The Home Service Expert Podcast - Achieving Permanent Profitability by Taking Profit First

Episode Date: October 18, 2018

Mike Michalowicz is a serial entrepreneur and the founder of the Profit First Professionals. He is also an accomplished author of many bestselling business books such as The Pumpkin Plan and Profit First, and has made several appearances as a guest expert on many TV shows, including CNBC's On the Money and MSNBC.  His passion lies in helping entrepreneurs achieve profitability so that they can live the vision that they’ve had for themselves. In this episode, we talked about profitability, leadership, hiring...

This is the Home Service Expert podcast with Tommy Mello. Let's talk about bringing in some more money for your home service business. Welcome to the Home Service Expert, where each week, Tommy chats with world-class entrepreneurs and experts in various fields, like marketing, sales, hiring, and leadership, to find out what's really behind their success in business. Now, your host, the home service millionaire, Tommy Mello. Welcome back, ladies and gentlemen. It's Tom Mello here with the home service expert,

and I'm here with Mike Michalowicz. Did I say that correctly, Mike? Yeah, so you nailed it. You nailed it. There's no need to rehearse. I love that. He's wrote five books. I've read The Pumpkin Plant. You know, I've read summaries of the other two, and I really love everything you work on. I think this is going to be huge. Our listeners are primarily home service businesses. I know some other people find a lot of similarities

to home service, so they listen. But tell me a little bit about your career. I already know you like to work with companies under a million. You call it the entrepreneurial poverty. Kind of tell them your story. A lot of people out there probably heard of you that are listening. So it's really a pleasure to have you on today. Oh, it's a joy to be here, Tom.

Yeah, so just a real brief on my story. I've been an entrepreneur pretty much my entire professional life. And I've been through the lowest of lows entrepreneurially and the highest of highs. And I think everything in between. And I've come to realize now, in retrospect, there's a lot more lows than there are highs. But those few highs, man, do they carry you and put out a beacon for future, hopefully future success and keeps driving you forward. But it's really the navigation of those dips that matter the most.

So 10 years ago, I devoted myself to being a full-time entrepreneurial author. I still own businesses. I still operate businesses. But 90% of my time is researching, writing, sharing, why discover. The other 10% of time is testing out these concepts of my own businesses to see how they work. And what I want to do is help entrepreneurs navigate those pits to ensure that they're profitable, to ensure that they're living the vision that they've had for themselves, to make sure they're having an impact. And to me, that's changing the world. I think entrepreneurs have the greatest ability

to change the world. If we are just able to do the good things we want to do through our businesses, the world's a much better place. So I'm trying to help the superheroes, if you will, of the world, which I believe are entrepreneurs, and get the kryptonite out of their way so they can go out and do the bad-ass stuff they do. Yeah. I love that. You know, a lot of us were a technician or a worker in a similar like business that we start out in. Is that something that you find pretty common and they really don't know? And I could speak because I was not very versatile in business when I first started. I really bought myself a job when I started my business. Is that pretty common for stuff you see? Yeah. Yeah. You know, who knows what the percentage is, but that does feel like it's the 99 percenter is that someone says,

oh, I'm really good at this. So there's a couple of scenarios. One is they're thrust into it. I'm really good at this and I have no other prospects. I may have lost my corporate job or whatever. I need to do something. What am I good at? I'll make that into my own business, which is basically you're starting your own job. The other scenario is they work for a small business, they say, or another business and say, I can do this myself and make more money. Why am I making money for someone else? I'm going to do this for myself. So they make a declaration to go out, but they're also buying themselves a job. And the other ones who say, I have the skill set. I got no other prospects. Let me go do it. It's the rarity where I find someone that says, oops, I found something in the market that is needed. I have a passion, not necessarily a skill set

there, but a passion, a desire and interest to serve this. Let me pursue it. And ironically, it's the people that go in with the lack of skill that more frequently are successful as entrepreneurs, from my experience. And the reason behind that is they can't bridge the company's success by doing the work. They immediately have to find and put in structure so the work gets done without them because they're not capable of doing it. And when they have to find a way for the business to operate without them, that's the definition of entrepreneurship, getting other people and other resources to do things. So it's the people that can do the work that immediately have put themselves in a trap because by the fact that they can do the work, they do do the work and therefore they are tied into doing the work and they stay in that cycle forever

and never break free of getting other people and other things to do the work. I know exactly what you're talking about. I think a lot of people listening probably find themselves in that trap. Yes. So, you know, over the years, you've done a ton. You've built large businesses.

You've written books. One of my favorites is Profit First. Talk a little bit about the Profit First formula and how you came up with that. Yeah. So I believe, and I haven't written this yet, but I'm just now researching it and compiling my thoughts around it and trying to prepare a hypothesis. And this is what it is, is I believe there is a hierarchy of needs, kind of like Maslow's hierarchy of human needs, where the foundational is these physiological needs, food, water, and you go up to the need to belong to a community, to be loved, to give love. And then the highest level is self-actualization where you're living a purpose. Well, I think for the entrepreneur, there's a

similar kind of pyramid where foundationally, the absolute foundation is sales. Like for our business to exist, there needs to be someone consuming our offering. That's the oxygen for a business. I believe though, the next level up where the substance comes from is actually profit. Profit is equivalent to the food. And most businesses are stuck in just selling constantly, never even really consider profit. And because they're not profitable, meaning there's getting no food, meaning the business is starving, they try to actually sell more, which means they start trying to breathe in more oxygen. They start gasping for air, though they're dying of starvation. It makes no sense, but in the moment, people just start gasping. So going up this hierarchy, I believe there's other levels too. I believe there's a lot of content, a lot of

knowledge about there, how to sell more. And I think a lot of owners focus on that. And a lot of owners, business owners are capable of selling more. I don't think that's the problem. I think they need substance, food, profit. So that's why I wrote this book, that the intention, the goal of a business is to be profitable. Profit allows the business to be sustainable. It brings the ability, the financial freedom to the owners of the business, the founders of the business, to live the lifestyle that they've defined for themselves. And without it, they can't do that. So, profit first is this kind of next level up after sales. And the core concept, when I was observing my own behavior around money management, and now, well, at the time, it was hundreds of entrepreneurs, but now it's over 10,000 entrepreneurs that we've studied through my

company, is we consistently see that small businesses know they need to have a budget. They know they should be reading their bank balance. Yeah, their bank balance, but also their income statement and balance sheet and cash flow statement. But what they really revert to consistently is the bank accounts. They don't read all those documents and time in together and do reconciliations and run the critical metrics and KPIs and different kind of accounting metrics. Instead, they just log in their bank account and say, if I got money, I'll spend it. And if I don't, I'll panic and try to sell something to anybody. So the method of profit first is developed around the fact that it's very hard to change

human behavior. Like for you, Tom, or for me, to change a habit is really hard. Maybe in a moment we can do it for a day or two, but sustained habitual change is nearly impossible. So the better method to achieving a positive outcome is to look at our established habits, then build a system that channels an existing behavior to get the new results we want, allowing us to stay the same way. So what Profit First is a system that works with our bank accounts. If you log into your bank accounts to see how much money you have and then determine what you can spend based upon that, that habit, which was working against you before, now is an ally of yours. And the real simple system, just to be brief, is we set up multiple accounts at your bank with different labels on them for the pre-intended purpose or use of that money.

