EntreLeadership - #197: Mike Michalowicz—Become Permanently Profitable

Episode Date: April 24, 2017

Author and serial entrepreneur Mike Michalowicz joins us to discuss his principles for turning businesses from cash-eating monsters to money-making machines. Mike offers a simple cash-management solution that helps companies become permanently profitable and breaks the cycle of the day-to-day struggle to survive. Also on board, we’re interviewing EntreLeader Alex Andronic of Andronics Construction Company. Alex shares his journey from surviving to thriving. entreleadership.com/podcast Summit Event EntreLeaders Guide to Running your Business Debt Free Infusionsoft's "Custom Growth Plan" Learn more about your ad choices. Visit megaphone.fm/adchoices

Helping business leaders grow themselves, their team, and their profits. This is the Entree Leadership Podcast. Now, here is your host, Ken Coleman. Broadcasting from the Music City, this is the podcast of leaders, by leaders, four leaders. Thank you so much for joining the conversation. Mike McCallowitz is our featured guest. This guy is an author of a book called Profit First, Transform Your Business from a Cash eating monster to a money-making machine.

I learned about him from our All-access program, which is a unbelievable group of people, thousands and thousands of leaders across the country that are part of a monthly, yearly tribe. And we have given them this information through a webinar. And when I saw it, I said, oh, boy, we've got to do this for free on the Entry Leadership podcast. You can thank me later because the All-Excess people had to pay for it. I'm giving you some of it for free.

You're welcome. And of course, speaking of free, we're going to have some great resources from Infusionsoft and our Entree Leadership team. We're going to open up Ken's electronic mailbag, and one of my favorite things we're doing these days, bring you a story of a real entree leader. So let's get right to it. Mike McCallowitz. You can't spell it.

You just have to trust me. We're going to have a link to his website when we come out of the interview. I'm not even going to try to give you his website. Eric the Bruce is going to have a link. in the show notes on entreleadership.com. But again, as I told you, this guy is pretty unconventional on how he looks at this idea of profit first. Solid stuff.

And again, when our head coaches are putting this content in front of our all-access community, okay? That's how I know it's legit. I knew it was legit. As soon as I saw it and I watched, I said, oh, man, this is good. So, hey, you need to be taking notes on this. This is practical. It's going to help you win financially.

so many businesses fail because they don't do the money part right. They got a good idea. They got good people, but they don't know how to handle money. This may be one of the most valuable conversations you hear this year. Here we go. Well, Mike, this is intriguing. This book really intrigues me, and I'm very excited about this conversation to set it up. Of course, I've already talked about the book and the book title of the audience here, but sales minus expenses equals profit. That's what everybody, except for you and your disciples would say, yep, that's what profit. is you say in the book that sales minus profit equals expenses. So since it's right there on the cover of the book, let's talk about the summary here of this whole theory. How is that possible? How have you flipped this, what, thousands years old accounting? You've just said, bah, that's not how we do it. Yeah,

I slapped it in the face. Yeah, you did. What does that mean? How is that possible? How can we do sales minus profit? That equals expenses. Well, I'll start with the reverse side. So sales minus expenses, equals profit is an abject lie. And I'm not saying from a logical standpoint, yeah, of course, mathematically that works. But it doesn't work in practice. 83%, and this is a number partly derived from the SBA, there was a study conducted, 83% of small businesses, there's 28 million small businesses in the U.S. alone. 83% are surviving check by check. They're not profitable. And they don't even know how to pay their payroll next month or to pay rent or whatever the next big expense is. They starving to make a sale.

And so there's this constant panic-stricken survival mode. And so I propose a new formula. It's the hidden pay-yourself first formula. This is nothing new, nothing I invented. I'm just saying this applies not just to our personal lives. This also applies to our business lives. And you switch the variables. Now it's sales minus profit, equals expenses.

Mathematically it's the same. But behaviorally, it's a radical change. What I'm saying is every time a sale comes into your business, immediately take a predetermined percentage, 5, 10, 15%, take that money, allocate it to profit, hide it away from yourself, and now make your business live off the remainder, and you'll find a way to do it. Boy, that's true. Now we've got some people going, oh, whoa, whoa, whoa. And I mean, hey, those numbers don't lie. So there's a lot of people that are listening in here that are in that same kind of scramble, that hamster wheel. And so you begin to unpack this. You call it the four core principles of this profit,

first mentality, philosophy, and then really an operating system. So let's, I'm going to walk you through these because I think this begins to really help people see how do I do this, Mike? So first is you say use small plates. What does that mean? What's it look like? So it's funny, I was doing a presentation on this yesterday. It's a couple hundred people in the room and I say, who here, are all business owners, who here runs their business off of one primary checking account? Every hand goes up. And I said, well, here's the problem. We fall victim to this thing called Parkinson's law. This is a behavioral tendency that all humans have. And what it states is that the greater the supply of a resource, the more we consume of it. One example is time. If I, and you and I were

discussing a contract and you said, hey, Mike, I'll get you that contract in one week. It'll probably take you a week to get to me. But if you and I, the same people, have the same conversation about the same agreement and you say I'll get the contract to in one day, you'll get it done. So as we expand time, we consume more. It's true for time. It's true for 20. the paper. It's true for any resource. It is true, definitely, for money. And when people raise their hand, I said, you've won a checking account. I said, well, tell me about this. Do you look at your bank account regularly? And they said, yeah. I said, well, do you do what your accountant says? Do you look at the profit law statement, the cash flow statement, the balance sheet? You tie those in. Do you know

your KPIs, your key performance indicators? Do you have your budget set? Do you have your OCR, the operating cash ratio, the most important metric? And they said, no. These are small business owners. They are in the mix of things. They don't have time to master or understand this stuff, and they don't even have the desire. So what they do is they revert to the bank balance accounting. They look what's at the bank account and they make decisions. So what I tell people is the goal is not to change your habits.

