Discovering your difference and making a profit., with Mike Michalowicz

Welcome to Amplify the Personal Brand Entrepreneur Show. Today on the show, Bob is speaking with Mike Mccallowic. If I give you Bob $20, we see each other in Mike, here's $20. I say thanks. And I say, well, but could you give me $7 back? There's actually a negative sensation. Even though I granted you 20 and I'm taking seven back, you'll that pull back and you're left at $13. If I approach and say, hey, Bob, here's $13. And you took it joy and walked away, you would feel good. The net effect is the exact same dollar amount, but you don't first have ownership and then the sense of loss of ownership. That's what taxes do to us. Hi there and welcome back to Amplify the Personal Ryan Entrepreneurship. My name is Bob Gentle, and every week I'm joined by amazing people who share what makes their business work. And if you're new, hit the subscribe button. And if you're on the iPhone, that's the plus icon or the follow icon. That way you won't miss a single episode. Before I jump into introducing this week's guest, just a quick reminder. Again, after nearly 200 of these interviews, I've learned a thing or two about what makes business work online. And it turns out success does leave clues. And I want to offer you a map. So jump over to my website and get your copy of the Personal Brand Business Roadmap. It's yours for free as a gift from me. So this week, I'm hoping to change some lives. And I don't say that lightly. This week's guest has done that for me and lots of people I know, but he probably doesn't. If you've been running a business and you've tried to grow, you'll be familiar with the paradox of a business that seems to grow, but you never make any more money. Costs go up. The team grows more clients and shiny premises, but no pay day. It's easy to get jaded or get into debt and more often than not, give up. But this week's guest is a guy who broke me out of that particular matrix and changed my business from the cash eating monitor into a money making machine. And as a consequence, he changed my life. So thanks, Mike, and welcome to the show. You're very welcome. I'm happy to hear it serve you. Thanks for having me on your show. It absolutely did. So, Mike Mccallowitz, I should say, I talk to people every day and your name comes up, probably more than anyone else, is somebody who's changed business, literally. I had a call with a potential client. Before this call, I said, I'm speaking to you. And she said, oh, my God, he changed my business. And I told my brother, who runs a film company in America, and he changed his business. I was on a Facebook chat with a friend, changed his business. I can remember sitting in my office reading, I think I was into chapter two. This is going back maybe two years ago, and I threw the book across the office. I was so angry with myself afterwards. So it's really difficult to describe. Sorry. You're going to get to talk in this podcast. I thought you're going to say it's horrible writing. Gosh, this guy's profane and offense. It made me so angry with the way that I built my business, the decisions that I'd made and more importantly, not made, and the trust that you put into the people that you think should be advising you on how to manage your money. Yeah. If I look at my business now and this is important, dear listener, if I look at my business now, my business, then this stress from money is pretty much gone. It is. And if you run your own business, that stress doesn't stay in the office, it goes home with you. And so my wife would also like to say thank you. Oh, yeah, you're very welcome. And you're right, it does come home. And we're just talking off air. Your son is going through an experience with a transaction that didn't play out his way. Ironically, maybe it did, but I suspect you were able to be there for him in a different way, minus the stress than you would have been if you had the stress, because I know that's happened for me consistently. I think when you don't have the money to worry about, everything else is easier to deal with. Totally. And you shouldn't have as a business owner, when your business is from everybody else's perspective, seems to be successful, that you are sitting there wondering how you're going to pay a gas bill. You shouldn't have that. Yeah. There's a saying, Bob. They say money does not bring happiness, and that is totally wrong. From my experience, money does bring happiness if you spend it wisely. I think many people just spend that money the wrong way. It's on accumulation, it's on stuff. I think the prudent use of money is that it brings joy through experience and longevity. Meaning when I say longevity, the financial longevity where you don't have to worry about tomorrow, it's not a hand to mouth. It can bring health. I think money is a vehicle to bring extraordinary things. So it does bring happiness if managed, right? In my opinion, yeah, absolutely. So for the listener who doesn't know who you are, I've jumped way ahead because that's literally the level of my enthusiasm when it comes to your work. But for the listener who doesn't know you, why don't you start just by telling us a little bit about who you are, which book we're actually talking about and the kind of work you do. Sure. So I'm Mike. I'm an author guy for Small business. The book we're talking about is Profit. First of the books