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How To Run Your Business Like Clockwork with Mike Michalowicz | #026

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Tags: Queen Bee Role, business systems, Clockwork, delegating, Profit First, QBR

Many solopreneurs or entrepreneurs who are running small teams don’t know how to get ourselves out to operate on the top down. Business makeover expert and keynote speaker Mike Michalowicz says if you want to eliminate the stress within your business, you have to create business systems. By his 35th birthday, Mike had founded and sold two multi-million dollar companies. Confident that he had the formula to success, he became an angel investor and proceeded to lose his entire fortune. He started all over again, driven to find better ways to grow healthy, strong companies. Among other innovative strategies, Mike created the Profit First formula, a way for businesses to ensure profitability from their very next deposit forward. Mike is now running his third million-dollar venture. He shares how you can set your priorities and ultimately set up and run your business like clockwork.

How To Run Your Business Like Clockwork with Mike Michalowicz

You are in for an amazing piece of content. I just hopped off the horn with multiple author, extremely brilliant, multiple business owner, multiple multimillion-dollar business owner, Mike Michalowicz. We were talking about all things. I thought we were going to be talking about business systems. Mike is the author of the book, Clockwork. I had him on the podcast because he had graciously sent me a pre-release copy and I did read some of the book and I thought that we were going to be talking about how can we build systems to automate our business.

You’re in for an amazing episode of all things of relative importance. If you want to eliminate the stress within your business, if you want to stop focusing on sales because sales create stress, that’s one of the things that we talked about in this call. You are going to absolutely love this episode. I want to give you a brief bio on who Mike Michalowicz is. By his 35th birthday, Mike had founded and sold two multimillion-dollar companies. Confident that he had the formula to success, he became an 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. We talked about this in the segment of this episode called Death by Chocolate. I’m going to tease you with what that means, but it’s directly relevant to that part of the story.

Among other innovative strategies, Mike created the Profit First Formula. A way for businesses to ensure profitability from their very next deposit forward. Mike is running his third million-dollar venture. He’s a former small business columnist for the Wall Street Journal. He’s the former MSNBC business makeover expert. He’s a popular keynote speaker on innovative entrepreneurial topics. The author of Profit FirstSurgeThe Pumpkin Plan and The Toilet Paper EntrepreneurAll books that are readily available for you to purchase. This is a fantastic episode just about all things in life, all things in business, setting your priorities and ultimately setting up your business to run like clockwork. Mike, welcome. I’m super excited to have you on the show.

Joel, I am pumped to be here. Thank you so much for having me.

Clockwork: Design Your Business To Run Itself

First, thank you for sending me a pre-released copy of your book, Clockwork. This conversation is going to be eye-opening for a lot of our audience. Many of our audience are solopreneurs or they’re running very small teams. A lot of us are either in the coaching and the consulting or the information space, where we can leverage your information to earn legitimate and great incomes. Many of us don’t know how to get ourselves out to operate on the top-down. I can’t say that I’m even remotely skilled in that. We run a pretty good company, but I’m still heavily involved in touching a lot of things. I feel like a lot of my audience are probably in that same boat. Mike, I’m super pumped about having you share your knowledge and talk about your systems within Clockwork. I know you’ve written multiple books. I want to ask you one question. What’s one thing that people can’t find on your website, one interesting fact about you that most people wouldn’t know?

I’m into vintage arcade games from the ’80s and ’70s. I was playing Asteroids, getting my butt kicked, but this is a new passion of mine. This isn’t like a lifelong thing, I’ve always wanted it and I finally got this machine that has about 200 or 300 vintage games I used to play as a kid. That’s my little side endeavor.

I can’t say that I’m into vintage video games. I’m definitely into video games so we share a common bond there. Mike, I want to talk about your book, Clockwork. I probably gave a very convoluted description of what a lot of people struggle with, but what was the whole reason for creating Clockwork?

We share a very common community. The peeps that you explained are the peeps that I love to hang out with. It’s the solopreneur or the very early microenterprise. We have two or three employees, information products. As an author, as the ultimate information product, you going into Barnes & Nobles is just information. I love that our community. I wrote Clockwork because I realized that as we grow our businesses, and I’ve had businesses actually in other fields too, that there’s this hierarchy of needs we go through. There’s a thing called Maslow’s Hierarchy of Needs, which perhaps you’re familiar with. It was relatively new to me but the concept was in the human needs starting off with physiological needs like food and water and it moved up to shelter and then belonging and so forth.

