The Toilet Paper Entrepreneur…………….. 258 Excerpt 01 02 03 04 05 06 07 INTRODUCTION 08 09 10 11 “I OWE YOU A BEER!” 12 The subject line of Dave Rinn’s email caught my attention. I 13 read on. 14 “I was just sitting here buried. I recently lost one staff member 15 to a lateral move and another is in Key West. Instead of three of us 16 carrying the load, I was here alone, crushed under it. We used to 17 just do everything that came our way, but with two people out, it 18 was clear that our approach of putting equal importance on every- 19 thing wasn’t working. We need to do the right things, not every- 20 thing. Yet I was feeling paralyzed by the multitude of choices. It 21 was like trying to go down every path at once. I didn’t know what 22 to do next.” 23 Sitting here buried. Feeling paralyzed. Don’t know what to do next. 24 Yup. That sounds about right. Some business owners feel this way 25 from time to time. Most business owners feel this way all the time. 26 That relentless weight of being buried by all of the problems that S27 need to be fixed affects business owners of every level of experience N28

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9780593084410_FixThisNext_TX.indd xii 1/21/20 4:01 PM 9780593084410_FixThisNext_TX.indd xiii 1/21/20 4:01 PM 01 ▼ and 01success. Whether you just started out or your company is the 02 ▼ industry02 leader, whether you’ve struggled to make payroll or are 03 ▼ rolling03 in profit, that urgent need to fix everything, like now, can 04 ▼ cause04 you to freeze up. Which problem should you tackle first? 05 ▼ Dave05 runs a successful coaching and cash- management firm. 06 Most06 days, his solution to overwhelm was an instinctual response: 07 get more07 people doing more things. Yet when he was down two INTRODUCTION 08 staff 08members, he was blessed with the new awareness that not ev- 09 erything09 is of equal importance. Suddenly, he was dealing with all 10 aspects10 of his business: intakes, bookkeeping, scheduling coaching 11 calls,11 making the coaching calls, chasing down data from clients— “I OWE YOU A BEER!” 12 everything.12 Down two employees, weak links that were always The subject line of Dave Rinn’s email caught my attention.13 I present13 were amplified and became crises. read on. 14 So,14 why did Dave say he owed me a beer? “I was just sitting here buried. I recently lost one staff member15 “I15 have always just gone with my gut in the past. I believed that to a lateral move and another is in Key West. Instead of three16 of us every16 problem was a problem to be addressed. Every opportunity carrying the load, I was here alone, crushed under it. We used17 to was an17 opportunity to be exploited,” Dave explained in a follow- up just do everything that came our way, but with two people 18out, it phone18 call. “In moments like these, I would have just gone into was clear that our approach of putting equal importance on 19every- ‘ fire-19 extinguisher’ mode and put out the fires that were burning my thing wasn’t working. We need to do the right things, not 20every- ass. I20 would have responded to whoever screamed the loudest. And thing. Yet I was feeling paralyzed by the multitude of choices.21 It when21 the team returned, I would switch from ‘ fire- extinguisher’ was like trying to go down every path at once. I didn’t know22 what mode22 to ‘ emergency- dispatcher’ mode. We had the same problems, to do next.” 23 except23 now I told my team which fires to put out. Beholden to the Sitting here buried. Feeling paralyzed. Don’t know what to do24 next. never-24 ending stream of urgent issues, we had no specific pathway to Yup. That sounds about right. Some business owners feel this25 way growth.”25 from time to time. Most business owners feel this way all the26 time. But26 now Dave had a secret weapon. A simple tool, not in his That relentless weight of being buried by all of the problems27S that toolbox,S27 but printed out and taped to his wall. need to be fixed affects business owners of every level of experience28N N28“This time, though, I looked over at my wall and saw the tool

xiiixiv Introduction

9780593084410_FixThisNext_TX.indd xii 1/21/20 4:01 PM 9780593084410_FixThisNext_TX.indd xiii 9780593084410_FixThisNext_TX.indd1/21/20 4:01 PM xiv 1/21/20 4:01 PM you gave me last time we met. It reminded me to slow down, step ▼ 01 outside instinct, and ask, ‘Okay, instead of doing little bits of every- ▼ 02 thing, what is the one thing I should fix next to move the business ▼ 03 forward?’ ” ▼ 04 The tool taped to Dave’s wall is something I call the Fix This ▼ 05 Next (FTN) analysis, and I’d given it to Dave as part of a beta- 06 testing group years back. Using it, Dave discovered that he had four 07 issues related toINTRODUCTION his current problem— two related to sales and cli- 08 ent commitments, and two related to overall efficiency, what I call 09 order. In just minutes, he was able to figure out which problem he 10 had to fix next in order to make progress that sticks, and how to 11 “Iapproach OWE YOU it. A He BEER!” quickly identified solutions for handling the sys- 12 temsThe problem: subject adjust line ofclient Dave commitments Rinn’s email and caught adjust my his attention. company’s I 13 workflow.read on. 14 Dave“I was told just me,sitting “Just here thinking buried. through I recently it was lost a one calming staff memberprocess. 15 Ito was a lateral no longer move spinning and another out isof in control. Key West. I thought, Instead ‘Iof can three handle of us 16 this.carrying Now the I have load, a pathway.’I was here It alone, pulled crushed me out ofunder my sense it. We of useddrown to- 17 ing,just doand everything I was able tothat pause came and our consider way, but what with we two were people missing out, and it 18 whatwas clear we could that ouraddress approach to fix ofit. putting equal importance on every- 19 thing“The wasn’t fix Iworking. came up We with need wasn’t to do just the forright the things, moment,” not every Dave- 20 continued.thing. Yet I“It was was feeling a realignment paralyzed ofby thethe businessmultitude so of that choices. I could It 21 straightenwas like trying out andto go not down have every to go path into at that once. buried I didn’t mode know over what and 22 overto do again. next.” The fix helped me now and it will help me next year. I 23 am Sittingable to here address buried. my Feeling business’s paralyzed. current Don’t issues know in whata way to that do next. will 24 Yup.serve Thatmy company’s sounds about future. right. Now, Some when business I find owners myself feel questioning this way 25 fromwhat timeto do, to I time.pause Mostmomentarily, business evaluateowners feel what this to wayaddress all the with time. the 26 ThatFTN analysis,relentless and weight then offind being myself buried back by in allcontrol of the and problems my business that S27 needmoving to beforward.” fixed affects business owners of every level of experience N28

