YNAB Interview with Mike Michalowicz

Hello, Weinabbers. My name is Jesse Mecham, and this podcast does not have a number because it is a special interview that I did with one of my favorite authors. His name is Mike Michalowicz, and he wrote a book that, as a business owner, absolutely, positively changed my life. It is called Profit First. However, Mike is a prolific author and he thinks deeply when it comes to businesses. So I know while we don't talk about business a lot on this podcast, I thought we might be able to make an exception because I know a lot of you are business owners, whether you've got something that is kind of your main gig or a side hustle. What he talks about in his new book will absolutely apply. It is called Clockwork. It is excellent. He has a fun way of writing where I don't get bored reading it, and he interweaves a lot of stories and has a great way of kind of breaking down principles into very actionable steps. So this rather exceptionally long podcast for YNAB and is now available, and it's where I interview Mike and we chat first about profit first and kind of how we got to know each other and how it changed my life as a business owner. And then we dive into his new book, which is Clockwork, which actually comes out today.

Okay, Mike Michalowicz, thanks for coming on the YNAB podcast.

Jesse, thank you so much for having me.

Yeah, absolutely. So our audience has maybe heard me mention profit first on the podcast because. And I'm not, you know, like, brown nosing here, but radically changed my. This friction I felt with my business around owner distributions. So I want you to give like a 2. I want everyone to know about profit first, and I want you to give a pitch for it, and then we'll dive into your new book, which I think business owners, if, man, if they can't find profit, they. Or if they just feel like they're running themselves. Raggedy Clockwork, your new book that we'll hit, is great, but let's give a quick kind of backstory on profit first and how we got to know each other, and then we'll dive into the new stuff.

You know, it's super humbling to hear you say that, and that's not the first time you shared that. We got together in New York City for a cup of coffee or dinner, drinks, actually, and you were kind enough to share the impact it had on me on you, and it blew me away. You know, I'm like the founder ynab. This is serving him. So thank you for saying that. I'm still taken aback in such a pleasant way every time you share that.

I had a break. Well, I had my coo, you know, Ynab is doing well. And we had a rock when we switched our business plan. We had a rocky time where I knew, oh, this will be a rough ride. Hopefully we make it and we've made it. And then this question of reinvesting, you know, that like entrepreneurs are. They're like, they're supposed to fill this, I don't know, this character attribute of like high flying, high risk, you know, swashbuckling, roll the dice. And I always felt that, but I didn't actually like doing that. So for years I would pour money back in. It was just like, oh, I got some chips. I'll just push the chips back on the table at, you know, times, you know, whatever it was. And then I would go home to. To my wife Julie and like, hey, Ynab's killing it. And she's just like, oh, news to me, you know, because our life wouldn't change at all. Any. Any profit we made, you know, quote, unquote, profit, I would just leave in the business say, oh, business will need it. And the business always did need it, always had to consume it in some way or another. And so finally, you know, reading your book, and I encourage everyone to read this, if you're a business owner, it applies to personal finance, but it's just perfectly on point with business owners. And the idea of just saying, I'm going to take a distribution and then let the business have the rest, that was simple as it sounds. Yeah.

What I found out is so many of us have been trained to push the money back into the business. And there's vernacular around that. Plow back, push back, reinvest.

Yeah.

Here's the hardcore reality. It is not profit. Then we call profit for a period of time and then we say, but, you know, I'm going to put it back in the business. That is not profit. That is an expense. We played a shell game. We said it was profit, we felt good about it, but it's an expense. A sustainable business must be profitable. And that then dictates that the owner must take that as a distribution. Compensation, a year end bonus, a quarterly bonus. It is your choice than to do what you want with it. I call it a celebratory account. And we can define celebration as going on an amazing vacation. You, your wife and your kids. You went to New York. I actually thought you moved there. You were there for such a Long period.

We were there for a while. Yeah.

Yeah. But it could be investing in your future. It could be savings. It could be starting a new business if you're so fortunate or not for profit. But the key is that money comes out, and the exclusive use is for the benefit of the owner. The hidden benefit or gem here is when the business doesn't have that dependency on that profit, which is not profit, then it's a reinvestment. It has to find a way to survive on its own legs, and that's what a business needs to do. Now. This infusion of this adrenaline shot every quarter or however you take a reinvest that profit, but it now must live off of its own legs. And that is a truly successful business.

