Episode 29: Profitability and Proactivity with Erik Knight and Jon Wood

Bruh. Yeah, bruh.

All right, all right.

One more rip shot. Okay. Bazinga.

Bazinga.

Okay.

From the studios of Fractal Recording, this is the Profit first podcast.

It's not episode one. It's not episode two. It's not even 3, 4, 5, 10, 15. It's episode 29. Ooh. Yeah. We all have to be with the brat, Brad, right?

It's like a musical instrument for you, my friend.

Dick. Dude, I come into the studio and I'm like, what's up? And this song, or there was a different song playing by Rage against the Machine.

Yeah.

And all of a sudden you start, like, doing air drumming.

Yeah.

You did a twirl. I've never seen an air drummer twirl the stick in the air and hit two cymbals. Foot kick to the bass, and you came back on the snare, bruh. It was incredible.

Making me sound like a theater major dud. Welcome, everyone, to the Profit first podcast. I'm Chris Curran. I'm the founder of Fractal Recording.

And I'm Mike Michalowicz, the author of Profit first. And you're listening to the Profit first podcast, where you learn everything about running a business profitably.

That's right.

On the hang.

Yes. You love that.

I love that.

You're. Do you play any instruments or guitar? You do.

You know, I'm gonna bring in my guitar. Do you have a drum pad?

I'll find something.

Yeah. Next. We gotta jam next week or a couple weeks from now. We'll jam out. Yeah.

So you can find this show on itunes and Stitcher. Those are the two big PODC platforms. And also on our website, profit first podcast.com.

That'S the place to go.

So how you been, man?

I've been well. I've been well, you know, I've been gardening. Gardening is, like, full.

Wow.

Thanks for rolling your eyes. No, this is the time to start gardening now, because we're in full season. So the last month and a half was setting up the garden. Now I got the broccoli growing. I got snow peas. The melons are getting started. I got watermelon coming your way. Blueberries, dude. I'm bringing fresh blueberries in the late summer, early fall here.

Do you and your wife do it together?

The garden, Mike? We have three children. You son of a bitch.

Son of a. Yeah.

No. Yeah, now she does, because I set up, like, a little patio so you can kind of walk into the garden. It has walkways now, as opposed to before, which that's hard manual labor. Installing Walkways. Before it was like this kind of muddy disgustingness and I didn't even go in there much.

Is your business profitable enough for you to hire a full time gardener?

No.

No, it's not that profitable. How you doing? You son of a. I'm good.

You know, it's funny. We were going up on the retreat a few weeks ago and the night before we were gonna make this little small road trip. I get out of my car, I just glance down, I see a screw in my front tire, bruh. And I was like, I don't know why, I just looked at the tire. When do you ever look at your tire tread?

Never.

Never really.

So.

But I just did. And then so the next morning I had to go get all the four tires changed.

But do you and your wife do that together?

Hand me the wrench, honey.

Jesus. No, I need the. The whatever.

Anyway, it's like the universe wanted me to see that screw.

Pull it out. Or did you have to?

No, it was sort of near the sidewall so they had to replace the whole tire. I needed tires.

Thank God you didn't drive on.

I know.

And it was that on the Prius.

Yeah.

How's that doing? Ever since you had that face to face train wreck crash. No, I hit a lamppost in Boonton.

Really?

I backed into it. Sorry.

What noise did it make?

Oh my God. It went like in my face. Yeah. Wife is not happy. Oh, it was in her car. Oh, dude. Community reaching out. We get an email in from Australia. I'm not gonna show their name. It's in remote Australia. This business takes photography of wild horses. Haven't been profitable since their inception five or six years ago. The business they read profit first audio edition available on audible. Turned the business around in two months. Profitable ever since. They're coming on our show, dude. We're just trying to sync it up because they're in Australia time which is like six days from now. So it is very hard. Like you know, what day is it? Like it's like it's like a Monday here. It's like a Sunday there. Yeah, exactly. Yeah. No, it really is like, like there's whole seasons are off. The holidays get flipped. They call them Claus Santa. Oh, it's all crazy down under. So I just wanted to give you that heads up. The community feedback's come in. We want you listeners giving us your feedback too. If you implement the strategies on this show, you're going to start learning some crazy stuff. And we're here on the show. Is some cool stuff on the tech side of business we're going to talk about. And then you're about to hear from probably the most non tech business you've ever heard of. And it's a fascinating story.

That's awesome.

Before we do that, quick. Sponsor shout out. Yes, Sponsors. R Nextiva, R T Sheets, R Fundera. Those three. We're going to talk about them later. Amazing supporters.

Thank you for our. Thank you to our corporate sponsors, our corporate partners.