Introduction xiiixv

9780593084410_FixThisNext_TX.indd xivxii 1/21/20 4:01 PM 9780593084410_FixThisNext_TX.indd xvxiii 1/21/20 4:01 PM 0101 ▼▼ and success.When entrepreneursWhether you reachjust started out to out me, or it’s your typically company to isask the for 0202 ▼▼ industryhelp to leader,make a whetherbig change you’ve or solve struggled a big problem. to make Some payroll have or hit are a 0303 ▼▼ rollingsales plateauin profit, and that no urgentmatter need what to they fix everything,try, they can’t like level now, up. can Or 0404 ▼▼ causethey youcan’t to dig freeze themselves up. Which out problem of a financial should hole. you tackleMaybe first? you have 0505 ▼▼ someDave of runsthe same a successful problems coaching with your and business. cash- managementMaybe you’re firm.fully 0606 Moststaffed days, and his still solution dog- tired. to overwhelm Or you’ve was lost an your instinctual passion forresponse: the busi - 0707 getness more because people you’re doing not more seeing things. the impact Yet when you hehoped was todown make. two Or 0808 staffmaybe members, you’re helooking was blessed for a way with to the leave new your awareness mark for that generations not ev- 0909 erythingto come, is butof equal don’t importance.know how to Suddenly, make it a hereality. was dealingWhether with you all are 1010 aspectsin crisis of his mode, business: simply intakes, want bookkeeping, to grow your scheduling business, or coaching want to 1111 calls,make making a lasting the impact coaching on ourcalls, planet, chasing Fix down This Next data findsfrom theclients— critical 1212 everything.issue you need Down to resolve— two employees, wait for it— weak next! links When that you were are always in “fire- 1313 present extinguisher were amplified mode,” FTN and givesbecame you crises. the pause necessary to pinpoint 1414 theSo, core why issue. did DaveWhen say things he owed are moving me a beer? along but just not moving 1515 forward,“I have FTN always points just goneto your with true my north. gut in the past. I believed that 1616 everyI problemhad taught was the a problem system toto hundredsbe addressed. of entrepreneurs Every opportunity already 1717 wasand an coached opportunity many to through be exploited,” it. I knew Dave it worked explained in the in a lab, follow but- upthis 1818 phonewas the call. first “In emailmoments I received like these, about I would how FTNhave workedjust gone “in into the 1919 ‘ fire-wild”— extinguisher’ without mymode prompting and put outor advice.the fires To that hear were that burning the tool my I 2020 ass.developed I would haveand testedresponded on my to whoeverown business screamed over thethe loudest.years actually And 2121 whenworked the for team another returned, entrepreneur I would made switch my from day. ‘ fire-(I owe extinguisher’ you a beer, 2222 modeDave.) to ‘To emergency- learn from dispatcher’ hundreds ofmode. others, We as had I would the same over problems, the com- 2323 excepting months, now I toldthat my the team system which worked fires for to bothput out. short- Beholden term panic to the and 2424 never- long- endingterm growth stream strategies of urgent made issues, my we whole had no year. specific And pathwayto hear that to 2525 growth.”a single piece of paper could hang next to your desk, as it does 2626 mine,But now and giveDave youhad totala secret control weapon. of your A simple business tool, . . not . that, in his my 27S27S toolbox, friend— but that printed— may out have and made taped my to whole his wall. life. 28N28N “ThisWhether time, it’s though, staffing I lookedissues, orover trying at my to wallmake and payroll, saw the or capritool -

xivxvi IntroductionIntroduction

9780593084410_FixThisNext_TX.indd9780593084410_FixThisNext_TX.indd xiv xvi 1/21/201/21/20 4:01 4:01 PM PM ciouslyyou gave declaring me last timea goal we of met. more It sales, reminded or more me efficiency,to slow down, or more step ▼ 01 profit,outside or instinct, all of it and at once, ask, ‘Okay, most entrepreneursinstead of doing busy little their bits days of every deal- ▼ 02 ingthing, with what the is apparentthe one thing issues. I shouldWe know fix next we haveto move core the challenges business ▼ 03 thatforward?’ need ” addressing and problems that need fixing, but we aren’t ▼ 04 sureThe which tool one taped to focus to Dave’s on first, wall so iswe something go for the I low- call thehanging Fix This fruit. ▼ 05 NextWe look (FTN) at the analysis, most obvious and I’d thing given that it seeminglyto Dave as needs part toof bea beta-han- 06 dled testing immediately group years and back. tell Using ourselves it, Dave that discovered we will work that heon had“all fourthe 07 otherissues relatedstuff ” later. to his You current know, problem— when we havetwo related more time. to sales (You and can cli- 08 probablyent commitments, sense my sarcasm,and two relatedeven from to overall outer space.) efficiency, what I call 09 order.Since In justI have minutes, written he five was books able priorto figure to this out one, which each problem one deal he- 10 inghad withto fix anext different in order core to businessmake progress challenge, that thesticks, question and how I amto 11 askedapproach most it. often He quickly by entrepreneurs identified solutionsis “Mike, forwhich handling book shouldthe sys -I 12 readtems first?”problem: A adjust good question,client commitments to which I and used adjust to give his company’s a poor re- 13 sponse.workflow. I used to say, “You’ve got to read Clockwork.” Or whichever 14 bookDave my told notable me, “Just bias thinking thought apropos.through it My was responses a calming were process. not 15 basedI was noon whatlonger served spinning my readerout of nearlycontrol. as muchI thought, as what ‘I can I was handle most 16 hypedthis. Now up onI have at the a pathway.’ moment. ItYou pulled know— me out the of apparent. my sense of drown- 17 ing,Now and II wasanswer able that to pause question and considerwith a question. what we Whenwere missing people andask 18 “Whatwhat we book could should address I read to fix now?” it. I respond by asking “What prob- 19 lem“The in your fix business I came updo withyou need wasn’t to justfix next?” for the If moment,”you need to Dave in- 20 crease continued. sales “Itand was grow a realignmentyour client base, of the then business I believe so youthat will I could find 21 Thestraighten Pumpkin out Plan and* notprovides have ato proven go into strategy that buried to do mode just that. over I and am 22 blessedover again. that The every fix day helped I hear me of nowanother and business it will help that me has next “pumpkin year. I 23 planned”am able to healthy address growth my business’s to great effect.current If issuesyour sales in a are way sustainable that will 24 yetserve you’re my company’s still struggling future. to Now, put when money I infind your myself pocket, questioning then I 25 what to do, I pause momentarily, evaluate what to address with the 26 FTN analysis, and then find myself back in control and my business S27 *Visit PumpkinPlanYourBiz.com to get free resources and access to certified Pumpkin Plan movingcoaches. forward.” N28