I believe that there is a parallel for entrepreneurship, that we have a base of needs in our businesses. The foundation is sales and if we don’t have sales coming into our organization, if there’s no revenue being generated, an inbound cashflow as the oxygen for business, you are suffocating without sales. Every entrepreneur will know this inherently, the next level up is profit. I wrote a book called Profit First specifically to address this. I consider that the nourishment for a business is the food and the water. Sadly, Joel, most businesses don’t get to the nourishment phase, most businesses are starving. They’re making sales but they’re starving for cash, profit.

Sadly, they revert to try and make more sales to get through this. They try to gasp for more air when they simply need subsistence food and water. That’s what profit is. Once we get past that stage, once you have a consistent stream of sales, once you’re taking home and income and that stress levels gone, there’s profit, there’s sustainability. The next level up is time. That’s the one thing that so many entrepreneurs will trade for the success of their business. I will make the ultimate sacrifice, grind it out every day, every night. I’ll sacrifice family and friends and so forth. What we want to get to is this level where we have the freedom to do what we want, when we want, in our personal lives and in our business. That’s why I wrote Clockwork to get this next level. I want readers to understand that even with a microenterprise, even with a single employee business, your business has a degree of freedom where it can run on its own. If we do that, it gives us the freedom to do what we’re passionate about within our lives, within our business. Bring back that balance to life, that’s what Clockwork does.

 

I love parallels. Deep down as a marketer and a researcher at heart, I’m trying to draw parallels and metaphors from anything that I possibly can. 

It resonates with people because then they can see, “Yes, I see it here. I see it there.”

That’s what great teachers and great instructors do. You mentioned something about going up the levels. You’ve got the foundation, which is sales and then the level above that is profit. You said people are gasping for air because they think that, even though they’re making sales, the cure to their profit problem is making more sales.

It’s an insidious trap. We don’t realize this at a conscious level, but subconsciously we all know this that sales is stress. The more sales we make, the more obligation we have. Sale is someone gives you money with an expected return. The more sales you have, the more expectations placed upon you, which is more stress. The counterbalance to that stress is profitability, sustainability. If a business does say $200,000 in sales and no profit, that’s pretty stressful. If a business does $2 million in sales and no profit, that’s stressful. We keep on increasing the stress level and get frustrated. There’s no profit, we’re putting more stress on ourselves. We need this counterbalance of profitability without a question.

That is a fascinating way to think about it. It took me a long time to understand that. I probably went through one of the most stressful pieces of my business. Our sales were through the roof. You said something that’s extremely powerful and extremely valid, which is the more sales that you make, the more expectations. I never would have thought that was true until I got to that breaking point. You said sales equals stress. If somebody had told me that before I’ve got to that breaking point, a light bulb would have gone off and at least allowed me to take a step back and think, “Let’s explore that a little bit more because I could probably agree with that but do I need more sales or do I need more breathing room?”

It’s hard to break out of that, I hope it would give you pause and other people. The challenge is it’s wired into the fabric of entrepreneurship. When you and I get together for a drink or something and I say, “How’s business going?” your response likely is, “Our sales are taking off.” I’ll say, “Our sales are taking off.” The ego starts pounding about the size of the business. “I hired four employees.” “I just hired five.” “I need to hire six.” There’s this competitive crazy ego thing about size. I’ve never been to them. I’ve never met an entrepreneur who says, “How’s business going? Tell me about the bottom line.” That’s never the conversation, which ironically is the health of the business. It’s hard to unwind that, but the fabric of entrepreneurship is about the top line when I don’t think that’s the right focus. It should be about the bottom line. It should be about profitability because that’s what matters for sustainability.

What’s scary is that if you asked a lot of entrepreneurs who haven’t gotten to that breaking point yet, “What’s the bottom line?” How many do you think would be able to tell you what their real bottom line is?

They wouldn’t know and many are stuck in the beliefs they are so entrenched in the sales believe that sales is everything. I’ve done presentations in front of large groups, small groups too, all sizes. I talk about profit and the first question they almost always get is, “I want to grow my business, so I can’t take profit.” Whoever says you need to take more money out of your business to support growth is wrong. Whoever said it takes money to make money is a freaking liar, it’s bull. It takes innovation. What I explain to people is when you take your profit first, when you start reserving profit it actually forces you to run a healthy business that’s critical.

Secondly, to find innovative strategies that work within your means and to beat the competition. Here’s the greatest irony, Joel, businesses that focus on profit and drive profit consistently they outstrip their competition on growth because they’re focusing on the stuff that matters. It’s not arbitrary. The people who are all about sales, every pain comes and goes back out, they start winging things, “Everyone is crushing on Facebook. I’d better do Facebook ads.” They blow their money and say, “That didn’t work. We need to sell more.” It’s arbitrary. By focusing on profit, it brings a healthy balance that you only drive forward with the stuff that generates more profit and you ladder up.

