It’s not easy to run a profitable business. Stats prove it to be true. A very high percentage of businesses do not show a profit and Mike Michalowicz believes it’s because business owners don’t plan on profit first. Mike is on a mission to eliminate entrepreneurial poverty. He believes creatives and business owners work too hard bringing value into the world to struggle with profitability. And the stress it adds to everyday life is unacceptable. In this conversation, you’ll hear Mike share his profit first strategy and you’ll learn how applying it has liberated Dane in ways he never imagined possible.
When sales minus expenses does not equal profit.
The basic accounting formula we all intuitively know for business is this: Sales minus expenses equals profit. That’s how it’s supposed to work but rarely does it actually work that way. Why is that? Mike Michalowicz says it’s because the formula doesn’t take into account the one thing that is always going to happen but isn’t quantifiable when you approach profitability that way. Can you guess what it is? Human nature. In this conversation, Dane and Mike dig into how human behavior is what truly determines whether an owner will run a profitable business or not, and outline the 30-second exercise that turns everything around.
Why profit has to come first and how it forces hard decisions to happen now.
Mike Michalowicz says profit has to come first in every business. Practically, that means predetermining a set percentage that is GOING to be paid to the owner, regardless. What the approach winds up doing is forcing you to look at the money left over for expenses, and make the hard decisions in that realm that will streamline your company and get rid of what Mike calls “ego decisions” that shouldn’t be part of the equation in the first place. It’s an ingenious and elegant approach that actually works… if you have the guts and patience to work the process to its logical conclusion and do something about what you find. Find out more, on this episode of Converge.
Most businesses can cut 10% of operating costs immediately.
You probably don’t realize it and you might even argue that it’s not true in your case, but almost every business has expenses on the books that Mike Michalowicz would call “ego expenses.” They are things you chose to do because of the encouraging effect it has on your ego but that don’t really serve the bottom-line necessities of what your business must do in order to serve your customers. Mike’s profit first approach helps business owners and creatives build a profitable business by putting them in a position where they have to cut operating costs, by 10% or more in most cases. Learn how you can make your business more profitable on this episode.
What life is like for those who make profit happen first.
As you listen to this episode you’ll hear Dane ask his guest, Mike Michalowicz what it looks like when a business owner adopts the profit first approach to business. What Mike describes could sound like a “too good to be true” result: less stress, more joy about what you do, better income, and greater profitability overall. But it’s not too good to be true. Dane says Mike’s approach has transformed the way he does business and the way he lives. You can hear Dane’s testimony and a step by step breakdown of how Mike’s approach works on this episode, so be sure you make the time to listen. It could change everything for you.
Outline of this great episode
- [0:22] Why profit is an important topic when it comes to creatives like us.
- [1:42] Why Dane loves Mike’s book and how Mike got to the point he could write it.
- [5:29] The ego explosion and personal crash Mike caused himself.
- [10:20] What changed for Mike beyond the money side of things.
- [12:18] The elegant and profound accounting formula Mike teaches.
- [15:50] The difference profit first makes in dealing with cash and efficiency.
- [20:11] The 30 second test that helps you know if you can run your business effectively.
- [28:13] What happens if you refuse to do what it takes to make profit happen first.
Resources & Links mentioned in this episode
- BOOK: Ego is the Enemy
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