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Welcome to Profit First Nation, the podcast that helps you achieve permanent profitability in your business by taking action to implement Profit First right. Hosted by Danielle Mulvey, a Profit First expert, and Mike Michalowicz, the author of Profit First, this podcast is for the top 17% of entrepreneurs who have cash in the bank to correlate with their profitability.
On the podcast, we dive into advanced Profit First strategies by sharing the honest and authentic ups and downs of being a business owner. Each episode provides information for entrepreneurs focused on taking the right steps and seeking appropriate advice from professionals in accounting, legal, tax, or other relevant areas. You’ll also hear transformational stories from business owners who have turned their businesses from cash eating monsters to money making machines with cash in the bank to correlate to their profitability by implementing the Profit First System.
With a focus on intelligent entrepreneurship, Profit First Nation guides you on how to take ownership of your finances and leverage Profit First as a DIY cash management system to make your business permanently profitable.
If you're a fan of Profit First and Mike Michalowicz, this is the podcast for you. Join a in on our community of successful entrepreneurs driven to be permanently profitable, with a grit and growth mindset that lets no obstacle stand in the way in pursuit of the three Ps: passion, profit, and play.
https://www.profitfirstnation.com
ABOUT THE HOSTS
Danielle Mulvey:
Danielle Mulvey is a former flight attendant-turned entrepreneur and the owner of multiple businesses doing $50-million in annual revenue. She is one of the exclusive, select group of Mastery-Certified Profit First Professionals in the world, and the go-to “HOW TO IMPLEMENT” workshop facilitator for Profit First and WSJ Journal Best Selling Author Mike Michalowicz following his keynote speeches. Danielle is currently running multiple businesses from start-ups to mature businesses with 10-year plus track records and revenues ranging from $1M to $40-million in annual revenues and is a certified numbers geek about Profit First, leveraging the DIY cash management system for small business to achieve maximum profitability. She has the ability to personally guide business owners to achieve maximum profitability in their business based on her 25-years experience of being an entrepreneur who has been there and done that.
Additionally, Danielle authored the book The Rapid Read™ Guide to The 5-Star Employee Rating System™ and is currently collaborating with Wall Street Journal best-selling author Mike Michalowicz on his new book, to be released in Q1 2024, titled ALL IN: How Great Leaders Build Unstoppable Teams.
https://www.daniellemulvey.com
linkedin.com/in/danielle-mulvey-66a315
theallincompany.com
profitfirstnation.com
Mike Michalowicz:
Mike Michalowicz is an entrepreneur and New York Times and Wall Strett Journal best-selling author of Profit First, The Pumpkin Plan, SURGE, Toilet Paper Entrepreneur, Clockwork, Fix This Next, and Get Different. BusinessWeek called Toilet Paper Entrepreneur a business cult classic. His books have been translated into 10 languages and Mike has had the privilege to speak on stages all over the world because of his passion to connect with entrepreneurs.
As the founder of Profit First Professionals, he empowers accountants, bookkeepers, and business coaches with the tools and techniques to maximize client profitability, allowing them to uplevel from being one of the 83% of small businesses operating check-to-check and struggling to be profitabably to becoming one of the 17% of thriving and highly valuable businesses with cash in the bank to correlate to profitability. Mike also co-founded the business growth consultancy, Provendus Group, and has successfully founded, built, and sold two technology service-based companies. He is passionate about sharing his experiences and advice with entrepreneurs and sits on formal and informal advisory boards while maintaining relationships with angel and early-stage investors.
linkedin.com/in/mikemichalowicz
MikeMichalowicz.com
ProfitFirstProfessionals.com
mikemichalowicz.com/books/
MikeMichalowicz
Welcome to Profit First Nation, the
official podcast for entrepreneurs
who are operating their businesses in
the zone of permanent profitability.
I'm Mike Michalowicz, the author of
Profit First, and now, here's your Profit
First Nation guide, Danielle Mulvey.
Hello, my entrepreneurial friends
and welcome back to another episode.
Today we're gonna talk about how
new businesses and old businesses
can leap to permanent profitability.
Well, the obvious answer is implementing
Profit first, and oftentimes.
Old businesses that maybe tried
implementing profit first kind of
fell off the profit first bandwagon.
And then new businesses when
they go to start think, well, I'm
not profitable when I start, so
I'm not ready for profit first.
Every business needs profit first in their
business, and the easiest way to implement
Profit First and start building that
habit is just by allocating 1% to your
profit account every time you get paid.
