Mike Michalowicz-

All right.

Hey, welcome everyone to our livestream today. Today is launch day for me, a year of crazy More crazy than I ever would have imagined when I agreed to do this crazy thing. So excited that today has arrived. Super grateful for all the team that's been a part of it. AJ Harper, Amber Vilhauer, great, great resources and help for me. And then of course, the man, the myth, the legend here with us today, Mike Michalowicz.

Yeah.

The original author of the concept. How you doing today, Mike?

I'm doing well. A big shout out for my little ski resort here. I'm gonna show you outside. I don't know if you can see, it's probably overblown, but I'm in the Poconos in Pennsylvania right now. We're on a business retreat. We just were finishing at noon, and I can't think of a better way to finish a business retreat than the launch of your book, John. It's— I'll tell you, dude, this is like, for me, Selfishly, it's a dream come true. Profit First, you know, I'm on this mission to eradicate entrepreneurial poverty. That's my personal mission, but we all have our individual missions. And getting to know you over the years, I consider you a friend far more than a colleague, but that too. That you took on this Herculean task, which honestly, I didn't tell you how hard it would be, because if I told you the honest truth, I think even you, the mighty John Briggs, would back down and say, well, maybe I'll pass on this one, that you are delivering such an important, not just message, but system to— and I truly believe this— to be one of the most important industries in the world. Because the foundation of even our financial fitness all boils back to our physical health. You've got to be healthy too. So I think there's no better way to finish what I'm doing here today than to be celebrating the launch of your book. I'm excited to be here and I just want to congratulate you.

Thank you. And we'll keep this— we'll be off here by 10:30 because we could talk for hours about this.

10:30 tonight. 10:30 tonight.

Yeah, that's what I meant. 12 hours. It's a marathon. So I wanted to first ask you, when you think about your original Profit First and the one that's now since been revised, why did you see a need to write that in the first place? What was going on? What happened?

So I think when, when business owners start a business, the dream has 2 common components for most entrepreneurs. I mean, one is we want to do something that brings us joy internally, but also of impact, right? The satisfaction of serving others in some way that we enjoy to do. Like, you know, it's often for many of us, it's a hobby that turns into a business, or it's a passion or interest that turns into something that generates revenue. The second component is we wanna make money. Like, we wanna have this financial freedom, this stability in our personal lives so that we can do, you know, financial freedom as I understand it and as I define it is the ability to do what we want when we want without the fear of financial struggle or debt or consequence. And that part of the dream Rarely happens. For the vast majority of entrepreneurs, it's actually the polar opposite. We start that business and it becomes this albatross, this actually more of a noose around our neck, and it's draining us financially even more. So the one major reason we started a business, to have financial freedom, is the exact— the manifestation of it is actually the exact opposite. So I felt compelled. The second thing, John, you know this, the approach entrepreneurs have taken is through complexity. How do I master and understand accounting? And the vast majority of entrepreneurs are not mathematicians, do not enjoy doing math, they're not— we're not great with numbers. So I wanted something that was really simple and easy to execute and drove the vision I have for my business, which is making money. So that's what compelled me to write Profit First.

That's interesting. I think your message is catching on in general, and one of the evidences I have for that I recently read an article about how a lot of analysis and experts, or analysts and experts, thought 2019 would be the year of the IPOs. And what they found was that, like in the example of WeWork, they had got funding privately at a crazy valuation. And then when they actually went public, it was a severe difference because—

Interesting.

And they blamed— they blamed— they used the look at profitability as the reason as to why The IPO was valued much differently because it wasn't profitable.

Interesting.

A lot of these big tech companies, the reason they survive is that they're getting investment. And the article talked about how really the investment money is subsidizing the true cost of their service because they're not focused on profitability. They're just focused on, let's just push, let's focus on the top line. How big is it?

