Marketing Expert: The Secret To Selling ANYTHING | Mike Michalowicz

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You're not generating $10 million doing your one thing. You haven't arrived yet. You're not good enough yet.

This episode is with Mike Michalowicz, who wrote the book on profiting first and is going to teach us step by step playbooks for you guys to profit and make money right now in your business.

To have a successful business, there's an intersection of three key elements you have to nail. What Stales does is it can bring in more cash, but also brings in more organizational stress. You have more responsibility now where customers will never say to your face, you know, your business kind of sucks, but what they will do is go online and slam your reputation. So you can't trust their words, but you can trust their wallet. I got a magical Jedi mind. Trick question, I guess. I got two that will blow your mind away. First question.

We've been blown away by how. How fast the show is growing. Like, getting to hang out with you every single week is so cool. But most of the people who tune in every week still haven't subscribed, which is crazy. It is the simplest way, though, to help me us keep scaling, bringing the best guests like Mike McCallowicz and making the big deal a big deal. So I can't thank you enough for your support. Like, we would be nowhere without you guys. And I just want to jump back into my conversation with Mike, but I also want you to do it subscribed. Oh, and share it with a friend. If you like this episode. I think it's better when you profit together, you know? Can I start with some, like, kind of real challenges, rapid fire that we've heard from owners?

Yeah, throw them at me.

Okay. What if you're a business owner, you're weeks away from running out of money, you're kind of panicked, you don't know what to do next. What's your first move if you call Mike?

All right, so first thing is you acknowledge you're pretty much every business owner on the planet. There's a saying that most businesses are on the brink of failure, and the statistics show that most businesses don't have enough cash flow for four weeks. But my analysis, and I love contrarian thinking, my analysis is most businesses are not on the brink of failure because most businesses find a way to survive that moment somehow, some way. Most businesses, yet again, doggy paddle and get above water. So I think most businesses are on the brink of success. It's just a good strategic move. So what we do, if a business like that calls, and I also invest in businesses. We do what's called reclamation services. We go into businesses that are specifically in struggle is we go through the client base. We deploy the Pareto principle 8020 rule. Identify who the best customers are and say, hey, what can we do right now to serve you? Because we're already the best customers. We get revenue in that way. We usually cut the lowest 20% of customers because inevitably they are costing you money.

And.

And you don't even see it. It's like, oh, I'm making revenue. This is great. The expenses are in excess of the revenue. And the emotional, you know, the emotional weight is killing you. So we get rid of the unfit customers, we amplify the best customers, then we start realigning the business around that.

I love it. So two moves. You call up your best customers and say, basically you're asking them, but not this way, how can we sell you more things? Which is, what else do you need? And how do we increase the LTV of every single person? Yeah.

And you tell them you love them. Like when you tell a customer, hey, you're such an customer to me. I value you so much. I just want to see if there's any other way to serve you. Reciprocity kicks in. They're like, we love you too. And you know, we were thinking about getting this. Can you do it? Yeah.

Love that. Okay. What do you do for someone who has more revenue than they've ever had before but is actually making less profit?

That again, is every business. I know. I was speaking yesterday at an event and I asked the group, it's similar size. I said, who wants to increase their revenue? Everyone's like, that's what we need to do. That's solution. I said, arguably that's one of the most dangerous things to do because it's a reckless belief. We believe that sales cures everything. And that is total nonsense. Total nonsense. What sales does is it can bring in more cash, but also brings in more organizational stress. You have more responsibility now, more things you need to service. So when a business says we're cranking up revenue, I am looking to see are they doing it through diversifying their offering, which I think is a mistake. Instead of becoming special, they're doing many things and they dilute their ability. They're not efficient. We'll look. Are they serving customers with varying demands? Customers that are perhaps big Names. But then they assert their strength. I had a client of mine I worked with, Walmart, was their best customer, number one in revenue. We looked at them, their demands were off the charts. They said when you, sir, deliver your product, it was like a bracelet thing. They said it's got to come on a Monday at 10:30 in the morning. And if you are without, if you're outside like a five minute window, we're going to penalize you. If the sku, you know that UPS code, if it's more than a quarter inch below the top of the box, we're going to penalize you. And Walmart does this for, you know, efficiency. That's why they do it. But my client, they were, they saw that as good revenue. It was crushing them with the penalties. Their number two customer was $ General. Is that around here? Yeah, yeah. So Dollar General, Dollar General's like, hey, deliver whenever you can because we're always playing second fiddle to Walmart. So Cody, you'll love this. Here's what he did. He put a sign above his desk and he had 15 employees. The sign says this. Our policy is to answer the call in the first ring. If it's the Dollar General, answer the call and start taking their order. And if Walmart calls, let it go to voicemail and then call them back when you're done. The miraculous thing with the next one, it said we always answer in the first ring. If the first call is Walmart, start taking their order. But while you're on the phone with Walmart, if Dollar General calls immediately hang up on Walmart like say, sorry, we have an emergency disconnect and prioritize. So they're not cutting off customers or revenue, but they're prioritizing the quality revenue. It transformed his business. It was a family business, it was 25 years old. They were struggling to get 4 million. It went 4, 18, 27, sold it.

You know what's crazy too? And we'll take you guys through this process. So you'll go through a process where you basically analyze your cash flow and we'll use a 13 week rolling cash flow, which I love. And then we'll also talk to you about your underlying clients. What's your best avatar versus your worst? Because I think a lot of times we lump our business all together but we don't know what customers cost us to get and we certainly don't know what customers cost us to keep. And it's not because we're bad operators, it's because we're busy and it's Sort of hard. And so it takes this pause and analysis. And the truth of it is, your team is not gonna do that. That is gonna have to be a you thing at most levels of the business.

That is brilliant. I'll add to that. There's a real simple strategy that we've deployed. And what you do is you sort your clients out over the last year, the revenue they've generated for you. And the reason is people lie to each other constantly. Cause it's social grace. Like, when you saw me, like, hey, Mike, it's so good to see you. I'm a huge fan. Like, are you, Cody? Are you?