Partners. Yeah. Oops. Oops. They're sponsors when they're writing a check to us. They're partners when we talk about them. His name is Eric Knight. And now he's not related to Michael Knight. You know, and Kit, you remember that show?

Yeah. Michael, we are low on guests.

Michael, stop talking to your watch. You look like an idiot. So Eric's never heard that joke before, right? He is the CEO of Simple Wan. And now if you're not an IT person, you'll probably think it's Simple Juan because it's spelled W a N. But WAN is a wide area network. You know how I know that? Because I used to be an IT guy and I used to install firewalls. Mouse. Eric, when we get you online, I'll test you, see if you know what a MAU is. Hubs, switches, and so forth. Simple Wan is a cloud based firewall company. Designed for the IT folks and service providers of the world. And the Simple Wan product won the product of the year in 2014 by TMC magazine. One of your favorite magazines. With no further ado, Eric Knight. Welcome to the show.

Hey, guys. How are you?

What's up, Eric?

How you doing?

You guys opened that can of worm? I have to say it. I actually have a Knight Rider replica.

Oh, now we're digging right into this.

Wow. All right, here we go. Let me give the applause. Here we go.

Yeah, serious. Give me the serious stuff. There he is. So, Eric, the replica. What year is that Firebird?

Ours is an 80. Mine is an 84, but it's rebuilt to look like an 81.

Oh, this is a drive. This isn't a Matchbox car.

No, this is a real one.

Now here's the second question. Is it a Firebird or is it a Trans Am?

It is a Firebird.

Nice. And do you have the moving lights of Wah wah?

Oh, yeah. The whole dash, the whole inside, it looks just like that car. Like it rolled off the lot.

Wow.

Really?

That's awesome.

Did you buy it or did you make it?

No, I totally made it. It's something that was a project that took like 10 years, and it's still always a work in progress. But you think that would be fun to drive. But let me tell you, with that wheel, not fun.

Oh, you do have that. Whee. Like the airplane handles. Yes.

Oh, my God.

Yeah. That was a ridiculous thing. Like, why would you make a handle? Well, I guess because it drove itself. Michael Knight didn't have to worry about that.

Those hard right turns, they're not fun.

Oh, my gosh. Now do you take it to car shows? You must.

Oh, yeah, yeah. It's part of the fun, having it all light up, especially the ones at night. Yeah.

Do you do the get up? Do you dress up? Like, with the leather jacket, the watch?

We're in Arizona. It's too hot for that kind of stuff.

Do you do the feathered hair at least? The David Hasselhoff feathered hair?

No, can't do that. Can't work that.

Are you a fan of his singing?

He sings.

Yeah.

He's like the most popular singer in Europe.

Oh, I know. But no, I'd rather not.

Okay. You're not a Hoff fan?

No, not a Hoff fan.

All right, well, we basically killed the entire clock. It's been a pleasure having you. All right, so, Eric, let's dig into your business. By the way, are you the owner of Simple Wan?

I am the founder of it. There is an ownership group, but I am the founder.

How do you go about founding a business in such a technical industry?

Wow. I would have to say a lot of money and a lot of talented people.

Did you have an IT background? What turned you onto this specifically?

This is actually my third startup that I've sold. The other two I've sold, they were all technology companies. Each time you get better, and you use that knowledge and information to start the next.

What was the problem you were trying to solve when you developed Simple Wan?

It came down to, if you ever talk with any of these small businesses, they just really lack the resources in the security space. If you ever look at. What was that old TV movie, War Games, that kind of stuff is happening today. The big businesses, you hear about them in the news, they're getting hacked and they're able to deal with it. But these smaller companies, they just have no ability to defend themselves. And that's what we're trying to do.

So how does it work? I mean, is this like a guy with a gun standing in front of your office and shooting anyone trying to hop on the net or. I mean, like, how does a system like this work? I know it's not a guy.

Yeah, more or less. I mean, but they're very smart. They're actual pieces of equipment that actually sit on a customer's location and they communicate back to a cloud or a network of other devices. And if one says, hey, I'm being harassed or I'm being attacked over here, it tells everybody else that this guy's a threat and we all need to ignore him. We all need to get on board. And they're just smart and they work as a team when stuff like that goes down.

But setting these devices up, if I'm a small business owner, which I am, I got five employees, we have an Internet connection, everyone's hopping on the line here. If I'm setting up a firewall like this, it's an expensive task. How expensive is the computer infrastructure and stuff like this for a small business?

Well, I mean, right now, and it traditionally hasn't been very expensive, but what's going to happen if you've heard of something called PCI compliance, which is if you run a credit card, you have to meet these certain compliances. I think in the next 10 years, the most expensive part about starting a small business is going to be compliant on all these different levels on your computer stuff.