Right, right. Yeah. I'm so frustrated by that. So You know, when I go through the airports, whenever I go through one of those magazine shops, the covers inevitably of all the business magazines is success is measured by size. Look at how big this person's business, look how big that business has become. And the majority of them, when you read a few pages in or you do more often the background research on these companies, they're not profitable, they're not sustainable. And a lot of them are out of business. You know, one of the classics is Pets.com. That's an old one, but it's just such a common— Study of internet boom, great concept, we're gonna sell dog food to people, no consideration for profitability, and went under. Yet today there's all these deliverables of pet food services. So it's a viable concept executed without consideration for profit, and you bomb. So it's just frustrating that, that, that belief still exists that it's how big you are. It's not. It's how healthy— and you know this— how healthy is your business. That needs to be our primary conversation. The size component is secondary to health.

Yeah. In the— in my book, which launches today, pick your copy up.

Amazon.com. If you're watching this video right now, get your copy, Profit First for Microgyms. It's on Amazon. Get it today. You'll be served.

I shared the example to illustrate this point. I have one client who had one location and his net income His gross revenue was about half a million. His net income was about $90,000. And then I shared, well, there's this other business that has, you know, 1 point some odd million in revenue, multiple locations, and their net income was also $90,000.

Yeah.

Well, when you have 5 locations and more partners involved, $90,000 is a lot harder to manage, especially as a percentage of their revenue. Anyway, so it just goes to show, like, well, the guy who's only doing half a million with one location is actually better off than this company that is doing millions, even though their net income is exactly the same.

You allude to this in Profit First for Microgyms, this concept that sales is— and this is my paraphrasing of it— is organizational stress, meaning the more sales volume you have, The more responsibility your organization, your gym, has to deliver on, right? So the more members you have, which we're all aspiring— we want more members, we want more members— the more obligation you have to service that growing membership, which is stressing your organization, which for business owners, if you don't have profitable health, puts the stress right on the owner. So the bigger the business gets, the more stress we internalize as a business owner if we don't have that balance. which is profitability, the health of the business.

Not just stress as a business owner, from a gym standpoint, stress on your actual equipment. Like, if you're not profitable and you have more members, you're gonna have to replace that faster than if you were profitable and had less members. So obviously this book exists, Profit First for Microgyms. Why did you see the need to allow Profit First professionals like myself to write some of these industry-specific books? 'Cause I'm not the first. Yeah, um, there's the, the contractors and e-commerce, and I know there's some others in the work.

Yeah, there's one that works for lawyers. Uh, we're just now doing one for salons. We just started that. That's a year and a half, 2 years away. Here's the reason a lot of gym owners, a lot of these other industry-specific people are discovering Profit First. They're reading the book and they say, okay, but how does this translate to my specific needs? So if you're a gym owner, equipment, I don't know much about gyms. That's why first we get an expert. You own a gym, John. You know, you have equipment costs. You have a different revenue stream, hopefully a recurring revenue stream of monthly payments as opposed to other businesses that have a more potentially volatile. You have seasonality, right? So this is the season, at least I know that at my gym, people are signing up because it's the new year, gonna get fit this year, and a month from now, They're like, I'd rather have a bomb bomb than to actually get jacked up a little bit. There's a lot of unique requirements to manage those fiscal responsibilities, and that's why when you and I spoke, we decided, yeah, there's got to be a book for microgyms. And a microgym is different than a franchise organization. There are different requirements on how you manage it. You don't have a corporate entity that's doing the marketing component for you. You're on your own to some degree. All those elements need to be considered. And so what you did, and why people need to read Profit First for Microgyms, is you took the core concept of Profit First, you took the elements that translate over, the core recipe, but then you expanded on it so specific to this community.

Yeah, it's interesting you said about, about the difference between the microgym and the, what we call the globo gyms, like the Gold's Gyms and the 24 Hour Fitnesses. So, a lot of— a micro gym, for example, a CrossFit affiliate. Well, last year CrossFit kind of got rid of their marketing department. So, now it is completely on the micro gym owner to do the marketing for their gym, to create that relationship. Even I've been dealing with some F45 owners, and while that's a franchise concept, they don't really offer very much marketing support.

Yeah.