Yeah. And a side benefit to this, I have a minority partner that, you know, our cto, Taylor. And he. He would get a distribution when I would randomly decide to take money out. You know, I. He always talks about the dog distribution because they're like, several years ago, I'm like, I'm going to get a Belgian Malinois puppy and train it and do, like, shoots and stuff with it and just. It'll be awesome, you know, and it was awesome. And so I. The dog cost, I think, two grand. These are expensive dogs, you know, Although for Manhattan Standards, I learned that wasn't that expensive, you know, when I was over there, but for us over here, it was expensive. And then because I'm, you know, I'm a partial owner, I always have to distribute proportionately to Taylor. So he would just randomly be like, oh, wait, what happened? Oh, you bought a dog. Oh, cool. Thank. You know, I got a little money. It was just so weird. Or I would say, oh, I'm going to do this. So I'm going to take out a distribution. And he'd be like, oh, good, I hope you take out more. You know, what else do you think you should buy? That. You know, it was just this weird thing where he couldn't count on it. And now we have this schedule, and per your book, I kind of have slowly been upping the percentage of gross to get. Not get too much in the weeds, but percentage of gross profit on our books, I just take a percentage of that. And I've actually applied a function to that and said, okay. And then this bit is carved out for the rest of the employees. So it's allowed me to kind of treat the employees as, you know, quasi owners to a degree. Exactly. And they benefit. So everyone's like, oh, if Ynab does well and really can take money out. Then it goes, you know, distributes to everybody and, and we're doing fantastic, you know, and it's just the predictability has been. I didn't think it would be such a boon to the partnership, already a healthy partnership. But Taylor is like, man, tell Mike thanks because this just made his life easier, you know.

But, you know, for, for guys like me and you, Jesse, what's interesting is, you know, you developed ynab, I developed Profit First. I feel it's the ultimate accountability. Like, I live by Profit first and I know that if I ever flounder from it, I become a charlatan. So it's a force, it's a self enforcing mechanism that we have a community that uses it. But also our own employees, my colleagues here, they share in our quarterly profit distributions. They're very profit first oriented. And the decisions they make here are fascinating. We're 10 employees, we're tiny. But one of my colleagues here, she effectively does our purchasing. I said, hey, I asked you to get such and such and you're proceeding with it, but you haven't bought it yet. She's like, oh, I believe there's a new coupon being released tomorrow. So we're just waiting a day to, to save another 15% because the bottom line's affecting her. The more profitable you are, the more she shares in it. So I just see as a great accountability mechanism, but also that the engagement from my colleagues now is there and they're bringing this into their own home lives. Some of them have their own side hustle, their own businesses, and they've employed it there. So it really starts to kind of snowball out, which is a beautiful thing to see.

Yeah, that is. And it actually kind of leads into your other book, at least that one line where you're kind of talking about employees acting like owners, you know, and. Yeah. And in that way, if they're sharing in the, in those real profits, then they do start behaving like owners. Like, oh, we could save money here, we could bump up our conversion rate or sales here. That's a big deal. Really big deal. Very cool. So on the. Anyway, so thanks for Profit first. And I know we have big overlap. A lot of ynabbers are, you know, that use YNAB for their business are fully like whole hog into Profit first as a, as basically a cash flow model for just how things should flow at a fairly high level, really. I mean, you do kind of show how you can get more granular as needed, but for the most part you're just kind of saying, take money off, essentially almost off the top, and then let everything fall where it may. And I've been doing that for almost a year now and. And lo and behold, things are just fine, you know, And I've distributed what it is.

And when we tell people to get granular, we say, do Ynap?

So it is. Yeah, exactly. Exactly. And one, one final thing that I, I just found, really. Yeah, just I think long term, could be a big lasting benefit, is I was chatting with my COO and this was before I had found it, but I was kind of, I was learning about it and, and he said, Jesse, if you never take a distribution, if you never extract the value that's been built with Ynab, then you are ultimately saying you will sell it because at some point you have to get the value out. It's too risky not to, you know. And so now that I'm able to see, oh, I can derive my value slowly over time and keep Ynab mine, that it's been such a weight off my shoulders because you know how. Well, you know how it is. Everyone as soon as you say you own a business, they'll say, well, when are you selling it? Yeah.

What's your exit plan?

Yeah, you know, it's like, it's just bizarre, you know, so now I can say, oh, I'm not. And it's brilliant. You know, it works out just fine. So anyway, so that's the profit first bit. I encourage everyone to check it out. Mike has several books. I haven't read your previous books, Mike. One of the Pumpkin Plan is one that I felt like I think I've cracked the nut there. But the Clockwork one, this new one, as I was reading, I thought, okay, I've got some work to do, you know.

Yeah.

So first kind of. Tell me. I mean, you're a writer. You write really well. It's fun. I actually like your audiobook. When I, When I read what you. I like, I like hearing your voice and you ad lib. So you get little, you get a little extra things in there. But tell me why you wrote this one. Like, what was the, what was the cause?

