Boutique Chat #215 | Running Your Business on Profit First with Mike Michalowicz

I'm so excited for this one. Today you guys get ready to meet the one and only Mr. Mike Michalowicz, the author of Profit First, Clockwork, the Pumpkin Plan, and numerous other books. Not only is he joining us live today on the podcast, but he's also going to be speaking at the 2019 Boutique Summit. Get ready, you guys. This is one of my favorite interviews to date. Let's talk about your business strategy and the juicy details of what actually works, from mainstream facts to fashion on Main street and the entire ecosystem behind it. How do we scale your company and do it with the balance and the happiness that we all seek? Let's hear from those insiders, experts and strategists that actually make it happen. I'm your host, Ashley Alderson from the Boutique Hub, and I can't wait to chat. In case you're a boutique owner who has ever struggled with the question, how can I pay myself more? This is going to be an episode you have to take notes in. And if you haven't already read the book I'm going to tell you about in just a second, make sure it's on your Audible or your bookstore wish list right away. Now, you've probably heard a lot of talk about Profit first inside of the Boutique Hub as our members talk about the strategy and what it means to pay yourself first. And for many of you, actually, what it means to pay yourself, period. Because unfortunately, today with so many boutique owners and really of all sizes, there's this common thread of boutique owners not paying themselves or not paying themselves enough and then getting burnt out day after day putting everything they have back into inventory and back into the business and believing this old BS line that we were told that businesses can't be profitable in the first five years. Well, guys, it's not true. You can be profitable tomorrow. But the point of this entire conversation is you have to choose, right? You have to choose that you're going to be profitable and you're going to put yourself first and you're also going to grow a business along the way. So if you haven't already read the book Profit first, the entire strategy is inside. But even better than that, today I'm excited to bring you more behind the Strategy because joining us on the podcast is Mr. Mike Michalowicz, who's the author of Profit First, Surge, the Pumpkin Plan, and his newest release, Clockwork. Now, Mike, by his 35th birthday, had already founded and sold two companies, one company to private equity and another Fortune 500. Today, he's running his Third multimillion dollar venture which is called Profit First Professional. Now, Mike is a former small business columnist for the Wall Street Journal and a former business makeover specialist, actually on msnbc. Over the years, Mike has traveled the globe speaking with thousands of entrepreneurs. And not only is he here on the show today, but he's also going to be joining us at the 2019 Boutique Summit in person, in the flesh to talk more about profit first and then also to do a private breakout session just for our retail boot camp clients so they can ask and have answered their questions one on one with Mike. So if there's anything you listen for today, it's not only the strategy of how to start paying yourself tomorrow, but really it's the why behind it. Because, guys, business is hard. You know, no matter if you're new in business or you're seasoned in business, it takes its toll on you. And unless you have a foolproof plan of how you're going to make that business profitable, at the end of the day, you're kind of spinning your wheels. So make sure you take notes, listen hard on this one and ask us inside the group at the Boutique Hub if you have any questions because we do have a couple of Profit first profess that are a part of our community and I know Mike's got lots of feedback to give to you as well. So without any further rambling by yours truly, get ready to meet Mike. This was an awesome conversation and I know for those of you who get to meet him in person at the summit, you are in for a huge, huge treat. Hey guys, man, if you've been listening to this show for a while and if you have been around the Boutique Hubs community for any period of time, there's no doubt you are familiar with Mike. You have heard about Profit first, you've heard about Clockwork. You've heard a lot. So today I'm really excited, Mike, to have you on the show and not just to talk about theory and strategy and the actionable pieces, but really more of the why behind some of those pieces too. So you ready to do this question.

Ashley, is are you ready for me?

I don't know, man. I feel like I've met my match for sure.

This is awesome. I don't know, we'll see.

So a little like to set everybody up. Not only do you get to hear Mike today on the show, which is, I know, going to be awesome, but you're joining us in a couple weeks in Atlanta as well. So you're going to kill it from stage too.

I can, I can't wait for that event. First of all, I have reverence for the stage. I think it's such an important privilege for speakers like myself to be there. But I just also, I can't wait to hear the stories before and after, to meet the entrepreneurs that are out there just, you know, grinding away and kicking butt and maybe struggling. But I just can't wait to hear the stories and just embrace all that.

