Profit First Keynote

Uh, Elise is, uh, my book recommend— recommender, I guess you might say. Like, she's like always sending me these awesome books. And I have a new habit. What I do is when someone recommends a book that I want to have, I don't put a note on it and then order it later. I just order it on one click on Amazon right then and there. So I've got like books, books, books, books. But some of 'em I like jump into right away. And in this particular case, I jumped into Profit First right away and absolutely loved it. And she was like, "Oh man, if you could get Mike here, how amazing would that be?" And then it turns out that she can't be in the session. She is so bummed out. So we gotta figure out how to fix that because Elise Makaravich is the one responsible for what you're about to experience. Love the book. Man's phenomenal. Please welcome to the stage Mike Michalowicz, Prophet First. Thank you very much.

Thank you. Whoa, wow, Howard, thank you so much. Appreciate you. Thank you. Oh, that's very kind of you. You know, when you get a standing ovation before you start, you better not screw I love our last presenter. She, the sponsor up here, said that they love numbers. That's pretty atypical, I think, for entrepreneurs. I actually hate numbers as an entrepreneur myself, and it's good to see someone that's into it. This morning I want to talk about addiction, and listen, I don't want to get all creepy on you. I'm not going to freak you out here. I have an addiction, but it's perhaps not what you think. 'cause it's an addiction I think you also have. Actually, I'm convinced it's perpetuated throughout all of society. It's an addiction to a thing called axioms. I don't know if you've ever heard of the word before. Axioms was new to me when I first heard it. An axiom is a belief that perpetuates through society because the prior generation believed it to be true. So the prior generation says, this is just the way the world is. And then the next generation says, clearly that is the way the world is. And it continues on and on and on. There was a time that mankind, we, literally thought the world was flat. Do you remember that from history class? This was around 1000 to 500 BC that mankind thought the world was flat. And if you looked at Old World maps, pretending this is a map, in the corner were like sea serpents and monsters. You know, they were there specifically to dissuade the sailors from going too far out in the ocean. Because if they did, they would fall off the edge of the planet. That's what people believed. Well, it was around 500 BC that Greek philosophers challenged this belief. As the story goes, there was a master philosopher and his apprentice, and they were sitting at the port as boats were coming in and out of port. The master philosopher sitting there, he was eating like a pear or something, and there was a brown spot on the pear. And he's looking at his pear before he takes a bite into it, and he turns the pear and notices that the spot disappears from his vantage point. He can't see it anymore. As he turns it back, the spot reappears, turns it away, it disappears, turns it back, that spot reappears. Well, he notices this phenomenon with the spot, and then he looks out in the ocean in the port, and he notices as the boats are going out of port, they start to sink down below the horizon. And as they return back into port, they rise back out of the horizon. He turns the pear, he looks at the boats, and that was the epiphany. He looked at his apprentice and said, "Do you realize what this means?" And the dutiful apprentice looked at the master and said, "Of course, master. The world is not flat after all. It is round." And the master philosopher looked at the apprentice and said, "No, you idiot. It's shaped like a pear." Oh my God, that's hysterical. Thank you. Thank you. All right, so I clearly made that, that little part up, but the rest of it actually is true. Around 500 BC, Greek philosophers discovered that the world was not flat, it was round, and they then told the world about it. Sadly, it took another 2,000 years— it was around 1492 that Christopher Columbus sailed the ocean blue— another 2,000 years before mankind, before we accepted this new belief. In fact, those Greek philosophers, when they said the world's not flat, it's round, got stoned for saying that. And I'm not saying the good stoned. I mean, they got— I'm not saying it's a bad— but they got killed. They got killed for saying that. I believe there is another axiom, another belief that's perpetuating generation after generation that is actually destroying entrepreneurship. The whole perspective we have is wrong. It's a formula I know you've been told and taught. Either you've read it in books, I'm sure other entrepreneurs have told you about it. I'm sure you've heard it as recently as yesterday. Here's the axiom we are told. Hopefully you can see that from where you're sitting. Sales minus expenses equals profit, right? We've all been told this. Profit's the bottom line. It's the year end. How much did you make? You have to have sales to run your business, to grow. You have to have expenses to support those sales. And what's left over is profit. We've all been told this formula. And what I want to share in our hour, hour and a half together is that this is an abject lie. It's not true. I mean, listen, logically it is. I mean, mathematically, this makes sense. But in execution, how it affects us, how it affects entrepreneurs, it's not true. I know Howard made reference to this. There was a study conducted in part by the SBA, the Small Business Administration. Uh, the study originally started with companies in the US. There's 28 million small businesses in the US, and a small business is defined by a company that does $25 million in annual revenue or less. That's absolutely my business. I suspect it's many or most of the businesses in this room. We represent small business and there's 28 million of us. The study went on to then go on to a global level. There's 180 small billion, million businesses in the globe. And this study concluded that 83% of these businesses are surviving check by check. They're not profitable. The vast majority of businesses are profitable. And what this means is that we are desperate for sales today. If money doesn't come in today, I don't know how I'm gonna pay rent tomorrow, let alone payroll, and let alone myself. Most businesses are surviving check by check, and I suspect it's you. Statistically, it's 83%. If it's not you, it's the person sitting to your left or sitting to your right, statistically. The problem with this formula is not the mathematics. The problem is it doesn't work with our natural behavior. It doesn't work with how we are programmed, how humans are designed, because this tells us that profit comes last. And we all know when something comes last, it's insignificant. Could you imagine if you got rushed to the hospital today, the doctor checks you out and she says, you know, you got to change your diet, you better stop smoking and drinking. Do you come out of the hospital that right after that meeting and say, you know what, starting today, I am going to put my health last. No, never. You say, I'm gonna put my health first, right? What becomes— what is a priority gets put first, and what's insignificant, we push off to the end. And we've been programmed and told that profit comes last. I remember going to my own accountant about 10 years ago. Maybe you've had this experience too. You know, he— it was around tax time. He takes out, you know, the profit and loss statement, the income statement. He's looking through it and he takes a big marker, big red marker, and circles the bottom number at the end. He said, Mike, congratulations, you actually had a profit this year. Remember, it was $5,000 circled on there. I then, I looked at him, I said, Keith, I'm a little bit embarrassed to ask, uh, where's the money? And, uh, he, he— thank you for laughing, because he did the same thing. He goes, "That's an accounting profit. You don't really have that money. You spent it already." And I was like, "What?" What we're going to talk about today is not the accounting profit, not a number on a sheet that you get excited about for 10 seconds and then you start crying because you don't have it. We're going to talk about the entrepreneur's definition of profit. Cash is in your hand for you. And did I hear an amen? Yeah, yeah, there we go. Yeah. All right, so here's the deal. I'm from New Jersey. All right, I just heard that. I literally almost hit the deck. I literally almost hit the deck. Um, yeah, do not do that. Holy cow. Yeah, but it's funny, two things happened. First, I almost hit the deck, and part of me also said, hey, I'm home. That was, that was scary. Okay, so what we're gonna learn today is this is not the formula. We're gonna make a real simple change. You must have sales. Sales must be the start of your business. But starting today, we're gonna say sales minus profit. Profit equals expenses. A subtle change in the formula. And if you know some basic mathematics, nothing's changed here logically or mathematically. We just swapped what they call variables. So nothing happens mathematically, but behaviorally it instills extraordinary change. What we're going to learn today is the pay yourself first principle. Simply apply it to business. Well, let's first talk a little further about that old formula where expenses comes first. I had the good fortune of growing a couple businesses, ultimately selling the businesses. I was in the IT space for my first business. My second business was in computer crime investigation. My company helped actually facilitate the investigation at Enron. A lot of people ask me about the Enron trial because we were involved in that. They say, "Mike, you know, you had the behind the scenes look. What's your analysis?" Guilty. Absolutely guilty. We, that company, we did some of the biggest cases, sadly, where there were criminal cases where there was computer forensic evidence, murder cases and just horrible, atrocious things. We also did Christie Brinkley's divorce, her, I think her, 1, 2, 3, 4, 5, 6, 7th divorce. She got divorced from a guy named Peter Cook. But at that time, my business had about 35 employees, and all small business owners know this, sometimes you have to make sacrifices for yourself and for the company and do the work yourself as the owner. So I had to work with a supermodel. 'Cause I'm a business owner, I had to make that sacrifice. And my wife, my wife still does not buy that line, but I still try it. And I subsequently sold that company to Robert Half International. Does anyone know Robert Half International? Yeah, okay, okay. Is there any Robert Half International employees here? Okay, phew, good. So they're a Fortune 500. They don't account temps and office temps. I'm sure you've heard their commercials. A lot of people don't know is I just shared with you my bullet points of my resume. Literally, those two things are like, that's my resume. I don't have enough space on that one piece of paper with those two bullet points, so I have to add, you know, proficient at Microsoft Word at the bottom, you know, speaks English barely. Like, that's what I have to put on to fill out my resume. They sometimes don't call resumes, by the way, they call them CVs. Anyone ever heard of CV? Do you know what CV stands for? Curriculum vitae. That's what I thought, curriculum vitae. It doesn't. It stands for covered vomit, uh, because under my resume and under yours is just like pure putrid disgustingness. It's called the entrepreneurial life, struggles and panic. I remember when I had 35 employees and was doing $7 million in that's such a successful company, refinancing my house for a third time to cover payroll. I remember the constant panic and stress. I remember not being able to sleep. I remember the tears coming down when I had to let go half of my employees because I didn't know how to run a fiscally responsible business one day. That's the reality, what's below it. And I said to myself, one day when I really make a lot of money, I'm gonna do good things with it. I'm gonna grow better businesses. I'm gonna serve the world in a better way. I know one thing that I won't let take control is an ego. I hate those stories of