Mike, I want to introduce you as the fixer, because by your 35th birthday, you had founded and sold two multimillion-dollar companies.
You were confident that you had the formula for success. You became a small business angel investor and proceeded to lose your entire fortune.
Then you started all over again, driven to find better ways to grow healthy, strong companies.
Now you have devoted your life to the research and delivery of innovative, impactful entrepren- eurial strategies to people like me and many other business owners out there.
You’re the creator of Profit First, which is used by hundreds of thousands of companies across the globe to drive profit.
You’re also the creator of Clockwork, a powerful method to make any business run on automatic, my sort of language, Mike, and your latest – arguably the most impactful discovery, is Fix This Next.
In Fix This Next, you detail the strategy businesses can use to determine what to do in what order to ensure healthy, fast, permanent growth and avoid debilitating distractions.
Today, you lead two new multimillion-dollar ventures, as you test your latest business research for your books.
You’re a former small business columnist for The Wall Street Journal and business make-over specialist on MSNBC, you’re a popular main stage keynote speaker on innovative entrepreneurial topics, and you’re an accomplished author. It’s an honor to have you here.
I hope your listeners and viewers get through those wonderful accolades, and I appreciate that and they’re all true, but I’m just a regular guy.
I’ve had some very good fortune that I’ve experienced in hard work and some good learnings, and some really tough times in between those two that I’m happy to share.
Mike, I want to zone in and start a dialogue from every business owner’s mindset right now. And that is how do I fix my business in this pandemic? And I want to start there because this issue of Authority5.0 Magazine and the Podcast that we’re recording are exclusively targeting business owners, because so many are scratching their head and asking, how do I fix it?
So I want to focus on your model that you present in your book, Fix This Next, in this entire interview, because I think many business owners and entrepre- neurs struggle to make progress. They make small progress, and then they’re ten steps back. This seems to be a constant pendulum.
So let’s start with, what is the biggest challenge entrepreneurs and business owners have right now? Or do you think that they don’t actually know what their real challenge is in this pandemic?
They don’t know.
Succinctly put, I believe the biggest challenge entrepreneurs face is knowing where their biggest challenge is. Unpacking that, what we do, Mary, is we focus on all the apparent issues.
Right now you and I, if we went into our email, there’d be like fifty things we could be taking care of and addressing, all of these different emergencies.
If you have colleagues at the office or they’ll call you on the phone and it always answers, they’re seeking that we can answer.
We rush through the apparent at the direct neglect of the important. We have to say our business is like a chain. So say you and I have a linked chain that we’re pulling and what we’re trying to see is where the chain breaks.
No matter what we do, you could pull it really hard and I can give you some slack or I could wave it.
But no matter what we do, the chain will always break in the exact same spot, which is the weakest link.
The key is to know what the weakest link is. Our businesses are like a chain, and if you want to strengthen the chain, strengthening each link does nothing for you, because if the weakest link is still there; it breaks just as easily.
So there’s a certain sequence we need to do things.
As entrepreneurs, we default to all the apparent issues.
We’re constantly fixing all these links without the consideration of what the business needs from us. What’s that weak link? So we need to know what the business needs from us.
Resolve that, strengthen the entirety of the business, find the next weak link, improve that, and then strengthen the entirety of the business again. And that’s how we up-level our organization.
I love that. You talk about the fundamental human needs based on Maslow’s law. I would like you to talk us through how your business model is aligned with Maslow’s law.
Maslow’s is a quick primer on studying human needs structure and it basically said there are five levels of needs for all of humanity.
Foundationally, we have what’s called physiological needs, meaning, you and I need to breathe air, eat food, and drink water. It’s the basis for our survivability. If we don’t have that, we’re dead. That’s necessary for survival.
The next level above that he pointed to was safety needs, shelter, overheads, as winter’s coming in and or summer for you, winter for me, shelter, and so forth. Even the shelter doesn’t matter, unless the base level need is addressed.
If I’m not breathing, I don’t care about shelter. But once I can breathe and I have subsistence, then I need to have shelter.
Once I have that, I need to belong to a community.
What we are naturally wired into our map as low hierarchy of needs to get, it’s actually five levels. So our sight, our hearing, our feelings, our hunger are indicators of what we need to do.
I translate this into a business with one great differentiator.
We are not wired into our business. We don’t feel when the business is struggling; we don’t smell or taste it. We often get a gut feeling, but that’s a beacon. It’s not the reality. We need to look at empirical data. We need to see what the data says about our business.
There are five levels in our business. Foundationally, every business needs sales. Sales create the cash equivalent to oxygen.
If you have no sales, your business is suffocating. You can’t breathe.
But sales alone are not enough to support a business. That’s like saying, you know, you’re in danger, someone put a gun to your head, just breathe a lot and you’ll be fine.
