Young and Profiting with Hala Taha - YAPClassic: Mike Michalowicz on Running it Like Clockwork
Episode Date: April 29, 2022Serial entrepreneur and author Mike Michalowicz believes that your business can run itself. Many entrepreneurs feel like their business requires their constant supervision or else it will fail. But wh...at if your business could run like clockwork, continuing to profit and grow even while your focus is elsewhere? Imagine the freedom and possibility this would provide! In this episode, Hala and Mike talk about the seven steps to help a business run like clockwork, Mike gives advice on hiring and building a team, talks about how you can move from delegating to designing, and goes deep on his “profit first” mentality. Topics Include: - Mike’s entrepreneurial journey - Key milestones in his career - Why productivity is a trap - Go from “doer” to “designer” - The four Ds of business - Advice for hiring - 7 steps to help a business run like clockwork - Analyze existing time - Queen Bee Roll (QBR) - Capturing systems - Balancing the team - Finding the right clients - The four-week vacation - Pareto Principle and the 80/20 rule - Profit first mentality - Parkinson’s Theory - Mike’s secret to profiting in life - And other topics… Sponsored By: Current - Sign up in less than two minutes at current.com/yap for a chance to win $200 Riverside.fm - Visit Riverside.fm and use code YAP to start recording studio quality sound and video and get 15% off a membership plan. Shipstation - "Go to shipstation.com and use my offer code - YAP. Get a 60-day free trial. That’s 2 months FREE of no-hassle, stress-free shipping" Constant Contact - To start your free digital marketing trial today, visit constantcontact.com. Jordan Harbinger - Check out jordanharbinger.com/start for some episode recommendations. Resources Mentioned: YAP Episode #52: Run It Like Clockwork with Mike Michalowicz: https://www.youngandprofiting.com/52-run-it-like-clockwork-with-mike-michalowicz/ YAP #166: Practicing Conscious Leadership with John Mackey: https://www.youngandprofiting.com/166-practicing-conscious-leadership-with-john-mackey/ Mike’s Website: https://mikemichalowicz.com/ Mike’s Books: https://mikemichalowicz.com/books/ Mike’s Podcast: https://mikemichalowicz.com/podcast/ Mike’s YouTube: https://www.youtube.com/c/MikeMichalowiczOfficial Mike’s Instagram: https://www.instagram.com/mikemichalowicz/ Connect with Young and Profiting: YAP’s Instagram: https://www.instagram.com/youngandprofiting/ Hala’s LinkedIn: https://www.linkedin.com/in/htaha/ Hala’s Instagram:https://www.instagram.com/yapwithhala/ Hala’s Twitter: https://twitter.com/yapwithhala Clubhouse: https://www.clubhouse.com/@halataha Website: https://www.youngandprofiting.com/ Text Hala: https://youngandprofiting.co/TextHala or text “YAP” to 28046 Learn more about your ad choices. Visit megaphone.fm/adchoices
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You're listening to YAP, Young and Profiting Podcast, a place where you can listen, learn, and profit.
Welcome to the show.
I'm your host, Halla Taha, and on Young and Profiting Podcast,
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Hey there, Young & Profitors.
Did I just hear my phone buzz?
It must be our YAP society text community
blowing up my phone.
Listen, I've had a blast reading all your text messages.
So if you haven't joined your text community,
all you got to do is text YAP YAP to 28046,
that's YAP YAP 28046 to text me directly.
All right, so today we're sharing an awesome YAP Classic with serial entrepreneur and author,
Mike McCallowitz. I interviewed Mike on YAP back in episode number 52 in January of 2020,
and our conversation really influenced how I run my company yet media.
And so I definitely thought it would be revisiting in the new workplace atmosphere that is 2022.
The content is a couple of years old but still resonates heavily in this current environment.
And this episode was made shorter and to the point so we can listen, learn, and profit faster.
Mike is the author of six books including Profit First, Clockwork, and
his most recent book Get Different, and they all focus on different aspects of entrepreneurship.
He founded and sold three multi-million dollar companies before his 35th birthday. He's
an active partner in multiple companies, including an American manufacturer, a business growth
consultancy, and an augmented reality tech firm. He was also a former small business columnist for the Wall Street Journal and a business
makeover specialist for MSNBC. Mike believes that you shouldn't have to sacrifice your life
for your business to succeed. He shares the secret to having your business run itself like
clockwork while continuing to grow and turn a profit. In the C-App Classic, Mike and I talk about
why productivity is actually a trap. We go deep into classic, Mike and I talk about why productivity is actually
a trap. We go deep into Mike's seven steps to help your business run like clockwork, and
we discuss my personal favorite topic, how to put profit first. So if you're worried
that without your constant presence and effort that your business will fail, or if you're
wondering about how to actually make a profit, this is an episode you wanna listen carefully to.
And with that, enjoy my conversation
with Mr. Profit himself, Michael McCallitz.
You've written so many amazing books.
You are a best-selling author.
You've written Surge, Profit First, Fixus Next, Clockwork,
The Pumpkin Plan, and The Toilet Paper Entrepreneur.
All of them tackle the topic of entrepreneurship
and building a business from different angles.
So at a high level, could you just share
what your main experiences that you've had are
and how did you become the entrepreneur know it all
that you are today?
Oh, that's, I've never heard that term.
I made it up.
That's awesome. That's awesome. I love it.
I've been called an entrepreneur by the way.
That was someone's like, gosh,
you just don't stop doing things settle down.
So my background is entrepreneurship after college.
I was gonna get a corporate job or something,
but I couldn't.
So I was thrust into entrepreneurship,
never had a desire for it,
but a few years into it, I fell in love with it.
It just became a absolute passion of mine.
And the journey, for me at least, was very difficult.
Tons of financial struggle, tons of stress.
It's funny, you see someone's resume or my resume
and you see like, oh, you know,
build four multi-million dollar companies,
sold two of them, and it's all true.
