Modern Wisdom - #165 - Mike Michalowicz - Fix The Biggest Problems In Your Business

Episode Date: May 2, 2020

Mike Michalowicz is an entrepreneur and an author. "An entrepreneur's biggest problem is they don't know what their biggest problem is" - hoooo boy if that ain't the truth. Expect to learn why running an effective company is so hard, how to bring order to the chaotic world of business, how to establish predictable sales, why it's crucial to transform that into permanent profit, how to identify your biggest problem and much more... Head to https://nadlab.uk and enter the code MODERNWISDOM for 5% off everything. Extra Stuff: Buy Mike's Book - https://amzn.to/2VLvDBy Follow Mike on Twitter - https://twitter.com/MikeMichalowicz Take a break from alcohol and upgrade your life - https://6monthssober.com/podcast Check out everything I recommend from books to products - https://www.amazon.co.uk/shop/modernwisdom - Get in touch. Join the discussion with me and other like minded listeners in the episode comments on the MW YouTube Channel or message me... Instagram: https://www.instagram.com/chriswillx Twitter: https://www.twitter.com/chriswillx YouTube: https://www.youtube.com/ModernWisdomPodcast Email: https://www.chriswillx.com/contact Learn more about your ad choices. Visit megaphone.fm/adchoices

Oh yes, hello friends. Welcome back to the podcast on a Saturday for the first time. This is not a singing podcast, but it is a very good one. My guest today is Mike McCallowicz and we are talking about how you can identify and fix the biggest problems in your business. As this brilliant quote is, an entrepreneur's biggest problem is they don't know what their biggest problem is. And whole boy is that true after 13 years of trying to run my own business. So yeah, today we get a really cool framework that you can use in your own business or just generally to assess how other companies are

operating as we move through sales, profit, order, impact, and legacy, which is like a rework of Mazda's hierarchy of needs, but it's applied to a business. It's all really logical. And from my experience, it actually matches up with how the reality of running a business works, which is fantastic. So yeah, get ready for that. And now we're going to learn how to make your business not fall apart because the entire world is crazy at the moment. And if this framework can help you to stay afloat, then we have done our job today.

Please welcome the wise and wonderful Mike McCallowicz. I'm doing well mate, how are you? Yeah, very good. Thank you. Nice use of mate as well. I like that. It's completely anglicized everything, haven't we? Yeah, it's good. It's good, man. So we're talking about business today. We're talking about how businesses can upgrade and level themselves.

You know, we've got a period of entrepreneurial turmoil at the moment. Gosh, yeah. Big challenge. And let's forget the current situation that we're in. Why can't operating a business be so difficult? Because you've got your product or your service. And there's customers who need it. So why does chaos ensue? Why is it not just plain sailing?

Yeah, because there's a million moving pieces. I don't know if that's the exact number, but there's so many different elements that we need to do. So it's a prioritization problem. When everything comes that you eat, I think many people come to work with a vision or plan for their work, I do, and yet you open email and there's this incessant, unstoppable chain of questions and direction and demand along with your vendors and clients. So it's about being pulled in all these different directions. We don't prioritize, we don't know how to prioritize what we need to do, and therefore we try to do everything with equal urgency.

So, you know, most business owners, it's just this circuitous circle of not making progress, but there's also this relentless need to do something, anything. You know? You use a term in your book about putting out fires. And it's funny that you say that because that's what made my business partner constantly feel like we're doing. You know that game of whack em all? Yeah, yeah, oh, that's exactly what this is. You can never win, right? But the funny thing is in whack em all, you get points every time you hit the wall. Yeah, I get it. So in our business, every time we accomplish something, we give ourselves

that conscious or subconscious pat in the back and say, yeah, now our thing down, super here is swept in, saved the day yet again, but then the next mole presents itself and you're whacking again. So this is actually human biology. We put extraordinary significance in recent emotion and wins. So completing something feels good, but we don't, we're not good at considering the long-term consequence. So we get this little endorphin release, completed a task, got that done, but we're not considering how that task will service in the long term. So it just becomes this perpetual series of just wagging things down.

I mean, perfect example of this is people that will be working from home at the moment for the first time. I've had a lot of messages from people saying, mate, I have no idea how you do this on a daily basis. They used to working in an office, perhaps with more structure, with a boss who's some combination of giving them

direction and breathing down the neck. And they're struggling, they go to work. And everyone that's listening will know this feeling, because you can even be someone with a very prescriptive job like an engineer and not just a knowledge worker working in the chaotic kind of mental space. You go to work, you're busy all day, you're adamant that you've done things,

and then you look back at the end of the day, and you say, what did I do today? And you're like, I don't know. I know I was busy, and I know that I did some stuff, but upon reflection, I feel like maybe actually I didn't do anything. You know, it's funny. So when someone else is giving his direction, they are theoretically doing this thinking for us.

So it does become very task oriented. And we can at least say at the end of the day, I did what I was told. And that feels like accomplishment. When when we're the ones telling us what to do, that's when it becomes the real problem. And so these people that are working, I friend of mine is called the distributed workforce as opposed to work from home. It's a distributed workforce. There's this work from home, it's the distributed workforce. There's this autonomy now.

You're at home and you're the one who has to tell you what to do. And therefore, there's this propensity to move to the apparent issues. It's such a trap. There's countless apparent issues. The question though is which ones of the impactful one? And all the things presented in front of us, mathematically, only one thing can be the most important at the time. We just need a tool or a way to differentiate that.

