248: All Roads Can Lead to Profit
Michele Williams:
Hello, my name is Michele, and you're listening to Profit is a Choice. Today, I am excited to offer you a replay of an episode that I did back in 2018 with Mike Michalowicz. You may know Mike, he is the author of a large number of books from Profit First to Clockwork to Surge, The Toilet Paper Entrepreneur, and The Pumpkin Plan. Mike and I had a really awesome conversation about how all roads can lead to profit if you set the correct coordinates. I really thought that as we're wrapping up this year, things have been shifting, they're a little bit different, we've been through a pandemic, and we've watched buying patterns change over the years and I think this is a great time to be reminded of the fact that we have agency and choice in our business and that those choices that we're making either lead us closer towards profit or further away from profit. With that being said, I want to introduce to you Mike Michalowicz.
Every day, empowered entrepreneurs are taking ownership of their company financial health and enjoying the rewards of reduced stress and more creativity. With my background as a financial software developer, owner of multiple businesses in the interior design industry, educator, and speaker, and coach women in the interior design industry to increase their profits, regain ownership of their bottom line, and to have fun again in their business. Welcome to Profit is a Choice.
Michele Williams:
Hey, Mike.
Mike Michalowicz:
Hey, Michele. How are you?
Michele Williams:
I'm doing really well, and I am super excited that you are with us today on Profit is a Choice. When I was thinking about launching the podcast, I knew there was no way I could do it without bringing you on.
Mike Michalowicz:
That's so kind. I love that you're doing this. I think you have such an important message, so it's a privilege to be your guest.
Michele Williams:
Thank you so much. So, Mike, I met you back in 2015, and I've told the story on other podcasts and things that I've done, but I got your book, or I was mentioned to your book from one of my clients, my coaching clients. She said to me, Michele, it sounds like this guy wrote the book that you haven't written yet because he's talking about the same things that you talk about. I was like, who is this guy that's written these things? So, I got your book. I read it in one sitting, and then I emailed. No, I called, and Ron called me back, and I was like, okay, this is my story. and I feel know Mike and I are living these parallel lives. We use the same analogies and I've got to be a part of this. What are we going to do now? And that was August right before the first Profit Con.
Mike Michalowicz:
Yeah, you're one of the early adopters. It takes courage. It's interesting, the message that you were sharing that I put in the book, this message has been shared for centuries. There's a book called The Richest Man in Babylon. It was devoted to principle. Dave Ramsey, who's phenomenal, talks about this in personal finance. There's a book called Think and Grow Rich that talks about these principles. I just took it and put a fresh, I shouldn't say fresh, but different approach to business, like you've been talking about. So, the message, I don't think is new. I think the power is that it's a slightly different perspective for business owners specifically, but then there's you out there, Michele, that you're helping businesses implement this, because the theory is powerful, but it only works if you implement it. Every business does have its nuances. Unexpected things come up, and unique challenges. So, the fact that you're actually delivering this to people, I think that's the real juice.
Michele Williams:
Well, thanks. And I'll tell you, you're right. I do think every industry is a little bit different in their approach. Even how they recognize profit, when they recognize profit, and then with the systems that they have in place, and understanding an industry and then trying to put that on top of it can be a challenge to do by yourself without a professional. I'm just thankful that there are professionals that you all train so that we can help everybody.
Mike Michalowicz:
It's going to be like this htank fest back and forth. I'm thankful that you're doing what you're doing and there are these other professionals who are pursuing verticals or a specific community to serve. This an estimate, but we think it's realistic, we know now there are over 75,000 companies that have implemented Profit First and a large portion is under the guidance of a Profit First Professional. We now have experienced verticals from pizza shops. We actually have a chain, a very famous chain, that's implemented Profit First to accounting professionals, manufacturers, and dog walkers. It's a wide breadth of businesses, so it points to all businesses that can benefit from it. The most basic principle is to take your profit first, which sounds backward, but when money comes in, immediately take your profit first, hide it away, and run your business off the rest. What it does is it forces us to reverse engineer profitability. So, the concept is easy. The stick-to-it-ness is the important part. It's like having a trainer at a gym. We all know we need to exercise, but if you really are committed to it, have a trainer who teaches you to do the proper exercises, holds you accountable and as you make improvements can guide you to a higher level of performance.
Michele Williams:
So, it's interesting. That was the book that introduced me to you, but it wasn't your first book, it was your third. I have a question, just a general question, and then I want to talk about each of your books and about how profit is seriously the strand that goes through all of them, even though the lessons are different in each. They literally resonate with everything that I'm doing on the podcast, that profit is not an accident, and it's not a one-time activity, it happens from a string of choices. Have you found that your definition of profit has changed over the years from the time that you started your very first company to where you are today?
Mike Michalowicz:
Yeah, it has. I now define profit as sustainability. I used to define it as financial freedom. It's still part of it, but profit means that as long as I continue the profitability of my company, I can continue to deliver what I intend to for my community. And the more profitable I am, the more impactful I can be. The most fascinating thing I've discovered now is that my clients, your clients, want their vendors to be profitable. Now, they don't use those words. They don't say, oh, make as much money off of my sweat as you can. No, they don't want us to gouge them. But could you imagine going to a client saying, we are surviving check by check? We're barely getting by. We're scrounging, actually. I don't have enough money to put food on the table and we'd love to serve you because I'm dying. I mean, how would your client feel? They'd be, oh, my gosh, I may invest in this business, and they go out of business. That's a very fearful position for our clients to be in. So, my realization is that clients want our sustainability. That's what they want. The definition of sustainability is profitability. If you aren't comfortable in your life and your business, it brings that discomfort to the client experience. I want you to be profitable as your client. My clients want me to be profitable because they want me to be around, sustainable, and deliver on my promises. So that's what brought this new realization that profitability is sustainability, and our clients want that sustainability.