Introduction xviixv

9780593084410_FixThisNext_TX.indd xvixiv 1/21/20 4:01 PM 9780593084410_FixThisNext_TX.indd xviixv 1/21/20 4:01 PM 0101 ▼▼ humblyWhen submitentrepreneurs Profit First reach* should out tobe me,your it’s next typically read. Ito am ask proud, for 0202 ▼▼ helphonored, to make and a bighumbled change all or atsolve once a bigto sayproblem. that hundreds Some have of hitthou a - 0303 ▼▼ salessands plateau of entrepreneurs and no matter have what profitable they try,businesses they can’t now level because up. theyOr 0404 ▼▼ theyfollowed can’t dig the themselves methods detailed out of a infinancial that book. hole. And Maybe if you’reyou have still 0505 ▼▼ somechained of the to sameyour deskproblems wondering with your when business. you’ll ever Maybe get you’reoff the fullyham - 0606 staffedster wheel and still that dog- is your tired. business Or you’ve and lostfinally your get passion back tofor doing the busi the- 0707 nesswork because you love you’re best, not then seeing Clockwork the impact† is your you best hoped bet. Entrepreneursto make. Or 0808 maybeall over you’re the world—looking for including a way to me— leave are your designing mark for their generations business to 0909 torun come, itself— but don’t and takingknow how annual to four-make weekit a reality. vacations— Whether because you are they 1010 inare crisis following mode, the simply systems want I shared to grow in that your book. business, If your or struggle want to is 1111 makewith a hiring, lasting leadership, impact on oursales planet, techniques, Fix This or Nextone offinds dozens the criticalof other 1212 issuecommon you need challenges, to resolve— the solution wait for it— is out next! there When in one you of are the in many“fire- 1313 extinguisherextraordinary mode,” books FTN written gives by you my the contemporaries. pause necessary to pinpoint 1414 the coreStill, issue. the questionWhen things remains. are movingWhat is alongthe next but problemjust not movingyou must 1515 forward,fix? The FTN answer points to tothat your simple true north.question is of critical importance, 1616 butI hadfew entrepreneurstaught the system know to how hundreds to answer of it.entrepreneurs Of all the challenges already 1717 andwe coachedface, we manyaren’t through sure which it. I oneknew is itthe worked most importantin the lab, rightbut thisnow . 1818 wasIt’s thea serious first emailconcern. I received How can about you be how sure FTN which worked problem “in or the op - 1919 wild”—portunity without you need my toprompting address first, or advice. when youTo hearhave thatso many the toolissues I 2020 developedon your list? and If tested you are on focused my own on business the apparent, over the you years would actually choose 2121 workedthe issue for thatanother seems entrepreneur make or break made in my the day. moment. (I owe Makes you a beer,sense, 2222 Dave.)right? ToYou learn know from what hundreds that issue of isothers, because as Iyour would gut over tells the you com so, -or 2323 ingbecause months, you that are theemotionally system worked connected for both to the short- outcome, term orpanic because and 2424 long-it’s the term easiest growth issue strategies for you tomade deal my with. whole year. And to hear that 2525 a singleHere’s piece where of paperyou would could expect hang me next to to tell your you desk,which as challenge it does 2626 mine, and give you total control of your business . . . that, my 27S27S friend—*Go to ProfitFirstProfessionals.com that— may have made to get my free whole resources life. and to request the services of a certified Profit First expert. 28N28N †YouWhether guessed it! it’sFree staffingresources andissues, expert or help trying can be to found make at RunLikeClockwork.com. payroll, or capri-