The kind of aha was, well, a few things. First of all, I got emails from readers of Profit first that had achieved their vision for profit. And then they said, but I have another problem. You know, what is it? I'm. We're still working my butt off. I've now concluded that Maslow's hierarchy of needs, which applies to our human life which says basically we have a base level of need, which is our survivability. You know, food, water, oxygen. If you don't have that, all of our attention goes to acquiring that. But once you have that level, then it's need for shelter and then belonging in a community and love and the highest level, self actualization. Well, I looked at this model for personal needs and said, oh my gosh. This applies in a different flavor but to entrepreneurial needs. I believe every business foundationally, it's oxygen. Is sales. If I don't have any inbound sales into my business, a recurring source of revenue, I am deprived of oxygen, I am gasping for air. So I need sales. But once you have some degree of sales, then the next level is the nutrition for the business, which is profitability. If the business doesn't have profit, it will starve to death. You can breathe in as much air as you want, you can try to sell more and more and more, but if you don't have the nutrition of profit, you will starve to death. You will die. Sadly, most businesses that are starving for profit actually focus on sales. Once the business has consistent sales or sustainable sales, I should say, and a degree of predictable profit, then the next level becomes the management of time. A business owner wants to utilize their time in a way that they can do what they want when they want. And actually that's why I just have the subtitle for the book. Design your business to run itself. The goal of a business, once there is production, predictable profitability, is to do, be able to do what we want when we want in both our life in our business. I found that most business owners, and this is true for myself too, I don't want to do everything in my business. I don't want to do a lot of the administrative stuff. And I've gotten to the point where there's predictable profit. Now I can do the work I want to do in the business, or I want the freedom to say, I'm done doing the work, but I want the business to continue on without me. This is the third level, giving us the freedom to do what we want when we want, but you have to have a business that runs itself for that to pull that off.

Yeah, yeah, absolutely. So when you kind of, let's assume listeners, they're saying, I can close a deal. You know, as a matter of fact, I was chatting with a friend yesterday and he just said, I don't know, I'm so busy. Clients call. And he has this kind of crass way of saying he Calls it the FU price. But his hope is basically for them to say, that's too high. I can't hire you. Because he's so slammed. And so he's cracked the sales code, as it were, and he's very profitable. But he's just going from one fire to the next and doing everything, working sun up to sundown, and there's kind of no end in sight for him. So when you had a phrase in there that I really like, where you said doing is getting you nowhere. Just kind of expound on that. That's a little bit counterintuitive.

Yeah. So I feel there's four phases that the entrepreneur, the business owner goes through in running a business. Phase one is doing where we do all the work. We call ourselves the CEO and the chief bottle washer. And it is necessary. We start a business, you have to do everything. The next level is actually deciding. And what this is, is we make our first hires, we assign them work. We call it delegation, but we're really deciding. What I mean is, if you hire me, you may assign me a task like, Mike, create these invoices for these customers. What you've done effectively is task rabbited me. The problem occurs when I come back to you and say, hey, Jesse, I'm not sure should I sort these customers by first name or last name? And then you say, oh, we do it here by last name. You've made a decision for me. You've just assigned me more direction. And then I come back to you a minute later and say, you know, do you want me to build in increments of one hour or 15 minutes, you decide again?

Yeah.

What happens here is I am taking the mo. I'm making the motions, but I'm not making the decisions. There is a Hindu goddess actually that I think describes it so well. Her name is Callie. Coincidentally, or maybe ironically, she is the name the goddess of both death and time. So I call it death by time. And what it is, is you are deciding and I become this, this Hindu goddess, which is one head with eight arms. You've probably seen pictures of her before.

Yeah, definitely.

One brain that still controls the entire organization. It limits our growth and actually takes us away from doing the work because we're deciding for everyone else. The next level up is delegating. Delegating is where you sign the outcome. You tell me, Mike, we need to make sure that we're collecting the revenue from our clients. Take care of that. That's an outcome based direction. And when I come back to you with questions, Saying like, should I short by last name or first name? The response is, I hired you because of your great mind. You figure it out, Mike, you decide. So it's pushing decisions back on me. The highest level then is designing. And designing is where we are having. We have the vision for the business where we want to take it that X on the map and are making strategic decisions, coordinating our resources, orchestrating our efficiency is a business unit to get where we want to go. And I think most entrepreneurs are in the doing, even if it's sophisticated doing. Like, like the person you described who's a high level closer. She's the rainmaker. She's still in the doing phase and that will be capped. You can only make so much rain generate, you know, be generated. What I would argue to be a true entrepreneur, she needs to shift to designing and orchestrate other people to do that miraculous thing she does so that she can get more and more people doing it and therefore grow the business and ultimately extract herself from the business even needing her.

So those four Ds like that, you have the doer. That's in its natural. It's, it's an evolution for. Well, I'll say this. Any business will always start around the doer. But whether you progress to that ultimate Ford, like the ultimate D of designing it is a question mark. Right. This isn't just oh, natural evolution of every business owner is to walk this path. It sounds like it's a very intentional path that you want to take.