Michele Williams:
You know what I love about that so much? I'm writing that word downright now. When we go in to, let's say, make a sale to our ideal client, or target market, and we don't have profitability to be sustainable, we literally break the trust. And how often do we teach know, like, trust? If they know you and they like you and they like you, they trust you. They trust you. They spend money. Well, we've broken trust. The minute they think that we're either going away and are not going to be there, or they start thinking you're bringing drama every time I work with you. So even if I love your work, here's the drama of you can't bills. It creates the exact environment we don't want to be in and that we're trying to get out of.
Mike Michalowicz:
I originally looked at only sales. I was very sales oriented and I now have a new word for sales. I believe it is a stress factor. Sales is responsibility. So while profit is sustainability, sales is responsibility. and what I mean by this is every time say I’m your client, and every time you sell me something that actually puts an obligation, Michele, back on you, you now deliver on your promise. so I give you x dollars, but you have to show up for that phone call or do whatever. Many businesses are sales-oriented. We need to grow to a million dollars. We need to grow to $10 million and I’m making a face because that's what I was like. We need to have a $10 million organization. What I was saying was, I want to have ten million dollars of responsibility. The greater that number gets, the greater the responsibility, the greater responsibility, the more stress it puts on me. What if we don't deliver? Do we have enough resources? So, the more my business generates an income, it puts more stress on me. The antistress potion, if you will, is profitability, that brings the balance. so, with greater responsibility, we must have greater sustainability. I think that's the correlation between those numbers that we have to understand. I also believe like we were talking about your business, I got goosebumps as we were talking. I still have them. I'm just thinking about it. You've brought about such sustainability that the top-line revenue, it's nice. it's really how much you are earning. I personally aspire to have a smaller revenue business, smaller responsibility with greater sustainability, and greater profit. I am more impressed by a business that does, say, $300,000 in revenue and the owner is taking home $200,000. That's mind-blowing as compared to a company where the business makes $2 million in revenue and the Owners take home $70,000. It's a shame that we, as an entrepreneurial humanity, have been braggadocious about our top line. I think we should put pride now in the bottom line, pride in the profit, the health of a business, not the responsibility, the sales of a business.
Michele Williams:
Okay, so if I can just go, Amen. We could almost be done at this point, right? Because even in my coaching practice, Mike, I've had clients come in with three and 4 million top-line sales, and they were losing a couple of hundred thousand a year, no net profit. And then I've had clients come in because I'm in the interior design industry, and they are just getting started. That might have $100,000 in sales, but they’re bringing home 50. And I'll take the $100,000 business that brings home 50, over 4 million, that loses a couple of hundred thousand every single time without thinking, and twice on Sundays. I'll take it.
Mike Michalowicz:
Amen to that. I agree wholeheartedly. The aspiration for big business, though, is wired into us, because if we look at traditional accounting principles, it says sales minus expenses equals profit. Right? The foundational formula of gap. People misunderstand, they think I say, that's wrong. I don't think it's wrong. I think it’s behaviorally wrong. I think logically that is what happens. But the behavioral response, how we've all been wired, is we look at what comes first, and it's human nature. When something comes first, we prioritize it. When something comes last, we delay it. So we’re told sales minus expenses. So most businesses I look at, all they care about predominantly, is what comes first. Sales. I got to sell more, sell more, sell more. Then they look at the next thing and say, I have to incur more. They don't say expenses. THAT'S A BAD WORD. They say I need to grow more, I need to invest more, I need to plow back into my business more. That's all definitions of expense. I need to put more into the business to facilitate more sales. So, most businesses are in this mentality of, I need to sell to cover expenses and growth, therefore sell more, and they stay stuck in this formula. Profit, sadly, since it's the bottom line, that's the vernacular we use, it comes last and isn't considered until maybe quarter end, or most businesses, year-end. We then get frustrated, like, oh, there's no profit, or it's negligible, maybe next year. So, we literally delay the profit consideration for another 365 days, and for the remaining 364 days, we focus on sales, expense, sales, expense. So, it's so ingrained in our entrepreneurial, societal belief that it actually is hurting businesses. They are growing out of business, not going out of business. They're growing out of business. So, we need to have this new realignment of having pride in profit. It is really what we want and focus on Profit First.
Michele Williams:
So, I usually tell my clients, we're talking about conscientious profit, like you said, not gouging. We're being very conscientious with our profit, conscientious consumerism, that whole thing. I've also worked with a couple of sales coaches who I love, and I think they have a really great job. But sometimes they can focus so much on that top number that they don't understand that. I think one of the most beautiful things you said is, that's not the value of your company. The value of your company is real revenue. The value of the company is what falls through. For some of us, it might look like gross profit, but if we really did the Profit First methodology, that real revenue, that's really what we have to run our company on. And now, how great are we doing with that? And in my industry, the majority of the companies, I won't say all, but the majority are sole proprietors and LLCs. So that lack of net profit or that $3,000 at the bottom isn't just profit, it's profit and salary. And then that brings up another, Oh, my gosh, what am I doing? And I'll tell you, my experience is, they don't even look at it on day 364, 365. They look at it on April the 14th, the next year for the prior year, where they have zero opportunity to affect change.