But what's left out conveniently is the struggles
in between the launch and the exit.
And on, I'll never forget to stay, it was February 14th, Valentine's Day, 2008. I had started my
third business and it was a calamity. I was doing angel investment work, helping other businesses
start out, putting my own money into them. I had made some money selling my prior companies.
And I had no right to be that space.
I had no idea what I was doing.
I actually evaporated all my wealth.
And I had to come home to my family and tell them that we were going to lose our house,
which we did, and our possessions, and all this stuff.
And the defining moment was looking at my daughter and her eye, which was nine years
old at the time, and telling her I couldn't afford to pay for her $20 horseback riding
lessons.
It's like a group session she'd love to go to because I was broke.
And she ran out of the room to go to her bedroom as fast as she could, grabbed her piggy bank
and she ran back to me with daddy, daddy, all start supporting our family.
And that moment was this wake-up call that I really didn't understand entrepreneurship.
I didn't have physical discipline.
I didn't understand what profit wasn't really or how important it was.
I didn't understand efficiency.
So I started writing about it.
And writing is a good therapeutic process just to write your thoughts.
But it started to formulate a book.
And that's when I realized I need to research and understand and learn everything about
entrepreneurship selfishly for myself so I can get better at it.
And then hopefully so that other people will have an easier journey.
You know, entrepreneurship is frickin hard.
Yeah.
And I'm just trying to make it just a little easier, just simplify it a little bit more.
Yeah.
So what are the key milestones in your career?
If you could just like, rattle them off.
Okay, so I'll give you the key highlights.
So first company was in computer systems,
computer technology sold that to private equity
after I think we got to about $2 million in revenue.
So a very small business.
Second company was in computer crime investigation.
Data forensics is what the direct term was.
Our company was one of the lead defense investigators for the N Ron trial.
That was actually our marquee case, but we did celebrity cases, sadly some many criminal
cases we did analytics on.
And that was acquired by Robert Half International.
We were on a run rate for $7 million,
just two and a half years in, and just fortunate 500.
So this is the industry we want to be in, and they bought us.
That was the grand exit.
And then another highlight I told you is losing all my money,
which is an important component.
After selling those two businesses, I was cocky.
I thought I knew it all.
I didn't.
I was very fortunate in the right place at the right time.
I hustled.
I worked hard, but I wasn't working smartly.
Then I became an author, so I have that as a business.
I have six employees, so it's not just an author guy in a corner typing away.
There's a lot more to it.
I also own a membership organization
for accounts and bookkeepers.
We have roughly 450 active accounts and bookkeepers
throughout the globe who are teaching our methodologies.
And then I'm also on the board of a comment on board
of a augmented reality company
and work with a manufacturing company
in an equity capacity.
Yeah, yeah, it's fun.
But my full-time work though is authorship.
I just love to research businesses, small businesses.
That's my space.
Just love it.
I had you rattle those off
because I just want my listeners to understand
that you're credible in the space
of industry experiences.
You've sold multi-million dollar companies.
You're not just an author who's
or an academic or something like that.
Right, I'm not pontificating like,
oh, you know, you should do, but I can't.
Yeah, exactly.
The best thing is, you know,
everything I teach, I've guinea piged on my business.
So I wrote a clockwork, I know we're gonna talk about that
and I talked about this concept of a four week vacation,
whatever, we employed that.
And now actually all the employees we've mandated that for them.
Profit first, my most popular book currently,
I live by that system.
So everything that I teach, I've tested on myself
before I ever goes to print.
And I think that's different than some authors who,
and I am not discounting their work, their work is powerful, but they don't necessarily, some of them have the practical experience of
the implementation, just the study of it, you know.
Yeah.
So I've listened to your most recent book, it's called Clockwork, and in it you say your
mission in life is to eradicate entrepreneurial poverty, and make sense considering that you
lost all your money and got it all back.
And you have so much value, it was really hard
to just narrow down to one topic.
So we're gonna stick to clockwork,
which is really about optimizing your time
and profit first, which is about optimizing your profit.
So we'll stick to those two different topics.
Right away in clockwork, you say that productivity is shit.
You say it's a trap, it leads to more time to do more work.
So tell us about that and what you suggest we do instead.
Yeah, so it was funny, I was in New York City.
And what happens when you write a book is like,
you study and prepare a hypothesis.
And I felt that businesses need more efficiency
and my belief was more productivity
translates to more efficiency there.
They're almost synonymous.
So I met with this productivity expert,
he was Chris Winfield.
He had dedicated his life to the research of the stuff.
And I sat down with him and that's the word to use.
I said, hey, let's get right to it.
How important is productivity?
And he looks me in the eyes and says,
productivity, it's shit.
And I'm like, hold on, wait.
You're the productivity guy saying this,
this is what?
And it was just around that time.
I mean, within the prior month or a few weeks
that he had realized that for teaching productivity
for so long, that it's actually a trap.
And here's how it works.
How if you take on eight hours of work in a day
and you employ productivity techniques
to get through that work, theoretically,
you'll be able to get that work done now
and six hours will say.
So the same volume of work done faster.
Here's the trap.
That now avails two extra hours that day to do more work.
So it's the nature of entrepreneurs
to then take on more work.
Well, now you're taking on the former eight hours
that you've compressed to six,
plus two, getting it back to eight.
Now you're maxed out again,
you need more productivity.
So we seek new tools, new ways.
And we constantly compact ourselves with work.
We allow ourselves no margin of error,
no time to think it's this trap of just doing. And as
we're talking, he says, he was saying that a successful business, the owner is an owner and not
an operator, definitely not an employee. I go to McDonald's admittedly with some kind of frequency
because I travel so much. And I've started a routine and I encourage you
to try the same thing.
Next time you're in a fast food restaurant
if you partake in that type of stuff,
I go to the cashier and I ask them,
I say, hey, may speak with the owner.