Is that baked into simple wan? Not trying to plug you too much, but is that baked into PCI compliance into your system?

Of course. Yeah. We try to make it so easy to use to where it naturally makes everybody compliant, just by the natural way of doing things. We really try to, of course, simplify things being simple wan. There's just so much complication out there. And even the IT guys that are in these businesses, man, they're overworked, They've got too much going on. And what I tell everybody is the number one day of hackings last year was Christmas Day. It's because nobody's watching and everybody's got a lot of free time, so.

Oh, the sons of bitches. Really?

Yeah.

Guy's probably wearing a Santa hat.

Exactly. He's smoking a cigar, munching down on it. It's like, I'm gonna hack the crap out of you now.

Well, nobody knows and nobody has a clue what happened.

Yeah. So, okay, so let's talk about the consequences because we. This show is all about driving profitability. One way to drive profit is not to lose your money in the first place. Who are the targets of hackers?

Easy targets like Chris. It's just like walking down the street and you see a bunch of houses protected by ADT or protected by this security System, the guy's going to keep walking down the street until he sees one without a sign.

Okay. So they kind of ping all these different sites or their. They ring all the doorbells, if you will, for all these different businesses, until one time they ring the doorbell and the door just falls open.

That's pretty much it. And most small businesses, a lot of the doors are open. If you look at our website, we actually have a real time graphic that shows all the attacks going on against our customers that we've blocked in real time. And it's like the War Games map and it just gives you an idea of what's going on out there and most people just don't have a clue. It's something like an average of 4,000 attempts a day per small business for.

An individual small business.

Yes.

So that means my business today, we're only halfway through today, has been hacked 2,000 plus times.

Theoretically, yeah. People trying to get in there. And the thing is, most of the standalone product that you buy off the shelf or have an IT guy plug in, once it's out there, it's exposed and you hear about all these things in the news about the software being susceptible to this and some protocol breach for that. Those. Unless you have somebody managing it and keeping it up to date and looking through it and looking through the logs every single day, how do you even know if that's you?

Jeez, that's 166 hacking attempts every hour.

Geez, that's a lot, man.

Who knew?

Yeah, it was all automated, so. Right, yeah. So. All right, Chris, off. Chris, Eric offline. We were talking about the, the credit card hacking and the consequence if you're not compliant. This PCI you referred to, if you're not compliant. This was interesting. What's the consequence if a credit card gets hacked from your business?

The PCI compliance is the compliance that regulates credit cards. And it got a lot stricter this year. With those rules came new penalties and everything else. The average right now between your legal costs and the fines is something like $250. A record.

Bazinga.

Yeah, there you go. So a customer that only does like 1000 credit car, that's a $250,000 in fines and liabilities. That's a lot for small business.

Oh my God. Yeah. And I mean, if you think about it, almost every small business, if you use square, I mean, tell me if this is accurate, Eric. If I'm using square to do transactions, which I do, I'm using a shopping cart to get credit card information. And Run recurring bills. I assume that's credit card information. If that gets hacked, it's my problem.

Absolutely, it is your problem. And the laws are changing to where they're pushing it onto the merchants. Before, the banks would basically eat some of. And now they're saying, if you're not compliant. But I think it's like October or November and you don't implement these new systems, they're like, hey, if you're not compliant with the new technology, then it's all on you. We're not taking any responsibility.

All right, so here's the last question I got for you now. Try to do this without plugging yourself. Eric. This is going to be a tough one. What can small business owners like me, like Chris, like John, who's going to come on in a few minutes, who's going to be awesome, what can we do to protect ourselves to reduce that risk of losing our profits?

I mean, it's all proactive. I mean, like I said, the people that are getting hacked, unless you really upset somebody and you're a target, they're just random people trying to go into the easiest target. So if you're proactive, of course, quote, unquote, buy a service like ours.

You didn't plug yourself.

I didn't say simple win.

You just did. I got you.

But just whatever you do, be proactive. And that's the key. Because as long as you're being proactive, you're doing 10 times more than the guy next door. And that'll work for right now, but things are gonna get more difficult.

Okay? Now. And I will do the plug for you. Seriously. I am a proponent for simplewan.com. it's s, I m, p l e W-A-N.com. why? Because the product works. And secondly, because Eric is one of us. He's an entrepreneur. He's the guy who found this place and is growing it. Eric, absolute pleasure having you on. Thanks for joining us today.

Sounds good. Thanks, guys.

All right, take care.

Thanks, Eric.

Bam. I love doing it. You know why I like hitting that button? Because it throws you off as the sound engineer. You're like J doing the mics to guess who's coming up next, bro. Guess what business he's in. You didn't look at the show notes, did you?

I know it's John Wood.

