Mike Michalowicz visits Jacqueline Pasquale Spa in New York, where owners Jacqueline Phillips and Pasquale Destro are drowning in $20,000 of credit card debt despite a busy client list. They work 15-hour days seven days a week, bleeding cash on a Mercedes lease and expensive dinners. Mike's fix: freeze services, cut the luxury car, do weekly financial reviews, and ditch the frivolous spending.
We're driving along the Hudson, right across from New York City. We're headed to Jacqueline Pasquale Spa. They have celebrity clients, they have a great list of services, they've been in business for years. So why would they need a bailout? Let's find out.
My name is Jacqueline Phillips.
My name is Pasquale Destro.
Pasquale is my boyfriend of 9 years. He's my business partner, and we own Jacqueline Pasquale Spa.
We do airbrush tanning, hair and makeup for weddings, special events, massage therapy, and cellulite reduction.
We're too busy to be organized.
Controlled chaos is how I like to put it.
Jacqueline Pasquale Spa. Uh, where's the boss? The first 10 seconds is the first impression, and the first impression was there was no one there. Hey, I'm looking for the boss. The boss is in back. Sorry. Hello. Oh my God, this place is truly a zoo. It was insane. Could you imagine making a call to a customer with Peter the parrot back there? Where's the— He's the boss.
Hello, I am sometimes.
It's nice to meet you.
Nice to meet you, I'm Jackie. We've definitely been going by the seat of our pants. Every day is crazy.
I'm Mike.
Hi, nice to meet you.
So I heard your business is struggling a little bit.
Yes, we're too busy for our own good.
Our issue with the business is finances. We really don't have any idea. We know how much money comes in every day. It's documented. We don't have control of the expenses.
They are making lots of money. They're spending lots more. So you, Pasquale, how much are you taking every month? Or does it depend?
We don't take.
You don't take?
We're just paying bills.
Okay. Do you guys have debt?
Yes.
How much?
We have a credit line for $25,000.
Credit card debt?
We do have some credit card debt.
How much?
Probably $20,000.
Max? Pretty much your cards?
Yeah, not all of them, but I would say yeah, pretty much.
Okay. Leases? Personal stuff?
Car lease. We own our apartment.
We do a lot of things. If it's expensive dinners, if it's, you know, whatever it may be.
So why not have a Mercedes? I don't know. That's the way we look at it, and maybe that's why we need help.
So I want to meet Pasquale. Where is he?
He's in the back.
He's in the back.
You want me to take you to meet him?
No, I'll find him. You're clearly making money right now. Keep making money.
Oh, geez.
You Pasquale?
Yes.
I'm sorry, gotta talk with you. Gotta get Jack in the room. Now? Yeah. You got it.
All right. All right, well, I'll be back.
He is the owner. He should be working on the business, not in the business. Tell me about the business. I came in here, I go through the front door, there's no receptionist.
There's no need to keep someone at a front desk and pay someone, um, when me and Jackie can handle it ourselves.
Okay.
Obviously there's no one to stop people like you from barging in.
You could work on the symptoms for the rest of your life, it'll never cure the disease. What's the monthly nut here? What's the run? What's the costs? Give me everything.
Those are great questions.
Okay. When they're back in their office saying, "We're working our butts off, we're running around like crazy, we're doing all these different things," they were ignoring the main problem, which is they're spending way too much personally.
And we'll turn in the numbers to the bookkeeper, and then she figures it out.
Okay. Is she telling you the truth?
They have no idea. From day one, we said we're going to take one day every week and sit down and do expenses and do the bookkeeping. Well, we're still saying that, we're 3.5 years later.
Okay, Jack and Pasquale, here's your bailout. We've diagnosed the disease affecting your business, and it's frivolous spending. The symptoms are classic: you don't have control of your finances, you're surviving month to month, and just to keep your head above water, you're working 15 hours a day, 7 days a week. Here's the cure: we're going to freeze and fix your business. You need time each week to take a cold, hard look at your finances. You need to put a few nonessential services on ice and cut the frivolous spending. You get instant positive cash flow and you get instant control of your business. I know exactly where to make the cut.
What? Oh, shit!
We got rid of the Mercedes-Benz. Hello! What'd you do? And now they have $700 they're not spending every month.
Well, I have to To tell you the truth, I didn't really care because I wouldn't mind saving a little money.
Wanna wave with me?
No.
And we got a truck that was free. I found an ice cream truck that was only being used on weekends. The ice cream man gets free advertising during the week and they get a free ride. I negotiated a deal. We got you an ice cream truck. This is your new ride. Cost you nothing. So are you ready for your new ride? You have to save every dime. That's the way you have to roll. You started a business to achieve financial freedom. Don't let uncontrolled, frivolous spending turn that business into a prison. Choose now, right now, to break free. They're lucky I didn't find a garbage truck. The recommendations expressed and solutions provided by Mike Michalowicz are solely his and are not the opinions of South of Broad Productions and are specific to the circumstances Mike encountered during the recording of this episode. Before acting on a recommendation, consider the suitability for your business and circumstances, and consider seeking advice from professionals, or better yet, contact me, Mike Michalowicz.