I've written so far that is the most popular. But I've written eight business books. I'm an entrepreneur I've been an entrepreneur my entire adult life, ever since University. And in the last 15 years or so, I've really investigated on what makes entrepreneurship work because it didn't work for me. I didn't work. I didn't understand how to grow a business, healthily or organically. I didn't understand fiscal management. And I thought complexity was a solution. If I just went back for accounting, if I just did this and realized, no. The solution for most of the challenges I was having are very simple. Profit first is just a rejiggering of the formula for profitability. Instead of taking profit last, you can take it first. Hence the title Profit First. And the other books I write are the same concepts. What's the smallest change we can have that has the greatest impact? And I'm on a mission to eradicate entrepreneurial poverty. I'm on a mission to support entrepreneurs, including myself, in living the dream we had for our business. Because many of us, we have a dream, but it becomes a nightmare. We have a vision of financial freedom and personal freedom, yet we're beholden to the business. It's a shackle around our ankles, and my commitment is to fix that for every entrepreneur that can touch. Sometimes you're the person who can answer this question. Sometimes when I tell people about profit first, they say, oh, that's just budgeting. Yeah, I do budgeting, but it's bigger than that. It's a complete mindset shift. How would you describe, really the difference between the prospect first philosophy, if you like, and basic budgeting? Yeah, well, budgeting is a passive experience, so I anticipate off a certain amount of income, and this is how I allocate the money. There are two separate things. Private first is an active behavioral management system meaning to implement and do private first properly as we set it up at your bank. And the reason we set these accounts at your bank with different intended uses is because that's where most entrepreneurs go. Most entrepreneurs don't refer to the budget if they have one, most don't. But even if they have one, they don't refer to that spreadsheet and check in. How we're doing today compared to the budget, most don't know how to read their income statement or balance sheet or cash flow statement. I sure as heck don't. I even question my accountant really knows how to read all the statements. But what we do is we revert to what I call bank balance accounting. I log into my bank account, I see if I have money, if I have money there, I can spend it. And if I don't panic and soothe. And that's my process. What I realize is if that's where I'm naturally going, we need to intercept that pattern. It is very difficult for humanity for us to change who we are, but it is easy to channel who we are. In other words, don't change your behavior, sustain your behavior, but put a system that brings the outcome you want. So I was logging into my bank account and checking my balance. I said, oh, I got to carve the money up here, set multiple accounts. What it does, what products does is it gives you a real time, immediate reflection of what money is available for what pre intended use. I used to think of $1,000 came into my business, I got $1,000 to spend. But the reality is, if $1,000 comes into my business, a portion of that has to be reserved for tax purposes, another portion for the profitability of the organization. That's why we started the business in the first place. Part of it for the salary of the owner, which is different than profit. The owner works in the business doing things. If you had to replace yourself with an employee, what would you pay them? Well, that's the salary you should be making because you are that employee and with reserve money for the operations of the business and other purposes, too. But those are just some of the fundamentals. By carving the money up, you realize, oh my gosh, I don't have $1,000 to spend running this business. I have maybe $400 to spend because the other ones have different purposes. With that clarity, I started operating my business efficiently and effectively. I lean into a lot of behavioral principles, but the big one is Parkinson's Law. Parkinson was studying human behavior and realized that when a resource is made available to us, it is our propensity to consume that resource. And the more that's made available for us, the more we consume. For example, if Bob, you and I were discussing a contract and I say to you, I'll get you that agreement in one week, it'll likely take me that week to get you the agreement. Now, if you and I, the same people have the same conversation about the same contract, but I'll say, I'll get you in one day. I've reduced the availability of that resource from one week down to one day. I'll likely get to you in one day. I'll work more efficiently. I'll hustle to get it done because the resource of time has been constrained. Well, this concept of Parkinson's Law speaks to not just time, but to all resources, including money. The more money that we have available, the more we spend. And it's a subconscious response. When we have less money, it's forced frugality. We have to survive with less, and we find ways to be innovative and leverage it. So it's uncanny and ironic, but as a business grows, and that's what so many entrepreneurs want to do. We