Not because I have a complaint,
I'm curious about the operation of your McDonald's here.
I've never, and I've probably done this
like 40, maybe 50 times now.
I've never had the cashier say,
oh, you only grab the owner there in the back.
No, the owner's not flipping burgers or cooking the fries
or in that glorified closet that they call an office.
It's the store manager that's there.
The business owners have employed and utilized
the system that McDonald's have helped
and they seek out new properties to own more businesses.
The funniest, and this kind of epitomizes
what ownership is, the funniest response I ever had,
I was talking to some cashier, I said,
hey, I'm really impressed by the operation here,
make speaking the owner, and the cashier looks to me and says,
oh yeah, the owner came in two months ago to pick up money.
Pah!
I'm like, yes!
So in clockwork, if we pursue productivity,
we are actually forcing ourselves to do more work.
Now, I'm not saying you don't need to be productive
as an organization.
But what we need to do as business owners
is transition from being the superhero
that does the work for our business and the high end work
to transitioning out.
Instead of being a doer, we want to be what's called a designer.
And a designer is someone that has a clear outcome
that we're looking for a business long term.
That's called a vision, of course.
But also the short term, how do we choreograph our resources,
the people we have or the software we have
or that one part time contractor, if you're a small business.
But how do you leverage the most out of the people
and even the clients around you
and the resources around you to get the outcome you envision?
It's really about thinking, not doing.
Yeah, and I know in the book,
you say that we should be a designer and not a delegator.
Could you explain what you mean by that?
Yeah, so there's four stages that a business goes through
and it exists in all four stages,
but the entrepreneur's journey is to kind of climb the ladder.
The base level, I call it the 40s, the base level is doing.
And doing is where we actually, as owners,
do the work necessary to support the business.
Every business must be doing.
You have to deliver your services or goods.
You need to have the administrative work
behind it and marketing.
So the deciding phase is the next level up.
Deciding is where we taskrabbit individuals,
but we control all the decision making.
So if you ever hired an employee or a contractor,
and like I did this, I hired a girl named Jackie,
she's phenomenal, and she came on board,
and I realized one of the doing activities
I was really engaged in was invoicing.
So I said, hey Jackie, I want you to start invoicing.
And she said, great, I'll do it, and I felt great. And then she came back a second later and said, how do we sort these invoicing. So I said, hey, Jackie, I want you to start invoicing. And she said, great, I'll do it.
And I felt great.
And then she came back a second later and said,
how do we sort these invoices?
And I gave her an answer.
And she left.
And she came back in my office and had another question.
And it was a constant stream of questions,
which in the beginning is great,
because it means she's a learner.
But after a month of that, it's like, oh my gosh,
can she not figure this out?
That's the deciding trap.
And many small businesses are stuck here
where the owner retains all decision making
because it's easy, it's better to just tell them how to do it
or do it myself at times,
then really build a system around it.
And it satisfies our egos, like, hey, I'm the node all,
I'm the business owner.
And for the employee, it's the safest thing.
Because if Jackie asks me questions,
and I give her instructions and she follows instructions, she can Jackie asked me questions, and I give her instructions,
and she follows instructions, she can do no wrong.
Even if I give her bad instructions,
as long as she executes on it,
she's good at following instructions.
So that's a trap.
But at a certain point,
you do need to make certain decisions,
so you need to move through that phase.
The next level is called delegation,
and delegation is not the assignment of tasks.
So most people think it is.
Delegation is the assignment of outcomes.
And the difference here is delegation is where we are,
tell your employee, here's the objective we want to achieve.
Do we have agreement on this?
Now your job is to navigate it
and give the employee the freedom
to make all the decision making around it.
So with that invoicing, instead of telling Jackie,
hey, go to invoicing, now I'm saying,
hey, Jackie, it's important for us to build timely and accurately.
That's the outcome we want to achieve.
And we have to get to agreement on that.
I'm like, why do you think I feel that's important?
And she said, well, if we build timely,
we collect our money faster.
That's fair to us.
If we build accurately, we're representing the work we do
appropriately.
So that's fair to our clients.
So it's a fairness thing, exactly.
So go do it.
And then she starts doing it, and she comes back
a second later with a question.
Now, this is the key.
When they come back with questions, your employees,
you need to say, well, what's your decision?
Push the decision back on the employee.
And a lot of us have heard of this,
not to make decisions for them.
Most of us don't execute on it.
That was what I found in my research.
So you have to do that.
But there's one other component that's probably
the most important component in true delegation that almost everyone have to do that. But there's one other component that's probably the most important component
in true delegation that almost everyone fails to do,
yet it's the most important.
And what it is is the approval of decisions
that our employees make, the approval of all decisions,
even the bad ones, the support for employees.
So if the employee comes back and makes a bad decision,
at least they're making a decision.
And if we say, oh no, no, no, that's totally wrong,
we're gonna do it this way. You're very quickly slipping back to that deciding phase
where it's control, which restricts your growth because now you're the one mind for the entire
organization. So we need to prove all their decision making, even the bad ones, and give them the
freedom to fix the mistakes that they make. Now, there's sometimes they're going to try to make
a decision that is really costly to the business.
Like, you know, we should hire 20 more employees
and no bankrupt does.
Well, in that scenario, you need to insert yourself
as a coach and guide the thought and logic
with the employee and say,
well, what's the consequences of this?
Let's discuss this before they proceed and curb that.
But otherwise, support decision making,
because that gives them empowerment,
that they're not gonna be punished as they make mistakes, that they have given the freedom to find the solutions on their own.
Which ironically, or coincidentally, we do for ourselves. Like, you know, we as entrepreneurs make mistakes all the time, but we don't fire ourselves.
And then that moves us on to the highest level. So once we get through delegation, the highest level is designing. And designing is what we talked about earlier. It's that envisioning of what we want.