Mike Michalowicz:
Yeah, it's a very historical look. So, I'm based out of New Jersey, as you know, and the quintessential New Jerseyans are here. Admittedly, I'm partly it. I get a little crazy. There's this one guy, this one guy I met who was so New Jersey, like what you'd see on the Jersey Shore television show, and he's like, I got a million, it was a $10 million company and it was in home construction. Well, I asked him, I said, you have a $10 million revenue business, but let's get to that concept of real revenue. What are you really generating? Well, ended up. He spent an extraordinary amount of money on supplies, sheetrock, and electrical componentry and whatever, and a significant amount of money on contractors, truly independent business owners. The plumber, the electrician, and so forth. When we went through it, the accounting, it was about $9 million that went out for supplies and these contractors. So, I said, what's happening is you pull in $10 million of revenue from your customers, but you don't even really touch it. You are then in turn giving it to the supply house and these contractors, effectively the customer, if they wanted to, could just do that on their behalf and say, here's who we're using. And the contractor said, yes. So I said, you have left over a million dollars. You're being paid a million dollars to render your service, which is the management of all those different resources and people. Right? And he said, yes. So, I said, I want you to realize your real revenue is $1 million. You got to stop acting like the $10 million guy and spending money like that. We got to start behaving like a $1 million business and living within those confines and if you get real with that, you can have a flourishing business. I actually suddenly lost touch with him. I wonder and hope he's done it. But I sadly see these businesses that are living up to their revenue and not living up to their true profitability, their real revenue.
Michele Williams:
Okay, so I love that point because it is true. There's this idea that the more our company earns, we are supposed to look a certain way and act, drive a certain car, and be in a certain area. And then there are some sales gurus who will tell you, you need to look like you're as rich as you think. You know what I'm talking about, right? So you need to look the part and all of this. Okay. But let's talk about your first two books because I think the first two books are what help us get out of that mentality from two different approaches.
Mike Michalowicz:
Sure.
Michele Williams:
So, your first is Toilet Paper Entrepreneur. I love that because that’s the way I started my business. Very scrappy. I started a drapery workroom in the year 2000 in the sitting room of our bedroom because I didn't have anywhere else. I started it on a plastic table with a Kenmore sewing machine and drafting table and started making money and then I started realizing it could have been garage. It just happened to be up there and finally; the business grew scrappy. I was as scrappy as I could be. Still wasn't profitable, but scrappy. And it kept growing. Finally, my husband said, you're no longer working in our bedroom. We're sleeping in your workroom. You got to go.
Mike Michalowicz:
That's funny.
Michele Williams:
It took over everything. But talk about some of the lessons in Toilet Paper Entrepreneur that you think can help us. Well, the first is to realize our real revenue. So, for anybody who's listening, I've got a great course for interior designers that will help you understand how to implement with our industry-specific needs so I'll put that in the show notes. But talk to us, Mike, about in that particular book, how we can be scrappy by looking at the real revenue and really living within the means of our company because I think that book has some very great detail on how.
Mike Michalowicz:
Thank you. Yeah, I wrote that book. It was my angry teenage years and that was the first book where I just looked back at my own personal history as an entrepreneur and said, oh, my gosh. Everything I was doing was wrong and kind of retaliated against my beliefs of fake it till you make it. You got to show it. You were being coached yourself. And started to reevaluate and studied wildly successful businesses, from Burt's Bees to 1-800-Gotjunk to Life is Good. I remember meeting with the two brothers who founded that business and found that their principles for success were radically different than what I thought. It was actually, the core principle of The Toilet Paper Entrepreneur is it's the lack of resources that are our biggest benefits. Yet many of us, myself in particular, did not realize that the lack of money actually brings about innovative thinking, approaching standard challenges in new ways. I could have put down $50,000 and got a shop and got some high-end sewing equipment and machines and started a business. But you said I don't have the funds to do it. I’m starting it in my bedroom. And look at the business it's eventually built and spawned. It’s unbelievable. It's that lack of resources that triggered innovative thinking, and I think, actually, I would argue, gave you a strategic leg up. So it's a lack of resources that makes us think outside the box, and get things done frugally, but effectively.
The other thing I found is the lack of contacts in a network. Many of us say you got to have that established network of people, you know. Often we look at our friends and say, hey, I’m making something. Would you buy it from me? That's my network and they will placate us by buying. They say, well, we're in the same community, and we take that as an affirmation that we have a good product or service. It's actually the lack of a network that requires you to sell to strangers and when you can sell to strangers, they speak the truth, not through their words, but through their wallets. And when they like your product, they'll spend. When they don't, they have no affinity towards you. Otherwise, they'll say, shove off, goodbye. So, the lack of a network is actually your advantage because you have to prove a good concept.
