The Next Thing You Need To Do In Your Business - The Business Priority Pyramid from Mike Michalowicz

Mike has built a massive following of loyal fans through his books, Profit First, The Pump Plan, All In, Get Different, Clockworks, and Fix This Next. That's the book he's gonna speak about today, and that's just to name a few.

There are more.

And he also happens to own 17 companies as well. So when I say this, I really mean it. Mike truly walks the walk, and that's a big part of the reason why we, why we selected him. Now, I personally I personally love Mike's body of work because of his ability to distill complex and thorny business problems into simple and easy-to-understand concepts and frameworks. And I've always found that when I read them, it sort of gives me the confidence to tackle whatever business is throwing at me that day, that year. So, we're really, really fortunate to have him. This man needs no introduction. Please welcome to the stage Mike Michalowicz.

Thank you. Thank you so much. I appreciate Benji. Uh, I thought I'd start off with a, with a fashion tip. Don't wear this. I, uh, was waiting for a friend. There's a bar at the other location, the other lodge, this morning, and I'm leaning against the bar waiting for my friend, and someone comes up to me, goes, hey, keep, uh, could you make me a Bloody Mary? So apparently you look like a bartender when you dress like this. I just flew in from Miami. I was— I don't live in Miami, but I was down there speaking with some entrepreneurs. I flew in yesterday, so I left weather that was in the low 70s, people wearing bathing suits, to a snow and ice storm last night. It's my first experience with snow and ice to this degree in a long time, and I get in the Uber and I'm driving over. And as we start driving, you know, a little conversation with the Uber driver, I said, "So where are you from?" He says, "Haiti in the Caribbean." And so now I'm a little nervous about his experience driving in snow and ice. So I said, "How long have you been here?" And he said, "6 years." And I just felt this, okay, this guy knows what he's doing. So I said, "Wow, 6 years. So you've been with Uber for 6 years?" He's like, "No, no." This is my second day. He goes, I'm terrified of the snow. And that was my ride to this lodge. Two of us just shaking the whole way. There was a story that broke in 2019, and you may have heard this story. And if you didn't hear the story, you're, you're definitely familiar with stories like this. It was about a woman named Amanda Eller. She was hiking in Hawaii. She's a resident of the state of Hawaii and lives on Maui. And she was hiking a trail she hikes regularly. It's a 3-mile loop hike. You park your car and you go through this circular hike. Well, this one particular hike back in 2019, halfway through, she decides to stop to take a rest in the woods. She actually saw a tree that had fallen about 100 yards off the path, and she went there and she rested and meditated, and then she was gonna continue her hike. Hike. Well, when she came out of her meditation, she was slightly disoriented. She's like, was that the path or was that the path? And she just trusted her gut instinct and went one direction that was the wrong direction and then another wrong direction. And for 17 days was lost in the woods. She at one point had fallen off of a cliff about 15 feet, broke her ankles, and could not even walk. She was now crawling to find shelter from the rains. She found a cave that was dug out by a boar. If you don't know what a boar is, it's a half pit bull, half mini rhino. That animal. Searchers found her 17 days later clinging to life. She was sipping water out of a stream and she was eating insects to stay alive. But this is the part of the story that you've heard before. She was found only about a half mile away from the parking lot she was looking for. She was walking in circles over and over and over again. And maybe you're not familiar with Amanda Eller's story, but you've heard stories of hikers who get lost in the woods and move in these circular patterns over and over again. We stay lost. There's a study that came out of Germany in 2009, that identified that when we don't have a beacon, when we as people do not have a beacon, a landmark to move toward, we start to move in circles. And it can happen in very condensed areas. In fact, in their research, they put blindfolds on people and started them on a football field to see if they could cross the football field. And 90% of the people never made it across. They're walking in circles. And this wasn't the long way, touchdown to touchdown. This was across the field. 50 yards. What we need is a beacon. And this doesn't just translate to navigating, walking, or hiking. It translates to how we navigate our business. Most entrepreneurs are going around about their business blindfolded. That's how I ran my business. We trust our instinct, our gut, to take us down a path. What I think we're gonna discover today, my goal is, is to help you identify what's that beacon, that landmark you must move toward in your business. And I do know it's going to be unique and different for each of us in this room. My goal in this little morning session is to set the standard for what you're going to do the rest of the day. Now, I want to start off with a little exercise. There's a worksheet, uh, that got handed out, and you can flip it over if you want. On the back of it is a blank piece of paper, and I just want to run an experiment amongst our group here and see what, uh, what the results are. What I want to invite you to do is draw the letter A and put a circle around it in the center of the piece of paper. Feels like I'm building up to a magic trick here. What A stands for on this piece of paper is where your business is right now. Point A. We want to go from point A, wherever it may be, to point B. A could also stand for apparent. How I operate my businesses for the longest time and the businesses that I studied, we have all these apparent issues going on. The problems that are happening. We don't have enough sales coming in. We need more revenue. Maybe there's a problem with debt. Maybe we have to let go of someone or hire someone. There's all these apparent issues. And once we have an apparent issue that presents itself, maybe we feel we don't have enough sales. What we do is we determine, well, what are the actions we can take to get out of this situation? I don't have enough revenue coming in, so maybe, you know what, we should do a sale, a big sale. We should sign up with Groupon and do a discount, or maybe we should hire a rainmaker. Here's what I want you to do in the second step. Whatever that issue in the moment may be, that's not relevant. What I want you to do is draw 3 arrows in any direction that you choose away from A. So in my example, I'll just draw you know, arrows like that. There's 3 arrows. What these arrows represent are decisions we can make to get out of A. So I don't have enough sales going on right now. I need more revenue. I may hire a rainmaker. That could be one