Work Less, Profit More: The 80/20 Rule for Business Growth

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What's up, my good people? Welcome to the CJ Moneyway Show, powered by CJ Moneyway Entertainment and the Believe Network, where we build success brick by brick through real conversations about leadership, entrepreneurship, and legacy. Today, my guest Michael, a financial strategist and the founder of Next Step CFO, with more than 40 years of experience helping services, retail, and manufacturing businesses grow profitably. Hey, welcome to the show today, my man Mike. Hey, what's up, Mike from Massachusetts? Hey, so, uh, man, I ain't gonna get into me and Mike, man. Just know that I've been a Laker fan for 46 years. Mike is from from the Boston area. So, you know, today we gonna play nice while we on the podcast, but we already established once the podcast over with, we like that cartoon back in the day, put 'em up, put 'em up, put 'em up.

You know what I'm saying?

So we gonna play nice right now. So Mike, man, let me ask you this, man. The journey, you spent more than 40 years helping businesses grow. What originally pulled you into the world of financial strategy and business consulting?

Well, actually, the first 20-something years, I actually owned businesses myself. So I owned retail, manufacturing, and service companies. And the retail business I owned went from $2.5 billion to $8 billion in 5 years. The frozen cookie dough company I bought was one of the, one of the top 20 products in Massachusetts on QVC. And then I had a failure. I started an outpatient rehabilitation facility called Freedom Therapy Center and after owning and selling two businesses successfully, I got a big head and I got complacent. And the things that I did in the businesses that I was successful at was implementing business strategies and financial strategies that my competition wasn't. But then when I went into the— I took stupid pills because when I went into the outpatient rehab facility business, I was doing exactly what my competition was doing. And so what motivated me to help small business owners is help them with the things that I learned not to do and the things that I learned to do that was successful. And it drove me to write my book called Powerful Business Strategies, which are business strategies that probably I would say at least 95% of businesses aren't using but should use and utilize and implement. And that's really what motivated me because I'm able to help small business owners who hasn't gone through some of the trials and tribulations that I went through as a small business owner. So it's basically driven by business ownership myself versus just having actually been a consultant for 40 years. I've really only been a consultant for 17. The rest of those years were pure business ownership.

I like it, man. How you, you know, like you say, you coming back and you helping other small businesses avoid some of the pitfalls and some of the mistakes that you made. You know, one of the things to come Being overly confident. You say, man, I got two businesses. I say, oh yeah, I'm finna tackle this one right here.

Boop, boop, boop.

That was another cartoon back in the day where they beat him upside the head with a bottle or something. You know what I'm saying?

Boop, boop, boop.

Running back into that hole. Hey, so Mike, man, let me ask you this, man. You also helped scale a retail company from $2.5 to $8 million in 5 years.

Right, right.

What were the biggest lessons you learned during that growth phase?

Well, not being afraid to do what I call a risk reversal. And a risk reversal is when the seller in the transaction takes most or all the risk. So the problem that the consumer had when I was in the ski business was that they never really knew if the ski they were being sold by some hotshot ski salesperson that would flex the ski in their face was the right ski for them until they got it up in the mountain and tried it out. So we implemented what we call the ski guarantee. Ski the ski 3 times, you don't like it, bring it back for a brand new pair and keep bringing it back until we get it right. And at the time, that was totally unheard of because, as you know, when skis are skied on, they depreciate dramatically. And so my managers and my employees thought I was totally out of my mind, but I just felt that all the ski a consumer wanted was a great ski experience. That's all they wanted. Is that that hard to do? Is that all they wanted was a great ski experience? Because a skier is very enthusiastic and really passionate about the sport. And even if they're only skiing 3 to 4 times a year, by the way, it's not just people who ski 50 times a year. If they ski just 3 or 4 times a year, they're very passionate about those that weekend or whatever it is that, you know, the few times that they get on the mountain. They don't want to ruin those days. That's all they wanted was a great ski experience. My managers and employees thought I was out of my mind because all they could envision were thousands of pairs of skis coming back and us losing a ton of money. But that didn't happen at all. We sold 8,000 pairs of skis the first year we implemented it, a 25% increase from the year before, and only 8 came back. The next year we sold 11,000 pairs, 14 came back. And so The point is, is that was a strategy that worked famously, and my competitors never even duplicated it. And so people would go to their stores and say, "Do you have a ski guarantee?" And they'd say, "No." And they would never implement it, and they came back, bought from us. I mean, it was just incredible what you can do with a risk reversal. So that was one thing we did. The other thing we did, we took the most popular ski graphics, the ski graphics that were selling the most. Okay, you know, these are the skins on the skis. If you don't know what that means, just the, uh, what's, you know, this, the cosmetics that are on the ski.