Then it's the lack of experience. The funny thing is, I thought I needed to know the industry to be successful. What I found is it’s the lack of knowledge that brings about out-of-the-box thinking, challenging the industry norms. When we know the industry, we follow the protocol of the industry and we immediately put ourselves right against the more established competitors who have a leg up. They've been around longer, but when we don't know the industry, we just break the rules because we didn't even know what the rules were and the customer notices, we become different and we stand out. So Toilet Paper Entrepreneur is about leveraging lack. It is actually your biggest advantage.
Michele Williams:
I think the challenge is when we no longer have that lack. Still working under Toilet Paper Entrepreneur ideas, because I know as my business has grown, there have been times where I've thought to myself, well, I can just go do that. And there's one question in the book, I can't remember the guy that you spoke to, but I think that was the book, it could have been Pumpkin Plan, but the challenge was, do I have to have that today or can I wait until tomorrow?
Mike Michalowicz:
Yes.
Michele Williams:
Okay. Can I wait another day? Can I wait another day? And then at some point, you're like, gosh, I didn't even need that. Why was I thinking that I did? And then sometimes it's like, no, I need it, and I needed it yesterday, and I better go do it now or I'm going to limit. But it's almost giving yourself a framework to say, just because everybody else has it, or I'm being told that I need it, do I need it? I'll be honest, I went through the same process, creating my podcast, because you can start a podcast, scrappy, and you can start it with everybody doing everything for you. And I’m somewhere in the middle, but closer to the scrappy side, because my goal here is not to make this a money drain on my business.
Mike Michalowicz:
Right.
Michele Williams:
And so really trying to keep those principles in. Do I need it? Do I need it now? Which pieces are worth paying for and which pieces are the free version fine, or is there another way to do it or not knowing what I'm doing and just doing it?
Mike Michalowicz:
Finding that balance is so important because we can go totally without. I mean, you could do a podcast over two soup cans and a wire string. I’m sure you could try to figure that out, but it would be an abomination. Right? We can go too frugal. There's a level where frugality goes to cheapness and that undercuts us.
Michele Williams:
Exactly.
Mike Michalowicz:
There's a point too, where the spending becomes not effective, but excessive, and that hurts us. So, we've got to find the balance in between. The strategy you’re referring to in the story, the guy's name I remember distinctly. Paul Scheider the “One Day at a Time” guy, and what he would do is we were driving to buy some, we need to get some electrical stuff. We were driving by Home Depot, and I said, oh, there’s Home Depot, why don't we get the electrical stuff? And he said I haven't put enough time into this yet. He goes, let me wait one more day. And what he would do is he knew that he thought, I should say he thought that electrical equipment, whatever, would benefit him, but he hadn't allowed enough time for it to happen to see if it really would benefit him. So he intentionally put a gap in. He would make a declarative saying, I think I need electrical stuff, but I'm not going to buy it, I'm just paying attention to it. And he'd let day after day after day go by and see, does that difficulty keep raising his head? If it does, then he needs to buy it, because if he doesn't, he's being cheap. But if he realizes it isn't actually negatively affecting him as negatively, then he realizes that if he did spend the money, he's moving to excess. So that strategy of just delaying or deferring a purchase or the spending of money just by a day gave him this clarity and I try to use that. I'm not so disciplined, but I try to use that for myself.
Michele Williams:
So, to me, that is kind of the crux of the Profit is a Choice podcast.
Mike Michalowicz:
Yes.
Michele Williams:
That every day we have a choice and so that means with choice and decision comes awareness. So that just means we need to be aware of what we’re doing, who we're hiring, what we're buying, not doing, not hiring, because everything matters. Everything matters. And I don't want to make it so important that it feels like we are scared of every movement but it truly all matters. I mean, I can point to every time I've had terrible mistakes, and half the time either I acted too quickly or rarely did I act too slowly. Almost every time I acted too quickly, or I didn't think about it all the way, or I thought it sounded good in the moment or whatever. I just want us all, I think, to get out of entrepreneurial poverty, which is our ultimate goal here for this sustainability, is to think about what we're doing and understand everything has a ripple effect.
Mike Michalowicz:
Yeah, I have a little saying that I use. I say profit doesn't happen in piles; profit happens in pennies. It's making profit a perpetual habit. Every transaction, just as you said, every transaction matters. And maybe there's a dime of profit here and maybe there’s a few dollars there, but it's this cumulative effect. If we don't make profit a perpetual habit, if it's not baked into every transaction, it actually never happens. Waiting for profit to be an eventuality, that one big pile of money to come in, it doesn’t, and in the freak chance it does, like, you win the lottery, people who aren't prepared and have that discipline, the money bleeds right back out overnight.
Michele Williams:
So, I heard, I don't know if it was a Chinese proverb, or I don’t know if it was in a fortune cookie. I don't know where I heard it, but it said, a rich man will stop to pick up a penny.
Mike Michalowicz:
Yeah, there you go.
Michele Williams:
Because if you think you've got money, you're like, I've got plenty. I don't need to pick that up. But even a rich man, a wealthy man knows that every penny counts. I think that's kind of the idea to have in mind as we're building these businesses is every penny counts and I'm going to stop and pick up every penny along the way, because over time, that compound effect, I'm going to have it. All right so now let's jump into Pumpkin Plan. So, we've done Toilet Paper Entrepreneur. We’re scrappy, we're making good decisions. We're living within the means of our business. Hopefully, at this point, we've layered a little bit of Profit First on top of it.