successful people that make all that money and just use it for stupid trophies and stuff like that. Well, at least that's what I thought for myself. Then that check came across the table when I sold my company at Robert Half International. I'm in the conference room, which actually was literally bigger than this room. I'm sitting all the way on that side. The managing partner, his name was John, was sitting all the way on that side, and between us were all of the partners, the people that had flown in from different branches of Robert Half International to facilitate what was called Acquisition Week. My company was being acquired along with some others. And I remember sitting at the table, and by the way, has anyone here sold their business? Anyone sold a business? Okay, so you can validate this. You go through what's called the dance where there's all these different suitors. A lot of people ask us, you know, selling a company, is that a good thing? And the God's truth is not. It's an amazing thing. It's an amazing thing. You sit at this table and then the check comes across the table. One little business tip I'll give you that you definitely want to put this one in the notes. If you do sell a business, do not do what I did. The managing partner slides across the check across the table. All the partners, like, in their perfect suits, are sitting there all applauding. Congratulations. And we were sitting so far apart that John had one of those little microphones that you would see at an airport where you had to push the button down and talk into it for general boarding. He picks up the microphone, pushes it down, and says, "Mike, I'd like to congratulate you. You are now officially part of Robert Half International." It was like seals, I guess, were there. I grabbed my microphone, and here's what you do not do in one of these meetings. Meetings. I push down the button, I go, "Pardon me, John, would you pass the Grey Poupon?" I didn't last long at Robert Half International, and that check didn't last long either. I became a multimillionaire when I was 32, self-made. And I called my wife and said, "I just sold the company. We're there. We've arrived. We've I think we should celebrate a little bit. Next morning, I got my dream car. I mean, I promised myself this when I was in college, that one day I'd have a Dodge Viper. My wife calls it, "He has no P word." Okay, personality. Person— yeah, you dirty minds. Personality. He has no personality. I also bought a Land Rover LR3 and a BMW 7 Series, all within 4 hours. Yeah, yeah, yeah. The guy who said, oh, I will never be one of those guys, I'll never have the ego, became the spokesperson for it. The term for being a spokesperson for someone with a big ego is being a dick. I became a massive dick. I can't think of another word for it. What I did is I moved into one of the more wealthy towns in New Jersey. It's called called Mountain Lakes. The irony of Mountain Lakes, if you know anything about New Jersey, is we neither have mountains nor lakes. It's more like kind of hilly ponds. It would be the appropriate term for the town I moved into with the intention of buying the biggest house in town. I joined the club at Mountain Lakes where the more money I spent at the club, the higher my name would be on the wall. And I became an angel investor. Because I said, well, now I know the solution to profitability. Profit is not something that happens as you run a business. Profit happens at the end when you sell a business, when you have that one big customer come in, when that one big investor comes to you. Maybe that's what you're thinking now too. And I was now convinced of it. That old formula where profit's the bottom line, it's a game of just patience. Just wait, wait, and wait, and that moment will come. I had proven it now. So I decided to become an angel investor and just repeat the formula over and over again. In 2006, I started 10 companies with my own money. You know, if you had a business idea, I'd be like, oh, that sounds amazing, but quite frankly, I'm here, which makes it super amazing. Like, yeah, yeah, the dick did not go away. And I would say, let's put $50,000 here, $100,000 there. Oh, that's a good one, $200,000. And I started all these businesses. Ends up I am the worst angel investor of all time. I actually have a new term for my technique. I don't call myself an angel investor. I prefer to go by the Angel of Death. Thank you. I destroyed these businesses. Within 2 years, every business was out of business. The money was flowing out faster than I could imagine. Unbelievably fast. In fact, it only took me 2 years to eradicate all of my wealth on stupid trophies, on stupid arrogance, and just pure ignorance. It was 2008 during the Great Recession we were having when I got the call. It was February 14th. My accountant called me. His name is Keith, the same one who had circled that profit that one year. And he said, hey, Mike, we gotta have a talk. I knew the talk was coming. He said, we're preparing your taxes and I know your cash situation. You can't pay your taxes. We're going to have to do something here. I responded, maybe you've been in a situation similar. I said, what do you do if you can't pay your taxes? And he starts laughing again. He's like, it's kind of funny. You go to jail. You go to jail. So I said, is there an option B? And he said, there is. It's called going on an installment plan, which if anyone in this room has been on an installment plan, that's worse than going to jail. It is misery. The penalties, the fees, the interest. No. February 14th, 2008, he said, Mike, you should declare bankruptcy. I never did, by the way. My ego was still too strong for that. But that day I had to go home and tell my family. You see, I have 3 children, 1 wife. I don't know why I have to say 1 wife. That makes no sense. Yeah, 3 children, 2 wives, 1 dog. No, 3 children and my wife and a dog. And I had to go home and tell them the situation because up to that point, I actually had not been telling them anything. I'd been lying to them embarrassingly by omission. You know, I believed that old formula would actually pay off one day. I didn't have to tell them how bad it was. And quite frankly, I didn't even really admit how bad it was. I logically saw the numbers declining, but my heart knew or prayed that one moment something would happen magical, that one turning moment, and everything would be fixed. But this was the day I said that one magical client, that one magical moment, it's not gonna happen, 'cause we're gonna lose our house the next morning. I came home to my family on February 14th, and how we celebrate Valentine's Day at our house is similar to maybe a Thanksgiving dinner dinner, maybe how you celebrate it. We actually cook a meal together as a family. My children, my wife, and I will be preparing the meal. And then we'll sit down at the table and we'll get these huge poster boards and fold them in half so they're like mega cards. And we'll write I love you as big as we can and write stories, these long stories of how we showed appreciation and love for each other over the year. It's literally my favorite holiday. Except for this particular day, it was not. I came home late, not because I had anything to do. I was ashamed. I came in the front door, and I opened the door, and I couldn't even make eye contact with my wife, who was waiting for me because I was an hour late. She'd been texting me. I hadn't been responding. And I couldn't look at her. And she said the words that cracked me open. She said, what's wrong? And that's when I started just crying. And by the way, it wasn't like a— it was more of a— Yeah, thank you for laughing at that one. I'm happy we're that comfortable with each other. It was a screaming, sobbing cry, and she's like, "Sit down, sit down. Who died? What happened?" And I sat down, and I didn't know what to say. My children had already gathered at the table. They were just sitting around the table and looking at me, and I just start saying, "I stole it." Actually, I didn't know the words to say, so I kept on saying, "I stole it." I stole it, I stole it. She's like, I stole what? I'm like, everything, everything we've had is gone. Listen, I know every person here is in this room for two reasons. One is I hope you have a business that you love, that you're serving your passion. Secondly, you're here because you're a provider for yourself and for your family. I know it. We are here to provide financial freedom. This a-hole took it away. I'm, uh, to the table and I'm crying, and I just start saying it like, we're about to lose the house. Um, we— the cars, who cares, they're gone. My daughter likes to go horseback riding once every 2 weeks. It costs $20 for a group horseback riding lesson. I'm like, that's gone. We're gonna be lucky if we can find a rental. The car's gonna be repossessed tomorrow. As I'm saying this My family was just staring at the chandelier. No one could make eye contact with me. I could barely look at my disgusting soul. I was just looking up, and they were too. And then my daughter, she was 9 years old at the time, just jumped up and she started to run as fast as her little legs could carry her, sprint out of that room. And I don't know what your darkest moment's been in your life. I know you've had it. In fact, I'm sharing my story, but I think I'm also speaking your story or a story similar to it. And when she ran out of the room, as much as that crushed my heart, that also was the answer, running away. You know, when you had that darkest moment of your life, sometimes the solution is just run away. Go to a place where no one knows your name, no one knows who you are, and you get a fresh start. The thing was this, she wasn't running away. She ran to her room, her room as fast as she could so she could get her piggy bank. And she ran back down to me, right to me and said, "Daddy, I'll pay for our family. I'll cover us." You know, I get emotional. I've told that story hundreds of times and now I still get emotional about it because I know that's the moment when I take my final breath on our planet, that's the memory that's gonna come to me. I can— it's crystal clear. It was 8 years ago, 9 years ago, 10 years ago. And that's what's called the rock bottom moment. You've been there. And there's a saying about the rock bottom moment, by the way. It's a beautiful saying. They say, as miserable as our life can be at those rock bottom moments, at least there's only one way to go. Up, which is total bullshit. It's a total freaking lie. The reality is you hit rock bottom and there's like shards of glass down there that tear your face apart, just rip your soul. What happened in my rock bottom moment is it spawned a 2-year spiral of depression. This is something I'm not proud about. But something I feel very compelled to share because people in this room have experienced depression, I know it. In the entrepreneurial community, it's the most prevalent of any community, is the entrepreneurial community and depression. I went through what's called functional depression. Functional depression is the highest level of depression, and how it manifested for me is I would never be in a social environment. Of course, I would never get on a stage and talk, let alone see my friends. I removed myself from any social environment. Started to drink. I'm not really a drinker. I mean, listen, someone wants to go out for a margarita tonight, I'm in. I'm totally in. But I'm not really a big drinker except for this phase of my life. I hit the bottle and I hit it hard. I also became an insomniac, couldn't sleep. I was just up all the time. I remember a year or two into this, this one particular night, I'm sitting on the couch in our rental home, and I'm wearing like a white t-shirt covered with Cheetos stains, and I don't even like Cheetos. And I'm sitting there, there is booze spilled around, and I'm watching television at 3 o'clock in the morning. And I couldn't afford cable television at this point, which is amazing when you have the rabbit ear television, the antenna television. They they still broadcast 3 channels. The only problem is at 3 o'clock in the morning is they show infomercials. And I'm sitting here and I'm, you know, just kind of in this fog, just thinking about how miserable I am. And on the television