Accountants have been trying to do that for centuries now, and it ain't working. So we've got to have a new solution. And what it is is to set up what I call small plates. Instead of having one big serving tray, if you will, of cash, we're going to divide money up into multiple plates. In execution, you call your bank and say if having one checking account, I suggest you at least have five accounts for different purposes. One to pre-allocate profit. We already talked about that.

One to pay, owners pay. Literally the most important and significant employee at any business is the owner, yet they pay themselves last. We're going to pay yourself first. A tax reserve, so when your corporate and personal tax liabilities are due, it's paid. And then, of course, to run your business. And this becomes basically the envelope system, Ken, like the old envelope system, I know someone in your family,

tree has done it. Someone in my family trees done, my mother actually did this. And what she'd do is divide up money when she cashed in her paycheck and she put money into the food envelope, money into the rent envelope and so forth. And she'd always work with the envelope for its specific task. She'd go buy food. She'd use the food envelope and she always had the money in there to work with. What we're going to do in our business starting today, pre-allocate money to different purposes and then work with that money allocated to that specific purpose exclusively. Never cross things or mix things up ever again. Yeah, and you do this in the book, you do this so well, you tie this into this idea of it's much like our eating habits and how they should be.

So if you go to smaller plates, obviously you've got smaller portions. And what happens is, is you begin to really get lean. And that's what you're really saying here. And when you are lean from a cash standpoint, and then you're really, really saving money. Now you're super healthy. That leads us to the second idea, and they all kind of tie together, serve sequentially. And so this, again, has a food metaphor to it. Yeah, so what I found is everything in the physical fitness industry, if you will, translates into the fiscal fitness industry, what we're talking about. And what I learned when it comes to diet is most of us serve our food simultaneously. I love a good steak.

So steak rice or not they'll serve that beautiful prime rib, the mashed potatoes, and then that vegetable medley. Yes. And so what do I do? And what do I think most people do is we go to the steak, we carve off a piece of steak and eat that, you know, maybe eat some potatoes. But we don't look at that vegetable mush until maybe our guests with us are kind of looking at us saying, oh, not going to eat your vegetables. And then we do what I call the potato cover up. We take the potatoes and kind of cover the vegetables so it looks like we ate them.

And I know this is true, not just for me, this is true for our society, because the biggest wasted food item at restaurants is always vegetables. And so what this fitness expert said is, we all know the value and importance of vegetables, yet we don't consume that. Again, we have to work with our natural behaviors. And so what the expert suggested is serve vegetables first and exclusively. Like literally put the vegetables in front of you, that medley, with no other food. You're hungry, you'll eat some vegetables. In this case, you'll get the nutrients and vitamins you need.

Then when the rest of the meal comes, it'll actually balance out the consumption because some stomach space has already been filled. Well, this translates into our finances in that most people, businesses, they go right to paying the bills. You know, the money flows into the business, and then we react by saying, oh, I just got to pay my bills. And we move reactionary, not sequentially. For us to be fiscally sound, it's important that, A, we first set up those plates, but second, the next thing we do, it always has to be in the sequence. When money flows into the business, the first thing we do is divided up into these separate accounts. Never pay a bill first. Don't do anything with that money. First, allocate the money to

its predetermined purposes. Then, out of your operating expenses, you pay your bills. And if you can't pay your bills, that is an indicator that you can't afford your bills. Too many businesses live exactly up to the exact income they have coming in. They max out their spend, and the day they have a dip, they're underwater. With this system, now that we've allocated money out to its predetermined purposes, when you look at your operating expenses, you have to live within that money. You have to live within those means.

All right. So now we go to the third principle, and that's removing temptation. This is a big one, certainly in the food space, but fiscally and our businesses, how do we remove temptation? What are some of the temptations that small business owners and business owners are facing? Well, so what's going to start happening is you're going to be starting to allocate profit, literally reserving money to distribute yourself as a celebratory account. And now I wanted to sandwich profit and owners pay because this is an important point. Owners pay, one of those accounts I mentioned, is an account we set up to pay ourselves as an employee for the business. This is what I call the lifestyle.

We have to live our lifestyle off of our pay. The profit account is different in that this is a celebratory account and a reward for starting the business in the first place. You have an equity ownership in your own business, and this is the reward. Just like I own some public stock. I own Ford. Ford sent me a distribution. I only own 100 shares, and I sent a 15 cent share distribution, so I got 15 bucks. But I'll tell you what I did with it, Ken.

When I received it, it's like, oh, great, this is a good day out at Starbucks. I am not going to, you know, send it back to Ford and say, hey, your management team really could do better with this money. Let's plow it back or reinvest it. No, I took the risk of investing. They are now rewarding me. We either realize in our small business, you took the risk of starting the business. The profit distributions are reward for you. But here's where it becomes a problem.