decision I can make. I could run a discount, 50% off sale or something like that, you know, a Groupon. I could do collections calls. And of course there's more than 3 decisions we can make at any given moment, there's countless ones. And what I've done, and maybe you do too, is we trust our gut and say, this is probably the move to make. Here's what I want you to do as the final step. In the bottom left corner of the paper, write the letter B and put a circle around that. And what B represents is what the business needs, is point B. If we do this one thing, this is what will move the business forward. This is what the business needs from us most. So we're gonna do this by survey, but quick question. How many people drew all 3 arrows toward B? Right, no one. Anyone draw 2 arrows toward B? Oh, one person drew 2 arrows, okay, great. Anyone draw 1 arrow toward B? A few hands go up. Did, who drew no arrows toward B? Raise your hand. Okay, most of us drew no arrows toward B. Now, of course, the obvious question with The obvious answer is this: if this is what the business needs from us, if this is the way out of the parking lot, why isn't every arrow going toward B? Why don't all of us have 100% success rate? And the answer is so obvious. I didn't know where B was gonna be. So you can't do it. And that's the problem. We don't identify the B for our business. What's the business need fixed next? What we instead identify is, here's the problems I have, how do I escape? What we're gonna do in the session is draw the B. Here's what most businesses experience though. Without knowing where the business needs to go, we choose a path. I don't have enough sales, I'm gonna hire a rainmaker, and I go through this path. It puts me in a new A, a new apparent issue. Hire the rainmaker, rainmaker is not generating sales like we expected. Maybe we should terminate them, maybe we should retrain them, maybe we should give them more time. And we pick a new path, Putting us in a new A. Now we're doing XYZ. And what happens is most businesses move in this circular pattern in the woods. Now, in our little survey here, I think one person drew a couple arrows toward B. Some people drew one arrow toward B. That's called happenstance. You didn't know where B was going to be. You just happened to draw an arrow in that direction. And this happens in our business too. Have you ever had that experience? Years of building your business, working your tail off, working hard, working long hours, sacrificing time with family and friends, but one day, for a day, this magical moment happens. All of a sudden, everything's clicking. The jobs got done properly. Clients are happy. Deposits are in. Money's in the bank. You have nothing to do. It's 3 o'clock in the afternoon. You ever have that day? It's a great day. And then the next day you come back and it's a total shitstorm, right? Right? That is this scenario. This scenario is you've taken an action in the best interest of the business. Something clicked in the moment, but we didn't know where B was. It was a happenstance event. So we end up in the next apparent issue and we make decisions we can move in multiple directions, we pick a new path, and we simply are in a new part of the woods, maybe in that boar's cave, walking in circles. Our job is to identify the B. Imagine this. Imagine you have a manufacturing business. Benji was kind enough to share, I've invested in businesses, I've a few businesses, and one of the businesses I'm in is a manufacturer. And the number one job to improve productivity is to always look for what's called the bottleneck. As things go through a sequence, there's a spot where things will slow down the most, where inventory piles up, the device we're waiting on. And what we do in manufacturing is you identify the biggest bottleneck, you improve that, and things flow fast again until the next bottleneck presents itself. Well, at the end of the day, every business is a manufacturer. You, you're manufacturing things. You have clients that reach out to you that want something. They're in need of it. They're in a state of need. They need a new roof. They need their foundation repaired. They need something. We then move through a sequence of events to bring an end product or end experience. Somewhere in that chain of events is the bottleneck. Our job is to identify where is the biggest struggle and then relieve that. I'll give another analogy. Imagine there was a chain between you and me, and our job is to make the chain strong. We're both pulling as hard as we can. You know, the most common approach that I used to use is, well, if we want to get the chain stronger, let's start fixing every link. Let's make every link stronger. But you know, that chain will continue to snap at the exact same spot, which is the weakest spot, until we get to it. It doesn't matter what we do with the rest of the chain. It'll keep on snapping. Our job is to first identify what's the weakest link in the chain. And by literally fixing one link, the entire chain gets stronger. And the next weak link will present itself and we need to fix that one and the entire chain gets stronger. So, what I wanna look at with you is what makes up the chains, the links of every business. In fact, I believe we have a common DNA in our businesses. I don't care if you're in home services or if you're in professional services or anything in between. I found there's a common DNA. Just like, humanity. If we all lined up together in a long line, people from the outside could identify our differences, our gender, our height, our weight, skin color, all these things. From the outside, it's very easy to identify the differences of people. We are so different. But when you look at the DNA, the makeup of humanity, we're 99.9% the same. The innards are basically the same. Everything's basically the same. If I went to the hospital because I had a heart attack, The doctor wouldn't say to me, hey, Mike, before we start the procedure, where's your heart? Is it in your foot? We don't know. No, it's consistently the same remedy. We have a common DNA. Well, in businesses, the outside looks radically different from appearances, but when you peel back the skin of a business, we're basically all the same. We are made up as people based upon this concept called Maslow's hierarchy of needs. And I want to share this with you, maybe something that you studied back in high school or something like that, but this also translates into the chain-like structure or the needs of a business. So a quick history lesson: Maslow, studying human needs, identifies that we have 5 core needs for our survival and identified they move in levels. There's a foundational need that's the most important for the survivability of humanity, and it goes up. The base level needs are physiological. So I'm just gonna put physio here, uh, physiological needs. And physiological needs are the needs to breathe air, drink water, eat food. These are the things that we need to sustain our physiology, and without those, nothing else matters. So for human survival, this