comes something more miserable. Suzanne Somers with the ThighMaster. Have you ever seen this thing? And she said, no, you can get into perfect shape by just clapping your thighs all the time. And that's when I'm like, oh my God, how pathetic am I? I've been watching this for a half hour and I'm enamored by it. That ultimately became the true turning point for me. And the true turning point, by the way, was an epiphany saying I found the solution to profitability. I figured it all out. That's not how it happens. What happened was the turning moment. I can't I can't put up with this anymore, and I turned the channel. And I am so grateful for turning the channel because what I discovered on the next program answered all of my questions about profitability, and I think it's gonna answer all of your questions and challenges you face with profitability. On the television, it was a public broadcast channel, and it was a fitness instructor talking to an audience similar to this size. They were recording and then broadcasting on the television, and she starts explaining the fundamental principles to fitness. It was amazing how she opened the event as it was being broadcast. She said, "You know those gimmicks out there?" she said to the audience, "Like the ThighMaster?" And I'm like, "Oh my God, how does she know I'm watching that?" And, "Have you heard of this other gimmick, the Ab Inductor? It's literally a belt you put around your waistline and you electrocute yourself until you're ripped." That's the Ab Inductor. And of course, there's the other ones she talked about, the extreme regimens. We can do the P90Xs of the world, you know, where you work out for 4 hours a day until you're ripped. And she said most of these programs fail us because either they're just flash-in-the-pan gimmicks or the regimen requires such a shift in our behavior that's not sustainable. Yeah, a few people do amazingly well with the things like P90X, but the vast majority of us can't work out 4 hours a day, let alone want to. She said the key to successful physical fitness is to work with our existing behaviors and went on to share 4 principles about it. As I was hearing that, and she shared the 4 principles, I'm like, oh my gosh, everything she's talking about physical fitness applies to fiscal fitness. What I wanna share is the 4 principles she explained and, uh, teach you how they translate into profitability. By the way, I have a little worksheet I handed out earlier so you can follow along with me. It's kind of a fill-in-the-blanks type thing. The answer to number 1, by the way, says society's addicted to axioms. So the first blank is axioms. We talked about when we opened up, we talked about the Greek mythology or the Greek stories of the philosophers. The second line is generation. So if the prior generation says it's true, The current generation— so repeat the word generation again— assumes it to be true. As a result of today, and Howard was kind enough to share, 83% of businesses under $25 million in revenue are surviving check by check. So the first one is axioms, generation, generation, 83%, check by check. The second one, by the way, is we've been told our entire lives that profit is an event. We don't usually say it's an event, we say it's the bottom line or the year end. And what I want you to learn today is that profit is not an event, profit is a habit. We're gonna bake it into every single transaction of your business. And so that for line number 2, by the way, that's the answer. Profit is not an event, profit is a habit. Alright, first principle we're gonna go over is small plates. So as I'm watching this fitness instructor, She starts talking about the diet in America, but this is true globally too. We have the worst obesity epidemic of all time. And she explained, you know what's funny is the problem isn't the foods we're eating as much as how we're eating. You know, 200 years ago, she explained in the 1700s or late 1800s that plates were this size. So if you think of like a coffee saucer or a dessert plate, that's how big a dining plate was nearly 200 years ago. So George Washington and his buddies ate off plates of this size. Over time, plates have literally doubled in size. And he's explaining that humans, we haven't changed. 200 years ago and today, we act the same way. We fill up our plate, and as our moms have told us, we clean off the plate. But since the plate has doubled in size, Our serving portions have doubled in size, therefore our caloric intake has doubled in size, therefore our waistline. She explained, "If you want to fix it, just reduce the size of the plates we eat off of, and we have to continue our normal existing behavior." Anyone here have teenage boys? Okay, for anyone who raised their hands, I'm sorry. I apologize. I do too. They're not called teenage boys, they're called creatures. I have two of these monsters at my house, and I know you all can relate to this. The cereal, the volume of cereal we go through at our house is ridiculous. Like, we go through a box every hour. You know, we just have like the Cheerios guy just back up the truck. And my boys, it's always the same thing. They go to the table, the kitchen table, they plop down the big cereal bowl. Then they grab the Cheerios box and they pour all these Cheerios in. It goes everywhere. Cheerios all over the table. Then they very carefully assemble the Cheerios like a Jenga tower, right? All the way up this precarious tower. And then they add the milk. Milk goes in. Cheerios everywhere. And they pick it up with milk and Cheerios on the table. They pick up their bowl and their spoon like, what? What? They start eating. They're monsters. I heard this principle 10 years ago now about smaller plates. I said, I'm going to try this out with those, those goons. And here's what I did. I all of a sudden got very clumsy at the house. I'd walk around like, oh, I hit another cereal bowl at the table and it broke. I'm so embarrassed. Broke another one, broke another one. Within an hour, all of them were gone. And I had to go for a run down to Walmart to buy some replacements. And then instead of getting the same size cereal bowl, I got smaller ones. Now here's the key: as much as those, those boys are creatures, they do have one— you know, they can, they can observe some things. So if I got a cereal bowl that was half the size, I know those creatures would notice. So I simply got bowls that were slightly smaller, put them out, And what did they do? Fill up the cereal bowl, everything, "Wah, wah, wah." Then 2 weeks later, clumsy dad came around, whoops, more cereal bowls crashing and smashing. Got smaller ones, smaller ones. It took me about 6 months of going through about 4 iterations of this and the cereal bowls were half the size. And those creatures never noticed. They just went, "Wah, wah," just kept eating. But our cereal consumption dropped. We're, you know, we got a box was now lasting us a couple days. Reduce the size of the plates and our behavior can continue to be the same. Well, as I'm hearing this on, on the television, like, that, that's the solution to my business. Now I need honest feedback here. Just by a show of hands, there's no wrong answer here, but I need a truthful answer here. How many people here in their business have a single primary checking account? And what I mean by primary checking account is that all of your deposits for your business go in there and you pay all your bills from there. Just raise your hand if that's true for most. Okay, whoever's raising your hand, awesome, awesome. Second question I have, how many people in here check their bank balance at least once a month? You log into your bank and check your bank balance at least once a month. Okay, almost every hand went up. Okay. Who checks once a week? All right. Once a day? Right now? Okay, it was two hands. Yeah, okay. I want you to realize, if you've raised your hand, that— and everyone did— that is the typical normal behavior of an entrepreneur. And what that fitness instructor was saying is leverage our existing behavior. Don't change who we are, channel how we are. My boys still fill up a cereal bowl. They did the exact same thing. Thing, but they started to consume less because we changed the system around their existing behavior. It's funny because our accountants will tell us the one thing you should never do is look at your bank account. Instead, read your profit and loss statement, tie that to your cash flow, tie it back to your balance sheet, run the OCR, which is the operating cash ratio, know the other metrics, what's your KPI and your budgets, and know all that stuff, and whatever you do, don't look at your bank accounts. Listen, I say that super quickly because I have no idea what that stuff is. Like, I don't know how to read a cash flow statement. Income statement, I'll try to fake it, but no. What I do know is I can log into my bank account, see what my bank balance is, and if I have money, I can spend it. If I don't, I panic. That's the system I use. And I noticed that this is true for many of us. That's how we run our business. And therefore, instead of changing that behavior, for 200 years, modern accounting has existed for 200 years, Accountants have been telling us, don't do that, don't do that, please don't look at your bank account. But for 200 years, we have been, and we will continue to do it. So instead of trying to change who we are, let's just change the system around who we are. And what we're going to do is set up, uh, multiple bank accounts at your bank. So step one in driving profitability in your business is actually to set up multiple accounts. I suggest every business has 5 accounts, and these can be checking accounts or savings accounts. I prefer, um, checking accounts. So the first account we're going to call Income. The second account we're going to nickname it Profit. Um, the next one we're going to call Owner Comp. Uh, the one after that we're going to call Tax. The one after that we're going to call Operating Expenses, or you can call it OpEx if you like to do a little short kind of cool thing. Let me explain how each of these accounts work. Starting today, I'm suggesting that we have what's called a Depository Only account, an income account where we only put deposits. We will never pay a bill from there again. The analogy I want to use is Thanksgiving. Think about Thanksgiving. It's only, what, a month away now? God, does time fly. It's a month away. At Thanksgiving, maybe you'll celebrate at your house, maybe you'll visit family or friends, but here's what happens at our house. That big serving tray comes out with the big golden turkey on it, right? Everyone oohs and aahs. They take out their phones. Oh my God, that's an amazing turkey, right? Then, because I'm hosting with my wife knife, we carve the turkey. We don't say, hey everyone, just grab your knife and fork and stab into the turkey, every man for themselves. No, we carve the turkey. Why do we carve the turkey? So we can apportion the turkey to each person that's at the table, so everyone has a portion to eat. Of course that's how you do it. Whenever you serve dinner, if you have a serving plate, you apportion some to each person. In our business, when we have a single checking account What we're doing is we're just saying, here's the big turkey business, all the cash there that we have, it's right there. Who wants to eat next? Oh, those bills? Okay, let's feed them. It's very reactionary. So if you have a single checking account, we just need to change the system around it. We don't need to change you, we need to change the system. And what we're gonna do is set 5 accounts. The first account is the income account. It's a serving tray. Money goes on there, but we will never eat off of it. It's for display purposes only. Money piles up. And you can log into your bank account, see how much money's piled up in your income, but you will never pay a bill from there. The next account is called profit. What profit is, is a reward for the shareholder of a business. Every person here that— who's an entrepreneur, which is everybody, has done something extraordinary. You've done what 97% of the world population didn't do, doesn't have the courage to do, nor the drive, nor the intelligence. You're in this room and there's billions that are not here