Meaning, if $100 comes into my business, I don't have $100 to run my business. I'm now going to divide this money up to different accounts. One account will be for the pay of the owner. I think the most critical thing won't be for profit, which is a reward to equity owners, which is different than owner's pay, which is a compensation, what I believe is for the best employee. Tax responsibilities. Maybe I need to buy some capital equipment. That could be an account. And then the operating expenses itself. So $100 comes up, the money gets divided in, and now the operating expense account may have $20 or $30. That's what you truly have to run your day-to-day business on. And now that you can see it by logging into your bank account,

I see and find that business owners run their business much more effectively than ever before because they know before using the money what the money is intended for. Yeah, that makes a lot of sense because a lot of us were not taught this stuff in high school or middle school or even elementary school of how to balance out things. You know, I've got a lot of, I'm starting to be a little more fond of QuickBooks over the last couple of years, but typically I bet you 99% of people out there can't say that their QuickBooks matches everything, including their credit card statements and their bank account. And that's, that's something to work on. And I got to tell you, I'm right in the same boat as most of the people you say out there. It's not fun. And I'm

learning a lot of this stuff. It's not fun because you want to spend the money. You want to do things and really it is about what's in the bank, but you're right. It's not all your money. It's taxes come out first. That's my game. And, uh, it's really hard to save money when you're growing or even in a decent economy. When, you know, I had a guy come in and he looked at my warehouse and he goes, this is a huge warehouse. Why'd you get another one? And I said, well, we needed more space. He walked around there and he said, when's the last time you use this stuff? Well, you know, so the point is a lot of people you'll see, they got a huge warehouse. They'll use up all the space. They'll get more room. Same thing with the bank account. If they

got money, they spend it. And I think you're absolutely right. And it does make sense because everybody I talk to talks about their revenue. No one talks about profit. I talked to one guy about a month ago and he said, dude, I'm happy. I'm making 25% profit.

I'm at 15 million bucks. He goes, I don't need to grow very much more. I look at the bottom line, not the top line. And it meant a lot to me. And he's a really smart guy. So how do you start that? Is there like, and I don't want you to give up everything. I want people to check out the book and everything, but where's the beginning process of really doing that? Is it the bank account set up? Yeah, that is the first thing. And so I'll give you the basic principles. I think they're helpful. And then this may be enough to get started. That's the goal here. So I start off with what I call the five foundational accounts. So when I looked at

businesses and we now have, we estimate we're approaching a hundred thousand companies running profit first, and it's in a diverse set of industries from like pizza shops to lawyers and anything you can think of in between. And what we found is every business needs at least five foundational accounts and they should have more. The five accounts are as follows. An income account, which is a depository account. When money comes in, it goes here in this account and we never pay a bill from it. It acts more like a serving tray, kind of Thanksgiving dinner. You know, you serve a turkey on the serving tray, but you don't tell everyone, Hey, everyone grab a knife and fork, everyone for themselves, you know, fight for it. You carve the turkey and then you give everyone a portion to their plate so that everyone can eat.

So the income plate, if you will, for the business is simply a serving tray. You just show your business how much money it has overall, but you never eat off of that. The other four accounts are a profit account, which I alluded to earlier. This is a celebratory account. It's like a large corporation. They do their quarterly profit distributions. This is a reward to the shareholders and the shareholders use it to quote unquote celebrate. They use it for their own benefit because they took on risk. They invested in this company. By starting a small business, you're an investor. So when this money comes out, this is a reward for taking that risk. The next account I call owner's compensation. This is for what's called the owner operator, the owner who doesn't just find a company but

works within the business. And for small businesses, that represents the vast majority of people. So these these owner-operators, I truly believe, are the best employees. They make huge sacrifices to make the business run. They know the business intimately. They care for it more than any other employee. Therefore, they are the best employee. So, we're going to reserve money for them to receive a regular compensation. You must pay your best employee well and the best employee is the owner. Next account is called tax. Tax is a reserve for the tax liabilities of the owners of the business. Because, you know, when tax season comes around, so many business owners panic. Oh my God,

I didn't prepare for this. I don't have money. Well, financial freedom is not worrying about money. So, we're going to have the business reserve that responsibility in advance. The business is going to worry about the taxes. And the last foundational account is called operating expenses. And that's what you run your business off of. Once you set these accounts, you allocate different percentages. And yeah, I have them available on my website and you can get them on the book. But the starting point is simply allocate a small percentage above what you've historically done. So if you've never had a profit before, you've never done a year-end bonus to yourself, that's 0% profit. Let's do maybe 1% or 2% in that profit account. If you paid yourself, say, $50,000 last year and your company generated, we'll say,

$500,000, well, that's 10%. Let's move owners pay up to maybe 12%. Business has probably never paid your taxes before, so that was 0% before. Let's reserve 1% or 2 maybe 12%. Businesses have probably never paid your taxes before. So that was 0% before. Let's reserve 1% or 2% there. And now the remainder is operating expenses. And maybe in the past, 90% of your income was operating expenses. But now we're allocating low percentages elsewhere. It squeezes your operating expenses from 90% of your income, maybe down to 85%.

And this small little shift will get you started. You'll feel a squeeze on expenses. You'll have to reconsider, are you spending money prudently, which most small businesses unfortunately do not. So it squeezes that down and it starts expanding money where it should go into profit and so forth. The last point I want to make is I found as companies implement this, is they start slowly, over, they start building what I call the profit muscle and they start allocating bigger and bigger percentages toward profit over time. It's usually maybe a year and a half, two years of doing this when a company goes into the full rollout and is really nailing good profits and so forth. I like that whole concept. And I've got my

numbers that I look at of cost of goods sold. And then I like my payroll to live around 30% ish, depending on how many trainees I have. And having those numbers are super important. And then it's kind of like a retirement account in my mind, because I don't, although I do look at it, I don't consider it my money today, but I'm pretty good about that. And I like the idea if somebody has the discipline to either let their controller, which I don't believe you should have checks and balances for everybody, but not look into that account and say, this is for this week or this month. And it's tough because operating expenses could get out of control when you're trying to grow.

And growing companies spend more money a lot of times than they're bringing in, depending on the speed of growth. What is your thoughts as far as becoming profitable? I like the idea of starting small and moving it up. But what do you find most companies lack? Yeah. As far as that whole process? Yeah.

You know, the guy who said, who first said it takes money to make money is a jerk. Like that guy is a real jackwad. I mean, I believe that's the worst thing that we believe to be true. I am adamant now that it doesn't take money to make money. It takes innovative thinking to make money. It takes serving a need to make money. It takes being extraordinary to make money. You got to stand out and be different to make money. But why does it need to take money to make money. It takes being extraordinary to make money. You got to stand out and be different to make money. But why does it need to take money to make money? Someone started off their business one day with no money and they're very successful. That had to start the entrepreneurial game. Money wasn't always been around. It had to be generated effectively. So my first edict is to change

and challenge the adage of it takes money to make money. The other thing that people say is profit is the bottom line or the year end, or it's the final take. Like that destroys me. It's like, bull, like who said that? Why do we believe that profit comes last? It's like saying, if I got sick, I would never come out of the hospital and saying, you know what? Starting today, I'm finally going to put my health last. I mean, I will say starting today, my health comes first. It's human nature. What comes first gets done.

What comes last gets delayed. I can wait. So profit waits. Ah, I didn't do this year. Maybe next year, next year. And then we're wiped out. So what I tell people is start taking your profit immediately. I don't care if you're just opening the gates.