This is a big epidemic and a real big problem for the small enterprise, the small business owners. I’ll be transparent, I don’t have a business background. I got hooked on my first experience into entrepreneurship as a commission only sales rep and my primary focus there was just to sell. Then I realized I was making my company a lot of money then jumped in entrepreneurship. I didn’t have a formal business background. Is this a problem that solopreneurs and small business owners have or do you see this also with a larger company or do they see this as a widespread problem or just for our niche?

I see predominantly with small business. A small business are companies that do about $10 million revenue or less. What I consider microenterprise, what I’m passionate about are these sub-million-dollar companies, a few hundred thousand dollars, a few employees, maybe they’ve achieved their first million. That’s my field of passion. I’ve studied up to companies that do about $50 million. I’ve found companies, even up to $10 million are still hand to mouth, not everyone but many of them. They start playing a cashflow game. Many business are in the cashflow game and the cashflow game works like this, not profitable. It means when I do sale, I’m spending all that money but if I make another sale, an influx of money will come and they’ll bridge me for. I’ll blow that money pretty quickly. If I keep on piling on more sales, there’s this constant influx of money.

What a lot of businesses experience is they grow. Sales is like this. It’s grown over time, but they noticed that their expenses are running almost in parallel. The day they have a sustained dip in sales like we had a bad week or month. The business goes into this total spiral because they can’t play the cashflow game and panic ensues. That’s when they say, “Stretch to credit cards. Don’t even open the bills. Wait until the vendors call. Send the old fake check that I forgot to sign so it won’t get processed. Sorry.” Delay. That’s all cashflow games. Sadly, it happens with bigger companies. The interesting thing is, as a small business, if you think you’re stressed about cashflow, wait until you meet someone running a $5-million company that has $1 million or $2 million of debt weighing on their shoulders when they can’t afford that.

Run Your Business Like Clockwork: The sooner we get out of this game of banking on sales alone and ignoring profit, the healthier it will be.

They can go to jail over things like this or go into bankruptcy more likely. They experience serious consequences where it wrecks their lives. The sooner we get out of this game of banking on sales alone and ignoring profit, the sooner we get out of this, the healthier it will be. The last part is businesses that do focus on profit, the stress relief is unbelievable. Businesses that focus on profit remove that stress and they’re much more strategic also about their growth also facilitating faster growth.

With a company that is probably over-stressed, what would be the first thing that you would say? “What do we need to look at? Is there an elephant in the room? Is it profit first? Is it looking at that number?”

The elephant in the room, there’s no question. What we have to immediately do is look at the profit. The profit-first system, which I know is as revenue comes in, cash deposits immediately take a predetermined percentage of that money to allocate it to a profit. Hide it from yourself, run the business off the remainder. That’s the fundamental basis of profit first. What happens is it forces your business to reverse engineer profitability. If you want to have a 10% profit, that’s what you’re committed to, take 10%. Run your business off the remainder and they’ll show you where the weak spots in your business and you have to adjust accordingly.

You said that there were six stages of Clockwork

Seven stages.

Can you elaborate on the seven stages?

There’s a page in the book that’s dedicated to the outline of it. I’ll give you more detail in the book. The first step is the 4D Mix. The 4D Mix is the understanding that businesses have different stages of activity. The 4Ds are: Doing, Deciding, Delegating and Designing. As a solopreneur or with employees, there’s a mix of this happening within your business. Inevitably, the business owner is slanted too much towards doing. What doing is the actual doing of work and every business must be doing stuff because that’s how we serve our clientele. You must be making that product, delivering that service and so forth. That’s the doing work.

The next level up, as you start to grow your business as an entrepreneur, you’re going to go into what’s called the deciding phase. The deciding phase is where you start using other resources, virtual assistance, part-time help, maybe a full-time employee to do the work. What we do then is we start deciding about the work that’s getting done. You hire that first employee or virtual assistant, and they say, “I’ve got some questions about the work you wanted me to do. What should I do in this circumstance?” We give them direction. We decide for them and say, “Do this and do that.” Ten minutes later they walk back in your office or give you a call and say, “Should I do this or I should do that?” We decide for them. We continue to give them a stream of decisions and it becomes very distracting.