because you started a business and you are a shareholder in your business. You took on extraordinary risk. Does anyone here own public stock? Anyone own any public stocks, some shares? Okay, some shareholders. So you probably get a quarterly profit distribution from whoever you own, right? I own Ford stock. I'm not endorsing Ford, by the way. I own stock in Ford, 100 shares. Shares. Last quarter, they sent me a distribution check for $13.23. Check came, it was the profit distribution for my shares. I ripped it open, I looked at the check, and here's what I did. I said, hmm, that's for me. I didn't say, you know what, Ford could really do better with this money. I'm going to plow it back into Ford. You know, I'm going to reinvest it. Hey, go, let's hire more people with my 13 bucks. That's for me because Ford knows it is critical that you must reward the shareholders because the shareholders have taken on extraordinary risk. I'm hoping Ford stock will climb, but it could go down, and therefore they're constantly rewarding me. And every major public company does this. You've taken extraordinary risk. You started your business. You You own more than 100 shares. You probably own all of them, or you and a partner own all of them. Profit is a distribution of money to reward and recognize the extraordinary risk you took. That's what profit is. It's a celebration. It's a recognition for taking risk. For God's sake, is there some other way to celebrate besides scaring the shit out of me? Oh my God, every time, like, oh my God. And again, my heart's like, I'm home, I'm home. All right, owners— this is crazy, this group. Owners comp. Who here has employees? Anyone here have employees? Okay, I'm going to pick on you with this nice suit in the front because you're right there. What's your name, by the way? Scott. Scott, I'm Mike. It's a pleasure to meet you, Scott. How many employees do you have? 5. So Scott has 5 employees. Are any of them here? This just became very awkward. Scott did one of these. He's pointing to the person next to him. For God's sake, he's like— and he did one of those smiles too, like, just move on, pal, move on. Scott, I'm real sorry. Of all your 5 employees, do you mind sharing the first name of your best employee? Employee? Reagan. Reagan. Okay, thank you. Okay, thanks for participating, and Reagan, congratulations. Anyone else here have employees in the front in here? Okay, uh, right here. Do you have employees? How many employees do you have? 3. Okay, and what's your name? Nick. Nick. Okay, what's the name of your best employee? Nice. I like how he rolls. He's awfully arrogant, but I like how he rolls. You're talking about yourself? Okay, here's the deal. I think you lied to me. I think Nick told the truth. I think many of us, as you were going through this exercise in your own head, you were thinking of someone else. You know, it's the entrepreneurial tendency, and I'm pregnant. I'm sure you are a rock star, but I suspect, Scott, you've done certain things that other people haven't done. I suspect you've worked some ridiculous hours for your business. I suspect you sacrifice time with your family and friends. I suspect you're the best salesperson for your business. I bet you're the best operator for your business. I bet you've done all this stuff at times for no pay, right? Have you, Pagan? No, she's like, no, no, you're paying me. I just defined the world's greatest employee. Scott, if I can get you to come to my office, work like a madman, sacrifice your family, be my best salesperson, be my best operator, and do it for no pay, you are hired. I would die to have you, literally die to have you. And our businesses should be dying to have us. All— every per— every business owner in this room does extraordinary things for our business, yet we're the last ones to get paid. What happens? Maybe 6 weeks, 6 months, 6 years after doing this, that we start to resent our business. Now, Reagan, I don't mean to be picking on you, but I'm sorry. If Pragyan goes to Scott and says, you know, you pay me very well, but I need a little extra money, Scott's trapped. He has to pay a little extra. Pragyan's the best employee. Pragyan's like, oh. Now she's taking notes. She's like, oh, all right. I can get a salary? I can get a raise? But we, the entrepreneur, are trapped by the best employee. Because we don't know that we, like Nick realizes, We are the best employee. No one is doing for your business what you are doing for your business. Therefore, we must reward you accordingly. We, we have to pay you like we'd pay the world's best employee, because you are. Next account's called tax. Like I said earlier, you, you started your business for one of two reasons. One is to, uh, to pursue a field you're passionate about, but secondly is for financial freedom. When tax time comes, April 15th, Shouldn't the business be taking care of our taxes for us? Why should that come out of our own pocket? The answer is, yeah, yeah, of course the business should be taking care of our taxes. So we're going to start reserving your tax liabilities as a business owner in this tax account. And the final account is operating expenses, OpEx. Um, if you look at the back of your worksheet, my colleague— where's Jill Frillman? Is Jill here? Oh, Jill's way back. It's just— if you look way back, there's Jill waving. Um, she's doing a little workshop later. She can answer all your questions. She is a Profit First expert. Um, but on the back, she helps people walk through this process. So we're not going to do this together on stage today, but you'll notice in the middle there's a chart that says TAPs. That stands for Target Allocation Percentages. What we did, Joe and I did, is we conducted an investigation of 1,000 fiscally elite companies and we discovered the percentages they're allocating effectively to these different accounts. So, uh, I know there's a wide variety of businesses in here. You can find your column, but let's just look at column D for now. Ignore the real revenue. That's a more advanced thing that Jill can go over with you. But let me just go for, for the remaining 4 cells in column D. This is a percentage-based system. The fiscally elite companies do 10% for profit, 10% of their money goes to owner's comp, uh, 15% goes to tax liabilities, and that leaves or remains 65% remains down there. This is how this system works. Now, if I have a— we'll say a $2 million company in annual revenue over the year— I allocate 10% of that to profit, literally $200,000 in the profit. I allocate $200,000 to pay me, the most important employee. I allocate $300,000 for taxes, because I'll tell you, when you're making $400 $100,000 in take-home, you do have a big tax bill. And that leaves the remainder, which is what, $1.3 million, to run my business. And this is the moment when I draw this on the board that people say, Howard just borrowed on someone who's freaking crazy. I can't do this. This is insane. Other people think it's the ice bucket challenge. I remember that meme that went around a couple years ago. You take it up bucket of ice you dump on your head and you freeze to death. That's what people see. This guy's, this guy's ridiculous. No business does this. No one in my industry does this. Clearly he was more than drinking, he was dropping acid during his depression. And that's how I felt too when I first saw these numbers from these fiscally elite companies. I said, my business can never do that, until I learned about a thing called Parkinson's. Parkinson's Law. So I want to explain Parkinson's Law, probably the most important thing I'm about to share with you. And before I forget, I do want to answer number 3 and number 4 on our chart here, on our worksheet. Number 3, we drew the 5 income— the 5 accounts: income, profit, owner comp, tax, and OpEx. So that's the 5— what we call the 5 foundational accounts you need to fill in for number 3: income, profit, owner comp, tax, and OpEx. Owner comp, tax, and OpEx. Number 4, we talked about the income account. Starting today, this is a serving tray. It acts as a serving tray, and you only deposit income into it and then allocate money to the other accounts. Okay. And the answer to number 5, which we're about to cover now, is Parkinson's Law, the concept of Parkinson's Law. Parkinson was a behavioral theorist in the 1950s, a modern-day philosopher, if you will. He's watching human behavior and he notices that there is a chart out there which is actually an axiom, an established belief, and he says it's totally wrong. It was the supply and demand curve. And this is how supply and demand curve works. That's a D, there's an S. You've probably heard this, Economics 101. As demand increases, as more people want to consume stuff, The supply, the rise of vendors, will occur. So the more consumers want to buy a certain product or service, more vendors, more supply will appear. Very logical. He looked at this axiom, established belief, and Parkinson said, you know, that's great, it makes logical sense, but behaviorally it's actually the opposite. He said how it really works is as supply increases, the more available something is, the demand for it increases. He actually flipped the chart. What he said is, um, the more we put something in front of us, the more we'll consume of it. Yeah, we talked about with my teenage boys, the cereal. The more cereal you put in front of them, the more they eat. Me, chocolate chip cookies, I'm addicted to them. If you put a chocolate chip cookie in front of me, I'll eat it. You put 15 in front of me, I'll eat more than one. More supply, I consume more. That is how humans behave. Well, the problem is when you're— everyone raise their hand. You said you're logging into your bank account, see what your bank balance is. You see all that money in that account. It's a big plate of chocolate chip cookies. I'll say, you know, I can spend some money, I can spend money, and we consume it. So the supply of money is dictating our behavior is what he argued. He said there's something phenomenally interesting. I had to embed the word phenomenal. I just did. Thank you. Thank you very much. No, I didn't. I didn't. There's something phenomenally interesting. What he said is, as supply increases, we automatically consume more, but as supply decreases, we consume less, which is obvious. And then he said, but we become very innovative about this little supply that we have. It's actually going to happen to you tonight. Parkinson's Law is going to happen to you tonight. Is everyone staying at the hotel here? Okay, 2 people. Everyone's like, "No!" Okay, hopefully you filled your room block there, Howard, with 2 people. So tonight when you go to bed at your hotel or at your house, watch the process of brushing your teeth. You know, you're getting ready for bed, you go into the bathroom, you pull out your fancy schmancy toothbrush, and then you open the drawer to pull out the tube of toothpaste. And there's gonna be one of two scenarios that presents itself. The first scenario is a full tube of toothpaste. You open the drawer, there's your full tube of toothpaste. You're like, yeah, okay, I'm gonna brush my teeth, go to bed, can't wait to sleep. That speaker today was amazing. Yeah, that was my Anthony Robbins. I'm trying to employ neuro-linguistic programming in your head. But so what you're gonna do is you have your big tube of toothpaste, you go and you put it on your toothbrush to brush your teeth. Then— and I don't know, by the way, when you put toothpaste on your toothbrush, why you're doing this part here. That's your issue. That's your issue. But you put toothpaste on there and then, of course, you turn the faucet on to dampen the toothbrush. The water comes bursting out. The toothpaste goes flying in the sink with all that bacteria and stuff. And you're like, oh my God, is that disgusting? I'll grab my new tube of toothpaste. You put it on and you start brushing your teeth. Scenario 1. Scenario 2, pull out your toothbrush, you open the drawer, you look down, and the only thing there is that shriveled up prune of a toothpaste tube. And you're like, oh geez, here we go. Mm. Right? All of a sudden, like, if there's ever a good workout, like, you know, oh, you know, you just lift weights and stuff, screw that. Get an empty tube of toothpaste. That is a workout of the