want to grow. As the business grows and more revenue comes in, we spend at an almost identical rate. We never seem to get past it. So profit first leverages Parkinson's Law by removing the profit first constraining how much money is flowing through the business to spend, and therefore, you have to work within those constraints. And sure enough, we all figured out we have less money to spend than I would have before. So how am I going to get this done? And we become innovative. We are forced to be frugal. We find ways to run our business often just as efficiently. I think in this kind of put a summary on this or kind of a point to this. I think most entrepreneurs are shocked that when there's less money flowing into the operating expenses that the business isn't compromised. It's surprising. It was surprising for me that my business really didn't change. It felt like I just had as much available to me as before. But all of a sudden now I started having profit accumulating. It emboldened me and made me more confident in my decisions. I was able to dictate bigger margins and to turn down customers or clients that weren't a good fit and pursue the ones that were because of that. It's the irony, but the more a business focuses on profitability, we consistently see this over 6000 companies that have implemented profit first. I consistently see that they actually grow faster than their contemporaries as a result. Yes. I think the way I often feel is like this boxer that's been in the corner getting pounded for years. And suddenly I can move around a mat and I'm flexible and I'm dynamic and I can move around and it makes such a difference. I mean, a great example is this is the second attempt at this interview I had to cancel on you. Can you. I know your computer bit the dust or something, I heard. Well, it did. And I had to replace my Mac and I had to replace my microphone. The budget is there. The money was already in the account. No problem. Additionally, I looked in my account software the other day and with a bit of a flutter on my chest, I thought, oh my God, my tax bill is going to be 16 grand. I spoke to my wife. Yeah, the money's in the account. There's no problem. That was the conversation for the 16 grand tax bill done. No stress, no drama. This is the practical application of profit first for me is all the dramas come out of money. And I think for a lot of people, they're accustomed to dealing with in the US. You have a CPA here, we just call them accountants. The problem with those people is that largely they're used to looking in the rear view mirror telling you what happened rather than helping you look ahead and having a plan. And for me, profit first. It gave me really simple rails to run on. I just have some simple rules to apply. It's like you described. You could write this on a napkin. It's that simple. Yes. And if the money's not there. You don't, do you spend it, right? Yeah. There's a phrase tube of toothpaste. Yeah, I share the tube of toothpaste story. And that's a great demonstration of Parkinson's Law. If you have an empty tube of toothpaste, you'll keep squeezing out toothpaste. An empty tube can last you a month when a brand new one seems to go through in a month. And that's Parkinson's law. The more scant a resource, the more disciplined we become and using it. You're going to say something? Yeah. So the funny thing is you were mentioning taxes. I just thought it was a funny antidote. I'm really lucky. I get emails from readers of Profit First hourly, usually for an hour and around the clock and it's the greatest thing for me cause I love hearing the feedback. It gets me excited. The funniest thing though Bob is when tax time rolls around is when I get the highest volume of emails, they triple up. And the first time I saw an email come in during tax time and the subject line said my taxes, I was like, oh gosh, here we go. And they said, I'm jumping for joy right now. I just paid my taxes. And other people are giving feedback like this is such a fun thing to do, pay taxes. I'm like, how can this be? Before taxes was the worst thing you wanted to shoot the tax and it now we're celebrating this. And what was interesting is there's another behavioral phenomena that is employed in Profit First and the concept of ownership. If I give you Bob, say $20, we see each other. I'm like, here's $20. He said thanks. And I say, well, but could you give me $7 back? Now there's actually a negative sensation. Even though I granted you 20 and I'm taking seven back, you feel that pullback and you're left with $13. Now Interestingly, if I approach and say, hey Bob, here's $13 and you took it and I said joy and walked away, you would feel good. The net effect is the exact same dollar amount, but you don't first have ownership and then the sense of loss of ownership. That's what taxes do to us. We generate income through our business and then the tax man comes a knocking and the money we generated gets pulled back out of our pocket. With Profit First setting up these accounts at your bank. When the money rolls in, we immediately allocate the portion toward the tax responsibility before it ever touches your pocket. So it doesn't go into owner's pay and then get transferred out. It doesn't go into the profit account, it goes right to taxes. So then when the tax time comes, we don't experience that sensation of oh, it's coming in my pocket. Conversely, it