Mike Michalowicz* is the entrepreneur behind three multimillion dollar companies and is the author of Profit First, The Pumpkin Plan and what BusinessWeek deemed the entrepreneur’s cult classic, The Toilet Paper Entrepreneur. Mike is a former small business columnist for The Wall Street Journal and the former business makeover specialist on MSNBC. Today Mike travels the world as entrepreneurial advocate speaking to groups just like ours. He is globally recognized as the guy who “challenges out dated business beliefs” and teaches us what to do about it. It is my pleasure to introduce Mike Michalowicz.
Hello and welcome back to another Dr. Nilda Business Foresight Show. Today I have with me, and I’m super excited, Michael Michalowicz. Let me give you his bio. Michael Michalowicz is an entrepreneur of three million-dollar business companies. He is the author of Profit First and The Pumpkin Plan which is the first book that I read of yours. Businessweek deemed the entrepreneurs’ cult classic and the toilet-paper entrepreneur. Mike is a former business columnist of The Wall Street Journal and he is a former business makeover specialist on MSNBC. Today Mike travels the world as an entrepreneurial advocate speaking to groups pretty much like ours. He is globally recognized as the guy who challenges the outdated business beliefs which I love and he teaches what to do about it. So, welcome Mike I’m so excited to have you here.
Dr. Nilda, it’s awesome to be here. Thank you so much for introducing me.
I met you literally before knowing you. With your first book and then I read this one. Ever since I’ve just been following everything you do. I have all of your books many of which I lend out because I think your stuff is amazing. I want to start with how you started with this.
My background is I’m an entrepreneur. I, as you shared, I’ve had the great privilege to have built and sold three multi-million dollar companies. But during those processes it sounds so great like what a wonderful resume but, I went through some severe struggles. In fact, one time I was in depression for a couple years because while the businesses were growing I wasn’t successful. I wasn’t making money. I wasn’t able to sustain. I was refinancing my house multiple times to cover payroll. Only when I sold those companies did I ever make some money. When I realized in retrospect I didn’t understand the disciplines of being a successful entrepreneur. I thought that the goal is to strike it big one day. But really entrepreneurship is a marathon we are in for the long haul and it’s going to be a tough trip. So, what I started doing actually when I was in depression I started journaling. One of my friends suggested that as a way to navigate some of the emotional struggles I had at the time. I was writing it down and as I was writing down thoughts I was like oh my gosh here’s a way to fix my business. Here’s a way to improve things and fix mistakes I was making in my business. Well this journal ultimately became enough content. I was like this is really a book. I should write a book. When I thought, I should write a book that struck a chord with me because I felt almost called to do it. It’s an absolute passion. I love being an author. This is what I do full-time. I strategically positioned my books for marketing purposes right there. I write books. Actually, I’m submitting a new manuscript for a new book to my publisher this Monday. So, in a few days from now.
Tell me about your entrepreneurial journey. Most people go to school and get a job. That’s the majority. There’s very few of us that take that entrepreneurial step which as you said it’s a struggle. It’s not easy peasy. It’s really a real commitment to a mission and a mission that’s bigger than you. I love that you said that because then you realize that the book that your journal was not for you. It was something that you had to share. When did you realize that this was your passion and that you were created to be an entrepreneur?
Right after college. I didn’t find my passion right away but after college I couldn’t get a good job. I worked at a local computer store that was the job I got coming back out of school while searching for that lifetime career job. This was back in the early 90s by the way. Then one day I said you know what why am I working at a computer store? I can run one myself. I’m going to start a computer based business and that was kind of the trigger. I did it and didn’t realize how hard entrepreneurship is. I thought that the boss sitting in the back room – sitting there writing down stuff in his book while I was out front at the computer store selling everything clearly, he didn’t have to work. Like that’s the life of the entrepreneur so I’m going to do it myself. I didn’t realize how much effort goes into behind-the-scenes, financing the business, getting customers in the door, and all these different things. It was a brutal awakening to what entrepreneurship is. The one interesting thing now I see in retrospect is I was terrified at that time because I couldn’t get business. I had to do anything it took just to get some money in the door. And where I realized is fear is actually a very powerful tool for a period of time because it gave me the energy. I woke up at 5:00 in the morning and I worked till 5:00 the next morning. I was relentless in making this work because I had to. I think fear is underrated. I think people say oh you know no fear but, I think it’s a good tool for a period of time. I think if I stayed in that state of just pure panic all the time that it would result in overwhelming stress and ultimately will kill you. I just leveraged fear to push me forward. It was over time a few years into being an entrepreneur I said you know I really actually like this. Then many years later I asked myself what is my calling here in entrepreneurship and how can entrepreneurship be a platform to do what I feel is my purpose my passion? That became ultimately being an author.