And so, from the micro gym standpoint, At least from profitability as well. Super important that you dial in your marketing. That is such an easy way to blow a ton of cash and your profitability if you don't know what you're doing or tracking so that you can actually figure out what's going on there.

So yeah, I think, I think just, I think a lot of people don't work within the confines of their finances. They work within the perception of what others are doing. Hey, people are running Facebook ads. I guess that's what I need to do. And there's no consideration for the finances. So I love that you did in Profit First Microgems in the book, it talks about pre-categorizing its money before you utilize it. So on a cash basis, the money is allocated to its intended use before you spend it. And now you're working within these envelopes, these categories to ensure you don't spend beyond it. So effectively you bake profit into your business. It is forced upon you to be profitable. Let's go to mute, this gets a little noisy here.

Yeah, that's true. Um, I was actually hoping maybe now that you brought that up, obviously the reason of that is Parkinson's Law, right? You, in your original book, which is awesome because it uses dieting and health fitness principles already, so it made the concepts really translatable to the gym owner, but you mentioned how you have a large plate and as humans, when we are served that large plate, we consume all the food that's on it. And if we just use smaller plates, we still get the same psychological benefit from eating. We actually still feel full, but we consumed less. You tell the story about how you shrunk your son's cereal bowl size. Do you want to kind of talk about that in Parkinson's Blog? Because you have a great spiel on that.

Yeah. So, you know, at the time I had 2 teenage boys. Now one is in his 20s. But, um, what's so funny about teenage boys, I'm sure anyone listening in that has teenage boys right now can relate, is the food consumption is unbelievable. And so these monsters would wake up for, you know, they'd wake up in the morning, which is like 2 o'clock for them, right? 2 o'clock in the afternoon, they come out and they're like, their hair's all over the place, and they would go right to the cereal bowl, put it out, fill it up, and it just overflows with cereal. And they consume it. And we were— this is true— we were going through a box of cereal every day. Like, a box of cereal would be just burning through. It was unbelievable. And so, um, I learned Parkinson's Law. Parkinson's Law basically says when you constrain the availability of the resource, the less something is available, we have to use less. It's called forced frugality. The other thing I think is interesting, though, is that our mind becomes innovative. We savor. So next time you go to a French restaurant, you get that one pea for your meal, you gotta You cut it up, we actually will consume it much slower because that's all we have. We'll first be shocked how little there is, then we'll be, oh, and you eat more slowly. So we— our behavior shifts to match the supply. So with my sons, to reduce the cereal consumption, we actually got smaller bowls at our house. I accidentally broke them, went out, bought smaller ones, and I went through iterations. Because if you leap over— if all of a sudden you cut this bowl to these little tiny dessert bowls, They'll notice, but the bowls get slightly smaller. It's inconsequential to their consideration. They don't really notice, but now they're consuming less. It took me 4 iterations over 6 months. I got to half the size and then our consumption went to half, which was interesting. They could have easily just filled the bowl once, eaten it all, and filled it up again. But the behavior was fill up the bowl and eat what's there. That's the mentality. And with money, we fill up the plate of cash and we just eat what's there. So when we constrain the cash or we constrain the bowl, we start working within the confines of the resource. And it's interesting, it is easy to fill that bowl up again, but they didn't. And now a box of cereal lasts us about a week. Same is true not just for those teenage creatures. It's true also— it's also true for our own behavior. We'll make do with what we got.

Yeah. What I love about the Profit First system is it actually allows us to acknowledge that we have financial commitments we've already made. And that's where we set up these other bank accounts, these other smaller plates. And we say, look, I have a commitment to provide equipment to my gym. So I'm going to create an equipment account. I'm going to set money aside there. I have a commitment to pay my coaches. So let's have a team member bucket and let's put money aside there.

Yeah.

Unfortunately, whether I like it or not, the government— I've given them a commitment that I have to pay taxes. Well, let's set that money aside. And as we do it more regularly throughout the year, we allow ourselves to not feel that pain very much, but it also lets us visibly see, oh, here are my financial commitments. And now I have my operating expense account, which used to be one large plate, and now it's specific to operating the business. And like you said, forced frugality lets us innovate, lets us find more creative ways to operate the business. So that's obviously one of the best parts of the Profit First system.