I don't care if you're in debt. I don't care if your business is struggling. I don't care about any of that. What I do care about is you start taking your profit first. When you start taking your profit first, it changes our paradigm, the way we view our business. We start thinking about more critically. The second thing is it will force us to have less money available to spend in the business. And that is the greatest instigator of growth. The lack of money forces innovative thinking. Just as an antidote about this, this morning, truly this morning, I met up with a friend of mine and we met up at a ridiculously early time this morning, 6.30 this morning. We went for a hike together to talk about his business. And his business is struggling. And he's talking about how he needs to infuse more

money and more money into marketing because the business doesn't have enough revenue coming in. And I said, hold on, let's do about face. What if we took out the money we're putting in currently? What if we had one fifth of that money? What could we do? And his first reaction is like, well, then we're done. And I said, well, let's rewind to when you were first starting your business. You had no money at that point. How did you get off the ground? He's like, well, then I did this method of using my old college database. He went to an Ivy League school and leveraged the fact that I have this email from this

Ivy League school, reached out to some of my alumni friends and reached out to other people using this email. And when they saw it come in from this Ivy League school, I was seen as instantly credible and people started to have a dialogue with me. And that's how I got my first group of clients. I said, well, how much does that cost? He's like, nothing. That email and the access to that database is permanent. I said, well, why do we abandon that? And the answer didn't come out this way, but we concluded the reason he abandoned that very effective method was because he was, quote unquote, blessed with money. As money came in, he started to spend it on these more traditional things like, well, traditional meaning, you know, Facebook ads and other ways

that a quote unquote normal business operates. So that's my challenge to him. And that's my challenge to everybody. When we remove money, we go back to much more innovative ways of getting things done. And I think we start to discover much more innovative ways of getting things done. And I think we start to discover it doesn't take money to make money. It takes innovative thinking to make money. That's a great thought. I got to tell you, it kind of hits home. I was thinking about all the stuff that I used to do when you were saying that on email blast, get ahold of old customers and just more of a guerrilla type marketing. And my market managers in every state we're in, they always call and they say, you know, we could, it's kind of a tango effect. We're either getting too many leads and not enough technicians or vice versa. But

I told them straight up, the only way I'm going to spend more in advertising is it's a percentage of revenue. Now I don't go off a profit because I do believe that marketing in general terms, if you talk to businesses, they say 10%, 5%, 12%, 15%, whatever that is. So basically you want more money for marketing. Here's what you need to do. You need to either increase your average ticket, increase your conversion rate, or I need to book more phone calls with the calls coming in, which is always, you know,

it's an obstacle we're always facing is to book as many phone calls with the calls coming in, which is an obstacle we're always facing is to book as many phone calls, but quality phone calls as well and dispatch the right text to the right jobs. So I do think that there's a lot to be said about the fact that putting money in the marketing is important, but it should be a derivative of the money coming in.

And if you want to increase that, because it forces you to look at other, cause it forces you to look at other things and it forces you to look at, I had somebody look at my stuff recently in the last few months and they said, your top 30% is so good. It's so amazing. But they said, look at your bottom 30%. And we actually dug into each technician and really looked at their abandon rate, their conversion rate and different things like that. And I said, wow. So, so the last month my focus has been, I said, look, there's nobody here. These people are like my family. I've had guys for seven, eight, nine years, and I don't want to fire them. But then again, I asked myself, is there another position like home warranty calls

that they might fit in? But also remind yourself, because everybody says, I'm just going to put them on the crappy calls. Let me just tell you this. I know this for a fact, Mike, and most people that are listening all think this. They say, I'm just going to put them on the crappy calls. They run a lot of favors for me. There's no such thing as a crappy call unless you've sold them everything on earth and there's

just nothing left and they're running pure 100% warranty calls. But then for my company, which is garage doors, I say, is there a second garage door? Is there a storage? Because we sell some storage stuff. Is there a storage opportunity? Is there an epoxy opportunity? Is there a keypad or a second remote or an introduction to a neighbor opportunity? And I had a guy go do a remote call the other day. He did. I mean, he made a couple hundred dollars on the sale he made because he was able to sell a nice door out of it. So in our minds, we justify these reasons.

And if we look at it, like you said, from a financial standpoint of like a QuickBooks, we say, I'm not gonna spend more than this percentage. So how could I get there? I could book more phone calls. I could do a better job of marketing, which is get more involved in the community and do guerrilla marketing and get more referrals.

I could get more reviews online, which helps my online reputation. I could get a higher conversion rate, meaning the jobs we go to, we sell more. I could increase my average ticket, which is like I said, selling storage solutions to these garage door customers. And that's it.

If you want to raise your marketing, where are you going to find the money? You got to increase because if you keep it as a percentage, it's very, very good because then you could calculate your profitability. And if you keep an eye on your payroll, you could give a lot of raises because the percentage, like I said, I stick around 30%. If I go to 25%, my people are not probably being paid a good. If I go to 35%, I'm in trouble. I mean, that's cutting straight out of the profit. So I think what you're teaching is amazing because it really compartmentalizes it for a lot of entrepreneurs out there that don't have...

I have three full-time people in my accounting department putting this stuff together. And I've got a lot of things I do to keep checks and balances to make sure everybody's being upfront. And I got to tell you, I'm not a lot of things I do to keep checks and balances to make sure everybody's being up front. And I got to tell you, I'm not a master of this stuff. I'm learning along with the rest of us. And I've made a lot of mistakes myself. But speaking of that, you know, I believe in making a lot of mistakes fast. I mean, get them done with, learn from them.

Don't create insanity doing the same thing over and losing a lot of money. I was several thousand dollars in debt when me and my partner split. And we're on course to do between $35 and $40 lot of money. I was several thousand dollars in debt when I, me and my partner split and we're on course to do between 35 and 40 million this year. But I've made a lot of bad mistakes. One of them was paying city taxes when I first started. I didn't even know any better. Taxes is a big one. Another one is keeping control of your inventory. What do you think is the worst business mistake you've ever made? And what is the takeaway for the listeners out there? The worst business mistake? It's like, what was the worst business mistake I made today? I constantly make them. I hope I'm getting better

at identifying I made a mistake and then nip it in the bud faster. The greatest that comes to mind, I mean, ultimately has become my biggest asset, Was after I sold my second business. I sold it to a fortune 500. It's called robert half international became a millionaire And I uh, i'm like, oh i'm gonna become an angel investor because that's the next step once you sell some businesses Clearly, you know you're doing And I was just putting money into businesses that A I didn't investigate whatsoever. B, they were disparate, meaning they weren't in complimentary industry. So each one was its own

unique startup. And C, I put money into them. I didn't look into how I compliment them beyond just inserting money, like my network and so forth. They were all destined to fail. That was my greatest mistake. There was no strategic thinking. It was just pure arrogance and ignorance, which is a deadly combination. But back to my other point is I think I make mistakes constantly, but I think mistakes are a good thing. They're more often labeled as failures. I think that's the term people use. How quickly are you failing?

And I do see the value in it because it's testing out new things. I just think we need kind of a, what do they call it, a stop gap, like when you, or a stop order, like when you own stock, if it drops at a certain point, it automatically sells out. I think what I try to do now is instead of asking myself, you know, I got a good idea, let's do this, I'm right. I think I say, I think I have a good idea. I think we should do this. How do I know I'm right? Like going in with a little more like, let me prove it to myself and trying on a much better, much more kind of a smaller level where I test things out and I have an ability to stop something that's failing. The other point I want to make, and it's kind of alludes Tom to what you're talking about, is a behavioral concept called Parkinson's law. When we were starting out, you talked about the

warehouse and kind of how you expanded into it so quickly. And now you're talking about your staff and kind of how salaries expand. There was a theorist in the 1950s named Parkinson studying human behavior. And what he observed was that the more available a resource is, the more we consume that resource. A couple examples. I like to eat chocolate chip cookies. If you put one in front of me, I'll eat it. You put 10 in front of me, I will eat more than one. So as the resource expands, the consumption increases. His analysis was in time. The more time we avail to do a project, the longer the project takes. We all know that. And I found this to be true with money too. That's why I wrote Profit First is that the more money that flows into a business, the more we see available, the more we consume of it in

different aspects of our business. And we justify it. We're like, oh, I need this now. And that's why so many businesses uncannily, and I suspect people listening right now can relate to this, as your income increases, no matter what rate it is, sometimes it's a big spike of an increase or sometimes it's more slowly, but whenever those pops come in income, uncannily, our expenses increase almost verbatim. That's not like the universe doing something. That is Parkinson's law. We see the availability of money and we automatically spend it. So we need to use that behavioral principle to our benefit. And how we do that is intentionally constrict the amount of money that's available to our business by taking our profit first.