century. You take your toothbrush out, you grab that tube of toothpaste, and you start to twist. Mm. Mm. You start using your knee pit as a vice. Mm. Trying to squeeze it out. I got to get some toothpaste out. Some people use the door jamb to slam toothpaste. My favorite, my favorite though, is when It's useless. You can't get the toothpaste out unless you go for what's called the turtle head of toothpaste. There's only one way to make this happen, and it's by double thumbing behind the toothpaste. You come in and you push as hard as you can, and that little turtle head of toothpaste pokes its head out. But the second you take one thumb off, it shoots back in. But there's a way around it. We're innovative. What you do, you take your toothbrush and you precariously put it in your teeth. Then, now you've worked some through the elbow, you— ahh! You get it down to the root tube and it pokes out. And as it comes out, you set the swipe technique. Get on there, you SOB. And we get one droplet of toothpaste on the toothbrush, and we're like, "Victory is mine." You have the toothpaste on there. You then turn the faucet on to dampen the toothbrush, And that water comes bursting out, it blows the toothpaste right in the corner of the sink again. But this time, you look around and you're like, "That bacteria, that's good for my immune system! Gah-gah-gah-gah!" Right? If you laughed at that, it's because you've lived it, you've done it. We've all done it. And if you've done it, it's because you've lived Parkinson's Law. Parkinson's states as the supply increases, we consume more—full tube of toothpaste—but as the supply decreases, we become more frugal—one droplet's good enough—and highly innovative. I've heard people cut the back end off of a toothpaste tube. Genius. It's true with money too. The more money is available, I need to use it. When there's less money available and you've been there when you started your business, you became highly innovative, highly frugal. So our system of setting up those multiple accounts where you have your income being allocated out to all those different accounts, profit and so forth, we are intentionally allocating less money to operating expenses. And by less money being there, you will become more frugal and highly innovative. In fact, great example of this is Apollo 13. Did anyone see the movie Apollo 13? Great movie, right? Yeah, it was awesome. So if you didn't see Apollo 13, it's a true story of the American space race against Russia. Russia sends up Sputnik, and the US responds by sending a lunar landing module up there. Apollo 13 is a 13th attempt to send men to the moon. 3 men go up in this rocket ship. And in the movie and in reality, the launch that particular day is pristine, perfect. The ship goes up, it's a beautiful day, everything's perfect until about 3 minutes into the launch and there is a malfunction. The rocket booster basically starts losing fuel rapidly because of some damage that occurred. The ship is now on a bad trajectory and the fuel is being lost rapidly. The astronauts radio back down to Houston and say, what do we do here? And Houston said, you're going to lose so much fuel, you're not coming back to Earth unless— and they came up with an ingenious idea— they said, unless we can use the remaining fuel to angle you toward the moon just enough so we can use the moon's gravitational pull to wrap you around the moon and launch you back to Earth. Right? Remember that? Unbelievably smart. So they do it. The ship starts going around the moon. They're pulling off this miraculous one-in-a-million chance thing. And then the astronauts radio back down to Houston again. They say, Houston, we have a problem. Which, by the way, I think was the inception of Houston, We have a problem. They radio down and say, we're losing oxygen. Remember that in the movie? We're losing oxygen. The oxygen filtration system is failing us. It's taking the carbon dioxide, actually filtering that out and regenerating oxygen. We have only hours left of oxygen or we're dead. And they had a 48-hour return to Earth. They were dead ducks. Next scene in the movie— next scene in reality. The lead engineer has a cardboard box. Remember that in the movie? This huge cardboard box. He walks into the engineering department. There's 5 or 6 men or women at the table. He walks with a box and just dumps it on the table, and out spills duct tape, toothpaste, wires. And he tells the engineering team, "We have men who are about to die unless we can build an oxygen filtration system. Make it out of that." And they did. They did. They literally, true story, saved those men and brought them back to planet Earth by making an oxygen filtration system out of duct tape, wire, and toothpaste. Now here's the backstory. Parkinson's law was at play. Now think, think about people that work at NASA. They are the smartest people on the planet. They are literally rocket scientists. They're rocket scientists and they still abide by the law of Parkinson's Law. We American taxpayers— and if anyone here is not American, congratulations, uh, because you didn't have to pay for this one— American taxpayers, we spent tens of millions of dollars to build the original oxygen filtration system that didn't work. Oops. Then when they had no money and no time They made a system out of duct tape and toothpaste that worked. Now, here, listen, listen, I'm not saying, oh my God, the solution to rocketry is make your rockets out of duct tape and toothpaste. That's the solution. No, but what I am saying is there's something in between. When all the money's put in front of us, we find a way to use it and justify it. When nothing's put in front of us, we find a way to make it work. So the real permanent solution is usually in between. They live by Parkinson's Law, and so does every human being on this planet. When we allow all the money to go into that one account just here, that one account, that one primary account you have, and all the money sits there, Parkinson's Law kicks in. And it's not something that's a conscious thing, like, oh, I got tons of money, I'm just gonna blow money. No, you're like, this is the money I have to work with. So we're gonna intentionally give you less money to work with. We're gonna allocate out from the income account to these different accounts, and only a portion— in my one example here, 65%— is going to go to operating expenses. My mother— I mean, some, by the way, some of you may recognize this system, uh, by the way, uh, this is the envelope system. Is anyone familiar with the envelope system? Okay, a lot of hands are going up. Yeah, so this isn't like I'm not inventing something new here. I'm like, oh my God, you never— no one's ever thought of this one. This has been around forever. I'm just the guy saying it doesn't just apply to our personal lives, it applies to business. If you're not familiar with the envelope system, I guarantee someone in your family or family tree is very familiar with it. My mother did this system. I was from Germany. She moved to the US when she was 26, 27 and brought to our family the envelope system. My mother had different envelopes, all in German, but one of them would say, for example, you know, was the food account. Another envelope— and these are physical envelopes— another one was the mortgage. Another one's to give back to the church and community. Another one was for emergencies. And my mom worked at a local factory part-time, and when she would come back from work, she would cash in her check from the factory, and then she'd just divide the money up based upon percentages— everything I'm telling you— into different envelopes. And then when it came to go food shopping, my mom would grab the food envelope and then drive to the local food store and shop with the food that was in there, only with the money that was in there. And she always had enough money. Now, don't confuse that with having the same amount of money. She always had enough. Sometimes my mom was sick, made less money that week. So while it was less money, it got portioned up the same percentages, there'd be less money there. Other times she made more, just like our businesses. Your business isn't consistent. Money sways, but she'd make do with what was available to spend. And when we didn't have much money, it was a lot of rice and beans at our house. When she had a lot of money, because my mother was German, she would get liverwurst. If you don't know what liverwurst is, the English translation is disgusting. Ah, or liver sausage, either way, disgusting. But nonetheless, She would spend based on what was available in that envelope. Parkinson's Law. Work with what's available. If you pre-allocate money to its purposes, you are reverse engineering your profitability. This system literally works 100%. I can't remember the numbers we had here. 10, 10, 15? 100% of the time. When you allocate money to profit, you've guaranteed your profitability and your business now is telling you not that here's what you have to spend. This is what you can only spend. You must live within these means. It's telling you how you have to run your business. It's real simple. If you look at your operating expense account and then you look at your bills and you can't pay your bills, your business is telling you you can't afford your bills. Cut the costs. Cut the costs. You're reverse engineering profitability. If you can't run your business off of this, you got to cut costs and do something that's even more important? Increase your margins. How do you make more money? Actually, this event's all about that. How do you expand your profit opportunities? But when you can't pay bills, the answer isn't, well, how do I pay these bills anyway? Your business is telling you, you got to fix this business. That's how this system works. All right. Um, so number 5, I think we answered, was Parkinson's Law. The next principle— remember this fitness instructor who was telling me this stuff? Up on the screen. She's telling all these different principles. The first principle was the size of the plates matter. The next principle she shared is about the sequence that we serve food. You know, in the global diet, how food is served is simultaneously. It'll happen at lunch today, happened at breakfast this morning. They put down the plate and say, I like for dinner steak and potatoes, love 'em. So now you know when we go out to dinner tonight, steak, potatoes, and margarita, and this guy's happy. But I'll get my, you know, a ribeye and some mashed potatoes and that vegetable medley, which is a real nice term for mush, the vegetable mush. And so they'll serve that, and what I do, which I suspect you do and most people do, is you go to your preference. When everything's served simultaneously, we go to our preference. I cut into the steak. This is delicious. I fork around with the mashed potatoes, taste a little bit. The vegetable mush? Eh, that can wait. Go back to the steak. In fact, I won't even touch the vegetables until I get eyed by my guests. You know, "Not eating your vegetables, Mike, are you?" So what I'll do is I do what's called the potato cover-up. I will precariously and appropriately put my mashed potatoes over the vegetables so it looks like I ate some and blocks their vision from it. In fact, I bet you could do something similar I can actually, I can guarantee it because if we go to any dumpster outside any restaurant anywhere in the globe, the most wasted food item consistently is vegetables. The irony is we all know the importance of vegetables, vitamins, nutrients, fiber, so good. But she said again, "Don't change who we are, change the system around who we are." She said, instead of serving things simultaneously, change the sequence, actually serve that vegetable, the edamame or whatever, serve that first and nothing else. Then watch how we behave. If you're hungry and there's only vegetables, you'll eat some vegetables. Oh, that's not too bad. Then when the steak and potatoes come or whatever your entree of choice is, you'll actually eat less of it because you've already consumed other food. By changing the sequence, it brings about balance. As she's saying on the television, like, oh my gosh, that's the solution to our finance. Businesses. The first thing we do is we pay bills. That's literally our preference. Most