xvixviii IntroductionIntroduction

9780593084410_FixThisNext_TX.indd9780593084410_FixThisNext_TX.indd xvi xviii 1/21/201/21/20 4:01 4:01 PM PM tociously focus declaring on first. a (As goal I’ll of explainmore sales, later, or itmore isn’t efficiency, necessarily or profit, more ▼ 01 evenprofit, though or all of my it at book once, Profit most First entrepreneurs may have busy you thinkingtheir days other deal- ▼ 02 wise.)ing with Except the apparentthat I don’t issues. know We what know it is.we Honestly, have core I don’t challenges think ▼ 03 youthat knowneed whataddressing it is either. and problems that need fixing, but we aren’t ▼ 04 sureThat’s which why one I to developed focus on afirst, tool so to we find go the for biggestthe low- challenges hanging andfruit. ▼ 05 opportunitiesWe look at the in most any obvious business thing quickly, that andseemingly at any needs given to moment. be han- 06 I’ddled been immediately following andthe tellprinciples ourselves for thatyears, we and will my work books on reflected “all the 07 that,other but stuff I hadn’t” later. yetYou figured know, out when how we to havebreak more it all time.down (Youfor other can 08 entrepreneurs.probably sense my sarcasm, even from outer space.) 09 TheSince tool I have I created written gets five you books out priorof guessing to this modeone, each and oneinto deal fast,- 10 impactful,ing with a deliberate different core action. business It took challenge, me the better the question part of three I am 11 yearsasked tomost perfect often it, bytesting entrepreneurs it out in my is “Mike,own business which and book with should other I 12 entrepreneursread first?” A through good question, multiple to iterations. which I usedNow toall giveyou have a poor to redo- 13 issponse. understand I used itto and say, follow “You’ve a 4got-step to process.read Clockwork Seriously,.” Or it’s whichever so easy, it 14 canbook be my done notable in less bias than thought fifteen minutes. apropos. (And My responses yes, I have were a story not 15 aboutbased onthat what in thisserved book.) my readerThe tool nearly is so as simplemuch asthat what by Ichapter was most 3 16 youhyped will up have on at mastered the moment. the basics You and know— you’ll the be apparent.ready to use it daily. 17 In fact,Now if I youanswer download that question the tool with right a nowquestion. (at FixThisNext.com), When people ask 18 “Whatyou can book pin itshould above I yourread now?”desk and I respond refer to by it askingwhenever “What the probneed- 19 arises—lem in your just business as Dave dodid. you I hope need it tobecomes fix next?” your If bestest you need friend, to in the- 20 consiglierecrease sales whoand grow whispers your inclient your base, ear then before I believe you make you awill critical find 21 decision.The Pumpkin Plan* provides a proven strategy to do just that. I am 22 blessedWhy that is the every Fix day This I hear Next of anothertool so effective?business that It works has “pumpkin because, 23 ratherplanned” than healthy connect growth to your to great gut effect.or emotions, If your salesit connects are sustainable to your 24 businessyet you’re needs— still struggling the foundational to put money needs inthat your all businesses pocket, then have, I 25 regardless of size or industry— and provides an order in which to 26 deal with them. When we address the apparent, we may be over- S27 *Visit PumpkinPlanYourBiz.com to get free resources and access to certified Pumpkin Plan lookingcoaches. a vital need that needs fixing first. In solving that need, the N28

Introduction xviixix

9780593084410_FixThisNext_TX.indd xviiixvi 1/21/20 4:01 PM 9780593084410_FixThisNext_TX.indd xixxvii 1/21/20 4:01 PM 0101 ▼▼ humblyapparent submit issues Profit and other First* notshould-so -apparent be your issuesnext read. may automaticallyI am proud, 0202 ▼▼ honored,be resolved. and humbled all at once to say that hundreds of thou- 0303 ▼▼ sandsThink of entrepreneurs of it like this: have You profitable build a house businesses from thenow ground because up. they You 0404 ▼▼ followedfirst need the a strong methods foundation, detailed inthen that a strong book. Andfirst floor, if you’re and stillthen 0505 ▼▼ chainedupon that to your a strong desk secondwondering floor, when and you’llso on. ever If you get don’toff the consider ham- 0606 sterwhat wheel supports that iswhat, your in business what sequence, and finally the get structure back to will doing collapse the 0707 workon itself. you love The best, same then is true Clockwork for your† business. is your best Focusing bet. Entrepreneurs on the appar - 0808 allent over is similarthe world— to replacing including windows me— are on designing the third their floor business while the to 0909 runbasement itself— is and in dangertaking ofannual crumbling four- week due vacations— to widening becausecracks in they the 1010 arefoundation. following the systems I shared in that book. If your struggle is 1111 with Inhiring, every leadership, book I’ve salesever techniques,written, my or primary one of goaldozens has of been other to 1212 commonsimplify challenges, some aspect the of solution entrepreneurship is out there so in that one you of the can many easily 1313 extraordinaryuse the systems books and written strategies by Imy present contemporaries. to meet your business goals. 1414 CountlessStill, the entrepreneurs question remains. have What shared is thewith next me problemthe transformation you must 1515 fix?their The business answer experienced to that simple after question applying is oneof critical or more importance, of the tools 1616 butin fewmy earlierentrepreneurs books. But know this how book? to answer This book it. Of has all the the mother challenges of all 1717 wetools, face, in we my aren’t (clearly) sure notwhich- so- humble one is the opinion. most important right now. 1818 It’s a Nowserious when concern. people How ask canme youwhich be sureof my which books problem to read or first, op- I 1919 portunityhave the you easiest need answer to address yet. This first, book. when Start you withhave Fix so Thismany Next issues. 2020 on yourHow list? much If you time are havefocused I spent on the putting apparent, out youfires would and randomly choose 2121 thedeclaring issue that objectives seems make for my or business? break in Beforethe moment. I started Makes following sense, the 2222 right?principles You know on which what thethat Fix issue This is because Next tool your is gutbased, tells pretty you so, much or 2323 becauseall of my you time are emotionallywas spent on connected the apparent. to the Once outcome, I figured or because out how 2424 it’sto the pinpoint easiest whatissue tofor focus you to on deal next, with. my businesses grew faster and 2525 healthier.Here’s where Since you creating would the expect tool, me I’ve to stoppedtell you whichrelying challenge on my in - 2626 stinct alone and have started using this system to listen and re- 27S27S *Gospond to ProfitFirstProfessionals.com to my company’s true to needs.get free Mostresources importantly, and to request I’m the committedservices of a certified Profit First expert. 28N28N †Youto guessedempowering it! Free resources you, my and friend,expert help so canthat be foundyou neverat RunLikeClockwork.com. miss another op-