And it's the alignment of all of our resources
to get to that vision.
Yesterday, this was literal.
This was yesterday, we finished our two-day retreat
for my business.
And we worked on the design phase.
And I have a clear vision of what I want for the business.
But you know, okay, coming up a room
with my six and colleagues there and saying,
hey, we're gonna do, you know, $10 million in revenue.
Let's do this.
Honestly, it's not exciting for them.
It's exciting for me.
I get the new car, the nicer house, whatever.
But for them, it's like, what, what?
So, you know, here's really good designing.
We sat down and each one of my colleagues, Jenna, Kelsey, Jeremy,
everyone sat down and has wrote down their vision for their own lives. We're doing this work to
support the outcomes we want in our own lives. So some people, I didn't know this, three people
actually want to become fluent in Spanish in our office. I had no idea. Another person is looking
to build their first home, they're renting an out and looking to build their first home. And the person wants to travel regularly.
And we really got clear on our own personal visions. Then we said, how can we achieve all
of these visions? How can we walk and march a path where we're moving the company forward
to a vision that I have as the owner and we're supporting and achieving
the visions you want.
That's vision alignment, individual vision alignment with the corporate.
That's what designing is.
Just to summarize this, we as business owners need to move to the higher and higher levels.
It's not a switch.
You don't switch from one level to the other.
It's more of a throttle.
You slowly move through these to higher levels.
And you, as the owner, will have to revert at times
of doing work.
You will have to decide and delegate.
But we want to be more and more focused on designing,
build our team for them to manage those other d's
that are elements.
Let's hold that thought and take a quick break
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For me, I have a lot of interns that work for young and profiting podcasts and that's
the hardest thing for me to delegate and have them submit something and I just like approve
it as is because I want to to control our voice and control our message
and make sure that everything's quality.
And that's where our productivity stops
because I'll get busy and I'll become a bottleneck.
Because decisions can't get made.
So how do you suggest that when it comes to like content or I guess when you're dealing
with a less experienced employee, how do you suggest we deal with that?
So first of all, this goes to you, Hala, for being so cognizant that you are the bottleneck.
In most businesses, I started including my own.
The bottleneck is the owner yet for many of us, not in your case, but in my case, my ego
didn't want to admit that.
I felt that I'm on the bottleneck, I'm a superhero,
and I need to go through me, I'm the ultimate.
So the first thing that I needed to go through
was this ego check and say, am I really that important?
Am I really that necessary?
The concept of brand continuity and content continuity
is that important, but
I, that important. That's different. So when I had that realization, because we produce
a lot of content here, I'm an author, but also a blogger, a podcaster, all that stuff.
And I have that team of six on my team. One of the people now is a full-time writer for
us. That's Jenna's job. Well, Jenna came on with no writing experience in this space.
She enjoys to write, but she's not a writer in the traditional sense.
So she didn't come out the skill set.
Here's the key.
When hiring people, we need to hire people for their passion, their interests, their enthusiasm,
cultural fit, intelligence.
There's all these intangibles that we can't train.
You can't train me, hallelujah, be more smart.
You can't teach me to be more driven.
You can't give me those things.
These are, I bring it to the table or I don't.
The one thing, the only thing that you can teach me
is the skills, the technical technique.
So what we did is we said we have a need for some writing
and notably we had an immediate need
so we did outsource to contractors and stuff,
and it was clunky and a little bumpy,
but we said we really need to develop this,
and someone needs to be extraordinary.
And we just kind of circled in with the team,
not saying that we need this, who wants to do it.
We actually didn't really say that.
I simply said, if you could do anything here,
what's your dream work, what do you want to do?
And it's interesting that Jenna, who did not come on for that kind of work, she was coming
on for more order management and stuff like that, said, you know, I just, I really like
the right, I don't know if you have any needs for that, but I like to write.
And we're like, you like to write.
Let's get you started.
And so about 12 months ago, a year ago, she started doing some writing for us and her
innate raw capability presented itself quickly.
It's like, wow, she can write well and effectively. Then it was like now,
let's develop this into a skill. So we went into voice, I don't know if the term
called voice management, but training on how to emulate a voice, there's actually classes and
course material for that. We are teaching her in processes of persuasion and influence
like different words and stuff like that. And even launches because we launch books, right?
So I won't come down and just four months from this recording, Jenna is now actively involved
in how do we communicate this in a persuasive but appropriate style to our community. And
she's really stepped up into it. So I found that when people like or love to do something,
they can gain the skills very quickly.
It's finding people that have an interest
and even a passion for something
that is from my experience far more important
than having the existing skillset.
I would even argue when I've hired people
with an existing skillset, sometimes I've had to try
to unlearn, help them unlearn, process,
and habits because it was in congruent with what we wanted. But they quote unquote, new better.
And it was really very difficult and cost-conflict. Yeah. For me, I've been like employing templates
and guidelines and trying my best. So hopefully it will smooth out. In the book, you outline
seven steps that can help our business run like clockwork.
So your book is like 240, something pages long.
So I know that we can't cover all of these steps in detail,
but could you give us the summary or elevator pitch
of this seven step framework?
Yes, yes.
So the first step is this concept of the four Ds
we talked about.
And it's really the basis action we need to do
is analyze our existing time.
How do we actively spend our time?
And if you maintain a counter like I do,
I track every activity of the day,
I can just go back on my calendar over the last two
or three weeks just to see what a normal week looks like.
That's the goal.
And we may be surprised as business owners,
of small businesses, we typically devote
a disproportionate amount of time to just doing stuff.
Actually, I probably won't be surprised.
We spend very little time in designing.
The irony is the day before you start your business,
most of us are in this design phase.
Like, oh, the business is gonna look like this,
and we're gonna have a cool,
we're gonna allow a dog to walk around the office.
We've all this great visionary stuff
and that goes out the window in the first day.
