to the table. Okay? So carry out or takeout is an obvious solution. Many restaurants have done that. One restaurant in our neighborhood really amplified that and they collaborated with a food truck. And a food truck is doing runs to neighborhoods doing food delivery. And now this former restaurant is a kitchen that's prepping food for delivery.

Then we ask you, what happens one step before that? Well, one step before carrying food to the table, the food's prepared in the kitchen. Okay, well, what are your 10 most popular menu items? Why not sell those recipes or why not sell a class explaining and having your chef demonstrate how to prepare these foods, or why not have a cooking class where you can go live on Zoom or something like that and do teleconferences with your customer base. Now they can cook this at home, but also enjoy the experience. There's a new offering, what happens one step prior to that? Well, it's the procurement of meats and vegetables. Well, why not still purchase those but carve them up, and now you become a blue apron for your local community. You know what happens one step prior to that? So you keep on asking this one step prior and you start to notice you have all these new offerings that have always been there.

Gresham Harkless 11:14

Awesome. So I wanted to ask you now for what I call a CEO Nugget. So that could be like a word of wisdom or a piece of advice or something you might tell yourself if you were to hop into a time machine.

Mike Michalowicz 11:26

Listen to wallets, not to words. You know, when I start, when I sell something or I start a new business, I ask my friends, do you want this? It's like, oh my God, man, that sounds awesome. I'm all in. Right? And then you go to sell it and they're like sorry bro, I'm out. I'm like, what the F***, you know, people will say things because it's socially appropriate. It's nice to say that. It's nice to be supportive, but what really matters for the sustainability of an entrepreneur is whether people are willing to depart with money. So instead, now it's, hey, I have this idea, are you willing to pay for it? And the people say no. That means my idea's no good. I have to be able to get people to open their wallets.

Gresham Harkless 11:59

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And I wanted to ask you now my absolute favorite question, which is the definition of what it means to be a CEO and we're hoping to have different quote and quote CEOs on this show. So, Mike, what does being a CEO mean to you?

Mike Michalowicz 12:08

Yeah, a CEO, is an empathetic leader to me. A CEO is someone, who leads through understanding and caring. Now, empathy and sympathy are different. Sympathy is where I take pity on someone, like, oh, you're really having a tough time, thank God that's not me. Empathy is where we put ourselves in someone else's shoes and really try to understand their situation and be of support and guidance through that. Our own we're tiny. We have 12 employees here in our office. But what I used to say was, oh my God, the vision of the business is everything. And then I realized, no, the vision of the business is to serve the people that are serving the business. So instead of having a corporate goal, we're gonna do X millions of dollars in revenue. That's my goal as a business owner. But what are everyone's goals collective. One person wanted to get their first house. Another person wants to learn to speak Spanish. We started to learn people's goals and now I realize how do we march toward my goal of making millions of dollars and be of service to everyone else's individual goals because everyone's goal to themselves is the most important thing. So empathetic leadership is understanding everyone's need and satisfying it as a collective.

Gresham Harkless 13:14

Yeah, it's extremely powerful. And I think as you said so many times we forget that the quote says that if you help a lot of people get what they want, then it helps you get what you want.

Mike Michalowicz 13:23

That's exactly right. There's a little tip to this that I discovered is, it's not about doing for others, it's about supporting them in their own journey. It's interesting. If you give someone a house, which is an extremely generous offer, the value is less significant to them as opposed to them acquiring their own house. Right? We appreciate what we have to earn. So my job is not to be a great giver in that regard. It's to be a contributor to their journey.

Gresham Harkless 13:49

Yeah, absolutely. Kind of quote and quote, teaching a man to fish, so to speak and giving them an opportunity to do that. Absolutely. Well, Mike, truly appreciate all the awesomeness that you provide. I appreciate your time even more. What I wanted to do is pass you the mic, so to speak, just to see if there's anything additional you can let our readers and listeners know, and of course, where we can get a copy of all your books, all the awesome things you're doing, and then get into contact with you.

Mike Michalowicz 14:11

Thanks, Gresh you know, what I wanna share as a final thought is, what we're going through right now. I know we're entering the summer and the world is the world has punched CEOs and small business owners in the face. And we have a bloody nose, a black eye. And while the world is doing that, it's also saying, save me. It's the weirdest situation ever. So I'm just encouraging everyone. It's not gonna be an easy path, but we need you. The world needs your success, so stand up, step forward, and kick-ass do whatever it takes to sustain. It's necessary. It's important. So stick in there and then one tool that may help you and it's totally free is fixthisnext.com. That's the site for my book. But in there is an evaluation site where you can click on a single button and evaluate where your business is right now, and it will pinpoint exactly what you need to do next. And it's not even a download, it just presents the screen. So you don't need to download anything, just click and analyze, and takes maybe less than five minutes and you'll be able to pinpoint what you should do, right now.

Gresham Harkless 15:09

Awesome. Well, thank you so much again, Mike. We will definitely have the links and information in the show notes so that everybody can click through and follow up with you. But definitely appreciate you, appreciate the reminder you gave us as well too, on how important small businesses, entrepreneurs, and business owners are to the world, and how it's kind of our charge to be the superhero, so to speak, to be able to make the world a better place. So I appreciate you for doing the same and reminding us.

Mike Michalowicz 15:31

Thank you, my brother.

Outro 15:32

Thank you for listening to the I am CEO podcast, powered by Blue 16 Media. Tune in next time and visit us at iamce.co. I am CEO is not just a phrase, it's a community. Be sure to follow us on social media and subscribe to our podcast on iTunes, Google Play, and everywhere you listen to podcasts. Subscribe and leave us at five-star rating. Grab CEO gear at www.ceogear.co. This has been the I am CEO podcast with Gresham Harkless. Thank you for listening.

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Dave Bonachita - CBNation Writer

This is a post from a CBNation team member. CBNation is a Business to Business (B2B) Brand. We are focused on increasing the success rate. We create content and information focusing on increasing the visibility of and providing resources for CEOs, entrepreneurs and business owners. CBNation consists of blogs(CEOBlogNation.com), podcasts, (CEOPodcasts.com) and videos (CBNation.tv). CBNation is proudly powered by Blue16 Media.

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