Now we constrict it and it forces us to work within new confines that are truly healthy for our business. You know that I talk about Parkinson's law, probably on five of the podcasts. And one of the things I've realized is by using steps of delegation, setting deadlines, getting full commitment through a signature and a date and checking up on those delegation steps. And usually it's a larger task. It's not like, hey, make copies of this. Anything that can be done in less than a half an hour is not through the steps of delegation, but it's so true. I think that's so right. And that's why I don't try to buy cookies or go to the grocery store when I'm hungry. Cause otherwise, and you know what? I was always taught to finish my plate. So no matter

what, and this is a challenge for me yesterday, I was able to walk away without finishing the entire thing. Cause I was already, I ate till I wasn't hungry and even a little bit more than that. And there was more. And I'm so used to just consuming all of it. I'll drink all my water. If I got a beer there, that's getting finished, you know, but that's, it's the same thing. But I love how you approached it because Parkinson's talked about time. If there's a paper due next Friday, today's Wednesday or Thursday,

I'm going to start on it next Thursday. And because I used up the time I have, but you applied it to all these other things. And it's so true. And I really appreciate that because you made me look at it in a different light. Because when I read and I read it a lot, I got a book on it right over on my shelf. It really discusses time and I never applied it to all these other things. So like I said, it's super great for me to hear that from you. You know, I talked about having to make tough calls and we had to make one last week and I had to do another one this morning, but letting people go, closing down businesses, severing ties with partners and clients, all these challenges an entrepreneur will most likely face

sometime in their career or life. What advice can you give business owners who are struggling to make these tough decisions? I mean, they are tough. They're unfair to certain people because a lot of people are in their way. They did a lot of favors a long time ago. They've been through us with the journey, but they're really holding us back and they're really hurting everybody else. So how do we approach that and how does an entrepreneur learn that? Yeah. So the tough decision, it's really a timing issue from my experience. I can make a tough decision today or I can make an even tougher decision tomorrow. It's easier to make the tougher decision tomorrow because there's no immediate consequence. This is actually how credit cards work. It's very easy to buy that expensive thing today on credit card because

you don't feel the immediate pain. Then a month from now, that's when you panic, oh my God, how am I going to pay this bill? And then you actually swipe the credit card again because there's no pain. It actually relieves the current pain of owing money, the fact that you can acquire something new, but then you feel the consequence again. And that's just the behavioral mechanism that credit cards leverage. We have to be aware that this plays into us as entrepreneurs. It is easier to delay a painful moment, even if it's of a greater pain in the future, because we're not feeling the pain now. And so what we do with Profit First, and I guess you can do it in other aspects too, is you move the intentional pain now. So let me explain. I can

run an unprofitable business until the day I'm almost bankrupt. And that day I have to go to all my employees and say, everyone, you're getting laid off. I'm an idiot. You can cut costs, renegotiate your rent, or just abandon the building and fly out at 3 o'clock a.m. in the morning and hopefully not get caught and try to start anew. And I did that, minus the abandoning my rent. I laid off half my staff. I did that. Literally in the conference room crying, walking person in after person in saying, you're fired, you're fired, you're fired. Not because they were bad people. They were extraordinary. I was a big effing idiot and didn't run my business fiscally well. Or I could have made the decision sooner. So if I took my

profit first, I would have seen immediately that there isn't enough money flowing to my OPEXs to maintain this. Instead of firing, I think it was 12 people on that fateful day, if I removed two people today, I could have got back to profitability immediately. That may have changed the course of the business. I may have saved 10 other positions. So we just got to get real about, and this isn't just profit, any decision making. It is easier to delay it because you don't feel the immediate pain. The consequences are far more dire if we do delay it though. So we have to have that adult-like thinking to force ourselves to make the difficult decision now, tear off that band-aid,

as opposed to doing total triage when we're bleeding out at the end. Yeah, I have a pretty big conscience when things aren't going right. And I feel that so much faster than most people. I guess I'm fortunate because if they, that was taken away from me and I was just like, we'll deal with it when we deal with it. I'm just like, holy cow, we only have 200 grand or whatever, you know, because our payroll is almost 200 grand a week. So like, if there's not extra, extra money, it puts me into this like fight or flight mode way sooner than I need to be. But what I had a really good discussion with my staff this week is let's talk about your weak

links. Let's identify them. Let's work on this and let's put a time limit on it to say you're either up, out or moving positions. Is that fair? Up. We'll get you up. We'll work with you. If you show the initiative, the will, I'll help you. I'll get you out of here if you're just not going to show me that. And we might move another position for you. So I think all those things that you said are just super important to be able to have that conscience and actually identify it. And I wanted to tell you real quick, because we're working on a platform that's going to talk to our CRM. It's an API, basically an integration that talks to grow.com, who takes the data and puts it in a useful information like bar charts or whatever type of charts you want. And I'm a

big fan, Mike, of identifying the outliers. So on the bell curve, you got your stuff to the left, you got your stuff to the right. Now, if you can eliminate the stuff to the left and have the stuff on the right emulated throughout the company and have them build case studies around it and teach other people and really focus on this guy sold 10 openers this week. I got three guys that haven't sold any openers this week or product differentiation and stuff like that, or selling home warranty packages or home service contracts, whatever it might be. Emulate the good stuff, identifying it as half the battle. And more people than not, I have a meeting every day with my staff, every morning at 7.45. We had one today,

every Thursday at 7 a.m. It's a full staff, but we're on now Zoom. And knowing the numbers, but so many people go, I don't have time to work in Excel or do a pivot table. Well, the technology today, Mike, will allow us to actually pull data in and you can just extract it to an Excel sheet and zoom.com and trust me, I promise I don't get paid anything for this. We're just getting started with it. I can't say for sure if it's going to be perfect,

but if the process is fixed, it'll fix the problem. And just like the other day, a couple of months ago, the girl said, I'm having a hard time hiring people. The process takes too long. I said, well, journal what's going on. She said, well, the background check takes five days alone. I said, okay. So I went out, I went on all my entrepreneur council stuff that I'm on and different publications

and talk to people. And I said, what do you guys use? Well, there was one common denominator. We switched and now we've got a really good comprehensive background check that's back within a second. It literally doesn't even think it finds everything on the internet and fixing those problems and identifying them and journaling my day has found, I said, how much time do I waste with email?

