What is Profit First and how can you incorporate it into your practice? What are some tips for simplifying the concept of money? How can you incorporate tithing while still using the Profit First philosophy?
In this podcast episode, Whitney Owens speaks with Mike Michalowicz about using Profit First in your practice.
Meet Mike Michalowicz
Mike mi-KAL-o-wits 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 a Fortune 500. Today he is running his third multi-million 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.
In This Podcast
- Profit First
- Tips for counselors to simplify the concept of money
- Recommendations to business owners that want to add systems to the business but are concerned about finances
- Incorporating tithing when using the ‘Profit First’ philosophy
- Using ‘Profit First in nonprofit businesses
- Fix This Next
Profit is not an event, profit is a habit.
There is a fundamental flaw in the formula of profitability which is:
- Sales – expenses = profit
Profit should be a habit and formula should be changed so that profit is considered before the business expenses:
- Sales – profit = expenses
Your numbers don’t change but your behavior is radically different. Every time a deposit comes in, you immediately take a pre-determined percentage and allocate it towards profit. The funds that are left are what you will use to operate your business.
Tips for counselors to simplify the concept of money
- Discard the accounting system and capture your existing behavioral patterns
- Incorporate a pattern intercept
- Set up multiple accounts: profit account, tax account, apex account
- Pre allocate a certain percentage to each account
Recommendations to business owners that want to add systems to the business but are concerned about finances
Everything we do in our business must have a ROI
Conduct a ROI (Return on investment) Investigation then do a test and then a roll-out. If you hire an assistant it doesn’t necessarily mean that they will be doing sales and directly generating revenue, but they may be freeing up your time for you to generate revenue for the business.
The simple principle to growing a business successfully is to look at what’s working and what’s not working. Whatever’s working, do more of it, and whatever’s not working, either delete it, diminish it, or redefine it.
Incorporating tithing when using the ‘Profit First’ philosophy
Tithing is calculated on 10% of the owner’s income, not the business income. Allocate an account for tithing so that you’re tithing based upon your actual income.
Using ‘Profit First in nonprofit businesses
This can definitely still be done, create a purpose account instead of a profit account. Allocate a percentage of funds to the purpose account. When setting up your distributions, funds are sent to the cause that you are attempting to serve as opposed to shareholders.
Fix This Next
The thesis for this book is that the biggest challenge business owners face, is knowing what their biggest challenge is. Mike has developed a hierarchy of needs – the business hierarchy of needs, analyzing Maslow’s hierarchy of needs translated into how it plays into a business entity.
Books by Mike Michalowicz
- Moving Forward when Exhausted | FP COVID-19 Bonus Episode
- Jeremy Zug on Effective Systems in Your Business | FP 21
- Grow Your Practice to a Group Practice with Start and Scale a Group Practice Mastermind!
- Email Whitney: email@example.com
- Faith In Practice Facebook Group
- Free resources to help you start, grow and scale
- Apply to work with Whitney
- Consult With Whitney
Meet Whitney Owens
Whitney is a licensed professional counselor and owns a growing group practice in Savannah, Georgia. Along with a wealth of experience managing a practice, she also has an extensive history working in a variety of clinical and religious settings, allowing her to specialize in consulting for faith-based practices and those wanting to connect with religious organizations.
Knowing the pains and difficulties surrounding building a private practice, she started this podcast to help clinicians start, grow, and scale a faith-based practice. She has learned how to start and grow a successful practice that adheres to her own faith and values. And as a private practice consultant, she has helped many clinicians do the same.
Thanks For Listening!
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Faith in Practice is part of the Practice of the Practice Podcast Network, a network of podcasts that are changing the world. To hear other podcasts like Empowered and Unapologetic, Bomb Mom, Imperfect Thriving, Marketing a Practice or Beta Male Revolution, go to practiceofthepractice.com/network.
The Faith in Practice podcast is part of the Practice of the Practice podcast network. A network of podcasts seeking to help you start, grow and scale your practice. To hear other episodes like the Imperfect Thriving podcast, Bomb Mom podcast, Beta Male revolution, or Empowered an Unapologetic, go to practiceofthepractice.com/network.
Welcome to the Faith and Practice podcast. I’m your host, Whitney Owens, recording live from Savannah, Georgia. The purpose of this podcast is to help you start, grow, and scale a private practice with a faith-based perspective.
