A summary of things you should know about Profit First according to Mike Michalowicz: Introduction In this episode Mike Michalowicz joins us for a third time to share his latestRead More
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]]>In this episode Mike Michalowicz joins us for a third time to share his latest book, Profit First. Michalowicz challenged the formula for business when it comes to profitability.
In his book, Michalowicz shows you the correct formula for success as opposed to the original from Generally Accepted Accounting Principles of GAAP. He proposes a new formula about selling as much as you can, extract your profit from your business first and then pay your expenses with the remainder. His approach changes the entire paradigm.
This book is perfect for all entrepreneurs who have based their businesses profitability on the formula of sales minus expenses equals profit. By taking the advice from this book, there will be less money for expenses, your behavior will change and you will find ways to get the same things done with less money.
Every book I have read to this point has talked about Generally Accepted Accounting Principles (GAAP) which is the formula that businesses base their profitability on. I challenge this formula and say it is totally flawed because profit is the leftover or after thought and it’s the worst formula for the way our minds work. I propose a new formula about selling as much as you can, extract your profit from your business first and then pay your expenses with the remainder. This changes the entire paradigm.
This is a beginning to end book. You start at the beginning and there are action steps at the end of each chapter.
Hands down it is flipping the formula of sales minus expenses equals profit or sales – expenses = profit. This formula does not work and hurts your business. I want people to take home the new formula of sales minus profit equals expenses or sales – profit = expenses. By taking your profit first there will be less money for expenses, your behavior will change and you will find ways to get the same things done with less money.
In the book I go over the four principles of Profit First. I found that in the fitness, health or diet industry there are four core principles and these four principles translate into a healthy business as well.
The first principle is about the intake of fewer calories. The diets and extreme workouts don’t work because they aren’t sustainable. The one way dietitians found very successful is simply by changing the size of the plates at your house. By getting smaller plates you now get to leverage your habits and that little change has a huge impact. In our business we have to realize that we have one massive plate called the checking account. All of our money goes in there and all our bills get paid out of this one account. The strategic step we need to make is to have multiple small plates which will reduce the size of that account for expenses, spread the money out into small plates and by doing this you see that less is available and you consume less for expenses.
The second step I leaned was to eat your vegetables first. In the health industry they found that most people eat their food simultaneously and most of the time that means the vegetables get pushed aside and never eaten. If we simple eat your vegetables first you’ll get the nutrients and vitamins from it and take in fewer calories. In business we do the same thing. When money comes in our account the very first thing we should do is spread it out to different plates and then the leftover should be used to pay expenses. By doing this you’ll have less money for expenses and you will be more likely to spend less on expenses.
The third step is to remove temptation. In the health industry they say that if you like soda, the best thing to do is not have any in your house. In business when we have our profit reserved the first step is to take that profit, transfer it to a second bank and now with the profit removed you are less likely to borrow or steal from yourself. By doing this you will feel more pressure to cut your expenses and make sure they fit in with the amount of money that is left over.
The final step that is taught in the health industry is our eating frequency. Most people eat too infrequently and the optimal amount is five small meals a day instead of three big ones. In business we need to establish a rhythm of going through the process of paying bills about twice a month. If you do this you see money come in piling up as income and then you allocate and pay your bills.
“Take your profit first always.” – Mike Michalowcz
I am an author targeted toward small business books and how to grow them to be successful and competitive in market. I challenge all the beliefs that are out there about growing a business and study other businesses to find the current formula for success.
After selling my second company I thought I knew the formula to success and became full of myself. I decided to become an angel investor, took my own money and started 10 companies and threw money at these businesses believing that the only thing that mattered was my involvement. This ended up being a train wreck and caused me to lose basically every penny I put in it. The day I lost my last penny became a defining moment for me and the realization that what I thought was the formula to success was in fact wrong. I thought that profit was an event and I became to realize that profit is not an event, it’s a habit.
The Starfish and The Spider by Ori Brafman and Rod Beckstrom
Buy Profit First by Mike Michalowicz on Amazon today
Visit MikeMichalowicz.com to learn more about Mike and his books
Follow Mike Michalowicz on Twitter and Facebook
Download the full transcript here (coming soon)
Listen on iTunes, Stitcher , and SoundCloud
Related books: Show Me The Money by Alan Barrell | High Profit Selling by Mark Hunter | Hyper Sales Growth by Jack Daly
Relevant advice and tips: Top Financial Mistakes Entrepreneurs Make When Creating A New Business
What did you like and not like about this episode? Fill out this one minute survey here.