xviiixx IntroductionIntroduction

9780593084410_FixThisNext_TX.indd9780593084410_FixThisNext_TX.indd xviii xx 1/21/201/21/20 4:01 4:01 PM PM portunityto focus on either. first. I (Ashope I’ll this explain book is later,a resource it isn’t you necessarily will refer to profit, over ▼ 01 andeven over though again, my because book Profit the tool First never may stops have working. you thinking You can other al- ▼ 02 wise.)ways return Except to thatit to Ipinpoint don’t know your what biggest it is.challenge, Honestly, fix I itdon’t next, think and ▼ 03 youthen know pinpoint what the it is next either. one after that as you build your beautiful ▼ 04 business,That’s floor why byI developed floor. And a who tool knows, to find maybethe biggest one daychallenges I’ll owe andyou ▼ 05 opportunitiesa beer* too. in any business quickly, and at any given moment. 06 I’d beenBusiness following success the is aprinciples journey, forsomething years, and you my need books to reflectednavigate 07 that,for the but perpetuity I hadn’t yetof your figured company. out how I am to convincedbreak it all thedown tool for you other are 08 entrepreneurs.about to discover will be your ultimate guide. I also realize that 09 leafingThe through tool I created a couple gets of you hundred out of pages guessing or listening mode and to into hours fast, of 10 impactful,audio to revisit deliberate the tool action. each time It took may me not the be betterthe best part use of of threeyour 11 yearstime. toSo perfect I created it, atesting collection it out of in resources my own forbusiness quick andreference. with other You 12 entrepreneurswill find a one through sheet explaining multiple iterations. the tool, Nowthe mostall you current have to(and do 13 isregularly understand enhanced) it and followonline a evaluation, 4-step process. access Seriously, to certified it’s so coaches easy, it 14 canusing be Fix done This in Nextless ,than and fifteen more. minutes. It’s all free (And and yes, available I have nowa story at 15 aboutFixThisNext.com. that in this book.) The tool is so simple that by chapter 3 16 youYou will arehave much mastered closer the to basicsyour goals and you’llthan yoube ready think to you use are. it daily. You 17 Injust fact, need if you to movedownload in the the right tool direction.right now (at Let FixThisNext.com), this book be your 18 youcompass. can pin it above your desk and refer to it whenever the need 19 arises— just as Dave did. I hope it becomes your bestest friend, the 20 consigliere who whispers in your ear before you make a critical 21 decision. 22 Why is the Fix This Next tool so effective? It works because, 23 rather than connect to your gut or emotions, it connects to your 24 business needs— the foundational needs that all businesses have, 25 regardless of size or industry— and provides an order in which to 26 deal with them. When we address the apparent, we may be over- S27

looking*I am totally a upvital for aneed tequila that gimlet needs or an old- fixing fashioned, first. In if you solving prefer. that need, the N28

Introduction xxixix

9780593084410_FixThisNext_TX.indd xxxviii 1/21/20 4:01 PM 9780593084410_FixThisNext_TX.indd xxixix 1/21/20 4:01 PM 01 02 03 04 FIX THIS NEXT 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 S27 N28

9780593084410_FixThisNext_TX.indd xxii 1/21/20 4:01 PM 9780593084410_FixThisNext_TX.indd xxiii 1/21/20 4:01 PM 01 02 03 Chapter 1 04 THE 05 06 BUSINESS OWNER’S 07 COMPASS 08 09 10 11 YOU ARRIVE AT YOUR DESK IN THE MORNING, PUT ON YOUR 12 firefighter gear (your glasses, your email app, and a cup of coffee 13 with a double shot of espresso), and get to work putting out fires. 14 Calm the pissed- off customer. Send out the late proposal. Scramble 15 to cover payroll— right after you deliver a speech to your employees 16 about your company’s “bright future.” All the while tightly crossing 17 your legs from that third cup of coffee, because who has time to go 18 to the bathroom? #amIright? 19 Even when you do find time to hunker down with that big proj- 20 ect you’ve been putting off, the question that begs to be answered 21 is, “Does it really matter?” That one big thing you are finally about 22 to tackle, will it really have a significant impact? 23 For well over a decade, it seemed the fires I put out most were 24 related to a lack of cash. I had a maxed- out megaloan, crazy credit 25 card debt, a house that was refinanced yet again to cover payroll, 26 and a constant feeling of compression in my chest, as though I were S27 having a continuous heart attack, hour after hour, day after day, N28

9780593084410_FixThisNext_TX.indd xxiv 1/21/20 4:01 PM 9780593084410_FixThisNext_TX.indd 1 1/21/20 4:01 PM 01 ▼ and month after month. I had to borrow from friends to pay the com- 02 ▼ pany’s rent, while uncomfortably saying— and pseudo believing— it 03 ▼ was an investment in our growth. I let my credit card statements sit 04 ▼ on my desk unopened in fear of seeing how much I owed, opening 05 ▼ them only when the collection calls came. My credit card debt had 06 surpassed seventy- five thousand dollars . . . and that did not include 07 personal or business loans. 08 In my hopeless state, I focused on the very apparent solution: 09 sales. I did everything I could to sell more things to more custom- 10 ers. Admittedly, I tried to sell anything to anybody. While more 11 revenue was an obvious solution, as the sales volume improved, 12 profit did not. In fact, as my company made more money, I inexpli- 13 cably accumulated even more debt, and officially maxed out all 14 sources of loans, putting me at $365,000 in personal debt. Yeah, my 15 business “made” more money, while I dug my financial grave. What 16 the hell was going on? Why didn’t the increase in sales fix my busi- 17 ness? It made no sense to me whatsoever. 18 If you are familiar with my other books, you may already be fa- 19 miliar with my story and know I eventually realized that more 20 sales alone does not help a business; it actually hurts it. The story 21 I haven’t told before is how I came to understand that I had to look 22 for the solution at a different level. 23 It was in the depths of my desperation that I met a moment of 24 inspiration. One fateful morning, my printer jammed, and I just 25 couldn’t get it to work. I pulled out the tray and the toner, opened 26 every flap, and then put everything back the way it was. Still 27S jammed. Then I tried that “fix” again. Pull out the tray and toner, 28N open every flap, then put it all back. Still nothing. I tried the same