Yeah, but do you know what John Wood does?

I was just gonna try to say John Wood, like, with an Indian accent.

Let's do it. Do it here.

John Wood. Wood.

Indians. Say the last name twice. That was perfect.

My wife's Indian. So just all you people relax out there.

John Wood. Wood. Mike Michalowicz. Clouds. Chris Curran. Curran.

Wood.

Wood. Yeah. Your wife doesn't. Unless she does have an accent. A little bit. A little bit. Barely.

Yeah.

Was she born in India?

She was.

Oh, yeah. Okay, I guess. I guess you would be if you're Indian now. I guess you don't have to be now.

This is gone. A lot of Indians are born here now.

Yeah, Yeah. I met some guy from Sri Lanka last week. I'll tell you, dude, entrepreneurial is all hell. And just bringing it, Just bringing it. I don't know. Okay, I'm going down some weird tangential path right now.

There we go. Do we need to.

Oh, here we go. Oh. Refresh, start. Okay, so guess who our guest is. Well, he does. You don't know.

Yeah. John Wood, tell me, what is the.

Stinkiest, most manual labored thing you'd have to do if you had a pet that you don't want to do?

Non disposable diapers.

Yeah. No. Okay, close. So you're on the right subject. If you had a pet, what do you have to do for your pet?

You got to pick up their stuff.

Yeah, exactly. And it sucks.

I've never done that because I don't have a pet or dog, whatever. But yeah, I look at them, I always look at people doing that and I'm like, there must be a better way.

Yeah, well, here's a better way. I'm about to introduce to you a guy who's got the solution. And. Oh, man. And he went full cycle with his business. So if you're listening right now, make sure you get really close to the speakers and listen in. John Wood started a low risk, low reward, and I put the air quotes around that pooper scooper business while he was a senior as a pre med student. Then he realized how bad biology sucks and he said, I'm not going to med school. I'm starting a pooper scooper business. Two years scrapes by a couple more years, starts growing this thing, milking it for all it's worth, and three days ago, sells the business. With no further ado. John Wood.

Welcome to our show.

Hi, John, how are you? What's up?

I'm doing well.

Wow, was that.

I've had the best four days of. I can't even know how long.

Well, I gotta hear what you did. Who bought your company? Can you share?

I can, I can. They're. Actually, there are a couple of friends of mine who I've Known them for years. And the wife, they're a couple. They're married couple. The wife, she actually has cut my hair for the last five years. And I was sitting there in her chair telling her about how I'm trying to sell my company and everything that was going on. And she was like, well, how about we talk about this? A lot of negotiating and talking and getting stuff in alignment later. I now am an example small business owner. That is very exciting.

Cool. And to sell it, that's considered a private equity deal when you sell it to friends. Yeah, I can't wait to dig into that. Why don't we start though from the beginning of your story. You're a pre med student, you're going to school in Oklahoma, right?

Yeah, Tulsa, Oklahoma. Yeah, I was going to school for pre med biology and I had read all about all these doctors going quarter million dollars in debt and I realized that I didn't want to go mass debt before I even started a career. And so I was like, well, I kind of want to do something. So I looked into real estate investing, mlm, network marketing type stuff and started this uber low overhead business, pooper scooper business. Because my parents in Nebraska had hired someone to do it when I went away to college. And I figured, well, if they're willing to hire someone in Nebraska, I wonder if anyone in Tulsa is willing to hire me. So I just kind of hung out my shingle to see what happens. I did a little bit of market research. I did look online and saw that all of the existing competitors in this space, none of them really had a strong online presence. I knew that there was a niche that I could dominate, which was Google. I got in there and just figured, you know what, worst case scenario, it crashes and burns. But it cost me all of about $15 to get started. The cost of a bucket and a rake. I read somewhere across $25,000 for the aver business to get started. Stuff like that. I'm like, well you know, I had a 25 year old car and a bucket and a rake and I started my pooper scooper business.

So they're like, John, it's going to cost you 25,000. You're like, nope, nope. Not going to cost $25,000. Yeah. So that's amazing. I'm just curious, what's the most common search term when people's looking for a business like yours to clean up after their pets?

Just dog poop removal.

Yeah, dog poop removal.

Dog poop removal, Dog waste pickup. And so that actually is what Got me into the next stage of my business because I started off as an independent with a really not catchy business name. And I did the best I could, but I just did not have any keywords in my company name. I kept my ear to the ground though and kept looking online. Around 2010 I saw this company that was just starting to take over the Internet. It was a franchise and they were looking to expand, looking to convert independent companies into their franchise system. And so I spoke with the CEO and I became the first. Can I say the name? Poop911?

I know you cannot say the name by the way. I'm kidding, you can.