matters the most. The next level of needs, he explains our safety needs, the needs to be, uh, in an environment where we're protected from the outside elements, from physical harm, uh, from someone else harming us. The next level need, uh, is belonging to a community, and it goes on to become what's called esteem. And then the highest level of the Maslovian hierarchy of needs is called self-actualization, to live one's life's purpose. But what's interesting, he says, we always revert to the We always have to address the foundation of the structure before we can elevate to higher level needs. And right now, maybe you're experiencing belonging. You know, there was some great networking happening before the event kicked off, maybe some self-actualization. Hopefully as I present and as you go through today's experience, you're gonna realize things about yourself and your business that will serve your business. But should a lower level need be compromised, we'll immediately revert to that. Like, as I'm presenting to you, Some dude could come running over and with a plastic bag, wrap it around my head and start suffocating me. I'm from New Jersey. Like, there's a 50% chance that could happen. Like, that's kind of— anyone else here from Jersey? Okay, I'm sorry. I'm sorry. All right. So I'm exper— we're experiencing up here, but right now, if someone puts a plastic bag over my head, a safety need presents itself. Itself, and I will revert to the base. What Maslow pointed out is we always need to adequately address foundational needs before we can elevate to higher-level needs. Well, what's so interesting about this DNA of humanity, this common structure, is the DNA, if you will, of business. There's a common structure, and this is what we're going to go through in detail. It also follows this kind of chart I call the Business Priority Pyramid, or BPP for short, because this will list the priorities of what you need to focus on. It too, like Maslow's hierarchy, has 5 levels of needs. And I think your worksheet— let me look— yeah, if you, if you want, you don't have to take too detailed notes. I put the notes on there already for you. It's in the bottom right corner. But let's start off with the 5-level needs of business, and then we'll talk about how you can leverage this. The foundational need of every business is sales. Now, what exactly is sales? Sales is the creation of cash. It brings money into your business. Like Maslow's hierarchy, we need to breathe air to oxygenate our blood. We need the oxygen of cash coming into our business. What was interesting about Maslow's hierarchy of needs was that word adequate. I wanted to emphasize we adequately need to address oxygen and adequately consume water. But you can also overdose. You can drink too much water. You can breathe and take in too much oxygen, causing hyperventilation, for example. You can have too many sales. There's some pundits out there, some proponents who say sales cures everything. That's not the reality. What sales is, is an obligation to deliver services or products or combination thereof. So if you sell something to me, you are now obligated to deliver that to me so I will give you cash. If you sell something to someone else, you are now obligated to them. The more you sell, the more obligation you have. So sales is critically important, but in balance with the rest of the structure. We don't want to build this massive foundation and then put a little tool shed of a structure on it, it'll collapse within. So sales are necessary at adequate levels. You know, it's adequate when it drives the next component. So the foundational need for all businesses is sales, the creation of cash. The next level is profit. Profit is the creation of stability for an organization. It brings about longevity. I'm just gonna put the word stability. I hope no one's in this scenario right now, but if you are not profitable, if you are surviving check by check, there is a constant panic going on. There's this constant thirst and panic. We need to sell a little bit more. We don't have money. How the business priority pyramid works is we simply ask ourselves two questions. Do we have any, and is it adequate? Do we have any sales right now in our organization? If you've no sales going on, You got a sales issue. If you have some sales, our question then becomes, is it adequate to support profit? And the only way to determine that is to investigate our profitability. And you ask the same question at the profit level. Do we have any profit, and is it adequate to support the next level? So let's go through these levels, and then we're going to start playing around with this model. So sales is the creation of cash. Profit is the creation of stability. The next level is order. Order means efficiency through the organization, and that creates, uh, longevity or permanence. I'll put longevity. This allows your business to keep operating. Efficiency is probably the better choice of words. I'll put efficiency. So order creates efficiency. You can get things done. The next level in a business's priority pyramid is, um, impact. Impact is the creation of transformation as opposed to transactions. It's transformational. The highest level, legacy. Legacy is the creation of permanence. So, so let's go through this entire model so we have a good understanding for it. As I was researching out this concept and working with different businesses and so forth, I came across Ole Miss. Ole Miss is the great University of Mississippi in the SEC Conference. And I interviewed them, and back in the '90s, actually it was the 2000s, early 2000s, they had a big sales problem. They noticed that students would come to the campus, but not necessarily select Ole Miss. Now, if you went to college, you may be able to relate to this. Most students pick the school they're gonna go to within 5 minutes of arriving on campus. That's perhaps how you picked your school. That's kind of how I picked my school. I did 2 things. I looked at campus, that's pretty. I also checked out the guy-to-girl ratio. There was more women at my university. I'm like, I got a chance here. I have a chance. We look at a few factors, and what Ole Miss noticed is students, prospective students, were coming in but not picking Ole Miss. They were going to other universities. They initially said, we have a sales issue. We're not converting, we're not creating the cash. The next thing they did is they went to their team. And as a leader of your organization, Your team represents, of course, your employees, part-time or full-time. Your contractors are part of your team. Your vendors are part of your team. And started asking them and saying, why are we struggling with this? In this inquiry of struggling, they also, of course, asked the client or prospect themselves. And the prospect would say, you know, as a student, I wanted to come to Ole Miss. My family went here and stuff, but I walked on campus, it's not a good-looking campus. In fact, it was rated one of the least attractive campuses in the US in the early 2000s. So they went to some of