How much time do I waste going over meetings? Meaning I don't have time sensitivity. There's so many things we do during the day where we put off the big things on the business and we work in it all day long and put fires out. And I find that this type of stuff and knowing your numbers, I think everything you're talking about is knowing your numbers and you don't have to be a rocket scientist. You don't have to be a professional at Excel. You don't have to have 10 extra hours a week. If you put it into a simple platform with a nice user interface and you can extract it out into a system like grow.com, Google's got their own. I believe there's one with Microsoft, but it's just a data aggregator

that puts it in really easy ways to read. So you're not sitting there two hours a day evaluating a graph. You're just like, whoa, this is the worst. This is the best. There's three of them. I'm going to try to pair the worst with the best guy and see if I can make a difference. And you'll find huge leaps and bounds. You know, I was interviewing this woman named Adrienne Dorison for my newest book. I have a book coming out this summer

all about business efficiency. And the subtitle is Design Your Business to Run Itself. Like, how do you get a business running efficiently? And so I'm interviewing Adrienne and she goes, you know, Mike, every business flows through the ACDC. Not the band, by the way, but the exact spelling. And I go, what do you mean? She goes, well, every business goes through an attraction phase, trying to attract clients, a conversion phase, converting those prospects into customers, the deliverable phase, delivering your product or service, and then the collection phase would mean getting paid for what we do. And it's not necessarily

always in that sequence. Sometimes we collect before we deliver or whatever, but those are always the four phases that every business is experiencing. And within one of those, within all of them, there are bottlenecks, but there's one that's the greatest bottleneck. Meaning like if we had a chain between me and you, Tom, and we're pulling as hard as we can, the chain will ultimately break only at this weakest link. So to strengthen the chain, you don't strengthen all the links. You go to that weakest link, strengthen it, and the entire chain's strength amplifies. So she said in this ACDC model, identify where you are having the biggest slowdown in your business, the bottleneck. Maybe you have

a leads issue. Maybe it's actually not a leads issue. Maybe it's a conversion issue. Maybe it's a deliverable issue. Or maybe you ain't getting the money and that's what's killing your business. And once you identify that, concentrate your efforts to fix that. She explained once you fix that one thing, the entire business chain, if you will, strengthens. The entire business elevates and then the new weakest link will reveal itself and that's what you target next. That's super great advice. I'm a big fan. I talk a lot on this show of KPIs and I say, what do you need first? Okay. And I always go back. How much money do you want to make? Okay. Then I go backwards and I say, what's your average ticket? And then I go back from that and

I say, what's your conversion rate? Meaning when you go out to a job, does it convert into a real opportunity that you're collecting money? Then I go back from there and I say, between your form fills on Yelp and Angie's List and at-home advisor and all your phone calls, what's your booking rate? Then I say, what's your cost per acquisition for your marketing? Those are the only things, and you can take a deep dive into each of those, but if you suck at converting, you're not good at booking phone calls. But if you move those numbers and you'll always find one lower one, like my booking rate, I'll give you a great example as the national booking rate for home service companies, according to Susie at Call Cap, who's super intelligent, knows this stuff

is about 45%. Now, bigger companies are way better than that. But the funny thing is, I talk to huge companies sometimes. They're like, we're at 90, 95%. I go to their company and trust me, they're not at 90, 95% because they're filtering out all these calls. Like, well, that wasn't parts call. That one was out of service. That one wanted a midnight call. So that one shouldn't count. You can make the stats, whatever you want. So the first thing I tell people is make sure your stats are right. Don't believe it. Tell me the system you're using to collect these KPIs, because if you don't have those, then it's really hard to identify what the problems are. But ACDC, I wrote that down and my business doesn't have really any problems with

account receivable for the most part. but I would say delivery stuff on custom stuff and attraction, I just think we can lower the cost of that. So there you go. So that may be the spot, you know, and then, and once you nail it, the entire business likely should elevate. Here's the irony. If you went and said, I'm going to fix our collections, I'm really going to streamline this. We're going to nail it. You already said it's good. It'll have no impact. And since you know, it's good and you know, I'll have no impact. You're going to nail it. You already said it's good. It'll have no impact. And since you know it's good and you know it'll have no impact, you won't focus on it. But sadly, most businesses just randomly do that. They say, we got a collections problem. Let's just fix this. And it's not a problem. It's not as big as another problem. So, I think we need to identify

what the true issue is that's slowing us down and then fix that. You know, as I'm sorry, as the tide rises, so do all boats. That's what we're trying to do here. Yeah. And you know, the old saying, you're only as strong as your weakest link. I mean, if you've got a great strong chain, you've got this little weak link. I mean, fix that. I agree wholeheartedly, but it's the identification part of it that I think a lot of the listeners out there might have trouble doing.

A lot of times they say, I need more customers. But in this economy, they're saying, I've got way too many customers and not enough service technicians. How do you fix that? I mean, that's a hiring problem, right? I mean, we just went to a staffing agency for the first time. We hired 12 people. Guess how many people are left? Zero. Twelve. They of them. They showed up to every single thing. They're kicking butt.

They understand. They went to the staffing agency because they wanted a job. So that just shows initiative in itself. Wow. Oh, I thought you were saying you had 12 people coming with. Because business is flourishing all over the place right now. It seems to be that what we're seeing is such a churn in people. Like people show up and they're getting double the salary somewhere else and they're leaving right away. Well, the deal is, you know, you pay more for a staffing agency.

And I'll give you an example. If something's about 15 bucks an hour, you're paying about 20 for the first three months. But what are the advantages? I'll tell you, they don't work for my company. They work for them. So if I tell them how to show up tomorrow, the staffing agency, those people don't come back. I don't have to give them, you know, we could pay for all the benefits. We don't have to pay the tax, which is as an owner, if you're W-2 and your employees is seven and a half percent and the other employee, the employees pay seven and a half percent. So I did all the math and I figure if it cost me a couple grand to hire an A player and I could tell him to go home after the honeymoon phase if it doesn't work out, it's worth it. Let me give it a shot.

And I tried this a few years ago. I didn't have as much money to play with. And I'm not saying I'm rich by any means. To pay $5 more per hour, people are like, shoot, so my $15 an hour is going to cost $20? But yes, a good hire, if I could just show you a chart and you saw a very good, not the best, but a good one compared to a bad one. You're talking tens of thousands of dollars a week for most of them. Oh, in returns. Yeah. That reminds me, I met, this is many years ago. I met a guy named Garrett Boone. He is the co-founder of the Container Store. And it was at a conference. He

was speaking. And then the lunch, they had a lunch break afterwards. And I saw him going to a table where no one was sitting. So I quickly scurried over and sat next to him and said, you know, may I sit with you? He's like, yeah, by all means. And loved your presentation. I said, you talked about hiring, right? And they have a reputation, the container store for hiring extraordinary people. Now think about it. Their competitors are retail outlets like a Walmart or a Target. If you think about the type of service level you get there is way different than a container store where the people are so knowledgeable about the product, so engaging. So I said, how do you do it? And he

said, he pulled out the old napkin, like literally pulled out a napkin and a pen from his pocket. And he put 1A equals 3B on the piece of paper, on the napkin, slid it over to me. And he goes, look at that. He goes, 1A player, just as you're saying, Tom, 1A player is equivalent in performance wise of 3B player. So one great person can play the level of 3 B players. And I found that to be true in my own experience. He goes, therefore, if I pay an A player one and a half times the standard salary, what the B players can dictate, they'll be getting paid more than they can dictate anywhere else, these A players. Therefore, they have no reason to leave me unless I'm a bad employer or a life event happens, but they'll never leave for money. And he goes, and I'm the one who's getting the deal because these employees are so good. I don't have to hire one third the staff effectively and get the same results. His people run circles around the Walmart people and do his people

get paid more? Yes. But Walmart people, I'm just making this number up and say you get paid $10 an hour, the container store, maybe $15 an hour. But three Walmart people, $30 an hour equates to one $15 an hour person. So Garrett's winning. When I heard that, it changed my paradigm. And I have actually been implementing in my business. I used to aspire to have more employees and grow and bigger. And now I'm aspiring, how can I maximize my revenue and profitability with the fewest number of people who are truly extraordinary? And then my mission is to pay them a salary that they could never dictate elsewhere so that they feel protected and served.