I became the first poop911 that wasn't like a friend or family of the founder of the franchise system. And so I converted into it and it's been a wild ride ever since. Obviously joining poop 911, which does have POOP in its name and has a very strong Google presence and everything helped just take over. Last time I checked, when you Google Tulsa Dog Waste Removal or Tulsa Dog Poop or any of those kind of things, my website and five to ten directory links to me make up about 75% of the front page of Google. So I just, like I said, the last few years I've really dominated that niche. Mostly by the benefit of a little throwback to your previous guest. The fact that the franchise system had this gold level high encryption, all the bank level security stuff made it so that I didn't have to worry about those kind of things. Now it sounds like coming up in six months, if I were still the owner, I would have to start worrying about these things again. But up until this point, by using Franchise System and their, their software, it's kept me from having to, you know, worry about hacks and stuff like that. So for all the credit cards that my company processes, so.

So the first couple years you're trying to figure out how do you make money doing this? Were you the only guy out there, John? Was this. You were booking the business and going out and cleaning up the business, so to speak. Sorry, I was a little late on that. Keep going.

I was doing everything. Not only was I doing marketing and sales and stuff, but I was actually I had to have a couple full time jobs for the first couple of years because I couldn't pay the bills. You know, when you're only charging 10 to $15 per visit and you got less than 10 customers, you know that's not a livable income.

That's it. By the way, it was $10 or $15 per visit. How many visits do you make a week or a month?

Well, now we do like hundreds and thousands.

But no, I mean for your average customer.

Oh, for my average customer. My average customer is one visit once per week.

One visit once per week for $15? Yeah, it seems like a no brainer for the customer. It's so inexpensive.

Oh yeah, yeah, it's really. And that's the nice thing is because of the price point, we can actually market to a lot. We don't have to get just the million dollar homes and things like that. I've got customers from all demographics and stuff. A lot of my customers are actually, you know, living on fixed income. They're elderly, so they can't necessarily pick it up. But they do want a dog. And so, you know, for 10, 15 bucks a week, you know, they find that it's much more worthwhile to have us do it than to try to do it themselves or. And we're more reliable than, you know, the kid down the street, my neighbor's son comes over once every five months and picks it up. You know that, right? That's, that's our competition right there is just the kid down the street. So.

Yeah, no, totally. And this is, this is true, Kristen. Lots of businesses you think about babysitting, for example, there's been businesses that have tried to roll this up. The babysitter is the local teenage girl or guy. Usually it's the girl. These businesses try to roll it up and have done it unsuccessfully. But this industry, junk removal is the same way. Junk removal is the local junkyard or whatever would send by some guy, he would actually probably take your dog away along with the junk or something weird. And so you see these roll ups happen. So poop, 911, the franchise comes in. Why did you do it? Were they a threat to you if you didn't do it? Was it also a little bit defensive or was simply the opportunity that you saw? John?

It was both. It was both. I've always recognized the value of a system. I mentioned I had been looking at like network marketing and stuff before that. So I recognize the value of a system. Plus I recognized I didn't want to do this the rest of my life. Like this is. This was a learning opportunity, a learning experience for me. And I had an opportunity to join a franchise system which is much, much, much more sellable. Independent scooping companies come and go all the time because it's such low overhead, because it's such low barrier to entry. If I Don't have something that sets me apart from my competitors in the area. Why would anyone want to buy me out? From the very beginning it was, yes, a little bit defensive. I didn't want poop911 coming in if it wasn't me. And two, one thing that I mentioned is that their system does all of the billing, routing and scheduling for us, which if you talk to independent pooper scoopers, they will tell you they spend the vast majority of their time routing customers and chasing people down for money. The thing about poop911 is their system, their software system that they provide for a relatively hefty franchise fee. What they provide takes all of that routing and billing headache away. I mentioned before I joined the franchise, I had less than 20 customers and I was spending an hour to two hours a week either routing or chasing people down for money. Once I joined the franchise and I scaled up very, very quickly, I got up to 100 to 200 customers in the first couple years. I was still spending that same one to two hours a week with ten times the number of customers because their software made it so much more. It just took off all those headaches that chasing people down for money. Since everything was done by credit card, it wasn't a problem to get money from people. And since their software integrated with Google Maps and just set up the route so that I didn't have to, it automatically optimized it for every new customer that came in. It took all of the back end headaches away. Most, actually, most poop scooping companies, independent companies around the country are usually made up of a husband and wife team where the husband goes out and scoops them all day.

Of course it's the husband, right? Of course it's the husband doing. The wife is sitting back, she's like, oh, collecting the money, counting it. The husband comes in, yeah. He's like, what's that on your arm? She's like, oh.