the employees there, the landscaping crew specifically, and said, why isn't our campus more attractive? We need you to beautify the campus. That's when that team, the landscapers, came back and said, we can't. We spend all of our time maintaining the campus. I think it's about a 1,000-acre campus. It's a massive location. And these guys and gals were out just mowing the lawns all the time. They had about 30 people on their crew and they said it takes 7 days a week just to maintain the property. Then the leadership, you, said to this team, said, well, is there anything we can do to fix that? And they said, yeah, we can be more efficient. They identified that the biggest problem on campus that was resulting in sales problem was efficiency. The weak link in the chain was efficiency. What the landscapers shared was when we are mowing the property, when we come upon a tree, we, with the low limbs, we have to jog around the limbs, which take time, or get out with a trimmer and trim. When we're going along, uh, the, the quad, the campus, and we come across, you know, a garbage can or something, um, that's off the sidewalk, we need to get out, trim around it. It takes a lot of time. Laying down mulch and stuff. The mulch was, you know, rotting quickly. That takes a lot of time. They said, we have some ideas. Idea number 1 is let's, let's cut all the limbs on the trees so that the lowest hanging limb is about 10 feet off the ground. This way, a ride-on mower could go right under it. Efficient. They said, let's move the garbage cans from sitting on the, off the sidewalk to sitting on the sidewalk. So we can go right by it, we don't have to jog around it. They said the mulch— we're in the South, we should use pine needles, it lasts way longer. They made these three significant changes. The people closest to the problem knew the solution. Within weeks of implementing this, they were able to maintain the property in about half the time. What took normally 7 days was now taking 3 to 4 days to maintain a property, which meant there was 3 to 4 days available to beautify the campus. They went on to invest in that, and within a year or two, Ole Miss became fabled to be one of the most beautiful campuses in the entire United States. And perhaps you won't be surprised, their sales conversion of prospective students to actual students skyrocketed. Our job is to identify where do we have the biggest problem? What is the weakest link in our organization? Well, let's go through all 4 of these elements, and I'm going to give you strategies, very specific strategies that you can deploy in your business should you identify that as the weakest link. Let's start off with sales. Say we need to drive more sales. Now, on your worksheet, these are just additional notes you can use. I wrote down the 5 key elements in each category. Conversion of clients, prospect attention, and explain those. One biggest challenge I've identified in the companies I've worked with and I've invested in— I'm actively investing in businesses right now and looking for some more opportunities— one of the common problems we identify is that the belief is any customer is a good customer. And that's not necessarily true. What we need to do is to rank our customers. Now, this is a real simple way to do it. What I invite you to do is create a chart that looks like this, a 3-column chart. In column 1, we're going to put revenue at the top. Column 2, we're going to put name. In column 3, we're going to put this thing called CC. Now, this is how it works. What I want you to do is sort your clients out by revenue they generated for you over the last year or two. Take all your clients and sort them out by revenue, from most revenue to least revenue. Now, the question, of course, is, is why is this important? People speak the truth about how they feel about you through their actions, not through their words. In fact, We lie to each other constantly. It's part of being socially grateful and social greatness. When there was networking going on, I ran to the back to get something to eat. I was listening to you guys. How are you doing? I'm doing great. I'm doing fantastic. How are you? Great, great. Everyone here is great and fantastic. Bullshit. Bullshit. Someone here is experiencing misery today. There's bad things going on, but we all know the rules. If you walk up and someone says, how are you doing? You're like, Miserable. That person's gonna say, oh, I gotta get more coffee, and walk away. We know it's socially inappropriate, and our clients know this too. Have you ever asked a client at the end of the project how we do? Fine, good, great. And then they go onto like a review system, like Google or something. They're like, worst company ever. Shingles lose. One star. I'd give them less than one if I could. Do you know? Yeah. Yeah. Oh yeah. You're laughing, so you know them. Um, the term for those clients, by the way, is, uh, JA, uh, just awesome, or jackasses, uh, you pick. We sort clients by revenue because by the spend, by their wallet, by their action, they're telling you they like you. If they spend more with you, ideally if they repeat, repeatedly buy from you, or refer you, they're demonstrating they value you. I have a personal story with this. I was in Copenhagen, Denmark, 8, 9 years ago. I was doing a presentation to a large group. It was a couple of thousand people, mid-cap, they call them mid-cap corporations, these large businesses. And I was doing a presentation similar to this. And you can kind of feel my energy. And as I get going, I get more and more pumped up. I was the only American speaker at this event. As well, anyone here from Europe by any chance? Oh, okay, good. So you can confirm this is accurate. European presenters are perfect. The way they dress was perfect. The way they presented was perfect. They had a podium right here. They stood perfectly and they had a PowerPoint and it was just pulsing. It was so perfect. And there was total silence. There was no hype music, no nothing. Well, I have what's called a rider. All speakers have a rider. A rider simply says, in the event, for example, there's music, play Mike's walk-up song, which is Jukebox Hero, you know, and so forth. At the end of this 3-day event, the host comes up in front of everyone and says, very happy we have one guest travel all the way in from the New York City area to be here with us, to present to us, the only speaker we have from America, Mike Michalowicz. Now I was offstage, so I'm down kind of in this spot right here. And I didn't know they had hired a DJ for me, 'cause there was no music this entire event. But as I'm sitting here, all of a sudden I hear the crackle of the speakers go on. I'm like, what is this? And then they played freaking "Jukebox Hero." And if you know that song by Foreigner, the opening note is a bass that goes something like this, bum, bum, pow. It is super loud. And so they crank this thing up, and I hear our speaker, Mike Michalowicz, And I hear, bum, bum, pow. And the whole audience goes, ah. And so I went, ah. And then all of a sudden, I'm