No, you have to defend and protect yourself.
So sales are necessary, but alone they’re not sufficient. Sales support the creation of cash.
“You will struggle, but maybe you’ll just survive.
If you go and see it as an opportunity, that’s a growth mindset.”
The next level is profit.
Profit is the creation of stability. It’s where we collect some of that cash and we start accumulating it. It gives us a runway for our business.
Once we have profit addressed, the next level of needs in the businesses is order. Where is the creation of organizational efficiency? It’s where the business is not dependent on the owner and carrying the business on their back all the time.
But that is impact. Impact is where we create transformation for our clients. So separate clients experiencing a transaction are experiencing a transfor- mation, but it’s systemic transformation.
And then the highest level is called legacy, which is where we create a business to live into permanence, into perpetuity, beyond us.
It’s not about us as a business owner. It’s more about us as a business steward, giving life to this entity, but the business will continue to serve beyond our active input in the business.
So those are the five levels of the business hierarchy of needs. And just in quick summary, we always have to satisfy the base level
first, just like Maslow, and only when it’s adequately satisfied can we elevate to the next level and the next.
So it’s a system. It’s not about reaction. It’s not about following the gurus and trying to fit a blueprint, a circle into a square.
It’s a system you’ve got to follow, but I also want to stay on the model because what I love about your modeling is that you’ve flipped the notion that you have to give before you get. I love that, Mike.
It is 100% common sense, and yet most business owners are not following that rule. They’ve got this idea that you’ve got to tithe and they give and give, and then by the time they’ve given everything they’re running on empty.
I blame my mother, because my mother raised me and she’s like, wait, you have to give to get, you have to be a giver.
And I understand it in social dynamics, but in regard to our business, if our business gives without getting, it’s not sustainable.
We actually have to get sales, profit, and efficiency in order to be contributors.
The classic examples are the not-for-profits. Often we’ll have a big altruistic goal to serve.
We’re going to rid the world of such and such disease.
We’re going to save people who are starving, and they’re wonderful and necessary goals, but these businesses focus on the impact and legacy they’re going to form. They don’t consider sales and in their cases that is contributions, profit, which are retention, sustainability, efficiencies.
They’re like, “Let’s change the world.” And these businesses come out with great ideas and then they vanish overnight because they aren’t sustainable.
I implore business owners and myself, you must do what’s sustainable. You have a responsibility to be profitable. I would even argue, your clients want you to be wildly profitable.
I’ll never have a client come to me and say, “Mike, could you double the prices on me?” or “Mike, please rip me off a little bit.” I like that. Unless they’re sadistic, that’ll never happen. But here’s what clients will say.
They’ll say, “Hey Mike, when you provide services to me, I want your full undivided attention.
I want you caring for me more than you care for anyone else. I want this to be the most important project you’ve ever done.”
The only way I can give that significance to that client is if I’m not worrying about making money, if I don’t have to worry about landing that client
immediately because I’m not making money here.
The only way I can give to them is if I’m getting in the first place; that’s what clients want.
They want us to be profitable and sustainable so we can care for them.
Mike, I want to touch on that word transformation because that’s a big word that I use a lot.
You know, I work with predominantly coaches and consultants or business owners who want to package their knowledge, wisdom, and skills into a digital business essentially.
And what I find a lot of people do is that they’re building online courses, but not online programs. For me, there’s a vast distinction – one is educational and the other is transforma- tional.
When you’re building a transformational program, not a course, a program, that is then supported with your own system, your tried-and-tested methodologies. You know, it’s a process.
Then you can ask for a high ticket. I think that a lot of coaches are so frightened of asking the price they believe that they’re worth is because the client, on the other side, can’t see the system, they can’t see where they’re going to start, where they’re going to end.
They want not just one transformation; they want micro transformations along the way.
So I think that word transformation is actually misunderstood because it has a direct link to your point about making sure that you feed the business and what it’s worth to then be able to give that client and others your undivided attention.
Would you agree with that?
Adding to that, I would suggest that the argument of “I can’t increase my prices because I’m going to lose clients” The number one person giving you that argument is you, right?
But understand this. The fear, of course, is if I increase prices, no one will come to me and I’ll lose my customers. If you increase your prices and you lose your customers, your customers are saying to you that you are simply a commodity.
I only saw you as valuable because you were the cheapest, but I wasn’t seeing value beyond being cheap, which is a real problem. If you think you’re going lose customers because they think that you’re the cheapest option, you are in the wrong game. That’s a very hard game to compete in as the cheap option.
What you should experience, if you increase prices, is that your customers will say, well, what? Like I’ve been getting a deal for a long time. That’s what you should expect. And any customers that say “I’m leaving you because you’re too much,” are looking for the value shopper.