It is. But we hit roadblocks because we become entrenched or familiar with or maybe it just becomes habit. You know, when I started my, started my businesses, I, my first companies were in the technical space and I would set up the computers and I got so efficient and good at it that it frustrated me. If I tried to hire someone, I said, you know, they're idiots. They can't perform my level. No one's as good as me. And I actually built through my ego and through my ignorance, I built this barrier between for my growth, I believe I couldn't hire the right people, so I would do more. Or I'd say I'd have to hire a person that I had to pay such a ridiculous fee because they have to come in with so much talent that I can never afford them. And then it prevents me from growing is once I had the realization that I had to up level my game, I had to move on from doing work and start really moving toward the true delegation of work and ultimately just designing a strategy for my business. Did I ever really elevate my business? And getting past that ego and that established habit is very difficult. It's very hard.

And what's so satisfying is when, you know, some time passes and you realize this person that's doing the thing that I used to do is far better at it than I was.

Yeah, it's unbelievable, right? The clarity. I was like, oops, that was a mistake. I'm not that capable.

And then you feel like you found gold. You feel like you struck and.

Yeah, I think there's another danger here is abdication can happen. And I fell into this trap. I had that moment, oh, my gosh. There are people that are better than this. I need to hire them. But then I abdicated any responsibility. I said, basically, go out and do your magic, person. And they did. But then they came back one day and said, hey, Mike, you're not paying me enough. I'm doing all this work. I need to be paid more. And if you can't pay me more, I hate to say this, but I have to leave. And that's when they had reversed the golden handcuffs on me. I now had to find ways to get them more money, because if they left me or out the door when all my systems, all the process, because they had all of that in their heads. So the key to a designer is not just putting the right people in the right places, but to be perpetually extracting the knowledge of the company and routinizing it, make it into systems and processes so other people can come in and replicate the process. That's the key. If you don't do it, reverse and reverse golden handcuffs could occur.

Yeah, absolutely. You feel like they're irreplaceable. And I've been. I've been stuck in that before. And sometimes you have. You know, you might be working with. You have a team member where you say, oh, this. This isn't working. You know, I need to let this person go. And they're too. They're just irreplaceable. And you start to have, you know, cultural things that can happen. And, you know, you've got a bad apple, but, oh, my gosh, they're irreplaceable. So that it can. It really is a protect. It's like a way of diversifying, essentially, and kind of protecting your business to say, to a degree, we're all. We're all replaceable.

You know, we're all replaceable. And the key here is as people come on and they develop their own processes and systems, I mean, a business at A point will get beyond our knowledge. I think it's usually around five or six employees that I've experienced is I can't keep it all in my head anymore. There's people doing things that I don't even know what's going on in my own business. We only have 10 employees here. I just heard that we have this major project underway and I had no idea. There is relief in that the business is moving forward without me. There's a fear when there's this lack of control. So one thing to set up that we've done here, and I explained in Clockwork, is as things are developed, new systems are brought about that those people are also responsible for recording it. And when I say recording, I mean we actually record it. If it's a process, like say it's an invoicing process, we use a screen capture tool. The person that's now managing this process records it, saves it. So that when we bring on the next person to do that work and the person that prior that was doing that work is now elevated to something else that we can just transition the knowledge by watching a video. Yeah, we always have to capture the work we're doing.

How do you deal with people that are, you know, you're saying, we want to capture this work, we want you to record it. You're familiar with eos, you know, with Gino Wickman's job work, you know, and I love that as well. And he talks about stepping back from the business. So you're not just in it, but you're, you know, you're step back from it. How do you, how do you balance that with employees where they're just, they're going, they're super efficient, they're going sun up to sundown, they're working like crazy. How do you convince them to say, wait, take a moment, take longer than you would for this task to record it?