I love your book but you do more than this. You do so much more. Talk to me about the other things that you do because are you still a business man? Are you still and entrepreneur?
Yes, I still own three businesses. To finish my entrepreneurial journey then I had a company in computer networks. It was my first business. I sold that to private equity. I had a business in computer crime investigation that was a fascinating business. That was acquired by a fortune 500. I really had the bug for entrepreneurship but also didn’t really understand entrepreneurship. I had some really good fortune come my way and I thought it was actually my smarts that got me there. It was just really lucky timing. My company did part of the Enron trial and I was like oh my God look at me you Enron wanted me. No, I was in the right place at the right time. I grabbed the opportunity there’s no question about it but I was really at the right place right time. Enron made my business it put my business on the map and we took off. Today why I’m writing books? It’s interesting how many opportunities present themselves. One is people have read my books they’re business owners and some come to me and say I want you to be a consultant for me. Are you willing to consult for me? I don’t do any consulting I don’t have the time but then they’ll say well would you be an investor in my business? Meaning will you take a part of the business just for the consulting work so it’s almost a quick pro quo. There’s been a couple opportunities. One was in a manufacturing business. Another one was Augmented reality. I said you know what I will volunteer a portion of time for a piece of the business. So, I have those businesses. Augmented reality the company in the architectural space. I have a business that manufactures leather parts leather item. Then my other business though is Profit First which is right there. Profit First got so much momentum that book knock on wood has really caught traction. When the first person emailed me about the book they didn’t ask questions about the book. They asked a question saying I want to hire an accountant or bookkeeper that knows this method of Mirrors of profit first so that so that I can get their direction. Who can you introduce me to? That was an epiphany moment. So, I started a membership organization for accountants, bookkeepers, and coaches teaching them this methodology of Profit First. Now they go and support people who once they’ve read the book to really instill the methodology in their business. We have 190 active members now throughout the globe that are doing this.
Is it fair to say that your entrepreneurial journey has really evolved and has opened doors each time you take a step? Even to write a book it’s opened doors to other things that you never imagined.
Yeah, no question about it the doors open. Many doors open so that I think the challenge I’ve had is picking the right door or more importantly not trying to go through two doors at once. There’s so many opportunities that present themselves I can go here. I can do this. I can do that and I think I know if I do it all it’s impossible. It feels possible but it’s impossible and I get overwhelmed. So, yes, many doors have opened. I’ve learned and I’m getting better at the discipline of actually declining opportunities because I realize an opportunity dilutes me from what I’m trying to do now. The entrepreneurial journey is a constant opening of doors and I’m just trying to be very selective in picking the one that I think I can serve best. Many times, saying no so I can stay focused and really do a good job in what I’m trying to do currently.
Right now, you’re in the process of yet another book. What is the direction of this book?
The book is going to be called Clockwork and it’s funny what I do is I speak with a lot of my readers. Every book I’ve written has been in response to what my readers I believe need next. So, when I wrote The Pumpkin Plan the next thing they wanted was I wrote in Surge and whenever they read Surge the next thing they wanted was the control profitability and really master profit king cashflow. That’s why I wrote Profit First. Now the most common thing I hear is when a business is growing and a business is profitable that doesn’t necessarily remove the stress off the owner in fact it could amplify it. So, many of my readers say I’m exhausted I’m stressed out I wish the business would run itself. I wish the business could just run like clockwork and that was it. I started to research organizational efficiency and really got into the meat and potatoes of what makes a business super-efficient and what doesn’t. Then I’ve called it down in a very simple method where I believe any business can do just a few things and experience immediate operational efficiency and growth with a lot less stress on the owner.
