In this episode, Michael speaks with Mike Michalowicz about how to write and launch successful books, how to hire your replacement, and why your clients actually want your business to be profitable.
GUEST BIO:
Mike is the author of Fix This Next, Profit First, Clockwork, and others. He has keynoted at the world’s biggest business events. He has built four multi-million-dollar companies and sold two of them: one to private equity and another to a Fortune 500. Mike is a business author with a clear mission: Eradicate entrepreneurial poverty.
SKIP TO THE GOOD PARTS:
- 0:42 – 1:54 Mike Michalowicz talks about his new book, Fix This Next, and shares some of the difficult parts about launching a book.
- 2:11 – 3:25 Mike gives us some advice on how to write a great good.
- 3:37 – 3:50 Mike talks about how his books are a blend of experience and entrepreneurship.
- 8:56 – 11:46 Mike shares his thoughts on getting over exhausting beliefs in business in order to really grow.
- 12:35 – 14:08 Mike shares his thoughts on how self-awareness of one’s strengths and weaknesses is key in running a business.
- 17:10 – 19:13 Mike shares his perspective on what criteria makes for a strong, healthy business.
- 20:44 – 22:31 Mike talks about who would benefit most from reading his new book, Fix This Next.
SHOW TRANSCRIPT:
Michael Bereslavsky 0:13 Hello fellow listeners. Welcome to the Domain Magnate Podcast. Today we have Mike Michalowicz on the show. Mike is the author of popular books like Profit First, Clockwork and Toilet Paper Entrepreneur.
Hi, Mike.
Mike Michalowicz 0:29 Hi, Michael. How are you?
Michael Bereslavsky 0:31 Good. So, Mike, I know you recently launched a new book. What’s it like to launch a book, you’ve launched quite a few now, what is the most difficult part of it?
Mike Michalowicz 0:42 Yeah, it’s uh, it’s exciting. So the new book is called Fix This Next, the launch day…depending on when people hear this…was April 28th. For me, it’s the culmination of all my life’s work. I love producing books because I’m an entrepreneur myself. Fix This Next specifically is around, what do we need to address in our business, in times of like situations like this where there’s economic decline, where there’s business change afoot, competition on the rise? All these different elements? How do we know the one thing we need to work on? And that’s what this is about. You know, launching a book is not an easy process, the marketing, the planning, preparing starts about a year and a half, two years in advance, just getting everything coordinated. And so as of this recording, we’re about a month and a half out. It’s the final steps to that. It’s not easy, and that’s probably the difficult part of a book launch. But it’s exciting because on that day, the readers will determine did I write a book that has impact and do people want this or, or not? I think it is the greatest book I’ve written, but we’ll find out from the readers.
Michael Bereslavsky 1:55 That’s nice. So there’s definitely a lot that goes into launching a popular book and I think by now you probably have the formula figured out. So what would be your advice? If I were to launch a book? How do I make it popular?
Mike Michalowicz 2:11 Yeah, and I think I have some elements of the formula. I don’t know, I haven’t all figured out. I know this, the most important part of marketing and launching a book is the book itself. Like we have to put our soul into writing an extraordinary book. That will be determined by the, by the consumer by the readers. It’s just like any other product. I liken it to music, you know, if you have a favorite band, they can market their launch of their new album as much as they want. But until we hear the music, we won’t make a determination. Is it worthy of our time? Is it worth listening to again and again? Do we want to share with our friends, about this music we found? Well, books are the same, is we have to put our heart and soul into a great book. So the book process of writing a book, it’s actually about five years of effort for me, I’m compared to my contemporaries that I’ve talked with I take a lot longer, I’m a lot less efficient in getting it out. But I want to make sure that my book is the best of me. So that’s the greatest lesson is if you’re going to launch a book, write a great book. A great book, followed by bad marketing can still be successful. A great marketing campaign with a bad book will still be a flop.
Michael Bereslavsky 3:26 And what are your books based on? Is it mostly based on your own experience and entrepreneurship? Or is it also research and your work with other entrepreneurs?