businesses are in business to pay expenses. So I need to sell more so I can cover my bills. I need to sell even more so I can cover even more bills. And we're staying stuck in that cycle. The thing that's being served first is expenses. So the real simple thing is when you do these allocations, always allocate the profit first. This has to be protected. Always profit, and then the rest will be served. If you take your profit first, you've served up the vegetables, you've guaranteed your profitability, and the rest will fall into alignment. So the answer to number 2— or 6, I'm sorry— is the sequence of how things are presented to us dictate our use of those things. But there is a challenge that we'll run into in the system, and I know my handwriting's on this board's particularly hard to read, so hopefully you can kind of stay with me here. There's a problem here, and it's temptation. I told you earlier my weakness is chocolate chip cookies. Also this thing called Chocodiles. Has anyone ever heard of Chocodiles, by the way? Okay, one person's nodding her head. You've heard it back there? Yeah, two people. Chocodiles is a delicacy from the '70s. If you don't know what a Chocodile is, and tell me this is accurate, it's a Twinkie covered in chocolate and wrapped in love. It's delicious. It's a Hostess treat. And they don't make it anymore, but I will tell you, with the preservatives they inject in those things, if there was one floating around here, I would fight you tooth and nail for it. I'm addicted to Chocodiles and chocolate chip cookies. I can't resist it. So much so that the only way I can prevent eating chocolate chip cookies is if they're not in the room. And trust me, I already scouted it out, didn't find any, didn't find any. True story, 3 weeks ago, I'm in Michigan presenting at a conference. There's— it was a smaller event, about 50, 60 people in the room. We're talking about this, and I tell them about my weaknesses for chocolate chip cookies. One person in the back just hops on a phone. I thought she had an emergency phone call. The take. As I'm presenting on stage— this is totally true, it's just an aside— as I'm presenting on stage, a pizza delivery person walks in. At least I thought it was a pizza delivery person with this big steaming box, opens it up with chocolate chip cookies, and they put it right in front of me. And she sits back and goes, "Now continue your presentation." So, were you a sadist? Like, what's up with that? Yeah, oh, why don't you put alcohol in front of me too? That's beautiful. So that was just a little aside. Please don't do that. My weakness is chocolate chip cookies, and I know you have a weakness too. And what we try to do to prevent consumption weaknesses is willpower. Willpower. How willpower works is first you look at something and say, no, really, I shouldn't. It's not good for the waistline. But it doesn't hurt to do a little window shopping. Never hurt anyone, says Harvey Weinstein. Well, too soon, right? Was that too soon? That was too soon. That was way too soon. So I— that was funny. That was funny. Did you catch it on tape? Okay, good. Yeah, yeah. That'll be in the news tonight. So the cookies are sitting there, and what I try to use is willpower. No, no, I really shouldn't. And then about, you know, 2 or 3 seconds later, I'm like, you know, it doesn't hurt to window shop. And I can do what's called the waft and walk, is where you kind of walk by real cool and you're like, oh yeah, yeah, yeah, yeah. Not for me? Okay, well, just one, just one. And then I take the one, I take that first bite, it's like, oh my God, I've been to heaven. Just give me 2 or 2,000, please. And I consume. Willpower is like a muscle. It fatigues. You can use it for a certain amount of time before it gives out. And the problem we have with this system at this point, if you can kind of read through this clutter of letters here, is as we transfer money from our income account to our operating, tax, owner's comp, and profit, the profit and the tax are going to sit here. They're going to accumulate. Your business is going to start accumulating profit. And this is— I put Bank One, it says here. This is your bank. The problem is, I know the day's going to come that you can't pay your operating expenses. You're gonna say, oh, can't pay the bills. You know what, I'll just, I'll just borrow from the profit account. And the day you borrow from the profit account, the entire system deflates. It's like one of your freaking popping balloons there. Literally, you're killing me, killing me. Just order a pizza box of chocolate chip cookies, we'll all be happy. So we're gonna steal from ourselves. It defeats the system. So we need to take another step. Step 3 is what she shared, was to remove temptation. Don't have those chocolate chip cookies in the room, and therefore you'll never eat them. I would encourage you to find another bank. Whatever bank you work with today, if you like working with them, set the accounts up here. By the way, some people say, but like, the fees they charge, $250 of monthly fees if I don't maintain a minimum balance, they're gonna destroy me. Just want you to be aware banks are businesses too, so you can negotiate with the bank. Tell the bank, hey, listen, I'm setting up more accounts so I can actually keep more money at your bank. I don't want to pay these fees. What can we do about it? Your bank will say one of two things: okay, we'll make an adjustment, or no. If someone says no, maybe they don't want your business so much, and find another bank. I found regional banks to be extremely good, federal credit unions to be amazing to reducing fees. But don't let the fear of fees prevent you from setting up the system. There's a way to address that. So you set these bank accounts up at your current bank, but then we want to find a second bank, a bank that perhaps you've never done business with before. And what we're going to do is we're going to set up two accounts over there. One is going to be called Profit Hold. It's just a savings account. The next account, uh, a tax, is going to be called Tax Hold, because this money is is going to be flowing in for different purposes. Money goes into your profit account. We're going to store that away for an ultimate profit distribution. Money goes into the owner's comp. This is going to be used to compensate the most important employee at the business. Next account, taxes. This is to pay the government, uh, their, their bill. And then we're going to store that money at the second, uh, place. So it's out of sight, out of mind, because usually taxes are due on a quarterly basis. I realize there's some businesses in here that may be S corps or some formation where it's taken out of your own paycheck. In those cases, this account still accumulates the money and then the business reimburses you for the taxes that were taken out of your account. So you never effectively pay the taxes, the business does. And the operating expenses is what we run the business off of. This is the business's lifestyle account, the OpEx. The owner's comp is your lifestyle account. This is what you live your life standard to. The profit is a reward. And the taxes for the government. And we don't want to steal from either one. So we go to the second bank and we set up these two additional accounts to transfer our profits and store them there and to transfer our taxes and store them there. I have a friend in New York City, his name's Peter, and, uh, he understood this concept very well, the need to remove temptation. He'd grown a $5 million company, which I encourage you, never judge a company by its size. Revenue is Vanity. Profit is sanity. So never judge a company by its size. He had a $5 million company, which sounds all great until you find out he was losing $1 million a year. He had maxed out everything he's had, his credit cards and everything. And he calls me up and says, what do I do? I said, we're gonna do profit first. Which he said, I've never been profitable before. I'm like, that's why we really need to do it starting today. I told him this concept of transferring money to a second bank to get out of sight, out of mind, and that connected with him. Because the second he got a loan available to him, a revolving line of credit, he maxed it out. Every time he got a credit card, he maxed it out. When the money was put in front of him, he found ways to spend it instantly. So he said, I gotta remove the temptation. What he subsequently did was probably the best way ever to remove temptation: to borrow from yourself, or steal from your profit account. And here's his story. He went to a second bank. I don't know what bank it was. We went to a second bank, a bank he's never done business with before. He walked in and he approached the teller and said, hi, I'd like to set up some accounts here because I want to store money at your bank. That is the best line of all time. Go into any bank and say you'd like to store money here. The bank manager, you know, instantly— there's a guy fixing his tie in the mirror in the back, comes running out, oh my god, sir, welcome. You've arrived at the most convenient bank in America. We're so honored to have you store money. He's like— actually, tears were coming down from the guy. He's like, store money, store, store. He's like, you know, we are the most convenient bank in America, and, uh, what we do is we offer online banking. We will give you this brand new shiny ATM card and starter checks right when you leave today. Peter looked at the manager in the eyes and said, said, "For God's sake, I am not looking for the most convenient bank in America. I'm actually looking for the most inconvenient bank in America. Because I don't want your starter checks. I don't want online banking. I do not want the ATM card. All I want to do is transfer money to this bank and never see it again." In fact, he said, "The only way I can withdraw money from this bank is if I come here in person, show my identification, you the bank manager come out and write me a certified banker's check. He said, I just ask before you do that, slap me in the face a few times, make sure I really need the money. That's removing temptation. Find a second bank that's inconvenient to you, not the one right next door. We can walk over and pull the money out. I want you to do the walk of shame. I want that bank to be miles, hours down the road. You look at your operating expenses, say, I, I I can't, I can't pay my bills. I'll just have to borrow from my profit account just for now. That's when I want you to start the walk over with that one heel kind of broken to your bank. That's the walk of shame to the bank to withdraw the money. I really want you to think about it for hours. Do you really need that profit or are you not being innovative and frugal enough? My, uh, I'm in a mastermind. I'm in a similar— I love organizations like what Howard's developed here because the learning is amazing. The, the colleagues, the peers is what the real power is. I participate in a group similar to this, and I meet with 7 other entrepreneurs once a month in my mastermind. Larry is, uh, one of the guys in there. And what I did to remove the temptation, I have a second bank. I have these accounts and I have checks that I can write, but my checks have dual signatures on it— my signature and Larry's. And Larry doesn't own any of my business. He can just sign off my checks. And when I want to take money out, my profit out, I literally have to go to Larry and say, hey, Larry, I'm ready to take my profit distribution. And Larry's a dick. He He goes, um, what are you gonna do with it? I'm like, Lara, I've been doing this for 10 years. We have to go. What are you doing with it? I'm using it to celebrate. Profit can only be used to celebrate for you, the risk taker, the equity owner, you. And if you've partnered, your partners. I said, Lara, I'm gonna go on vacation. Show me the receipts. I want to see the order, the reservations you made. Prove it to me. And only once I proved I'm using the money to celebrate does he authorize the check. That's what you use profit for, to celebrate. The second you plow back, push back, reinvest, or any of those fancy-schmancy terms, you've entered what's called a shell game. You've put money in here, you've called it profit and feel