Yeah, so. So, you know, it's funny, I was thinking about that exact question when I was writing the book and I, I said, you know, what employee is in such demand that they have to be going from summit to sundown? And they have such technical knowledge that they have no other time. And I figured, at least I determined that doctors in ER situations in particular are that scenario. So I studied, started to study ers. I found two kind of polarized situations. One was a hospital in Cape Cod, Massachusetts. Another one was a hospital in New York City. And this one in Cape Cod was blowing the metrics off the door. They had a wonderful reputation for excellent service but also they had the ability to see patients within minutes of their arrival in the er. If it was a bloody nose or a broken arm or worse, it didn't matter. They were seeing everyone quickly and they were busy. I found another hospital that had the same degree of demand placed on it, but they were horribly inefficient. Doctors were overwhelmed. Patients were in the waiting room. There's one case study, it's a very sad case study of a woman named Esmond Green, who actually was in the waiting room for such a long period, she actually died in the waiting room from what's called thrombosis, which is basically sitting for too long and you get blood clots in your leg that go to your brain. Horrible case study. But it does point to the two extremes. The one hospital in Cape Cod that was so successful, realize two things. First of all, the doctors have to have any superfluous work removed from them. Our rainmakers, those star employees we have, often have superfluous work. Peel that work away. That's step one. Don't have them do the administrative work. Hire an administrator. If they're kicking butt at sales and they're also tracking their time, make that higher for someone else to track their time. So avail them to do what they're best at. Step two is record them during the process, not teaching it. Don't say, okay, stop selling now. Come and teach us how to sell. Have someone watch them in parallel when they're on a sales call. Send the learners to observe them in the process or have a recording of the process as it happens so they don't have to get off the track of their production. But the training is happening in parallel. That was the two significant things I found, and I think we can all do the same.

Yeah, absolutely. And it's. Is this the salesman that you're talking about? Is this kind of the queen bee role that you. That you work around in the book, that concept?

Oh, great question. Not necessarily, but. But the queen bee role is a critical function. Here's what it is. I discovered or feel that or concluded maybe is the best word, that every business has a critical function. I consider it the heart of the business. It needs to keep beating. If our heart stops, the entire body dies. You know, if we get a cut on our finger, we're not dying. So the heart is a priority organ. It must be protected naturally. In our natural biology, the caging of our skeletal system actually protects the heart. There's an encasement around the heart, this water, to protect it. Our fingers don't have extra structure around it or water to protect it because it's not critical. So the heart is the most critical thing. What is the heart of the organization? I call it the qbr. Stands for queen B Role. There's a reason I derive that term I explained in the book. It's not necessary to explain, but every business has it. Here's how you find it. Determine what your brand promises for your business. What's that one thing you're distinguishing your business on? The example I've been using a lot recently is Federal Express. FedEx is known as to deliver packages on time as promised. That's their brand promise. You know, if it absolutely, positively needs to be there overnight, we'll make it happen. That's their brand promise. Then we peel the onion back, just one layer and say, what is the most important function the business is doing to make that band promise a reality? What FedEx does is logistics. They move those packages very quickly to get to where you need to be quick and efficient. Logistics. That's their qbr, the critical role that's happening within the organization. Now. They do a million other things. They have a wonderful website, they have great customer service, et cetera, et cetera. But here's the honest truth. If the customer service slacks and they don't answer the phone in a minute, they start answering the phone in 30 minutes and this happens for the next month that they take 30 times longer to get to the phone call. Will people complain? Sure. Will they lose some business? Maybe. Will they lose the entirety of their business? No way. But now think about packages. Say it took 30 times longer to deliver a package. They still get there in a day, but now it takes 30 days to get there. Will they lose business? Yes. Will they go out of business? Yes. That is the heart of their business. We need to determine the qbr and every company has it. To find it, figure out what's the one big thing you, your business is known for. Then peel back the onion. What's the most important function, activity in our business that supports it? That's the heart of the business. Protect it. Make sure it's served. Just like the Cape Cod Hospital. Protect those doctors so they can do that one critical thing and remove their distractions. Find your qbr, protect it and serve it and your entire business gets elevated.

Yeah, that's going to make me. I'm going to have to think through that. We, we do pretty well thinking through kind of our uniques and, you know, what positions us in the market and our purpose and things like that. But to get to a question of saying, well, where is our support for this queen bee role? Where is that? And how can we support it even further? It's almost like you're saying, where do we just double down again and again. When I was reading you allude to Bezos at some point in the book, I remember, and I read his book, the Everything. Well, not his book, a book about him. The Everything store. Yeah. And it was interesting how they had this point where they would just double down on the same exact concept again, which is. I mean, the Everything Store caught it. It was, we're going to make everything available for sale. We'll start with books. Then they had very logical reasons why. But. But then they just kept doubling down. Oh, now we're going to be into jewelry and now we're into car parts. And I don't even know what now. I. I mean, if I want to buy something, where do I go? You know? And so it's a fascinating thing where they're saying, we promise that we'll have everything here. And then they found some.

Yeah.

With shipping and stuff. But everything that was. That's still the thing they pursue more than anything else is we have everything you need.

Everything.

Yeah.

