HOP Nation Podcast – Episode 15 – Mike Michalowicz, Part 1
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
- 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.