I am.

Thank you. But could you. Could you imagine you come up to me and say, oh, your books really suck, Mike. Like, you can't do that because of social grace and not make. Well, that's offensive. And then we get into this disagreement. Our customers will never say to your face, you know, your business kind of sucks poop. 911's here. Oh, it's kind of like more turd 411. You know what I'm saying? Like, you're never gonna. That was a good one. That was juicy. But they would never say to you. But what they will do is go online and slam your reputation. So you can't trust their words, but you can trust their wallet. So don't trust words. Trust wallets. If they buy from you repeatedly or they're demonstrating they value you. But there's a second test. It's the intersection of them valuing you, spending money with your appreciation and enjoyment of them. So when the car ID pops up on your phone, are you like, oh, my gosh, they're amazing. Or are you like, oh, gosh, I wish they didn't exist. Which one do you pick? Because if you have a customer generates a lot of revenue, but you don't like working with them, you automatically, inherently, subconsciously, perhaps deprioritize their service. You don't call them back as quickly. You delay. You avoid it. So we want the intersection of best customers that you love working with. Circle those customers and start to clone them. And what I mean by cloning them, I find out where they congregate, where's their associations or communities? Where's the people like them hanging out? And I'm gonna insert myself there.

So good. Yeah, we obsess on client avatars. And I feel like the number one thing that most people do wrong in business is they sell demographically as opposed to really nailing their avatar. Like, I've never met a 45 to 65 year old male, 40% of the time and 60% of the time a woman. I mean, these days, who knows? But historically, no. And so I really like this idea of what are the characteristics of this type of avatar and then how do we go after them?

Yeah, and look for the congregation points. So when I'm targeting a market, I'll say, is there an association for this? You know, this is what I'm selling. B2B. Is there an association? Is there some kind of meetups or something like that? For example, maybe I'm serving pilots, retired pilots. Why say is there a retired pilot association? Which actually I know there is. So that's an opportunity. They're already congregating. But if I looks for single moms who hate their mom, that demographic exists perhaps even in this room. But they don't. They have a meetup club. Maybe not. If they don't have a congregation point, you have to assemble it yourself. It is the most exhausting, time consuming effort. It rarely fails. So when someone says I have a niche, it's, you know, I serve single moms who don't like their moms. I mean, that's not a niche because you have to now assemble them together. But if you're serving the airline Retired pilot Association, I know where they're going. They may have a dedicated podcast and you insert yourself there and they see you ubiquitously. They see you everywhere.

So good. Let's zoom out for a second. What does everyone get wrong about making money in business?

Okay, so this is very opinionated. It ain't about the money. And you probably heard that before. And when you don't have the money, it's very easy to say. I mean, it's very easy to focus on the money. And when you do with the money, it's very easy to say, it ain't about the money. My perspective is both. So I became a multimillionaire when I was in my early 30s. I had an exit to Fortune 500.

Robert.

Half international. You sold quite a bit.

I do remember.

You remember them. They had account temps, office temps. I was doing computer crime investigation and the Enron trial broke my company. Right place, right time. We got the Enron trial. Now to give context, we were not the prosecution. That's the FBI, the CIA, you know, we were the defense. So if you remember names like Kenneth Ley, Andrew Fastow, they were our clients. They were guilty, by the way. That was their defense. That was their defense. They were guilty. And we got put on the map very quickly. What I assumed was When I sold that business and it was a lot of money, I was like, I've arrived. But I really didn't what I did, and I'm embarrassed to admit this, but it's important to admit it is. I thought I had to show the effect. So I bought all the stable of cars. I got a private place out in Lanai, which is an island owned by Larry Ellison. Now for sabbatical, we got a place in a very affluent town in New Jersey where I live. And I'm like, look how important I am, people. And like, no one gives two craps then. Total idiot. I blew all my money because I thought I knew everything. I knew very little. And with the collapse, no one really cared either. No one really cares. I found the essence of a good business is that it's an expression of our purpose. Like, I know from the interviews I listened that you do, you put out, you're such an authentic real human, that this platform is an expression of who you are. Listen, your mom is here. You know, the last time my mom came, my mom came. I was doing like a puppet show in third grade.

Like, this is.

That's a dream to have your mom here. Which also indicates the authenticity in this. I think too many entrepreneurs go for the money, only find out that was a mistake. We gotta go for it because it's an expression of our heart. That's my opinion.

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True. And you know what else is crazy that I love that you talk about often. That statement, it's never about the money was so triggering to me when I didn't have any Money. I'm like, that's cute, Mike. Like, give me a million, I'll figure it out.

Right?

But what I've increasingly realized is you never don't have enough money. You don't have enough knowledge. Because if you had more knowledge, you'd see that there are 372 Ways to Get the cash. And the real question is just like, what's the best way? What's the best game you want to play? What's the right game you want to play for you? Who's the right investor? What's the right way to get capital? Then it becomes, what's the right fit? Never just it doesn't exist. Why don't I have it? And if I could impart one thing to people more often, it would be that and that you can make money doing anything, which is great. Pooper scooper. You know, everybody should just wear their business shirts here because look how much market you guys are going to have. Like an ad on this podcast. It costs a billion. Not for you to poop. 911, call my ladies.

I got a question for you.

Yeah, sure.

Yeah. So when it comes about money, I heard recently, and I've experienced this, and I'm curious about you, is there's not a single person who's ever had enough money. So I was talking to personal finance experts. I just interview series and consistently heard wherever someone is financially today, they feel their freedom is double of their current worth. So if you're worth a hundred thousand, when I get a two hundo, I'm good. And people too are saying four and people in mill are saying two. So I'm curious, have you arrived financially? Oh, no, no, right?