Today is episode number 22, my interview with Mike Michalowicz on how to make Profit First a part of your business. I’m particularly excited to be interviewing Mike. I’ve read several of his books and I found them truly impactful in running my business. And so, if you haven’t heard of Mike – obviously you’re listening to the show so you’re gonna hear a lot – but I want you to think about getting his books. Start out with Profit First, and he’s going to go through the details of Profit First in this episode. He gives so much awesome information and makes it really simple. Therapists can get so overwhelmed when we’re talking about money and budgeting. And he really breaks it down into ways that therapists can understand.
So, I’ve been following Mike for a few years now really, ever since I started really growing my practice, especially when I went from a solo to group practice, I had to really improve my money management. And so, I had read a few of his books and in the Profit First book, if you’ve read it, he talks about Jesse Cole, who’s the owner of the Savannah Bananas. The Savannah Bananas. That’s right, that’s what they’re called, it’s a good name. They are a baseball team of college students here in Savannah; these are the college students that are looking to go pro or get into the minors. And so, people are coming in scouting them out and they come and play in the summers at a really old stadium right here in Savannah. It’s just a few miles from my house actually. And it’s so much fun. The games are focused on entertainment over, well, they do have some skills, but the entertainment is there and so they do really funny things like throw the first banana, or you can get your nachos on the top of a trash can. So, it’s a really fun place to go. And when I read Profit First, Mike talks about Jesse Cole and how he got out of debt by using the Profit First principles. It was really right after he bought the baseball team. And so when I went to the game, I guess it was a year or two ago, went out to one of the games and thought to myself, I have got to talk to Jesse Cole about Mike Michalowicz and how awesome the book is and how much I love these principles. So, super pumped about talking to Jesse Cole. By the way, Jesse Cole does run around the stadium in a yellow banana suit. It is amazing. So, I went over to the fence thinking, when Jesse gets off from this thing that he’s doing on the field, I’m gonna go say hello, introduce myself. And as I’m standing there, legit the microphone goes off and says, I have Mike Michalowicz here. And he did this game where he had to keep his eyes closed or I think he had a blindfold on. And they put $100 on the field and he had to get on his hands and knees and crawl and people would yell out where to go so he could get the hundred dollars. But I was in awe. I couldn’t believe that Mike was actually there. So, I was wanting to talk to Jesse about Mike and now I was gonna get to meet Mike. So, the big fan girl that I am, I followed Mike up the stadium steps and yell his name and he was just so cool. And he talked to me and we took a selfie together and then I met some of his Profit First professionals because they were actually doing a conference here, locally. And so, I actually spoke at length to a Profit First professional about how to do that in my business. But what I really like about Mike is, not only does he have this awesome business sense, but he’s just a real guy. Like he’s authentic, he’ll talk about anything and he doesn’t make himself to be any better than anyone else. And so, I really admire him for that, and I think that really comes out in this interview and it definitely came out in meeting with him.
When I was asking him to be on the podcast, I sent him a text and said, Hey, will you be on my podcast? He was like, sure. And so, I just love that about him. And you’re gonna learn a lot from this episode. And I really encourage you, if you feel like it’s helpful, let me know, reach out to me, reach out to Mike. He actually has a new book coming out – I believe it’s next week by the time you hear this episode, on April 28 – on what to do next in your business, which I’m always asking myself that question. I sometimes know what to do next and sometimes I don’t know what to do next. I’m looking forward to reading this book and learning more about next steps in my business. So, you’re gonna enjoy this episode, so let’s jump right in.