Otherwise it becomes this mouse and the spinning wheel. We keep on moving but are making forward progress. It's very frustrating, but it's human nature. That was a hammer blow that I needed reapplying to me when I read Fix This Next Your Book. And that point, there can only be one highest priority. There can only be one most important thing by definition. Right, by definition. And you know, he's here, his company saying, here's our top 10 priorities for this year.

It's like, that's bullshit. You can't have 10. What's the number one priority? Well, they're all important. Uh-huh. And that caused the trap. And if we bring this down to more of a micro level, um, on a daily basis, or by an hourly basis for an individual, uh, business owner or employee,

um, everything's a priority. Same thing. Like all those little micro tasks are priorities. And, uh, that, that's a priority. Same thing. All those little micro tasks are priorities and that this is not mathematically possible. But what it allows us is to escape contemplation. What I believe between every action and reaction, there needs to be contemplation. We default to, though, is incomes that request action, I'm going to react and take an action around it, delete it or respond to it or complete the task. But contemplation is where we start prioritizing, the true nature

prioritizing, what's important and needs attention, what's important and can be deferred, what's unimportant and should be avoided. And then we can start, you know, differentiating things out, but we don't give ourselves time for that contemplation. That's the problem. I suppose as well, you can have too much time for contemplation, which is where that paradox of choice comes in, right? And you end up just wallowing around in your to-do list with you just swit drowning in papers and you have no idea what's going on. So let's get into it. What is the problem that the fix this next analysis is solving? Yeah. So fix the core problem, I call it the survival trap. And how do you

can imagine this is if you take on a piece of paper, you write the letter A on a large piece paper right in the center, put a circle around it, that's representative of where we are right now, point A, right? It's either crisis or maybe there's opportunity, but it's whatever we are considering in the moment. And in many businesses, particularly right now, it's crisis oriented. There's demand on us. Well, any action, any direction we go away from point A

will give us relief. So say the crisis is we need more sales. Well, if I draw an arrow from point A up saying, and that represents hiring a rainmaker employee, well, I could also draw an arrow to the right that says we're going to cut prices by half. I'd draw an arrow to the left saying that we can offer a prepay coupon. You buy four products today and give us money and you'll get it in the future or whatever. You can keep drawing these arrows in any direction you go, we'll get you out of point

A, giving you relief. That's, but there's a problem here. If the business needs you going to point B and you can draw this out on that piece of paper and the bottom left corner of that paper, draw the layer of being a circle around it, that's the way the business needs you to go. You'll see that many of the decisions we made in this little example, the arrows weren't pointing in that direction. In fact, in some cases, the arrow goes in the polar opposite direction, taking us further

away from other business needs to go. Well, I call this the survival trap. This urgent need to get out of crisis, but taking us yet to a new crisis. So what we need is a tool, and this is what I share and fix this next, a specific strategy to know where point B is. It's not about doing the right thing, it's doing the right thing at the right time. You know, sometimes we're doing the right thing, we're doing the wrong time.

It's like, why isn't this working? Other times, we're doing the wrong thing at the right time and it doesn't work. It's the combination of two. We need to do the right thing at the right time. So we need clarity on where the hell we need to go in the first place. Yeah, can you tell us that the biggest problem,

quote, can you give us that because I absolutely love that. Oh, yeah, right. And this is the thesis of the book. I'll tell you how it came about the conception. I have a sizable readership that I'm very blessed to have and a regular contact. Well, I sent out a survey about five years ago when I was the first contemplating this book. I said, I want to know what your biggest challenge is. And hundreds and hundreds of responses came back.

And some people responded multiple times with different challenges. It became very clear very quickly that the biggest challenge business owners and entrepreneurs have is knowing that they're biggest challenges. So the biggest challenge is simply knowing what the biggest challenge is. There's a lack of clarity. Everyone was rushing to the apparent. So I became the thesis of the book to resolve that. I love it, man. If you can teach me and my business partner to work out what our biggest

problem is, I will be, you will have done more than we've done in 13 years of business because you're right. That's my goal then. We'll do it in the next four minutes. We've got 40 minutes to go. Okay, so let's talk about the business hierarchy of needs. I recently had Scott Barry Kaufman on the guy that hosts the psychology podcast, Big Time Lover of Abraham Maslow. So we've recently gone through Maslow's hierarchy of needs. Perfect. But today we're talking business hierarchy of needs, what are they? Yeah, and they're very similar with one extraordinarily important and significant difference.

So, back to mass laws, then you're very familiar with the basis physiological all the way up to self-actualization. What mass law was arguing and what's important as it translates over to business hard-gave needs is that if a base level need is not being satisfied, that becomes a primary need. The example I use is the base level is physiological, breathing air, drinking water. The next level about that safety needs,

like seeking shelter from the elements or clothing or protection from harm. Well, if I'm outside, I live outside New York City, and some of these winters we get here are, you know, sub zero, I'm talking Fahrenheit, so sub 30 minus 30 Celsius, you know, sub-zero, I'm talking Fahrenheit, so sub-30 minus 30 Celsius, you know, freezing temperatures. If I'm outside in a T-shirt and these temperatures are coming in, I will biologically respond by seeking shelter and clothing immediately,

because otherwise I will die from hypothermia. Conversely, if while I'm out there, I was suddenly supposed to put a plastic bag over my head and wraps duct tape around my neck. I am now suffocating. My primary need has shifted to even a more base level need, physiological. I need air. I will tear at that bag to rip it open because I'm dying for air. The freezing doesn't matter until I get that bag open.