actually feels like the business is caring for us, the business is paying for it on our behalf. So it actually comes to celebrations like my business took care of this for me. I didn't have to pay a dime. And while we can go into the logic all day long, but this is a shell game and I hear that regularly from people. It is a behavioral system. That's the part I think, that people miss out on and get confused about. It is our behavior that when we don't feel it coming out of our own pocket, that we feel good. And that's why I see people and myself celebrating tax time when it rolls around, because the money has been reserved for its purpose. Yeah. And I think the Parkinson's Law works the other way as well. That those businesses that tend to generate the most revenue, often they can be the most frivolous with their money, and then the tax season comes around and they have to go hard on sales. That's exactly right. Downside of Parkinson's Law. The more of a resources available, the more we consume. So we see that money piling up. We haven't allocated toward taxes. It's just piling up like, oh, I can spend this. Let's grow. Let's push the business. Let me get me that fancy, whatever I wanted for myself, and we do that. And then tax time comes around. We don't have the money and panic ensues and disappointment and frustration. But for the listener, you need to go and read the book. There's an audio book. I don't really want to go too deep into profit first, other than to say it will get you out of the situation where you're constantly trying to sell for yesterday's mistakes and being able to celebrate yesterday's successes. It really changed the game for me and for many other people. But you have a new book, Get Different. Yes, and I am about halfway through, and I think it's going to do the same for marketing that you did for profit first. It's so well aligned with my own personal philosophy of marketing that everybody is so busy trying to be better than everybody else that everybody kind of blends in, just being in a slightly different version of the same thing, and it doesn't work at all. And I remember when you launched a book, I saw a lot of Lycra, and you don't strike me as a Lycra guy. And perhaps you could tell us a little bit about Get Different. What that's about, who it's for and underlying principles of that. I'm sorry you had to bear through that micro video, something you can't unsee, unfortunately. So when I wrote Get Different and how I write all my books, Bob, is I will speak to people who are reading my books and just learn about their story and find out what's your next challenge and what I heard from many people is. I've grown my business to a point where I get some referrals and so forth, but it's not growing at the rate I want to. I don't seem to have control over it. Business flows in or it doesn't. What we need is a throttle, some way to control it. And clearly, marketing is the source behind that. If you market more effectively, it will yield more opportunity. And if you stop marketing or don't market effectively, there will be less opportunity. The question that presents itself is, well, how do we market effectively? And I started this research about seven years ago. It takes me about seven years to write a book and start doing some research. And I was talking with behavioral psychologists, neurologists, anyone that works with the brain and asking them questions of what garners people's attention and interest in something. And I discovered that there are only three ways into the brain, in fact. And this is a little science class here. But the human brain is designed to ignore almost everything. Anything that's irrelevant is ignored. So 99 point 99 into Infinity percent of stimuli is ignored. Right now, as you're watching us for listening to this, there's things around you that could all be drawing your attention, and you're making a subconscious decision. The reticular formation specifically, is doing it for you, saying to ignore things. Because if we focus on everything, we become so immersed, we've compromised our survivability. You'd be immersed. I have a pen at my desk here, just staring at, why is this pen Gray? And who invented the word pen? It could just go on and on forever. Now I'm starving to death or dying of thirst. But the brain does allow three things through. It's all based upon survivability. The first thing are threats. And that's priority number one. If something is a known threat and can harm you, a snake comes squiggling towards you, we will jump back and defend or protect ourselves. And it's fight or flight mode. The interesting thing is it happens so quickly. It has a subconscious level. That snake moves. The reticular formation, the gatekeeper of the brain opens up, it hits the amygdala. The amygdala is a hyper response section of our brain. And we're jumping back even before there's conscious thought. Then it comes conscious. What is this? The second thing gets through to the brain is called opportunities. Known opportunities. Someone drops a lot of cash, you will pick up on that instantly. And if they're long gone and you can take the money, chances are you'll look around, make sure watching and pick up that money and put it in your own wallet. What happens in that case is a particular formation opens up, says there's an opportunity in front of you that we know is a good opportunity. It forwards