Never. I know, but also true. Yeah, and me neither. Well, even like mom, we were having this walk this morning, remember what you asked me? She was like, aren't you proud? Like the headquarters. And look how everything's grown. Because most of my businesses have been remote for many, many years, I ran businesses where we had people all over the world. She's like, you have a look. I can touch it. Do you take a second? And I literally was like, it feels like, what did I say? We haven't scratched the surface yet. So I totally think about it. Zero at any level. But it's also because I love the game. Not necessarily like, I want the bank account to be bigger. I still have, don't get me wrong. I mean, what do you ask me every time she sees me? She asks me, she asks me, but who takes care of the money at your company every Time, don't you? She's always like, but who's the cfo? Who's in charge of making sure you don't run out of money? Because if you didn't grow up with any money, that's like, deep inside all of us, we're just like, ah, but who's in charge? And are they stealing from us? And the answer is like, yeah, people are going to steal from you at some point. That's. That is true. And it'll also be fine, and you'll keep going. But, yeah, I agree. I don't think there's ever enough. But if you can flip it to stop talking about the dollar amount and start talking about, like, it's never enough. Because I just want to see what am I capable of. Like, I want to die having squeezed every last drop out of me. That's when I think it starts to get fun. You've seen the rarest of things, which is you lost it all. And I think that is off. How many people here are almost more scared of people knowing that you lost it all and, like, seeing the flame out than actually not having the ca. Who else? I see a lot of. I see a lot of nodding. Like, I think that is what scares us. But you're a perfect example of like, I was there. Nobody fucking cared, and I'm fine.

No one cares. That's why no one cares. And it is true, that saying that the people who do care don't matter. The people that matter, you know, do care.

Wait, can I ask you a question? Did you have a very dark moment then when you were like, I lost everything. This is how I defined myself. Who am I?

Yeah. Do you want to go there just.

In front of our 20 new best friends?

Yeah, exactly. So if you. I wrote about my books, so this is the moment. So become a millionaire. I buy all these things. I buy. I got to start off with the arrogance I had. I bought a Land Rover, a BMW, and a Dodge Viper all within four hours on the same day. Thanks for laughing.

Right?

And I thought. And the Viper was in college, I saw the Viper. I said, when I arrive one day, I'll get it. I got this place out in Hawaii for a sabbatical. I got this. I joined a club. I also started investing. I invest in a whole different way now. I used to do, basically private equity, putting in, but small tranches. Angel 50, 100, 200, in all these different businesses. And this arrogant dick was like, oh, it doesn't matter if you're here, Cody, Mike's here. Here's the money we have. Me, I have the Midas touch. I believed my own story. And there is. I looked up in the Webster dictionary, there is a word for someone who has arrogance and ignorance. The word is dick. It's true. I was a total dick. And the Dodge Viper is like the winning trophy for dick. I, within two years, evaporated all that wealth. I lost every penny, Cody. And I'll never forget. My accountant calls me. It was February 14, 2008, Valentine's Day. And he says, mike, you have to declare bankruptcy. I didn't have enough money to pay my tax bill that year. And it wasn't even a tax bill. I came home. I have three children. My wife and my kids had prepared a meal. And I was sobbing when I came home. And that's when I told him what happened. I lost everything. Now, I'd been lying to my family by omission. My wife was like, how's business? And I saw my bank account. I don't know if you've been there. You see it dwindling. So logically, I saw it, but emotionally, I wasn't ready to accept it. I'm like, that one client's coming. So my wife would say, how's things going? I'm like, it's fine. It's good. But I had to face it. We lost our house. Thirty days later, we liquidated our assets. The cars were gone, Viper was gone. Thank God. Everything's gone. But this was the moment. And I'll probably start crying, so I gotta go quick. My daughter asked me. She goes, daddy, she was nine. Can I still go to horseback riding lessons? Now, to give you context, it was 20 bucks for a group of, like, 10 kids, and they ride around for a half hour. And I said, I'm so sorry, we don't have anything. And as I said that, she got up and she ran as fast as she could into her room. And I hear the door slam, and I'm sobbing. I'm like, oh, my God. You and I, we define ourselves as providers. We are here to provide for ourselves, our family, our community, our globe. And like my one effing job, I can't do it. My daughter is so scared. She ran away from me. And as I'm saying that night, or someone going, the door comes swinging open, and she comes running down those gaggly legs, and she has a piggy bank in her hand. And she goes, daddy, Daddy. She goes, I'll pay our bills. I was so embarrassed of that day. And, you know, there's a saying about rock bottom. As difficult as it is, at least there's only one way to go which is up, right? It's a beautiful saying. It's total bullshit. It's total bullshit. You hit the bottom, you get dragged along the floor to self disdain and hatred. I'm like I'm a scumbag and I went through two years of depression self diagnosed and everyone to a therapist do now you should drank a lot, I don't know. But in reflection is the greatest moment of my life because I said I'm going to fix this. Your traumas, whatever they may be, my traumas, our traumas often are the biggest opportunity. I'm on a path. I'm committed to eradicate entrepreneurial poverty because I know how visceral it is. I know how freaking bad it is. I am committed to make every entrepreneur I come in contact with as profitable as possible. Because honestly, I need to learn that for myself. What we teach is what we need to learn. And so I'm just putting it out there, putting it out there, putting it out there. I'm not great with money. I'm better. But God, I'm never going to stop teaching it.

I love that. How many of you guys resonate with that? And you've had. Yeah, I mean my dad calls it the head of the hands in the dark with no idea what to do moment. And I've had one too.

What was yours?

