Mike’s Website: https://mikemichalowicz.com/
Link to Mike’s Books: https://mikemichalowicz.com/books/
Intro & Bio:
Simon Sinek calls Mike “the top contender for the patron saint for entrepreneurs”
Mike by the age of 35 had built and sold two multi-million dollar companies. At 26 Mike was awarded New Jersey Small Business Association’s Young Entrepreneur of the Year. He’s had multiple best-selling books from Clockwork, Surge Toilet-Paper Entrepreneur, The Pumpkin Plan and Profit First which we talked about on our last podcast with Mike. Mike has been a small business columnist for The Wall Street Journal and his books have been published in 20 different languages and he is still an active entrepreneur walking the walk with multiple companies including a manufacturing company, business growth consultancy, an augmented reality tech firm and a certification organization for accounts bookkeepers and business coaches.
01:07 Mike’s Mission: “Eradicating entrepreneurial poverty”
02:23 “I want people to know that I’ve experienced what I believe is the entirety of the entrepreneurial journey. The highs and the deepest lows and it has set me on a path…. I’m a full time author now devoted to serving entrepreneurs in that process of or that mission if you will of eradicating entrepreneurial poverty.”
03:16 Founders Story and some of the things that Mike learned through the ups and downs of being an entrepreneur – Funny and inspiring story
Started a business I was 23. My wife and I had our first son. I got started early in life. I had three mouths to feed now and no clue.
5:20 Fear became an extraordinary motivator to wake up in the morning and get stuff done. And even though I was clueless, I was relentless because I had to be. It took time talk about eight years but ultimately that business was a multi-million dollar business and I was able to sell to private equity.
05:43 Multiple Stages of an entrepreneur
- Fear
- Stress
- Systems
- Confidence
- Repeatability
- Momentum
- Aspiration
- Wrap up – Celebration
06:53 Wrong Question to Ask Yourself
“If you had all the money in the world what would you do?
It’s a very good aspirational question. The problem is it presupposes we have to have all the money in the world in order to make that reality. Well there’s another complimentary question. When you have no money what’s the vocation that you desire most to drive an income for yourself and when the vocation lines up with the dream well now we’ve got what I believe is a calling.”
11:30 Profit First Framework
This framework has easy to implement tools that’s based on so many other foundational principles. Mike has captured something that’s simple yet has great depth and that is easy to incorporate into any business and implement.
12:07 “One of the fundamental reasons I started my businesses was for financial freedom aka profit and it wasn’t happening. Then there was a study I heard that 83% of small businesses are on cheque to cheque survival. They say 50% of businesses go out of business every 5 years and whatever they say it’s all cashflow. So what’s wrong? How can’t we figure out the one reason we start the business? Why can’t we figure out that part and that’s when I realized the foundational formula that were taught, it’s an every accounting book in the world tells us that profit comes last. It’s the foundational formula: sales – expenses equals profit [Old formula – accounting based] and while that makes logical sense it doesn’t work with our behavior. So when something comes last it’s human nature’s head it’s insignificant… so that was a realization that we’re told profit comes last and we even give it vernacular, our common vernacular is bottom line, bottom but like bottom feeder. Is that a good thing?”
13:23 Profit First Formula: Sales – Profit = Expenses
13:28 “every time we have inbound revenue into our business we propose to deposit a predetermined allocation to profit off the top.” It’s the pay yourself first principle. Problem with talking top line revenues all the time – It is ego driven.
15:39 “I think what people don’t know or don’t appreciate is that sales directly translates to stress.” Here’s what I mean – More sales an organization has the more responsibility that organization has. If I sell twice as much this year as I did last year, I’ve got twice as much I need to deliver to my clients as last year. A sale is an obligation so it puts organizational responsibility on these increased sales. In small businesses the owner is usually the choke point. They’re delivering on that in some capacity. They’re managing & overseeing it. They’re acting in some superhero capacity for the business. So that sales, which is organizational stress, then translates directly to stress on the owner so as the business gets bigger we get less sleep where were pulled in more places and it relates to more and more stress. Sadly the vast majority of business owners default to what Mike calls the instinctual thinking for business which is very dangerous.
16:38 In our podcast next week – when we talk about the next book coming out in April: Fix This Next – Mike says “I talked about the dangers of our gut. You may like to say we trust our gut. I used to brag about that. I now realize how dangerous. Our gut will say we got to sell more. We don’t have any money left over. We need to make more money to take more money. I saw more it actually enforces & impacts a business with more organizational stress or stress to the owner and the cycle gets worse. We use soft terms like leverage. That’s a soft term for acquiring debt. So we say well we’re going to take on debt to facilitate growth.