And I would argue it's everything. It's easy access to everything. I would say their brand promises, if you want it, we get it to you easily. One click. Right. Single click. I suspect if they said, you know what, we're gonna give up on the easy part. We're gonna carry everything. We're gonna have the best price. It'll just be the cheapest. But, you know, maybe a little difficult to get it. And. And it may be Kluge and it may come through third parties. And when you get it, you may not be able to do a return. And maybe it's not one click, maybe to verify your credit card every single time. Because they're all different purchasers. But it's going to be always the cheapest. I wonder if Amazon will even survive. I think. I wonder if that'd be a devastating decision. They know it's about making it extremely easy to get that one thing you want, that everything and the ease of purchase. If you check out their website, they're one of the most highly tested websites in the world, all around purchase efficiency. I actually observed the test going on because Amazon's an important platform as an author. Watch their selling. They are doing heuristics as you're looking at an individual book. If you're looking to buy your book just came Out. You need a budget. I'm looking to buy it. If I go in there to a Kindle version. I'm sorry, if I go into and look at an Audible version, it won't even show the hardcover book as an available option. Not readily. I have to dig for it. It'll only show the most likely alternative to an Audible, which is a Kindle version. So when I went to buy your book, I saw an Audible, and I said, oh, maybe I'll go Kindle. And I'm like. I'm like, you know what? There's not even a hard. He doesn't even have a hardcover. I'm surprised until I then looked at the Kindle, and it says, as an alternative, you may want the hardcover. So they're walking me through a final. A very easy one. Two decisions, even when it comes to buying a book.

Yeah, Nothing's accidental. Nothing is accidental around that.

Nothing.

Yeah. Which is creepy.

And we shouldn't have anything accidental either.

Yeah, absolutely. I mean, it's very. It's extremely purposeful. You know, our, you know, Ynab's purpose is to help people gain total control of their money, full stop. That's the end, you know, And. And so when we're butting up against all sorts of phenomenal suggestions and opportunities, we just are always kind of saying, well, will that further our purpose? And it's so much easier to then say, no, I don't think it will. And we just keep going. And we do have our uniques. These three things we do that really help us deliver on that purpose. And we always are kind of further filtering down. We'll help one of these unique. So that lens lets you jettison a lot. But I feel like as a business owner, if you're just kind of going, going, going, hey, there's an opportunity. There's an opportunity. Here's a new shiny. Pretty soon you're just running. And actually, you have a bit. And I think I might be mistaken because I haven't read your book, the Pumpkin Plan. I know that was one of your earlier books, but I think you work on that in that book as well. And perhaps more than here. But when you talk in step six about knowing who you're serving. I was speaking with a young guy yesterday at the gym. He's just this super buff kid, but he's a killer. Designer designs killer logos. And I said, hey, how is it going with your business? He might be 24 or something. He's freelancing. And he said, yeah, I don't know. I might Get a job. And I said, why? He says, well, you know, I charge 400 bucks for a logo, and sometimes it takes me four days. And a lot of the times my clients, they're asking me to change this, change that, change this, like. And I'm sitting here hearing this, I'm saying, okay, he's hiring a client that thinks the logo is worth $400. And then suddenly I'm thinking, and that means that's kind of the worst client to work for, you know? And so I couldn't help but think about when you. When you know your customer, when you identify attributes of your customer that are. I just told them, hey, if you land one client that's $1200 for the logo or 1600 or 2000, you will notice a difference in how they behave and try that and see what happens. So I don't know if that's what you mean by know who you're serving or what kind of market you're going for, but I just reminded of him, he's just. He's going so hard, and he's just, you know, he's serving the wrong customer, essentially.

Yeah. So I do talk about that in the pumpkin plan, and I call it customer cloning. But I dedicate a lot of time to that in clockwork. And I've gotten a little pushback, but I'm. I'm pretty adamant this is the right approach. I say that the customer decision, deciding who the right customer is, comes after you know, what your talent is. Most people that push back together, they say, well, figure out the customer and then determine what they want and adjust accordingly. But I do a sports analogy. I say, you know what? Why don't you go play tennis? That's the customer. Figure out how to now serve them and how to get really good at tennis. But if your natural talent is absolute speed in catching a ball, I don't know if that's going to serve you. In tennis, maybe the speed kind of plays in. But it's not about catching, but hitting. But if you're super fast and can catch a ball, maybe your sports, football, and you should be a wide receiver. We have to first analyze what are the talents, the inherent strengths of a business and who can cater to. And, you know, Jesse, you naturally did this. You developed that spreadsheet. That was your initial thing. You know, you're developing a spreadsheet for your own budget. And then all of a sudden, now you say, I wonder if this will serve other people. You developed the talent first and. And then derived it in clockwork, it's, it's really honing in on what's that one thing you're so talented at? And then getting crystal clear on the customer service. I'm not saying, by the way, that you first develop. Develop it and they will come. What I'm saying is, as an established small business, you're already doing certain things, and we need to further hone in that talent. As we further hone in that talent, some of your existing clients will elevate up. They'll. They'll resonate with it. Some of them will go by the wayside and it'll be very clear on who you need to cater to.