Mine was the same thing. A company was almost out of cash that we had and I didn't tell anybody. And mine was like really? It was almost so fast. It was like a cancer diagnosis where you die the next 30 days. Like I didn't know. I didn't really have the slow burn. We had made a terrible mistake in a business. And it was, it's often, I think mistakes are usually who's not how's. And so I had trusted somebody and that was my first and I had let them have too much control over one of these businesses and the way that they had reported it, had not really anticipated some expenses we were going to have and also that we would have seasonality in the business. And I was so embarrassed about it that I called him in the middle of the night and he said two things to me. He said, one, when we step on a nail at a construction site, we don't ask how we got there, what happened, what's going on? Do I take a bubble path so I feel better? We pull out the fucking nail. And so he goes, you're gonna do the hard thing. You're gonna do the hard thing right now, which is you're gonna look at your business. And that's why I obsess for all of you guys on making sure that when you are in that poverty center, how do we get out of it immediately? How do we fuck the emotions, fuck the feelings. We pull out the nail. You don't wonder how the nail got there. You fix the safety issues later, you wear better boots the next time. And so he did a really good job of snapping me out of it, of saying, instead of staying here worrying about it, which is why I'm always saying to you guys, money really likes speed. He basically was like, why would you worry about this one more second? You're not gonna sleep anyway tonight. Stay up, stay up. Let's look at the books. Let's fix this. And what I've found in investing in hundreds of businesses now, it's almost always fixable, to your point. Almost always. But the reason it won't be is because you don't move fast enough. You don't have people who have been there before around you. And you don't focus on profit. You focus on what is gonna look good, what is gonna be okay. Like, sometimes you gotta do the really awful thing, which is rip off the band aid. But I'm so glad you talked about that because one of our missions here is, you know, we've looked a lot at the data surrounding small business, and most small businesses fail. That is true. Most of them do. Nobody talks about it. Most of them do. And a lot of the reason why, I think, is due to not having systems of control for situations in which emotion gets high. You have a ton of systems and stories and ways that you kind of are honest about yourself. You keep yourself in your, I'll call it your bumper lanes because you know that you have self awareness to be like, I'm not the best with money. The people that get in trouble are the ones that think they're the best with it. Yeah, yeah, yeah, right. And so I want to talk about. I want to talk about a couple of things. You can kind of pick which one I want to talk about either the Pumpkin Plan or I want to talk about Clockwork or I want to talk about Beacon. Do any of those speak to you in this?

Yeah, they do. So I'd say Pumpkin Plan to start. What I did, just to give context. That's one of the books I wrote. And it's the runner up to profit first in popularity. What I did was I hired a business coach before business coaches really existed. This is back in the 90s. And he came into my business and said, day one, we're gonna go to a pumpkin field. I'm like, what? He's like, you gotta understand biology. Cause there's a thing called biomimicry. And when you study what Mother Nature's figured out, she's pretty freaking smart. And she spent a lot of time figuring things out. You can copy those strategies, and usually they have a more. A better success rate than something that's artificially engineered. So I went to a pumpkin farm and studied colossal pumpkin farming. And sure enough, it works for business, too. So that's the context.

Talk about why and what you got from it.

Yeah, so there was a few things. The first one was it's called seed selection. And basically, to have a successful business, there's an intersection. It's like a Venn diagram of three key elements you have to nail. And the likelihood of growing is much greater than otherwise. Most entrepreneurs simply say, I'm doing this because this is my historical vocation. I have some experience, I'm going to do it. Or I heard you can make a lot of money doing it. And I don't know if either of those are actually necessarily good. The first thing that we ask, and I ask myself is, do I have something that's truly distinct in the industry? Can you redefine the industry? I'll give you a personal example. Who's heard of the Savannah Bananas here? Okay, they're exploding, right? So Jesse, call as a friend from before, right when the Spam bananas were starting and they used profit first, I went down, coached organization. What he did was say, what is the industry doing currently? And sucks about it. He said, I don't know if anyone knows, but baseball is boring. It's boring. So he's like, that sucks. And he went through all these different things. So the first thing he said is, what are the things that people don't like? I'm going to unsuck it. That sounded. That sounded very. I don't know why it sounded so gross, but it did. So he and his wife Emily, started to redefine baseball to make it not boring and to make it entertaining. The second thing is they put intentional constraints in place, so they used profit first, which inherently means there's less money to spend. And one of my favorite things is he said, we don't have enough money for like a cheer squad or anything to entertain people. So he's like, what do you do when you have no money? He's like, you ask your Fans. So he said, if you're 80 years or older and you're a woman, you're on our cheer squad. And teeth are optional. And that's true for half the squad. I met the squad, and they're the nana bananas. And people lose their effing minds like we lose our minds watching this. So what makes you truly unique, better than the competition is not noticeable? You answer the phone in two rings, I answer in one. I'm technically better. The customer won't notice. You run a standard baseball game. I have a grandma banana dancing around. I win. You gotta be different. Secondly is you have to have client demand for it. So I could do something very different. I could be your first guest that comes dressed like Bozo the Clown. You know, waka waka. I come in with my big floppy shoes. Everyone will notice it's different. But is there demand for a weirdo that does that? Maybe not. And now I've compromised myself. So who's the customer that wants that? And it's not your standard baseball fan. They're not there for the winning game. They're there for the winning experience. So he's redefined the customer. And the last part is, to your earlier point is systemization. And most people don't understand what systemization is. Systemization is where you can attract prospects, convert them to customers, collect revenue, have them raving about the experience all while you're sleeping without any of your active input with the entrepreneur. Not doing any of that. Now you have a systemized business. And so I learned from the pumpkin plan is that's the seed. And just like growing Colossal pumpkin, you need a seed that matches the environment, the soil content, the climate. You need a seed that matches up with those three elements.

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Dude, I got. I don't know why I called you dude.

Is that cool?

I love dude.