Mike Michalowicz:
Yeah, hopefully.
Michele Williams:
Okay, so Pumpkin Plan. I've got to tell you, I love the story that you’ve told, and I don't want to spoil it about the biggest pumpkin, but I would say there were two things that that book did for me because we've all heard target market, ideal client. I mean, I almost think they're thrown around so much, Mike, that we almost don't even, we’re just like, yeah, yeah, I've done, yeah, yeah, I've thought about that. But a couple of exercises that you had in that book were, and I've worked with my clients to do that is to really think about what resources are truly available in my company and how do I want them to be perceived, how do I want to execute, how do I want to service, provide for my client. Layer that with who is the ideal that I want to work with, and then step back and look at your current client list. I did mine two ways. I did which of the clients were taking the most time, and I did most time to least time. And then I did it and said, now who's paying me the most, and then I layered them together so that I could just think about it differently. I realized that the clients that were taking the most time were usually the ones that were paying the least amount of money, and the clients that took the least amount of time who were more of my ideal clients. I didn't have to spend as much on them to keep them happy and to keep them satisfied and almost over-serviced to some degree. That was a big eye-opener for me on Pumpkin Plan, because I think we have in our mind who we’re serving and how we're doing it. But I don't know that we really understand that relationship.
Mike Michalowicz:
I agree. I'm admittedly eccentric and study things that I think a lot of people don't necessarily see a parallel truth in, but I stumbled across pumpkin farming, and as I was studying this, just out of pure curiosity, I was like, oh, my gosh. The parallels between growing colossal pumpkins, specifically growing a colossal business, are uncanny. The goal of The Pumpkin Plan is to share a methodology to grow a business larger and scale it, but organically and healthily, that's the key. Anyone can get an infusion of, anyone can get infusion cash, but if anyone could get an infusion of cash, it's easy to grow the business very quickly because you can just throw gobs of money at it, but that doesn't mean it's healthy. So, the question that inspired me was, how do we grow healthily, organically, quickly?
One of the elements that you alluded to, which is my favorite part, is the client cloning. What I mean by client cloning is we have an elective; we have the ability to choose which customers of ours we want to clone when we leave it to kind of haphazard growth most businesses actually replicate their worst clients. When I'm saying worst clients, I am not suggesting these are bad people. I'm just saying they're a bad fit for our business and as you pointed out, consume a lot of our time to pay us disproportionately less money. Some of our worst-fit customers will chew up all our time, pay us very little, complain about the work, threaten us. I will put this on Yelp and say how bad you are. Mandate that we redo the work and still not pay us. Like, that's the bottom of the barrel and that happens. Yet it seems that for most businesses, perhaps your listeners, Michele, get more of those clients than the exceptional phenomenal one. Why is that? Well, it's our default behavior is to address and hopefully serve the bad customer well enough that they're no longer disappointed with us. So, we actually concentrate our effort and time, as you calculated, on our bad customers. Now, think about this bad customer from their perspective. They’re like, wow, I required that they redo my work. They met these new audacious requirements I set, and they actually did it, and I didn't pay them a dime. This is the best company I've ever worked with in my life. I'm going to tell all my friends. Who are the same as them, birds of a feather, flash together. So they actually start marketing for you, saying, yeah, there's this one company that finally they stunk, but they catered to me, and I didn't have to pay them. Do you want to work with them? And people are like, don’t have to pay, get the work I want? Yes. And we constantly attract bad customers.
We have to be very cognizant about who we're paying attention to. Redefine the best customer as the true best and I define that by a customer who pays us extraordinarily well because they see the value in what they're deriving from us. That we can serve very efficiently and that we get joy out of serving them. We do the work we like to do. Once we define them, and set out by cloning them, you do it by giving them preferential treatment. My mom was wrong, not everyone's the same. Don't treat everyone the same. Treat your best customers best. Cater, uber cater to them. That’s part of it. Then we can go through, and I explained in the Pumpkin Plan a replication strategy to find out what I call congregation points, where they congregate. To tap into what I call the vendor well. There are many ways to clone our best customers, but we first have to define them and then be very deliberate about the cloning process.
Michele Williams:
I think sometimes the difficulty is even defining who we want our ideal to be, especially for some of the newer businesses. I know when I first started, I didn’t know who my ideal client was. I mean, I had an idea that they needed what I had. I'll give you a prime example. When I first started, even my coaching business, which I came into after having owned two other businesses by myself or with partners, I came in really planning that business out really giving it for thought that maybe I didn't give the first two. Originally, my company was for coaching and consulting women in business. I started realizing that when I had coaching clients, when I would suggest things that they needed to do, they went and did it. And when I had clients that came in under a more consulting label, Mike, they were the worst because they were the ones that complained. They were the ones that wanted me to go do it all. I started going, what is the difference? And it was under, in their mind, consulting meant that it was all my job to make them look better, do better. But under coaching, they realized they were the one in the game and I'm on the side kind of calling the play or telling them, look to the left, look to the right. I went in, and my company name still has consulting in it, but I took consulting out of my website.
Mike Michalowicz:
Fascinating.
Michele Williams:
I changed it to consultative coaching or coaching with a consultative twist. Then those people were bought in, and it was literally a word that changed the way they saw their responsibility in our business relationship.