Then I'm running for shelter. So Maslow says, if a base level need not being satisfied, we revert to it. Well, our business has a similar structure, but there's one significant difference, and I'll explain the structure of business. The significant difference is this. We are not biologically wired into our business. You know, we are biologically wired into ourselves.

Therefore, if you're walking down a dark alley in Newcastle and you all of a sudden get the creeps, that someone's gonna attack you, you should turn around and walk away. And the reason is your senses, sight, smell, hearing are triggering that emotion. In our business, we're not in a lot of your ego wired, yet business owners consistently say,

Chris, oh, I trust my God, I need more sales. I can feel it, I need it. No, you can't feel it. It's impossible to feel it because you're not neurologically wired in. It's maybe a beacon, a call to action. Maybe there's an instinct that's triggering, but we actually need the empirical data. Here's the business hierarchy of needs and new and your partner can start using this in your business right now.

The base level needs for all organizations are sales. That is the creation of oxygen for a business. We need inbound cash flow. But immediately above that is profit. Profit is the creation of stability for an organization. Now, these two are already interrelated in all the levels are. The foundation must be strong enough to support the level above it. But it doesn't need to be adequate. For example, I need sales and I ask myself in my business, am I creating sales? Any sales? And if the answer is yes, I then ask simply the next question. Am I creating enough sales to support a degree of profitability? Are my sales adequate?

And this is where businesses already get messed up. Many businesses owners don't consider the stability organization. They simply say, sales cures everything. We need to sell our way out of it, which is the biggest bunch of lies ever. Sales do not cure everything. Sales actually translates to organizational stretch. Stress, the more sales I have, the more responsibility placed on my organization.

And if I'm a small company and I run the business, that's more stress on me. So sales is important to the degree that it supports profitability. Profitability is stability. And sadly right now with this crisis going on with COVID and stuff, I see business after business here and where I live outside New York City collapsing because all they cared about with sales, they don't have any runway of cash, no protection, no stability.

And within weeks, some of them in days of the crisis are out of business for life. Well, I mean, I think that reflects business owners and generally people's personal precliivities with the way that they set their own finances up, right? That's right. That's right. That's statistic that I think 80% of Americans don't have more than one month of a cash set aside, you know, like that month, that month's gone. That month's been a month.

That month's gone and we're done. It's a bit. It's definitely a bit more. When you get your phone, you ratchet that up to the business level. Yeah. And you're like, that's, we had five working days of capital. That's how much liquidity we were playing with. Yeah.

So, so what happens is desperation kicks in. Now we start doing desperate moves to save the business, big sales, big discounts, anything to save the business, which if it staves the immediate moment, if it saves you, you're simply a point A and you drew an arrow out, the crisis will be worse because now how you're going to recover from this, you're making less profit, you're even even undermining the company more. So people focus on how much they make, not how much they take. And those are radically different.

Level two in the business hierarchy of needs, how much is your business taking? That is the stability organization. But once we achieve that, we simply ask ourselves, do we have a degree of stability? Do we have enough stability to support the next level in the business hierarchy of needs, which is order? Order is the creation of efficiency. Efficiency gives the business strength because organizational efficiency reduces the dependency on any individual.

If the business owner gets sick and that used to be an analogy, now it's very real, you can get sick and are taking out the business for weeks or months, can the business continue to deliver on its values and promises to its clients? And this is in truth for the boss. It's true for anyone in the organization. And there's other opportunities and efficiency that as a business delivers on efficiency, it can bring more value and more margin to a business benefiting profit. So these all work interrelated.

The remaining two levels in the business hierarchy of needs are impact, impact is the creation of transformation. This is where your business is beyond the transaction of the service or products that provides. It's about transforming the lives of the people that touches. And then the highest level of business is called legacy, which is the creation of permanence. This is when a business achieves permanence, what I found is that's when the business owner realizes they were never business owners. They were stewards of this organization.

It's its own entity and it's meant to live on without them, beyond them. So these are the five levels. And the final thought I want to share about the business hierarchy of needs, is this is not a ladder. It's not about climbing to the top and waving to your friends from the top.

What it is is a pattern of needs that need to be addressed. And we simply ask our questions, is the base adequate to support the level above it? Is that level adequate to support the level above that? And if not, we have to revert to the base. Like building a building, a structure of five stories, you don't start on the fourth story and say, that's what's put a building up here and it falls into thin air and collapses. And at the same time, you don't build this massive basement foundation and put a little tool shed on top of it because it would fall in it.

They have to work relationally. What are some of the common mistakes that you see business owners making, which go against the Fixus next analysis or the business hierarchy of needs. How do people get this as wrong as they can get? Yeah, well, I'll give you the two most common because I can write to mine. The first most common, particularly in startup businesses, is they focus at the impact or legacy level.