Okay.

And we went to the clothing department because packages in the ski business are very commonplace and they sell really well when skis, bindings, and poles are packaged together. So we took the most popular ski graphics that were selling on the ski floor and we went to the clothing department and matched up that ski graphics with a parka, pants, hat, and sweater, and we packaged them together. And those flew out the door. And our competition never copied us. They would go to the other stores and say, "Do you guys have clothing packages too?" "No." Say, "That's it, uh, no." Right. And so packaging and bundling is another component of a compelling offer in addition to a risk reversal. So when we take those two strategies alone, it did phenomenally well. And we also— when we were in the ski business, one of the things that got consumers together was 4-day sales. So a sale in 4 days. That's it. 4 days. And it's going to stop in 4 days. And that drove business because that's scarcity and urgency, which is another component of a compelling offer. So when you add all these components of compelling offer, risk reversal, packaging, bundling products and services together. And scarcity and urgency, which is my 4-day sales, that provides a powerful punch.

So I'm gonna tell you this, Mike. I would wish to have supported your ski business and your skis and this and that, but your boy ain't going on no mountain.

I knew that. I knew that before I got—

So ever, man, that is not on my bucket list. I ain't going to Colorado. None of that. I don't need to see none of that snow coming down. I would be like an avalanche, you know, no pun intended to old girl Lindsey, the Olympic ski lady, man. I would have been just like her coming off the ramp. First thing, I'm hitting flags and everything, and I'm tumbling all the way down, man. That is not for the kids.

Well, let me, let me ask you this. Do you like scenery? Because if I just had to go up the ski lift and down the ski lift You'd be cool with that, right?

No, I'm not doing that either. I'm not really. No, no, I'm not taking a little trolley thing to go up and go over. Sorry, Mike.

What if I locked you in with all kinds of seat belts?

No, nah. Uh, only place I'm going that happen is on the airplane. Hey, Mike, man, when I come to Massachusetts, man, I'm really gonna— I hate that, man. We'll have to find some other type of scenery, man, that we could do. Maybe a Starbucks. I know you guys got a lot of Starbucks there, you know what I'm saying? Or maybe do a Starbucks scenery or something and then watch the skis, watch people ski on the TV, man, or something from Starbucks. And so let me ask you this, or maybe one of the places that I hate, man, Boston Market. Maybe we go to Boston Market.

Yeah.

Hey, but no Celtics game. Hey, let me ask you this, Mike, man. You talk about using the 80/20 rule to increase efficiency and profits. For listeners who might not know it, what exactly does that mean in the business context?