2 Fix This Next

9780593084410_FixThisNext_TX.indd 2 1/21/20 4:01 PM sequence of steps yet again, just much harder. I yanked open the ▼ 01 tray and slammed it back in. I tugged out the toner, shook it like a ▼ 02 can of spray paint, and threw it back in. I swung open all those ▼ 03 stupid flaps and slapped them back closed. I did this a fourth and ▼ 04 fifth time, with growing force and frustration (and perhaps a curse ▼ 05 word or two), until I realized that I was instinctually repeating the 06 same fruitless steps over and over, and that I needed to try some- 07 thing different next. Instead of picking the printer up and throwing 08 it out the window, which I was highly tempted to do, I paused and 09 pondered. Since what I was doing wasn’t working and, with the 10 force I was using, probably making things worse— what else could 11 it be? 12 I poked around the back and found a tiny piece of crumpled- up 13 paper caught in the feed. I removed the blockage with a combina- 14 tion of scissors, a paper clip, and masterful hand yoga, and we were 15 back in business. Cue the epiphany! I realized that if the approach 16 I’m using to fix a problem doesn’t work, despite repeated attempts 17 and despite my gut instinct to do the same thing but harder, it’s 18 not the solution. Right then and there I asked myself, what if my 19 company’s problem didn’t reside with the sales side of my business 20 but was jammed up in another part? Rather than reverting to 21 “sell more— sell harder,” I paused and pondered where my business 22 blockage really was. 23 I was able to figure out that the apparent sales issue I had was 24 not a sales issue at all. I had a profit issue. All my work to bring 25 in new sales wasn’t going to get the job done because I had been 26 working on the wrong problem. The steps I took next all came S27 out of this realization, and wound up saving me and my business. N28

The Business Owner’s Compass 3

9780593084410_FixThisNext_TX.indd 2 1/21/20 4:01 PM 9780593084410_FixThisNext_TX.indd 3 1/21/20 4:01 PM 01 ▼ Applying the solution I came up with, my business became perma- 02 ▼ nently profitable, practically overnight. As of this book’s publica- 03 ▼ tion date, it has had forty- five (yes, forty- friggin’- five) consecutive 04 ▼ quarters of profit distributions— to me, the business owner. That 05 ▼ solution was the foundation of Profit First, which has helped hun- 06 dreds of thousands of businesses become profitable. 07 The funny thing is, the solution of taking the profit first for my 08 business is perhaps unique in its simplicity, but I’m sure I wasn’t the 09 first to think of it. I suspect you’ve probably thought of similar 10 ideas. It’s not about coming up with the solution; you already have 11 it in your mind, or someone has written a book on it. The trick is 12 in the timing. Applying the right fix at the wrong time yields a 13 little bit of benefit and a lot a bit of frustration. The key is to apply 14 the right fix at the right time in your company’s evolution. The key 15 is to know what to do next. 16 Over the last twelve years, I’ve devoted myself to the study of 17 business and entrepreneurship, and I lived it for almost three de- 18 cades. I’ve come to understand that all business owners struggle, at 19 every level. Very few achieve their big plans for revenue or for 20 changing the world, let alone turning a profit. And the few that do 21 still seem to end up losing their way at some point. This is not due 22 to a lack of experience or resources, or even money— the three most 23 commonly reported reasons why businesses fail. The biggest prob- 24 lem business owners have is that they don’t know what their biggest 25 problem is. Let me say that one more time for the folks in the back: 26 The biggest problem business owners have is that they don’t know 27S what their biggest problem is. 28N We sure as hell don’t, because every problem seems like the big

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9780593084410_FixThisNext_TX.indd 4 1/21/20 4:01 PM problem— a fire that needs to be put out before it becomes a blazing ▼ 01 inferno. I suspect you may feel this way about your business right ▼ 02 now. Or you may think you know the exact thing that you need to ▼ 03 fix, that thing that, if you could only solve it, would finally make ▼ 04 everything work. Shoot, you may have a list neatly tracking all the ▼ 05 things you need to address to finally achieve the goals you have set. 06 You may even believe that the solution is just to keep grinding it 07 out. (It isn’t.) Yet even when you do manage to successfully tackle 08 a problem, or even all those problems, it doesn’t seem to move your 09 business forward in a big way. 10 In the past, I repeatedly fell into the trap of fixing whatever 11 problem was in front of me. Whether I was saving the day, or just 12 trying to get my company to the next level, I rushed to the appar- 13 ent problems. You know, the obvious stuff and the squeaky wheels. 14 Because— and I know you getthis— at any given time there is al- 15 ways a boatload of problems that need your attention. So, trusting 16 my gut instincts, I would just pick the one that felt like the most 17 urgent and focus on that. In this process of addressing the apparent 18 issues, I was disregarding the most impactful one. What resulted was 19 a continuous run of problem solving, and yet my business remained 20 stuck. 21 Sometimes— rarely, but sometimes— you solve a problem and 22 your business does take a leap forward. Phew. The relief. You see 23 positive movement. In that moment, the future looks so bright you 24 gotta wear shades (made of gold). Everything is perfect, until 25 it’s not. 26 Before you know it, your business careens back into the strug- S27 gle. That’s why this outcome is worse— tasting success only to get N28