They go into business saying, we want to change the world. I will do everything to be the business that just changes everything. And then they don't think or consider the foundation of sales. They don't master profit or efficiency. They just go, we're changing the world. And very quickly, the business has no structural rigidity below it. And the business collapse is on itself. There's these great ideas and concepts that just

pffft, deflate upon themselves. So that's the most common problem. it and the business collapse is on itself. There's these great ideas and concepts that just deflate upon themselves. So that's the most common problem. The second one is sales cures all. It is a horrible belief. They just build this foundation and foundation of sales. True story, I'm a friend who a dear friend who had a company at the $250 million US in an annual revenue. And yeah, exactly. And that's what people say, whoa, that's a big business. And sadly, it collapsed within two weeks. Not of the COVID virus of a bad strategic decision. They made six months ago.

And the entire business collapsed like that. Because they made a bad strategic decision, they didn't consider the next level of profit. They didn't bring financial stability to the organization. So it's a shame, but many business owners think that sales cures all and our ego's tied to it. That's the kind of a third component. It's like, it's all about the entrepreneur pajoneses.

You know, I gotta keep up with you. You're doing a million. I gotta do two million. You're doing two. I gotta do five. It's this constant back and forth of the vanity metric of sales and revenue without the consideration of sanity of cash profits. Man, top line is bullshit. Top line is, top line has been bullshit for as long as I've done business. I'll tell you a little bit about what I do.

I run nightclubs. That's been my job. I'm a club promoter in the UK. We're fortunate. We've got a lot of cities, Newcastle Manchester leads, some big party cities. People like to go out and they like to have good events to head to and thankfully we can service that need. But in our industry, it's very easy. It's like a football match, like a sports game every week and you've got your match and your competitors, your rival teams have all got their matches and they say we did we did 2000 people tonight. Well, we did 3000 people tonight. Yeah, yeah, yeah, yeah. And you're like, well, I know for a fact that your venue capacity is only 1800s. Like, where did you fit the extra 1200 people? But there's I see this, right? I see this manifest.

And everybody that's listening will know the friend that talks about, maybe they don't give out the pure figures of how much money they took, but it was this busy. We did a restaurant owner that always talks about how many covers they did last night. It's like, you're not telling me about how your business rates on that in ridiculous location that you've got are completely pulling your arse out. And you're having to pay yourself dividends out of the company in a desperate, because your director's wage isn't covering the car payments that you've got to do or your mortgage or whatever it might be. And again, as a final example that kind of comes from my own experience with regards to this sales versus profit relationship. Typically price elasticity of demand would suggest that when you put the price up, your

level of demand goes down. So me and my business partner, you can imagine we have these club nights, some of them are really cheap entry, you know, a £1 for a very early on entry and then it maybe goes up to £5 and six pounds later on. And we were looking at, we were like, I just can't get this night to become as profitable as we wanted to. We know it's popular, we know that it's good. And we're looking at stripping back costs and doing this and the other, but you're always concerned about putting your price up because you know there's so many competitors that can come in, they can always jump in and go and get it. And it's usually my business partner that's the guy

that's kind of on the grind for the finances stuff, but for one size like, look man, let's just, let's see what happens if we put the entry price up across the board by a pound. We did it, the numbers didn't move, and you add because of the way that there's no variable costs. The zero variable cost, if you walk past the front door, or if you go in, it's the same. I don't have to make you walk past the front door or if you go in,

it's the same. I don't have to make you the food. I have to sell you the drink. I literally take the money from the door. And it was like, that's 800 pounds a week on your bottom line, bottom line and top line for nothing. So to loop background, top line's bullshit, bottom line's everything, I agree.

Yeah, and people use, I call it entrepreneurial rounding, right? So it's like, oh, you know, you know, 10 people show, it felt like 50s. I'll say 50s. And people say this with revenue too. You know, I can't tell you I may come and say they do a million dollars in revenue, and I'll be shocked if they're doing 500,000 or, you know, it's rounded to the nearest million. Yeah, you rounded the nearest million. Yeah, and it's funny. But we put such significance in it. I'm trying to change the question here. And when people say how big is your business and people may not be so bold to ask your revenue, but they'll say, how many employees do you have? They'll try to guess it. I say, Hey, before we have

this conversation, let's talk about how healthy our business is. And that's when people like our deer and headlights and, oh, what do you mean, how healthy? What's this talk about? They're only numbered at manners. Let's talk about profit. And it becomes a uncomfortable conversation. Very uncomfortable. But that's all that really matters. I don't believe a big business is better.

I believe the right size business, that's very profitable is better. Well, both myself and you will know some business owners who have a couple of employees and turn over, the top line is okay, but that bottom line is the sort of figure that huge hundred person medium sized enterprises would kill for. Yes, I salivate when I, yeah, there's people I do that. And I aspire to be it.

I was the other guy. I was the guy who was bragging, hey, did seven male this year? And I had lawn furniture in my house because I couldn't afford furniture. I want to be, and I'm behaving consistently with it for quite a period of time now, is I actually, I'm very proud of our small business. We've 12 employees, and most of our employees

are part time employees, and I am proud of that. And we are achieving profit margins that are very comfortable and give us a lot of protection. That's what I want to grow. I know people that have achieved that 10 times even healthier than I have, and that's the aspiration for a good business. I really believe that. Look at this age of what we're doing right now. You know, you're writing and podcasting.

We've got some podcasters, even medium sized guys in the US, less so in the UK, some medium sized guys in the US that I know that are turning over a hundred grand a year as a side hustle for doing their podcast. Just for selling out some of that hundred grand turnover, they're probably keeping like 90 grand in their pocket. They're worth it. What are their costs?