Yes, dude. I called my friends dude. So you just. I didn't even know. Subconsciously, you just qualified. So, dude, this is what you gotta do. I got a magical Jedi mind trick question, I guess I got two that will blow your mind away. And it's not what you think. That's how Jedi's role. First question, ask your best customers. Those ones we identified. What am I doing right now? Here's why this is a Jedi mind trick. They will not tell you what you're doing right. So I used to work with hedge funds. They were my first company. We did technical services for hedge funds. They had Bloomberg Ilx and all these different systems. I went to my best customer, Appaloosa Management. I said, what am I doing right? And they said, you respond very quickly. Now, this is in the 90s. They said the typical computer guy was taking like a full day to get on site. When our system went down, they got backup systems, but you get on site within four hours. Now here's the Jedi part. When your customer tells you you're doing right, they don't tell you what you're doing right. They tell you how they're judging you, what they're observing you. And I do. You do thousands of things for your customer. Your customer does not see the thousand things. They see one or two things. So when you ask them what I'm doing right, they tell you the thing they see. So when my client said, you respond quickly, I said, holy crap, I'm not responding fast enough because that's what he's measuring. So I figured out a way. It was real simple. Dispatch one of my technicians or myself to be within a half hour radius of Appaloosa management. And anytime he had a problem, I would leave my other clients. I have an emergency with my number one client, Dollar General. Get there, and I was getting on site within a half hour. Within a month, he's like, I don't know what you're doing, dude. But it is blowing my mind. Like, the service level has skyrocketed. He's like, we're telling everyone about it. So trick one is what I'm doing right? It's actually what you need to do better. Trick two is, what am I doing wrong? But here's a Jedi mind trick. Don't ask what you're doing wrong. Because people lie to each other. Social consequence. Ask, what is wrong with my industry? It's the person outside the room. So when I leave here, you can have a can of conversation. Like, oh, Mike was not that good. He spoke a little quickly and he did a lispy thing that didn't work. Like, whatever. You can say what you want, but to my face you're like, oh, you know, you were great. Good tips, Mike. You can't tell me the truth to my face. Only when I leave. So have the conversation about the person outside the room. The general industry. So I said, what's wrong with the computer industry? This is when the. You remember the. You don't remember the Palm Pilot. You're way too young. Do anyone remember the Palm Pilot? Okay, you're over 50. Over 50? No, you're not over 50 if you don't know who the Palm Pilot was. It was the first smartphone that was neither smart nor a phone. That's basically it, right? It was the weirdest thing. And he said, and my computer company, my last guy tried to repair the Palm Pilot and he charged me more than just replacing it. I wish there was fixed billing. We moved to fixed billing in the early 2000s, when MSPs only moved to it in the 2015s or so. So what am I doing wrong? Is your opportunity to. What's the industry? Doing wrong? Is your opportunity to differentiate from the industry.

That's so good.

I got fired up there.

It's good. I mean, it is amazing how the right questions serve you so much better than the immediate answers because you can just rinse and repeat. One of my pet peeves at our companies is we send a lot of surveys. I hate surveys. So I have like a. Like, how many of you guys get a survey? You're like, thank God that came out. I'm so. I needed more things to respond to in my email inbox. It's my huge pet peeve. I'm always like, instead, we should actually. I'm curious on that. I'm like, we should actually try to sell people more things. And the reason why is because then you actually know what they want. And if you sell something and nobody wants anything, you're like, oh, that's the survey. The money's the survey.

That is gold.

Right?

So I remember entrepreneurs.

Do entrepreneurs sell enough to their customers? Are most entrepreneurs scared of selling?

They absolutely do not sell enough and they don't sell the right way. I actually believe MVPs are not the right way to sell. So an MVP is a minimum viable product. I think that's too far advanced. We do a technique we call sell the tell. What we do is say, so we. I was a co owner in a manufacturing business for a while that we made leather products sheaths specifically for knives. And instead of making a prototype and seeing what was out there, we simply announced our audience, we're thinking about making a sheath and it's going to have this feature and that feature. Are you interested in buying it? But we asked the most important question. If you are put down a deposit now, people speak the truth through their wallet. I was actually thinking about doing a conference at my old high school, but to pull it off, we needed 250 people there. Reached out to our audience. We had 75 people put a deposit down and we said, no, this isn't going to go, and refunded their deposits. Ironically, prior to that, our marketing team said, why don't we just ask? We had over a thousand people said, oh, I'm in. That's amazing. And if we acted on that, we would have blown money and embarrass myself at my old high school, I'm always.

Scared people aren't gonna show up for my parties.

Oh, cool.

Rock literally every time. Still, it never, never stops. Okay, so you sell to tell, which I love. Do you have any good frameworks for how to know if you are selling enough? As an entrepreneur, it's one of my beliefs that most entrepreneurs are too scared to sell and so they don't do it frequently enough. How do you know if you're selling?

The act of selling as opposed to the dollar number. Yeah, yeah, yeah, yeah, yeah.

Are we asking our customers for enough things? Are we asking for enough upsells? Are we. What is our relation between content and actual conversion?

Yeah, I think the two indicators is if you have customers come back to you and say, please stop that. That's a good indicator. And listen up, particularly your quality clients. Often we listen to the one naysayer who doesn't matter. Like, you sell so much, you totally suck and they've never bought from you. And they're like, oh, I'm so sorry, I'll never sell again. So listen to your best customers. Secondly is if you see every time you sell a decline in purchasing, and I've seen that before, that someone sells so much, people are like, you know what, I'm just turned off to you. All you do is sell. I think we have to care for our customers at an amplitude of a 5 to 1, maybe a 10 to 1. Just acts of service, caring for them, educating them, entertaining them, because that builds reciprocity and then the sell becomes obvious. But I think particularly small businesses serve at like 100 to 0. Like they're. All they're doing is like, I love my community, I'll do anything for them. And they don't monetize it. I would say, Cody, your customers, people in this room, my customers not in this room, maybe want us to be profitable, and your clients want you to be profitable. In fact, it's the number one customer. The number one person in your life that wants to be profitable is not you. It's actually your customer. And we don't believe that. Could you imagine, you go see your doctor, you have a heart situation, you rush in. Doctor One comes out and she says, oh, here's the situation. I'm not profitable. I'm actually nearly broke. I'm really panicked for money. I'm just selling anything to anyone. And I've decided to generalize. I'm going to do neurosurgery, pediatrics, geriatrics, anything with an act that come in. Doctor two comes out and she says, I am wickedly profitable. I make a boatload of money because I am wildly successful at what I do. In fact, all I do is serve this one situation. Which doctor are you going to pick? Dr. 2. You want your doctor to be profitable. And listen, maybe you're not providing life saving services. You're providing life altering services. Your customers want to know that you're profitable because then you treat them as the number one customer. They won't say, you know, hey, can you charge me more? Can you rip me off a little? But they will say, I want your undivided attention. I want the best of you. And all those things are indicators of I want you to be profitable. I see you. I see you.