17:13 Leverage and Debt For Growth – The Danger:
Leverage sounds very good because you can picture a lever and that you’re really moving big mountains with small mass of money. What happens is we take on this debt and there’s no commitment to ROI. There’s no understanding. it’s like you know what if
17:34 It’s not calculated – True debt leverage is where I say I borrow $1 and a month from now I know I’m getting back $2 and I have a 99% of surety of excited measurements.
18:29 Better Question Than How Big Is Your Business – How Healthy Is Your Business?
22: 45 Clockwork and The Benefit of Taking 4 Week Holidays From Your Business
Clockwork – the subtitle is design your business to run itself.
“I believe actually when it comes to what I call entrepreneurial poverty that the greatest form poverty is not financial poverty but time poverty” – Mike Michalowicz
“I too devoted so much time my life to work working into the night through the night and sacrifice time with my family, with my loved ones, with life itself, my friends. It was all about I need to get more work done. I was bragging about how I consider myself a workaholic…. but
it’s the ultimate badge of shame now. It’s a big W on my chest because workaholism means that we’re extraordinarily good at not being productive.” – Mike Michalowicz.
24:02 As opposed to building organizational efficiency and that’s what clockwork is about. Clockwork is the goal of no longer being a superhero for our business. While being a super
visionary for our business. To have clarity on the outcome we want and coordinate the resources around us.
24:26 Your clients themselves – organizing them in a fashion that drives toward the vision & outcomes you intend to achieve.
24:32 One of the big elements in this concept of this four week vacation is we need to break the pattern of thought of being a superhero for our business.
25:23 In the book – among the steps that facilitates the transition is commit to a 18 month ramp up to the 4 week vacation and fortify that time with no social media or work during that time. It will also force delegation.
26:04 What’s called true delegation – delegation is not the assignment of tasks buts the sounding of outcomes. Here’s what we need to achieve. Here’s our best practices. You’re now responsible as you manage this.
Mike and Fix This Next – Part 2
Mike’s Website: https://mikemichalowicz.com/
Link to Mike’s Books: https://mikemichalowicz.com/books/
Link to Business Hierarchy of Needs:
https://mikemichalowicz.com/establishing-sales-the-foundation-of-your-business/
Intro & Bio:
Simon Sinek calls Mike “the top contender for the patron saint for entrepreneurs”
Mike by the age of 35 had built and sold two multi-million dollar companies. At 26 Mike was awarded New Jersey Small Business Association’s Young Entrepreneur of the Year. He’s had multiple best-selling books from Clockwork, Surge Toilet-Paper Entrepreneur, The Pumpkin Plan and Profit First which we talked about on our last podcast with Mike. Mike has been a small business columnist for The Wall Street Journal and his books have been published in 20 different languages and he is still an active entrepreneur walking the walk with multiple companies including a manufacturing company, business growth consultancy, an augmented reality tech firm and a certification organization for accounts bookkeepers and business coaches.
03:23 Motivation for this latest book: Fix This Next
“you know I’ve got those businesses but I’ve also struggled and I leave those off my resume that for any particular reason but it would be a super long resume if I just talked about all the struggles and failures I’ve had. I’ve had one company which was a disaster as an angel investor. I lost all my income doing it also my wealth. I lost my house once. I’ve lost my fortune twice. The entrepreneurial journey is not as you know a straight incline and it can be these deep dives and terrifying things and most entrepreneurs get stuck and that was actually what compelled me to write this book.”
04:28 Biggest challenge entrepreneurs have is knowing where their biggest challenge is. That is the thesis for Fix This Next. We don’t know what we need to work on. We know we’ve got challenges in our business and we rush to address all the different apparent issues we have but we don’t know how to identify the right thing.
05:35 So with Fix This Next I created a tool to pinpoint exactly what the business needs now. The one most impactful thing that we need to work on starting immediately.
06:16 How does Fix This Next differ from Mike’s other books like Pumpkin Plan, Profit First and Clockwork. To start with a similarity, Fix This Next is a specific actionable sequence of steps- it is actually three significant steps that a business needs to take to pinpoint and resolve issues within the business. Mike’s other books he discovered the importance for giving very digestible actionable tasks to an entrepreneur to simplify the process. How Fix This Next differs is it is a specific tool to pinpoint where your challenges are and it is based it upon Maslow’s hierarchy of needs.