Thank you for saying that. What I think Profit First does that we don't necessarily teach you to do, but it becomes wired into you, is the innovative thinking. Meaning when you have less money available to spend, it's not that you will only spend less. You'll also get more innovative. You'll learn how to stretch that dollar. I remember walking into— I like to go to gyms all the time, went this morning. I travel a lot, so I'm not a gym member as much as just go to whatever gym's here. I'm often very impressed by the gyms with the least equipment. Not that they have little equipment, but the ones that have less equipment and then demonstrate how it's actually more your asset. They say, you know, I went to this one little gym here. They had some straps and stuff and just some free weights. And they said that based upon this, there's 5,000 different exercises you could do. They had a whole booklet you could go through. And I went to another gym that had like tons of equipment, just streams and streams of equipment. And each piece of equipment had the one exercise you could do. You know, it was a bench press or a shoulder thing or whatever.

Yeah, exactly.

I don't know, it's like some masturbatory thing. But yeah, like, like Literally, you had all this equipment that started to reduce the flexibility, and then this one gym has a few free weights and they say all these things you can do. That's the same thing with dollars, is that when we constrain the amount available, we start seeing how we can actually get more out of every dollar we spend. If that makes sense.

Yeah, no, that's awesome. Um, I want— I have a question for you about your exercising and stuff. But first, I wanted to ask, because you have a book coming out called Fix It Next— Fix This Next?

Fix This Next.

Fix This Next.

I made it more of a tongue twister. I should have made it Fix It Next, but I made it Fix This Next, so it's really hard to say.

But it also makes more sense because it's specific to the system you created. Tell us, because it's in pre-launch stage, you can preorder it right now as well. Tell us maybe a little bit about how fix this next could benefit a gym owner and kind of just overall concept.

So what I discovered, and I think this concept is very important, is that there is a hierarchy of needs that businesses have. So this guy Maslow says there's a human hierarchy of needs, that we need oxygen, water, food as the most fundamental thing for survival. And we also need to belong, we need to experience love and community. And ultimately, he says we move on to self-actualization, living a life's purpose. But there is a priority. Oxygen, air, and water is more important than anything. And if we're deprived of it, we need to revert and get it. So you could be out with your loved one, your spouse, for an amazing dinner talking about your dreams for life, self-actualization, and you're eating hamburger or something and you start choking. Our body is wired to say, okay, let's stop the conversation for now. Let's not keep self-actualization. Let's get this out. And so you'll start trying to expel it and hopefully your loved one will try to help you with the high level. We naturally revert to our base level need, and if it's not being served, it will kill us.

Yeah.

In business, we have this base level need that we don't know. We're not wired into our business. We're not neurologically wired to our business. So sometimes a base level need is not being satisfied. We're working at a higher level and our business is choking, it's gasping for air, and we're just trying to, you know, self-actualize with the best of them, and it kills the business. So I created this hierarchy of needs, a sequence of things we need to do And in this book, we will pinpoint what we need to work on next. For many businesses, it actually is profit. But once you've profit mastered, what's next? Maybe it's bringing about actually more efficiency. Maybe it's about building community. That's what I call impact, as opposed to selling a service, which is 2 different things. Or maybe, maybe we have to revert back to the most base level, which is the generation of cash, leads, and sales. So Fix This Next will pinpoint where you are in your process and what you need to work on. Again, I just want to reiterate, for most businesses I analyze, I would say upwards of 80 or 90% of them, the businesses often have a profit problem. Not we need more members, we need to drive more profit. A portion of those actually have an efficiency issue beyond that, but— Read Profit First for Micro Gems, if I may. That is something that many businesses need right now.