So figure out, analyze your time
so you can find out where devoting time. Then next level is the window on the first day. So figure out, analyze your time so you can find out
where you're devoting your time.
Yeah.
And the next level is the concept of the QBR,
stands for Queen B Roll.
It came out as I was doing research for this book.
It takes me about five years to research a book.
And I was researching it out trying to find
what the most efficient businesses are in the world.
And I found many individual categories.
I remember going to Lewisburg, Pennsylvania,
and meeting with this place at manufacturer, very efficient. And they had a system,
but they had their own kind of system that didn't necessarily apply to everybody.
When we can't find a common thread, the next step is often to do what's called bio mimicry.
Go back to nature, see what nature is doing, and see if that translates back to business. Because
nature spent a billion
years figuring out how to do something and she's probably got mastered.
Well, the most efficient organization, if you will, in the world outside of human organizations
are bee colonies, very efficient can scale very quickly.
And they follow a simple rule set that the most important function in a bee hive is the
production of eggs.
That's the QBR, the queen B roll.
Now in B hives, queen B's lay the eggs.
These bees die pretty quickly, it depends on the species, but they can die pretty quickly.
Therefore, every B is programmed to know you must produce eggs.
Now the queen B is the one who produced the eggs, but every B's responsible for the production.
So they need to be heated or cooled.
The bees will change the activity in the hive to support that.
They're always grooming the eggs.
And if eggs aren't being produced, that's not the queen bee's problem.
That's everybody's problem.
The queen bee herself, too, by the way, I don't want to be confused like she's the most
important bee.
She's just as expendables any other bee.
If she's not producing eggs, she'll be removed from the hive and a new queen B will be spawned. So it's about the egg production,
that activity. Well, how does it translate to business? Every business does not have a singular
most important person. There may be a person supporting the most important role, but it's that role
that's most important. We need to identify what is the most critical function in our business that's
delivering on our promise. What's the egg production? Just as a real quick example. I
as an author, my promise to readers is that I will simplify the entrepreneurial journey.
I make entrepreneurship more simple. That's my commitment. That's my promise. And I
deliver it through my books and so forth. As I look at all the different activities,
I do podcasts like we're doing now, I do speaking interviews, I'm going to do a TV thing
soon. All these different things are important, but there can only be one thing that's the
most important to Queen B. Roll. And for me, it's the writing of excellent books. I need
to write excellent books. Now, I'm only, I can't be the judge and jury, the readers will tell me if I wrote an excellent book
or if I wrote a bummer,
but I need to devote myself to high-quality books.
If I continue to deliver on that,
my business will continue to grow,
my staking my reputation on that.
Conversely, if I'm like,
yeah, I can just sign that part out to a ghost rider,
it doesn't really matter.
Let's just churn through books.
My reputation will sink very quickly.
So the QBR is the singular most important activity that supports your reputation. What do
you want your, what do you want to be known for your reputation? Then ask yourself of all
the activities. Which one is the most important to support that? And then you go to the
third level, which is protecting serve the QBR. Every employee, including ourselves as
business owners,
must ensure that that egg production, if you will,
is happening.
And if something needs to be compromised,
if we can't get everything done,
the one thing that will always be done
is the egg production, the other things can be compromised.
If I stop doing podcasts, if my speeches stink,
as long as I write excellent books,
I'll continue to make progress.
If my books suck, I won't get any more speaking.
So the priority is not speaking, the priority is writing excellent books.
So that's the third level is the Protect and Serve to QBR.
Four is capturing systems.
Capturing systems this.
Most people write SOPs, templates you're talking about, how you do that.
Here's the challenge with that.
The challenge is the other side,
the person receiving that template
needs to actually follow it.
And it's human nature to divert from it, not do it.
Our attention spans are very short, so we may skip on it.
The process that's better is to do captures.
And captures is, I shouldn't say better,
is a great alternative mechanism is to use capture
of the activity as we do it.
So basically record video.
If you do invoicing like I do or I did, I simply use a screen capture and I'm recording
the process as a best practice.
I then go to Jackie with this capture process and say, hey, watch this.
This is our best practice and follow this.
Now, here's the key to captures though.
Then I told Jackie, after two weeks of doing this process,
we're understanding it.
Now you, Jackie, have to record a video explaining it
for the next person.
Teach it, because ultimately, the best student
in the room is the teacher.
Therefore, in your situation, as you're saying,
you're doing these templates, that is a great first step. I would now mandate that that person actually records
a video teaching demonstrating how to do this
for the next person.
And I don't really care about the next person so much.
I just care that this person that you've taught
now can demonstrate they know this
because they have to teach it.
So that's the process of a capture.
And the great thing, of course, now,
is since they create these videos,
teaching what they know
If they ever leave our employment their knowledge doesn't walk out the door. We've captured it
So that's the capture in process
Five bring balance. It's called balance the team balancing the team is
Putting the right people in our places and we already on this podcast devoted a little bit of time to that
This is that dream alignment asking employees
What do they want what what are they passionate about,
and matching them up.
Historical models are we use a,
basically a pyramid process where you have the president
you off top, we usually are at the word me in there,
we have a long line coming down and then below us,
we have all these other people,
and we have that traditional organizational chart.
When we match or balance the team,
what we're doing is we're matching people's talents
to their tasks.
The old model, the organizational chart,
matches people's talents to titles.
I need a receptionist.
I'm like, okay, well, what's the receptionist?
That means someone that's really good on the phone,
they can do light data entry, et cetera, et cetera.
Well, you may have someone come in the door,
and this guy is just amazing how friendly he
is, but I cannot do data entry if his life depended upon it.
And historically, we'd say, well, it doesn't qualify to be our receptionist because it doesn't
check all the boxes.
Well, we actually had that exact scenario.
And so we hired that guy.
We said, you know what?
You're so good on the phone and so good at greeting people.
But quite frankly, the phone rings maybe, you know,
once every 10, 15 minutes, but no one walks in the door.