Oh, well, my camera lens broke because I sat on it and I need to pay for my podcast hosting and maybe get a new microphone or whatever. You're totally right. You can run these hyper lean businesses. So yeah, definitely. If there's any entrepreneurs that are listening and are thinking, yeah, I've kind of been a bit focused on sales.

And now, I'm being told by Michael that I need to perhaps flip that, look at my profit a little bit more. But how do we move from sales to profit? I mean, there's only really two figures, right? There's how much are you taking and how much are you spending? Exactly. So, profit is driven by the exact thing, cost control margin. Margin is the spread between what you sell something for and what you collect for. Right. So we can always increase, or we should seek ways, increase margin and reduce cost. The interesting thing is cost can only be reduced by so much. There's a certain point you can't cut costs anymore because either you're cutting the

muscle of your company, meaning you can't produce or you've hit zero and you can't go below zero. Margin can always increase. So what I do with a lot of businesses is if they have some degree of sales, they have the base business hierarchy achieved, we then say, well, what are the necessary costs for that sales? And we can cut in many businesses 10, even 15 or 20 percent, like that, unnecessary subscriptions and so forth. You can cut a certain amount of fat out of the business, but certain points are cutting

muscle and you got to stop there. Then we look at the margin and that's where the big opportunity is. And you're, you're example at the door, one pound versus two pounds, like that's, you doubled your margin. That is, it's a hundred percent growth. That's unbelievable. And no one flinched. That's the big opportunity.

And, and what, as I went through the business to Harkie of Needs and Fixis next, I, and as interviewing companies, I found that the biggest resistance about increasing margin is actually not from the clients themselves. It's from the business owner thinking that they can't do it in the first place.

Oh, man. You are striking at the heart of entrepreneurs across the world at the moment, like, especially if you're a small business owner, you feel the fear that you have, the level of anxiety that you have when you think about putting the price up is unbelievable. I remember the fun believe it. The first time that we started to use this a long time it. The first time that we started, it was just a long time ago now.

The first time that we're gonna raise the price on the door, and I was adamant, I was like, right, no one's gonna come. No one's gonna, it's got from two pounds, 50 to three pounds, 50 before 11 o'clock. I'm like, it's a Saturday looking back now. I'm like, it should have been six pounds. It should have been, it should have been two times, it should have been three times that.

But at the time, you just terrified. Completely, completely terrified. No one's gonna come. But at the time you just terrified. Completely terrified. No one's gonna come, everyone's gonna think it's shit. It's never worth anything. You know, and the funny thing is, that is the exact feeling. We go through all of the worst case scenarios we're gonna lose clients and so forth.

Here's the truth. If those people didn't come and when you're charging three pounds 50, when you're charging that and clients don't come, that means they don't value that venue as much as you want them to. If you're going to say, you know what, an extra pound, no way, this is not for me. Those are cheap clients. Do you really want those clients in the first place?

And that's what we got to consider. If people are not going to buy something at a higher price point, do they really value what we're offering? And that also means that then the onus is on us to share the value, to show the benefits of paying the additional money. And that's the challenge that many businesses have is actually just enunciating what value they deliver. Often they just increase price, they're afraid of increasing price because people will leave, but they don't even consider, if I do increase price, I need to tell them the value that they're really getting.

That's inherently there in many cases. This need to make it public. And then when you do it, you're often surprised, like, oh my gosh, no one blinked an eye. I should have done this years ago. I'm a fool. Well, in other businesses that aren't as easy to acquire customers, like I say, it's the same cost. There's no variable cost.

There's essentially no extra work for us to do 1000 people versus 500 people. DJ's gonna be their door staff and us and blah, blah, blah. It's essentially the same event, but a lot of other businesses aren't. And the interesting relationship, I think you touched on it at the very beginning where you said that increasing sales

actually increases headaches a lot of the time. And if you had the choice to make the same profit at half the sales that you're doing at the moment. Oh, that's heaven. You know, like there's a stage where you get to where you're like, well, essentially could have the entire business running off the back of one client, which is where you're now no longer hedged against risk

if that one client decides to go away. But everybody knows where that, or you should know where that kind of middle ground lies. And it's like, yeah, if you can continue to use prices and indicator of quality, continue to move your way up to higher and higher quality clients who need who mean business more and more, especially if you're looking at B2B, I'm going to guess, you know, if you're if you're in that sort of a business and you keep moving up that better, better client range, another perfect example of one of the co-hosts to the show, Joni and Yusuf, they used to do online coaching, PT's doing diet plans, this

that any of the 50 pounds, 100 pounds for a eight week beach body-ready type thing. They realized that the low cart value stuff, although that was what they understood, it wasn't what was getting them fired up, they switched and they started coaching coaches. So their cart value is now from 80 pounds to a thousand pounds. And they'll do the same number of sales calls. But then and their conversion will be lower. They're not going to sell as many a thousand as they were at 80, but the people that they work with, they love their serious, you don't have someone who just happens to spend a thousand pounds on a course. It's like I'm put enough money in love, they're serious. You don't have someone who just happens to spend a thousand pounds on a course. It's like, I'm put enough money in for this to be serious.