Very cool. Yeah, I love— I've had the privilege of actually seeing Mike present on Fix This Next, the base concepts, a few times, and he draws out the pyramid. And every time I walk away with different notes. And it is interesting because obviously Profit First for Microgyms, I believe, addresses the majority of the problems in the industry where we have gym owners falling on the sword Not paying themselves enough, then they get the state of burnout. And once you're in a state of burnout, you just don't care anymore. You don't, you don't want to keep going on with the business. And then all of a sudden, and if we think about the long-term impact of that, especially in the industry, that's hundreds of people you could have been helping as a gym owner, like improve their health, save their humanity, increase their lifespan on earth. And now you're not there to offer your expertise. So profitability is great because we do hear often like, if I just had 10 more members. Look, if it's 10 more members that you need, I promise you can find 10% in your current expenses and probably cut that. But that's not to say that we come across gyms and I look at it, I'm looking at your coach expense and your rent expense alone, and then I see what that compares to your revenue. Yeah, you do need more members, legit. But at the same time, you can also always be focusing on adding lean expenses instead of adding fat that isn't necessary. And so in the book, I have an entire chapter on how you analyze expenses and how you can ask yourself questions to make sure that you truly are choosing productive expenses versus kind of throwaway expenses.

Let me, let me add this. I would argue your gym members are not literally dying to have you profitable, but they're figuratively dying. They want you to be extremely profitable. Now let me be very clear, your gym owners will never say to you—

Oh, we lost him.

Or, I want to pay— you lose me? Am I still here?

Yeah, you had a 5-second pause. So gym owners—

So gym owners, your members will never tell you, I want to pay more, or charge me more, but they do want to be wildly profitable. And they won't say those words, but they will say, I want to sign up as a member here. I want to make sure you're going to be around for the next few years or more. I don't want to worry that you're going to shut the doors the next day. That's absurd. If I have a trainer that I'm working with, one of your coaches there, I don't want to have them worrying about the next client coming in so they can just make enough money and scrape and get by. I want them focused on my health, my experience. I want to make sure that your equipment is in good condition or great condition that's functioning, that I'm not at a risk for injury. Those are things they'll say. And the only way, the only way to deliver on all that and not be distracted as you operate your business is by being profitable. I've been on both sides. I've had businesses that made a lot of money and I took home nothing, and it was constant check-to-check survival, panic and fear. I wasn't focused on my clients. I tried to be, but not nearly the way I Could be. I've also been on the other side where my businesses have been sustainably profitable, where I have a cash reserve waiting for me. I can focus— just like right now, I can focus on this moment and deliver. Hopefully I'm delivering the best of myself. You can deliver the best of yourself only when you're not worried about the next moment or the next day or the next month or even next year. Your clients want that, so you have to be, and they want you to be, financially viable. It wants to be wildly profitable. Get your book right now on Amazon, Profit First for Micro-Gyms. Please get it.

Well said. Well said. Um, okay. So final question. We definitely have enough time. We don't have to feel rushed on this. You mentioned your exercise habit. You mentioned you find places as you go. Um, cause I had heard rumors that you're a runner. You enjoy running. Um, many of the people listening may not be aware of how crazy your travel schedule is, but it is crazy. I mean, if you follow Mike on Facebook, almost every day he's in a different city doing something. How do you maintain your exercise habit with what I would say is kind of a, kind of sporadic schedule? How do you maintain it? And is there a correlation with the way you maintain your exercise habit and how gym owners can maintain a financial habit that they may not necessarily have yet?