08:15 I found that in business we have a hierarchy of needs for our company. The significant difference, albeit there’s many, is that … we’re not wired into our business and I think many entrepreneurs, myself in particular, I thought I could just trust my gut. Anything I felt was right was the right thing to do but I found that, since I’m not neurologically wired into my business all my gut decisions weren’t moving my business forward and I was just spinning the wheels. So I created this hierarchy of needs.
09:01 Business hierarchy of needs
Full explanation in video but for a brief overview see Mike’s blog post on Business Hierarchy of Needs here: https://mikemichalowicz.com/the-business-hierarchy-of-needs/
Let’s check it out (courtesy of Mike Michalowicz-Reference above):
THE BUSINESS HIERARCHY OF NEEDS
-
- Sales (the base level)
- Always make sure your base level is met first. When it comes to humans, we need food and water. When it comes to our businesses, we first need cash flow and sales in order to move up the hierarchy of needs.
- Profit
- This is the creation of sustainability. Many businesses have a profit problem but are focused on sales. It’s more important to bake profit into every transaction you have. You cannot sell your way into profit. You need a system to bring profitability around.
- Order
- This is the level of organizational efficiency. The idea is as your business grows it becomes less and less dependent on you and it becomes organized. Achieving organizational efficiency will extract the owner from the business so it has no dependency on you, and can run on automatic.
- Impact
- Impact is the creation of transformation. This is where you realize your business is not about transactions but transformation. You are not selling a commodity, but a service that impacts lives and a community. What is the feeling you are leaving for the client, how are you transforming their lives and decommoditizing yourself.
- Legacy
- Legacy is the creation of permanence. It is where the business is designed to live on into perpetuity without you. When you create a legacy, you realize you are not the owner of the business, but the steward. To achieve the legacy level the owner must care more about the corporate legacy vs his personal legacy. This should be the objective of your business.
- Sales (the base level)
The Business Hierarchy of Needs is the compass that will move your business toward the vision you originally had. By applying it, you will assess your business to see what requires repair. You will use the evaluation tools I have created to help you navigate and understand exactly where you are in your business and what needs to be addressed in order to propel you forward.
09:08 Foundationally every business needs sales – that’s the lifeblood, the oxygen if you will, for a business. Then every business needs profit which translates to sustainability. It’s how a business protects itself – how its sheltered in that way it can manage through the storms the owner can live a normal life without being constantly stressed. That’s what profit is like that shelter. Then I have above that order – which is efficiency. Efficiency is where business no longer has dependency on individual. Its dependency is on the collective. You know historically with small business it is the owner who carries a business on their back. It’s all sweat equity and how do we transition out of that. Then the fourth level up is impact. It’s where we are no longer transactional clients but transformational and the experience that clients have they belong to something greater than just buying our product. The highest level is legacy. That’s where business now self actualizes or a business can live on into perpetuity in absence of the owner. While these five levels were not neurologically wired into ourselves so the book will help us pinpoint through a series of questions – there’s 25 – core questions which identify what level the business is currently residing at and where its biggest need is so we can address it. Solving it we can now go up to higher level needs and we can cycle back to if a base level need isn’t happening.
11:23 Foundational – it’s like building a pyramid. You need to build a base in order to put the next layer up. But if the base is too small and you put a bigger layer over it the foundation will collapse. The interesting thing is the reverse too. You can put this massive foundation in this big basement and you put a little tool shell on top of it- it’s going to fall in. So what we have to do is build a strong base to support the level above and, if at any time the level above is not being adequately satisfied, we look at the level below to say is that strong enough. So there is this cycling process. It isn’t like climbing a ladder.
11:59 Businesses live into perpetuity and their needs shift just very much like human needs.
13:29 Case Study: A guy featured in the book and his story of how the principles of Fix This Next worked for him in his HVAC company in Savannah, Georgia.
14:00 Previously focused on impact in the community. However, they pinpointed through the process that they didn’t know who our real avatar of a prospect is. They reverted back to the sales stage. Part of sales is the defining avatars.
14:24 Not-for-profits are sadly notorious for this. I mean not-for-profits set out to change the world but they don’t have a foundation of inbound donations so the business goes under right away and sadly many for-profit businesses are functioning as not for profits.