Well, in the business context, what I found when I was doing research for my book, Corwin CJ Moneyway Johnson, is that most people look at the— by the way, no one is ever wrong about the 80/20 rule. Just, I make sure that I make that statement. And most people in business think that the 80/20 rule as it relates to business is 80% of your revenue comes from 20% of your customers. And it does. For the most part. Like I said, no one's ever wrong about the 80/20 rule. But what we found is that in order to be more efficient as a business owner, you need to have 80% of your revenue driven by 20% of what you do every day. And that 20%, I found, is made up of 7 steps that business owners should focus on to save time, to be productive, to be efficient as a business owner, spending more time on the business instead of in it. And there are 7 things that business owners should focus on that represent that 20% that drive 80% of the revenue. The first one is leads. Not just any lead though, it has to be a high-quality lead. Second, conversions. What does that mean? Well, once you have a lead, you have to convert them into your sales process, whatever that is. For a retailer, that's just a customer showing up in the store. For me, let's say that's just somebody listening to a presentation. So you have leads, conversions. You also have to track your closing rates and how you can improve those closing rates. So you have leads, conversions, closing rates. Then you have to look at something that's ignored a lot by business owners, and that's client retention. And remember, these are the 20% of activities that you need to focus on that drive 80% of the revenue. So client retention is something that people don't really focus on at all because they think that once they get a customer, they get to keep them by default. Doesn't happen. So it's leads, conversions, closing rates, client retention, and then you have to work on increasing the average dollar per sale per customer. Increase that. So if your average sale is $200, you have to look to increase it to $220. To 10 to 30. Then frequency of sale. How often am I selling to that customer? That's another important metric to follow and to work on. It's part of that 20% that drives 80% of the revenue. And then finally, you have to control your costs, both fixed costs and variable costs. So what business owners should focus on that represents 20% of what they do every day that drives 80% of the revenue is number 1, leads. 2, More leads. Two, more conversions. Third, higher closing rates. Fourth, client retention. Fifth, average dollar per sale. Sixth, frequency of sale to the customer. And then finally, controlling their costs. And what's interesting about the 80/20 rule, Corwin CJ Moneyway Johnsonway Johnsonway, is that small incremental changes in each of those areas compound on each other to produce a phenomenal results. And so most times all business owners need, in my experience, is small little tweaks in these areas. Nothing major, not going to blow up the business, just little adjustments, little tweaks.

Man, you heard it from Mike, man. Make some small little tweaks in your 80/20 rules. And if you don't understand the concept of it, go holla at my man Mike, man. He'll get you straight. Hey Mike, speaking of that, man, let me ask you this. Financial strategy, most businesses Mr. Why is financial forecasting so important for small businesses, especially when market feels unpredictable right now?

Right. Great question, Corwin CJ Moneyway Johnsonway Johnsonway. Well, there's several things that a forecast does, but one of the things that really relates to business owners is it can answer the can I afford it question. Lots of times I get asked all the time, can I afford a new truck? Can I afford a new location? Can I afford a new manager? All of these "can I afford it" questions get answered with a business and cash flow forecast. But the other thing that it does is that it's so revealing in terms of understanding the most effective business model that you have that you can't help but land into the right business model. Because with a business and cash flow forecast, there's a lot of what-if analysis. What if business is off 20%? What if costs are up 10%? All this what if, and it really helps you understand the business model that you have and where to adjust it to be able to maximize your profitability and scale.

So let me ask you this, Mike, man. What are some small operational changes that can lead to surprisingly large profit increases?

Well, I think that it depends upon the business, but let me just speak in some generalities. The first thing you have to do is watch your overtime. In other words, let me say it in clearer language. If you look at your sales per operating hour, sales divided by operating hours, okay? If you look at your sales per hour, which is effectively what it is, but it's per operating hour, and you look at it over a long period of time, let's say a year and a half, 18 months, something like the 18 to 24 months, you can tell how efficient or inefficient you are. Another metric to look at is sales per employee, and that is sales per full-time equivalent employee. And that's another way that you can measure operational efficiency. You know something's wrong with the operation if those metrics are out of whack, if they're lower. If all of a sudden they're low, you'll know those metrics are out of whack. But it's all about really analyzing and understanding your process from start to finish. Where are the holes? Where are the leaks? Where employees are spending too much time? In what areas in the process itself? And if you can analyze that, you're going to be able to make the corrections that are needed. But it's basically analysis, a real strict analysis of the entire operation to make sure and getting feedback from the field, getting feedback from people in the field as to where the holes, the leaks in the boat are, where they're spending most of their time. And if you can solve those issues, you're going to be more efficient, more effective, and make more money. Mm-hmm.

