Sales, Obligations and Profits with Mike Michalowicz – Amanda Abella


    Mike Michalowicz, author, entrepreneur, and angel investor, tells his story of losing all of his financial assets fifteen years ago.

    “I lost all my money because I didn’t know what makes an entrepreneur successful.”

    As a result, Mike lost his home and possessions; but still had his family.

    Does sales cure all business problems?

    “First we have to see what sales are.” Sales create money, but sales alone are not enough. “Unfortunately there are some experts who say that selling heals everything. And that’s total bullshit. The point of sales is creating a runway for profit. “

    Sales give our business a reserve of liquidity in which to maintain our business changes; However, sales create stress. “And I think that’s often ignored.” says Mike. The more you sell, the more committed you are to delivering what you sold with those products or your promises. “The more we sell, the more obligations we have.”

    Bake profit into your business

    “Profit is something that we have to bake into our business.” Every transaction must be a profitable transaction.

    Profit first – every time a deposit is made, instantly take a predetermined percentage of that money and hide it, assign it to a profit account but hide it from your business. The rest of your money is what you use to run your business.

    Second, we need to maximize our spending in our businesses based on our bank balance.

    Capital expenditure

    Some companies are so overwhelmed with the expense and pat themselves on the back that they have a tax bill of $ 0. So instead of paying tens of thousands of dollars in expenses, let’s pay thousands of dollars in taxes. And that gap between what you would have spent on unnecessary spending goes into your pocket now.

    If you buy equipment that is not in use in your business, it is unused inventory, which means a total loss of money. For a picture, imagine you take hundreds of hundred dollar bills, tear them up, put them on the table, and think, “Hey, I don’t have to pay taxes on them now.” “So I tell people, when you’re ready to spend money, do we tear up cash?”

    If I make this investment, what will our actual use be and what historical evidence do we have? What return do we expect? Once you can answer these questions, says Mike, you will be able to make more prudent decisions. “It’s pretty hard when you’re running a business and putting out fires left and right.”

    Behavioral intercepts

    With his passion and interest in behavioral psychology, Mike’s book Profit First is rooted in how our minds work. For example, checking what we are spending money on before taking the plunge is a behavioral trap. This process is a way of breaking a pattern that is forcing us to recognize what we are doing before we engage the autopilot.

    Apparently this is normal behavior. As humans, our brains like routine – regardless of whether our routine has a positive or negative result. This is because we carry out a common habit in a certain way, and our brains have a common expectation.

    Then we feel uncomfortable with our habits, good or bad. Mike’s business associate says our habits are grooves that often turn into furrows because we become so comfortable with our old habits that we start digging this hole.

    It is no surprise that when we create a new behavior, that behavior is unfamiliar to our brain and therefore a little unsettling. However, if you stop and think in a pattern of behavior, you can discover inefficiencies in your business. Whether you want better results or new ones, you can now do it with fewer resources and less effort – and that is the definition of efficiency.

    Work more with commitment

    I think part of the job is a sense of obligation as an entrepreneur. It feels weird to me as a business owner to work less, especially while my employees are working and making the money I take.

    It almost feels unethical. But when I changed the framework and started thinking of myself as a shareholder, I felt a lot better about taking money out of my business.

    The goal of an efficient company

    The goal of an efficient company is not to have a fulcrum. That means that leaving one person would create a massive problem in your company. Instead, Mike suggests having a substitute for each team member so that someone else can step in and take over if that person is unable to do their job for some reason. “We always have a backup on site and the business is stronger and healthier than ever.”

    The four D’s

    Mike created the Four Ds to work on a higher level of thinking.

    “The basic level does. Doing is necessary. Where do we actually work. Then it’s time to decide, delegate and design. “

    In design, his team works on the vision and planning and puts the puzzle pieces in place.

    “Having a break from actually doing it helps us shape the design work that is most important.”

    Resources that are mentioned or add value to this episode:


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