In this episode of the Tech Talk for Accountants podcast Andrew Lassise was joined by Author Mike Michalowicz to discuss how entrepreneurs can grow their businesses quicker, the concept of profit first and other topics of interest to accountants. You can listen wherever you listen to podcasts and even ask Siri to “Play the Tech Talk for Accountants Show podcast.” Listen to their conversation, watch the YouTube version below. You can also read this article, which is based on their conversation.
Mike has written several books, including the ones below and helps entrepreneurs grow their business. Being an entrepreneur is hard and people expect:
- Personal freedom
- Financial freedom
“And then we don’t achieve either,” Mike said. “That’s entrepreneurial poverty. So, I’m out to fix that.”
Why does the entrepreneurial gap exist and how to overcome it?
The entrepreneurial journey is misunderstood from Day 1. “It’s perpetuated as this hustle and grind. Work your a** off and how bad do you want it?” Mike said. “And you demonstrate that through raw time, effort and sacrifice.”
It doesn’t have to be that way, Mike explained. Consider thinking of entrepreneurship like this:
- Have a vision of what you intend to produce and provide through your company
- Organize resources around you – which includes employees, technology, vendors, even the clients
“Organize the community to achieve that outcome,” Mike said. “Entrepreneurship is about planning and thoughtfulness and consideration and improving and tweaking.”
Do keep in mind that when you do start a business, it does necessitate you doing the work. You may not have employees out of the gate or a ton of budget for the best of the best technologies. Because that’s needed early on people start believing that the hustle and the grind is the reason is the way to grow.
“And that’s not true,” Mike said. “It’s about more thoughtfulness and preparation.”
[Tweet “Hustle is necessary in filling gaps, but it’s not the way to build a business – @MikeMichalowicz”]
Andrew can relate to the early hustle stage. When Rush Tech support was first created, Andrew himself would handle tech support calls from clients. The bing of a remote support request sometimes would even wake him up.
Today, Rush Tech has a team of technicians that is available throughout the day and well into the night.
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How to make entrepreneurship a success
“We want to believe that there’s this one moment where it will switch,” Mike said.
Entrepreneurs need to move from doing the work to designing the outcomes. ” That’s a throttle. You transition there,” Mike explained. “It’s not this one moment that clicks.”
Who wants to be an entrepreneur?
Mike explained that:
- 93 percent of the population want to do the work
- 7 percent the population is looking to be the business owners.
“So it’s our responsibility to provide jobs,” Mike said about the 7 percent of the population striving to be business owners.
How to delegate
The stage between doing to designing is called deciding, Mike said. A business owner can’t be making all the decisions and needs make decisions to move into the delegation phase.
“Many owners think they are delegating when they are simply deciding for others,” Mike said. “Delegation is the assignment of outcomes.”
[Tweet “”Delegation is the assignment of outcomes” – @MikeMichalowicz”]
- Here’s what we need to achieve
- Your job is to get us there
“Many business owners know they should do this, very few do,” Mike said. “It’s easier to be the decider. We need to empower them to make the decisions.”
That also means you give them permission to make mistakes. That’s how people learn.
“We didn’t fire ourselves when we made mistakes,” Mike said. “And entrepreneurs make the most mistakes.”
Once delegation is progressing, move into designing outcomes.
Andrew reminded us that it’s easy to do when results are happening quickly. On the flip side, making that first hire and not seeing results can be painful.
But remember, totally going back to doing all the work yourself is even more painful. Faster, smaller failures can help you adjust quickly and learn quickly.
“I commit never again to work in my business and be the doer. I commit to designing,” Mike said. “I love writing books and being the spokesperson. Those are the two things I do for my business.”
Mike said he would never get to those things if he also was doing all those other tasks, including managing employees.
One alternative to making this work could be to hire a virtual assistant at a few hours a week. That virtual assistant can take certain tasks off your plate.
What’s profit first?
How do you make profit really happen? Mike asked himself. How come so many businesses start their journey toward financial freedom and then don’t achieve it. Profit first means that you take the profit off the revenue coming in first. For example:
- $1,000 comes in
- $100 kept for profit
- $900 for expenses, etc.
“We were told that sales – expenses = profit,” Mike said. “The reality is when something comes last it’s insignificant. When profit comes last we ignore it. What comes first gets prioritized.”
When you take profit first you give the business a dollar amount that it must operate on.
“It’s the pay yourself first principle,” Mike said, adding that business owners have asked him for accountants who support the profit first model.
Using the profit first model, has helped some accountants expand from compliance work into consultative work.
Read next: Pricing strategies for accountants
Just like going to the gym, you need a guide – somebody who can help you understand what to do and when. In addition, an accountability partner is very helpful.
What results are accountants seeing with profit first?
Mike shared the story of an accounting firm who grew 4x in a year. Before the firm was looked at as a commodity. Just by changing the label to “Profit advisor for small businesses” it changed the whole paradigm. It wasn’t a cost question anymore. It was priced based on perceived value.
Common reasons when the transition is not working? They aren’t doing it. They aren’t making it a priority. It needs to come first.
“When you use it as a tool it can bring value to your clients,” Mike said.
Being a specialized accountant is like a brain surgeon. Nobody goes and finds somebody who is cheap and says “oh, yea. I’ll do this brain surgery for cheap. I think I can do it” or “it’s my first one. Should be fine.” They go to the actual brain surgeons and don’t argue over the cost.
Profit first works for any industry and can be modified, Mike explained.
And how about IT?
Mike explained that IT services – like accounting firms for clients – want to address problems quickly and without making the customer have to worry or think about it.
“I don’t want to worry about IT because it’s mission critical,” Mike said. “When we specialize we need to realize there’s a community that needs us. Price is secondary to them.”
Pricing can be easier to understand than value. That doesn’t mean that you always have to get the most expensive product either.
Andrew shared the story of a 10-person firm who wanted the top packages. “Those are the enterprise level programs, but they aren’t necessary for where you are. Let’s get what you need for your current situation.”
Sometimes people see the value after they tried doing it cheap and gotten terrible results and then they don’t want to repeat the results.
Specializing helps you speak the lingo, Mike explained.
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