Let your competition serve those race-to-the-bottom folks, but raise your prices.
The other thing I want to talk about prices is the number one marketing message in the world.
It isn’t some great website; it isn’t a social media ad on Facebook.
The number one marketing mechanism is the price.
It is the biggest determinant value.
If I drop a big diamond right now on the table between us and say, “That’s worth 10 bucks,” you’re going to instantly know that it’s a cubic zirconia at best or it’s costume jewelry and it’s garbage. If I plonk that exact same thing down and say “That’s $10,000,” that’s like, “Whoa! Grab the tweezers! Where’s our safe? We’ll hide it away.”
Our perception of the value of something is first and foremost determined by the price. So your marketing message is in your price.
If you are having a low price point, you are saying, “I’m the cheap provider.” If you have a higher price point, you’re saying “I’m the value provider.” Realize that’s your marketing message.
I love that, Mike! That is a massive takeaway for me. I just love that. So I believe that there are two types of business owners. There are the ones who are after the money and the ones after legacy.
The legacy is a lifetime game. The transaction is short-lived, and I believe that most people have the intention to leave a legacy, but then go the other way and are in it for the transaction.
In your experience, Mike, does this happen to people because they haven’t reached what you term as the creation of permanence? What happens to people? Is the intention legacy, and then they get off track or is the intention only to make money and then it becomes legacy?
I’ve seen both. And honestly, I don’t think I’m in the position to judge what is right or wrong here.
I’ll give you an example. A friend of mine has grown a business that is very successful from the outward measurements. It makes a lot of money.
There’s no demand on his time. He can do whatever he wants. I sat down with him for a few drinks, pre-COVID about a year ago, and I said to him, “Wow.
Now that you’ve achieved all this in your business, what’s next?” And he’s like, “I’m gonna go golfing. I’m gonna try to get in 18 holes a day for this. And about five days a week. I can’t wait.”
What my thought was is first of all, that everyone’s life is their own. Right. Good for him. If that’s what he desires. As long as you’re not putting harm on other people, go do what you want to do.
So I think that’s great. But then as I walked away from it, I said, “I wonder if the day’s gonna come when he goes around that same course on the hundredth time, and he’s coming into the 18th hole, if he’s going to say, “Is this all there is?” I think that may be a shame.
I think some business owners achieve what they set out to achieve regarding their financial achievement, freedom of their time, having other people do the business while they sit back and collect the money and then feeling that there’s an emptiness there.
I know from my own story, as I grew those businesses you shared in the beginning, they were outwardly successful, but inwardly, they weren’t fulfilling. I think a legacy, at least for me, is when we have a realization that we’re on this this planet for something bigger.
I believe every single human being on this planet is for something of significance.
Significance doesn’t mean you’re the biggest name in the world that saves everyone.
You’re not the next Gandhi or Mother Teresa necessarily. It could be that you just impact one person’s life deeply just through affection and care or focus or doing something.
But I do believe all of us are on this planet to do something of purpose.
I believe as entrepreneurs, it can be a platform for expression that our business can serve a purpose while building its impact and all the money and the elements that generate further facilitates that impact.
As the impact grows, it builds the business more. So it starts this upward spiral, and you can live a life of your dream in regard to money or freedom of time and have the impact at the scale that you want to.
I think that’s what we’re really looking to do. And, and I don’t know how it comes about; I don’t know if we started off with the legacy.
I didn’t. I started off saying, “I want to make a lot of money.” And then I woke up one day and said, “That’s not secondary to what I need to do here.”
I think for other people, they set out a legacy and they forgot the money part, like we talked about the not-for-profits and they’re in real trouble.
I think this balance does need to come about. I just don’t know where it starts.
Absolutely. So let’s make the assumption that business owners are reading this magazine right now. Their business has suffered because of COVID.
What advice do you give those people? I’m sure that you’ve been consulting a lot of those people who are really struggling
– smaller businesses. What does the dialogue look like between you and a business owner?
First we need to do an identity shift with most people.
Many people are like, “Oh my gosh, the great recession is upon us again.” Like, you know, 2008 was a great global recession. The first thing I do with people and myself, I say, “I’m not going to call 2020 ‘The great recession.’ 2020 is going to be the great reinvention.”
I give it new terminology because we become what we say and if we say I stink at math, I stink at math. If we say this is a recession, our business will start acting consistently with it.
So first of all, let’s own a new label. This is the great reinvention and small businesses are the great reinventors.
The other thing is to realize when it comes to small businesses and small business as defined by the SBA, which is the small business administration here in the U.S. – it defines a small business as doing $25 million annually U.S. or less.
That’s my business; perhaps it’s yours. It’s a lot of businesses, right? Of these businesses, we’re the ones who will reinvent. What’s interesting is it doesn’t take us much.