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Music Style.

Music Store.

So let me ask you this, Mike, man. You said that, you know, the overtime, the efficiency things, you know, that you track and things of that nature. So if the overtime efficiency is not matching, so that what people start cutting overtime? And you were saying something about the employee ratio. And so is that when people start letting people go, when the math not adding up? Is that what plays a part in these decisions?

Yeah, let me give you an example. So I have a client who's in production, production business. I won't be specific as to it. He had 5,000 hours of overtime in 2025, and his competitors had 300 hours of overtime in 2025. So to me, the manager has to help the business owner understand why there's so many overtime hours.. And the business owner has to challenge the manager to cut those hours. Now, not all at once, but make small incremental changes. Once again, little tweaks to reduce that overtime. Because that's deplorable when you think about how does your competitor operate so efficiently without overtime, does the same amount of sales as you're doing, but you have the overtime. And by the way, the facilities are the same size. So you have the facilities the same size, you have two different companies, one has 300 hours that do the same thing, one has 300 hours of overtime, the other one has 5,000 hours of overtime.

Yeah, do the math.

Okay, it's not one thing, Corwin CJ Moneyway Johnsonway Johnsonway. You have to look into the operation and challenge your manager or challenge whoever's scheduling. And if you are doing the scheduling, you better challenge yourself that something's up, something's wrong. And, you know, sometimes I'll hear the excuse, "Well, if that happens, we'll have to increase the wage rate of our workers to compensate them for the overtime loss." That's not an answer because there's other workers that will replace those workers for a lower pay because the market value is what it is and it does not include Overtime. So if you just have, number one, somebody that can guide you in terms of from a financial standpoint, that's the starting point. Because once a financial guy gets in there, it starts to analyze what the problem areas— the business owner can go in and solve the problem. But if he doesn't know it's a problem— this business owner didn't know it was a problem, man.

You say $5,000 to $300, man, that's a big old difference right there. You know what I'm saying? You got to do the math, man. Holla at my boy Mike, man.

He'll get you straight.

He'll get you Oh, Paul, man, you might have to go to Massachusetts and get on some skis and deal with it, man, but it'll get you straight. Hey, Mike, man, let me ask you this, man. You talk about the idea of market dominance for small businesses.

Yes.

What does that actually look like in practice?