And the only reason they ever leave is because of a life event or that I'm a bad employer, but I never want money to be the issue. That's my responsibility. Yeah, that's a good one. And I think a lot of us forget that. But I will tell you the simple math and I brought this up to all my managers. I said, if I hire five guys at $5,000 a pop for training, I got to go through, I fly them in, I put them up and then they get paid for it. And let's say I'm pretty good at getting rid of them fairly soon.

It's more of an interview process. You get to, I'm going to try it before I buy it. And I tell the people, and there's some laws around that depending on the state, but 5,000 bucks a pop, one out of five, it cost me 25,000 to hire that one guy. If I showed you the math and I could do this for gutters, I could do this for air conditioning. I could do this for any service. You'll have your money back within two weeks. So if you think people go, you know, I just hired the guy, I spent all this money on training. Now, don't get me wrong. You do not want to hire bad people. The problem why they say it costs 75, 100,000. The reason why they say that is because the likelihood of you getting rid of that person within the first month is very slim.

So they take the average person less than six months of wrong, not hitting what an A player could hit. But on top of all that, Mike, a lot of A players don't like to work around B, C players. They're like, it's not for them. And I'll tell you, we can do the math whichever way you want. But if I make 10 bucks a phone call and you're at 70 percent and I pay the other one 15 bucks an hour at 90 percent, the variance, if we broke down the math, you would understand real quick, pay that other guy 17 bucks an hour and get more of them because it's way better than the 20% of your revenue.

So the one guy's doing 90 bucks, the other guy's doing 70 bucks. That's $20, that's 20% difference. I just wanted a simple number, but I just, I get so passionate about this because it's so important and people don't realize it. And if you trim the fat, but I get so passionate about this because it's so important and people don't realize it. And if you trim the fat, and I hate to say that because you don't need to fire people.

You need to manage them up. You need to make sure there's the will and you can create the way. But if you look at the bottom, there's the most room for improvement. And a lot of it is top grading, unfortunately. But I want to jump into another topic because many businesses put a premium on the team's ability to cross as many tasks as possible off their to-do lists. What can you say about this relentless pursuit of productivity? Oh, so, and I sound so pitchy here. This is what I've been studying in my newest book.

So, just to do a big reveal, it's called Clockwork. And as I was preparing for Clockwork, I decided the goal here, again, is to design a business to run itself. My hypothesis was it takes productivity. The more productive a business can be, the more it has a competitive advantage, the more it can run automatically. So I started interviewing productivity experts. And one of the first guys I met with, his name is Chris Winfield. He tells me productivity is crap and he's a productivity expert. He goes, here's the trap. The more that an individual does, the more they can do, therefore, the more they take on and therefore they do more work. And as business owners, we see this all the time. We try to pack in as much in a day as possible. We find out a hack. We find a way to get things done faster. Then what do we do? We take on more

work and we're constantly buried. People are more overworked today, particularly in the US, than ever before. I believe the answer to a business's effectiveness is not productivity anymore. Foundationally, you have to be productive. You can't be anti-productive, but that just gets you in the ballpark. It's really organizational efficiency or what I call the choreographed dance of organizational efficiency. Getting the individual resources, complementing each other, putting people in the right, you know, they say the right seats on the bus, putting in the right positions where they are doing the work that brings them joy and has the most impact on the business. The other part is having the discipline

in a company to abandon what's not working. So many businesses do stuff because that's what they've always done. I'm doing air quotes around that. You know, like, oh, well, that's our history. We've always done that. There's this concept of always adding more. I think we need to bring about simplicity. What are the fewest things we can do for our clientele that have the greatest impact that they feel totally catered to and served to, but reduce the offering set to the point where they're not compromised, but that being overwhelmed with stuff either. Then find the fewest people who can have the biggest impact within the business delivering on that, doing what brings them the most joy.

And it's really now, as much as I hate this analogy, it's a chess game. It's we as the business owner are moving the different pieces on the board to position ourselves for that strategic win. It's the choreographed dance of organizational efficiency. I'm pretty vehement about that now. I love that because I'm rolling out and I've been working on this and it's a challenge, but we're working on lean and going lean in your personal life and your business life is how could I step two less steps? How could I go up these steps less times in a day? How could I make my pancakes quicker? How can I, it's the little things. If you say 10 seconds a day, you got a hundred people. What is that? 10,000 seconds. So you got 10,000 seconds a day by a little task that

everybody's doing. And I can tell you that this whole lean process is just, I've seen what it could do to businesses. And the first thing I told my guys, I said, look, if we were to all start a new market, what would be our first steps? I said, number one, make sure it's super organized. Make sure you're lean. Make sure you're not ordering, hey, there's a special, we're going to order 10,000 widgets. Well, they're going to be there in two and a half years. And by that time, we'll see if they're even relevant. No, you make it lean. You make it a good process. I don't necessarily agree that all the time you need to have just-in-time ordering, but it is efficient. And if you go that route and it doesn't

hinder you because you never want to be out of something when somebody needs it because you lose an opportunity. But, you know, you talked about the companies that keep doing the same thing and there's so many of them out there. Think about it, Blockbuster. I mean, they created a whole cliche. It's a Blockbuster hit and now they're out of business and you got to adapt. And that's one of the biggest cultures we're trying to grow is just a culture of change. It might not be the same way in a week. We might go to a different CRM. We don't plan on it for a long, long time. And I'm hoping we could work with the one we love, our CRM, but everything, you know, QuickBooks might not always be the solution. Everybody's used to

QuickBooks. It's kind of universal accounting software, but guess what? There's a lot of innovation going on. There's a book called The 10 Times Rule, Grant Cardone, and it's a quick read, but it just says, quit thinking about moving up 10% a year. How are you going to get 10 times bigger next year? Because that's where innovation and efficiency is born. And I'm a big fan of just thinking outside the box. If I wanted to grow 10 times and I asked my guys, how can we go 10 times? They all laughed. I said, I'll show you right now how we do it. Yeah. Yeah. You're tying into something. I don't know if this was Bill Gates who said this. I think it was Bill Gates said, if you want to achieve greater success, you got to ask

greater questions. And I think it was his question instead of saying, how do I develop a operating system that people love? Instead ask, how do I get an operating system on every computer in everyone's home? Right? So, it changed the paradigm. He was now developing something that was so easy and effective to use that everyone would want to use it. And that became the implementation of Windows. I think we got to ask big, bold questions. I actually came up with a new term. They talk about BHAGs, big, herodacious goals. I like it.

I don't love it. And I was wondering why, and it hit me one day. It's because there's not, the impact isn't talked about. How is it of service to others? And I think that's the biggest thing. I talked early on when we started talking, Tom, about the hierarchical needs of entrepreneurs starting off with sales, going up to profit. And I think there's a lot more as we go up. I think the top is also self-actualization where now we're,

everything's been served. So now we're in this give back mode. That's the impact we're having on the community, how we're truly being of service. And instead of using BHAG, I now use an acronym called Big Bang. And it's the big, beautiful, audacious, noble goal. What's beautiful meaning what appeals to you? And what's noble meaning that serves others? And when we think big, like $10 million is exciting for you or for whoever states it. Our company, we're going to do $10 million or 10 times the size. But for the people involved and my customers to be

excited, I know it has to be of nobility. It has to be of impact. And that's where, as I define goals, I'm looking for that beautiful and nobility components. And so, our own company here, it's called Profit First Professionals, our organization, the big, beautiful, notable goal is to eradicate entrepreneurial poverty. And we have metrics and what that means, but it means for no entrepreneur ever to live an impoverished life again. And that's the impact we're looking to have. And that's become this, this magnet or this catalyst for excitement around what we do beyond the traditional metrics. Yeah. Finding your why and really identifying. And I hated that cliche when I first heard it, you got to figure out your why, because to be honest with you, I think it goes after the five love languages, figuring out what you need. I like to be noticed. You know, I don't think it's the end all be all. I also, I'm not building this business right now with, we've got a million great people. Every market manager, Adam, my general manager, I mean, between Joel, Rob, there's just so many. I keep going on and on and on. But the point for me now is just to build something bigger

