Putting profit first with Michael Michalowicz

By |May 28th, 2018|

Episode 138:

Making a profit is the goal of any agency owner. But too often, the way we think about profit actually hurts our agency. The standard equation (sales – expenses = profit) can lead to bad decision-making. We are willing to accept the leftovers (profit) rather than running our business to deliver profit as a key outcome. I’d much rather have you determine the amount of profit that is acceptable to you and then you manage your business to that goal.

This is a more effective way to look at the profit equation – one that helps agencies thrive and gives you the ROI you deserve for taking the risk of owning an agency.

Michael Michalowicz founded and sold two multi-million dollar companies. Then in his mid-30’s, he went broke. Starting over again, he was driven to find better ways to grow healthy, strong companies. Among other innovative strategies, Mike created the “Profit First Formula,” a way for small to mid-sized businesses like our agencies to ensure profitability from their very next deposit forward.

Michael is now running his third million dollar venture, is a former small business columnist for The Wall Street Journal, the former MSNBC business make-over expert, a popular keynote speaker on innovative entrepreneurial topics, and is the author of Profit First, Surge, The Pumpkin Plan and The Toilet Paper Entrepreneur.

 

 

What you’ll learn about in this episode:

  • The two questions Michael asked himself that allowed him to find his calling to become an author
  • Why leaving too much money in your agency leads to bad decisions
  • What it means to run the Profit First system within your agency
  • Basic principles to help your agency get ready to use the Profit First system
  • Why you aren’t limited by a lack of resources
  • The parallel between Pumpkin farmers and business regarding organic growth
  • Key takeaways agency owners can apply to their biz dev strategy using the principle of “growing the strong sprout”
  • Why it’s important to serve the verticals your agency knows well, and that will allow three or four of those legs to support your stool
  • Consequences you may face when you put too much focus on your weakest clients
  • Why entrepreneurs struggle with being profitable
  • A better way to calculate profit for your agency so you can stop using the “Frankenstein Formula”
  • Principles taken from health and fitness industry you can apply to manage your money better and simplify your agency

The Golden Nuggets:

“I have a pretty specific process in my writing. I ask, ‘what did I do wrong in business, and then what did I do right?’ Then I interview as many entrepreneurs as possible who did it right.” – @MikeMichalowicz Click To Tweet “It’s not good enough just to study best practices. I test them out in my own business before I write about them.” – @MikeMichalowicz Click To Tweet “In my mind, the fact that you've built successful businesses and you've made mistakes along the way – which you've been pretty transparent about and learned from – that’s actually what makes your books so pragmatic.” – @DrewMcLellan Click To Tweet “A successful business is actually facilitated through the lack of resources because a lack of resources requires innovation.” – @MikeMichalowicz Click To Tweet “When you borrow from profits, it doesn’t allow you to correct systematic mistakes. You’re just masking mistakes.” – @MikeMichalowicz Click To Tweet “We've all been told this in our personal finances: Set a percentage of income aside – hide it from yourself as money for your future. Live on whatever remains. This principle should apply to your business as well.” - @MikeMichalowicz Click To Tweet “If you have an idea and you want to start something, don’t wait. Time is the only non-renewable resource. And your lack of other resources is actually an advantage.” - @MikeMichalowicz Click To Tweet “Don’t exert yourself on your weakest client. Weed out the weak clients and focus on assisting the strong client. I call this the pumpkin principle.” – @MikeMichalowicz Click To Tweet

 

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About the Author:

For almost 30 years, Drew McLellan has been in the advertising industry. He started his career at Y&R, worked in boutique-sized agencies and then started his own (which he still owns and run) agency in 1995. Additionally, Drew owns and leads Agency Management Institute, which advises hundred of small to mid-sized agencies on how to grow their agency and its profitability through agency owner peer groups, consulting, coaching, workshops and more.

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