Mike Michalowicz:
Just as a quick aside, it's amazing, this power of labels. I love what you did. There was a company in Brazil, and sadly, I don't remember the company's name at the moment, but they manufactured bottles like Coca-Cola bottles or whatever but a huge variety. If you look at anyone's wine collection, the variety of bottles just in wine can be pretty astonishing. This company that made bottles in Brazil was falling behind in its innovative designs, and it used a very interesting technique to become the leader again in the industry. They changed the labels of their employees. They used to be called line workers. If you were in the factory making bottles, you were a line worker. They changed their titles to engineers. They didn't get paid more. They weren’t trained on anything new. They just started calling them engineers and when they became engineers, they started living under this new title and said uh oh, we can design this bottle differently and became a leader in innovation again. I think we better not discredit the power of labels and sadly, many times we label something for a bad outcome. I'm accused of this with my own children. I say you're not trying hard enough. You fail to try. You're lazy. And the danger here that I've done with my own children is they see themselves as I guess I'm lazy and now it's an excuse not to thank God. I had this awareness to say, oh, my gosh, maybe I'm the one causing this. I said, now I acknowledge a strength and say, you're a driver. You get through challenges, you see it to the end, and they start to take on this new label, and I think it's improved their lives. I think we need to be cognizant. We influence our clients in the same way. It's the same way.
Michele Williams:
Yeah, and I think you did spend time in Pumpkin Plan at the beginning helping us, not necessarily with the term label, but helping us identify who we wanted to be in business. Because again, my business, even though I'm still coaching, I started in January 2013. I'm in the fifth or 6th year. It's not the same as it was and giving myself the ability to realize my business is growing and changing. My ideal client target market is my big pumpkins are changing. I don't have the same big pumpkins that I had when I started, and that's okay. I'm more than fine with that, and my clients should be more than fine. Chances are they're not coming out as an interior designer, I'm not saying it can't happen, but I will say, by and large, their first job is not in a multimillion-dollar home. Their first job is usually serving someone who lives in a very similar way to what they do and over time, they're able to increase the size job they have and the level of client that they have. I don't think there's anything wrong with that. I think Pumpkin Plan gives us kind of the prescription for kind of, here’s where I am now. Here's what it looks like now. Here's where I want to go now. How do I get there?
Mike Michalowicz:
Yes. Thank you.
Michele Williams:
We're not stuck.
Mike Michalowicz:
Yeah, you're not stuck. The right size business, the right type of business can and should find you.
Michele Williams:
Yes. So, one year in my sewing business, I found out my son had dyslexia. That was a hard year for us because we found out two months into the school year and we could not get him into, um, a special class. And the cost to teach him was like, I don't know, I was almost $200 an hour and he needed three a week. I didn't have an extra $600 after taxes to do that. What I did that year was I made the decision that I was going to try to earn the same amount of money that I had earned before I went to school to learn how to teach him. I went and learned the Orton Gillingham method myself because it was only $1,000. That was one week of training for him, right? So, I go learn it. I came back, and my whole goal that year was to work half the time and make the same amount of money. It did two things. It made me focus on real revenue, even though I didn't know the term at the time. It made me do what we're going to talk about in Clockwork, create some efficiencies and it made me choose the right clients and the right jobs. So, if people weren't willing to pay what I needed to pay for the time that I had available, I wouldn't work with them. At the time, I didn't know that I really realized what I was doing. I had to. I didn’t really have a choice. But I'm telling you, at the end of that year, when I realized that I had made the same amount of money that I made the year before and I worked half the time, well, now I have a different opportunity for growth that's not dependent on just taking more and more work and more and more clients. I didn't even realize what I had done until I was on the other side of it. Now I look back at the gift of the struggle that we had with our son and what it did to our family because it actually improved everything in our family. It's a lesson I've never forgotten and so now when I start feeling overwhelmed, I step back and I go, okay, how can I make the same amount of money and do less, work less? How can I level up my client base? How can I level up my offerings? How can I give them more than they are paying for but work less? What do I do?
Mike Michalowicz:
There's a statue dedicated to what you've done. It's called the Thinker, one of the most famous statues of all time, albeit that's a naked guy with his chin on his fist. But it's sad that there's this context out here that we need to hustle and grind right now. Workaholism was kind of the prior term that we were using, and I think we’re misunderstanding what that means. I think it means putting our best foot forward. We have to do that, but I think it's being interpreted that everything must weigh on our shoulders, and the only way to progress our business is by working harder. That's not right. It's about working smarter. Ask those questions, those big questions like that. How do I generate double my revenue in half the time, or whatever it is? And our mind starts thinking about it. I just love your story, and that's the reality. We need to think more about our outcomes and ask better questions to get better results.
Michele Williams:
Right. One of the things, too, and I mentioned this to Ron on a call that I had with him the other day at Profit First headquarters. Is that book 212: The Extra Degree? Okay, so there are two things he says in that book. He starts off that at 211 degrees, water is hot. At 212, it boils. Boiling water creates steam, and steam powers a locomotive. But one of the things that he says is that we have to be as committed to the journey and the process as we are to the outcome. Because if we are only committed to the outcome, and I think that's true for everything that you teach, the minute it doesn't happen, or the minute we get a setback, or the minute it didn't work the way we thought it would work, it's easy to give up. I think that's the thing with Profit First, we have to be committed to the process and the journey, knowing that it may be two or three steps forward and one back equally as much as we are to that outcome. Not just outcome-focused, but journey process growth-focused, the outcome is going to follow that. Have you found that in your experience?