What we're gonna do is we're gonna station you in a way
that you're also gonna be our frontline salesperson.
So that when sales costs come in,
we want you warming up that relationship
because you're so good at it.
My former salesperson who's a closer is really good
at closing isn't giving you the warm and fuzzies, but it happened a closer is really good at closing isn't giving you the
warm and fuzzies, but it happened that she is really good at data entry. So we started
doing, so you no longer a salesperson, your talent is that you can close deals, but also
you're going to do our data entry and so forth. So we started building this web like
structure, it was no longer a pyramid structure. And what we found is you can get so much more
accomplished with fewer people
because you're matching their talents to the tasks. Similar to before I said before,
it's ask people what they are excited or interested in doing. Don't put any titles to it. Don't say
this is what we need to say, if you could do anything in this world, what do you want to do? And then
our job is owners to start matching them up. That's how you balance a team. And I would argue with our six people, and by the way, our six people only two are full time.
So as four part-timers,
we produce at the levels of my prior companies
that maybe had 20 or 30 employees.
And we're able to do it because people are doing
what they're really excited and interested in doing.
So that's how you balance the team.
Yeah.
Six, commit to the specific clients
that you desire to serve.
As we build efficiencies into our business,
you'll identify the clients that it resonates with,
but you'll also identify the clients
that you enjoy working with.
And this is where we start honing in
on that specific community we want to serve.
Now here's the funny thing.
The concept that's been revolving around for a long time is to
Do this concept of pivoting meaning when you start your business day one identified a client
You want to target sell something to them a MVP a minimum viable product and if it fails to serve them or they're not buying it
Clearly they're indicating through the behavior. They want something different. So sell them something different modify your offer
they can't even through the behavior, they want something different.
So sell them something different, modify your offer.
It's called a pivot, keep modifying,
and then keep modifying until the client buys.
Well, here's the problem.
Many businesses I studied have pivoted themselves
into a business that, yes, it's making money,
but the owner hates the business.
That is the antithesis of what we want.
So that's why it's as we build a sufficiency,
we then, as near final step, we evaluate
what true customers we like the most, and we're serving the best now through our systems
and cater to them.
So now you're doing what you like to do, you've built efficiency around it, and you're serving
the community you like to serve.
That's the ultimate win-win.
And the final step is really releasing ourselves from the company.
This is that, I call it the forerification, but this is the going to make Donald's and
the owner's not there kind of concept.
The ultimate goal of a business owner is that there is no dependency on you from the
business.
That the business can survive, I should say, thrive.
The business can thrive in your absence.
And what this allows you to do is then you can have choice one.
You have a cash ATM, the business is running on its own.
You can pursue other endeavors as you get consistent flow of money.
B, you can reinsert yourself in the business in the way of your choosing.
What gives you the most joy?
And that's what I chose option B.
So my business now generates consistent revenue and will
continue to do it in my absence, allowing me to reinsert myself into the role I want.
I'm not the president of the company, actually, Kelsey's president.
I'm simply the spokesperson.
I do interviews and I write books.
That's what makes me really, really joyful.
And so that's what I'm doing.
The four-week vacation is a concept of the ultimate asset test. If you can be taken out of your business
for four consecutive weeks, a full physical and digital disconnect, and the business grows
in your absence, it's likely you can grow into perpetuting your absence because most
businesses experience all elements of the business in four week cycles, billing, hiring,
new clients, losing a client. If your team and your systems
can support that for four consecutive weeks without any of your active input, now you're
most likely in a full-time design capacity where you're working on the vision and objectives
now comes you want for the organization.
We'll be right back after a quick break from our sponsors.
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Let's move on to the topic of profit,
something near-indirator our hearts
at Young & Profiting Podcasts.
We were doing some research,
and many of your descriptions of revenue
really reminded me of the Pareto principle.
Pareto's principle states that for many events,
roughly 80% of the effects come from 20% of the causes.
Would you share with us how revenue is not the same and not all revenue is created equal?
And how to identify those critical causes responsible for a majority of our profit?
Yeah, the Pareto principle can also be called the 80-20 rule.
And as exactly what you said, what his research and subsequent many people have discovered,
and I've seen it play out in practical ways
in so many capacities, is that often,
20% of our client base is yielding 80% of the profitability.
And many of us, like when we're trying to grow our business,
we have that one frustrating nagging client
where I cannot stand this person or killing me by can't afford to fire them.
The irony is, you actually can't afford to keep them.
The other side of the 80, 20 rule or the 20, 80 rule
is if 20% of your clients yield 80% of your profitability,
that means 80% of your clients are yielding
only 20% of your profitability.
And when you look at those, it's not all equal.
There's definitely some bottom feeders,
there's some clients we have that are costing us.
We can leverage this in many ways.
One way is I call it the Pareto overlap.
I just touch on this in a little bit in profit first.
The Pareto overlap is analyzing your clients.
Which ones are the most profitable, meaning which ones generate the most revenue, matched
to the products that are the most profitable.
We have basically two columns here.
Column one is ranking our clients.
Column two is ranking our offerings.
And it's the clients, the best clients
that do the most volume with us
buying the best stuff and we like doing business with.
Those are the ones we want to clone and focus on.
And of course there's some clients
that are great clients, but they buy unprofitable stuff.
Well that's an educational opportunity.
Explain what else we have to offer them,
see if we can transition them to something
that serves them better and is more profitable.
Conversely, you have horrible clients buying great stuff,
so they make you money, but they are a mind suck.
That is the ultimate test.
Usually, those people, we have to jettison.
It's hard to make someone that you don't like,
become likable, even if they're making us money.
And then, of course, the other final intersection is clients
that do very low volume, we don't like working with
and they're buying stuff that's not profitable at all.
That's the starting point.
Just removing those clients free up so many resources.
It's funny, it's I was ready to profit first.