good about yourself, but really it's an operating expense. I just don't want to call it that. And you transfer money back over. Remove the temptation, make it very hard to access. And then when you do access it, it's for you. So let's see, I think we did number 6. Number 7 is if something's not accessible, we don't use it and revert to make do with what you got. Okay, next principle, and the last principle she shared was to get into a rhythm. So I'm watching this fitness instructor. I've never had so much clarity in my life. Sitting there, I'm watching this. I started taking copious notes, Cheetos stains and all. I'm just writing this stuff down like, this solves all of my financial problems. The last thing she shared was amazing. She goes, do you know most diets are 3 meals a day, but we have what's called peaks and valleys? Maybe even happened today. We eat breakfast, lunch, and dinner, but sometimes you gotta skip one, right? Maybe you were late to the conference, you had a late start, you're like, oh, you skip breakfast, and now you're like, oh my God, is this guy gonna keep talking? I gotta eat. Eat something. We go into peak hunger. Then at lunch, we're like, oh my God, just anything, anything. We eat, we eat, we eat. We go into a glut or a valley. Oh my God, I ate too much. By the time dinner rolls around, it's like, I really shouldn't. But after dinner, it's like, I'm starving again. We go into peak hunger. So she says we have these huge fluctuations which actually encourage us to eat more. She shared— and maybe it's a principle you've heard of— the optimal meal frequency is not 3 meals a day, it's 5 small meals a day. Breakfast, small snack in between, lunch, small snack in between, also small dinner. You know, small, small, small. But if we eat more frequently, we never get hungry, and therefore we never go through these peaks and valleys. And actually, our caloric intake drops. We're too reactionary when we go through these peaks and valleys. I'm starving, or I've overeaten. In business, it's the same way, and it happens every time you log into your bank account. You look at that plate. Oh, I got money in there. Whew, I can eat. And how we eat is we spend on all those bills, pay all those bills. We can finally make that hire we need. We can pay for that computer we need. And the money's gone. And then we're panicked to collect money again. It's very reactionary. There's a simple change I want us to make in our businesses. I call it the 10-25 rule that will address that problem. 10-25 rule is the 10th of the month and the 25th of the month. And this is how it works. Remember that income account we were talking about in the beginning? That's a depository-only account. Money goes in there just to be deposited, just to be deposited and to look at, to see how much money's in there. The 10th and 25th are what I call trigger days. So today, let's see, today is the 26th. So the next trigger day would be the 10th of the month. Then the next one after that's the 25th, and then the 10th and the 25th. And maybe you want to draw this on a piece of paper that's a little chart, but those are the trigger days. What happens is, today being the 26th, some money hopefully will come into your business today, some deposits. The money goes in, then do nothing with it, because remember, the income account is a serving tray. It's just to simply see how much turkey we have for our business. Tomorrow, maybe no money comes in. Maybe the next day nothing comes in, and then next day after that some more money comes in. At a certain point, the money will accumulate until we hit the trigger day. Which is the 10th of the month. On the 10th, that's when we go through that allocation I've been telling you. Everything on the serving tray gets carved up into profit, owner's comp, tax, operating expenses, and the income account goes back to zero. Then from the 10th to 25th, we accumulate money again and it goes to zero. Accumulate money, goes to zero. Accumulate money, goes to zero. Accumulate money, goes to zero. What this allows us to do is a few things. Why is the 10th and the 25th of the month good days of the month? Is as money accumulates and then gets allocated out on the 10th, money will go or fill into your operating expense account. You can then look at your bills and pay your bills on the 10th of the month. When you send bills out on the 10th of the month, they usually arrive to your clients by the 15th of the month, the mid-month. That's when half your bills are due. Then when you do this process again on the 25th of the month, You issue out the checks from the operating expenses, they arrive by the end of the month. That's when your other bills are due. It's a real simple system to get on a rhythm with your vendors. And I'd argue your vendors should be paid on time, just like you should be paid on time. So we take care of our vendors, but something even greater happens. It starts forming wave patterns. You ever, ever go to the beach and notice this phenomenon? You go to the beach and the perfect spot on the, on the beach is with your lawn chair is where the ocean waves are rolling in and just getting to your toes. Like, that's the perfect spot. You put down your chair there, you get out your book— Profit First, that's my book, that's my book— you sit down, and then the waves start touching your toes. Then it just happens like magically, all of a sudden the waves come rolling in, you don't even see it, knocks you over, feet in the air. You're like, forget the children, save Mike's book, you know. Then, then what you do, you, you pick up the chair and everyone lugs it back and you find the new spot where the ocean waves touch your toes. Big waves. Other times the waves don't reach you anymore. You're like, I didn't even notice. So we pick our chairs up and we go closer to the water to get the perfect spot. Everyone does that. We adjust to the waves. Now here's the thing I know you don't do. You're not reading the tidal charts for the day. You're not reading what's up with the moon's gravitational traditional pull today. Hey, how's the ocean storms out there? No, what you're doing is you're just measuring wave patterns and you're actually identifying tidal conditions. In our business, what happens here is you're going to achieve a standard norm, an expectation. You're going to expect, you know, on the 10th or 25th, usually I have— I don't know, I'm just gonna pick a random number— we'll say $25,000 in there in my income account. Some days it's gonna be less, way less. And when you notice that, that's a red flag moment. You're like, oh my god, what happened? Usually I have about $25K, there's only $10K here, we better investigate this. Other days you're gonna have a huge wave come in. That's not $25K, it's $50K. What happened? I want to do more of that. So what happens with this wave pattern is we set a normal expectation, and the second the waves are short or long, You notice. Do you know that's the main objective of a cash flow statement? A cash flow statement is created to identify changes in expectations with cash flow. And most people have no idea how to read a cash flow statement. I don't. I don't know if you do. And I question if any accountant really can. But what's beautiful about this is you can throw that cash flow statement out. You can do what you've told me you're doing. You said you look at your bank account balance every day. Awesome. Don't change who you are. Keep doing that. And simply on the 10th and 25th, when you log in, is it where we expected or not? And if it isn't, it's either something that we got to fix or something we got to replicate. Cash flow waves. One more thing I want you to do on a rhythm. It's a quarterly rhythm. And what it is is the distribution of profit. Remember, I talked about that profit hold just a few minutes ago, that profit hold account. The money is going to be piling up there. Every 10th and 25th, we do these allocations. The money goes from income to owner's comp, profit, tax, and operating expenses. You pay the bills out of the operating expenses. The money's been transferred into the profit account. We now transfer the profit to the profit hold account. Some people, maybe some people are here thinking the same, well, Mike, why don't I just transfer right from the income account to the profit hold? Why do I have to go through this interim step? Because transfers from one bank to a second bank can take sometimes 2 to 5 days depending if there's holidays and stuff. And that means I have 2 to 5 days of temptation just sitting there. If we at least allocate money to its proper envelope— profit— you can use your willpower for a couple days not to touch it. That's why we put it there first immediately and then transfer to the second bank. But once a quarter— and the quarter is what we are, the 26th now, so we're 26 days past the end of Q3. Q4 ends on December 31st. That money that's piled in that profit account, we are going to take a distribution out of it to reward you, to pay you. When that money comes out of that profit account— and by the way, uh, when you talk with Jill, we don't necessarily suggest you take 100% of that money that's been piling up out of your profit account, usually about 50%. It is good to have a rainy day fund. Major challenges hit a business where it's good to be in a position where you have some cash, and the profit account in those extreme circumstances can be a backup for you. But what I want to do is take out 50% of that money and distribute it to you as a reward, not to plow back into the business, as a reward. Go on vacation, do whatever. I've been doing this for 8 years, almost 10 years now. Every quarter, my business is profitable every single quarter, every single quarter. My family loves my business. For the 10 or 15 years prior to this, people are like, are you insane? Like, my family's like, what the hell are you doing? Like, please just get a job for God's sake. Now my kids, Dad, it's almost the end of Q4. When's the profit coming out? Where are we going? What are we doing? It's funny, I was, uh, I did a presentation literally with Shaquille O'Neal. This was 6 months ago at a conference. And we're backstage, I'm talking with him, and he actually used the line on stage. He says, we were talking about our children, he goes, yeah, my kids, after he made all his money in athletics, and he makes tons of money through business endeavors, he said his youngest son came and said, dad, we're rich, we are rich. And Shaquille O'Neal looked at his son and said, you're not rich, I'm rich. I'm gonna use that line with my kids next time. Where are we going with our money? My money and mom's money ain't yours. Um, this distribution of profit, this distribution profit comes out on a quarterly basis. You know who else does that? Public companies. We just talked about earlier, they, they do the quarterly profit distribution. Now listen, I'm not necessarily a fan of make a corporations. I am a fan of how they got there. I mean, they all started just like us out of— Zappos started out of a garage, uh, so did Apple, so did Hewlett-Packard. Any major corporation, they all had to start and be conceived somewhere. They started just like us and they've gotten to their size. And one thing that I believe is truly remarkable, what they've achieved, is they know an absolute fiscal discipline is to reward the shareholders consistently, to keep them engaged. And so every quarter they send out their profits. And I believe every small business on the planet, all of our businesses, should be rewarding us quarterly. It's a definition of absolute fiscal discipline. So on a quarterly basis, at the end of the quarter, the minus net profit account comes out and it's for you to celebrate with. Um, so we answered number 8 is peaks and valleys, if I didn't say that yet. Number 9 is profit is used to celebrate. If you plow back or reinvest the money into your business, you are training yourself to kick the can down the road and are avoiding the call for innovation, efficiency, and frugality. I'm also gonna show you another behavioral trick just to prove to you how our minds work. Probably half of you didn't realize all the answers are already on the paper. If you just look at the bottom, the answer key's right down there. If you didn't see it. So every answer