So there's two examples from people that the audience will know personally, from listening to this show, who have had this very situation that you're talking about right now happen in their businesses. It reminds you of a story of the University of Mississippi and the power of this business hierarchy of needs and how making shifts like you're saying and just changing the perspective that you can

generate the same amount of income with a lot less effort. This story just shocked me. So University of Mississippi is in what we call the Southeast Conference. This is a conference of universities. And there's I think 15 universities in there. University Mississippi also called Ole Miss. Ole Miss had the lowest applicant rate of all the SEC schools back about 15 years ago. So people were applying everywhere but Ole Miss. And they realized this is a sales problem, right? We're not getting enough applications on a prospect.

Well, they do in a study and they realize that students pick a university within typically five minutes of visiting that campus based upon how the campus looks. It's a very instinctual, I like this place looks beautiful, I'm in, or this place looks like shit, I'm out. Well, Ole Miss unfortunately had the reputation

of looking like shit. So that was a sales problem. They weren't attracting enough prospects. Sometimes in this business hierarchy, you can get two birds with one stone. Well, they realized they need to beautify the campus. They talked to, there's a guy named Jeff McManus there. He oversaw the landscaping Ole Miss and found that the landscaping

team couldn't maintain this 1,000 acre property adequately. They could just keep up with the mowing and that was it. They couldn't do the beautification projects and stalling plants and flowers. Well, Jeff talks to this team and says, why are we struggling to beautify the campus? And they said, because we're so inefficient. So the team talked about a challenge at the order or efficiency level. He said, well, what's the problem? These guys said we have these sit-on mowers that we go running down on the campus mowing

the lawns, but the tree limbs are so low that we get the jiggle back and forth around the tree limbs to mow. When we get to a mulch patch where we have all the mulch, they are square patterns and we have to do these angular cuts and slows us down. So they made some suggestions. They said let's cut the tree limbs up about two or three meters so that we can go right under the tree limbs in a straight line. Let's make the mulch patterns oval shaped so we can do sweeping motions and keep going

on. They made other changes too, but it was all about the efficiency of these mowers. They were able to mo the entire 1000 acre property now and half the time, which meant the other half their time they had available to do beautification projects. Within a year of these changes, the efficiency of Ole Miss had improved so much. The beautification projects were implemented. Application rates started to skyrocket back in early 2000, because now the students are coming to campus and saying, this is beautiful.

Ole Miss today holds the prestigious title of having one of those beautiful campuses in all of the United States. Because they identified the hierarchal needs. They said we've a sales issue. The sales issue was triggered by another opportunity in efficiency. They combined the two, killed two birds with one stone

and Ole Miss benefited in a significant way. I love that. So let's move from profit to order. How are we moving from profit to order? Yeah, so the question is, do we have enough stability and organization to bring about organizational efficiency? Some businesses try to get more and more efficient. How do we get more done with less effort without considering the demand it puts on resources to do that? As you bring more efficiency to a business,

it takes more effort to achieve it. One example, too, is in scalability, the bigger you get efficiency works to your advantage. There was a manufacturer I interviewed in Pennsylvania. They make play sets. They were the, at the time before they sold their company. They were the biggest play set manufacturer They're now part of a conglomerate and they had this massive massive machine and This machine would paint the play sets What was interesting was the setup for a machine to get it ready to start running a run could take about three to four hours of effort Maybe even more time so when when you spend three or four hours doing it, one playset goes through and gets painted in five seconds. It didn't get painted in five seconds. It got painted in four hours in five seconds.

Well, when the second went through, it didn't get painted in five seconds. It got painted in two hours in five seconds, right? Because that set-up time has been split in half. As more would go through it, the set-up time became less and less important. So once you really get the steam rolling and they were sending thousands of sets of places through, they are making money big time. Well, that's why efficiency is so important at this level. We first need

to have some kind of sales, consistent sales in there, profitability, sustainability, and that needs to be at a level of significant enough that we start focusing on efficiencies because it brings value back to the organization. That's how it works. And then to get more efficient, it may trigger you to say, now we can support more sales. Well, let's go back to the sales level. So instead of climbing a ladder here, we start cycling back down. We build the base of sales stronger, allows more profitability, allows more efficiency. We cycle back down and we'll start ping-ponging around as the business grows.

Kind of like a volcano, a mountain is formed by a volcano flowing down more lava and then again and again and the mountain gets bigger. Yeah, I get it. So order your middle section of the pyramid, I think this is where me and my business partner spend a lot of our time. We're very, um, process oriented.

We like to have, there's a document written for everything, anything that's ever happened that we think might happen again. There's a process written for it. And I think you touched on that about the owner or the CEO, the MD or the partner or whatever, being ill or being unavailable for a period of time and the business being able to continue without them. Yeah, I call it the four week vacation and sometimes four week vacations are not planned. We're all on one at the moment. Yeah, we're all on one at the moment.

Well, no, well, it's a coronavirus vacation, isn't it? Yeah, yeah, yeah, we're all on that. But it was funny, I speak a lot in the US occasionally in Europe and in the US, no one takes vacation. You're actually considered weak if you don't work through vacations that you do take. And it's a horrible mentality because the problem is a business becomes, is being carried on the back

by the business owner. And if they are taking, I have a coronavirus or something, the entire business stops because the business owner has failed and it can go under. So the fortification, the idea is if someone can leave a business for four consecutive weeks, and the business contains a flourish with them fully disconnected,

physically and digitally, there's a business that's no longer depend on the owner, it can grow on its own. Well, when I toured through Europe, I was in Germany recently, I'm like, you gotta take this fortification. You know, people laughed at me. They said, welcome to August.