Not to get off on that tangent. Not to get off on that tangent. But my point is simply that as a, as a franchisee, I was able to use their software and I've been able to run this basically as a one man show with the exception of the actual scooping. The actual scooping. Once I got up over 120 customers, I couldn't do all the scooping myself. There's not enough hours in the day and we are hindered by daylight, especially when we only have six hours of daylight in the winter. Once I got up over 100 customers, I had to start hiring employees to physically scoop poop, especially once I expanded to Oklahoma City, which is about an hour and a half away. And so for a while, I was actually running two businesses, One in Tulsa, one in Oklahoma City. I had four scoopers working for me. And then I was still trying to pay off some of my student loan debt from that biology degree. And so I was waiting tables at night. So it's been a long.

Oh, yeah. Which is not atypical until you find your niche. Now, what was interesting is you're such a low price point, I wonder, did you not get those big, expensive houses because you were too cheap for 15 bucks a pickup?

No, we get. We get plenty of the big expense houses. As a matter of fact, within my territory, within Tulsa and Oklahoma City, I am, you know, I hate to say, b, I am the most expensive. You know, just straight up, I am the most expensive. Yeah. And other. Other people will come in and say, oh, I can do it for a lot less than that. And I'm go for it. I don't necessarily want the customers who are looking for the cheapest deal. You know, I read Toilet Paper Entrepreneur. I know you can only compete on price, quality, or. Exactly. Price, quality or speed. And my. My price. I'm in the ballpark. I'm not outside the realm of reality. I'm in the ballpark. But what I do is I blow my customers away with quality. I have to talk in past tense a little bit because, like I said, I sold the business three days ago.

No, I know. We're going to get to that in a second because I want to start the party.

Yeah, I always blew my customers away with quality. We did crazy stuff like send them handwritten letters as soon as they sign up, make phone calls I usually responded to. And then I also competed on speed insofar as turnaround time of customer service. Somebody sends me an email or signs up for service that goes straight to my phone, I call them back within five minutes. For me, that quality and speed were. It set me apart from a lot of my competitors. And so I never had to compete on price. So that was that. Again, Toilet Paper Entrepreneur. And this is one of the reasons why I'm so happy to be on this podcast, man. TPE and Pumpkin Plan were two books that completely changed my perspective on my business and everything. And speaking of Profit First, I implemented Profit first two years before Profit First. The book came out because you introduced Profit first in tv. Tpe, dude. And so I took it from TPE and I ran with it from there. Oh, wow. And so on. You went on Creative Live and did a Creative Live webinar, which was awesome. I loved it. And I got to be there in the chat room being like, listen, folks, I've been doing this for two years.

Yeah. And they were calling you out. So, Chris, it's so funny. Do you ever hear of CreativeLive, Chris? Yes. So I'm at CreativeLive, you get thousands of people watching. So I don't know what the number was, but say five or six thousand people watching. You're in the studio and they're like, hey, does anyone in the electronic audience have questions? And they're like, oh, a question just came in from poop911. I'm like, that's John Wood. No, because we've been having a dialogue for all these years. And as an author, one thing I do is I drop in concepts and I see what resonates with people and they become a future book. So that was a concept back in the TPE days. John, I didn't realize you implemented that far back. Tell me about your experience of implementing taking your profit first for years. What were the results for you? What was your experience?

Right. The short answer is it's all been positive. I have to admit, I fell off the wagon a little bit during the second year of implementation because I wanted to make some investments. I've always taken my profit as part of my compensation for tax reasons and whatnot. That helps out with things. But my second year, I took a bunch of that PFA money that I'd set aside and I drained that account. Unfortunately, because it left me in a little bit less of an ideal situation when it was time to sell. I didn't have as much of a cash buffer as I would have liked. But like I said, I was able to make some investments and do some stuff. Because I had set this profit aside for a year and a half, I built up this essentially savings account. It's profit for a savings account.

I assume it forced different decisions or harder decisions. When you were taking your profit first and you had to make decisions for your business, I assume your decisions were tweaked because the profit was taken out first. Is that true?

Yeah. The short answer is, and every personal finance guru will tell you this for your personal life, save put something aside for yourself first. That was the first time I'd ever heard it from a business perspective. And it's the same thing with all budgeting. You will spend whatever is available. Always. You will spend it. If it's there, you'll spend It. And so if you set it aside, if you take it out, you will change your spending based on what's available. And so that's that. Yeah, I mean, I made it and it made a huge difference. And then like I said then, once I had this war chest built up, I was then able to use that war chest. Instead of, say, going into debt to make a decision, I was able to use that. And so that's when it comes to business and finance. I've heard you mention in the past Dave Ramsey, and I think you mentioned him in Profit first, the book. And my wife and I have always kind of followed him a little bit. Entre. Leadership is a book that I'm a big fan of and just trying to avoid that depth black hole.