Well, it's such a good point. I mean, I don't know if anybody else feels like Mark Zuckerberg knows their purchasing pattern better than their husband does. But like, Mark's got me on Instagram, those ads come up, I want to buy. But if I go to double click on a shirt or an outfit and the Cost of that shirt or outfit is like $7.99. I don't buy. Why? Because I think the quality is going to be bad because I think it's not actually going to be a good service. So not only do I think we don't sell enough, I think we price ourselves out of deals all the time because we're the cheapest, you know, because we're like, oh, no, no, no, I want to over serve the customer. No, you look lost my business. Because I don't trust that it could be quality at that price. And so I want to talk a little bit. You have multiple. Yeah, that's what I want you to do.

So I would buy that $7 shirt. And I think what's important about that is you have to bifurcate your customers. A large majority of customers are the cheapo customers, and that's me in that situation. But you care about the quality of your clothing and therefore you're going to pay a premium. Now, I play guitar. I bet you if I saw $1,000 guitar, I might buy. I don't know if you play guitar. Okay, so you're like, you'll buy the $7 guitar, I suspect. And what price dictates is the quality of customer? You will find customers at the lower price point. And for anyone here that sells at a low price point, if you ever found that your customers are really bitchy and moany and they really suck, it's because you're attracting the shit customer. The one who says, I don't really care about this, I just need a shirt, so I'll pay the seven bucks. And that's why I think we need to have a higher price. We get a higher value customer that's more vested in the outcome, and they're actually a higher quality customer.

What do you think about. I tend to think that when you solve rich people's problems, they pay more and they appreciate it more, by and large. And when you're a junior entrepreneur, when you're not the best entrepreneur in the world, I almost like solving more luxury problems because there's more margin in them, typically, and you don't have to get as many. So it doesn't have to be such a volume game until you're good. Do you think that's true or do you think when you go and serve luxury customers, you better be luxury, you better be top tier, you better be great?

That's a good question. I think the quantity game is really difficult to compete in because you only become profitable when you can handle that volume which means exacting systems. That's why Walmart's so good. But they have to demand from their providers that it has to arrive at 10:30 and there has to be a skew at a certain point, small businesses, we don't have the resources typically to pull that off. So that's very difficult when it comes to quality. Quality, I think is misunderstood. Quality, I think we hear that and we say, well, it's a special fabric or it's something that's really of long lasting value. But quality simply means distinct. I'll give you an example. My youngest son, this is like a bad father moment. When he was six years old, I wanted to show him what devotion and commitment was. And it was the Olympics. It was like the Beijing Olympics. Michael Phelps wins like gold number 1 billion. And in this particular race, I don't know if you all remember, he was actually in third place and he's swimming like super hard and there's like three meters to go, he's in second place, there's a meter to go. And the person that lead, I think from the Ukraine is reaching out to touch the wall. And Phelps jumps out of the water like a shark and slaps the wall. And there's like this long pause and it pops up and Michael Phelps won by.001 seconds. And I jump up, I'm watching my son, I'm like, jake, that's the world's best. That's how you do it. Total commitment, total devotion. That's the highest level performer. And he looks at me and goes, but, Daddy, Michael Phelps isn't the world's best. Jimmy Mickledorf is. Now here's the bad dad moment. I said, who the fuck's Jimmy Mickledorf? Like, I never heard of. He's like, daddy, he's in kindergarten. Never say it to your kids. But anyway, he goes, daddy, Jimmy's in my kindergarten class. He can swim across Mountain Lake. It's a lake near us. And he's like, he's the only kid in the world that can do it. I was like, oh, my gosh. So the context of the best in quality is the context of the consumer's world. For me, it's the Olympic stage. For him, it's his kindergarten class. And Susie can make the biggest cannonball. She's a rock star for him. And it's like, oh, oh my gosh, I am such an idiot. So when it comes to quality, I just ask. We have to know who our customer is and what can we do that's unique and distinct to Them they never experienced before. And now you've introduced quality.

That's so good. Let's talk about distraction a little bit. You have a lot in multiple of your books. I think I'm referencing the pumpkin plan more here. But how do you personally decide when to double down on an idea versus when to call it a distraction and cut it?

Yeah. So we generally look at a revenue threshold because that's just a shocking metric to many small businesses. We generally say if you're not generating $10 million doing your one thing, you haven't arrived yet, you're not good enough yet. For most businesses, that's about 0.001% of the market cap. So it's nothing yet. Most businesses said, oh, we're doing 300,000 in revenue. I should diversify into do more things. And it starts diluting you. It's all about the efficiency game. That's where we focus. The second thing is we just do diagnostics. With AI, it's so easy now. Just look at the customer base, what they're consuming, what's the profitability per product, and we just focus in on those few things. I think businesses pursue diversification too quickly because we hear if you're diversified, you're safe, you're protected, but it also stalls growth.

Do you think entrepreneurs should ever have multiple businesses before they do $10 in revenue?