is already there. Yeah. Oh my God, this guy's a magician! No, that's normal human behavior. But here's the deal: if you missed any of the answers I gave you, you can fill it out there. I just taught you a system that drives profitability in businesses. We now estimate over 40,000 companies in the world are doing Profit First, and we have 2,000 plus documented cases, case studies that have come into our office that we tracked. The results are nothing short of astonishing. Businesses eradicating debt doing this process, and that's an advanced technique. I'll tell you how to do it, but this supports that. Businesses that are growing faster than their competitors. You know, one of the challenges I get sometimes too is people say, but Mike, this is a great system for a lot of businesses, I'm sure, but not for my business. I'm really unique. You don't understand my industry. Well, I would argue it probably does apply to your industry. I, I'm an owner of a manufacturing business in St. Louis. We do Profit First very profitably. I'm an owner of a membership organization in New Jersey. We're very profitable. It works. I've owned consulting businesses. I've been in the, in the legal industry as an expert witness. It works in all of them. The one challenge though that I see people face is they look at the industry norm. They say, well, this won't work because my industry isn't profitable. You don't know anything about our industry. This industry is barely getting by. I can barely— I'm just trying to get the industry standard, the industry average. I just want you to think about this. If you have children, would you ever tell your kids, hey, what's the class average? Let's aspire to be just like the class average. I suspect you don't say that. I suspect you say, I want you to be the best who of you. Exploit your own talents. Really be the most of you. Don't worry about them, be all of you. That's why I want to challenge you with your industry. When you look at your industry, I don't care what the industry standard is, why not radically change the industry, redefine it? I— with this manufacturer I own, we make leather products like belts, for example, stuff like this. And one part— I don't know if anyone's in leather manufacturing— you need things called clicker presses. These are these big heavy machinery that comes down and makes a makes a clicking sound, "click," as it cuts out a pattern of leather. And they can cost, I don't know, $10,000, $15,000 for a used one, a new one, $20,000, $30,000, $50,000. You also need molding presses. They run the similar gamut of $10,000, $15,000 if you're lucky for a used one, $50,000, $60,000 for a good one. For us to make products, we have to have these clicking presses. At least so we thought. We ran Profit First in our business as a system, and we looked at our operating expenses And up to this point— I acquired the business, it was already running— up to this point, we had no margins. Razor thin. There was no money. That's how the industry operates. Well, we took our profit first and we looked at our operating expenses and said, wow, we have way less than we're spending. Maybe this won't work for us. Maybe it won't work. We said, but let's have faith. Parkinson's Law. Let's see what we can do. Let's get innovative. And so what we did is we took a little bit of money out of operating expenses and drove down to the local Home Depot. I went with the business owner, Paul Scheider. We drove down to Home Depot and we walked around and we said, with the few hundred bucks we have, what can we do? And we bought, you know, a microwave oven that was on sale. We bought some other stuff and we brought these things back to the office just to test them out, to innovate. One thing I'll tell you, if you ever decide to get into the leather business, do not microwave leather. It turns it like into flubber or something. Like you hit it and ding ding ding ding ding. But, but, what that led us to is that you can actually superheat leather in a very inexpensive way, and it becomes extremely pliable. You can apply molds that require these heavy presses in seconds and get the exact form you need. Those guys spend $50,000 for a brand new press and spend hours molding pieces. We do it in seconds for like $75. I'm not going to tell you what the process is. It's now proprietary to us. but our profitability has skyrocketed. The opportunity to innovate exists in your business too. We have to get started, and that's the final thing I want to share with you. I just told you literally the entire Profit First system. If you get a chance, please— you saw Jill back there— please meet with Jill. She can talk with you about your individual business. She's got a booth set up there. She'll walk you through the process and how it applies to your business. But the thing is, I taught you the entire system, and the system works. But there's a, there's a little saying in the marathon industry: if you've never run a marathon before and you want to run a marathon, your first practice session is not running a marathon. You don't practice for a marathon by running a marathon. You build to it. And I have come to realize that if you do the Profit First system in its entirety, I'm telling you to run a marathon. It's too abrupt of a change to your business. Maybe it's easy conceptually, but the execution Execution may be hard. So we need to start off slowly. There was a study in a book called Switch. It's written by Dan Heath and Chip Heath. It's a great book about the changing of mindsets, particularly in entrepreneurial businesses. I encourage you to read their book. In the book, there is a study about people who want to get cardiovascularly fit. It's always interesting how much the physical fitness industry translates to the fiscal fitness that we do. And what they did is they noticed that when people want to get cardiovascularly fit, the regimen is to run 3 miles, 3 days a week. That's the optimal regimen. So they took 200 people in that were looking to get cardiovascularly fit and they ran a test. They took half the group and they were called the control, meaning you just keep assigning the standard practice. They told these 100 people, run 3 miles, 3 days a week, keep going, keep going. This side, they ran a new test. You know, we as entrepreneurs and athletes always are told, we're Raise the bar. What's your BHAG? What's your big, hairy, audacious goal? X factor. Amplify things. They decided to test something out. Instead of raising the bar, they said, we're going to lower it. I mean, really lower it. So they took these 100 athletes, aspiring athletes here and 100 aspiring athletes here. They said to this control group, run 3 miles 3 days a week. OK? OK. Raise the bar. This group, they said, we're going to lower the bar. They said, hey. 'do you guys like to watch television?' The group's like, 'Yeah, I like TV.' They had that weird voice. It's always the same voice impersonation, so let's deal with it, right? They, they then go, 'When you watch television, are you sitting on the couch?' And this group's like, 'Yeah.' They then said, 'Would you be willing to stand instead of sitting when you watch television?' This group's like, 'I thought I was here to get cardiovascularly I don't get it, but okay. Go do that. 2 weeks later, they came back. The control group, who was running 3 miles, 3 days a week, they were just getting into this regimen, already had an 87% failure rate. 13 people out of 100 were still running. Too abrupt, too fast, too strong. No surprise. This group, 100% success. Everyone that was told stand in front of the television now was standing in front of the television. It's easy. Lower the bar. Next experiment, they said, "All right, we want you to keep running, keep doing this, keep up the regimen, push yourself." This group, they said, "You're standing in front of the television, would you be willing to kind of start marching in place?" This group's like, "Yeah." Two weeks later, they come back. One person left here. This side, A 99% success rate, which if you think about it, it means one person's like, "Did he say march or did he say lay down on the couch again? Because that's what I'm doing." So one guy couldn't figure that out, but 99% of the people were now marching in front of the television. Start fast-forwarding. Next week, everyone was done. No one was continuing the regimen. This side, they were now doing jumping jacks in front of television. After that, they said, "Hey, when there's commercial break, sprint outside, sprint back inside." They kept on amplifying it. Within 6 months, they were running 3 miles, 3 days a week, and they had an over 70% success rate. That's the key. If you do this entire Profit First system today, 'cause I love this, I'm in, I'm all in, I'm going all in, the failure rate is astonishingly high. But the success rate is extraordinarily high when we start really slow. So here's my final call to action for you. Actually, I got 2 calls to action. My books are in the back, so if you want one, pick one up. That's the first. But here's the other call to action. Today, you have no excuse not to do this today. Call your bank, or you can go online, your existing bank. Instead of one account, a checking account, and nickname it profit. So step 1 is set up a checking account and nickname it profit. Step 2, starting today, allocate 1% of your income to profit. 'Cause what I'm saying is, if $100 comes in, I'm saying take a buck, 'cause if you can run your business off a $100 deposit, you can run your business off a $99 deposit. Put a buck in profit. If $10,000 comes in, I'm saying take 10 bucks, or I'm sorry, take 100 bucks, 'cause if you can run your business off $10,000, you can run your business off of $9,900. It's standing in front of the couch, after all. But here's the miracle that starts to happen. Within a few weeks, you'll say, oh my gosh, I can do 1% profit. I'm actually allocating profit. I have a profit accumulating, and not an accounting profit, actual cash. Then after 2 weeks, you may say, maybe let me try 2%, and 3, and 4, and you start amplifying it. And then profit and the entire Profit First system becomes an inevitability. And I'm hoping at that point there won't be 40,000 businesses in this world doing it, there'll be 40,200 doing it. For our entire lives— and this is the answer to number 10— for our entire lives, what comes first has been what's been getting done. If you put your health first, it gets done. If you do something first thing in the morning, it gets done. But we've been told to take profit last. That's why that old formula doesn't work. Profit is not the bottom line or the year end. It's not last. It's first, because when something comes first, it gets done, and when something comes last, it simply gets ignored. So that's answer number 10: what comes first gets done, what comes last gets ignored. I am wishing every person in this room extraordinary profitability. My, my life's mission became very clear that day, that fateful day. I'm here to eradicate entrepreneurial poverty. It sickens me that there's 128 million small businesses in this globe that aren't profitable, and it stops here today. Take your profit first. Thank you. Thank you. Thank you. Oh, I gotta get a picture of this one. Keep going. Hold on. It's gonna take me an hour. Oh, shit, you're scaring me. All right, we're filming here. Woo! Here we go. Profit first, profit first, profit first. Woo! And we're out.

That is awesome. Mike, thank you so much. Actually, hang on before you go. This is a little gift from some of our friends in the audience. Fuck. Lewis right here is your main man. Oh, man.

So we gotta hook him up. Yeah, guess what it is, right? It's— oh my God.

That was incredible. Thank you. I already have his book. Here's what's gonna happen. We're about to break for lunch and you definitely wanna get your book first because there is limited supply and we're gonna get, get your book and then go to the selfie station. That's where he's gonna be signing those books. Lunch is actually not gonna be served until 12:15. So that gives you plenty of time to get your book and get in line because I guarantee it's gonna get long. So awesome job, Mike. Thank you again so, so much. We'll see you back here at 1 o'clock. Get your book, get it signed, and have some lunch. Thanks.