That money starts being allocated to the profit account over time. it starts piling up. We're only going to distribute this money once a quarter. That's what large companies do. And large companies, if anything, they started off small and they found a way to get big by being fiscally sound. But between those 90 days, that money's piling up there. And then I know that moment's going to come. That big bill rolls in. And an entrepreneur looks at the bill and says, ah, I don't have enough money. My operating expenses, I'll just borrow from my profit account. And that's when they start unwinding the system. Because now they're playing a shell game. So we have to remove the temptation to borrow from our profit account or steal from it.

And that tax account, that's money reserving to pay our taxes. That's usually on a quarterly basis too for most companies. So we have to remove the temptation to borrow from that. What you do, and it's real simple, is find another bank. I don't care what bank you're with today. If you love them, stay with them. But I also want you to find a second bank. What we're going to do is when we allocate profit and tax the first bank,

we're then going to invoke a transfer from that first bank to the second bank. bank, and now the money is going to stay there. And the whole goal of the second bank is that it's out of sight, out of mind. So no convenience options. You do not want online banking. You do not want starter checks. You definitely do not want an ATM card. The only way you're going to withdraw money from the second bank is when you drive to the branch and you ask the manager to come out with the cashiers check for you. That's how we remove temptation. And then you have to live off of what you truly need to live off of your operating expenses. All right. And so the final corporate principle of this profit-first idea is to enforce a rhythm. Unpack that one for us. Yeah, so,

you know, most of us back to the physical fitness or diet industry, have a bad food rhythm. Most of us eat three meals a day, but what happens, and it happened to me today, is I was running late to get to the office, so I skip breakfast, and then lunch rolls around, and then I overeat. So we go through these peaks and valleys of super hungry to super overfed, you know, we're stuffed, and we go through these peaks and valleys. And what does is it actually results in greater caloric intake. When we're starving, we eat more. And then when we're overfed or stuffed, it actually stretches our stomach and we continue this pattern.

Well, businesses are very peaks and valleys like this too. Very much so. In that when the cash is flowing in, you ask an entrepreneur, how's the business going? Fantastic. And they start using the money to buy new equipment, pay off all the bills they had. Maybe it's time now to hire that employee. But the next day when the money's gone, they're in a glut. then panic ensues. We have to sell anything to anybody. Let's get rid of those employees we just hired.

So we become very reactionary. Back to the diet industry, they found that actually five small meals a day makes our diet stay very consistent, and we don't go into these extreme variables in peaks and valleys and hunger and being overstuffed. So five small meals a day actually results in lower caloric intake because there's consistency. Well, in our business, I found we also need to get into a serving frequency. A rhythm. What I found the best rhythm is for many businesses is twice a month. Some businesses once a week, but usually twice a month. And what we do is we allow money to flow into our business. It goes into the primary account I call income. That is the serving tray, but we'll never eat off this plate or this account again. The money flows in there and it just piles up. Then on the trigger date, the 10th or 25th, whatever that next date is, all the money in the income account gets divided up into those other four accounts.

profits, profit, owners pay, tax, operating expenses. The income account goes back to zero. And then we live off the operating expenses. Then the money starts flowing into income again. And on the next trigger date, we allocate the income account back to zero and everything gets allocated out. Now what happens, Ken, is we get into this rhythm that you'll actually see what's called cash flow waves.

You'll see just by looking at your bank account, like we always do our normal habit, log into the bank account, you'll see when your income peaks right before you allocate it and you'll have an expectation for what your normal income flow is. And of course it's not always going to be the same. It will vary. But now when it peaks, it goes super high, maybe you'll celebrate and say, what happened?

Do we have more sales? And you'll call your accountant and get some details of what happened. Or if it valleys out and you say, what's going wrong? Do we have a cash flow issue? Are we not doing collections? You'll inspect it. But the beautiful thing is you don't have to read a balance sheet or account. cash flow statement. Actually, most entrepreneurs can't. But you are now with the system allowed to do

what you normally do. Log into your bank account, see where the cash is, and now you'll be prepared to see when there's anomalies and taking action accordingly. Okay, that's so good. Now, we just walk through the four core principles. Now, I want to fast forward in the book a little bit because you challenge folks to just kind of get started and tiptoe into this at the end of the first chapter. You just say, look, start with transferring 1% of your current money into the profiting out, just to kind of get yourself used this. We've got a lot of people are going, all right, Mike, it seems to make sense, but they've just not been operating this way. And I think one of the big questions in the back of our listeners' minds, you begin to answer in Chapter 5,

and that's allocation percentages. So you talked about those five key accounts to get those things going, but how do they begin to get practical? And everybody's business is different. So give us at least a framework for the allocation percentages. Yeah. So I studied my team here about a thousand businesses ranging from brand new startups, zero to $250,000 in revenue. Typically, that's one person working there, up to $50 million companies and everything in between. And what we did is we went into every industry. We looked at literally pizza shops to sewing manufacturers that use sewing technology,

to professional services, radio shows, like everything. And what we did is we identified the fiscally elite, meaning the businesses in those industries that were generating the most profitability. And then we categorize them based upon different revenue sections, so zero to 250s 1, 250 to 500 and so forth. And we put the numbers for the fiscally elite. And actually, I don't even have them memorized, so I can't say I'm off the top my head. But an example may be a company that does a million dollars in revenue that's fiscally elite allocating 10% of total income to profit, another 20% to pay the owner or owners, another 15% to pay taxes and then the remainder, which I think is 55%, for operating expenses.