Mike Michalowicz 3:37 It’s a blend of the two, you know, my own experience is helpful because it’s relatable. I call it the arm of the shoulder, I can share what it was like to go through experiences. So every book I’ve written, Profit First, for example, I implemented Profit First in my own business 11 years back now. The book only came out about four years ago. So I’ve been testing and working so I can relate to the emotion of implementing it and the reasons why I wanted to avoid it myself and not do it and why I was skeptical of that system. But then it’s the research of others doing it where I start seeing patterns. So for Fix This Next, I interviewed and research by about 100 companies, 12 companies made it into the May 15, into the final book itself, but when I start observing these group of companies and they’re using the system, I can see what works for them on a group basis and what doesn’t. And that’s really how I refine and tweak the system. So it’s the blend of things for the emotion and the relatability and the research for the viability that matters.
Michael Bereslavsky 4:44 So you know, when I first heard about Profit First, I had many of my friends as entrepreneurs recommending it, and I read a quick summary and I thought, well, that’s obvious. You know, you have to make sure the business is profitable. And I was thinking if I found that book 15 years ago, back when I was just starting out with my first business, that would have been just invaluable. But I realized that by now I just learned that on my own experience, so I’m curious if the books, are mostly for beginning entrepreneurs, or is other lessons also for people who have done this for a while?
Mike Michalowicz 5:23 Yeah, I focused really on a size business. So in regards to the age of a business, how long it’s been in business isn’t nearly as relevant as the stage. The stage of the business is the different experiences is going through very early small businesses, micro-businesses, where it’s just started by a founder. That’s a very different environment than when you have your first five or six employees, your behavior must change. All my books are targeted at companies that do $5 million in revenue or less, and a lot of readers are in the early early stages. They’re under $500,000 in revenue, but my sweet spot is 5 million or less. Regardless if you’ve been in business for one year, or if you’ve been in business for 50. It’s how you level up your business to the next stage.
Michael Bereslavsky 6:10 Make sense. And for your other popular book Clockwork, who would you say is the perfect type of entrepreneur to benefit the most from it?
Mike Michalowicz 6:20 Yeah. So Clockwork, you know that book, the subtitle is, design your business to run itself. The symptom I think that it addresses is business owners that are carrying the business on their back. So if the business’s growth and sustainability depends upon your raw work, need to make more money, I need to work more hours. That’s the kind of entrepreneur I’m trying to address. I call it time poverty and there’s different flavors of poverty. There’s financial poverty, of course, this is time poverty, where people are sacrificing their life, for the business, and what I teach in Clockwork is even a solopreneur can start extracting themselves from the business through excellent systems, through perhaps contractual or virtual help. In a larger business where you have employees can create systemization by empowering employees in a new way. But the end goal is to remove the owner from the business so that the business can operate in their absence. And when we achieve that pinnacle moment where there’s no dependency on the owner, as an owner of the business, we have the right to reinsure ourselves in the business in the way that gives us joy. And I, I told you, I guinea pig every one of my own companies. So Clockwork is a system we’ve implemented and continue to implement here at my own company. And we’ve achieved the goal of the business running in my absence. And I’ve reinserted myself in the business in the ways that give me joy. I love being a spokesperson for an organization. I love doing interviews. I love speaking on the mainstage I love writing books. So that’s the work I’m doing. And the rest of the work is now managed by our team and our systems.
Michael Bereslavsky 7:59 Yeah, I love the way you describe it. And that’s something I personally struggled with for many years. Because first of all, as an entrepreneur that didn’t really have any kind of tutoring or learning on how to be an entrepreneur, I just got to learn everything on my own. And for a long time, I was thinking that, well, I just have to go, I have to work more, I have to work harder. And I always thought that hiring people, I would just hire people for things that I don’t know how to do. And I always assumed that if I, you know, delegate something that I’m already reasonably good at, that’s just not going to get done well. And later, I found that this is very common that most entrepreneurs have very similar beliefs. And so I want to ask, is that accurate in your opinion, and how can people quickly get over those beliefs to grow?