Welcome to the Faith in Practice podcast. On today’s episode I have Mike Michalowicz and let me tell you his bio here: Mike Michalowicz is the author of Profit First, Clockwork, Surge and The Pumpkin Plan and his new release, Fix This Next, coming out in April. By his 35th birthday, Mike had founded and sold two companies, one to private equity and another to a Fortune 500. Today he’s running his third multi-million-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. Thanks for being on the show today, Mike.[MIKE]:
Whitney, I’m happy to be here. Thanks for having me. [WHITNEY]:
Yeah, you’re kind of making your rounds with the therapists in the world. [MIKE]:
It seems that way, right? In both teaching but also learning. I have a therapist myself, and it’s been a fantastic experience. [WHITNEY]:
That’s what I like to hear. How does therapy impact you as a business owner? [MIKE]:
Well, it’s insights into my own mind and the way I’m operating and behavioral patterns and I can now better notice, at a conscious level, when I’m in a pattern that may not be of service to me because of the therapy I went through and continue to go through. Just to observe the way I behave in situations in other aspects outside of business. I behave that same way inside the business but couldn’t interpret that and now I can see that with more clarity. [WHITNEY]:
I love that you just pulled that out right at the beginning. We’re always like, therapists, we are always loving therapy, but like, there’s such a taboo about that. So, I love that you’re just like, yeah, this helps my life and it’s awesome. And you don’t have to be some crazy person to have therapy. [MIKE]:
Yeah, it’s sad that there is that persona, because that is a reality. When I tell someone I go to therapy they’re like, Ooh, what’s your problem? And I’m like, No, no, I have an advantage. I believe every business owner should go to therapy. You know, I believe if we can master ourself, we can master the universe. If we can master our own mind, we can master our business. So, I go there because I benefit from the help, no question about it. I go there also, because there’s a major advantage over not going. It really amplifies the strength of my business. [WHITNEY]:
Yeah, yeah, just the idea that it helps not only you personally, but also helps your business, which really helps a lot more people. So just working on ourselves is really great. [MIKE]:
Yeah, I agree. 100%. [WHITNEY]:
Great, great. So, today we’re going to focus on the Profit First book, even though you’ve got all these things that I wanted to focus on. But the most questions that I get from the people that I consult with is about Profit First, and how to make that a part of their business. So, for anyone who hasn’t read Profit First, can you give a little synopsis of the book? [MIKE]:
Yeah. And so, interestingly enough, it’s based upon behavioral principles. So that’s a little side hobby of mine. I am not certified. I don’t have a license. I haven’t been trained officially in it, but I study it relentlessly. And what I found is that there is a fundamental flaw in the formula of profitability, and we all know what the formula is, it’s sales minus expenses equals profit. And it’s taught in every book, it’s, actually so pervasive that it’s now in our common vernacular, we say that profit’s the bottom line or the year end. Well, the problem with this is that when we put something last, it means it’s insignificant. It can wait. You know, if I had a physical health scare, and I went to the doctor, the doctors like you got to start exercising, stop drinking. I won’t go into the hospital saying, you know what, it’s time that I start putting my health last. Yeah, I’ll say I’m gonna put my health first, right? Your loved ones, your family – if you love them – you put them first. So, it’s human nature: what comes first gets prioritized and addressed. What comes last is the perpetual manana syndrome. So, the problem with the traditional profit formula is we’re told profit comes last. So therefore, most entrepreneurs and business owners, therapists included, we look at our profitability at the end of the quarter or more likely at the end of the year, you know, when tax time rolls in, and we’re like oh, shoot, no profit, well, maybe next year, and we kick the can down the road on profit for another 365 days. What we need to do is not make profit an event; I was saying the profit’s not an event, profit is a habit, we need to bake it into every transaction. But in execution, fundamentally what I explain in the book is that the formula must change. The Profit First formula is sales minus profit equals expenses. And in basic mathematics or in mathematics – if you studied variable swaps – it is the exact same formula, meaning the numbers don’t change. But the behavior is radically different. Because what we’re saying in practice now is every time a deposit comes in from a patient you see, every time revenue comes in, you immediately take a pre-determined percentage of that money, allocate it toward profit, meaning take it away, out of the business, hide it away into a profit account. And then the business will tell you, based on what’s leftover, what’s available to operate your business. [WHITNEY]:
You explained it so well, thank you. Yeah, it makes me think about what we were just talking about, the importance of going to therapy like, you put yourself first. And even with our money, you need to put yourself first instead of putting your expenses first and other people first. [MIKE]:
Right. Right. But we’ve been told this way. It’s become what’s called an axiom; an axiom is a belief that’s established and just known to be true, because it’s just the way things are. And axioms aren’t always of service to us. And this axiom of believing that profit is the last consideration, it’s the bottom line, it’s the year end, is extremely damaging. The reason you and I and therapists go into our business, any entrepreneur goes into business, is usually one of two reasons: there is a goal of financial freedom, and there’s a goal of personal freedom, to do what I want, when I want. To be in charge of my own destiny, and to make the money that supports a lifestyle I’ve determined for myself, that I want to experience. And the ultimate shame is we start our business to be financially free and personally free, and the two things that most entrepreneurs, business owners never achieve is financial freedom and personal freedom. It’s the greatest irony. It’s like one of those horrible Greek tragedy plays, you know, it’s just… The two reasons we start this are the two things that exactly don’t happen. And it’s not our fault, meaning it’s not that we’re not capable of running a business. The therapists I’ve met are pretty freakin’ good at what they do. They understand how to track prospects, clienteles, patients, they know how to serve them. They’re doing millions of parts of the business, right. We just can’t figure out – and I’m doing air quotes around that – the profit component. And what I want people to know is it’s not you, it’s the formula. We use the wrong formula. You can’t make profit work when it comes last. It’s the rarity. In fact, it’s less than 17% of businesses have sustainable profit, of all businesses, of all small businesses globally. So, it’s not like 83% of people are just, have a defect in their mind around profit. The formula we follow his flawed. [WHITNEY]:
That’s so insane. I love… what I loved about the book is that mind shift, and you’re explaining it so well, that profit is coming first and not last. And so even when you say that, I’ve gotten so used to the principles of Profit First, to think about all these people that are not making profit, like, oh, it’s saddening, it’s saddening. [MIKE]:
It is really saddening, and it’s upsetting. And it is not easy to overcome an established belief. So, I had the privilege of traveling all over the world. You and I met in Savannah, at a baseball game of all places, because I was traveling with entrepreneurs, spreading the word on Profit First, and I consistently get the pushback, sometimes verbally, sometimes… most often through action, of people not doing it. They said this guy, what he’s saying is insane, or it’s not gonna work, or it’s too simple. That’s actually a common thing I get: it can’t be that easy. And we revert back to our old patterns. But also, at least my understanding of behavioral psychology, is that there is comfort in maintaining established patterns, even if they don’t serve us. Because in the moment, there’s some kind of reward. By deferring profit to the end, I think the momentary reward is, well, I don’t have to worry about my numbers today, you know, I’m not gonna worry about numbers today. And we get that, at least, that reward of one day of not worrying about it, you know, the stress of that amounts on an ongoing basis. And finally, you will have that financial heart attack, and that’s a devastating day. But there is definitely this draw to the comfortable even if it’s not of service to us. [WHITNEY]:
Most definitely. So what I found with a lot of people when I’m talking to them about Profit First, especially counselors who are not money managers, and don’t have any business sense necessarily, from school, you know, we learn it as we go. So, when I start talking about the accounts, the numbers and stuff, they get so overwhelmed, and they’re like, Oh, no, like, I can’t handle that. So, do you have some tips to kind of simplify the concept of money to a counselor that feels really overwhelmed by numbers? [MIKE]:
Yeah. Yeah, yeah. So, we’re going to ditch the accounting system. And what we’re going to do is we’re going to capture your existing behavioral pattern. I’ll give an example. I work out now regularly, but I didn’t before. I’ve been working out regularly for about five years. And – thank you therapist – gave me the little trick to do this. He said to me, he goes, What’s your routine in the morning? And I said, Well, I get up, I think about a good workout in the day. But then I do the first thing which is go to the bathroom. And then when I’m in the bathroom I’m like, you know what, I should make a cup of coffee, I go make the coffee, and then no workout and I’m off on the day. He said, Well, if your pattern every morning is to go to the bathroom, why don’t you put your gym shoes in the bathroom? I’m like, Oh. So, my gym sneakers sit on my toilet seat. The only way I can use the bathroom now is to grab my gym sneakers, and now I started that first little baby step toward putting them on and once they’re on, like, I might as well go to the gym. It’s a pattern interrupt. Or pattern intercept is probably a better way of putting it. It intercepts our natural path. Well, most business owners do not read their