15:18 Case Study #2 – Coffee shop with multiple locations in South Dakota and in business for 13 years. Sometimes the roadblock in our businesses is us – the owner and our egos. This belief – This identity we’ve defined for ourselves and sometimes this process will challenge that identity that we’ve formed.
16:10 Part of that identity, especially with entrepreneurs, is growth for the sake of growth.
16:20 Business Measures that Matter
16:57 Idea of Fix This Next was to have a system that would force a pregnant pause in our decision-making. Most business owners there’ll be some kind of action – some kind of trigger and then there will be an immediate reaction.
17:37 The pregnant pause – I think that’s the biggest benefit is that there’s a trigger in action and before the reaction. Now there’s consideration – so it’s action-consideration-reaction. Consideration can supersede our ego based thoughts, our reactionary thoughts, and contemplate impact on the business strategy. It will just force us to think more logically about our business and that alone can right a direction of a business significantly. … we can always consider the outcome we want now and we’ll make decisions that are much more consistent.
19:07 Where Mike is at with his own businesses in the Business Hierarchy of Needs – Examples and how he sees the cycling process for the different businesses and their different levels in the hierarchy.
21:06 The entrepreneurial journey & not getting stuck on any one level
23:23 Concept of Get and Give
23:44 When it comes to the business structure we actually need to get to in order to give. If the business doesn’t have consistent sales, consistent profitability, consistent efficiency, it’s not going to be able to be a contributor to its community or clientele. Clients actually want us to get more profit. What a client will say is I want your absolute attention when you’re catering to me. When you deliver your product or services I want to make sure that was designed for me without distraction. I don’t want you focusing on other clients while I’m engaged. … the only way to have that clarity and focus on catering to our clients is to not be worried about other revenue generating sources. … so if we’re profitable we can then cater to our clients – if we’re not worried or distracted by the next opportunity and desperation.
25:44 Link Between Prices and Value
25:54 There’s a perception of value – the less I charge my client the less perceived value there is. so I’ve changed the use of the word money to changing it to calling it appreciation points or thank you notes. So say I charge a client a thousand dollars. Now I am saying I’m going to charge a thousand thank you notes and or thousand appreciation points. If the client is not willing to pay that, they don’t value me at that level. If someone pays me ten thousand dollars they’re showing much greater appreciation. the
27:06 I think equality is unfair by nature.
27:12 I know we have different segments of clients and because of that we need to charge fair not equally – like those that demand exclusivity and are at a higher value point and are paying more for that. Not all clients are created equal and not all clients have the same needs, even though maybe the same product or offering. Their expectations around responsiveness and other things may change so this concept in the accounting space called value-based pricing. People are purchasing the value you deliver to them. So what is the value and you can price accordingly not one thing I don’t
28:03 I do believe categorizing based upon the variables around the same thing.
28:10 Link with Urgency and Demand
I remember going to a restaurant and finding these signs: you can have it fast, cheap, and good. Choose Two – Fast and good is not cheap, Cheap and good but not fast, cheap and fast is not good.
28:44 The whole value and what pricing is actually not about dollars and cents… it’s a value prop.
29:23 Mike’s Next Exciting Contributions He Is Currently Working On
Right now Mike’s working on two more concepts. One is this concept of different trump’s better. What I mean by this is that better is not better different is better. there’s a way to use different to your advantage and get the client or prospect moving in the direction you want. The second is how to get my employees to act like owners. We’ve dropped the corporate goals and we’ve set what we call an intentions path which is the amalgamation of individual goals of all the employees and those of the company. To be of service to the employees and to our clients and catering to them and the company’s goals will then therefore reveal itself. How do you collectively organize them that the company is delivering on that mission for the individuals core supporting the company.
33:16 Engaged in the outcome of the business because it’s not about the business anymore.
33:49 Needed since we know every product or service can be commodified or you know turned into a commodity there’s not a product service company out there that isn’t really at risk of being commoditized and in a highly competitive marketplace. With increasing influence from the internet and access to information, everyone can be turned to a commodity. So how do we differentiate? … It is going to be relational. People want to do business with people that they can have a relationship with and there’s a loyalty and a differentiation that comes with it.
Fix This Next Offer– Free Evaluation For Your Business
https://www.fixthisnext.com/find-your-fix
This will be available when the book comes out April 28th.
35:47 You’ll see a button to take the evaluation. It’s automated and it’s fully online. You can test your business, evaluate your business and pinpoint where your most important impactful need is in the moment and start working on it.