Yeah, that's a, that's a great question. And there is a correlation. Um, first of all is to put— the most important thing I did was put the value on health as the number one priority of my life. Honestly, my physical and mental health I've put at the highest priority, even over relationships and business. And it's actually in that order. I am not saying my relationship with my wife, my family, my friends, you are not important. They're extremely important. I know I can't deliver on a relationship if I am dead or if I'm not healthy or I'm In a hospital or whatever. Health, I really now understand and appreciate, is the foundation for presence. So that's how important it is to me. The second thing is I definitely have an accountability mechanism. I'm wearing it right now. This is my watch, and I have it— it may be upside down for you, but you can see there's my health monitor right there. And if you know the Apple Watch, you will see that my exercise circle is already done. It's Still in the early afternoon here in Pennsylvania, but my exercise is done because at 7 o'clock this morning I was at the gym. Um, having some kind of accountability measurement is absolutely key. I used to say— so I started doing this 5 years ago. I always thought health was important, but prior to 5 years ago, I wasn't tracking it. So I'd say, oh, I worked out, you know, probably about 4 or 5 times this week, and it was probably twice. So It's funny how I think my mind, our minds, will default to a perception that is favorable to what we want, but not the reality. So I'm like, oh yeah, I think I worked out 5 times this week. And I would start tracking it. This tracks automatically. I start tracking it and I'd say, I think I worked out 5 times a week. And I was looking back and I was like, holy cow, it's only 2 times. So now it's 5 times and it's religious. The second thing is I am in an accountability group.

Yeah.

Every Friday I have a call, I have to show my numbers. Actually, they're automatically recorded when it comes to health and other metrics, so I can't BS it. And the interesting thing about my accountability group, it's a collection of men and women, they don't say, hey Mike, why didn't you get your job done? Like, what's your problem? Are you— we'll see. Instead, they'll say, we notice a trend, like you're failing to do, say, working out consistently. What's happening? What's going on with you? And they start talking about the mind internal discussions that are going on. The translation to us with our finances is for your business, the number one component to the sustainability of the business, the exercise, if you will, the business is the financial viability is the number one thing in our human body. It's, it's cardiovascular health. It's, it's physical health. It's diet and it's sleep. It's right. So it's It's the physical, the sleep, and the diet, right? In our business, it is the financials that translates to that. It has to be the number one thing we do every morning. Now, since businesses are a 24/7 operation, it's just the thing that needs to be done prior to other activities. That's why our profit— that's very noisy. That's why our profit gets allocated first, always.

Always.

And then the rest comes into alignment. If I address my physical first, I will be able to sustain hopefully extraordinary relationships. I'll be able to support the business I want to. All those other elements will come true if I first take care of health. In business, first do the profit.

Yeah. And that's so good. That's a good note to kind of summarize on. In the book, there's a chapter I mentioned that The title's called Profit First, but I feel like we could have called it Cash for the Benefit of the Owner First. It's just not as sexy and it's longer and it's a mouthful. Profit, it's better. Because as the owner, if you're working in the business, you are the most important person. And as the owner, if you don't have the ability to give your 100% focus to the gym, Then that's a problem. And so the best way to make sure that those things happen is if you're taking care of yourself. I mean, you mentioned Maslow's hierarchy of needs. There has to be a base level of sustainability in your life financially to be able to cover your personal bills. And if that's not happening, then all the other stuff just isn't as good. I'm not saying it's not good. I'm just saying it's not as good. There's always room for improvements.

Yeah.

If you're listening, please pick up a book, a copy of the book today. Those who have already purchased, thank you so much. I truly hope that you take something from it and it helps you stay in business longer, that it can improve your lifestyle. And Mike, thanks again for taking the time. I know you're so busy. Really appreciate you stepping in here on my launch day to share this moment with me.

It's— sorry, it's so noisy here. Listen, it's my privilege to be here. This to be said. I consider you a great friend, and not a great friend in the traditional sense. We should, but we don't. We hang out, went to March Madness together, and I do want to do March Madness with you. Please make a note of that. I really, really do. So if you're up for it again, instead of taking your wife, take your other new wife. Now, me, I consider you a great friend. You are such an integral man. You are caring. You don't take yourself too seriously. You're a really funny guys, sometimes on the lewd side, which I love. Uh, we had some crazy conversations, and I know you wrote this book because of how important it is to serve the community of gyms. I just wish you tremendous success with this book. You deserve it, and the community deserves to be aware of this book and read it because it will change lives. So just thank you for what you're doing, man.

Thanks, Mike. Hey guys, thanks for listening. Enjoy the rest of your day, and here's to your profit.

Cheers.