and better than we've ever imagined. And it's the process in which we get there. And, you know, I guess I got to sum down, I want to do whatever I want, whenever I want, with whom I want. And that's more of a monetary goal. But it's also to be the world's, especially North America's largest garage door company and most trusted garage door company is our vision. And it's really hard to figure that out. Self-realization. I think people go, I started this business for money. I mean, literally you don't see a lot of people going, I just, unless they've already got a lot of money, then it's more of a noble thing to do. But a lot of people, when their bills aren't being paid, they're not spending enough time

with their family, the wife or husband saying, we need to go on vacation. It's like, you know, it comes down to money. And I think what you're doing now is amazing. How do you get the buy-in for that? And how do you find out what the long-term goal is? Because everybody says that, look, you're working with businesses under a million dollars, right? These guys are not going, I want to change mankind. You know what I mean? It's not like that. So tell me a little bit about that thought process behind it. That's a good question. I think there's certain, many entrepreneurs are in business to just make money. Like that's all I'm here for. At least they start that way. At least they start that way. And that's how I started too. It was like, I got to make money.

There's a certain point that comes where making money is no longer satisfying. Like some businesses never make enough money to support a lifestyle they want. And therefore, they stuck in that. I just need to make money. They're down the hierarchical chain, if you will. Certain businesses, you get to a point where you realize, oh my God, there's never enough money. Like I've had that realization. And I mean, by the way, it's not like you have to become this billionaire to realize you have not enough money. There's certain points like, oh, I made more money this year and wow, I'm not more satisfied. There's got to be something bigger than this. That's I think when it comes about is when the mind says, oh, this isn't the end all be all. It's not about

the money alone. Money is an important component, but it's not the money alone. I think that's the turning moment. I've also found that businesses, once they grab onto something bigger, how it motivates others is not, I don't go to my team or my employees and clients and say, hey, get motivated around this. Isn't this exciting? I find people who are intrinsically motivated by it. It's actually become a filter. I know most people in the world don't care about entrepreneurial poverty. Most people don't even know what that means or can relate to it. And many people probably think that's stupid. Like there's quote unquote real impoverished people that, you know, don't even have a physical home. I'm some kind of, you know, idiot. And I get that. That's all true from their perspective.

But my reality, from my perspective, is this weird dynamic that happens for entrepreneurs. And I feel this mission to serve it. There are certain people that relate to it. We have a small company. I think there's eight of us here, maybe nine now. And of us, our little tiny company, each person has lived through entrepreneurial poverty. Either, in most cases, it's been a parent or a sibling or themselves who just never got out of the grind. They saw their dad working through them. They actually didn't even see their dad because they were, he was working every single night

trying to get the business off the ground. One girl here, her mom was trying to support the family and her business venture failed and they went without electricity through the winter. So there's this visceral connection. I don't know that teach them or motivate them around it. That's intrinsically there. My job now is just to channel that intrinsic energy with the goal of the company and get everyone marching in sequence.

I love that concept. And I like the example of the people that actually lived it because I think that really finding those people and getting their buy-in, a lot of people come up with a mission vision because they're building a business plan to give to a bank or something. And it needs to be more than that. And I agree with you. And I don't think you need a mission and vision that doesn't change. Google's changed. I mean, every business along the road changes. And sometimes it becomes more visual. I always believed that when money's no longer at all, and I don't think it's too far away from me.

I mean, I don't know, five, 10 years could be two, could be 20. But when money's no longer involved in the decision making, which everybody should still have a profit, but I think people like Elon Musk, they're actually trying to increase humanity. And with money not there, it's a lot easier to make clear decisions on certain things that happen. So I love the concept and I love your vision. I'm going to ask one more question and then I'm going to ask some things about how to get more of you because we're going to go over. But what specific strategies can business owners implement in order to attract the right

customers? Because Jesus talks to everything and marketing is one of the toughest things in business. How do you get the perfect customer? How do you find your perfect avatar? So I do have a specific strategy and this is from experience. And of course I've written about it. What I've discovered is first identify, if you have an existing client, how sort them out, but I believe sort them by revenue and what I call the crush cringe factor. My mean is clients that generate the most revenue for you and buy from you repeatedly are demonstrating through their actions. They value what you offer. Those are the clients that like you. But the second question is, do you like them? And it's the intersection of the customers that buy from

you repeatedly, spend the most with you, and you have a crush on them. You like them. Those clients are the ones we want to clone. So first you can identify them from your existing customer base. If you're a brand new business, I think you need to kind of test the waters in multiple areas to find out who your true best customer is. Once you identify the avatar from your existing base, then you go through a cloning process. And here's the irony. Most businesses actually clone their worst clients. Most businesses I go to them and say, tell me how many top clients you have. They're like, oh, here's my one or two best clients. Like tell me how many crappy clients you have. They're like, oh, I got like seven or

eight of those guys. Well, why do we have more bad clients than good clients? The reason is we usually oil the squeaky wheel. The bad client bitches, moans, doesn't pay us. And so we, the business owners say, oh my God, let's fix this. We'll resolve this. We go out of our way to cater to them. So what do they do? They go to their friends and say, you wouldn't believe it. There's this company out there I bitch and moan to. I don't even pay them and they cater to me. You got to work with them too. And we automatically attract crap clients. So once you identify your best client, over-cater to them. That's strategy one. But the second thing is identify what's

called congregation points. Ask your best client, where do you go to learn about your industry? Basically, what you're trying to do is find out where do other people like you congregate? And then you insert yourself there. I did this with my own little computer company. And this is what grew explosively. I learned that a hedge fund was my best client. I loved working with them. I went to Larry, the hedge fund manager. I said, where do hedge funds congregate? And he's like, oh, there's a conference called MarHedge every year in Long Beach, California. I was going to the Chamber of Commerce. There was no hedge funds there. I went to this conference in Long Beach. It was all hedge funds. I was the only computer guy walking the floor. And it was no surprise, very quickly over time, people started to recognize me

as the computer guy for hedge funds. I started picking out the best clients. So, go to their congregation points. And the last thing is once you identify your best client, ask them the other vendors they depend on. Not competitors of yours, but other vendors outside of what you do. You know, for the hedge funds, there was a guy who made the trading desk. There was a, the companies that installed the information feeds like Bloomberg terminals and ILX. And my client, Larry, introduced me to them because I told him, I said, I want to collaborate with your other vendors.

Collectively, if I understand what they're doing, I can serve you better. I can design the computer systems network to tie into their systems and what they're doing. He said, I'll gladly make an introduction. He did. I built rapport with them. We did improve our service offering to Larry because we understood now his full needs. But those other vendors also started to turn us on to other Larrys. So that grew my company explosively and allowed me to sell to private equity. That's how you do it, by client cloning. I love that. Yeah, you know, it's the 80-20 rule. And if we can start to focus on where we're pulling the most profit, and it's, the numbers don't lie. The one thing I would tell every listener out there is take two

steps back, figure out your system, your CRM, and how you're going to view these numbers without being a slave on Excel. And take a look at this stuff because even though it's easy, Mike, and it's easy for me and you to say, look, analyze your best customers. People are going, wait a minute, but you know, where do I start with that? And well, who do you love first of all, and how much money, look, I fixed garage doors. Okay. So everybody who's my client, everybody that owns a garage door, I don't care if you're in the shitty part of town they still have a garage door we still make money with that but you know what there's a couple builders that are willing to spend

ten thousand dollars a door and they're low they're really not a lot of stress and how can I get ten more of those guys because they're not there I'm not paying for advertising either so that's great advice And I'm so glad I had you on here. I want to talk a little bit about your books. If you could go through each of them, give a little synopsis of them and tell them, I think they're all on Amazon, but just talk a little bit about them. Yeah. Well, thank you for the opportunity to share this, Tom. I'll go through them in rapid fire in the publishing order. My first book was called The Toilet Paper Entrepreneur, and it's about how to bootstrap a business. It's really the lack of resources is your biggest ally. So that's The Toilet Paper Entrepreneur. My second book was called The Pumpkin Plan.