And what that means is a million-dollar company, the fiscal elite, the owner's taken home 200 grand, plus 100 grand bonus of profit over the year, plus $150,000 of taxes have been reserved to pay off all their tax liabilities. And that also means they have to run their business off 550,000. Well, the challenge is it is like taking a frozen mug out of a freezer and putting it into an oven. If a business just jumps into it, it will bust the business. And I've also come to realize the system that we just outlined in 15 minutes together,

it's a big change from what you've been doing. So as I've been traveling around doing speaking engagements about this, I've been invited back now to the same conference the following year to talk on the same subject, so it's the same audience. If I ask the audience, hey, you saw me last year, I told you profit first, this will change your business forever, how many people are doing it? And I would get so dismayed when one hand, about 200 hands, one hand would go up.

I'm like, what happened to the rest of you? What's wrong? And for a while, I thought they, the audience, was the problem, that they didn't have the drive or the hoodsput to do it. And now I've come to realize the problem was I was telling them, I was the problem, I was telling them to go too fast into the system. So the easy way to get started, and literally anyone listening to the show right now can do this moment.

Just set up one account. What we're doing here is instead of raising the bar, We're actually going to lower the bar. So low, that's easy to get started. Call your existing bank. It doesn't matter if bank you use. If you like them, they're fantastic. Let's use them.

Call them. Or go online and set up one checking account. Then re-nicknamed online that checking account to the word profit. And starting today, we're going to allocate 1% of every deposit. You don't have to do it every time a deposit comes in, but every time you look at your deposits, add up your total deposits, and take 1%. And what I'm saying, just for easy number's sakes, If you have $1,000 deposits, I'm telling you take $10 and move it from the income account

and we're going to transfer it to this new profiting account that we set up. If you can run your business off $1,000, you can run off $990. You can't even argue it. But you will have started this envelope for profit. And while you won't get rich overnight, I suspect you'll get rich in confidence that setting up these envelopes will give you clarity on your business and definitely help you drive more profit. That's good. Good first step there. Okay, now let's go into the weeds some. We've got a lot of people that are beginning to conceptualize this, ask themselves some questions. So what about the small business that maybe has an outside accountant? Do you know what I mean? They may not have somebody in-house, and they're going to go to them and start to pitch this. And I just sense there might be a little bit of pushback. So let's address that. I think that's possibly an issue for some folks. And now they're going to get pushback. People are going to get pushed back. People are going to. What are you nuts?

What are your thoughts on that? Yeah, and that's exactly what many people experience. Eye rolls and this won't work. And can you only imagine the demand or administrative time for reconciliations and other accounting tasks if you said multiple accounts? And I know that happens because we get calls and emails every day now saying my accountant doesn't say it's a good idea. Well, my own account, I've been doing this for myself for almost 10 years now.

When I first set this up for myself, my own accountant did the old eye roll. And so I put a challenge back to him. His name is Keith. I said, Keith, I know you don't want me to do this system. Why not? He's like, well, if you just follow what I tell you to do, read your income statement and balance sheet and cash flow, you'll know where you stand and you'll be profitable as long as you follow this system. I said, Keith, how many of your clients do you tell this to? He says, of course, all of them.

And Keith has about 200 active clients. So I said, Keith, I want to know, out of your 200 active clients, how many of them are profitable? I mean, you tell them all of them to do the system, right? And he said, yeah, yeah, all of them do the system. So you tell them how many are profitable. And that's when he kind of looked away from me. I said, well, is it half your clients? You're saying, this is the way of profitability?

There was silence. So I asked him, is it 20% silence? It ends up less than 10% of his clients are truly consistently profitable doing what he and all their accounts have told him. So I said, Keith, you got to trust me. I'm trying something new and we're going to deal with it. Well, he came back a year later, says, Mike, you're literally the most profitable company I'm working with, and now I got to know why this is working.

He started teaching his clients. Here's the challenge. Accountants, and rightfully so, come from a background of extreme training. They achieve certifications in a process. And it is a very logical process, managed by very logical people. Accountants in general don't realize our entrepreneurs are emotional, logical, behavioral. We trust our guts. We're reactionary. We can wing things better than anyone else on this planet. The challenge is we don't run numbers logically. We run them the same way, behaviorally. We respond in the moment at a snap of the fingers. So just because your accountant doesn't get it, realize they may not understand human behavior.

Force them to do it. Tell them you're going to do it anyway. But there's one more great thing. This does not require you to change your accounting. We're just changing your bank accounts. So that back-end accounting stays basically the same. Yeah, they guys have some more general ledger accounts to account for those banks. but everything else is the same.