Mike Michalowicz 8:56 Yeah, so those beliefs are very common and the interesting thing about our businesses in the early stages, it’s necessitated that you and I, as the founder of the business, have to do all the work. And therefore we have to gain that capability and demonstrate that capability. The problem is, is we are in what’s called the TFM trap, time for money. The more the business demands of us, the more effort we have to put into it, and we’ll see money increasing to a certain point. But as money increases, we need to spend more time and now it becomes a trap. Because time is exhaustible, and therefore we start capping out, and then we get frustrated. What happens then is we say, Well, now, I need to find someone that’s as good as me, but no one as good as me exists. And of course, we can’t replace ourselves. Because if we found another one of ourselves, that person will be running their own business. So we set up this unreasonable expectation to find a replacement that we can never find. And then therefore we say, well, the only resolution is for me to work hard. Which is not a resolution. I do a demonstrative actually I just did a keynote two weeks ago. And I asked this all these 500 people, I said, who would rather make $100 an hour, and who’d rather make $10 an hour. And no surprise, every hand went up saying I wanna make $100 an hour, of course. Then I said, let me add a new variable. Now, what is the only way to make $100 an hour was based upon your time if you’re working you get it if you’re not working, you don’t. And for the $10 an hour, it is just a perpetual money-making machine so every hour, no matter if you’re working or not, you get $10 which would you prefer? And now the hands kind of get mixed. $100 an hour is 10 times more than $10 but I got to work for $10 an hour automatic even when I’m sick or tired or at the beach is still being generated. Then I add the final variable and I say, what if that $10 an hour can be amplified to any number once 100 hours an hour is capped, so you never make more than $100 an hour off your own sweat, but that 10 dollars an hour can become 20 or 70, or 100, or 1000. Which one would you rather have now? Now the $10 an hour becomes the most appealing because of its of its scalability, and it’s money on automatic. And those three stages are the demonstrative of what business goes through. When we start a business, it’s $100 an hour. The more you work, the more you make it, that’s very appealing. But then we go through this transition stage, which is a scary bridge, because now I’m saying well, several hundred dollars now I’m going to step back on how much money that I benefit from $10 an hour, but no effort required on an ongoing basis. So I’m going to make this risk of losing $100 an hour to take $10 an hour, and people are often afraid to cross that bridge. But if you do cross that bridge, you see the open pastures on the other side, at $10 an hour can grow into infinite dollars. The entrepreneurs who are willing to take that risk which is crossing that chasm are the ones who build a business that can run into perpetuity and in some degree becomes an ATM a cash machine for them. That transitions, the difficult part and that psychology is why I try to coach people through.
Michael Bereslavsky 12:05 Yeah, that’s certainly makes sense. That’s been our experience as well. As the company grew and the team expanded, I’ve noticed that there are just so many more opportunities that we can go off to right now. You know, compared to earlier that it was mostly me doing the work. Now, most of the work I do is just managing the team. And people do the work. But that was certainly a big, big transition.
Mike Michalowicz 12:35 Yeah. And we can be very cognizant of our capability. So as we transition to managing a team, are we a good team manager? And it’s hard to be aware of our actual capabilities. I concluded I’m a good team cheerleader. I’m not a good team manager. And those are different, cheerleading is about you know, bringing about enthusiasm and excitement and driving toward a vision. Management is the appropriate delegation of the work that needs to be done in a way that it’s manageable and moves organization forward. But I’m much more of an applicator. I like to say just do this, and do that. And I don’t put much difference in the priority of things. I prioritize everything. And that’s a real problem. So with that awareness, we’ve apprised them for a small company. We’re small, there’s 12 employees collectively. So we’re a tiny company. We have a president and Kelsey, the President is very good at prioritizing and managing the workflow to keep us moving forward. And I need the discipline of not interjecting myself and misprioritizing. So self-awareness is key and then enacting on that putting ourselves in a position where we actually protect the business from ourselves. Because the owner, believe it or not, you know if we believe it about ourselves or not, we are extremely influential in our organization. And we can to actually bring harm to organization if we don’t have the skill set to manage people. And so just to be aware of that is what I want people to do.