it onto the prefrontal cortex of our brain. And the brain makes a conscious decision to consume that opportunity. And then the last thing that always gets through is different. When something unexpected presents itself, retick of formation illuminates the entire brain. The amygdala, the prefrontal cortex, everything, and says, what is this? This does not compute effectively. We got figured out if you ever been walking down the street and you do that double take where you kind of do that, what was that? That double take is unknown. Different stimuli, particular formation opens up, brain lights up. And now the brain is immersed in figuring out what this is. Is this a new threat? Is this a new opportunity or is it something that can be categorized as ignorable in the future? And that's what we have to go through. Well, the lesson for marketing is if you do the same marketing as your contemporaries, if your prospect is seeing the same marketing that everyone else is sending from you, they see the same that the others send. They've already deemed it as ignorable. You won't get past it. I remember receiving an email that started off with the words hey, friends, and the very first time I got it, it was new. I never saw somebody start off that way. Ticket information opens up, illuminates my brain. I started reading this email halfway through it. I'm like, oh, it's irrelevant. Smart me marketing. I don't want this. Every hey friend I've got. Subsequent to that, I've never opened again because it's a common noise. My articulation is blocking it out. So our job in marketing, as simple as it sounds, it's hard to execute because we have to get past our own limitations and our own considerations of why not to do things. And there's a whole reason explain why we do that in the book too. But you have to break the pattern. If the prospect isn't being disrupted in ignoring things, if they're not seeing something new, they can't even see it. It's invisible. So you have to do something unexpected and different just to get into their brain. And that's why I find it so exciting, because your competitors just won't do it. And I think the simple reason for that is the key ingredient is courage. Yes, and I talk about this in the book. Here's the interesting insight. That component of why we don't do things ties back to the cave dweller days. Back in the day, if I rejected the common approach of the tribe, you're like, hey, let's go hunt a boy mammoth. And I'm like, no, I want to go hunting a Sabertooth Tiger. I put our tribe in jeopardy, and therefore the tribe would reject me as on my own, which meant certain death. So back then, nonconformity meant death. Ironically, in modern society, nonconformity means you'll be noticed. If I stand out, I know logically I'll be noticed. But the reptilian part of my brain and everyone's still there, it says, but you'll be ridiculed, you'll be rejected. And that means death. And that's what's fighting in our head. If we simply can get past that reptilian part of our brain and shut it down or just ignore it, if we can realize that if our product or service is superior to the alternatives we have a responsibility to market now is an act of kindness, then we can take an action that is different and get noticed. And the interesting thing is, our competition likely won't because they're stuck in that reptilian mind too saying, but you're going to be ridiculed if you do different than the rest of the industry. So let's just keep doing the same. We just have the courage to do different. We'll get noticed and lap up business. So do you have any good examples of what difference can look like in specific industries? So I'll give you some quickies. The first one to start off with is my own marketing. As an author. I first observe what other authors do, and that's always a good starting point. See what the common approach is. Another author introduces a book, they do an email blast and black text comes white background. So I said, okay, so that's the one thing not to do. What if I got rid of the black text and made it white? I was like, no, white text, white background. That won't work. And I said, oh, my gosh, it'll be invisible. It would totally work. What if I sent out an invisible ink email? I sent out a marketing message. The subject line said, this is the first ever invisible ink email. Click and drag the content to reveal the message. And when you click and drag over text with the mouse, it turns blue and you can read the message that was different and address the other elements. So this whole framework is called dad. It would be different. It was attracted, then you must direct. It was different. I noticed it tracked, meaning it spoke to the audience's. Intrigue and interest and engagement kept them engaged and then told them what to do. Now they are engaged, which in this case was to buy a buck. I'll give you another quick example. There are many fitness Studios here in the town I live. I'm in Northern New Jersey. It's a very colonial type of town historically, and there's a lot of storefronts, but because of Coba, they went out of business. But these fitness Studios moved in in the windows of them have the before and after pictures. Here's what our clients looked like before and look at how amazing they look now. But everyone has that common noise. So I went to some gyms, I found one, ended up not being in our town. But we got rid of