If I say no, I'm a hypocrite. So I have many businesses that aren't doing $10 million, but I don't run them. So I think people misunderstand a business owner is. In fact, when people ask me, what do you do in addition to author? I don't say, I'm an entrepreneur, even though it's my favorite word. Because entrepreneurs become so bastardized. There's pundits that say, oh, entrepreneurship's hustle and grind. It's, you know, work your ass off. That is not what entrepreneurs entrepreneurship is. You were sharing something that I hope people took notes. Down 6%. You said of the world population runs a business. The back. I'll give you the data behind this. I'm really into the numbers. 17% of the population ever attempts to start a business. So if you think about kindergarten and the 20 kids in your class, 17, three kids, maybe four kids ever attempt to start a business? 20% ever start a business and after five years are doing it on a profitable, sustainable basis, that's 3%. So the 6% who are running a business, three half of them are actually pulling it off after five years. And that's how the math works. Which means if you ever thought about who was the weirdo in your kindergarten class, it was you. You're a weirdo. Some messed up part of your mind is like, oh, I can start a business and make money. The number one job of an entrepreneur is not to do the job. The number one job of an entrepreneur is to create jobs for the other kids in your class. 19 kids in your kindergarten class want good jobs with good companies, to live a good life with just good experiences. If you are doing the work in your business, you're failing the responsibility of an entrepreneur. Your job, my job, our job is to create jobs for the other 97% of the global population. Yet most entrepreneurs are doing the work. So let me get off my soapbox for a second. I don't call myself an entrepreneur anymore because unfortunately, we're told that means to work in our business. I call myself a shareholder because I also own public stock and I'm a shareholder of my business. And when someone says, what are you? I say, I'm a shareholder. Small business. Like, what does that mean? I'm like, oh, in the stock, I share in the profit and I give strategic direction. I vote, but I don't do any of the work in the business. So for every one of the companies, we have a president, we have, we have a C suite, if you will. And these are some are small businesses. C suite could be like six people in the entire company. But I am not in the business doing the work.

So. Cool. So let's talk about beacons. So you referenced a study about football fields and blindfolds. But how do you stay in, how do you stay on course in a business and not get distracted?

So the study, this is my book actually called Fix this Next. What I found is most entrepreneurs are reactionary. And there was a study of a woman named Amanda Eller from the state of Hawaii back maybe 10 years ago. And it's a common story. She was just a unique global phenomena. She went for a hike on a path. She always does. Halfway through a hike, it was like a five mile hike, she sees a fallen tree. She decides to sit down and meditate. She comes out of her meditation. She picks a path. The key variable being a path. Starts walking. She's like, oh, God, I'm disoriented. I'm not in the right spot. Seventeen days later, she's found clinging to life by a rescue crew. What's interesting about the story is she was a half mile from her car. She started walking in circles without a beacon. This happens over and over. People get lost. In this German study, they took people on a football field and they put like a sleep mask on them and said, find your way across. No one could do it. And it wasn't the long way. It was the distance, like halfway across the field, which is only 50 yards. And they couldn't do it. Most entrepreneurs operate their business this way. It's very reactionary. It's like, oh, my instincts, let's go here. My instinct says, go there. And we're totally blinded. So we have to pick a beacon of what the business needs. The typical beacon is this. The most common missed part in businesses is, are you profitable on a daily basis? At the end of today, Saturday, are you going to walk out of here and your business made more money than it spent. And tomorrow, does it make more money than it spent? Most entrepreneurs don't focus on that at all. They simply say, I need to sell more. And they actually dig a hole further. So the number one beacon is sustainable daily profitability. The second beacon after that, once you nail your profitability, you can use profit first to do that. Number two is efficiency. And I'll give you the hack to efficiency that most people don't do. Most people say, oh, I gotta learn how to delegate. Question. Who here has a personal assistant? Raise your hand. Live audience. Okay, hands down, hands up. Who does not have a personal assistant? Okay, keep your hands up. You are the personal assistant. If your hand is up right now, it is the biggest flaw in small business. Everyone that just raised your hand, hire a personal assistant stat. And they don't have to be full time. They can work one hour a month. And it's not to have someone doing work for you. It's so you can learn how to delegate to other people. Is the biggest weakness most entrepreneurs have is the ability to delegate. Second tip. Most people delegate the wrong thing. What don't I like to do? I don't like doing this. I'm gonna delegate it.

Wrong.

What do you love to do so much you'll never give it up. Delegate that. Because when you can delegate your passion, you'll learn to delegate the entirety of your business.

Love that.

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Yeah, I mean, Zach, you know what one of the first things we do in the boardroom is, which is yell at you guys to get vas right. He's nodding his head yes. And that is because you're right. Otherwise, that means you do not value your time more than minimum wage offshore labor. Like, you got to look at yourself in the face and think about that for a second. You are saying your time is not worth more than a couple of dollars per hour. And if that is true, then are you really a business owner? And I think the answer to that is no. You're an employee. You're still an employee status. And one of the first things we do in our groups is say, let's offload some of these. Let's kill the zombies, let's cut the weight, and let's offload the things that you should never be doing in the first place. And now they're incredible systems to do that. And we'll talk about that later today. As well as Zach knows. Okay, I want to talk about. Let's talk about profit first. Many people think revenue minus expenses equal profit. And profit is the last part of the equation. In business, you famously argue the opposite. Let's talk about what the profit first framework is.

So after struggling with my own finances, I looked at my businesses historically. And while they grew and I did sell two businesses, they were never profitable. And so they were strategic acquisitions I was lucky to get out. Most people will never sell their business. So I ran the data. There was a study from the SBA in conjunction with a major bank. They identified 83% of small businesses in the U.S. there's 36 million of us now under 25 million in revenue are considered a small business. So it's probably the majority in this room. 83% of us are surviving, check by check. And probably everyone in this room, in part, started your business for financial freedom. So I'm like, oh, we started our business for financial freedom, but no one pulls it off. What's wrong with us? And then I was looking at the formula. One day I said, Holy crap. That formula is wrong. It makes logical sense. Sales or revenue, you subtract expenses, what's left over is profit. Totally makes sense. It does not make behavioral sense. It is human nature. What comes first gets done. What comes last gets ignored. The manana syndrome. We are told profit comes last. It's the bottom line. Last. It's the year end. Last. It's all last. And so most business owners and how I run my business, I'd wait till the end of the year. I'm like, ah, shucks. I wouldn't use word shucks, but your mom's here. I'm like, ah, shucks. I could never swear in front of my own mom, but I'm f bombing here. I would go shucks. I don't have any profitability. Maybe next year. And that was the fundamental flaw. Once I took my profit first, I started becoming profitable every day. It's the pay yourself first principle applied to business. And this goes back to biblical times. It's like nothing new in the Bible. They talk about tithing and the necessity putting money aside. It's been modernized in tons of personal finances. We're told to have a 401k pay yourself first. And yet in business we don't do it. So it's literally that simple. And it ain't a shell game. It leverages into behavioral principles, a thing called Parkinson's law. Parkinson's states that our demand for a resource expands as the resource expands. The more time you have to do something, the longer it'll take. The more cookies that are served as a dessert, the more you're going to eat. Guilty. And the more money you make in your business, the more you will spend as your revenue goes like this. Over time, I bet your expenses increase the uncanny same rate. It's because how we're behaviorally wired. So what we're gonna do is starting today, every time sales comes in like today, take a percentage. You want to have 10%, bottom line, take 10%. 20. Great, take 20%, take that profit, hide it from your business. And now your business tells you what's available to run your business. What I say is, profit first doesn't fix your business. It tells you what needs to be fixed within your business. Because if you want that profit number, it'll tell you you don't have enough, your prices are wrong, you gotta fix your margins, inefficient over costs, all that stuff.