Right.

It's really hard to get out of. So by. By building up my Profit first account, I was able to make large spending decisions that didn't necessarily put me into debt because I had a war chest built up.

And it got you to the point of four days ago, you sell your business, you're talking, you're getting your hair cut, maybe you're getting a little quaff, maybe you're getting a little coif, and you're like, hey, I want to sell my business. Tell us about the experience of selling your business. What was that like? What happened?

Oh, dude, Mike. It's been a roller coaster, but everything is. It's all about the. For me, like I said, I started this business knowing that I wasn't gonna be doing it for the rest of my life, knowing that every thing that happened was a learning opportunity. And so I started off. I first reached out to a business guru person. They gave me a valuation on my company that was an eye opening. If you've never. If you have a company that you've been running yourself and you've never had it valuated by an independent third party, do it and be ready to be shocked by how low the number is.

A slap to the face, right?

Oh, God.

It's a slap in the face, yeah.

Oh, man. But that put me in a position where I'm like, okay, these are the changes that they are recommending before I put this thing on the market. And so I started making profitable changes and scaling changes and doing things to make it more appealing to a potential buyer. So at the point that actually did put it on the market, within the first two months, I had a buyer who was ready to come to the closing table with me and basically pay me my asking price with half down and half on A note. And that was last July that that was supposed to happen. And unfortunately that potential buyer walked away from the closing table. I learned two things from that. One, never count your chickens. Because I had just handed out like a very serious chunk of change in thank you bonuses to my employees that I then obviously couldn't get back. And all that money came out of my. I mentioned that war chest got depleted.

Well, there, that's where it went, huh?

That's one of the places. And then the other thing that I learned from that experience was always get earnest money if someone makes you an offer and they get some earnest money up front because that was a very expensive month for me. I made a lot of decisions between when the due diligence ended and when the closing was supposed to be that then ended up coming back and biting me in the wallet because that potential buyer walked away. And I never got any earnest money. And so I just didn't get anything. It was just very expensive.

There's a kind of saying when selling a business. They say, don't count your money until it's in your pocket. But that's not even true.

Right?

Don't count your money until it's in your pocket. And you haven't been sued for that. Got a claw back from you a year later. That's how bad selling a business is. But tell us about you finally sell the business to these friends. Cash on the barrel head, by the way, or big check?

No, unfortunately not. Unfortunately, it's enough to meet my needs. There's two different things that I was looking for out of this experience of being a business owner. One, to be able to provide, you know, financial support for my family. And two, to be able to, like I said, originally pay for medical school. Well, turns out I didn't go to med school, but my wife went to PT school. And the amount that we got out of it is going to allow us to pay off all of her student loan debts. So I paid Bazinga. Graduate degree, just not my graduate degree.

Yeah, you paid one. John, looking back, one last question for you. Any one thing you suggest to people listening in if they want to be more profitable, what do you suggest they do? Any tips? One tip.

Oh, dude. Take your profit first. Take your profit first.

Absolutely. That's why I sent you a check.

Oh, stop. Go on.

Oh, stop. Please say more. John. Hey, we gotta rock and roll. I didn't realize how late it's getting here. Absolute pleasure to talk with you. Your story's amazing. I think we gotta touch base again in about six months. You know, post, you're in the Cloud nine stage. I wanna see how things wrap up. So why don't we touch base again in nine months? We'd like to have you back on the show.

Absolutely, absolutely.

Thanks, John.

All right, man. It was great talking with you. Congratulations to you.

Thank you very much.

Take care.

All right.

Some mind blowing things there, man.

In a world where you start a business collecting poop and then sell it.

I mean, it's kind of weird. We have Michael Knight, you know, wah, wah, wah, wah. And then we have a guy who collects feces for a living.

Right? But he did great.

Good for him, dude, full cycle. Listen, you can go to a room of 100 entrepreneurs and say, hey, who sold a business here? John will be the only guy raising his hand. Most people don't sell their business and I love what he was sharing. I got some tips, but first I want to talk about our sponsors. And we got a rock and roll fast.

Yes.

Fundera.

Fundera.

You know what they do? One stop shop. Get funding if you want to scale your business. John needed new equipment, new stuff. At a certain point in his business, he could have used Funder. It's a shame he didn't, but, you know, they would have funded his business. They fund any business.

Great resource, Fundera.

Amazing. One stop shop. Second one. Nextiva voiceover IP phone system. I use them. You should be using them, but you don't have a phone.

I'll use yours.