The Business Owner’s Compass 5

9780593084410_FixThisNext_TX.indd 4 1/21/20 4:01 PM 9780593084410_FixThisNext_TX.indd 5 1/21/20 4:01 PM 01 ▼ stuck again is not just frustrating, it’s costly and demoralizing. I call 02 ▼ this the Survival Trap. Sadly, I have found it to be the most com- 03 ▼ mon situation in which entrepreneurs find themselves. They take 04 ▼ the necessary (and often panicked) actions to keep the business 05 ▼ alive today, and then repeat the pattern tomorrow, and the tomor- 06 row after that, and so on. The goal for each day is simply to survive 07 the day. 08 The Survival Trap manifests in many different ways. If you’ve 09 read my previous books, you might be familiar with it. When it 10 comes to our business’s (lack of) cash flow, we often throw our few 11 remaining dollars at the immediate problems and opportunities, 12 hoping that profit will magically materialize as a result. When it 13 comes to our time, we burn out ourselves and our people by work- 14 ing even longer hours, constantly putting out fires and chasing 15 arbitrary quarterly targets instead of building sustainable systems. 16 And when it comes to fixing the business, we find ourselves patch- 17 ing up the obvious problems, only to wonder why they keep re- 18 occurring over and over again. 19 If this cycle seems a little too real and you’re wondering if it’s 20 even possible to break out of it, take heart. Entrepreneurs are nat- 21 ural problem solvers. You are a natural problem solver. You can’t 22 get a business off the ground without being one. So it’s not as 23 if your business is being held back because you’re up against an 24 unsolvable problem. You can fix whatever it is that’s holding you 25 back . . . if only you can figure out what you need to fix, and in 26 what order. 27S You can move your business forward in big strides, and in short 28N order. Your vision for your business can become a reality. And it

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9780593084410_FixThisNext_TX.indd 6 1/21/20 4:01 PM will, once you figure out what your biggest problem is right now, ▼ 01 and then devote yourself to fixing that next. ▼ 02 ▼ 03

▼ You Can’t Get out of the Woods 04 ▼ on Instinct Alone 05 06 Amanda Eller intended to take a brief hike in the Hawaiian woods 07 but ended up lost for seventeen days, clinging to life. Eller’s plan 08 was to go on a three- mile hike. At one point, she sat down on a log 09 to meditate. When she finished, she wanted to return to her car, 10 but she was disoriented and unsure which way to go. 11 “I have a strong sense of internal guidance, whatever you want 12 to call that— a voice, spirit, everybody has a different name for it,” 13 she told reporters after the rescue team found her. Except, it turned 14 out, her “internal guide” seemed to be on the fritz that day. And 15 continued to fail her for sixteen more consecutive days. She tried 16 one path, and then another. She even ended up on a path that was 17 not for humans— it was a boar path. Yup. You read that right. Her 18 internal guide sent her on a boar path. You know, those half feral 19 pig, half minirhino beasts that try to impale you if you look at them 20 the wrong way. That boar path. 21 When rescuers found Eller, she was severely injured (not from a 22 boar, which was a small mercy), could barely move, and had given 23 up all hope of being found. She was only a few miles from her car. 24 So what might have helped Eller find a path out of the woods? 25 She admitted later that she was irresponsible and should have 26 brought her cell phone and some water. She also didn’t have a S27 compass in case her cell phone battery died or she couldn’t find N28

The Business Owner’s Compass 7

9780593084410_FixThisNext_TX.indd 6 1/21/20 4:01 PM 9780593084410_FixThisNext_TX.indd 7 1/21/20 4:01 PM 01 ▼ service to use the map app on her phone. The magic of a compass 02 ▼ is that when you have one, there’s no need for batteries or phone 03 ▼ chargers or GPS, it can work in any weather condition, and it is 04 ▼ ready to go twenty- four seven— whenever you need it. If Amanda 05 ▼ had had a basic compass, just a simple, fit- in- your- pocket, nobells-- 06 and- whistles compass (and knew how to use it), she would have 07 made it home safe and sound in time for dinner. 08 I’ve always been a big believer in working with my human na- 09 ture to accomplish a goal, rather than trying to change my wiring 10 to achieve it. Why go the long way around the block? Or take a 11 seventeen- day, life- threatening detour through the woods? That’s 12 why I designed the Profit First system to work with our natural 13 tendency to manage our business by our bank accounts. In the past, 14 I would spend all I had, based on how much cash was sitting in my 15 bank that day, even though I knew that I had to set aside some of it 16 for taxes or for a big equipment purchase. I would always try not to 17 spend down my bank balance, but it was a game of wills. And I al- 18 most always lost that game. 19 By simply allocating my revenue into profit and other accounts, 20 such as a reserve for taxes, I ensured that when I spent my operating 21 expense account down, I still had enough money for everything 22 else— especially profit. 23 So what we really need are systems that work with our natural 24 tendencies. You can still use your gut to navigate the terrain, but a 25 compass will ensure your instincts are in fact consistently moving 26 you in the right direction. In much the same way, Fix This Next is 27S a simple system that works like a compass for your business. When 28N I use this system, it always points me in the direction I need to go,

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9780593084410_FixThisNext_TX.indd 8 1/21/20 4:01 PM and I use my instincts to address the immediate terrain. And you ▼ 01 will too. ▼ 02 Getting your business bearings begins with what you see as a ▼ 03 barrier to your company’s path forward, and then, in four simple ▼ 04 steps, home in on the direction you need to take (that is, the prob- ▼ 05 lem you need to solve). 06 07 The Business Hierarchy of Needs 08 09 Chances are you’ve heard the common belief that the actions you 10 need to take to drive growth should be determined by the stage of 11 revenue your business is at. For example, “they” say when you achieve 12 $250,000 in annual revenue, you will likely need a full- time em- 13 ployee. When you get to $1 million, you will probably need to master 14 niche specialization. At $5 million, you’ll need to build a cache of 15 cash. When you hit $10 million, systems are everything. I under- 16 stand this thinking, and although these are occasionally applicable 17 guidelines, they don’t hold much water in our times. 18 On its own, revenue is not a reliable marker for healthy business 19 growth. A business doing $250,000 in annual revenue could be 20 more successful than a business doing $250 million.* In fact, a 21 small business can bring more joy to the owners, have a higher 22 profit percentage, be more efficient, have a greater impact on their 23 industry and community, and create a remarkable legacy that far 24 surpasses a company that has one hundred times the sales. 25 26 *Sadly, as I was writing this section, a very good friend of mine who was running the S27 $250 million company he founded filed for Chapter 11. They were crushed by an inability to deliver their services as quickly as they needed to sustain a healthy cash flow. N28

