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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
Hello, my entrepreneurial friends.
Today's episode, we are going to talk
about the three slippery slopes that
you need to be cognizant of and make
sure that you are not falling victim to
letting the profitability of your company
bleed from these three slippery slopes
that just kind of take it and you just
ride with it and then go What happened?
these slippery slopes all
relate to probably the largest.
Expense category on your income
statement or your profit and
loss report, and that is payroll.
Yep.
We're talking employees.
We're talking payroll.
The biggest expense on most businesses.
Income statements and profit
and loss reports is payroll, and
that is employee related, right?
And it's how big your team
is and who your team is.
so the three slippery slopes that you
need to avoid, number one, is you need
to be cognizant of what the cost of a
mis hire is because I too often see.
Employers hire people by half-assing
their recruitment and hiring and
saying, well, they seem good enough.
We'll give them 90 days
and we'll figure it out.
usually after those 90 days,
they didn't figure it out.
And you really did make a mishi.
So when you hire someone and think,
oh, we'll just give them a 90 day
probationary period, that's the sign
right there that you shouldn't be hiring
them because if you do make a great
hire, they should hit the ground running.
They should be going 60
miles an hour on week one.
They should be going 70 miles an hour.
By week two, they should be at a hundred
miles an hour by like weeks five or six.
You don't need to give someone 90 days.
You want people who are ready
to go outta the gate fast.
So if you do make a mishire though, let's
calculate the cost of a mishire Now I know
you could Google it, but I'm gonna break
it down for you how I get to the cost of
a mishire And in this case we're gonna
say that the cost of a mishire is $23,000.
Yeah, the cost of one miss hire
on the modest end is $23,000.
How do we break it down?
Well, if you're paying someone $25 an
hour, $25 an hour times, 40 hours a
week, times 90 days equals $12,000.
So right there it's
$12,000 in just salary.
Then we've gotta add another 20% on that
$12,000 for employer taxes and benefits.
So that's another $2,400 added on to the.
$12,000.
And then what about your time?
What about the time of the other
people in your team that were
involved in the recruiting, the
interviewing, the hiring process,
the training and onboarding process?
I mean, let's just put
that at a modest $5,000.
Okay.
Then one more piece to the equation
is loss, customer confidence.
When you have someone who's not a five
star fit for the role, who's kind of,
eh, muddling along and such, you are
gonna lose some customer confidence.
A ball is gonna get dropped, something's
not going to go well, and you know what?
That's gonna be worth probably
$3,600 in lost customer confidence.
So how did we get to that?
$23,000 in the cost of a mis hire?
$12,000 in three months of wasted
salary, $2,400 in employer taxes and
benefits, $5,000 in onboarding and
training and recruitment and hiring.
Time spent by you and your
team and another $3,600 in
lost customer confidence.
So make sure that when you make a
hire, it's not a, well, maybe they'll
work out kind of thing, because
that's your answer right there.
It's not to hire the person.
If you get this kind of
high pitch, well maybe.
Then please don't make that
hire Go back cast a wider net.
Go fish in other ponds and find that ideal
5-star fit employee for the role, and then
avoid the cost of a mishire going forward.
The second slippery slope
that you need to avoid.
Is, uh, existing employee entitlement.
So when you made your first hires, and
they've stuck with you through getting to
the first million, getting to the next 2
million, maybe to 3 million that's great.
And that's nice.
And they have worn many hats.
They've done lots of things But if
you're trying to take a company from.
One, two, $3 million to $10 million.
Well, my friends, the people that got
you to one, two and $3 million are
probably not the people who can get
you to $10 million dollars because
these people that started with you
don't necessarily have the experience.
You guys have figured it out while
you were figuring it out, and that
works and that's fine, but no one.
At a company of any size should
be the linchpin to your company
that you can't live without.
So if you have people who feel threatened,
when you try to bring in other people who
have more experience, who are savvier,
who have done the things that you want to
do going forward, and they've been at the
places that you wanna take your company
to be, then you shouldn't be beholden.
to employees who feel entitled that,
Hey, I've been around here the longest.
I should be the vice president.
I should be the chief operating officer.
I should be the one in charge.
'cause I was around
here from the beginning.
That right there is a recipe to just
kind of be stuck where you are because
that person, again, doesn't have the
knowledge, the experience, that been
there, done that, that you need to get to
that next level because if they did, why
are you stuck at one, two, or $3 million?
Right?
Loyalty is good, but just because someone
has a job with you doesn't mean that they
should be a lifer in your organization.
Some people want to grow, and
that's great, and some people
just like being comfortable.
So I too oftentimes see those
people with entitlement that
I've been here the longest.
I'm entitled to the next big role.
I'm entitled to a raise.
Now I'm entitled to make more
because I've been around the longest.
are the people that are the wrong
people for your organization.
and I oftentimes see people
that try to be the linchpin and
have this sense of entitlement.
Try to like close in on
everything and say, I got this.
I got this.
Don't worry about this.
I got this.
And if you have an employee who
is like, I got this and is wanting
no one involved and even you out
of it and their hands are up.
and then when you talk about bringing
someone else in, they get really sort
of desperate seeming and panicked
of like, Hey, no, I'm capable.
I got this, I got this.
That right there is a red flag
that they're hiding something.
if you bring someone else in,
they're threatened and feeling
like they could be found out.