Yeah, so we just talked about the everything store. But what you wouldn't want to necessarily say is, you know, when, when I say, hey, you know, Mike, who's your audience? And you say, well, gosh, everyone could benefit from the book. You know, like, it's such a trap to say, like, well, everyone. I mean, I said that everyone needs a budget. But at the end of the day, lo and behold, we certainly resonate with a group of people far more than another and that we can't think we serve everyone because we'll just be just bland and there'll be nothing there for anyone.

And I think a lot of people look at Amazon or Facebook or whatever you name the mega corporation, and we say, but Amazon does everything. Amazon sells every product or Microsoft, they make video games to software to hardware. They do everything. But the reality is that is the end point. They, once they got to a billion dollars, I think they're allowed to expand.

Out a little bit, although then it's faster. What happens is you'll see these massive conglomerates because, you know, the conglomerate was the thing back in the day. And then suddenly you have jettison. You know, look at ge. They're like, oh, we're getting rid of this, right? So there's. There the focus that's can be lost. Even, Even at that high, high level, it perhaps takes longer to.

True.

But yeah, I don't even know if that's.

It's so true. I also encourage people, whatever company you aspire to be like or inspires, you look at their early stages. You know, I, and I did this too. You know, Bezos started off just with books. It was just him. He was the guy packaging the books in his garage. And he had to grow that to a lot of revenue before the be Everything store ever became a true thought. He had to be there. I looked at Procter and Gamble, who sells thousands of Products. They started their company by selling only two products, candles and soap. And they decided that was too diverse. They dropped a candle line, and when it was just soap, they went with Ivory Soap and they exploded. And you see this repeat over and over again. If we want to achieve growth and efficiency, you have to pick your one thing for your one community. And you kind of got to make an all embed on that, become super efficient around it, and let that community carry you to the broader markets. And then you start expanding. And I'll tell you, if you haven't surpassed the magic number I'm discovering is $10 million in revenue. If you haven't got past that first $10 million in revenue, don't think of anything else but that one thing for the one niche before you expand into the next.

It's so, it's so, so tempting to dilute. You know, I've done that so many times. I'll come up with some other channel of revenue and then it'll run for a year or two and you think, huh, that's 3% of all of our revenue. Like it's not even worth the effort. And then this, you have duplication of overhead and thought and mental power that goes into it. And yeah, you end up just. You're kind of expending the same amount of energy for 3,4% of revenue. If you would have just landed one new client, you know, with that effort, it would have made the difference. So it's, that's so true. It's tempting. And, and the other thing is you, you know, you hit it once and then you think you're. You're a genius, you know, so, so you're like, oh, I've clearly mastered all business, you know, so I can just kind of go around and do anything I want. The old false positive, like, well, no, you got lucky one time and you maybe worked hard, but you know, there it is. So that's also. It's pretty. You gotta be careful of that. Mike, where can people go go to find out more about you? I mean, you've got a lot going on. I think clockwork. I mean, do you have a progression for, you know, a budding business owner like, hey, read this, then this and this, or what would you have them do?

Yeah, so I'll tell you where to go, and I'll tell you where to start. What I've discovered. I used to say, oh, you know, start off with the Toilet Paper Entrepreneur. The first book I wrote. And I now regret as I making that suggestion now, when I say to someone. When they say, where should I start? I respond with another question. I say, what's your biggest current challenge? They say, well, I don't have any profit or, you know, I need more clients or whatever. I've written a book. If you need more clients, the Pumpkin plan is a starting point. If you need more profit, it's profit first. If you need to hire someone, that's right for you. I haven't written that book. It's someone else's book. You know, if you need a budget, it's ynab. So you have to figure out what is your biggest challenge and then seek the answer for that challenge. So I don't have a starting point in regards to selecting a book. I do have two points you can start if you want to further explore what I'm doing. One is my website, where all my content is. It's Mike Michalowicz.com. here's the deal. I had the worst last name ever. It's long, it's Polish, it's ugly. So there's a shortcut to get there. My nickname in high school was Mike Motorbike. The greatest irony, by the way, Jesse, is I've never driven a motorcycle, but I was Mike.

Yeah, yeah, Mike Motorbike.

So. But you can go to mikemotorbike.com and that will bring you to my website, where everything is. And Clockwork specifically. If you want to explore Clockwork, my newest book, if you go to Clockwork Life, I've created this, my most comprehensive to date resource guide for a book. It's all free, but it's. It's the. The systems are there to make the process of rolling Clockwork out much easier and for your colleagues to embrace it, too. So Clockwork Life is where you can get started with the book.

Okay. I have something else I'm just going to tack on to the end. Even though we. That was a killer ending, but I just came up with it just now. So I'm going to do like a lightning round kind of thing. I've never done this before, but give me. Just tell me, like, one. One morning. Like, what's something that's critical to your morning as far as just personal success, Whatever. Just something that's critical to your morning. All right.