Uh, Europe shuts down. And it's like, oh my god, this is predominantly an American phenomenon, but sadly, it's seeking, it's kind of seeping out all over the world that we need to be workaholics. And that's wrong. We actually need to prove that we can remove ourselves from the business because it will happen. Maybe it's not a vacation, maybe it's an illness or you get hurt, but it will happen. And we need to remove that dependency of being on an owner.

Anyone that's listening who runs a business or even is just in a business where you get to know who the CEO is, just take a second and think what would happen if the boss left for four weeks now and especially if you're a business owner, that visceral, that fear that you've got that's rising in your chest that makes you want to throw up onto your air pods. That is, that's how we felt for a very, very long time. And especially in this world now where increasingly you've got lots of small businesses, you know, I wouldn't like to guess what the average number of employees is in a business in the UK, but I'd guess maybe something like 20, probably, you know, like, or 20 or 50, something like that, like a typical, typical sort of size company.

And that means that the owners moved up through the ranks, they know the office, they the landlord that owns the thingy, they go out for beers with the guy that owns the office block, you know, everything, every little bit, and you've got your claws into all of these different sections of it. And every one of those claws needs unpicking one back, one back, all the way along to allow you to relinquish that control. It's very emotionally, for something that's supposed to be sales, profit, order, efficiency. It's actually, you get into the point now where you're like, it's an emotional interaction you need to let go of. efficiency. It's actually you get into the point now where you're like it's an emotional

interaction you need to let go of. I love your example because it is talons in the business and the removal is not like you just release it. Sadly actually though that is the perception of any business owners that one day there'll be a switch flipped somehow magically that also in the business runs itself you're like I'm retiring I'm selling this and I'm going to make tons of money but the reality is this is a throttle. We have to slowly and specifically and deliberately extract those claws once every time from the business. And it can take sometimes months,

many businesses years to extract the owner fully. I've implemented it in my own business, and I've now reinserted myself. And what I mean by this is, I was running the operations, I was involved in every little task. Well, I started to remove myself. I've now brought on a president that runs the company. Her name is Kelsey. She runs the organization. And now the business can run on the day to day completely without me. It's freed me up to do what gives me

the most passion, which is be the spokesperson. I love talking shop. Like what we're doing now, Chris, I love this. And I love writing books. So now I be the spokesperson. I love talking shop, like what we're doing now, Chris, I love this, and I love writing books. So now I can do the things I'm passionate about, but if I get sick or I leave the business, yes, the spokesperson role's not filled, but the core essence of the business will continue on. Here's a perfect way for people to frame this as well.

If you're a business owner that's listening and you've never relinquished that control, but as you've just explained there, Michael, you were able to bring someone on who was able to do the things that you were capable of doing. Think about that as a business owner. If you were able to bring someone on and write them a document that was how to be Michael Doc Doc X. Like, and just write them a big thing.

This is how you do me. It's like, if someone can do the job that you are doing now, off the back of a document that explains how to do it, where is your unique talent being placed within this business? You're just a guy, you're just a bleep, bleep, bleep, input output, like that's it. That's it, there's no longer your unique creative vision

that's being deployed to the business. You're just computer program. Yes, right. We're avoiding playing into our strengths. And the funny thing is Kelsey doesn't replace me. Kelsey is like 10 times better than me. She understands her super strength is in human connection. My colleagues here have an adoration for her that supersedes the adoration.

They had for me. And it's almost painful to say that, but it's realistic. And I love my colleagues. I will do anything for them. And I feel the same way about me. But Kelsey has that something special. They will take a bullet for her. They will protect and defend her because she protects and defends them.

So not only does she replace me, she's amplified the strength of our organization. It's funny, as I was writing fixes next, I was looking at organizational charts and most org charts are pyramid structures. Up top, it says, doesn't even say, president says the word me. A long, long arrow. You know, long, long, long going down to the minions down below. That's the vice president of sales and all these different things. Well, those structures are a structure

that plays into titles, not into strengths. A better organizational structure is matching someone's tasks or talents to the tasks they have at hand, a web like structure. We actually don't have, no one has titles here. I act as a spokesperson. I write books, but I don't have a title. Kelsey actually is the only one with the title. She's the president because we need that for a certain discussion and it never needs to know that, you know, if you have smaller, smaller businesses.

But no one else has a title. They deserve roles. And what that's allowed is us to be very dynamic in our capacity. When we have a massive order for say books that we're shipping, usually our disability does it, but if we have to do it, we three people that can shift over to that, no problem. If we have a large amount of customer service calls, we have one person that caters that, but with two other people cross-trained in that, we can shift resources there. So by doing role specialization and matching to people's talents and removing titles,

it allows this almost organic shifting of the business. And people don't feel compelled to stick within their role of a title. Yeah, I love it. So we've got two left. Impact and legacy. Let's talk briefly about impact. Yeah, so the fascinating transition that happens at this level, the first three levels we talked about is about getting. We need to get sales, get profit, get efficiency in our organization. Impact, we flip the myons about contribution now of giving.