Love to tell you. We have a formula called the Conversion Formula, and it's designed to convert prospects into either your sales process or to sales. And what we found was that, first of all, I had to go back to 1931. I forgot who was the person who said it, but he said, in order to be successful in business and in generating sales, you have to get into the mind of the prospect. Well, how do you do that? I mean, we mind readers? And what he said is that, no, it comes down to two things: the problem the customer has and doesn't want, and the solution they want they can't find. And if you can identify that problem that the customer has, it's usually with the industry, by the way. For example, an easy one to pick on is contractors, okay? They're always late, they don't return phone calls. And if you could come up with solutions surrounding that problem that can satisfy the customer's need and to counter the problem for that customer, that's going to be a winning formula. So our formula is called the Conversion Formula. And step 1 is called Captivate. Captivate is a problem that the customer has and doesn't want. Now, we have programs that help you identify those problems that customers have because it's not as simple as, you know, like a painter. The problem the customer has is what color paint to apply because everybody can do that. Any painter can do that. So that's not what we're looking for. We're looking for real inherent problems with the industry that you can solve. So that's number 1, the Captivate, the problem the customer has and doesn't want. The second step of the formula is called Fascinate. That's the solution to the problem that they can't find. So the first 2 components of the conversion formula is called the position of market dominance. Captivate, the problem the customer has. Fascinate, the solution they want, they can't find. And if you can identify those 2, and by the way, the Captivate should be the first thing you say are the first thing when somebody comes in contact with your brand, whether it's in open networking or whether it's on an ad or whether it's in social media, whatever it is, the Captivate and the Fascinate should be the first two things that they come in contact with. Then the third component of the Conversion Formula is to Educate them. Educate them on why your solution to that problem is superior to the competition. And then finally, the close. So it's captivate, fascinate, educate, close. That is the conversion formula, and that's how you convert prospects into customers or prospects into your sales process. And the offer, though, needs to be very compelling. And if you remember earlier in our conversation today, I talked about compelling offers. I actually named 3 of them, and there's actually 5. The first one is scarcity and urgency. Limited time, limited quantity. We talked about that. Second is risk reversal, like I did in the ski business, the ski guarantee. Third is actually adding more value to your product or service. When I was in the frozen cookie dough business, the problem the customer had— and if you notice, everything I say about my past is the problem the customer had is how I lead. The problem the customer had in the food business, specifically delis and restaurants and those types, was that they didn't want to waste valuable oven space baking cookies. Now they wanted the cookies as an add-on sale, but they didn't want to waste valuable oven space baking them. So what did we do? Now our opening order averaged $50. That was it. But I was very confident in my product. Gotta be confident in your product. It's very important. All right. I was so confident in my product that once they tried it, they would keep it. That I would make a $200 investment in a convection oven. And so with every opening order, my customers got a free convection oven to solve the problem that they had of utilizing space to bake cookies in their primary ovens. And that worked famously. But I solved the problem, Corwin, right? Just like I solved the problem in the ski business. Remember I said the problem the customer had is they didn't really know if the ski they were being sold was the right ski for them. Until they got up and out and tried it out. That was the problem. So if you can identify the problem and then have a solution to that problem, you're going to open doors, you're going to get business, you're going to convert prospects into your sales process, and you're going to convert them into customers. Oh, by the way, one last thing. So I got scarcity and urgency, risk reversal, adding more value to your product or service, bundling and packaging. Remember we talked about bundling and packaging products and services together? That's another— that makes an offer very compelling, number one. Number two, it makes it difficult for a competitor to match because they're not going to have the exact same combination of things that I'm going to have. So therefore, it's hard to price compare. And then finally is being indifferent to the outcome because People can tell when you're trying to just benefit yourself by selling a product or service. If you are indifferent to the outcome, truly indifferent, and you have to really pay attention to what's being said and be very present. But if you are truly indifferent to the outcome, you're going to make more sales. It's compelling. Very compelling.

I like it, man. Mike is a problem solver. If you listen to Mike, he say he solves problems. That's what he do. You have to captivate. Fascinate, educate, then you got to close the deal. You know what I'm saying? And you gotta holla at my man Mike because it sounds like he know how to close $8 million worth of deals, man. The man ain't playing around here. I don't care where you from. You can be from Massachusetts, Los Angeles, New York, Gary, Indiana, ain't nobody— the man say he know how to make some money because he can solve problems that others can't by packaging things that others are refusing to do, man. He said it's simple. I don't know why they didn't do it, but they chose not to. And so, Mike, man, let me ask you, man, I only got one more question for you, man. I really enjoyed you sharing these nuggets with us today, man. But before we go there, man, where can we find your company, man? Where can we find you at? Where can we find you on social media? Where can we find your book?

Okay, it's real simple. And my book is free, by the way. I don't sell it. It's just something that I like to give to business owners that are interested in hiring me or if they're not. It doesn't matter. Go to nextstepcfo.net and you could download a copy of the book right there. But what I also like to do also, Corwin, is I like to give business owners a little, what I call a tchotchke, but it's a one-page evaluation of your position of market dominance. So the Captivate and Fascinate of the Conversion Formula.. And I can give you that. It's a one-page template and you evaluate yourself on how well you solve a customer's problem and come up with a solution. And it's just one page, it's real quick, and I'd love to give that away. So if people are interested in that, they can go to my site, nextstepcfo.net, hit the contact button, fill out the contact form, and put position of market dominance or just market dominance in the contact form. And I'll be happy to send it to them free of charge.