We don’t need to be the next Amazon or whatever mega company you want to think of, but we can be the next great version of ourselves in this situation, if we start off by calling it the great reinvention.
Second is we got to realize small businesses, their fate, our fate is played out with very few clients.
If you’re a service-based small business, losing 10 clients can be devastating. Gaining 10 clients can be magnificent. If you’re a product-based business, it’s usually smaller shifts.
It’s these massive companies. When they lose 10% of their client base, they’re in real trouble. It’s easy to pick up 10 more customers if you apply it, right?
So we, as small businesses, don’t have to play into the recession. We can say, “I’m deciding not to play part in a recession.
It’s the great reinvention. I’m actually gonna increase my client base by that 10% and actively market into it.
”It’s the big businesses that are losing those clients and they’re entering the market stream that we can gobble up as to the smaller fish.
So we have to look at that opportunity.
And the last thing is we got to start asking our customers what they need now. Realize that we’ve entered a new customer paradigm, meaning we have new expectations.
As a customer, I expect certain safety standards. I expect actual responses via Zoom and in digital formats a lot more now than I did ever before.
There are other expectations that come about too. We as small businesses have to respond to that.
So reach out to your patrons and ask, “How can we serve you now? We’re still open for business. We’re still ready to serve you. We just realized you may want us to serve in you in a new way. What can we do now?”
When we ask our customers back, that can help us improve our business. The danger, any businesses that don’t ask, we simply guess. We say, you know, I think this is what people want now.
Or even more dangerous, we do the hypothetical where we go to some friends or acquaintances and say, “If you were my customer, what would you want?”
And now we’re playing a game with people who have no clue what’s going on. And we come up with ideas.
Go to your core customer base, and learn from them by asking and then observing. And you’ll find the pathway to your success in the great reinvention.
Mike, what about people who are starting out? Like what about people who are in a position of compromise? They’ve lost their six-figure salary in a senior executive position. They’re almost unemployable. They’re 55 to 60.
What about those people who are starting to now contemplate “Maybe I should start a consulting business.” What advice do you give those people?
First of all, you guys have to see this as a great opportunity, something to be handed to you potentially.
You have to see it that way. If we lament and say, “I got fired.
I don’t know what to do and I’m doing this not because I want to, but because I have to,” that’s a survivability mindset.
You will struggle, but maybe you’ll just survive. If you go and see it as an opportunity, that’s a growth mindset.
So again, we have to frame this the right way. The next thing you can do very tactical is to do, I call it a beta rollout. Don’t develop this comprehensive idea. All the different offerings have hoping someone’s going to buy it. We don’t have that time, or that money. What we need to do is reach out to a prospect base and simply say, “I have an idea.”
Then the next step is ask for money. Don’t say, “I have an idea. Do you like this?” Because it’s socially appropriate to say, “That’s a good idea. I wish you luck.”
That’s a great affirmation, but it doesn’t get you anything, Instead, go to your prospect base and say, “Here’s my idea. I’m asking for a deposit.
If you want this thing that I’m developing early on, I’ll give you a discount or some kind of preferential treatment, but I need a deposit now.”
People speak the truth, not through their words, but through their wallets. So if people are willing to open their wallets for your idea, you got something that’s got legs; go for it.
But if you’re simply asking people what they would do, you’re entering the space of hypothetical thoughts, and there’s no value there. So start selling today.
That’s awesome advice, Mike. Now I’ve got one last question that I ask everybody, and that is, “If you can meet somebody who is no longer living, who would it be and what would you ask or what would you want to know?”
I’ll give you two answers if that’s okay. I have one from a life aspect and another one just because it was personal, but the life aspect is George Washington, founder of the United States or one of the founding fathers.
The reason why I’m so compelled by it is here’s someone who was given such power, such opportunity to be a king of a country and my understanding from history, I don’t know if this is true, but he says, don’t want that. I want a country that can self-sustain.
Let’s set it up the right way or what he perceived to be the right way.
I think it’s very powerful to be offered extreme power and to decline it because it’s in the best interest of humanity. I love to learn about that.
Personally, I’d love to meet any of my grandparents. All my grandparents had passed away before I was even born, so I’ve never met any of my natural grandparents. I’d love to meet just one and learn about their lives and history.
Mike, you are such a wonderful human being. You are helping so many people. You have a lot of brand advocates out there. I have clients who absolutely love what you stand for. They follow you, and they talk about you, which is just a testament to the sort of person that you are.
Mike Michalowicz is the entrepreneur behind three multimillion dollar companies and is the author of Profit First, Clockwork, The Pumpkin Plan, and his newest book, Fix This Next.
Mike is a former small business columnist for The Wall Street Journal and regularly travels the globe as as an entrepreneurial advocate.