Michael Bereslavsky 14:08 Yeah, absolutely. I’m in a similar way. So we are similar size in terms of employees. And I’ve also noticed that I’m not the best manager. I’ve gotten better. But I’ve also found that it’s quite challenging to find someone good to replace yourself. If as a manager, like it’s much easier to replace yourself on all the different technical things that you do. But finding a manager is difficult. I wonder if you have, if that’s common if you have advice?
Mike Michalowicz 14:39 Yeah, I do have some advice. So first of all, I believe hiring from within is the best, practical work together experience trump’s interviews and resumes in my opinion. So when we bring people in typically, again when we have 12 employees, but everyone here basically started an entry-level position. And we simply work together and see what their capabilities were within our organization. Kelsey came on as a personal assistant to me, and within a year was showing how capable she was and started managing more office affairs and sales negotiations. And then within three years, we said, wow, you actually run this organization better than anyone else. So she grew into that position. The second thing is we use a Strengths Finder, Strengths Finder is a way to analyze people’s individual communication, and strengths and skill set. And the key here is to find a compliment. So according to Strengths Finder in these different rankings, I’m a cheerleader. That’s not the term they use, but definitely a cheerleader and motivator where Kelsey has a motivational component, but also is an organizer and compassionate she understands the empathizes with the emotion around work too, not just assigning work, and that was a very good compliment. And then the last element is when you find a person likeability is key. I have an admiration for our president Kelsey, I admire and adore her and respect her tremendously. And I think she has the same feelings toward me. And that likeability is important to navigate the difficulties and the conflict that comes about. We actually even have a business coach who comes in now periodically, just to coach us through the communication of our organization between me and her. That job on time is very important the time to communicate. So those are my tips.
Michael Bereslavsky 16:38 Yeah, good advice. So promote people from within. Now at Domain Magnate, we buy businesses up to $1 million. And a lot of the time we have people coming to us that just don’t have very good businesses, that have businesses where the owner is still involved. And most of does most of the work or is just not profitable enough. So I’m curious, from your perspective, what’s your criteria for a strong, healthy business, when you look at businesses?
Mike Michalowicz 17:10 Yeah. So, you know, right, they say revenue is vanity. Profit is sanity and cash is king. I put very little significance in revenue, I used to put tremendous significance in it. I used to feel when my company hit a million dollars, I was a big deal until I heard companies that were doing three and four, then my company was on a $5 million, actually $7 million run. And I’m like, now I’ve arrived. And that’s when I heard about the company doing 20 or 30 million. It was simply a vanity metric. It was an ego metric. The sinful thing behind this was my businesses were not profitable, they weren’t healthy. In fact, I found that more sales often translate to more stress on the organization, which translates to more stress on the owner. Because you think about sales equals obligation. I sell something I now have to deliver on that. Well, it’s a small business. I’m the one who’s carrying the way the organization. So it’s more stuff I’ve deliver more stress. The communication I have and when I’m looking at other businesses or just in dialogue with people is, how profitable are you? How healthy are you? And it’s amazing how it changes the conversation. The person comes bragging and says, I got a $5 million business and like, that’s great. But tell me about the profitability, the health and it’s like, oh, let’s not talk about that. I’ve become that guy. Like, I used to be so bragged. So braggadocious, about top line revenue, I really don’t care. It’s a metric. It has some importance, because is the creation of cash but the retention of cash, I’m really concerned about because that points to efficiency, healthy operations, sustainability. Particularly right now, you know, the economy, we’re in for a ride now. There’s no question about it. It’s the businesses that are financially viable that will see through this, anyone who doesn’t have a cash reserve or is not prepared, if they don’t just, you know, very quickly in the next few weeks with the right move, it could sink some businesses in the small business market. So I put a lot of value in health and that’s where we’ve been focusing for the last 11 years on our organizations to go in very healthy so we can sustain or even thrive in situations where most companies that don’t focus on their health will perish.
Michael Bereslavsky 19:14 And the current situation with the Corona Virus and everything shutting down, it certainly affects a lot of small businesses, and that don’t have a positive cash flow. People that don’t have enough savings. Probably going to go out of business and that’s, that’s quite sad to see nowadays.