We actually touched on the concept now of client cloning. And how do you grow your business organically, healthily with very little investment, rapid growth, but organic, healthy growth. My next book is called Surge. Surge was kind of part two of The Pumpkin Plan, healthily with very little investment, rapid growth, but organic healthy growth. My next book is called Surge. Surge was kind of part two of the pumpkin plan. And it was the realization that markets move as very small niches will move and we can position ourselves in front of a movement, offer something they need before the mass market needs it. You were talking about the bell curve. This is getting in front of that mass market. And sure enough, you will get massive momentum in your growth. And then the next book was Profit First, hands down my most popular book.

And Profit First is about the system we just talked about, taking your profit first to ensure profitability, permanent profitability, and actually facilitate growth. And then my newest book that's coming out now, the one I've never been so excited about a book, it's called Clockwork. The subtitle is Design Your Business to Run Itself. And it's all about how do we extract ourselves from our business so the business becomes an automatic ATM effectively and gives us the freedom to do what we want in our lives. But also if we choose, it is our business after all,

what we want to do within our business too. And that's my books, all on Amazon. I love it. I'm really looking forward to clockwork and I'm really trying to live what you're preaching. I mean, literally, how can I, I enjoy business so much. I mean, that's my passion. People love golf. I love, I love golf too, but I really love business. I mean, I'm entrenched with it. I just love the fact that technology now is changing the game and checks and balances and getting the right people,

personality profiling to identify where people will excel. There's so many little tricks out there. And I'm really, when is that book coming out? August 21st of this year of 2018. So as of this recording, about a month and a half from now. So usually I ask, what are some books you recommend? But I think those five are where we're going to end. And I like to finish out just something, Mike, to just share. Well, number one, tell us where they could get you if they want to talk to you or connect with you on LinkedIn or an email or website. And then number two is maybe something that we didn't discuss, a final thought that you

want to leave the audience with, just something we didn't get a chance to cover. Yeah, yeah. Okay. I'll put a massive challenge down. I would say the way to get hold of me is the best for my website. It's mikemichalowicz.com. I know that's too hard to spell and it's a doozy, so I'll give you two shortcuts to get there. One is if you go to Google and type in Mike and then Mick, M-I-C, Mike space Mick, you'll see this big Polish name drop down. That's me. Click on that. And then alternatively, my nickname in highC, Mike space Mick. You'll see this big Polish name drop down. That's me. Click on that. And then alternatively, my nickname in high school was Mike Motorbike. The ultimate of ironies is I never have driven a motorcycle. But if you go to mikemotorbike.com, that will bring it to my website. And what's cool is all the books are there, but you can get free chapter downloads.

So you can try before you buy type thing. I also used to write for the Wall Street Journal for years. So you can get those articles. If you're a subscriber, you can get before you buy type thing. I also used to write for the Wall Street Journal for years. So you can get those articles. If you're a subscriber, you can get them from their archives or you can get for free from me plus other things. Here's the big lay down on what you can do. As I was studying for clockwork and doing my research, it took me six years to write this book, by the way. As I was going through the research, I found that ultimately the test of a successful business is the ability for the owner of the business to remove themselves from the business for four consecutive weeks. And the reason it's four consecutive weeks is most businesses go through a full cycle of offerings within a month's timeframe. Billing,

collections, delivery of goods, attracting new prospects, converting the customers, et cetera, et cetera. If we have no interaction with our business for four weeks, the entire business is tested out. Here's my declaration of courageousness. 18 months from today, when you're hearing this, look at your calendar, 18 months out, that's a year and a half from now. Book a four-week vacation. And I mean, book it. And you know, it doesn't have to be something extravagant. I just want you out of the office. Make that your decree. And it's a total disconnect. You'll see once you make this decree and tell people about it, you'll tell your loved ones and bring them with you so you're held accountable to it. Once you make this decree, it forces you in the next 18 months to find a way to make the business run itself.

It reverse engineers it. And I found that people are making this decree actually pulled off. The people who say, I'm gonna make my business run on automatic and just kind of lumber along, seem to never do it. Wow. You know, that's a big challenge.

Mike, I talk about Zig Ziglar because I listened to him and he goes, you know, he commanded the stage up there and he had his little Texan accent and he go, ladies and gentlemen, how many of you want to go on vacation? You know, and he's all, he's just a happy guy. And he said, uh, I do too. He goes, here's what I'm going to do. I'm going to take you to Hawaii for a week. I'm paying for you, the kids, the alcohol, the food, the jerk, you know, we're going to go up to the volcanoes, everything. He goes, but now here's

the deal. We got to leave in three hours. We're going for a week. How many of you can pick up and leave and your business run okay? And he's like, I see a couple of hands out there. Good for you. But that was a week. You're challenging a month. And I love that concept because it forces you to do that. And then book it. I love what you said. Book it. And maybe you can do a deposit or go to a travel agent. So you're not spending, you know, four weeks is not a cheap trip unless you're going somewhere. No I bet you listen you could go to the mother-in-law's and the reason I found four weeks just to kind of tie put a bow tie on this I found that when businesses were taking a week off what they were doing was the owners were cramming in as much as they could right up till before they left, hoping it would bridge them for

one week. And the day they got back, they would then take up the work and the slack that had built up. They were trying to bridge through it. I try to find what's the longest or the shortest gap where the business owner has to find other resources to contain the business or maintain the business. And that's when it came to four weeks. Well, I challenge everybody out there as well. And I'm going to make that my goal. I have a hard time with a three-day weekend, but it's not because I don't trust my business. And it's not that I'm all focused on A1 when I get back.

But I got to tell you that it's really, I do trust other people. And I do think we're at a very important time of the company. But I don't think there's a lot of owners out there that are going to say, we weren't at an important time when I left. It wasn't even important because right now, I just don't think that's going to happen. But I'll tell you, my God, I need to talk about this.

Yeah, it just never gets done. So you got to put a stop to it. But I think I think there's a lot of good stuff. And I really talk about some of the similar things. I think you're more of a lot of philosophical as far as like the mentality of your mind and making sure that you're around good people. Mine is more like tactical strategy. I'll definitely send you a copy, but I really appreciate it. You know, I think everybody on the call listening to this podcast is going to get a

ton out of it. So thank you again. And I hope the weather in New Jersey is amazing because it's very hot here in Arizona. Oh yeah. Phoenix is boiling, but Tom, it was a joy talking with you today. Thanks so much for having me on your show. Yes, sir. Thank you. This was the Home Service Expert podcast. Now I've got some great news for you. You want more money, time, and freedom? If yes, I put together a free training session where I reveal my four-step process to grow your service business up to eight figures without having to compromise your freedom. Check it out at homeserviceexpert.com forward slash webinar. If you're working too hard and you're not getting results, you better watch this training session now. Just go to homeserviceexpert.com forward slash webinar.