Innovation is at the core of everything that I do and I’m a business foresight strategist. What that is, is that I help businesses understand the future and understand their industry. You know this you’ve been writing for quite a number of years and you see that there’s a difference in the way that people are doing business. Not only how they’re doing business but what’s making them successful. What made them successful yesteryear is not necessarily making them successful today. With that change how do you position businesses for the future? How do you help them?
So, ironically Surge, which I have right there, I dedicated that book to anticipating the future and positioning yourselves in front of it. The analogy I used is a surfer. Surfers go out in the ocean and what they do is they look for a wave. It’s called wave spotting. Then they paddle in front of it as hard as possible and they catch one wave. I think a lot of businesses they’re trying to spot all the trends that are going on out there in fact they’re looking at all the waves. They try to paddle and catch all of the waves which is impossible. Though there’s a few principles. One is we have to look for what I call eminent trends. If you look at waves coming or a surfer they’ll look at the next two or three waves out. They don’t look for what’s a mile out in the ocean. That’s not even a thought in their mind. They evaluate what’s imminently upon them. One example I talked about nowadays is the electric car versus the autonomous car. Electric cars are imminent meaning it’s been proven that there’s consumers wanting electric cars but electric cars are not the dominant force in the market. There is now potential that it will replace the traditional gasoline engine so the imminent trend now is the growth of electric cars. I think that’s what we need to investigate. Now the question of course is what’s the services and products you offer. If it’s not even in that space ignore it don’t worry about it focus on that trend so, you have to pick the spot to serve. How to do this by the way is you pick your niche. Pick the community that you want to serve first and find out the trends that are going on. I picked the accounting community and I’ve researched out what’s going on in the accounting and bookkeeping community extensively. I know that the imminent trend and change that’s happening and I’ve put my business right in front of it. That’s why my business is growing so well not because I’m particularly smart not because we’re a great company. I think we’ve got great elements. I think we’re a wonderful company but, I think the biggest thing that’s moving us forward is we put ourselves to serve an imminent need. So, go back to those cars there’s an imminent demand for electric cars. But, the autonomous car, you know a lot of people talk about cars that drive themselves, where’s that going? Well do you know anyone that owns an autonomous car right now? The answer of course is no. That means that trend is possible there’s no question about it. It could be magnificent but it’s not upon us right now. So, for me to make decisions in that market would be a mistake. I find that we have to look at our niche. Identify the community we want to serve and then research out what’s happening now. Easy way to do it by the way I go into Google and I say what’s happening now in the accounting space. Like literally that’s all I had to do and I start getting articles about all these different changes with technology going on. So, if you provide auto parts you can say what’s going on in the auto parts industry. They could say with the rise of the electric car we need more efficient supplies or parts for cars that don’t consume as much electricity because there’s only so much electricity in a car. I don’t know what it is. I know we have to look at what’s are niche what’s imminent. Then make moves to get right in front of that wave and serve what we can see coming.
Absolutely because that’s exactly what I teach exactly and understanding the trends in your industry. Not just the trends in your industry but what are the things outside of that industry that can impact your business. You have to know that because you can be working really hard and there may be something in another industry that’s going to put you out. That’s what happened with yellow pages.
I think the mistake that some people make is I’ve had people come to me and say hey Mike what’s the next big thing tell me about it. I’m like be really careful here. There’s a million next big things. If you’re looking way out there but your calling your passionate is here and you’re looking there you’ll actually get diluted and pulled away. Just like you said we have to first pick the area we want to serve and then look at all the factors that are influencing it for sure.
Absolutely and again what I teach is a small like an evolution of change. Don’t just dismantle your company and start it all over again because there is the next big wave. It’s about making those small changes towards that future and that’s what I loved about all your books. You really break things down and you simplified it and that’s what people need in business. Nobody has the time to dismantle their business and redo it especially when you put so much effort into it but there were small consistent small changes that can make a huge difference.