Make sure I get those links, Mike, man, so we can get people to get this free content, man, that you out here giving. Mike, like I said, know how to solve problems. If y'all been listening, captivate, fascinate, educate, close the deal. Hey, so Mike, man, let me ask you this, man. Right now, many entrepreneurs are worried about economic uncertainty. What are a few practical steps small businesses should take to protect themselves financially?

Well, I think that the most important thing, you know, when I'm in front of small business owners in a room and I ask, "How many people look at their profit and loss statement once a month?" Less than half the room raises their hand. Then I ask them, "How many people look at their balance sheet once a month?" Well, then less than 10% raise their hand. And then when I ask how many people look at their cash flow statement once a month, I might get one person to raise their hand. And so what people have to understand is they have to look at their financial statements. Now, they might not know how to read them, and that's where they need to hire somebody to tell them the story that their financial statements are telling them. Because in uncertain times, one of the critical components is just understanding the story your financial statements are telling you. And if you understand 5 metrics, that's sales. You know what your sales are, and by the way, you'd be surprised how many people don't. But in any given week, you need to know your sales, your gross profit on those sales, your gross profit percent, your net profit, and your current Cash balance. If you know those 5 numbers, you can make 75% of your business decisions. Just those 5 numbers. So you don't even have to know the story your financial statements are telling you, but it's very important that— it's still important that you do. But if you know those 5 numbers, you're going to be able to make 75% of decisions. The other 25% is understanding the story the financial statements are telling you.

I like it, man. But Mike, I may not know the 5 numbers and the things that you were just talking about because you got me with the one which you say, no, the gross percent, gross profit percent, man, that's something new right there. But one thing I do know about 5, Mike, and I'm gonna throw a jab right here, one thing I do know about 5 is I know that Magic had 5 rings and I know that Bird— I do know that, brother. So, uh, so Mike, man, Lemme ask you this, man, real quick, man, I oughta get outta here though. For entrepreneurs listening right now trying to grow their business and create more freedom in their life, what's the one financial habit that they should start immediately?

I think they should know that vital 5, those 5 metrics. It's not hard. And they can ask some financial people on what gross profit percent is and what gross profit is and understand what their net profit is. I think if they could follow those 5 things, But I have something else. I have something else, Corwin CJ Moneyway Johnson. Now it just popped into my mind. You know, before you do tactical things, you have to strategically understand, why am I doing this? Where am I headed? And what does success look like for me? But not in the business, in your life. I see this mistake happen over and over again where people are so excited to make their impact in the world that they jump out there and they create this business and all of a sudden They're building their life around this business thing that they created. The way it's supposed to work is that you create the life you want first, and then you let the asset, which is the business, serve you, allowing you to get to that life. And I hope that makes sense because that is critically important. Forget about financial, forget about all of it. That is critically important. That's clarity. Mm.

I like that. You, then you build around you. First you got to be grounded and set in some things, then you build around that. Not the other way around, you know what I'm saying? Not being born breeched, you know, as they say back in the day, a backwards. You know, this is a clean show. Don't be born ass backwards. And so, uh, Mike, man, I really appreciate you coming on, man. This has been a great conversation. Your experience helping businesses grow more than 4 decades really highlights something important. Success in business isn't just about working hard, it's about working smarter with the right financial strategy. Thank you for sharing your insights with us today. And to everyone listening, if you enjoyed this episode, make sure to subscribe to the CJ Moneyway Show, leave a review, and share this episode with an entrepreneur, a business owner who could benefit from this conversation. You can listen to this show on all major platforms or wherever you listen to your favorite podcast show on. Until next time, legacy over likes, build brick by brick. This is your boy CJ Moneyway with my man Mike from Massachusetts with his man Larry Bird with 3 rings, and my man Magic Johnson with 5 rings, and then Kobe came back on top of that with 5 rings. Enough said, man. We gonna end it right there, man. To the next time, we out of here. Peace.

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