Dec 18, 2019
It’s been a long time coming, but here with me on today’s episode is Mike Michalowcz. If you follow me regularly, then you will have heard me mention his name on multiple occasions.
Mike is the author of a bunch of first-class business books, including Profit First and Clockwork, that I highly recommend you read. His Profit First method will simplify your finances and ensure that you pay yourself what you deserve from day one, and never miss a tax payment.
It doesn’t matter if it’s as little as 1%, you must start paying yourself immediately.
Key Highlights of the Episode
This episode was extremely actionable and insightful. Here are a few key highlights:
- Entrepreneurial poverty – Telling your friends that you’re an entrepreneur may give them an image of you being rich and living the high-life. In reality, most entrepreneurs are working all hours, highly stressed and struggling to survive. Mike’s mission is to close this gap. He believes you can live a great life and avoid working 16-hour days if you run things efficiently.
- Every dollar has multiple responsibilities – You have to pay bills, taxes, your own compensation, and make a profit. Traditionally, profit is calculated by taking your sales and subtracting everything you spend. This makes logical sense. Unfortunately, it doesn’t fit with human nature. Mike recommends flipping the formula. For everything you earn, a certain percentage goes straight to your profit account.
- Multiple bank accounts – To better align your business finances with human nature, Mike suggests having multiple bank accounts. He recommends that you have separate accounts for: receiving deposits (sales), paying your profit, owner’s compensation (your salary for running the business), paying taxes, and operating expenses. This gives you immediate clarity on how you can use your money. Your operating expenses are what you have to spend in the business after you’ve taken care of yourself. This forces you to try to improve your margins and make more money. Also, in following this method, you always have money available to pay your tax bills.
- You’re a shareholder in your business - Mike points out that as a business owner, you’re a shareholder in your business. As such, you should be earning and receiving a large chunk of profit. If you invest in a Fortune 500 company, you expect to receive a dividend for taking a risk. Why should your own company be any different?
- Force yourself to consider the ROI - When you follow Mike’s Profit First method, you will have less money to spend on the business after taking your cut. However, this works in your favor. It forces you to be more diligent with the money you have. Rather than blowing a load of money on Facebook ads because it seems like the popular “thing to do”, you will have to be disciplined and continue to search for investments that yield the highest ROI.
- And lots more! Tune in now.
If you want som e help clarifying your program promise and refining your curriculum, I’m here to help.
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