Mike Michalowicz 19:32 there’s a saying that desperate people do desperate things. Desperate business owners do desperate things. And, you know, as we’re recording this, we’re only a few weeks into the manifestation of shutdowns and stuff like this, the ripple effect, even if all the shutdowns are lifted tomorrow, the ripple effect is already in place. I can’t foresee a quick recovery, it’s going to be a sustained thing. Well, businesses that get into a desperate situation now and don’t have enough cash flow to cover payroll or whatever are going to start doing desperate things, which usually means they drop prices very quickly to get quick sales, which actually the long term consequences devastating because now they have more obligation, right. So sales is obligation, greater obligation at a lower cost point, which if they have razor thin margins ready will put them in a negative cash position. So now I have a desperate response, increasing obligation, less viability, those businesses will spin out. So I’m just expecting that response from many businesses and it’s the inappropriate response, but they just weren’t prepared. They don’t have the mentality going into it is my fear.
Michael Bereslavsky 20:36 So you’re current book, Fix This Next. Who is it mostly for and how different is it from your other books?
Mike Michalowicz 20:44 Yeah, so Fix This Next, it’s for any business owners that are stuck in doing a hustle and grind mentality, that are…it’s having a vision for their business, but it seems to keep plateauing and it doesn’t seem to get to the next level. The reason I found for this, and this is the thesis of the book is that the biggest challenge business owners have is identifying what their biggest challenge is. They simply say, well, we need to sell our way out and they do pot shot solutions for their business. What I’ve discovered is every business has a DNA structure, if you will, there’s a certain makeup of every organization that’s consistent, I would say, actually, 99% of every business is identical. It’s really the skin and the outside of the business that we judge a business on. And that’s why they look so different, internally are the same. Why de-constructed this into what I call the business hierarchy of needs, five levels and within each level, there’s five needs, there’s 25 needs a business has regards to business, and it’s a diagnostic tool to pinpoint what you should work on. And, and this is, you know, situations like this where there’s economic shift, it’s going to impact our business. The gut instinct is to do sales, but our guts, you know, we’re naturally wired into ourselves instinctually But we’re not naturally wired into our business. So our gut instinct when it comes to business decisions can be and often is, actually not the appropriate guidance. So, this is a composite tool to pinpoint what you should work on. Sales is not likely the solution could be it may be a marketing thing it may be repositioned some offers, it may be jesting products and services that are not profitable and amplifying ones that are, it could be an efficiency thing. So this tool in Fix This Next pinpoints what you need to work on next.
Michael Bereslavsky 22:32 Thank you, Mike. And for our listeners, if you have a business that you are looking to sell currently, please go to Domain Magnate.com/sell and fill out the form to get a quick purchase of form. Thanks, Mike, for your advice. And any final thoughts on what you recommend entrepreneurs to do and how can they reach out to you?
Mike Michalowicz 22:57 Sure, I do. Thank you for having me. So to reach out to me and I’ll give my final thought, two things right now you can go to fixthisnext.com and on that site, we have a diagnostic even if you don’t have the book yet you can diagnose what your business needs and it takes less than five minutes so that’s fixthisnext.com — And if you want to learn more about my work in the entrepreneurial space, I’ve tons of free giveaways it’s my personal website, which it’s mikemichalowicz.com, but no one can spell that last name so it’s Mike motorbike as a motorcycle. I that’s my nickname Mike motorbike even though I’ve never driven a motorcycle, but mikemotorbike.com, you will find all these free resources. My final thought is I want you to know that your clients want you to be profitable, and they’ll never use those words your clients will never say to you, Hey, could you charge me more can you double the rates? But will your clients will say is I want your undivided attention. I want the best of your products and services. I want you catering to me and not distracted by trying to land the next deal. So, realize that the only way to achieve that focus and catering to your customers is by being healthy and profitable. So your clients won’t use those words, but they do want to be profitable and you’ve responsibility to be profitable.
Michael Bereslavsky 24:13 Thank you, Mike, and good luck with Fix This Next.
Mike Michalowicz 24:16 Thank you Michael.
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