that common approach. What we did is replaced it with mirrors, specifically from fun houses. One mirror makes you look kind of squat and flat. The other one made you look kind of lean and tall and all ripped. And we put that in the windows instead of the before and afters and above the one that made you kind of look sloppy. We put the word before on it. And the other one, we put the word ripped on it or after. I'm sorry, after. So now people are walking by this and they see themselves in the mirror. Oh, my gosh, look at me. And they're putting on social media. There was a sign next to it. He said, we just transformed your body in the mirrors. Let's transform you in real life. Walk inside. Their foot traffic went up over double. They're going to double the clients that they ever had before because they did different. So for a small business, for a solar printer or a personal brand business, a lot of the time your marketing is essentially social media content or showing up at events and things like that. Are there any good examples of people simply showing up different? Oh, yeah. So a classic example here in the States, there was a computer company called Geek Squad. They simply showed up wearing flood pants and glasses with tape in the middle, narrow neck ties when all of their competition was wearing a standard business suit, just because the way they dressed, they were noticed. And who doesn't want to geek fixing their computers? So the way we physically present ourselves can be a game changer. Now, here's the key. Don't be outrageous for outrageous sake. I'm not suggesting that if it's not true to who you are, it's inauthentic. And maybe you get a customer intrigued. But once they find out your services, they're like, oh, that's not really who you are. And now they've been bamboozled. So simply to find a way to look that is true to you and lean into it. As long as no one else is dressing that way or presenting themselves that way, you will get noticed. It works, like, every single time. And I think what's exciting there is if you can do the work and discover what it is that people like about you, what it is that makes you unique and lean into that you'll connect with people better as well. For sure. At the end of the day, the only experience people will have with your business or mine until they do business with us is the marketing. So if the marketing is a true amplification of ourselves, I present myself just as I am. I leverage my idiosyncrasies. I lean into silly and goofy, no question about it. But that's who I naturally am. Then when people do business with me, they're like, oh, this is exactly what I was expecting. The mistake is to put ourselves out in one way and then truly be in another way. That's disingenuous and people will catch that. So, Mike, I'm looking at the time, and I know you have a hard stop at the half hour, which we've just gone past. I apologize for that. I was the one doing all the talking. So it's my fault? Well, that's kind of the point of the podcast. That's fine. I'm really grateful for getting to spend some time with you. I look forward to doing this again sometime. But for the listener who wants to take things further with you, they want to find out more about you. How can they do that? The best place to go is my website. It's Mikemccallowitz.com, but no one can spell it so you got to be different. My nickname is mikemotorbike. I've never driven a motorcycle. That's the irony. But go to mikemotorbike.com. All my books are there and get free chapter downloads so you can explore them elsewhere. You're right for the wall Street Journal for years. So you can get those articles offer free@mikemotorbike.com and my final question what's one thing you do now that you wish you started five years ago? Meditation. I went through transcendental meditation training and I'm loving the experience. I wish I started this five years ago but I am thrilled I started it recently. I think I'm going to have somebody on the show to talk about meditation Because it comes up all the time. Or translate. Meditation is one form of the many versions out there, but for me it was just such a simple meal Applicable form that has become habitual. Now. I do it twice a day, including this morning and I do all this afternoon. I think one of the things that attracts me to the transcendental side of it is what to do when you close your eyes. Problem is very straightforward, right. Whereas with a lot of meditations, where are you going to go? Yeah, it's too calculated. There are too many rules, I think. And this one was just so simple. Seems to work, right? Well, absolutely. And that's why I love your books. They're really fundamental, really actionable and hellishly impactful. So thank you very much for that. Mike, you've been an awesome guest. Thank you for your time and I look forward to talking to you again soon. Thank you, my brother. Before I go, just a quick reminder to subscribe and join our Facebook group. You'll find a link in the show notes or visit amplifyme. Fminsiders. Also connect with me wherever you hang out. You'll find me on all the social platforms at Bob gentle. If you enjoyed the show, Then I would love a five star review on Apple podcast. It would make my day. And if you shared the show with a friend, you would literally make my golden list. My name is Bob gentle. Thanks to you for listening and I'll see you. See you next week.