There'll be a lot of em for sure. So to kick this off, I know you know, so many people have either read your books or obviously know some of the background from your bio, but what I want to know first is for anyone who doesn't have that context, how did the entrepreneur, a real bug first bite you?

So this is not a recommended strategy, but it's how it got me. Was drinking, a lot of drinking, which I like. Do not start a business this way. This is like the antithesis of the way to start. But when I graduated college, I thought I was going to get that one job for life because that's what my family, my parents were kind of grooming me for. That's what they lived. But out of college, I didn't get the dream job, far from it. And one night went out for drinks with a buddy of mine and was throwing back some beers. And I'm like, oh man, I can start my own business. The place we worked for, which was a computer store. I'm like, I'm smarter than this guy that owns it. He just sits in the back room smoking cigars and counting money on my sweat. Which wasn't true, but that was my perception. And six beers in the voice go, sorry. And I'm like, I'm just gonna do this. And my, my friend said, well, do it. And I said, dammit, I'll do it. And I left this nasty, drunken voicemail telling the boss, I quit and you're a jerk and I'm gonna sat around, beat you solid. And next morning I came in with a hangover, begging for a job back. And like, that was not who I am. And the boss said, you're fired, kid. Good luck in your life and you ain't gonna make it. You have no idea what you're going into. And he was right. I had no idea I was going into. But I made it because at that young age, I already was married and had my first son. We have three children now, and I had three mouths to feed. At age 23, I think I was. And fear became this massive motivator for growing A business. Ironically, it was after I started a business that I actually fell in love with entrepreneurship. I never aspired to be that before, but once I started doing it, I'm like, this is the coolest thing ever, man.

I feel like that's a story so many people can relate to, because isn't that the truth? Well, not only that, I think every entrepreneur has that. Everyone has this idea of, once you're an entrepreneur, you sit back in the back room and count the money. That's what your boss did. But your boss is actually back there also drinking and sweating bullets.

Right. Right. Entrepreneurship is fraught with fear. And the funny thing is, very few talk about it. Yeah, I think it's something we need to embrace in the beginning and then we need to use as a stepping stone later, you know, when you start your business. At least when I did, fear kicked in, Ashley, to such a degree that I was not sleeping well. I was getting up at five in the morning, and I was working till midnight. But the thing was, fear gave me the energy I had to make this work. And what I also realized, though, there was a certain point of time that if I stayed stuck in fear, and I did, it was starting to have really serious health consequences. Remember, I thought I was having a heart attack. It was just stress, this constant squeezing on my chest. And what I realized is fear needs to turn to confidence. And confidence only comes out of predictability. You know, fear is when you don't know what's coming your way, and you just. You're in the fight. Confidence came about when I was able to instill predictability to my business. Some degree of predictable sales, some degree of predictable income, then once you can achieve the confidence stage, which, sadly, very few people do, that's a big part of my life's mission, is to bring entrepreneurs confidence is then to move to the final stage, which is aspiration. Fear's the motivator to just get up and do. Confidence is the. I've got this feeling. And then aspiration is, oh, my gosh, I got an opportunity to change the world, man.

So talk to me about the point at which you felt that shift in your own life. You have the piggy bank story, right? Which is. That was a huge shift. Talk me through that.