One of the greatest gains of getting rid of unfit clients
was mental profitability, meaning
instead of going to bed, bitching and moaning about, oh, that client again, I hope tomorrow
I'll have to deal with them again, they're such jerks.
Instead, now you're going to sleep saying, I love my clients, I can't wait to do more for them
because you've jettisoned that bad client. Those bad clients take up tons of emotional space. That's incredible. And it made me think how much expenses we spend on bad clients and how just reducing those
unnecessary costs, you would see a jump in profitability automatically and reduction
and stress in your employees and everything like that.
So I think it's a really good concept to think about.
Yeah, they take a disproportionate amount of time and therefore profit.
So what we would have to consider is when delivering something, what is the investment to deliver
it?
So sadly, in traditional counting analytics, if we sell a coffee mug, that's the product
we're selling, we'll say that coffee mug, the profit margin is 20%.
So I sell it for $5.
I make a dollar every time I sell it.
Well, that's not true.
You don't make a dollar every time you sell it.
Because great clients will say, well, I want 5,000 of those
and they'll buy high volume.
Secondly, if there's a mistake or whatever, they'll say,
hey, whoops, there's a mistake.
We want to give you a heads up.
Would you help us fix this?
And they'll actually get engaged in the resolution.
Conversely, you have these low clients that are never satisfied. They order volumes very low, they order one mug,
and then like, you didn't do it right. The ink colors is not consistent. I want it again,
I want it again. And now we're making 10 mugs to satisfy this person. And it actually costs
this money. So even though traditional accounting says, you know, a mug makes a dollar, it actually costs us money. So, even though traditional accounting says, you know, a mug makes a dollar, it actually
is contingent upon the client that it's buying that product on the real profitily or loss
for that thing.
Yeah.
So, let's talk about the profit first mentality before you go.
There's an age-old formula for profit.
It sales minus expenses equals profit.
And you have said, this formula is a myth and can lock you into a never ending
cycle of selling more yet profiting less.
Can you talk to us about that and how you rework this formula?
Yeah.
So it is the most pervasive formula in business world.
In fact, it's penetrated our vernacular.
So we call profit the bottom line or the year end.
I mean, that's the exact terminology we use.
Listen, mathematically, it makes logical sense.
You have to have sales, you have to subtract
out the expenses you incur to have a profit.
I get that.
The problem is this.
Behaviorally is radically wrong.
What we're saying is that profit is the last consideration.
So most people at the end of the year say,
did I make money this year?
I didn't, oh, damn it, maybe next year.
You know, when it's human nature,
when something comes last, that means it's insignificant.
We don't have to be concerned about it now.
So profit is treated like the perpetual manana syndrome.
The resolution is to flip the formula.
It's sales-mys profit equals expenses.
That's why I call profit first
is the first consideration of your sales.
Sales-mys profit equals expenses. How we do this call profit first is the first consideration of your sales. Sales minus profit equals expenses.
How we do this in practice is every time you have a sale
come into your business, you take a predetermined percentage.
When you start slow and low, maybe a one or two percent,
then you grow it over time to five, 10, 15, 20 percent,
whatever.
But now, if a thousand dollars of deposits come in
from revenue, we take say 10 percent of of that $100 allocated to a profit,
a literal physical account, often one that we don't have easy access to.
So we removed temptations to steal from ourselves.
And now you see for your business, you don't have a thousand dollars to spend.
You have nine hundred dollars to spend because you've taken your profit first and you start
working within the confines of what really is available.
We're reverse engineering profitability.
In short, this is the pay yourself first principle
simply applied to business.
Yeah, and I know over 175,000 companies
have implemented the system so far.
So you must be doing something right, very cool stuff.
So Aristotle has a quote, it is,
we are what we repeatedly do.
Excellence then is not an act but a habit.
In a similar vein, you have said that profitability
isn't an event, it's a habit.
Could you talk about that in more detail?
Yeah, so many business owners, including myself
for a decade plus, looked at the end of the year
or the end of the quarter to say, hey, do we have a profit?
And if not, then I try to do correction.
What I believe I'm convinced now is that profit is a habit
that every single transaction we bake it in every day
or even every hour.
So it can be this literal that every deposit comes in,
you immediately take a percentage of that money,
hours profit, hide it away,
and you run off the remainder.
Or as I teach in the book, I suggest on a periodic basis, maybe every week or every two weeks
that we're taking out profit first, and then seeing what's left over.
There was a theorist, his name is Parkinson, Northcoat Parkinson's, his name, and I think
he was in the 1950s, studying our utilization of resources and came up with this concept,
called Parkinson's theory.
Basically what he said is, is's human nature to expand our demand
to meet the availability of a resource.
For example, if you put a cookie in front of me,
I love cookies, I will eat the cookie.
If you put a plate of 15 cookies in front of me,
I won't eat a cookie, I'll probably eat,
well, I'll probably, from somehow figure out how to eat 15.
So as the resource expands its availability,
we'll consume more.
So Pareto said, the greatest way to control our consumption of a resource is to restrict
its availability.
You know, just serve one cookie and you'll only eat one cookie.
But also an interesting phenomenon happens.
The less available something is, the more innovative we become in its utilization, the
more we savor what we have.
Next time you go to a French restaurant
and they serve like one P,
that's like your whole dinner,
you'll notice it's our behavior to eat very slowly.
We cut that one P up into 15 pieces somehow.
It would be very slowly to savor what we have.
Well, when we remove the profit first,
now we start looking at our business in a different way.
We're like, okay, I only have X dollars for my business. I mean, I should buy my computer equipment
used or maybe there's a way to get labor less expensively. Maybe I don't need that great
day office space. And we start reconsidering things. It's called forced frugality. But we
also become innovative. We start breaking the rules of the industry and just don't do
whatever else does because we don't have the money to do it. We have to find out how
to get the same solutions
at a cheaper price point.
So that's how it works.