Mike Michalowicz:
Oh, my gosh, yeah. And a little insight, I am starting to research my next book, and it is about the journey. I'm still playing it out, but I think when we find purpose, or if you believe, calling, once we define that, and I understand for some people it's God-given, for some people, it's self-given, and that's fine. But once we have clarity on a purpose, the journey then becomes very rewarding. And for myself, I’ve been very blessed to have a very clear calling for myself. The journey is no longer a slog to get to the outcome every moment, even if it's difficult, is still rewarding. I've also realized for myself, is with clarity, on purpose, that every day as I work on it, it actually increases my energy. Yeah, I'm tired at the end of the day and I run and sleep, but my mind is even further stimulated. And as long as I feel that every day, I know I'm congruent with my purpose, and it's a joyful day. The interesting thing, too, is I think we can put such an audacious goal out there for ourselves that maybe it's never attainable and that's okay. That's okay. The reward, of course, is the journey, and maybe we never even need to achieve that final tremendous outcome.
Michele Williams:
I'm a fan of Simon Sinek's. Why I actually have taught it in our industry probably for four or five years. Now even Jack Canfield talks about it in his book. He didn't define it quite the same, but it was the same outcome. And I'm like you, I am extremely clear on my why. I know, and I don't have a shadow of a doubt, and it has been consistent, and I've gone all the way back to the roots of it, and I know what, why, how, I got it, and that gives me peace in the journey. On one of the earlier podcasts, we're talking about fear and that feeling of fear, and I think Simon had it out there the other day that the feeling of fear and the feeling of excitement are the same, physiological, so we get to change it and go, wait a minute, I don't have to define this as fear. I can define these butterflies and these sweaty palms and all of that as excitement. And that to me, is what I've been trying to do over the last four or five years, as my business has shifted and morphed and changed, and I'm doing things now that I didn't even have on the plan. If somebody had asked me five years ago, what do you do? I'm like, I don't know. Jennifer Dawn is one of my business coaches. I know she's on the podcast as well. I remember her asking me five years ago, what do you want? I actually met her actually three years ago at Profitcon. And I was like, I don't know. I said, I know how I want to feel, but I don't know what it looks like I said, and I'm okay with knowing how I want to feel in 3-5-10 years because I almost feel like if I had so defined it, I would have missed opportunities and blessings. But by defining how I wanted to feel or what I wanted to put out into the world, it actually made me more open for the journey.
Mike Michalowicz:
Yeah, I really like that. I really like that.
Michele Williams:
So, talking about the journey, we talked about Profit First, but I want to jump to your next book real quick, Surge, because I want to make sure we have time to talk about the last one. But in Surge, I think it's part of that journey of also knowing your industry and going, what's, um, the next big thing, and what am I going to do with that? Tell us a little bit about Surge and how it fits, not only maybe the direction our company is going, but also profitability.
Mike Michalowicz:
Yeah. So, Surge was kind of the follow-up to the Pumpkin Plan. What I realized is the Pumpkin Plan was identifying the best clients, really building a business around what you do best, matching to the best clients, and growing on that. There was one little, but significant caveat is that the client changes. The person you married 20 or 30 years ago, I got married 21 years ago, is a different person today, and so am I. If we stay with that vision of the client being exactly the same for the entirety of their lifespan, we will serve them in the same way, but their needs have changed, and actually, it becomes incongruent, and we lose business. We have to actually stay in front of the market shift and the customer shift. This is called market momentum, and every community niche has it. So, in Surge, what I explain is how to identify a community and how it's starting to move. Then place your offering in front of them to proactively anticipate their needs. It is the best marketing method in the world. If you offer something to a customer that they are becoming aware that they need, and you're the one that's offering it, they will buy from you. So, Surge is about catching the market momentum or the wave patterns of markets, putting your offering in front of it, and then catching the momentum of the wave.
Michele Williams:
Perfect. I do think our industry is changing like crazy.
Mike Michalowicz:
The interior, interior design.
Michele Williams:
Yes.
Mike Michalowicz:
Gosh.
Michele Williams:
Changing like crazy. Radical. The way we do business, the way we interact with clients, the tools and methods we use, everything, and even trends, oh, my gosh, you could just change, know, just get in front of a trend. I mean, how many people, as much as they may hate shiplap right now, wish they had been Joe and Chip Gaines and shiplap with Fixer Upper because they would be multimillionaires to come up with an idea to rip a wall and see old stuff on the wall and use it and make it an element. I mean, we all hate it now because we kind of overdone with it, but everybody I know wishes they had been on the surge of that.
Mike Michalowicz:
Right. And there's a new surge coming. Right. Because that industry is so affected by fashion style.
Michele Williams:
Absolutely.
Mike Michalowicz:
Yeah.
Michele Williams:
It's constantly changing. I want to jump in real quick now and talk about Clockwork, because as we talked about before, my degrees in information systems and making sure it's got to be repeatable, it's got to be efficient. Time is money. I teach we have two currencies, time and money. Spend them both properly, and Clockwork kind of ties all of that together. Tell us a little bit about that.