It doesn't take longer to reconcile. We have 30,000 companies now that are doing this process. It doesn't take longer to reconcile. It's actually easier to manage because money's pre-alcated, so it's actually faster to go through a lot of the accounting processes. And it works, and your accountant doesn't need to change a thing because they're not managing your bank accounts. They're just managing the books behind it,

and this sits seamlessly on top of it. Okay, before I let you go. And folks, let me just say this. This book is very, very private. There's so much in this. I can't possibly cover it all, and it just leads poor Mike into this, you know, never-ending, like, reveal the step. This is why you got to go get the book. There's a lot of practical stuff in the book. On the back of the book, it's going to walk you through this, gives you graphs, charts the whole nine yards. But Mike, final question on this to encourage leaders. If they begin to move on this, this is not a lone wolf thing. Even if they're a small company, they're going to have to talk to their team about this. If they've got a leadership structure, they're going to have to cast this vision to the other leaders. There is a key component here, and this is doing things very, very different than most companies and probably how you have been doing it as you're listening in here. So what would you say from an encouraging but practical standpoint on how to communicate

this, how to make sure that you're consistent with it and you don't let this thing fall apart and go back to the way things were? Yeah, so I think there's two levels of accountability. One is there's internal accountability. So my own company, we're a small business, there's nine of us here. And what we did, myself and my colleagues or my partner, what we told our team here is that we are a profit first company, we allocate money to a profit first, and we're going to distribute it out. And what happened is the team stepped up and said, oh, what are ways to make us more profitable? So having that internal accountability, and now, of course, it's brought about open books, not totally open, but we don't share something.

salaries and so forth. But we do share our profit and what we're achieving. And now it's been very motivating. And I want to buy some equipment, for example, for the office, the administrator comes up to me and says, no, no, no, Mike, you're not buying equipment. That I don't think is the most profitable choice. And now the guy who owns the company, forced to check and balances. But to stick with it, another thing I've done, and this works for any size company, even a brand new startup, is to find a peer, another entrepreneur's going through it. And so, Similar to the Weight Watchers process, Weight Watchers is a very successful program because when you arrive at a Weight Watchers meeting, you have to do the way in.

There is no denying the way in. Either you lost weight or you haven't, and the number's right there, and it speaks for itself. You can talk to your blue in the face, the proof is in the number. So what you do when it comes to fiscal accountability, I have some peers now, it's a group of seven of us. We literally have a meeting next Tuesday. We start our meetings off. Everyone brings in their bank statements.

Now, it's an extremely confidential meeting. We're not in competing businesses, but we're here to support each other. And you have to plop your bank statements down on the table to prove that you're sticking with the profit goals and objectives you set for yourself. And just like Weight Watchers, there's no denying the numbers. They speak for themselves. Folks, that is good stuff. The book is called Profit First. Transform your business from a cash eating monster to a money-making machine.

Mike, thanks so much for being with us. A lot of good practical wisdom here. We appreciate you spending time with us. We're better for it. Ken, it's been a joy. Thank you so much. Great stuff from Mike McCallowicz. Really practical.

The book, Profit First. Transform your business from a cash-eating monster to a money-making machine. Who doesn't want to be described that way? Get the book. Now, I told you, at the top of the podcast, I'm not going to try to spell his name for you for his website. Okay? It's just not even worth it.

It's just not. So go get the link. All right. in the show notes for this episode. It's episode 197 at entreleadership.com. Click on podcast. And again, you can get the book wherever books are sold online. So just type that in, profit first, and you will find it. Now, we talked a lot about money. That interview, obviously, that is a huge conversation. So we want to help you. We're going to give you a free tool from Andreleadership, and we know a little bit about handling money around here. You know, Dave Ramsey,

most trusted financial advisor in the world. Let's just be honest. Okay. So he wrote the book, Entree Leadership. So we're going to give you a free tool. This is the Entree Leaders Guide to running your business debt free. It can be done. We're going to give you some myths and then blow them up. Three myths about small business debt. It's garbage. You don't need it. We're going to give you an article that will help you motivate your sales teams, so hey, they're bringing in cash. Cash is king. Cash flow is what it's all about.

The more cash you have, the more you can resist the temptation to borrow money. Also, we're going to teach you about how you can turn down big deals that end up saving your business. What? Yes, I said it right. That and so much more. It's a free tool. Text the phrase altogether.

You ready? Be debt free. Be debt free. Free is the phrase. You text it to 33444. 3344. Or you can go to Entreeleadership.com slash podcast and get the link in the show notes to download the resource.

Ken's Electronic Mail. You've got mail. Oh, I love when I get your letters. Electronic letters. Oh, it's fun, fun, fun. You can email us podcast at ontreleadership.com. And here's the deal. I don't care what you email.

You can email us suggestions. Guest you'd like to hear from. Hey, listen. We get tremendous suggestions from you, folks, all the time. You're reading a book, it's rocking your world. I want to know about it. It's coming right to Eric the producer and Will the Engineer and myself. Podcast at Entreeleadership.com.

You want us to do more of something, less of something. There you go. Now listen, if you're rude, I'm going to delete it. All right? I'm just going to tell you. I'm not interested in you telling us that you don't like us. Guess what? It's a free podcast.

You can unsubscribe. You don't have to listen. So every once in a while we get somebody who likes to nitpick on some stuff, let me just tell you what I do. I don't respond. It goes into the electronic trash heap, otherwise known as the deleted items. Okay?

So I'm just going to tell you that. I thought I needed to say that, Eric. Every once in a while we got somebody who thinks they're smarter than we are. And you might well be. I'm just not interested in hearing about it. All right. So love the emails we got. This is so fun.

These are really similar. So I'm going to read both emails. because essentially are very similar answers. Okay, so first one is from Shelby. She says, how do you incorporate new ideas, introduce better processes or methods when you're a young professional, and you have to introduce them to pros that have been doing it for years? So what she's saying is, I'm younger,

and how do I best pitch new ideas that I have to people who are more experienced than me? Second email, David says, I am a middle manager. and an employee of a small family business. How do I encourage our leadership to share vision and establish goals to motivate the entire team without overstepping my boundaries? Now, there's a reason why I read both emails because you can already see very similar here in the question.