It doesn't take much to implement Profit
First, and we have lots of resources
and episodes on that, but Profit First
isn't a complicated spreadsheet system.
It's a behavioral pattern.
It helps you filter out your
decision making and the comes
down to do I save or do I spend.
and when you have profit first allocating
into your different buckets, whether
it be profit owners, pay tax, or
operating expenses, those are your
four primary allocation accounts
in profit first, but you can expand
upon those and do subcategories.
We allocate to payroll.
We allocate a portion of operating
expense to general liability insurance.
Anything that is a significant
spend for us that we need to.
Categorize, we just open up a new
account when in doubt open a new account
and start allocating to that account.
But that percentage that it comes
from is from the operating expenses.
Now.
If you are a new business, the beauty
is, is that you can start operating
your business at the target allocation
percentages out of the gate because
your business knows no different.
If your business has been around a
while and your business isn't wildly
profitable and isn't at those target
allocation percentages already,
well then you've gotta slow your
role and you've got to do an instant
assessment to see where you are.
And then you know where you wanna go.
so if you do your instant assessment and
your target allocation percentage for
profit is 5%, but your instant assessment
shows you at losing money and your
profit is actually a negative percentage.
That's okay.
It's not uncommon.
Let's stop the bleeding now
and let's fix things now.
what you can do is, is
you can offset that.
Now by, what do you need to do guys?
if you're running a negative
in profit, then you need to
decrease expenses right away.
So if you're negative 2% in profit, then.
Your expenses need to be reduced by
at least 2%, but ideally 3% because
now we've got 1% going to profit.
we've reduced expenses by 3%.
That gives us the ability to wipe
out that negative 2% that we were in
profitability and add 1% of profit.
Does that make sense?
Of course it does.
It's simple math.
We're talking here when it comes to profit
first, and then over time we're gonna
move that profit quarter over quarter.
And to be honest, it takes six to eight
quarters to move from your current
allocation percentages to those target
allocation percentages, and that's okay.
It's incremental.
One, two, 3% adjustments to profit
owners pay, tax and operating expense.
Quarter over quarter until you get to
those target allocation percentages.
So out of the gate we just
focused on fixing profit.
We were negative 2% in profit.
We decreased operating expenses by
3%, and now we've got 1% going to
profit in the quarter going forward.
Real simple.
Maybe we don't touch tax and operating
expense at that time because you can't.
Just take a big haircut
to any category overnight.
and if you've been running your
business off of, you know, let's
just say 80% operating expenses
and we need to cut it by 3% and get
it to 77%, that's pretty doable.
but we're not cutting it 10%.
We're not doing an arbitrary number.
We're doing what's realistic,
what's easy, what's not going to
upset the apple cart too much.
All right, so let's get
that 1% to profit happening.
Now let's write the ship if
we're negative, and let's
just do those incremental
increases quarter over quarter.
Now one thing I, love to see with
businesses is if you could start your
current business tomorrow over knowing
what you know now, where would you begin?
what's interesting of that is I
hear a lot of people say that they
would do everything differently.
Not just the money aspect, not just,
implementing profit first sooner, but
they would increase the efficiency, the
decisions they make, the daily life.
and you know what, you don't have
to have a new business to start
from scratch, from if you have a
business right now, you can start.
Improving efficiencies.
You can start changing the
decisions that you're making.
You can change your behavior
and your habits because that's
where we grow is when we change.
if you've just been stuck and
nothing seems to be moving
the needle and we're just.
Kind of barely surviving and nothing's
getting better, and you had these visions
that you'd be a $10 million company,
but you're stuck at a million dollars.
Well that's okay.
You're stuck because you're
not doing anything different.
You're not changing anything,
you're not improving anything.
You're not eliminating things
that aren't working for you.
You're just doing the same old, same old.
So my entrepreneurial friend, you have to
push yourself outside your comfort zone.
You have to decide to take
the bull by the horns.
You have to decide that you want to
grow and you want to do different.
And so I challenge you to
make those differences.
Go out there and set a timeline.
Say, I need to do this
by the end of next week.
I need to do this by tomorrow.
It can happen now and it can
happen fast, but you have to be the
one to decide to make it happen.
I know Hannah Cox was on a recent
episode, so if you do need some
accountability there with that, Hannah
is amazing accountability partner
who will really help you keep those
three priorities whatever they are
each week, priorities and getting
action done on them and making things
happen and producing results because.
Too often we get stuck
working in the business.
We get stuck trying to put out the fires.