Most businesses can’t get past two or maybe three full-time employees because at that level, all the business owner is doing is making decision after decision on behalf of their employees. The owner is basically a single-head or brain with eight or nine or ten arms flapping around that’s the people doing the work. It’s why it’s called task rabbit. I tell you, “Joel, do this but I will be the brains behind the organization.” It’s an instant trap in growth. We need to move on to the next stage which is called delegating. Sadly, most entrepreneurs say they’re delegating work when they’re actually deciding about work. Delegating is the assignment of outcomes. I don’t tell you, “Here’s what I expect you to do. Do this task one, two and three.” I say, “Here’s the outcome we’re trying to achieve for our customer. Do we agree to this? What’s the path that we agree is probably the best path? I want you to get to that outcome. I also acknowledge that problem. Things are going to happen along the way. I am not here to give you answers for that. That is your responsibility because that’s why I hired you. Once we get to the outcome, let’s convene again and talk about it. Maybe I can coach you or we can coach each other on getting to that outcome faster or better next time.” That’s true delegation.

The highest level is designing. Designing happens, especially for small entrepreneurs two times. One is before they start the business. This is the big thinking, “How are we going to change the world?” Sadly the day you open the doors, it’s putting out fires every day forward and we never go back to designing except when we take a shower. That seems like the one other time when your mind is disconnected and you don’t have a phone in your hand and all of a sudden those great thoughts appear. Design is thinking, vision where we want to direct this business and then strategic work where we’re putting the right people and resources in the right places. We need to get back to the design time. It has to be specifically implemented. That’s stage one.

Stage one sounds like it is rather in-depth and complex in its own right. There are four micro stages within stage one. Let’s say somebody is doing $1 million a year or $2 million a year. They’re clearly stuck, they’re running around and they’ve got that task rabbit syndrome. If they’ve committed, it’s like, “Mike, I’m going to work with you. I’m going to follow your process. How long does it take to get to that top level which is designing? 

To get there and that’s what we’re targeting for most businesses, I find it’s about a year to two years of committing to this process. The stage one is simply an assessment. Stage one what I laid out is what you need to know what you’ll do in stage one and simply say, “How much time am I devoting to designing?” Ultimately, an entrepreneur will not devote all their time to designing, but it becomes the majority of time. I’m just picking large companies because everyone knows the name Amazon. Jeff Bezos, when you put his place in order at Amazon, we all know he’s not running to the warehouse and packing this for us.

What he’s doing is he’s thinking strategically. Where can Amazon have the next impact? How can I generate even more revenue? Does Jeff Bezos still do some of the doing? Yes. When the new Alexa product was coming out, was he one of the testers? I’m sure it’s at his house and he’s playing around with it. When there’s a strategic negotiation with another major vendor on distribution, like with UPS, is he at the table? Yes, I suspect he’s doing the major wheeling and dealing. The majority of his time is on strategic work. That’s what design is. That’s where we want to move ourselves. It’s a slow throttle over time.

Let’s move on to the QBR. What is QBR?

I consider this the heart of Clockwork. This is the big thing. QBR stands for the Queen Bee Role. I was studying what drives business efficiency and I found the answer actually not within the businesses I was studying. They all had their own solution, no common thread. What we found is beehives interestingly have the common thread. The Queen Bee Role is the most critical role for the survivability of a hive. They’ve got to lay eggs, it happens that the queen bee supports it. Every bee knows two rules. Make sure the queen bee is laying eggs, protect her and if she’s doing that, then you go out and do your primary job function.

Here’s the thing with the QBR. Every single business has a primary function that the business’ success hinges on. You have to know what that function is in and every employee needs to be educated on it. That function must be humming along at all times. If it does, your entire business will elevate. If you don’t know where it is or you’re ignoring it or it gets compromised, it will crush the survivability of your own organization. The question is, what is my QBR? Here’s the ultimate shortcut. Define what your brand promise is. What are you known for? FedEx is known to get your packages there within the delivery expectations overnight if you so desire or three days, but they will deliver on time every time. That is their brand promise.

The QBR is the function or the activity that supports it. What supports it? Logistics, moving those packages. FedEx could say, “We’re going to amplify our customer service. We’re going to be the friendliest people you’ll ever talk to when you call FedEx.” Will that elevate the company? No. Will they get some notoriety for it? Maybe, but it’s passive. If one package gets delayed, that person’s going to be on Twitter saying, “FedEx sucks.” If FedEx ignores their core competency, the QBR, logistics to do something else the business will actually suffer. Every employee at FedEx knows this. If we aren’t delivering packages on time, we have an issue. Go make sure that’s happening.

The person from accounting doesn’t run to the warehouse and start moving packages, but they know their job is to protect the people that are serving that role. Customer Service knows, protect those team. Makes sure they’re doing it. If our team needs more time because one of our warehouses burned down, communicate so customers know what’s going on so we can get that warehouse back up to speed. Every business has a QBR. We have to declare what’s our brand differentiator? What do we want to be known for? Define the activity behind QBR and then make sure that’s protected and moving along, humming along.