like, channel Anthony Robbins. What would Anthony Robbins do? He would run on stage. So I run up. I'm like, hello, Copenhagen. And that was the response. Thank you very much. Yeah, total, total silence. And I'm like, oh, God. What would Anthony Robbins do? Oh, he would do this move. I can't hear you, Copenhagen. That was basically the response too. Couple of laughters and everyone else silent. And I was like, oh, so I'm like, I gotta bring the energy, little mini Anthony Robbins. I'm drawing, I'm doing stuff, sweat is pouring down from me. Now you may or may have not noticed, I use markers. I always put the cap on. I never leave the cap off. Because of what happened in fucking Copenhagen. Here's what went down. I'm drawing, I'm doing all this stuff, and I'm like, do you understand this Copenhagen, how important this is? Everyone's kind of just looking at me. I left the cap off, sweat's dripping down, there's a spotlight on me. I'm like, we have to do this. I wiped the sweat off my eyebrow. I drew the most massive unibrow on the planet on my forehead. And no one said anything. It was total silence. But what did happen is all of a sudden no one could make eye contact with me. Everyone starts taking notes. They're like, "Mm." One woman legit dry heaved. She looks up, just— And I'm sitting here going, "I'm amazing. They love me. Look at the notes they're taking. You're crushing it, Mike." Don't trust people's words, trust their actions. Trust their wallets, not their words. It was only at the end of the event that one person in broken English goes, "Dummkopf," which means, "You idiot. You have a unibrow on your forehead." When we sort our clients out by revenue, it's the people who spend the most with us that value us the most. I have one client that spends spend, say, $50,000 a year. This was my business that was doing computer systems. That was a big client for me. I did— had another one that did $25,000, a few that did, you know, $20,000, $10,000, a few hundred dollars. I had clients down here, I was paying them money to do business with me. Total jackpots down there. Once you do this, sort the clients out by revenues. I had a bank, I had a hedge fund, one was a retail store, This was a law firm. This was another bank here and so forth. Then we do the last part of this analysis, perhaps something you're going to do today. It's real simple. You pull out your phone and you pretend this person's calling you. And when they call you, do you have a crush on them or do they make you cringe? That's the CC factor. Because someone that you have a crush for, you inherently will provide better service for. The phone rings, you're like, oh, I love them. Hello, how are you today? Hey, we love doing business with you. Or is the other scenario, the phone rings, you're like, oh, I thought they had died. I, uh, which, uh, this is a true story. I kind of said that once. The, I have an iPhone here and they update the iOS, it seems like every week or something. iOS 17. They updated it. They swapped, this is many years ago, they swapped the answering button and the hang up button. So I saw this person call, I was like, oh gosh, I kind of hope they weren't alive. I didn't hang up, I answered the phone. And now my hand's shaking, I'm like, hello? And they're like, did you just death wish me? And I'm like, no, no, no, no, no, I thought you were my mother-in-law. That client, the one you don't want to talk to, is the cringe. Now here's the analogy or analysis you do. Next to each client, put either a smiley face or a frowny face next to them. And you may notice sometimes, even these are the worst smiley faces and frowny faces ever, but you may notice that your best clients aren't always at the top. Once you identify your best clients, it's the intersection of people who spend the most with you, they value the most, and you enjoy working with the most. Put a circle around them. They're the clients you want to— And I'll give you one last tip for this sales level. We're working, excuse me, on the sales level. The challenge most businesses have is we think every customer is a good customer, and that is not The fact the best customer is the best customer, and we want to get more of them. So this method of storing clients, you first identify your best customer, but you can clone them. You can get more people like them, and you can do it through 3 simple questions. And I promise you, if you ask these 3 questions, it will transform your business of your best clients. These are Jedi mind trick questions, and just like a Jedi mind trick, when you hear, you'll say, that sounds so obvious. It ain't. Call your best client and say, hey, we love doing business with you. You're— you— we really enjoy working with you. Thank you for all your business in the past. First question I have for you is, what are we doing right? Write that one down. I will tell you, if you ask this one question, it could transform your business. Now, here's what you may be thinking: customers are just going to give you accolades, reviews. I had my best client when I did this, was a hedge fund for my computer company. I said, what am I doing right? They said, uh, You respond quickly. The last computer guy took a day to get here. You, Mike, your company gets here usually in about 3 or 4 hours. We're a hedge fund, we're trading stock, we have a backup system, but we, when our systems go down, we want to get them back up quickly. You respond quickly. Now here's the power of this question. When you ask your best customer, what am I doing right? They do not tell you what you're doing right. They tell you how they judge you, what they see in you, how they place judgment upon you. So here's the great irony. When I asked this hedge fund, what am I doing right? He said, respond quickly. I said, the number one way he judges me is by how quickly I respond. I need to respond faster. That's the key to that question. When you ask your customers what you're doing right, they tell you the number one thing you need to improve. Jedi mind trick. That day, I started dispatching myself or one of my technicians always to be within a half my half hour of this hedge fund. So when we, he had a problem, I would dispatch one of my technicians from another client saying, we have emergency, head out, take care of this client. We were getting on site within 30 minutes, usually about 20 minutes on average. After doing this for about 2 months, the hedge fund owner calls me, he says, Mike, I don't know what you guys are doing, but the service is off the charts. This is the best experience we've ever had with a computer company. And the thing is, he told me the secret of how to blow his mind. And you will get the secret of how to blow away your customers if you simply ask, what I'm doing right? And then make the simple effort of doing that way better. Whatever you're doing right, do better. Here's the next question. Ask, what's wrong with my industry? Power of this question is when you ask what's wrong with the industry, you're asking about the person outside the room. We don't speak the truth to