accounting system. So if you’re one who instead of reading an income statement and balance sheet and cash flow statement and running all those metrics, if you’re more like me, I log into my bank account, see if I have money and follow a real simple process, if I have money, I can spend it. If I don’t, you know, panic ensues. If that’s the system you use, that is actually typical for entrepreneurs. And what we need to do is put this pattern intercept in there. What we’re going to do at your bank, because most people log into bank accounts, is set up multiple accounts with this intended purpose. What I mean is, one account will be a profit account – what we’ve been talking about. Allocate a percentage of that money to reward you as a business owner, for someone who took on an extraordinary risk of starting a business. Only 7% of the world population will ever be business owners. You’ve done something significant. You’re a contributor to our community, you’re a contributor to your employees, you’re a contributor to your vendors, you’re having impact, you get rewarded through a profit account for taking on that risk. The next account is owner’s compensation, that’s a normalized salary. If we had to replace you, what would you pay that person to do all the work you’re doing? Probably a pretty substantial salary and probably, for many owners, not what we’re taking now. We need to allocate that money to treat us fairly. And if we don’t, it’s just a matter of time before resentment kicks in, like, I hate my freakin business, it doesn’t care for me. I take care of everyone else, but me. So, we have to fix that. We set up a tax account. The biggest bill associated with the operation of a business that entrepreneurs and business owners are least prepared for is a tax bill. I can guarantee you, every year taxes will hit you. And I can guarantee you pretty much every year they’re going to go up. So, the tax bill we have to be prepared for and your business can pay your taxes. And don’t get caught up in the minutiae of I have a S Corp or C Corp or LLC or one of these million variations of businesses you can have. Every business, the business can pay the taxes on behalf of the owner. Sometimes it does it through a distribution reimbursement, other times it pays it directly. Just talk with a qualified accountant – ideally a Profit First Professional – and they’ll guide you in this process. And then the last account is OP-X. That’s for the operations of the business. And so, what happens now is, say $1,000 of deposits come in, I used to think, Oh, I have $1,000 to spend. But now that I carve this money up into these different accounts, before I spend it, I pre-allocate money before I use it, now I see its intended use. Oh, $100 for profit, I’m going to hide that away. Ooh, $300 is reserved to pay part of my salary, another $200 for taxes. And that means the remainder, which I think is $400, is left to operate the business. And that gets rid of that confusion of $1000 comes in, and we think we have $1000 to spend. Now we have the reality, we have $400 for the operations of the business, because that money has other responsibilities, too. [WHITNEY]:
That’s great. I love how you brought in the behavioral part because that’s what a therapist understands. That’s what we do with our clients all the time, is create new behavioral patterns. Yeah. [MIKE]:
Oh, I get it. That’s why I think therapists are kind of badass. [WHITNEY]:
What I discovered through therapy was, don’t try to resist who you are, channel who you are to get to the outcomes you want. If you want to be acting a certain way, how do you currently act and how can we redirect that to the outcome you want? As opposed to just saying, Nope, I’m not going to do that, I will do this. And that’s what accounting tells us. Nope, I’m not gonna look at my bank account. In fact, your account may even say that to you: Never look at your bank account. It’s not reflective of where your business stands. Instead, read the income statement, the balance sheet, the cash flow statement, bah, bah bah, bah, bah bah. And so, we revert. We don’t tell our accountant, but we very quickly revert to looking at our bank balance. There’s not something we need to learn here. You don’t have to become a master at numbers. You don’t have to go back to school for accounting. We have to just channel the existing behavior to get the result you want. [WHITNEY]:
So, a lot of business owners are thinking about systems of their practice. So they’re thinking, Okay, should I add this component even though it’s going to cost me maybe a certain software like an electronic medical record, or hiring a Profit First Professional or whoever they’re adding, right, to be able to make things run more smoothly and their business, but then they look at their money and they get super stressed out. So, do you have any recommendations on when you’re considering adding something? How do you go through that process of deciding if it’s worth it? Because some of these things, like adding an assistant, is going to help you make money in the long run. So how do you decide that? [MIKE]:
Well, it can help you. And that’s the thing. We need to do first what’s called an ROI investigation, which is a Return On Investment. Is this going to return money? And what’s our probability of that happening? Then we have to do what’s called a test. And then finally we do a rollout. So, ROI, test and rollout. The ROI is, say it’s that assistant. So, you know, if I hire an assistant, what return on investment… I’m going to pay them, you know, $30,000 a year. I don’t know what the number is, I’m picking it up. Do I anticipate that that person’s work will return at least $30,000 a year to the business, otherwise they become a cost that keeps on amplifying and if I spend $30,000 a year and they have no return to the company, no financial return, now they’re generating a loss of $30,000 more a year, and I can only sustain it for three or four years now I have over $100,000 of debt, and I’m in trouble. So, everything we do in our business has to have a return on investment. And it’s not like, I hire someone now that person, that’s my administrative person is gonna be a salesperson, they’re not gonna be doing therapy. It’s not a direct relationship. They’re not necessarily generating revenue, but they may be availing time for me to generate more revenue. So, we gotta see how it works out. The software that makes me more efficient, and instead of spending five hours a week I’m only spending one hour a week doing stuff, that avails four hours. Can I use that four hours to at least do one or two more hours of productive – I shouldn’t say productive work – but of billable work? And now you can kind of see the ROI. Most businesses don’t go through any investigation. They don’t put much time into evaluating its return and putting a time stamp on it. Most business owners say, Well, I think that software could help, let’s get it. And then they don’t use it because of distraction. So just spend a little bit of time… and you don’t have to go into minutiae. But what are we investing? What do we expect it to return? And document that. And then what timeframe do we expect it to return whatever it is? And the return doesn’t have to be directly financial, it could be efficiency, it could just be stress relief, accuracy, those components. And then we go through a test. A test is, can you sample that, like that receptionist or that administrative person. Instead of hiring a full-time person at 30 grand a year, can I hire a virtual assistant just for use for the next two months to see if my ROI, expected return on investment, is actually realistic. And now we go through a little test and now that virtual assistant may cost us 5000 over that month, a little more on an hourly basis, but… Or over two months, but that test is only $5000 instead of a $30,000 test so, now I can see if it’s working. And if it works, we roll it out. If it doesn’t work, then we modify it. The most simple principle to growing a business successfully is looking at what’s working and what’s not working. Whatever is working, do more of it, whatever is not working, either delete it, diminish it, or redefine it. [WHITNEY]:
Thanks for making it… I love how you make it so simple. You’re breaking it down where people can totally get it. Therapists get so overwhelmed when I talk about this, and you’re breaking it down really well. So, let’s move into a little bit of some of the questions that I get as far as like a faith-based practice with tithing. So, some practices want to tithe. What are your recommendations on which part they should tithe, and how would they fit that into the Profit First mentality? [MIKE]:
So, my definition of tithing is 10% of the owner’s income, not the business income. So, if a business makes a million dollars a year 10% of that will be $100,000 contribution to your faith, to your church. The thing here is a business may have extraordinary expenses of half a million dollar, of $500,000. So now your million-dollar practice is only really generating $500,000 of gains, but you’re giving 10% of the top line. And that can put an undue burden on the business. For you to tithe, you have to have health in your business. To contribute, you must receive. You can’t give something if you don’t have it. So, what I do is I look at the owner’s compensation and allocate 10% of that. And you can, with Profit First, set up an account called Tithing. And so what happens is, I allocate money out, so say $1,000 comes in, say 30% of that designated as owners compensation, so I’m getting $300 in that case, then I take 10% of that $300 and move into the tithing account. And now I’m tithing based upon my actual income. So that’s the way we structure it. [WHITNEY]:
Oh, great. Great. Another question I get a lot is about nonprofit businesses. What… Is Profit First work for them and what would they do? [MIKE]:
Yeah, so it’s kind of funny. So, Profit First works seamlessly with not-for-profits, but there is a bad taste in people’s mouth when they hear setting up Profit First for a nonprofit. So, we made one simple change, we changed one word. We changed it from Profit First to Purpose First and it’s been received very well. Here’s what we do. Instead of having a profit account, you have a Purpose account. And now you allocate a percentage of your funds to the Purpose account. And then when you do your purpose distributions, instead of that going to the shareholder, now it goes to the cause that you’re trying to serve. [WHITNEY]:
Love it, love it. So, we talked a little bit before the show started about your own faith and, kind of your journey with that and things you might want to share with our audience. [MIKE]:
Yeah, it’s been a wonderful journey for me. So, I was raised Methodist, but by a Lutheran mom, go figure. And once I was raised Methodist, at a certain point, we left the church not because of problems at church just because of the dynamics of life itself. And I started to kind of investigate my perception of a god. It was nice telling you off air. I am now convinced that God exists. And here’s how it works in my mind. So and not just, I mean like, on a quote-unquote logical basis, if the universe is infinite – and I believe it to be true, that it just goes on and on and on – and infinite space means it has infinite possibility, every variable must exist in infinity. And if everything exists, therefore God must exist, there cannot be a non-existing God. I also believe that God is a universal source that you, myself, everything… that even the airwaves we’re talking over right now is a part of God, and therefore, all of us are equal, regardless of your specific religion, or how you practice, or if you’re atheist, that in my definition doesn’t matter anymore, because we’re all the same source, we’re all of God. And therefore, we must all be… we must all relish each other, to be of service to each other. There is no one better or worse. So, I started to wear a symbol that I carry around, which is not necessarily a religious symbol, but it’s now the symbol for my definition of religion, which is an infinity sign. I have it on my wrist on a bracelet. And I never take it off. In fact, sometimes I have it resting on the palm side of my wrist, because that’s where the blood flows most through the arm. And I want this to flow through me, that’s the visual, and it’s just my constant reminder that we are all the same. We’re all on a journey. We’re all here to learn from each other. And from our experiences, we all have a compulsion to share and love each other. So that’s how I’ve redefined it for me. [WHITNEY]:
Yes, and how does that impact the way that you run Profit First? [MIKE]:
Yes. So, what I realized was this is not… Profit First – ironically, with the title Profit First – is not about profit first. It is… You know, people hear profit first and are like, Oh, this guy sounds greedy. Profit First is about the formula of putting profit first, but when it translates into sustainability and contribution, the only way that we can be of service is to be profitable. And so with my understanding of is that we’re all on this journey together, this path, that Profit First here is to be of service, to be a contributor, to strengthen people’s experiences in any way it can. And so that’s what Profit First is about. It’s about being of service. [WHITNEY]:
Yeah. And you’re giving people a better quality of life. Right? [MIKE]:
Yeah, that’s the idea. [WHITNEY]:
There are so many businesses… I think it’s – you might know it better than me – but I think it’s 50% of businesses fail in the first five years. [MIKE]:
Yep. Because of cash flow. [WHITNEY]:
That’s right. That’s right. And so even as a consultant, one of the reasons I went into this was, Okay, I can help people build their businesses, and their faith-based practices. So, we’re going to help more people find good counseling, because these businesses are going to last longer. So, it’s not necessarily about the money benefit and that kind of thing. It’s about making the world better, like one person at a time. [MIKE]:
Exactly. And you know what, another thing I discovered is that, I used to understand that I was, or feel that I was an owner of my business, and I’ve had this awareness – I’m not an owner, I’m a steward of my business, and that’s different. An owner is someone that possesses something, puts control around it. A steward is someone who facilitates and has responsibility over it, but just for a period of time. And if I structure my business as a steward, the business is designed to live on, and serve on, beyond my effort. If I do as an owner, there’s a control and there’s a defined beginning and defined end. So that was the realization I had for myself because of my faith, is that I am a steward for Profit First, I’m a steward for the work. It is not mine; it is ours. I just have a responsibility to carry it for a period of time. [WHITNEY]:
That’s beautiful. I love your words on that. [MIKE]:
Thank you. [WHITNEY]:
So, yeah, so your new book, Fix This Next, can you talk about that? [MIKE]:
Yeah. So, I’m totally jacked about this book, like, I’m so excited. So, as I do research for my books I come up with a thesis over time, after I do my research, and the thesis for this book is that the biggest challenge business owners face is knowing what their biggest challenge is. The vast majority of business owners are in this constant, two steps forward, three steps back cycle. And we’re rushing to put out all these different fires to address all these apparent and urgent issues, but we unintentionally are not doing the one impactful thing. The question of course is how do we find it? So, in Fix This Next I developed a hierarchy of needs, I call it the business hierarchy of needs. I analyze Maslow’s hierarchy of needs, which was the human needs, translated how that plays into a business entity. And there’s similarities and parallels, but a business is its own unique entity. We as humans, we’re wired into ourselves. If I walk down a dark alley, and I get spooked, I should definitely turn around and walk out. There’s probably harm coming my way. But my instincts, my senses triggered me to turn around. Well, when it comes to our business, many of us rely on that gut instinct. And it fails us because we’re not hardwired into business, you know, my sight, my smell, my touch is wired into me but not into my business. Therefore, we need this compass. We need something to work in conjunction with our senses. So Fix This Next has a business hierarchy of needs, there’s five levels, and what we can do is through a series of very simple questions, pinpoint what our business right now needs in order to have the greatest impact toward the vision we’ve set. [WHITNEY]:
I can’t wait to read it. I need it now. [MIKE]:
I can’t wait for you to read it. I’m really excited. I hope you love it. I feel that this is the most important work I’ve done to date. But admittedly, we’ll see in the numbers, we’ll see what readers think of it and I… it is the best of me, but we’ll see what people see of it when they see it… or say of it. [WHITNEY]:
Yeah, that’s great. So, what I ask everyone on the show, at the very end, is what do you think that every Christian counselor needs to better understand or know? [MIKE]:
Okay. This is a critical understanding and I don’t think most Christian business owners, actually most business owners at all understand this, but a faith-based community sees this the least: your clients are starving for you to be profitable, they are begging for you to be profitable. But here’s the thing – they’ll never use those words. You’ll never have a patient come in and say, Hey, can you double the rates on me? Or, Hey, could you rip me off a little bit? I’d really appreciate that. Of course, they’ll never say that. But what they will say is when I come in for counseling, I want your undivided attention to me. I want you concentrating on my needs. I don’t want you distracted about worrying about the next patient coming in because you need the money. That’s what they want, they want our undivided, our fully devoted attention to their needs. And that’s fair, but the only way we can do that is by being profitable. Because if we have financial worries, and we have to get another patient in the door, we can only pay half attention to this current patient while our mind is calculating the background, saying, I need money. I need money. How am I going to do this? So, your clients will never use the words, I need you to be more profitable, but they’re actually begging for you to be more profitable. You have a responsibility to bill accordingly. I’m not saying take advantage of clients, we have to be fair, but to all parties, yourself included. We must drive profitability, it’s the only way you can deliver the best of yourself. [WHITNEY]:
You are hitting the nail on the head there. I’m going back to years ago when I first started my practice by myself, and I was totally distracted by money, like, I need more clients so I can make more money, or I’m missing this phone call while I’m with this person, or I got to call this person back because hey, I got to hurry and get them in so I can make more money. Or, a lot of times, I would see clients that weren’t necessarily in my wheelhouse, but I needed the money. So, you’re speaking to this whole concept of also not only giving good treatment but getting them to the right type of therapists for the right kind of therapy that they need and giving them better care. [MIKE]:
Yeah, that’s exactly right. And when we get to that level, when we understand that we need to be profitable and we need to care to a specific community, we will be selective not because of us, but because it’s in the best interest of your patients just as you’re sharing. Sometimes a patient walks in the door who’s not a fit for you, but another doctor would benefit and be of great service to them and vice versa. So, its collaborative nature kicks out, but it all starts with a focus on consistent and permanent profitability. [WHITNEY]:
Wonderful. So, Mike, if somebody wants to get in touch with you or learn more about Profit First or maybe even hire a Profit First Professional, how do they do that? [MIKE]:
Yeah, I’d be honored for folks to check it out. The starting point for kind of all things is mikemotorbike.com. That was my nickname in high school. No one could spell Michalowicz. So, thank God, I reserved the domain. So, go to mikemotorbike.com and that will forward you to my website. There is a simple button there that says, ‘Get The Tools’. That will give you parts of all my books, and not just like a little paragraph or two, it gives you actual full chapters. I think you get two or three chapters from every one of my books, actionable chapters. Plus, I used to write for the Wall Street Journal, you’ll get that stuff. I have my own podcast called entrepreneurship elevated. All that is accessible with one click, one email, you don’t even need to subscribe. And then if you want to up-level Profit First and explore work with a Profit First Professional, go to profitfirstprofessionals.com, click on ‘Find One’ and we will hook you up with someone that’s well matched to your needs. [WHITNEY]:
Thank you so much for your time today. You really broke it down simply for therapists. I think people are going to benefit a lot from today’s show. [MIKE]:
This was an absolute blast. Thanks for having me on, Whitney. [WHITNEY]:
All right. Thank you.
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