The huge light bulb moment came off for me because you brought up a great example. Some people think that you have to be great at everything, like you have to have superior customer service. You debunked that. Not that customer service isn’t important, but it re-shifts the focus saying, “Where does customer service fit in with our brand promise?” If we are aligned with that brand promise, which is delivering my packages on time every single time, then the customer service is below that, meaning the customer service should take care of itself if we’re protecting that brand promise. There are other companies who pride themselves on customer service where they put that towards the top meaning, “We’re the friendliest. We care about our customers.” If that’s what they’re protecting, then that supports everything else which is delivery or you name it. That makes total sentence and I’ve never heard of it explained like that before.

Run Your Business Like Clockwork: My one activity that’s most important is books.

 

For a microbusiness, talking about myself, being an author is a business. My products goes on a shelf but not at a supermarket. It goes on Barnes & Noble’s shelf. I went through this process for myself years ago as I was developing and assessing this concept. What came clear to me is that my brand promise is simplifying complex business ideas. I said, “There are many ways I can do this. I can do it through books or speaking or interviews.” Those are all things I’m doing, but what’s the one activity that’s most important? It’s books. If I’m doing so many interviews that it’s impeding my writing, I’m going to start slipping back further and further. I can never compromise the delivery of books. What I’m saying though is that other things can happen. They have a degree of importance, but they’re not the most important. Just like FedEx has to have a customer service. They can’t just say, “Let’s ditch the customer service.” That’s important, they need it but it’s not the most important. The key of the QBR is identifying literally most important function happening within your organization and make sure that goes unimpeded all the time.

It’s almost like your company’s functional organization chart.

For example, in the olden days, I used to install computer networks. I had a business and did a great fortune of selling that company. When we install computer systems, we always go to the president’s office, the owner’s office and that person will get the nicest equipment. One example, let’s say it was a hedge fund in trading. The managing partner had the nicest computer in the world, it was so cutting edge. The people that were driving for the QBR transactions have old junk computers. The president is like, “Why are we so slow? Why aren’t we trading faster?” It’s because you’re equipping the wrong person. You’re serving the ego, you’re not serving the QBR. Even for myself, when it comes to writing books that’s the most important thing. Any other stuff I have is fluff. I need to invest the most effort and making sure the books are produced. If I had to choose where dollar goes, it goes toward improving my books not toward a nicer camera for a video interview. The key is to get out of ego, the old organizational charts so as the president of top, and that’s where the ego goes and all the money flows of functional chart of how business flows along and you identify the QBR that’s where your money and effort needs to go.

We go into the next stage, which flows nicely into what the QBR is. What’s stage three?

It protects and serves. We need our employees, our entire team realizing the importance of the QBR and that needs to be protected. This can bruise some egos. We have ten people here at my office. I have a business partner what I’m doing, and I tell them “I got to write books.” He’s like, “We need you to do other things. Get out there and do some more speaking or help lead the company in the certain vision.” He’s come to realize, and all my team has come to realize, that if I’m not writing books which have a prolific impact on our readership, this business will suffer, all the activities will suffer as a result. They know, and they have to believe it and they do, that if Mike is not writing books, we have an issue.

Here’s a better example. If next time you go to the doctor’s office, if you ever see the doctor, when you walk in the waiting room, coming out saying, “Good to see you, sit down. I have to pull some files, just some insurance claims. I’ll walk in to examine a little bit.” That doctor’s office has a problem. The doctor doesn’t greet you, they have a receptionist. The doctor doesn’t pull your file. The doctor doesn’t even do the pre-exam. The QBR for many doctor’s offices is a thorough and efficient exam. That’s what the patient benefits from. All the doctor does, is they come in and do the exam. They call you to their office, give you the prescription of what to do, and then he go to the next person.

That’s the QBR and every employee knows if you see the doctor milling around, escorting patients in or the doctor’s doing an insurance claim, we as an organization have an issue and it’s suffering in its entirety, we must protect them and serve them. That’s the queen bee doing that role. Last bullet point is in my own business, your business. Ultimately, you don’t want to be the queen bee because that means you are the linchpin for the organization. You want to get that, too, off your shoulders and once that’s off your shoulders and other people are serving the Queen Bee Role, that’s when the business can run itself.

Is the Queen Bee Role just one person or can it be multiple?

It can be multiple. In small businesses it’s often served by one person. As the organization grows it’s served by a magnitude of people and resources. Think about FedEx. The logistics is the Queen Bee Role. They have tens of thousands, maybe hundreds of thousands serving that from the delivery guys to the logistics that’s happened behind the scene. All of them are serving that. That heart of the organization needs to be protected.