It's my. I call it the prayer bowl. Every morning I start with prayer. I am religious agnostic, but I do believe in a greater God. And so every morning I found this thing in. This is funny. I was in India and they turned me on to these things called singing bowls. This Guy demonstrated it and it just resonated with me because this bowl, you rub a stick on it and it starts to hum. And it just, it brought such focus for me. I was like, why doesn't everyone know about this? I got to bring this back to America. And I came back and found out, actually everyone does know about it. It's every, every tchotchke store in the world has it. But nonetheless, every morning I will ride my bike from my house. It's an eight mile ride up to a lake where we live. I sit on the edge of the lake on a cliff and I hit my singing bowl at usually 6, 6:30 in the morning and pray. And that has been, that's been life changing.

I'm glad I asked you that. That's, that's phenomenal.

Do you ever hear these single.

I mean, you're like, everyone knows. I'm like, well, except me. I have never heard of that.

Okay, all right. Okay. I thought you got, you got. Just type in singing bowl in Google or something. It's really fantastic. And I think I'm a tactile person. I need to hold or feel something. I really have struggled with prayer or meditation or anything of that. My mind drifts in church. I remember a Methodist, my upbringing was Methodist. But I remember in church, whenever our preacher, our pastor was giving a sermon, it was so hard for me to listen. My mind would drift to business. I was actually ashamed with this bowl. It just gets my mind focused. I can't help focusing.

There was a guy that came and talked to us. He said if you've, if you kind of lose yourself in an activity and you kind of ask yourself like, oh, where'd the time go? You probably were in the meditative state that you, that you're seeking. But he said you can do it in lots of, you know, skiing down a hill. He said a lot of times you're just so focused on the thing, there's, there's no room for anything else. And you can find that your mind just kind of, it's, it achieves that. What is it? The alpha state where they're saying that it's not, am I making a flip flop alpha beta? But where you're just saying, oh, my mind's in one spot and one spot only and not going everywhere and on your bike. I'll bet sometimes just the cycling could potentially be or something.

I love cycling. I love cycling. Yeah. Once you hit a hill, you can't think.

You just gotta paddle. If you think you'll quit, you know, so you really can't think. Excellent. What's. What's one? Business book or not. I don't want to limit it. What's one book that you've read that you just thought, oh, that. That one belongs in a library for people. That's a good one.

Oh, yeah. You know, the book was. It was called the Goal. It's written by a guy. Have you read that?

Yeah.

Yeah. Unbelievable, right? Someone turned me on to it and said, listen, you gotta read this. It's for manufacturers. I'm like, well, that sounds boring. The book is amazing. You know, it's written in Parabel. I think some of the storyline is a little bit cheesy, but that being said, I got goosebumps as I read it, so maybe it wasn't. And the concepts of TOC or theory of constraints unbelievably applicable to so many parts of business and life that I've truly embraced that book. I have three copies of it. I keep one. One in my house. One here at the office is actually right behind me right now. And one goes with me in my travel bag. And I just kind of hop in, read a story, and start thinking about.

The business again with the Boy Scouts. And he kind of gets that. Oh, yeah, I love that one. It's just. It just suddenly you're like, oh, I get this. You know, it was awesome.

And I think as I was reading that story, that resonated with me, too. I was like, I think we all can see ourselves. Either you're the slow guy, some of us are the sprinters, the other ones are the carriers. I think one of those Boy Scout characters represents us. And then I saw that, I said, oh, okay. I see now where I fall on this line. I shouldn't be where I think I should be. I need to be in a different spot. And that is.

And you mentioned. I mean, in your book, you know, in Clockwork, you mentioned you kind of go after the weakest link, the chain, which is that idea. You don't go after everything because you'll get, you know, you'll hit nothing, so. Excellent. Well, Mike, it's been a ton of fun. I'll have to have you on again because you seem to write books fairly regularly, so we can at least have you on. Thanks for taking the time and sharing your work with, you know, with Weinabers. I hope people get a lot out of it. Again, thanks for profit first. That was awesome for me as a business owner, and I hope anyone that's listening that hasn't found it yet, which would be really rare if you're in the business Ynab Realm to not have heard of profit first already. But definitely check it out. It's awesome. And then clockwork. This for me is a great reminder of especially the four Ds doer, decider, delegator and then designing and what that really looks like. So let's kill our stuff. Thanks Mike. Have a great rest of your week and good luck in all you're doing man. You stay busy, but you're killing it.

And that's a wrap. Thanks for listening and thanks to Mike for letting me have have him on and pick his brain about his new book. Until next time, follow YNAB's four rules and you will win financially. You've never budgeted like this.