And this is a really important question. Super important. I'm going to brag on my producer, Eric, and my engineer will. Both guys are younger than I am. Don't ask me to tell you how old I am and how young they are, okay? It just makes me very sensitive. But both guys work with me very closely, and they have ideas and suggestions all the time. But I've been doing this broadcasting thing for a long time, much longer than them.

They are amazing at this. So I'm bragging on you guys in my answer. So both questions from David and Shelby essentially come down to one thing, presentation. When you are presenting new ideas. So in Shelby, this is ideas or processes, and then, David, this is, hey, I'm going to suggest that we share vision, that the company needs more of vision and clarity of that vision and some goals. So how do you do that?

Presentation. Let me start with posture. All right. When you're presenting ideas up, and I think this is a function of leading up, so you're younger and you are presenting or essentially trying to lead up, I like to call this trickle up leadership. I'm a Ronald Reagan fan. You heard a trickle-down economics. If you haven't, Google it, here's the point.

You're trickling up. You're trying to lead up. It's all about posture in the presentation. Here's what I mean. Whatever the idea is, whatever the suggestion is, you go to the person who's more experienced, who's outranking you, and you say something like this. You're very humble.

Say, hey, listen, I've got something that I've been kicking around in my head, and I just don't know, I don't know if it's going to work. not sure 100% or you can say I think it might work but I'd love your feedback what you're doing here is you're instantly projecting a posture of humility you didn't walk in and going hey listen what we're doing right now sucks and here's why it sucks and we need to do this because that immediately puts a leader on the defensive the other way the posture I'm recommending is one of humility we're going and say here's what I'm thinking I'm not 100% sure but I love your feedback on this. I want to get your thoughts on my idea. Now what you've done is you've given that

person ownership. They may not agree with you, but the way that you have presented it in humility by saying, I want your feedback, you are getting them to say initially, all right, give me your idea, I'll tell you what I think. And then they're able to shape it or endorse it. And now they've got buy-in, here's the key, Shelby and David. They've got buy-in not just to the idea that you presented, but to you. Because how you handled it. You came in with humility, you asked for their feedback. This is the key. I don't care what it is. That's how you start. And many times it's that simple. If they reject it completely, well, then here's what I would say. In a place of humility, to the extent that you can, if they reject the idea at first, go test it.

Test it. I mean, here's the deal, David. You said you were in middle management. We're not a big fan of that phrase, but I get what you're saying. You're telling me where you're at in the organization. Test the idea. What influence you have. You've got some influence.

Test it. Then go back and say, hey, you had some really good thoughts. And so I thought, you know what? I need to test this. Hey, it's kind of working. But always. in a posture of humility. I'm telling you, you get a leader to buy into your idea.

They're also simultaneously buying into you. That's how you increase influence up the ladder. Hey, thanks so much for the email, Shelby and David. Really, really good stuff. I love that you're asking this question. Now you've got to go do it. You've got to try it and you've got to learn. You may skin your knees, whatever, but you're going to learn how to do this the right way.

And one more quick one from Stephanie. She writes in, I'm 30 years old. and I am a tax prepare. I started listening to the podcast last summer and became hooked. First of all, Stephanie, thank you. We appreciate you being hooked on the Entree Leadership podcast. She says, after hearing about the Entree Leadership Summit, I was so excited that I told my dad about it last October. And I just found out he secretly purchased two tickets for me. My husband and I will be joining you at the summit. How fun is that? Well, let me just say this. Stephanie, I don't know if we have your email address.

Eric's producer, if we do, we need to connect with her. That'll be fun. Let's talk with her and her husband at the event. You're going to be there, and I will be there, so that would be fun. And, Stephanie, we'd love to certainly meet with you and connect with you as you hear the podcast. We're really excited about that. And folks, it's hard to believe. We've been telling you about it for some time, unapologetically.

The event is four weeks away. I've got to get some sunscreen, Eric. It's going to be hot. May 21 to 24 in Orlando, Florida, our speakers, Simon Seneca, Robert, Herbert, from Shark Tank. leadership guru John Maxwell, legendary football coach Lou Holtz, leadership gold coming from Pat Linchioni and Dave Ramsey and Chris Hogan and Chris Uright, amazing communicators from our team. We'll all be there.

I get to host that event, so I'll see you there, and it's going to be big fun. There still are a few seats left. Text Summit 17 to 33444, and we've got a special discount for you. Well, I told you we're going to bring you another spotlight story on a real entree leader this episode. It happens to be Alex Andronic. Now, he's originally from Moldova and now is based in North and South Carolina, running Andronic's construction company, Inc. Now, this is a success story of an immigrant who had the American dream in his head and says, I'm going after it. And now he's living the American dream.

dream. He is the American dream. I love this. He goes from surviving to thriving. That's where we all want to go. I mean, don't we all want to get there? And by the way, that's a roller coaster. There are many times in life where we go from thriving to, oh my gosh, I got to survive. I love this story. It is so inspiring. Take a listen. My name is Alex, and I represent Andronic's Construction Company. And we design and manufacture staircases. We came here with my parents. We grew up in Moldova. It's between Ukraine and Romania, a small country. My parents entered Win a Green card. We were so excited. I even remember getting the latter home and we're like, yeah, we're going to America. And we were 11 years old

at that time. And it was like so exciting. And it was a big transition for us to move to a different We flew into New York and my mom's uncle came to pick us up and he found a place for us in Buffalo, which is really brutally cold. There we went to elementary school, high school, and then I took some college courses. And then I decided it's not worth it for me. And I'm going to directly to workforce because I loved construction. I love doing things with my hands. After I quit college, I went to work in New York for commercial framing and Chirac installation.