Just to recap the seven stages of Clockwork we’re talking about here. Stage one is the 4Ds. Stage two is a QBR, the Queen Bee Role. Stage three is protect and serve the QBR and stage four?

Capturing systems. This is where scalability kicks in. Once we had these fundamentals in place business is ready to grow. What we are going to want to do is to take work off of our highest-paid, high-skilled people. Take off the lowest level work and push it down the organization. When I say down an organization, I don’t mean this as a negative thing or ranking people, but this the function we need to protect the core functions. How do you do this? You’re capturing systems.

Most organizations, even to date, use SOPs, Standard Operating Procedures. I found SOPs fall short in so many ways, but in particular, they’ve become these big thick manuals, these books about how the organization runs that no one reads. They sit on shelves. We need a more dynamic system. The other shortcoming or challenges these small businesses have is they say, “I don’t have any systems or I have a few. I don’t have time to develop my systems.” Here’s what I found as a great reality, every small business everyone watching has all the systems they need. They’re already created, they’re all in place. The only challenge we have to face is they’re stuck in your head. You as the business owner, you’re doing them all they’re just here we need to extract them. The most efficient way to extract them is through a capture process.

As you do the activity, package something, email someone, process something on the computer, do a phone call, simply record it, you can do most of this with your iPhone or some software on a computer. You record the process as you do it. Give it to the next person that you’re going to delegate this work to. Tell them, “We want you to achieve X, Y, Z outcome. Here’s the best practice I’ve been using so far. Please follow this and improve upon it.” Once you’re done with the five process and you have it down, create the next video for the next person because ultimately the best student is the teacher. Make your employee taking ownership of his system to actually record the video to teach it because once they’re teaching it, they will have mastered it themselves.

We talked more about branding and creating a very solid vision for people to follow and systems aren’t even near the top of that list there. They’re towards the top. Like you have to establish that before, you can even start to build the system.

The key to a business that runs like Clockwork is prioritization. It’s selectivity. It’s doing the fewest things with the greatest impact. Most small businesses are trying to do everything that’s actually the bane to our growth and we don’t even realize it. We keep expanding, the clockwork system is first about narrowing things down to the few things, the QBR, then capturing the systems that do it. As we go through this process, at the very end you’ll see how topsy-turvy it gets. One of the last considerations is something that most people make the first consideration, that’s a mistake.

Run Your Business Like Clockwork: One challenge experts have is they think everyone else has access to the knowledge they have, and that’s not true.

We went to the four of the seven stages of Clockwork and I also don’t want to completely overwhelm our audience. I want to go into a rewind section. I want to talk about what got you here. Experts Unleashed is all about identifying the opportunities that experts that I’m interviewing and myself have been able to find. Here you are, Mike, you’ve written multiple books and you’re an established thought leader. Can you take us back to when you started in business? Can you identify one or two pivot points where the opportunity presented itself to get you to where you are? 

There’s no question about it. I’ve been an entrepreneur my entire life. Right out of college, I became a business owner. I’ve had the good fortune of selling businesses. Two of them that I’ve had the misfortune, which I realize is the greatest portion of all of wiping myself out. I sold my company to a private equity. I sold the second one to a Fortune 500. I was a self-made millionaire in my early 30s and became a cocky son of a bitch. I did not appreciate that, but I was totally arrogant, a dick. I lost all my money as a result and I deserved it, I wasted money. I became an angel investor. A horrible investor though, an angel of death quite frankly. I was blowing money.

One day, I woke up to the fact that I had to consider declaring bankruptcy. I actually never did. I believe that I dug myself into such a deep hole and that wasn’t the responsibility of creditors, that was my responsibility. I also had to face my family and tell them I’d lost everything. My family stuck with me unbelievably, but we lost our house, we lost our possession, we lost everything. It became a wake-up call and this became the pivot. I’ve heard that saying, “If you had all the money in the world, what would you do?” I’m contemplating that over time saying, “I would just be an author.” If I didn’t have any financial worries, I’d be an author.” There’s a better question. The problem with that question is it presupposes that you have to have money to make that dream a reality. When I had no money, I said, “Now, I have nothing. What am I going to do? What do I want to do?” The answer was the same, I said, “I want to be an author.” I don’t know how much authors make. “I’m starting at scratch. What do I want to do?”

When the answer is the same for all the money in the world and no money in the world, that is a calling. At least that’s how I define a calling and I said, “I’m going to be an author.” Ten years ago, on the verge of bankruptcy I said, “I’m going to become an author.” I wrote my first book, The Toilet Paper Entrepreneur, this edgy, angry book actually trying to resolve my own mistakes in business. Subsequently, every book I’ve written from The Pumpkin Plan and Profit First to Clockwork was trying to correct all my misunderstandings about entrepreneurship. I’m writing books to serve, help, fix myself and then find a community of other people who have similar struggles and can benefit from the books.

