Podcast Episode 23 – “How to Structure Your Business Practices to Maximize Profit” with Mike Michalowicz (Author of Profit First)
Episode 23 – If you think your business isn’t creating enough profit, you’re probably right. But, it’s not for the reason you think! The reason you’re not taking home enough profit is because you’re not taking out profit first! In this week’s episode, Mike Michalowicz argues that the traditional model of business (Revenue – Expenses = Profits) is wrong.
Instead, you should use this model: Revenue – Profit = Expenses. Take profit out of the business first, then use the remaining money to pay taxes and expenses. This conversation is revolutionary, but it’s the best way I’ve heard to ensure that you have a profitable business. If you’re bringing home profit and not meeting expenses, the answer is to spend less money!
Listen to this week’s episode with Mike Michalowicz and learn how to create a wildly successful and profitable business just by taking out profit first!
“Your clients want you to be wildly profitable. When you’re serving them, they want you focused on them, not whether or not you’ll be able to make your bills this month.”
– Mike Michalowicz
Meet Mike Michalowicz
By his 35th birthday Mike Michalowiczhad founded and sold two multi-million dollar companies.
Confident that he had the formula to success, he became a small business angel investor… and proceeded to lose his entire fortune. Then he started all over again, driven to find better ways to grow healthy, strong companies. Mike has devoted his life to the research and delivery of innovative, impactful entrepreneurial strategies to you.
Mike is the creator of Profit First, which is used by hundreds of thousands of companies across the globe to drive profit. He is also the creator of Clockwork, a powerful method to make any business run on automatic.
Today, Mike leads two new multi-million-dollar ventures, as he tests his latest business research for his books. He is a former small business columnist for The Wall Street Journal and business makeover specialist on MSNBC. Mike is a popular main stage keynote speaker on innovative entrepreneurial topics; and is the author of Fix This Next, Clockwork, Profit First, Surge, The Pumpkin Plan and The Toilet Paper Entrepreneur.
Fabled author Simon Sinek deemed Mike Michalowicz “…the top contender for the patron saint of entrepreneurs.”
Connect with Mike Michalowicz
Buy the books
This week’s featured blog post: 3 Reasons Why You Should Take Your Profit First, Before Paying Expenses
Free Resource: Setting Reachable Financial Goals
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- 00:00 – Introduction to episode 23 .
- 01:26 – Subscribe to the podcast, and please leave a review!
- 02:01 – Join the “Business and Personal Finance for Physicians and Dentists Facebook Group”
- 02:23 – Get a free set of disability insurance quotes from Pattern Financial.
- 03:29 – Introduction to Mike Michalowicz
- 04:19 – Welcome to Mike Michalowicz!
- 04:40 – Profit First turns the traditional business model on its head! From a behavioral standpoint, we are creating a recipe for disaster when we don’t take out our profit first.
- 05:47 – The better formula is to pay ourselves first. Sales – Profit = Expenses
- 06:16 – Use small plates! As money flows into our practice, we need to divide the money into smaller accounts so we are less likely to spend it all before allocating some to profits.
- 08:12 – Mike argues that your business should pay for your taxes.
- 08:52 – When you adopt a profit first mindset, you stop spending every single dime on new and better equipment that you don’t necessarily need.
- 09:11 – Start sequentially. Start with the profit account first!
- 10:23 – Remove temptation. Make it difficult to access your money! That makes it harder to eliminate your profit.
- 12:36 – Enforce a rhythm. Make this a habit that you do month after month. Your patients want you to be profitable so you can focus on them.
- 13:23 – Do your allocations on the 10th and 25th of each month, rather than whenever a paycheck comes in. It sets up an anticipation that you’ll get paid.
- 14:12 – Every 90 days, take a distribution from the profit account (about 50% of the profit). It creates a dopamine response and reinforces the profit motive.
- 15:14 – What about if you’re not making any money yet? Mike Michalowicz says you probably need to cut expenses or increase your prices. That may require a tough conversation, potentially including cutting staff.
- 16:26 – When you take a profit first mindset, your growth tends to outpace your competitors.
- 17:40 – If someone hasn’t launched their business yet and are pre-revenue, they should still start the profit first system. It’s ok that the business has no revenue yet.
- 19:19 – If you’re in large personal debt, you can still use the profit first model but use the profits to pay off debt.
- 20:20 – Don’t incur any new debt while you’re working on trying to get out of debt.
- 21:15 – The profit first concept mainly applies to small businesses, not so much with personal finances.
- 21:56 – Not all clients are good clients. Get rid of bad clients because you’re losing money on them! There are clients who are a drain on the business, and they’re hurting your business.
- 23:59 – Mike Michalowicz shares his parting advice: call your bank and set up an account that you can call profit. Start by putting 1% of every paycheck into that account, but it’ll build the habit that sets you up for success.
- 25:27 – Summary of the episode
- 27:07 – This week’s free resource: “Setting Reachable Financial Goals.”
- 27:54 – signing off
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