So for seven months, I worked in Buffalo and then decided that it's too cold, I can't take it anymore. I had some relatives that lived in Charlotte, North Carolina, and I'm like, Dad, I'm moving. I am one of the seven kids. So my dad to let me go from the house, it was a big deal. So I decided that I moved. He's like, you're now moving by yourself. You're moving in with my brother, who was my uncle. So we found a job.

I started working for a stair company and got to working pretty good. And I love catching up. You know, if somebody shows me something, I love. I love that information and I, like, swallow it. And the information is like for me. And I started becoming better and better. And then I asked my boss, hey, can I go on in rail installs? that made a big huge difference for me

and he's like oh well I'm going to teach you how to install hand rolls but you know that's a lot of money for training I'm like listen I'll do installations for you you know from there on so after I got caught on real quick

he started sending me to the jobs by myself but I was making eight bucks an hour as Alex continues to work hard and learn as much as he can about the construction business his brother Ivan moves to North Carolina and joins Alex on the job. What happened is one day Ivan was like, man, I think we pull it off. The economy is going up. Let's start on framing and you can do your stairs.

So I'm like, you know what? Listen, let's talk about this more. I'm going to go back to my boss and I'm going to say, hey, listen, I'm getting eight bucks an hour. I want to get 12 to 15. I'm doing all your installs, you know, automates. and you're making money. You're paying the other guy more than $25 an hour to do the rail installs. And that was a decision for me, breaking point.

If he says yes, then I'll stay. Don't do the business. If he says no, then I will go ahead and quit. Give him a two-week notice. That's what I talked to my brother about it. So I came up to my boss and I explained himself. Oh, I want to get more because I'm doing a lot more. making you money. He said no. And I told him, I'm giving you two week notice. That day, when I left,

he calls me back and is like, I'll pay you 20 bucks. Stay. I said, no. You made my decision when I, you know, I was simply honest with you, you know, about the things. So that's where we started our company. The year was 2005. Even though Alex and Ivan weren't experienced, they knew they wanted to work for themselves. We decided to start the business, so we went ahead and purchased ourselves a truck, a trailer, went to Home Depot, got tools, and then we found a team for a crew for framing.

So I would sell, and Ivan would do the job. Alex was hustling big time, and he was rewarded for it. We were really, really green and didn't know anything. So we were like, it works here. It doesn't work here, so we tried and hit and miss. So we had a bunch of issues. The guys were complaining this or that, or, you know, they demand stuff. And we were fresh off the boat.

We didn't know anything about business. We decided, you know, when the crews mess up, we try to do it the best way that we can, you know, deal with it. Due to Alex's hustle, they were able to get plenty of projects, but the problem was they still didn't know how to run this company. We had to work. I had to work hard. I would go around, talk to builders and explain, you know, here's what we're going to do. We can do this. So over time, we had, you know, a lot of jobs, but I wasn't pricing them correctly. I was losing some money because I didn't price enough or like remodels, you know, instead of charging $6 per square foot, I would be charging

three so we wouldn't make any money so whenever we start approaching different builders they said hey we have two dollars per square foot to do it so i sat down with ivan i'm like ivan you can't make this happen anymore i'm going to have to shut it down and just continue doing stairs because i had a success in stairs i would sell the stairs and i would go buy parts and do them uh you know on a job site installation And after a while, we kept on doing that, and it was profitable, and we kept on doing that. As Alex and Ivan began to experience success, they realized that the competition was going to be a huge challenge. We started off building curve stairs in my backyard. Like literally, we'd get 20-foot-long studs, make a drum, and put it up, and my neighbor's like,

what are you doing? I'm like, I don't know, building a stair. So after that, we decided that we can't do in the back of yard because all the neighbors are complaining or it would rain. We rented storage units. So we were lucky enough that the guy who had storage just let us work in there. 8 to 5, whatever we need to do, we just worked there. Business picked up and then we start looking for a bigger place where we can actually set up the drum, do all the parts and buy more machineries. So that's what we did.

It's 2008, and after much success, Alex and Ivan hit some setbacks. 2008 came. We had to let go two of the guys that we had on staff, you know, who's helping us out. And we told our landlord that, listen, we can't do this. I can't pull pain for the rent because I'm not making enough money to pay my own house. So I'm like, I'm going to put all my tools in a storage unit and just do whatever I need to do from there. But my landlord was really nice. He's like, you know what, I have closer something to your house

that I can give it to you for, dirt cheap. Like how much you're going to pay for a storage unit? I'm like, well, for two storage units, about $400. I'm like, I got a 2,000 square feet warehouse, pay me 400 bucks. So for next two years, I paid 400 bucks in the storage unit and warehouse, where we were able to move little bit by little bit. We hired a salesperson, and then he had a lot of knowledge, but he's 70 years old. So I'm like, hey, I get to get some knowledge.