People over-complicate things like coming up with new ideas. If you just look inside yourself and we talked about that, we call this the experts’ curse. It’s like, “I don’t know how to explain what I do, or I’ve got a million ideas, what do I run with?” I talk about how you position yourself as an expert even if nobody’s heard of you. It’s like you are very likely your own. Use yourself as a case study and look inside what problems have you solved first because almost guaranteed there are other people. There are 7 billion people in this world. I guarantee you somebody else has had the same problem that you’ve gotten. You’ve solved it and people will want to know how you solve it.

One challenge experts have is we think everyone else has access to the knowledge we have and that’s not true. Everyone knows this already, they don’t. The other thing is it’s already been answered. It’s the pay yourself first system. It’s the envelope system. This is nothing new and they’re right. It’s nothing new conceptually, it’s a new packaging. I took it and said, “Here’s the established concepts that work in this space. I’m going to shift it over here and see if it works.” Sure enough, it does and introduce it to a new community in a new package. It’s a shame that so many experts or people that have ideas inside of them say, “The idea’s already been played out.” It has not. Give it a new flavor, a new package, and the impact you can have can be extraordinary.

Not only that, but timing is everything. The pay yourself first model that was created X number of years ago, but new people are always entering the market. If you assume that everybody has read that, everybody has heard that, that is a fatal mistake. If you come out with that message and you put even in your own unique spin on it, like there’s going to be people who’ve never heard of the pay yourself first. People have to understand that timing is everything and the market is constantly evolving, growing and siphoning through new and an old people. The thought process they have when you decided to become an author. You said, “If I had all the money in the world, what would you do?” Then you ask yourself the same question which is if you had nothing, what would you do?” When did you piece that together? Did that all come to Genesis when you were on the verge of declaring bankruptcy? Meaning that this is the same question that I would have asked myself.

For me, I had to be in that situation, otherwise, it was a theory. If I had all the money in the world, is simply a theoretical question, I don’t have all the money in the world. The question of I don’t have any money in the world was a theory because at that time, I had money, but it was depleting. Once I hit rock bottom, then it was a true reality. I had no money. I said, “What am I going to do?” The vocation of being an author had to make money. I didn’t say, “This is a pipe dream and it would be fun one day.” I said I want this but I also want it with certain parameters. You’ve got to support the lifestyle that I intend for myself. I looked at that from a different perspective.

I met with other people and they said, “You’d be an author. Are you freaking crazy? Authors make no money. That’s the worst, the worst space to be in.” I said, “Have you ever been an author?” Most of them say, “I have no experience.” “Your knowledge is irrelevant or your thoughts are irrelevant.” When people were authors, I said, “It didn’t work for you obviously.” They’re like, “No.” I said, “Tell me why.” “It wasn’t their full-time devotion.” They were writing books to be more of a business card, quite frankly.

Then I also met with Tim Ferriss and other very successful authors. I said, “Tim, can you make money being an author?” He’s like, “You can become a millionaire.” I’ve never met J.K. Rowling, I hope to one day, but I suspect she would have the same answer, Stephen King, I’m sure. I knew there was a path to make money and I only started as to seek out the advice and direction from people who made money as authors. That’s when I started putting the pieces of the puzzle together and said, “I can make extraordinary lives living in this if I do X, Y and Z.” That’s why I’ve done it. I’m ten years into it and like any other business, it’s a struggle to get going. An authorship has a flywheel effect to it. As you get more and more momentum, it’s easier to get even more momentum and that’s the stage I’m at now.

When you were in that situation, when you were contemplating and you’re coming from these theories and figuring out what the path that you wanted, figuring out how this is going to support the lifestyle that you wanted for your business, for your life and for your family, one big takeaway I’ve gotten from this is this Queen Bee Syndrome or the Queen Bee Role. At that point, did you know about the Queen Bee Role? Was it identified as that or did you call it something else? Was that developed later on? 

That came later on, and I didn’t realize it. I had to take on everything. I also realized very quickly all of a sudden, I hit this limit. I couldn’t work anymore. There was another pivotal moment. I write about in the book. I call it the Death by Chocolate moment. The reason that happened was I had an office. It was hard for me to work from home, so I got an office. I was able to negotiate a free space in a cookie factory because my friend owned it. They had 25 ovens blazing 24 hours a day. These are commercial ovens. Each one bakes a thousand cookies at a time or something. The office that they graciously gave to me was almost directly above the ovens in a windowless office on the second floor of this building. In one particular day, I remember it was 93 degrees outside in New York City area where I live, and it was 98 degrees in my office with no air conditioning. I said, “How bad do I want this? I want to grind it out.” There’s this nauseating smell by the way of chocolate. That’s why I call it death by chocolate. The first time you smell fresh baked cookies, it’s amazing. When you smell fresh baked cookies every day for 24 hours a day for a couple of years, it is nauseating.