Yeah, I agree. I do a presentation and I share that most businesses are trying to fix 95% of their problems when in fact there’s only 5% of business that needs to change. If it’s a Pareto principle where Pareto shared the 80/20 rule that was his thing. Modifying 20% of your business will have 80% of the effect or benefit. So, we have to look for the smaller things or the fewer things that have the bigger impact and focus our attention there. I agree trying to fix everything is the worst move actually. Here’s the other irony I’ve been studying manufacturing principles and one thing in manufacturing is they called the one dial at a time. If there’s a problem in my manufacturing line and I change this dial here and that dial there to fix it something may happen. It may actually get fixed but then I don’t know which dial did it or was the combo. Other times it may not be fixed. I turned 2 dials it doesn’t fix it means that maybe this dial fixed it then this tile broke it so, I don’t know which one is the cause. So, manufacturing the basic principles turn one dial observe the result then put the dial back and try the other. I believe ultimately every business is manufacturing something. We’re manufacturing the service or experience that people are having and we’re making an end deliverable. I think when we make these changes in our business to improve it turn a dial and then measure. Then turn the next dial don’t turn all these things simultaneously.
It’s like anything I think the reason why people are so resistant to change is because they feel that they have to change everything. But if we made small changes like even in our diet. Small changes but consistent changes and now you start seeing an improvement. You don’t lose 20 pounds overnight but the consistency is how you lose that weight. Then you start seeing changes in your health and then you start seeing changes. But you make one life change. It’s no different in a business. It’s a living organism I tell people all the time. It’s a living organism and this is how you just make those small consistent changes. Look at the areas in your business that you’re wasting time, are not making revenue or you are making very little revenue and just change that. Just make a switch with putting something that’s innovative and something that is going to make a difference one thing at a time. Do that for a while and then move on. Tell me where do you see your company in I don’t know five ten years?
We have some clarity. Right now, I told you we have a hundred and ninety members we anticipate within the next five years or less we will have a thousand members. Maybe actually even sooner. What a member means is an accountant or bookkeeper or coaches out there providing profit first services to entrepreneurs. What a thousand means to us is our average client serves an average of a hundred-other people with profit first. So, a thousand people out there delivering profit first to a hundred companies that’s a hundred thousand companies being affected. Those companies in fact if their profitability improves and we’re convinced it will find profit first we’ll touch other people. We really think, and this is our mission, to eradicate entrepreneurial poverty. 83% of small businesses are surviving check by check. They’re impoverished. We think if we can affect a hundred thousand small businesses every year through our thousand members that that will start the trend to start reversing that and make more businesses profitable than the ones that are failing. That is our mission and our calling. I’m super excited about it. I think if we keep of this rhythm within five years or less we will have those thousand key members and having a real impact on the economy. That’s our goal.
The membership is just for the accountants and coaches?
Okay, so, somebody with a business like myself would be a part of that membership or would be pulling from that membership?
Pulling from it. We have entrepreneurs who contact us constantly. Actually, fifteen inquiries already came in this morning from entrepreneurs throughout the globe who said I’ve read profit first now I need help with it. I want to go in deep with profit first do you have an accountant, bookkeeper, or coach that can guide me? Then we make an introduction to our members. That’s how we do it.
Okay, so, these members are trained by you?
Yep. We have a small business here. There’s eight employees. I’m one of them so, there’s seven other folks here and we do the training live. We actually have, you can’t see out my door, but outside my office there is three coaches. Our internal coaches who are working hand-in-hand with our members to really get them up to speed. We mandate that if you’re an accountant, bookkeeper, or coach within our profit first professional’s organization, that’s the name of our organization, that you have to first run profit first in your business. It’s like the doctor saying you should really stop smoking while he lights a cigarette. That makes no sense so, we mandate all of our members are running private first and abiding by it. Then and only then do they start rolling it out to their prospects under our guidance. We help them set it up and we go through all the intricacies. It takes about six months to a year and then they’re fully on their own still calling in for regular support and learning new trends and technology that we’ve developed. But the core principle is our members have to master private first for themselves first before they roll it out to their clientele.
At that point they’re eligible to be qualified?
We call it certified yup.
Now this is without even an accounting degree. I guess this is why I was under the impression you were an accountant.