each other. How you doing today? I'm doing fantastic. I'm doing great. It's what the person leaves the room when we speak the truth. After I leave here, you can say, that speaker guy, he was kind of sucky. That outfit really didn't work. Or you can say whatever you want because I'm not here, but you won't say it to my face. So don't ask what's wrong with our business because a customer won't feel comfortable. Ask what's wrong with the industry and they tell you the truth. When I asked Larry what's wrong with our industry, he said, uh, you know, these other computer guys When they, when a computer, when, when, when a Palm Pilot, that was back in the day, when a Palm Pilot breaks, they charge a ridiculous amount of money to fix it. They're so cheap, just get a new one. Does anyone, by the way, anyone remember a Palm Pilot? Over 50, over 50. Yeah. Okay. Yeah. The Palm Pilot, if you don't know what the Palm Pilot was, it was the first ever smartphone that was neither smart nor a phone. Put that one together. When you find out what's wrong with the industry, if you find the solution to that, you redefine the industry. My little computer company back then, we identified, my gosh, all these computer companies, including ourselves, are doing what's called break-fix. Something breaks, we charge hourly to fix it. We moved to a flat rate in the '90s, and our customers fell in love with it. Our competition started doing it about 15 years later. That company grew explosively because we had the advantage. We fixed or changed or redefined the industry. I sold to private equity. Third and final question to ask is, where do you congregate? Kind of a weird question, maybe don't use those exact words, but remember this, birds of a feather flock together. This hedge fund told me, oh, there's two hedge fund conferences a year, every hedge fund goes there. So I started appearing there. I'm not a great marketer, I didn't get a booth, You ask your best clients. I know you're a lot of folks here are B2C. Are you part of a club, golf club, pool club? Where do you hang out? Just start appearing there. Have your information there because we start winning the trust of, of clients and new prospects just by frequency, just by appearing. I started going to this hedge fund conference. There's, there's one in Long Beach, California and one in Greenwich, Connecticut. I didn't have a booth, nothing. I was just, walking around, people come up to me and say, what hedge fund do you have? I'm like, I don't have a hedge fund. I'm a computer guy. And one hedge fund said, you're a hedge fund technologist? And I'm like, apparently so. I guess I am. And I started winning business this way. We simply need to appear where our best community is congregating. So if you have a sales link that needs to be fixed, It's through client cloning, not just more clients. Let's move on to the profit level. We're going to use a technique called the Pareto overlap. Has anyone heard of the Pareto overlap? No one? Good, because I just made the term up. If you said you did, I think you're crazy. All right. But it is based upon a principle called the Pareto principle. Real quick lesson in this. There's a guy named Vincenzo Pareto studying the economy of Italy back in the 1600s. He, what he found ultimately became known as the 80/20 rule. He identified that 20% of the Italian population maintained 80% of its wealth, and 80% of the population only had 20% of its wealth. He went on to see the study and saw in all aspects of nature. In fact, if you look at your closet of clothing, chances are you wear about 20%, a small portion of clothes almost all the time. It's your favorite clothing. Chances are you're wearing it right now, your favorite stuff. That's the 80/20 rule at work. Well, in our customer base, we can evaluate our customers. Here's the 20, here's the 80. This is the top 20% of clients that are spending almost all the revenue with you. They're generating all the revenue for your organization. These are your best clients. These are your big clients. These are clients that we just demonstrated value the most. Now, you can break down the 80/20 rule even further and do this: 20 plus 60 plus 20 is 100, but 60 and 20 is 80. These are your middle clients. These are those JAs, just awesome people. These are the clients that are terrible to work with, never satisfied, always complaining. They cost you maybe financially, and they definitely cost you emotionally. Now, this is our clients. There's another component we can look at, which is our products or our offering, right? You have your services— repairing roofs, doing electrical work, doing the plumbing, whatever it may be. You have a mix of offers. A small percentage typically of your offering represents almost all of your profitability. You make a lot of money off of a few specific things, but there's other things we do that cost us money, that we, we lose money on? Well, what we're going to do in our profit analysis here is something real simple, and you can do this during your workshops later. There are 4 scenarios that present itself, and if we take actions on these 4 scenarios appropriately, it will drive profitability for our organization. Step 1 is identify who those best clients are. You already know how to do it—sort by revenue, identify the crush, cringe, Identify your best offering, where you make the most money, most profit, and your best clients buying your best stuff. This is the heart of your organization. You need to do everything to defend and protect this situation. Love upon these customers. Make sure they're thrilled with this experience. You can't afford to lose them. This is the heart of your organization. There's another scenario, and if you want to be profitable, we have to remove this. This is your worst customers, never satisfied, don't pay on time or don't pay, threaten to sue or something like that, buying stuff that's not making you money. This is called poison. Stop swallowing poison. We need to spit it out. And the best way to spit it out is to refer these customers to your competition. It's the best. And your competitor's sitting there saying, you wouldn't believe these idiots, they're sending customers my way. I'm swallowing them up. And they're swallowing poison. They're swallowing poison. Let them swallow the poison. Now there's two other scenarios, and this is, uh, these are the difficult ones. There will be a scenario where you have great clients, they love spending money with you, who are buying unprofitable things. This is an education opportunity. You need to call this customer and say, we so value doing business with you. You are important to our organization. You're buying this. Did you know we also have that? Now it's got to be ethical and of value to them, but turn them on to what else you have. They're demonstrating they love you. They're just loving you in the wrong way. We need to fix that. So that's a call. The fourth and final scenario is the most dangerous. And here's this scenario where you have clients that are never happy, never satisfied, bitching and moaning. But