I looked back at my life and this is two or three years into being an author of doing this. I’m like, “I’m grinding out so hard and I’m not getting much momentum.” That started this trigger. I said, “There’s got to be a better way. Maybe it’s not about grind and hustle, the popular terms. Maybe it’s about efficiency. Maybe I can put other resources and even as a solo author of people to support me, support the mission and start moving this forward. Maybe I can move on to just doing what I’m best at, which is writing books and public speaking as my other talent.” Everything else I suck at. Our company here, we have ten employees. You’ll talk to most authors and they’ll say, “It was just me.” I moved to the QBR and we have a staff of ten other colleagues at work alongside me to move this authorship forward. That was the big turning moment.

You’ve asked yourself how badly do I want it? You’ve identified the most important tasks and responsibilities that you need to do. Ultimately, from what I heard, that’s how this whole QBR came. 

It came out of exhaustion and just working relentlessly and saying, “This is not going work. There’s a better way.” It seems often for myself and I suspect a lot of people, is that it’s a point of exhaustion or frustration that were willing to turn. I’m hoping from our conversation that some people say, “I can see them trending this way. I’m going to make this leap over a little bit sooner before I get exhausted from it.”

We started off talking about Clockwork, fantastic book. We talked about the four of the seven stages to run like Clockwork. We’ve talked about the Four D’s, the QBR, protecting and serving the QBR and then capturing systems. Then, we also learned that you are a big vintage video game. We talked about Maslow’s Hierarchy of Needs and how that parallels to entrepreneurship and we talked about that sales equals stress. This has been an advanced course on how you need to think about your business and redefining the most important things of your business, so you don’t burn out, go bankrupt or consider filing bankruptcy. We talked about essentially the rewind of how you got to where you are. First of all, is there anything that we left out that you wanted to make sure that we talked about or that maybe I inadvertently skipped over that you thought was important?

There are tons more, but you’ve said the keywords. I don’t want to overwhelm people. The last little thought is with Clockwork, Profit First actually anything I do or that you do, and then I suggest that for myself, always take small steps. With Clockwork, if you want your business run itself it’s not going to happen overnight. This is not a switch and all of a sudden, you’re a jammer business. This is not a second gear even though people use that term. This is a very slow, methodical process but consistent, deliberate, small steps will make a massive change for your business.

Where can people connect with you? Where can people go grab your book? Let’s spread the word. Let’s give people ways to find you.

If you want to go to one hub where everything is, it’s my website, MikeMichalowicz.com. You can go to Google and type in Mike MIC. When you type in MIC, you’ll see this big Polish name drop down. Click on that or you can go to MikeMotorbike.com. The funny thing is my nickname in high school was Mike Motorbike. The irony is I’ve never driven a motorcycle, but if you go to MikeMotorbike.com that forwards you to my website and I have all my books there. A free chapter download so you can experience it before you decide to purchase it or not. I used to write for the Wall Street Journal for years so you can get those free articles. I also have a podcast, I’m a blogger. It’s all up there for free. The last is if people are specifically interested in Clockwork itself. I’ve launched a supplemental site with all the resources for the book and an additive stuff. My newest research, I keep on posting up there that I’m finding after the book became published and that’s at Clockwork.Life.

Your podcast, which is fantastic, is called the Profit First Podcast. Mike, it’s been a pleasure speaking with you. Thank you for sharing your knowledge. Please hook up with Mike. Go and grab his books, his fantastic stuff for any entrepreneur or any business owner.

Joel, thank you so much.

About Mike Michalowicz

By his 35th birthday MIKE MICHALOWICZ (pronounced mi-‘kal-o-wits) had founded and sold two multi-million dollar companies. Confident that he had the formula to success, he became an 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. Among other innovative strategies, Mike created the “Profit First Formula”, a way for businesses to ensure profitability from their very next deposit forward.

Mike is now running his third million dollar venture, is a former small business columnist for The Wall Street Journal; is the former MSNBC business make-over expert; is a popular keynote speaker on innovative entrepreneurial topics; and is the author of Profit FirstSurgeThe Pumpkin Plan and The Toilet Paper Entrepreneur, which BusinessWeek deemed “the entrepreneur’s cult classic.”

Mike is on Google+Twitter and Facebook.

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