Impact is where we are serving our client beyond the transaction. It's life changing for them. I say life changing. I don't mean like you've saved someone's life, but there's a shift in their life. There's some kind of meaning beyond the commodity and they put significance in you. The example I use is Harley Davidson. Anyone can sell a motorcycle by a Harley Davidson. You now belong to the Harley Davidson community or a weekend warrior, a tough guy or whatever the title is, but you belong to a family. Now you don't have to transform people by making them belong to a community. There's countless

ways to do it. But we want our clients saying, wow, this is something greater in my life than I ever expected. And they see that value. That's transformation. And I will tell you this, you don't have to do it. I don't think Walmart transforms people's lives, at least not here in the US.

They actually probably deplete people's lives, quite frankly, but they do deliver on the three levels very well. They offer sales, they offer a value of cheapness, they are profitable and they are efficient. But I don't know if they're transforming lives. Some businesses can make this election. And this is when you start realizing to the degree,

you are a steward of something good here. You have a platform now of service. But it's a choice to be there. And I don't think it's better or worse. It's just a choice. The highest level is impact. Impact is the creation of permanence. And this is where you set your...

What was that? Legacy, not impact. Legacy, I'm sorry, legacy. Legacy is the creation of permanence. And legacy is where you set your business to live into perpetuity. It's where you realize even you, the founder, aren't important in this.

I mean, you are significant, you've served a role, but it's the business that's important, and I can continue to have its impact as a legacy into perpetuity. This was a question you've already touched on it there. I asked, should every business aim toward impact and or legacy? It's going to be challenging for me as someone who gets 18 to 20-1 year olds drunk for a couple of years while they're at university to have a legacy. I appreciate that. I understand what it is. So how do I know whether I should let go? And also you've said as well, some people kind of set the sights on the peak of the mountain and everything else falls.

Yeah, so the answer is no, not everyone should do it. We should speak to what our heart calls out to do. I have a friend who's got a business that does 15 million US, it is efficient, it doesn't need him, he's making money, and he's like, I'm off to the golf courses. He's like, I'm gonna go golfing every day. I love it now.

Yeah, and I'm like, that is good. And I actually would argue it's more than good, it's noble, I'm going to go golfing every day. I love it now. Yeah. And I'm like, that is good. And I actually would argue it's more than good as noble because the company is providing for employees. It is giving great services. It's supporting the economy. But I also feel one day he'll wake up and say, is this all there is? And I think that's the calling. When there's that sensation, this is all there is.

We realize that our business or a new business can be a platform for expression. I've had for me that transition. I've had businesses that made money, and I became a millionaire, and I thought it was all about the cars and the big house and the vacation house and the why. I thought that's what it was.

And then I had the awakening. For me, I said, no, no, there's something else going on. And that's when I decided to devote myself to having impact and legacy. Additionally, I'm absolutely responsible to master sales, profit, and order. You can't skip levels here. You can't just go out and say, I'm going to change the world. That's a business that I'll collapse on itself. So I am very regimented in driving sales that are adequate to support profit, profit that

can bring about efficiency in order for me to have impact and legacy. Man, I love it. Before we go, I know that we're tight on time. I've got one final thing. Upon you speaking about the fact that you manifested some of this material wealth, then got red-pilled either by combination of yourself and the way that you were in your life and then realized that wasn't it. I was listening to Naval Ravakant on Tim Ferris and he gave this quote and man, it just hit me straight between the eyes and it said it is far easier to fulfill your material desires than it is to renounce them. announce them. No.

Oh, Jack, very true. I wonder whether or not part of your transcendence, this fulfilling of potential and the change of dynamic has been serviced by the fact that that box has been ticked, that Michael no longer has anything to prove on the year I've had the home in Hawaii. I've had the day. Yeah. I think I think a lot of people Might need to go through that fire and actually tick those boxes. That makes sense It totally makes sense like it's funny So we all know or heard that it's not about the money. It's not about the acquisition of stuff or heard that it's not about the money, it's not about the acquisition of stuff.

But I also agree that the only way for most of us to discover that is to go through the experience. It's all well and good, someone telling us that, but look at the people who say it. I know, as they fly in their private jet over you, say, you just fuck you Warren Buffett. Like stop telling me about how zen you can be and how easy and simple life is

because you no longer have to play that game. You have already done it. So man, I've absolutely loved today. Fix this next, your book will be linked in the show notes below. If people want to hustle you online, where should they go? Go to micmoderbike.com. It's actually Mike McCallowicz,

but no one can spell McCallowicz. Mike motorbike as in the motorcycle is my nickname from high school. So, they'll forward to my site. My books are there, free chapters. I use Ray for the Wall Street Journal. You can get that in my own podcast there too. What's the podcast called?

I called Entrepreneurship Elevated. I love it. That'll be linked as well. You know what to do if you've enjoyed this episode like, share, and subscribe. All of the stuff that we've gone through today will be linked below. Man, I think I really love the framework. I think it's great.

And it's nice to read a book. I did five years at Newcastle Uni Business School and I constantly read things which didn't reflect my experience as a young business owner. And this is the precise officer. I'm coming up with stories that tell you the concepts from your book because I'm still happy. So man, awesome. Thank you so much for your time Mike. Brother, thank you.

Thank you very much for tuning in. If you enjoyed the episode, please share it with a friend. It would make me very happy indeed. Don't forget, if you've got any questions or comments or feedback, feel free to message me at Chris Willett on all social media. But for now, goodbye friends. やった