you make money from them. They're buying your best stuff. This is a— this is the people that abuse you, don't like you, and they pay you for it. I don't know what term you use for that, but I call that prostitution. Uh, you're a prostitute. You're prostituting your business. You're saying, just take the beating, business. Well, you know what, we're doing it for the money. Here's what you got to do if you're prostituting your business. What you need to do is have that hard conversation. You call this customer and say, your behavior is not acceptable, whatever that behavior may be. You don't pay us on time, we will not serve you if you do not pay on time. The way you treat our workforce, it's not appropriate. We do not tolerate that here, just like I hope you don't tolerate either. It's a hard conversation. Here's also a hard reality. Less than 5% of these customers will ever become better customers. The majority will say, see you later. And that's a good thing. And your team and yourself will thank you for having the integrity to get rid of someone that will never care for you as much as you care for them. Okay, so we tackled Scenario 2. Oh, let's go back in our chart here. We talked about sales. Now you know how to do it— clone your best customers. We talked about profitability. You know the 4 elements. What about bringing more order and efficiency to your organization. How do you do it? You can do it in one simple step. You can do it today if this is the weakest link in your organization. Um, but this may give you the, the scare of a lifetime. It takes about 3 minutes to do it. Go into your calendar, scroll forward at least 1 year. You can go up to 18 months but no further out. Find a 4-week block Block out all 4 consecutive weeks for a vacation from your business. A 4-week vacation. If you take 4 weeks with no physical connection to your business, a full digital disconnect, your business has to operate efficiently without you. And this is the only way I've been able, with all the companies I've ever worked with, to force that. Because most entrepreneurs, superheroes. We swoop in, fix the problem. You know, I, I got this. Uh, horrible client? I'll talk with them. Employee threatening to leave? I'll fix that. No one available today? I'll sacrifice time with my family and friends and everything just to drive this business forward. It's called the superhero syndrome. I don't know if you watch many superhero movies. My wife and I watched on Netflix, whatever, the Wonder Woman movie, the new one. Wonder Woman takes on the big villain, saves the Earth or saves humanity while destroying city after city. And that's what happens for us right now. Back at your office, I'll tell you what's happening. Your team's sitting there and saying, the tornado's coming back. The bossy boss is in Bend, Oregon right now. They're listening to this freako speaker that looks like a bartender. And here's what's going on. These little ideas are popping. Oh, we could do this. We could do this. They're gonna come back with a ton of ideas. So here's what we're gonna do as a team. Like a tornado, just take shelter. They're gonna come walking in. I got all these amazing ideas. Here's what we're gonna do. 2024, it's a brand new year. Things are gonna be insanely insane. We're going to crush it this year. Just be prepared for all that crap. Just don't even make eye contact. Just hunker down. But I'll tell you, just like a tornado, it breezes by. If you hunker down long enough, within a day or two, they'll forget they even talked to us. They'll be back there doing their stuff and everything will go back to normal. That's exactly what they're thinking. And you know it. Here's what I challenge you to do. Commit to not being there. Imagine this, going to your team. I've been doing this for 7 years now, my business. The first year I went to my team and said, hey, went to this conference, we gotta become more efficient. And I found the greatest way to become more efficient is to empower you guys. I've decided to leave for 4 weeks. Uh, I'm gonna do every— I'm leaving in one year. I'm gonna leave for 4 consecutive weeks. I'm gonna do everything I can to delegate, to transfer things over, and I'm gonna leave. And when I come back, uh, you tell me what worked and what didn't work. It is a terrifying moment. And if you're feeling terror in your heart right now, this is the thing you need to do most. It forces efficiency. I left for the first time. I went all the way to Australia. I think there's a guest here from Australia, right? Somewhere? One person. I went to Australia, went to Perth, Australia, literally 12 hours time difference. I went to the furthest destination for my, but I couldn't connect. And yes, I sat there just panicking, panicking, like, what's going on back in the office? After 3 or 4 days, finally I was like, there's nothing I can do. I'm probably gonna come back to this destroyed business. I returned, it was there. Things weren't perfect. Actually, something shocked me how much they improved. Other things, we had some challenges. I asked my team, I said, on a 1 to 10, how badly do you need me right now? Like, 10, stop talking, start working, Mike. 1, go back to Australia. Give me a— they gave me a 1.1, and I'm like, what's the 0.1? They're like, we kind of like it. You can stay. You can stay. I said, why do you feel this way? They said, for the first time ever, I feel empowered in work. I, I feel trusted. You gave me the keys. And yeah, we found things we can fix and we wanna fix it for you. You know, often I find the biggest impedance to the growth of our organization is us, the superhero who's blocking everyone else from doing it. Let me summarize what order is. The number one job of entrepreneurs is not to do the job. Is to be a creator of jobs. There was a study came out from the SBA. They identified that 17% of the global population will ever start and operate a business of any size. 17%. If you go back to your kindergarten class, there were 30 kids in my class. 17%, that's 5 kids. 5 kids or so from your kindergarten class ever start, operate, or run a business. But here's another statistic that's even more mind-blowing. The SBA identified that 20% of people that start and operate a business do it sustainably after 5 years. Most businesses are on the brink of failure or fail within 5 years. Very few make it. If, if you're in this room, you're making it. Well, 20% times 17% is 3%. 