That was a shift of the century. So fear is not. It's not like once you address fear, that it goes away permanently. It can flow back in and out. And for me, I took a dangerous path. I went from fear to confidence, not to aspiration, but to cockiness and cockiness is. Well, that's a shitstorm, to be honest. What happened was I had grown a second company. I sold my first business to private equity. I built and sold a second company to a Fortune 500 called Robert half International, and came out of that totally cocky. In my early 30s, thinking I knew everything about entrepreneurship, someone called me Midas. You know, you touch something, it turns to gold. And I believed it. I believed it. That's. That's a big problem. And I felt with all this money I had now, that I had to show my success by, you know, having expensive cars and having the big house. And I literally thought I was better than other entrepreneurs. By the way I looked up the Webster definition of what this is. The term is dick. I was a dick in the time I didn't know. But in retrospect, I'm like, what a dick I was, and just think I was better than other people. I also became an angel investor, and I was cocky. I was arrogant, and I was ignorant. I didn't know anything about the space, but I thought, wow, I had two successful businesses. I'll do it with 10 simultaneously. And none of those worked out because I had no clue what I was doing. And out of arrogance and ignorance, within two years, I evaporated all the wealth I had made in my early 30s. And in 2008, which was not a great economic time to boot, I had my last penny. My accountant called me and said, actually, I remember his exact words. His name is Keith. And he said, mike, I never expected to say this to you, but it's my professional recommendation that you declare bankruptcy. And that was the jolt I needed, even though I saw my wealth evaporating, my money. Perhaps people listening in can relate to this. You look at your bank account, you can see the spend going on, but you don't actually emotionally accept it. I hadn't. And then when he told me this, I had to go home to my family and tell him what was about to happen. Now I committed not to declare bankruptcy. I knew the problems that I had financially were not my creditor's problem, the credit card company, and my friends. The problem was me. I was responsible to fix this. But to do this, we had to make drastic changes immediately. So I came home to my family on February 14th of all days, Valentine's Day, 2008. Sat down with my wife and three children, sobbing and telling them that everything was gone, that the house we just had moved into, we were about to lose. We lost it 30 days later. Our cars and, you know, all those thrills and frills were gone. And I remember my daughter, she was nine years old at the time. I can only imagine what was going through her mind. Seeing her father breaking down, sobbing, and it was like an ugly sob, snot coming out and stuff. It was disgusting. And my daughter, I looked at her and said, I can't afford your horseback riding lessons. Something that cost, by the way, like 20 bucks a session every couple weeks, couldn't afford. We had nothing. And as I'm telling her this, she stands up and runs out of the room as fast as her little legs could carry her. And I remember the feeling that she was running away from me. And as painful as that was to see my own daughter so scared and disgusted by her father to run away, I also respected that because I wanted to run away from myself. The thing was this Ashley, she was not running away. She ran to her bedroom as fast as she could, not to hide there, but to grab her piggy bank. And she came bolting back down to me. And with these blue eyes, looks up at me, goes, daddy, Daddy. She goes, if you can't help us, I'll be our provider. And so that moment is implanted in my mind. I will never, never, my final breath on this planet will be remembering that. That I had brought such travesty financially to my family. That my daughter, who was saving to buy a horse one day, that was her dream, that she felt compelled to give up her dream to support us. And that was a turning moment for me. What I realized, by the way, and it's not like that second you wake up the next morning, like, oh, I've got it all figured out. Life is perfect. I went through depression. I was what I believe was the highest level called functional depression. You can still function. But I started drinking. I'm not really a drinker at all. Like, hey, listen, at the event, the boutique event, like, if someone wants to grab, like, a margarita, like, I'm totally in. Like, I won't deny that, but I'm not going to drink, like, seven margaritas. But at this point in my life, I started using it as a medication, really struggled with it, But I'm so grateful for that period. Because what I realized is I don't understand finances. I'm not good at accounting, and I don't have any desire for it. And I committed to finding an alternative way, a way to make my business permanently profitable and actually make it a joyous experience and not have to change who I am. And that was kind of the parameters I set for myself. And Found ultimately became profit first, man.

And I want to talk about, you know, specifically, we'll go through the functions of profit first, but before we do, I want to go back to just that moment with your daughter for a second. And, you know, so many people, I think, struggle with the idea of scarcity versus abundance. And really what is money mindset as maybe before that process, before you got to that turning point, had you been set up to really understand what your money mindset was, or if you were living in a period of fear or lack or abundance, like to the degree of cockiness, where were you at on that radar? And how did it change as you went through that evolution?

Yeah, so I was definitely in the scarcity mindset. And how it manifested for me is in comparison. So I look at other entrepreneurs and constantly look at how much are they earning? You know, the great measurement is how much money you make. It's the old how big is it? Question. And I just look at other entrepreneurs, and after I achieved a million dollars in revenue for myself, I'd find out that, you know, the gal down the street that started a company, a boutique shop, is doing 5 million. I'm like, damn it, she's better than me. I must beat her. And I would set out to achieve a bigger business. I grew a company that's 7 million. And I found out once you have 7 million, that's insignificant because there's another person down the street that has 10. And so it was this constant keep up with the Joneses mentality. It was very competitive too. I wanted to take business away because I see it's a two for one deal. Take business from a competitor, they shrink, I grow, I'm the winner. And that mentality of scarcity is a very exclusionary component. I was actually kind of painting myself in a corner. I'm not building alliances and friendships, really kind of leveraging relationships, but not serving relationships. And so who'd want to do business with me? And I don't believe I was the biggest, like, schmuck on poor. The.