It works with our natural behavior.
That's very cool advice, I love that.
So the last question I ask every guest on the show
is what is your secret to profiting in life?
So I use profit as a kind of a nebulous
or I should say all inclusive term.
There's the, yeah.
So profit, direct definition is how do I make more money?
And I actually take the profit for a system and I have it at home.
So profit versus a bank accounting based system or bank cash flow management system, which
we didn't really go into how to do that.
But I have multiple accounts allocating money to different purposes before I spend it.
And so everything's cash. Like when I buy a car, I pay cash for it because I've saved up allocating money to different purposes before I spend it. And so everything's cash.
Like when I buy a car, I pay cash for it
because I've saved up the money to buy it,
but I won't buy it prior and that's my trigger.
I know I can't buy a car until that money saved up.
So that's how I do it that way.
But honestly, I shouldn't say honestly,
inclusively outside of just money,
I found it's really two things,
savoring present moments, really being present,
which is a difficult thing for me,
but as I practice that and more intentional about being present,
I realize of all the quote unquote profitability
that just exists around us,
all the moments of joy and happiness that are there
that I was overlooking in the past.
And everything is health.
Health is, I really understand the importance of health
and exercise, and that without our health,
good diet, good exercise, good sleep behaviors,
that we can't live out fully.
So if you really want to be profitable,
you got to nail that part, health.
I love that, great advice.
And working our listeners go to learn more about you and everything that you do.
Oh, well, thank you.
You can visit my website.
It's called micmecaloets.com.
But here's the thing.
No one can spell my caloets.
So there's a shortcut.
It's mic motorbike.
My nickname in college was, or high school, I should say, it was mic motorbike.
The ironies, I've never driven a motorcycle.
I don't want to, but that's what they call me,
because they're rhymed.
If you go to micmoderbike.com,
it'll bring into my site,
and I do have a button there, so let's get the tools.
I give all my books, chapters for my books away,
and not just like, you know, here's the fluff chapters.
I give like the actual ex-tutile content,
so you can get all that stuff for free.
Plus I'm a podcaster.
My podcast is called Entrepreneurship Elubated.
I'll give you a link to that when you go to my website.
So go to micmotorbike.com.
Awesome.
Well, I loved this conversation.
I think we had so many gems throughout it.
So thank you so much for joining Young and Profiting Podcast.
It was such a joy, Hala.
Thanks for having me.
Mike is such a wealth of knowledge.
He's a true innovator in this business base.
And look, we had this conversation back in 2020, two whole years ago.
But somehow the topics covered in this episode are even more relevant today.
Talk about evergreen business content.
And I think especially what Mike said about balancing the team is super interesting.
We're in the midst of what we're calling the great resignation.
And to be successful as a business,
you've really got to hire the right people
and then support them in their passions and their interests.
Otherwise, you're going to just be
hemorrhaging time, money, and talent
because people are going to leave your organization.
And I love what Mike says about hiring employees
who are passionate over hiring employees
with existing skills.
The technical aspects of a job can be taught, but the passion or interest is either there
or it's not.
I personally am in the stage of my business where I'm really looking for people with both
skills and talent because we don't really have time to train, but if you're in the
position to train, I would definitely prioritize passion over skills.
And this reminds me of a recent conversation about conscious leadership with John Mackey,
the CEO of Whole Foods in episode number 166.
We talked about how if employees are happy and inspired
at work, that their energy is infectious.
Clients will be happier with the products or service,
which in turn will lead to more profits and greater success.
And if you have great employees,
you're one step closer to your business
driving without your constant oversight.
And think about all the time and energy you can save
to start putting into other ventures or aspects of your life
if your business is running itself.
Now when you're ready and you feel like putting your business
and your team to the test, ask yourself,
will your business continue to grow and thrive
if you're totally absent for
an entire month?
If so, then great!
Your business is successfully running like clockwork, and you can start focusing on the
aspects that you love, or innovative projects, or even branching out into something else,
while your business continues to succeed.
If not, take a look back at Mike's 7-Step Framework and assess what you need to work on.
Maybe your QBR isn't quite pinned downed. Maybe you're spending too much money on the wrong clients,
or maybe you've got to take a step back and really take a hard look at where you're spending your time
versus where you should be spending your time. Okay, so last but not least, we all want a profit,
right? So as you move into Q2, I want you to consider something. Consider Mike's idea of putting
profit first. Now, when we hear Mike talk about this, it sounds super obvious, and it just kind of makes
sense, right? But the funny thing is as intuitive as it sounds, this isn't the typical way
it's done in business. But if your company is not practicing profitability as a habit,
it's not too late. Like Mike said, start by hiding a set percentage of revenue away. This is going
to force you to be frugal with your income that you have to spend. And then you'll be creative
and see what solutions you come up with and see how your bottom line changes as a result
of putting profit first. All right, young and profitors, let's set a goal. By the end of the
year, I want to hear that you've got your companies and your side hustles running like clockwork.
And if you haven't yet, make sure you guys follow me on Instagram and Twitter at YappwithHala.
Shoot me a DM.
Let me know how everything is going.
You guys can also find me on LinkedIn at HallaTaha.
Give me a follow over there and let me know your progress.
And if you haven't yet and you have access to an iPhone no matter what app you listen to,
I would really appreciate if you dropped us a five-star review
on Apple Podcasts.
Apple Podcasts are like the most coveted type of reviews
for podcasters, it really helps with social proof.
And I actually don't have the biggest following on Apple.
I'm huge across all apps.
And so I'd really appreciate if you guys took some time
and dropped me an Apple Podcast review
and subscribed there while you're at it.
Thanks for listening to yet another great episode of Young & Profiting Podcast.
Until next time, this is Hala, signing off.
Are you looking for ways to be happier, healthier, more productive and more creative?
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And every week, we share ideas and practical solutions on the happier with Gretchen Rubin Podcast.
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