So a little bit by little bit, we grew. out of that space and moved in into our 12,000 square foot warehouse and we grew. Successful people are aware that failure is a mirror, and Alex knew he needed to grow. I had to do some growing up too. During 2008, I thought everybody owed me, a negative reaction to, oh, if you don't give me the job, you know, it's not fear, I'm working hard. When 2008 happened. I read a lot, start reading a lot, that's how I found out about FPU. From that experience of learning, we start growing our company a lot more. I'm like, you know what? I'm going to put 100%, 150% into my business to grow it. So when my mentality changed about the growing,

personally like John Maxwell says, there is a lid if you don't learn. So I was there. I know that that place that, you know, I got to the point where I could lead just because of my knowledge. So as soon as I started getting more knowledge, I had more room to grow. So a lot of times I remind myself, hey, I got to learn. I got to come to the meetings. I got to go to different seminars just to grow myself. On the path to growth, Alex discovers the Entree Leadership Master Series event. We grew to 28 people working for us.

Our goal is to be a lot more bigger, but the way that we're doing business right now, we don't have a roadmap, so I need to learn. So that's why I came here to get more knowledge, to get more information, and even connect with the people who have that knowledge, who can help me. And a lot of times we as leaders think,

oh, I'm scared to ask whenever I don't know because it's going to, you think it's going to diminish your ability to lead. No, a lot of times it's the opposite way. I rather ask for help and doing other things in a company than just suffer because of my ego. There is tremendous safety in community, and that was the reason that Alex and Ivan joined All Access. I just joined All-Axas three months ago. When I joined, I started All-Excess, you know how they have a meeting each month, a mastermind, and whenever they start asking goals, I would set the goals, but they told me, remember, we're going to go over your goals and see where you're at.

So that actually kind of pushed me, pushed me towards, hey, I got to focus. because next time I got to tell the whole group, 10 other people, hey, what do you have done? Have you wasted your time or did something? So that actually pushes me towards succeeding as well. And a lot of times Chris Oakley is talking about books, different books. I'm like, man, I got to catch up on some reading too. As Alex became intentional about learning, he also began to lead immediately.

One thing that stands out even from Antral Leader is hiring. Before we would come in and have a one-day interview, oh, I think you're good, so we would hire them. And then, like Dave said, you lose a lot of money. Because you pay those guys for several months, pay them just because they have to learn the steric components and the way that we do the business, the way that we serve other people.

because all businesses are dealt differently. So now we just hired on Friday a salesperson. And it took us about a month, month and a half to go through that process. But I implemented a bunch of steps and that opened my eyes. Of the many things Alex would share with you, this is what he wanted to share most. One of the things that you should do to be successful in business is like Dave says, have a plan. Because if you do not have a plan, we started off without no plan.

And we lost out on a lot of money that we could have saved or made at the same time, a lot of time. Because we went through a lot of people. We over the past three years, that's the only time that we built the brand name. Because if you don't have the plan, what you're going to do, what is going to be implemented, how are you going to present yourself? You know, it's not going to work. And also, read.

Leaders are readers. And I remind myself about that as well a lot of times. We all do fall back, but we've got to push ourselves and remind it. Like Dave says, it has to be intentional. Well, I hope you enjoyed that Alex and Ivan are certainly inspiration for us and they should be for you. Eric, the producer incidentally, got on the phone recently with Alex. Just to see where they're at now. what are some things they're doing, and they have recently paid off $68,000 in debt and now

working on that business emergency fund, which is an absolute gain changer. So big thanks to Alex for sharing his story. Hey folks, InfusionSoft is bringing you a free growth plan this month. It is a 30-minute consultation with one of their small business growth experts. So they're going to let you ask questions about your business. Here's what they're going to help you with. Okay, this is their growth expert talking with you. They're going to help you with some tactics to convert leads into loyal customers and raving fans. Going to give you some calls to action that are designed to earn trust from your customers. They're going to give you ideas for offers that they know are going to make buyers absolutely buy.

You're irresistible to them because of how you create and offer great things. So that and so much more, and here's the best part. Once they give you all these different things you can do, they're going to help you put it into a plan. That's right. You can actually make the plan happen and quicker and more efficiently. So they're going to help you with all that and then put it into a plan of action. That's the best part.

You're going to get great stuff, but then help you put it into action. That's why we want you to jump on this. You get it at infusionsoft.com slash customer. growth plan. Infusionsoft.com slash custom growth plan, or you can just go to the link in this episode, show notes at entreleadership.com. Before we leave you, we want to say big thanks to Mike McCallowitz and Alex Andronic. Here's what's coming up next episode. Ian Cron joins me in studio. Here's just a snippet of that valuable conversation. Cornell University recently did a research study. They took 72 CEOs of companies whose bottom line was anywhere from $50 million to $5 billion.

Wow. The highest predictor of success was self-awareness across the board. Hello. So what does that tell you? Self-awareness is the capacity to understand, to self-regulate and monitor what's happening inside your inner world as you relate to yourself and to other people during the course of a day. If you're a leader and you don't have self-awareness, you are an accident looking for.

an intersection all day long. You're just banging guardrail to guardrail through people's lives and making those kinds of decisions that are, you know, going to be troubled down the road for you. Hey, on behalf of Eric the producer and our engineer Will Rudder and the entire Entree leadership team, thank you for listening. We'll talk with you again real soon.