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]]>A summary of things you should know about The Pumpkin Plan according to Mike Michalowicz: Introduction In this episode Mike Michalowicz takes a deep dive into his bestselling book, TheRead More
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]]>In this episode Mike Michalowicz takes a deep dive into his bestselling book, The Pumpkin Plan where he helps you implement a unique strategy for growing your business.
In his book, Michalowicz utilizes the techniques that farmers use to grow colossal pumpkins. His theory is that pumpkin farming provides some similarities in growing a successful business and he provides you all of the steps to do so.
This book is perfect for entrepreneurs and business owners who are struggling to grow their business and have too many tasks on their plate. Michalowicz gives you the steps to focus on that one thing you do well and becoming a master at it so you can experience colossal growth.
I am a big believer in the stories, at the end of the day to remember 200 to 300 pages worth of stuff is impossible. In my books I wanted to paint pictures in the readers mind so instead of that one sentence, they can walk away with that one vision.
You will need to read from beginning to end.
Less is more. If you want to grow your business stop trying to do more things, the natural tendency. If you want to grow your business find that one thing to focus on and become a master at it.
The essence of The Pumpkin Plan is five significant steps.
The first step is called Seed Selection. In the pumpkin industry there are two types of pumpkin farmers, the ordinary farmer and the colossal famers. Ordinary farmers pick ordinary and cheap seeds while colossal farmers are focused on quality seeds. Colossal farmers become highly selective of their seeds and spend hours investigating individual seeds looking for indications of strength.
Many entrepreneurs are after the cheap and easy seed but the colossal entrepreneurs pick colossal seeds. There are three major components in a colossal business, firstly it has to exploit the uniqueness of the entrepreneur, secondly there has to be demand for it, and lastly is the component of systemization.
The second step I talk about is the sprout. If you are an ordinary farmer you look for any sprout. Colossal pumpkin farmers focus on strong sprouts. If you want to grow a colossal business you have to focus on the strong elements of it. The one thing I really emphasis on is being selective of your clients.
The third step I talk about is the watering process. Ordinary pumpkin farmers use a saturation strategy while a colossal farmer uses a quenching strategy. It’s at this stage that the colossal pumpkin can grow ten times faster than the ordinary pumpkin. For a Colossal Business using the pumpkin plan I recommend the strategy of quenching. Once you identify your best customers that you want to clone, your next step is to find out where they congregate and start contributing to those environments. Now you become a contributor as opposed to someone just trying to take and this will change the relationship to a much more positive one.
The fourth significant step is what’s called Rude Analysis. Ordinary farmers don’t even look at the root system but colossal farmers get tools and devices to look at the roots because it feeds the entire plant. The root system for a colossal business is the vendor network. After you find out who your best customers are you need to find out who else they work with, what other vendors they use and build relationships with them. The whole goal is to circulate with the vendor network that is serving your best clients.
The final step is the pruning process. Colossal farmers don’t prune so much as they do what is called killing and as little pumpkins come up on the vine they will kill them immediately. Every time a little pumpkin is allowed to grow on a vine it is stealing nutrients from the colossal pumpkin. As applied to business colossal entrepreneurs will focus on their best clients and turn away all the other opportunities. You grow by saying no and colossal entrepreneurs get this. They have to focus on what’s best and the only way to do that is to say no to everything else.
“He’s a very handsome young man.” – Mikes Mom
I am an author of The Toilet Paper Entrepreneur, The Pumpkin Plan and Profit First. I write books to help entrepreneurs grow their businesses. I challenge all the beliefs that are around because I believe most of our beliefs are hurting our businesses and propose new ways to do it.
I started studying colossal pumpkin farmers and I realized that they basically follow the same process as ordinary pumpkin farmers do but change a few elements. Just by changing 5% or 10% of the growing process the pumpkin responds with explosive growth. I figured that if you can do this natural, why not do it with businesses and I put it to the test.
Influence by Robert Cialdini
Buy The Pumpkin Plan by Mike Michalowicz on Amazon today
Visit MikeMichalowicz.com to learn more about Mike and his books
Follow Mike Michalowicz on Twitter and Facebook
Download the full transcript here (coming soon)
Listen on iTunes, Stitcher , and SoundCloud
Related books: How To Get Unstuck: 25 Ways to Get Your Business Growing Again by Barry Moltz | Zero To One by Peter Thiel and Blake Masters | Vision To Reality by Honoree Corder
Relevant advice and tips: 5 Important Things That Every Entrepreneur Needs To Know About Starting a New Business | 5 Ways Entrepreneurs Can Overcome Business Failure
What did you like and not like about this episode? Fill out this one minute survey here.
The post A Preview of The Pumpkin Plan with Mike Michalowicz appeared first on The Entrepreneurs Library.
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