You do have one POTS line. Yeah, you can use mine. It's an amazing phone system, voice over ip. And then of course, tsheets and T sheets is time tracking for your employees, job costing, stuff like that. That all these companies, man, we are 29 episodes in and they keep coming back and keep coming back and keep. They're crazy. God, what are they?

Yeah, what are you thinking?

What are you thinking? So what's your takeaways?

Should we start with John and then go back or.

Sure, let's just start. John.

I don't know. Like for me, when he said. When he talked about how changes in your spending make a big deal and that setting your profit aside first forces you to change your spending. I think spending is probably a place where a lot of people can get more profit from, right?

Yeah. You know what's interesting is he said it. It's called Parkinson's theory. When more money comes in, we spend it faster. Parkinson's theory is the more something's available, the more we use of it. And it's true. With money, I Thought that was fascinating. He was in a volume game. 15 bucks a gig, $10 to 15 bucks a gig. That's not easy money. You have to do the volume. So he made a volume decision. I realized he had good quality, but you got to be doing 100 visits to make some serious money. That's what he did by going through franchise. So I thought that was impressive. Never count your chickens, man. Oh, geez.

Ouch.

I've been there. The mental game. Someone's like, I don't want to buy your business. That second. You're like, oh, I can finally buy that car. I've been looking. My wife and I can go for a wonderful vacation. If you start behaving that way, it will burn the shit out of you. No pun intended.

Yeah. Because then day to day business activities suffer, right?

Yeah. And by the way, it's a buying tactic. And I know you have a question for me, but I'm going to answer it right now because you don't. I forgot to give it to you. Here's the question I should have given to you. When there's a buyer's tactic, it's dirty 30. It's called the high ball, low ball. And what they do is, if someone came into your studio here at Kris. This is such a great setup and stuff, I'd love to buy this. This is worth, you know. If we cut you a check for 500,000, would that be cool? And you're like, Holy shit. 500,000. That's a lot of money. Yes, that sounds good. They'll say, great, we have to go through the due diligence period. John referred to that. We'll have accountants and stuff look at it. Then they do what's called the stretch. They give you a high number. You start spending mental. They stretch for five months, six months, say, oh, the things we're finding aren't so good. They come back after a year and say, you know, your business isn't nearly as strong as we thought it was. We'll give you $50,000 if you're lucky, or $25,000. Well, they know over that year you've mentally spent the money in your head and the business starts to fracture. You're not focused on the business like you should be. They come swooping in, they repair the damage, fix it. You just do the deal because you want it off the plate now. And you get screwed. No high ball, low ball technique. What'd you learn from Eric Knight?

Yeah, well, being proactive. I mean, I think that word proactive is. Is it I mean, talking about all the. The credit card compliance over the Internet and everything, even Internet security and all that, I think it's just being proactive. And, you know, if. I guess if. If there's a company that has a website or uses certain online systems that's really not protected, it's kind of dangerous.

Yeah.

So being proactive is. I think it's always good.

Yeah.

Although you can maybe be a little too proactive at times.

Maybe. Maybe. I think, you know, don't do it all yourself. If you try to do, you know, you want to do it all yourself because you're early stage business, but a certain point, you start stepping in areas you shouldn't be stepping in. If you're trying to manage protect credit cards on your own and you get hacked. 250 bucks a credit card. Fine. Plus a. Like, this could more than tank you. It could ruin your life, you know, so just be very aware of the potential costs of just trying to do everything on your own. Dude, we gotta start rocking and rolling. We gotta get prepared for our next little thing.

Yes, we do. So thank you for listening again. You can find our podcast on profitfirstpodcast.com or iTunes and Stitcher.

And be sure to. As I'm flipping all these papers. Yes, always be sure to tune in next week. We have Shama Hydra coming and special guest Tom Knox.

Wow.

My buddy. My buddy Tim Knox. That's how much of a buddy he is.

Tom Knox.

My buddy Tom. My buddy Tim Knox is coming. That was pathetic.

My buddy Jim.

My buddy Scramble. Where's his name, Frederick? Tony Knox. T. Knox.

Oh, God, it's been awesome. Mike McKowicz, Profit First Professionals. Thank you.

If you're an accountant, if you're a bookkeeper, we want to talk with you because you can bring profit first out to the entrepreneurial base. If you're an entrepreneur and you want to counter bookkeeper, that'll drive profit, visit profitfirstprofessionals.com and dude, tell us about Fractal Studio.

Yeah, Fractal Recording. Producing podcasts for businesses to just supercharge your marketing mix. That's what we do.

If you can help your hosts not mess up people's names like Tom Knox and make it Tim Knox, that'd be cool too.

Thanks for listening, everyone. Great job, Mike.

Thank you.

All right, bruh.

Yes. I'm getting better at that.

Oh, boy. All right, see you guys. Ouch.

It.