No one in any organization should be the
one that you are wholly dependent upon.
You should be able to.
Let anyone go at any time and be okay.
Yeah.
It'll be rough for a week or so, but
you should be able to recover from that
because whether that person leaves because
they take another job or something else.
something tragic could happen and
that person could be gone because
I mean, the proverbial, they got
hit by a bus tragically story.
that's why you need great people in your
organization who are not going to have
this sense of entitlement, not have this
sense of, I've got this, I'm in control.
I'm not gonna share with anyone.
I'm going to keep this all a secret
so that you're dependent upon me.
That right there, again, huge red flag
that is going to cost you the ability
to scale, to grow, and might be costing
you some other things like possibly,
embezzlement or other waste, fraud
and abuse in your organization Again.
I'm speaking from the experience of
working with hundreds of companies and
entrepreneurs over my 25 plus years of
being an entrepreneur and a consultant.
then, the third slippery
slope to avoid is, failing to
hire to scale to new heights.
So if you have a vision that you
wanna take your company from one to 3
million to 10 million, well then you
have hire people who have been where
you want to go, and those people.
can help you bring up your processes,
your systems, your selling, your
marketing, your scalability.
It has to be someone who has experience.
so do not be afraid to hire people
who are more experienced than you.
The thing is, is they're
not a threat to you.
There's very few people in this world
who are crazy enough to be entrepreneurs.
Most people don't like the
risk that we as entrepreneurs.
Thrive on.
So the people that you hire, as
long as they've never had their
own business, they're fine.
They're never gonna be a threat to you.
They're not gonna wanna start their
own business at the age of 40 or 50.
so make sure that you are really
going after people who have that
experience and that knowledge of where
you want to take your business and.
The plus side of hiring someone who's
experienced like that working for
your smaller organization is you're
gonna be a delight of an employer.
There's going to be less
bureaucracy in your organization.
You're not gonna be this
corporate behemoth that, has.
Kind of held them back to certain
degrees, things will move a lot faster
in your smaller, nimble organization.
And that is an attraction factor to
people who are just kind of sick of
the corporate games and the politics,
and the bureaucracy So don't be afraid.
And don't think that you can't hire
someone who comes from a larger
organization and has the experience of
where you wanna take your organization.
So how do you fix and avoid these,
slippery slopes when it comes to
hiring, and building your team to take
your organization to that next level?
It takes getting really clear on
what you want and what you need
for the organization and how people
are spending their time, right?
Because again.
every payroll dollar should be producing
a return on that investment of what you're
paying someone in terms of their salary.
So we say that payroll
should produce a 3.5
x return on salary.
So if you're paying someone $50,000
per year, they should be having
$175,000 positive impact on revenue.
Okay?
That's 3.5
x $50,000 in salary.
And that $175,000 positive impact on
payroll, you should know exactly what
they need to be doing to hit that.
What I like to do when I'm considering
a new role, or I'm working with
someone who's adding a new role
to their organization or making a
new hire, is, Hey, let's look at
what their week should look like.
Let's look at what their
month should look like.
are there things that need
to happen in the quarter?
get out a calendar with time
blocks for the day and really
block out what you envision them
spending their actual time on.
You are paying them per hour to spend
on and really get it dialed in of how
they should be spending their days
and what needs to get done that drives
that positive impact on revenue.
then from there, you are gonna see really
clearly when you map out someone's ideal
week of how they should be spending
their time, hey, it kind of boils down to
these three to five key responsibilities.
Great.
75% of what your employees are doing
should be in the three to five key
responsibilities of their role.
And when you have those three to
five key responsibilities, then we're
gonna quantify what success looks like
for each of those responsibilities.
you're gonna quantify it with a number, a
dollar value, a percentage, a timeframe.
So for example, with my team of claims
adjudicators, when they're processing
long-term care claims to either pay or
deny a claim, they need to produce 98%
financial accuracy, and they need to
process on average 42 claims per day.
I've quantified with numbers and
percentages what success looks
like when they are adjudicating and
processing long-term care claims.
and when you give those success metrics to
each responsibility, here's the best part.
Your employees in those roles
that are quantified with success
metrics can manage themselves.
Everyone is on the same page
of what success looks like, and
so they can manage themselves.
They can know, Hey, did I hit 42 today?
Oh, darn, I hit 40.
That means I'm below my
average that I need to be.
I kind of need to squeeze out maybe
44 tomorrow to get back to 42.
Five star employees are savvy.
They're smart, they're driven,
they are made for the role.
They are perfectly suited.
They are ideal fits for the role.
And when they know what's expected
of them and how they should spend
their time and what numbers they
need to hit, they'll hit 'em.
And if you've got someone who's not
hitting it well, then you're on that
slippery slope there, my friend.
You've made a mishi.
You've got someone who feels entitled.
You've got someone who is just not
getting it and not a right fit.
So the challenge to you is fix this.
Let's make sure that you are building
a team that scales and grows with
your organization and you've got this.
So if you would like to get the resources
associated with today's episode, then
please visit profit first nation.com
and click on resources.
And if you'd like to connect with
a profit, first, professional
bookkeeper, accountant, or coach,
again, go to Profit first nation.com
and click on contact.
Cheers to another profitable day.
My entrepreneurial friends.