Mike Michalowicz:
So, Clockwork was, I studied the growth of businesses, and the first stage is we need to have sales for a business. Once we have sustainable sales, we actually need to move on to profitability, which we talked about permanent profit. Once there’s perpetual profit, there are sustainable sales, there is a higher level, and this is the freedom of time so that you and I, as entrepreneurs, can do what we want, when we want, in our lives, and if we so elect in our business. The goal of Clockwork I call it design your business to run itself and give you the freedom to do what you want back in your business, if that's what you so desire. Not all of us want to leave our business. So, it’s a process of extracting us from our business. What I realized as I was doing my research is there are books about systemization, and actually, one of my all-time favorites is Emyth by Michael Gerber.
Michele Williams:
Love it.
Mike Michalowicz:
Love it. Right? He says, don't work in your business, work on your business. But what I believe is entrepreneurs have been interpreting that as a parent-child relationship. What I mean is, I'm the parent of my business. I birth the business, I nourish my business, I protect my business. Over time, it becomes an adolescent and then an adult, and it has its own legs and it'll give back to me. But in reality, I don’t believe it's a parent-child relationship. I believe it's more like conjoined twins. As the business goes, so do we. We share critical organs and vital organs. We share the same legs. And if my business is sick, I will feel that stress and be sick. And if I am struggling, my business will struggle. Therefore, the process of separating us is a very surgical, deliberate process of disconnecting those critical organs and so forth. And one day, finally separating those conjoined twins so they can live independently. We will always share the same soul, but now we're independent organisms. The benefit here is now we can experience life back in our business, the way we define it. And what I found is when we are able to remove ourselves from our business, we have the highest value not just to potential acquirers, because they know they have a plug-and-play business. They're not depending on Michele Williams. If you decide I'm going to go to the beach and enjoy some mai ties, that the business suffers. They know that regardless of how you decide to participate, they've bought something that can sustain on its own. It's also of tremendous value to our clients, because if we are sick or have a family emergency or decide to just take off from the business, they won't be compromised. So, there's super strength in the business not being reliant on us. That’s what clockwork is about.
Michele Williams:
Okay. So, I was blessed enough to be one of the prereaders for Surge and for Clockwork and I enjoy that process a lot, by the way. So, keep me on your pre-read list!
Mike Michalowicz:
I love your feedback.
Michele Williams:
I think the thing about Clockwork that is so difficult in our industry is many of us are solopreneurs, so it is hard to separate who we are. I teach all the time. You are not your business. If the business goes away, you still exist. There is a conjoining there, but there's also the separation and I think in our industry, for many that are alone, and especially with something that is so creative and coming out of their ideas and design over and over like an artist, there are some things that can be replicable, but there are other things that are really hard. I think that’s a struggle for sure in that type of niche industry.
Mike Michalowicz:
Yeah, especially when you're a small business, and I'm a small business too. It’s me, and there are ten people in total. We're tiny and so there's dependencies on us to keep performing. In fact, just in a couple of minutes, I got to hop on another thing, because I don't have someone else to back me up. But what we realize is that, as a small practitioner, we can start the process. Before we went live here, you were talking about the implementation of Infusionsoft and these other packages and that’s exactly the goal of a clockwork business, is to not one day just stop working and I’m going to go on vacation. But it's to start removing elements of responsibility from ourselves and automating it through other resources, virtual help, and so forth, and over time, we will get to that point where we can remove that last piece from us, and that’s when we're totally independent of our business.
Michele Williams:
Thank you for that. I'm going to highly recommend Clockwork. It just came out, didn't it?
Mike Michalowicz:
August 21 is the official release day, which is Tuesday, August 21.
Michele Williams:
Excellent. I'll have a link to that and to all of your books in the show notes. I cannot recommend enough your books, and I know it sounds like I'm being crazy, but I'm just serious. I use them in my coaching practice. I use aspects of them all the time, and I just can't recommend them enough. I also just want to tell everybody that if you leave us a review on iTunes, I will send a Profit First book to the first ten people who leave an iTunes review. So, if you want a free book, give me a free review and I'll send you one. Okay. Mike, thank you so much for your time today. I really appreciate it. I'm going to have to bring you on again because you're writing more books all the time.
Mike Michalowicz:
That's honored to come back.
Michele Williams:
We're just going to keep talking about them over and over because I think there's so much richness and, I mean, the conversations could go on forever.
Mike Michalowicz:
Well, it's a joy being here. Thank you for having me, and congratulations on your show. This is an amazing show.
Michele Williams:
Thank you so much. Have a good day.
Michele Williams:
Thank you so much for listening to our podcast today. I hope that you can see how relevant it is here in 2023, going into 2024, as it was in 2018. I also want to offer that if you're looking for how to create profitability in your company and you want help doing that, I have a really great new offer that I want to tell you about. It's my CFO2Go offer. What we do in this is we work with you over a couple of weeks or maybe one or two months, it's a short engagement, help you look at your financials, understand them, put some metrics in place, and then put you on the right path to be able to monitor those. This is a combination of working with me and some of the tools that I have along with Metrique Solutions. If that's something that would interest you, you can find out more at ScarletthreadConsulting/CFO. Remember, profit doesn't happen by accident. Profit is a Choice. It's proud to be part of the Designnetwork.org where you can discover more design media reaching creative listeners. Thanks for listening and stay creative and business minded.