3% of those 30 kids in your kindergarten class, that's one kid. You're the kid. You're the weirdo. You're the— yeah, congratulations. Yeah, you are the weirdo. You're going to come back to your, uh, your team next week. How was the event? I found out I'm a weirdo. I found out I'm a weirdo. Yeah, you're the weirdo. You're the one kid doing it. Do you know what the— every other kid, the other 29 kids in the class, you know, the other 97% of the What the global population is looking for? A good job with a good company that gives a good experience. Our job is not to do the job as quickly as possible. Our job is to give people an opportunity to work for a great company. If you're an entrepreneur, your job is not to do the job, it's to create jobs. Take that for a vacation. You're gonna have an emotional heart attack. It's gonna force your hand to have the business operate without you. All right, 2 last things before we wrap it up. Um, impact. Impact is the creation of transformation as opposed to transactions. Every business is transactions. You buy something, you get something. Transformation is where it becomes part of you. I don't know if anyone here is into bikes. Uh, I'm not particularly, but I do admire Harley-Davidson. And if you're into bikes, or even not, you know countless motorcycle brands. You got BMW, Kawasaki, Indian, you know, Indian. There's millions. Harley-Davidson though is a transformative experience. I don't know if anyone here has a Harley, but when you own one, you are a different person. You have a hog. There, there's some people who tattoo themselves with a Harley-Davidson. There's people who tattoo themselves with the company logo. Logo. I am dying for someone to tattoo themselves with my company logo. And that happens all the time with Harley-Davidson because it speaks to who you are. You can have a transaction with your customers, but you can also start identifying what's the transformation by buying from you. Are they environmentally responsible? Speak to that. They're more than— I know some people here are roofers. They're doing more than buy a new roof. They're caring for the environment. Why don't you give them a stamp, a certificate, an acknowledgement saying, my gosh, you made an impact on our environment. Thank you. Move toward impact. The last and highest level is legacy. Legacy is the creation of permanence and Perhaps my best story and example around this happened when I was in Guatemala City. I was doing a tour through Latin America, I was in Guatemala, and I met with an owner of a business who makes these water jugs. Now, I don't know what you know about Guatemala. Guatemala is a very poor country. 99% of the population lives outside of Guatemala City, the main city, in the rural area, and it is extremely poor. Back then, the average worker made $1 per day. Now, to survive, talking about Maslow's hierarchy of needs, you always revert to your base needs first: water, food. It is hand-to-mouth survival for many people in Guatemala. And water, how you collect it is you go to their local river. It's putrid water, it's mud, there's sewage, it's horrible water. You bring it back to your hut, and then you use your money to buy firewood. You use about half of your monthly income to buy firewood so you can boil the water so the water at least doesn't have bacteria. It's consumable. It's putrid, but at least it's consumable. Phil Wilson, that's the guy I met with, who was actually born in Guatemala, came to the US and moved back to his home country, saw this problem and said, I need to, I need to fix this. And he made this water jug that is clay. It's red clay. Looks like a water cooler we'd have here about that size, but it's infused with a mesh of, of silver. Silver has this interesting quality that when bacteria crosses over, it kills bacteria. So what people can do now is pour water into this jug, it fills up, slowly seeps through, and out comes pure, clean, bacteria-free water. It's like Avion water dripping out of it. The, the jugs, they aren't cheap. He'll sell one for maybe $30, which is a month's salary. But if you're buying firewood, that costs 2 months of firewood and you no longer need firewood. I met with him. We were taking a little tour of Guatemala City while we were talking. We walked into a, a coffee shop. The sign out front said, "The World's Best Coffee," and by golly, it was the world's best coffee in Guatemala. And we sit down and I said, "What's it feel like to own a business that's doing this?" And he said, "Mike, I just realized about a year ago, I don't own this business. I'm a steward." of this business. Like, what do you mean? Because this business has to live on permanently. It's not about me, it's about what it's doing. I said, what do you mean? Because people that are buying our jugs, and now they have tens of thousands, hundreds of thousands in the population, he goes, what's happening is people aren't burning wood anymore. They are making and saving more money because They don't need to have that money to buy wood. They can buy a farm animal or something. They can start starting businesses. It's causing this entrepreneurial boom in Guatemala. But he goes, the transformative moment wasn't even that. This ecological study is going on. They're happening all the time. They're studying the environment, the atmosphere and stuff. And there's an organization out there studying it. They flew in to meet specifically with Phil and they said, we've been studying pollution throughout the globe. And there was one part on the globe that there is a significant drop in pollution and it's Guatemala. They sent out a ground force to figure out why is Guatemala's air quality improving faster than the US and everyone else? What's going on? And they found out that people weren't burning wood. They were using this. He wasn't just saving lives. He was saving in Guatemala. He was saving all of our lives. He's a steward. I hope you realize that your business is more than just a transaction. It's doing something that can be transformative to a level that it's changing society. Maybe it's changing a small community or a small section of people, but it can amplify out in ways that are unknown. And maybe that's what you need to focus on. As you get ready for today, I, uh, and the exercise we're going to do together, I have a final thought before we do the Q&A. So it's back to that Amanda Eller story, you know, lost in the woods, moving in circles. There's a fascinating interview about her around her. You can Google it. But the rescuers say, asked her, they said, you were lost in the woods for 17 days. You, you barely survived. In retrospect, what do you wish you'd done? If you could only done one thing, what was the most important? Now here's the thing. She walked out there without a cell phone. Cell phone batteries die. That was a mistake. She didn't bring water with her. That was dumb. But she goes, none of those things were as important as a compass. She goes, I just wish I had a beacon, a compass to know where to go, because then I could have moved in a straight line. That's what I'm hoping for your business. I hope in our little session this morning is that you've identified potentially somewhere in here where the weakest link is. Yes, you have challenges. All throughout your organization. You could do all these things. You could come back to your office tomorrow and be that tornado they're expecting, or you can come back differently next week and say, here's the one thing, the one beacon we're heading toward until we fix that. And I promise you, if you do that, your organization will move to the next level. Thanks so much for having me this morning. Appreciate it. Thank you. Thank you. Thank you.