I love that. We'll do an activity, I think later today that talks about like we like to have people actually think about where in your business, can you cut costs immediately? It's like one of my. Because it's hard to make new sales, right? You're like, yeah, I'd love to go right now, close a bunch of new business, go out there, execute on it can be hard. You don't always have control over that immediately, but somewhere in your business is sitting some cash. And so we have a process. Carter's really good at this. Where we go through and analyze again and again. Where in your business do you have hidden money? And it's not the sexiest of things, because nobody's like, I saved a thousand bucks today. You're like, I close a bunch of new clients. That's way sexier. Who gets paid the most? Salespeople? Who gets paid the least? Accountants. And yet accountants are more consistent. And so I really like this.

That's brilliant. There's a little hack you can do.

Let's do it.

Get a credit card. A new credit card. This sounds crazy for your business. You can do it in your personal finances, too. Move all your subscriptions to that one card and get paper statements. I did my personal finances. I'm like, oh, I probably spend, you know, a couple hundred bucks maybe on subscriptions. Holy crap. I spent 500. I got, like, the hydro system. I got the Peloton. I've got Netflix. And I was like, what am I doing? I'm not using half this stuff. You got to make it visceral, and you got to make it conscious as opposed to subconscious. In your business, set up a dedicated card just for your subscriptions, and you'll see how much you're spending. It's the first way to get control of that stuff.

I love that. Yeah. I mean, the. And I want to open it up from questions here at the end. So think about it for a second. Have your questions kind of ready. The other thing I think we don't think about enough as business owners is investing in ourselves. And I know it sounds a little cheesy because it's so much easier to say, I invested in the business here. I hired a new person. But I found that if we don't become better, our business never gets better. And so I'm curious, you think. Been in the sort of educational business for a long time. Do you still have coaches and mentors? How do you think about investing in yourself as the entrepreneur and getting better? Is that important to you?

Yeah, so wickedly important. Surprise. What I do is identified. What is the role that I enjoy the most? Meaning, gives me the most joy. But first I had to eradicate myself from doing it. So let me explain. I get the most joy from being a spokesperson for my brand. Okay. I realize that requires a lot of public speaking, and I realize if I'm the only person doing it, I become the linchpin for my business. So first, I educated about 50 people on speaking on profit first. In fact, there's like three profit first keynotes going on today, and I'm not doing any of them. So that's the first thing. So I'm not necessary. Then I said, okay, I own the business and I want to do what gives me joy. I'm not going to sit on the beach and stuff. So I'm going to reinsert myself, and I want to be the best spokesperson I can. So I go to improv classes, I study comedy. I look at what do my contemporaries do, and most people sit behind a dais and like, they're like, that's the one thing I can't do. I have to be different. So I study theatrics, performance, all those things constantly. I have a speaking coach who comes to my events and critiques me sometimes. Live. Like, he'll be signals. He'll sit in the front row. He's like, we have these hand signals like, oh, gosh, hands out of your pocket. Named John Bates. Yeah. So I very much invest in that. I think for any of us, this is human nature. We can be super elite at very few things, but pick that thing and then you become the Michael Phelps or the Jimmy Mickledorf of your category.

Well, it's now.

You all know Jimmy Mickledorf.

No. Poor Jimmy.

Poor Jimmy. I know he's like 20 years old now. He's never had a girlfriend as a result, because of me.

I love that. Thank you. I think a lot of times we need to give ourselves permission to spend time getting better because it feels like there's too many things to do every single day, and it might even feel like a little bit of a luxury. And I'm a big believer that, you know, if we don't spend money becoming the best CEO we can be, then. And how can we hire the best talent who can then be talking on other stages, who can then be growing the business? You cannot attract what you are not. And so I think you have to keep becoming better if you want to attract better people. Okay, I have one last question, then I'm going to open it up for you guys. You often talk about building a business that runs without you. What's the first system every owner should put in place.

We do this with every business we invest in. We immediately schedule a four week vacation for the business owner within one year of today. And I challenge you right now. In your calendar, put a four week vacation that's one month away from the office. Tell your loved one you're going on vacation with them, perhaps tell your kids they're the ultimate accountability mechanism. And if the thought of that gives you a heart attack, and when most business owners it does, that's the first indicator. We do not have a systemized business. If you can extract yourself from a business for four consecutive weeks, we actually turn off your email, full shutdown. It changes the mindset from how am I going to be the superhero again today? To how am I going to get the business operating without me? And that's what we do. That's the first thing.

At what level of revenue or existence of a business do you put this into place?

We found like $100,000 business and it's like, how can you do with that? It's a one person business. Even if you're a one person business, you have vendors, maybe not employees. You have clients. You can make your clients work for you. I grew up back in the day where you had catalogs and you want to order that nice expensive shirt of yours. You call up and the operator be like, oh, what's your address? And you say, it's 12 Main street and you're like, what was that? Vain Street? No, now they have customers doing the work. We actually go on the web and click, Click, click, click, 12 Main street, ha ha ha. Like we think it's cool entering the data for them so you can actually train your customers to do the work for you. Your doctor, your GP has you fill out this ridiculously long form for you. You're doing the work. I'm like, this is amazing. So Even if you're $100,000, you can do it.