Yeah, I don’t have an accounting degree I’m actually horrible at accounting. People are at first like whoa you built a system for accounting and you’re horrible at it? Exactly I’m so bad at accounting that I needed a system that worked with who I naturally am. You see traditional accounting says read your income statement, your cash flow statement, your profit and loss, and your balance sheet tie those in together and run metrics. Whatever you do in traditional accounting don’t look at your bank balance because that’s not indicative of where your business stands. What I did is I grab my phone every morning and say do I have money or not and run my business based upon my bank accounts. Even though my accountant was telling me never ever look at your bank balance use those sheets. So, my epiphany was well if this is what I naturally do using my phone and looking at my bank balance why not set up a system that allows me to do that and drives the results I want. Profitability. Making sure all my expenses are paid. Pay for myself you know many owners never even pay themselves. I want all those things. How do I do it with my bank accounts? That’s how profit first came about. The beauty of profit first is you don’t need to know anything about accounting. You just need to know how to log into your bank account. When you follow the system, you will know exactly where your business stands for all the different elements. Profitability, how much you’re being paid, your tax responsibility and so forth just by logging into your bank account.
Wow the doors that open for you when you put yourself in that position, right?
It’s amazing and here you are helping people without even an accounting degree. But you’re helping accountants do a better job at what they do.
The ultimate irony is during the process I started interviewing accountants. I’d say give me the honest truth, how many of your clients are profitable? The response consistently was like basically 5% 10% none of them. Very few clients were profitable. Well accounting has existed for over 200 years now modern accounting. I’m like for 200 years it isn’t working for the vast majority of us we need something new. There are now accountants, bookkeepers and coaches who are saying oh my gosh the system while it’s very logical doesn’t work with the natural human behavior. Therefore, we need a new system so these accountants and bookkeepers are adopting this and sure enough driving profitability. The best part about profit first by the way is it doesn’t negate traditional accounting. When you have to deep dive into your numbers accounting is fantastic for it. It’s that day-to-day cash management where the main problem is. It’s the 5% fix we were talking about. Fix a few things. You fix this one part of our behavior by staying with the system that lets us as entrepreneurs continue to behave the same way we always have. Log into the bank account but you fixed that by pre-allocating money to its purpose and sure enough everything gets fixed. That’s why these accountants and bookkeepers are adopting it. It naturally fits in with old traditional accounting but there’s a little spin that ensures profitability.
That’s really innovative that you would have come up with a system that works for the average person who is not an accountant. Here we are running our businesses but where not accountants. We don’t understand all those ramifications and all those little things that are the ones that really make that profit first. You saw the need and you developed.
I think all of us have this opportunity. The need was for me. I’m an average guy. I’ve had some successes but I’ve had huge failures. And what I realized is I just needed something that worked with who I naturally am. Then I find out a lot of the world when it comes to at least managing money kind of behaves the same way I do. I think for all of us entrepreneurs we have an opportunity to identify challenges that we face ourselves. Then when we fix it for ourselves realize there’s a lot of other people that need that same fix.
Well they say that the person with the solution has the key to the money. You have to provide solutions. A business is not about what you like to do but about what solutions you can provide for clients. That’s what you’ve done. That’s exactly what you’ve done. You’ve provided solutions. Through every book, you’ve dealt with a different part of a solution and that’s where you are. That’s fantastic. I love it. I am so excited. I’m so happy to have met you in person because I’ve known you three months and finally get to meet you in person. The only book that I haven’t read is profit first which means when I get off I’m going to Amazon. I want to thank you so much Mike for being here. I listen to your podcast. I love your energy, your positiveness, you’re such a positive happy person and I love watching you. Even when I read your stuff your happy personality just goes right through. I really enjoy that. It was really great having you here. I want to thank you for giving me your time. I understand time is very valuable and I want to thank you may be very soon we can have you back for your next book.
It’d be an honor. Well thank you for having me and yeah if anyone else is interested if I can share profit first or any of this stuff. Just Google profit first or you can go on Amazon. Everything’s on Amazon, Barnes and Nobles and it’s all up there.
And these are all your books that are behind you. We’re going to have links to all of this and your website. I will have you back when your next book is published.
That would be wonderful.
All right. Thank you. Bye.
#DrNildaShow #DrNildaBusinessForesightShow #BusinessForesightShow #DrNildaPerezShow #foresight #strategicforesight
#MikeMichalowicz #ProfitFirst #Surge #ThePumkinPlan #TheToiletPaperEntrepreneurship
“Interview with Mike Michalowicz Is Your Business Money Making or Cash-Eating?l”