We just kind of Feel
important and it's easy.
This is the easy stuff.
we can put out fires with our eyes closed.
We can answer employee questions,
we can sell to customers, we can do
all that stuff because it's easy.
we tend to like those
dopamine hits of easy.
I can do this.
I'm doing something, I'm being
valuable to my business, but.
I beg to differ.
You're not being very valuable to
your business when you're working in
your business instead of working on
your business, increasing efficiencies
in your business is working on
your business, answering the phone,
answering customer emails in terms of
efficiencies, working in the business.
So let's flip the script.
Let's work on the business.
let's do things differently so that
we can move that needle and so we
can scale and we can grow and we
can increase our profitability.
I recently ran a business
sort of mini retreat.
we did it over a series of five Saturdays,
and we met, for a bit each Saturday.
It was perfect because, The
businesses weren't running, so
there weren't any fires to put out.
It was quiet, time to focus and think
and we had a challenge each week.
and it was exciting to hear people
take the challenge for the week
and then come back and share
their success and their results.
and really, a lot of it was
getting rid of old thoughts.
and moving that needle hard.
with one exercise we did, I think
of Katie, my Canadian goat farmer
friend who, just dove in and
was so excited about things and.
it's really figuring out what can you
do with what you have, and having this
abundance mindset that what you have in
your business is enough to do it with.
and that's the premise of profit first.
If you only have $10,000 in your operating
expense account, then that's what you
have to spend on operating expenses.
It's not time to go out and spend $15,000
on a new piece of equipment if you only
have $10,000 allocated to operating
expenses or equipment or whatever.
We need to put it off.
So in Katie's mind, she wanted
to, have offerings that were way
more than her modest, average
price point of 10, 12, and $15.
she wanted to sell something that
was valued at, $250 as a price point.
And she has everything at her disposal
on her farm and in an exciting
fashion, she actually came up with
something that just blew everyone
out of the water using what she had.
So how many items would it take
to sell, $250 worth of product?
If your average price point is
$12, it would take a lot of sales.
So she came up with one item,
one package that would be $250.
and I think she even raised the price
a little bit higher, but when she
came to it, you know what it included?
For $250, you got all of this amazing
experience on Katie's farm and you
got to go home with a baby goat.
Wow.
How amazing.
And how incredible is that opportunity
to have such an experience?
and.
It was a resource that, was
underutilized on our farm.
when you're a goat farmer and
you have lots of goats and lots
of new babies so, What do you
have and what can you do with it?
How can you repackage what you have?
How can you put a spin on it?
How can you bundle it differently?
How can you dial it up?
Dial up the value, dial up the margin?
Is it a change in experience that
allows you to charge a higher price?
Because remember my friends, there's
only two ways to increase profitability.
Number one, increase margin, and
number two, decrease expenses.
So it's not one or the other.
I always see it as being
a combination of both.
how can you increase margin?
How can you increase value
and increase the price?
And then how can you
decrease expenses as well?
Katie didn't incur any additional
expenses when she came up with
this new $250 package value.
Do and work with what you have.
All right, and
then, I want you in this kind of
final thought as we get towards
wrapping up this episode is think
about the last year or your last
quarter and Ask your best client.
Or look at the best day from your last
quarter and ask yourself, how could you
turn more of that into more revenue?
So who's your best client?
How can you find more
of those best clients?
You know what's funny is Let's be
honest, the best clients are your
easiest clients, and your easiest
clients require the least effort, which
makes them more profitable, right?
So why are we not trying to
continually uplevel our client base?
Why aren't we trying to find
more of those clients so that.
You know, going from 50% of our
clients being delights to 90% of our
clients being to delights, or 95% of
our clients being delights instead
of just accepting what comes to us.
And on your best day ever, in
terms of last quarter, in terms
of total sales, what was that?
What made up that day?
Why did that day just go off the charts?
Okay.
You got that.
Then how can you repeat that
kind of day happening again?
Can it happen weekly?
Can it happen monthly?
Does it need to happen quarterly?
I know it can happen more than that.
One day it happened last year.
Start taking control of your business.
Start working on your business.
Start forcing yourself
to take the challenge.
To grow and to change and to
adapt and make things better.
'cause when you make things better,
life does get easier, right?
And it gets more profitable.
Thank you so much for joining
us for this week's episode.
If you would like to connect
with a profit first, professional
accountant, bookkeeper, or coach,
please go to profit first nation.com
and cheers to another profitable day.
My entrepreneurial friends.