The Business Owner’s Compass 9

9780593084410_FixThisNext_TX.indd 8 1/21/20 4:01 PM 9780593084410_FixThisNext_TX.indd 9 1/21/20 4:01 PM 01 ▼ The old model of business stages tied to revenue is too narrow a 02 ▼ perspective for modern businesses. It’s also rooted, in part, by ego. 03 ▼ Why do we want to build a multimillion- dollar business? Is it be- 04 ▼ cause that number will fuel predetermined personal and profes- 05 ▼ sional goals? Or is it because we want to be able to say we built a 06 multimillion- dollar business? We need to be honest with ourselves 07 and admit that our revenue goals are often arbitrary, and some- 08 times, just sometimes, based on a need to hear our friends say, “Dang, 09 dawg! That’s impressive, yo!” (Or however your weirdo bowling 10 buddies would say it.) 11 I believe there is a better model to help illuminate the right busi- 12 ness strategies, and you may already be familiar with it. In 1943, Abra- 13 ham Maslow identified what has now become known as Maslow’s 14 hierarchy of needs. Originally presented in a journal article titled “A 15 Theory of Human Motivation,” Maslow’s theory states that there are 16 five categories of human need. From the most basic and essential 17 needs for survival to the highest needs for happiness and fulfillment, 18 they are: 19 20 1. Physiological: These are the most critical needs for human 21 survival, and include necessities such as air, food, water, 22 shelter, sex, and sleep. 23 2. Safety: At this second stage, humans are focused on a secure 24 and safe environment, health, and financial security. 25 3. Belongingness: Moving up to the third stage, we seek love, 26 friendship, community, family, and intimacy. 27S 4. Esteem: In the fourth stage, humans focus on confidence, 28N self- esteem,self- worth, achievement, and respect.

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9780593084410_FixThisNext_TX.indd 10 1/21/20 4:01 PM 5. Self- Actualization: At the fifth stage, the highest level, hu- ▼ 01 mans thirst for morality, creativity, and self- expression, and ▼ 02 to help others achieve self- actualization. Maslow argued it is ▼ 03 at this level that we realize our full potential. ▼ 04 ▼ 05 You’re a smart cookie, so even if you’ve never heard of Maslow’s 06 hierarchy of needs, you can probably figure out that in order for us 07 to attend to something higher on the list, we first need to make sure 08 that our needs are met in the categories below it. So, for example, 09 before you can focus on meeting your needs for love and belonging, 10 you first need the basics: air to breathe, adequate hydration and 11 nutrition, and a safe place to sleep. It’s pretty tough to deal with 12 your self- actualization when you’re tiredand hangry. 13 Even when we humans do have all of our basic needs met in our 14 everyday lives, we sometimes find ourselves back at the bottom of 15 16 17 18 19 20 21 22 23 24 25 26 S27 Figure 1. Maslow’s Hierarchy of Needs N28

The Business Owner’s Compass 11

9780593084410_FixThisNext_TX.indd 10 1/21/20 4:01 PM 9780593084410_FixThisNext_TX.indd 11 1/21/20 4:01 PM 01 ▼ the pyramid. You could be self- actualizing with the best of them 02 ▼ while munching down a double bacon cheeseburger, and none of 03 ▼ that matters the second a piece of Angus lodges in your wind- 04 ▼ pipe. Suddenly, you are forced to deal with one of the most basic 05 ▼ needs: air. It isn’t about intellectual contemplation anymore. Now 06 it is all about, and only about, getting that hunk of meat out of your 07 throat. 08 What does any of this have to do with running a business? 09 Looking at Maslow’s hierarchy of needs, I realized that it has a di- 10 rect correlation to entrepreneurial progress: what drives your busi- 11 ness, what keeps your company trapped, and how you fix the 12 roadblocks along the way to achieve the highest levels of success 13 as you, the entrepreneur, define it. It’s all there in Maslow’s hier- 14 archy, just with some tweaks and changes to fit the dynamics of 15 business. 16 Exactly as Maslow argued, we must first meet our base- level 17 needs before we can focus on advanced levels such as love, be- 18 longing, and self- actualization. Similarly, a healthy company must 19 first attend to the base needs of sales, profit, and order before the 20 leadership (you) can focus on more advanced pursuits, such as 21 impact and legacy. The key to climbing the hierarchy is simple: 22 fully satisfy your business’s current level of needs, not by rushing to 23 the apparent daily demands, not by addressing advanced needs 24 before basic needs, and certainly not by trying to fix everything at 25 once. To do this, we will use what I call the Business Hierarchy of 26 Needs (BHN). 27S The model looks like this, starting with the most essential: 28N

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9780593084410_FixThisNext_TX.indd 12 1/21/20 4:01 PM ▼ 01 ▼ 02 ▼ 03 ▼ 04 ▼ 05 06 07 08 09 10 11 Figure 2. The Business Hierarchy of Needs 12 13 Within each level, there are “needs” that must be adequately 14 met before you can focus on a higher level. So just as we humans 15 need to ensure we have food and water before we can start to address 16 our self- esteem, your business must first focus on its basic needs. 17 After three years of research and redos (and banging my head against 18 the wall a few times), I have identified five Core Needs within each 19 of the five levels of the BHN. They are listed below, and we’ll get 20 into each one in greater detail in chapters 3 through 8. 21 22 23 Sales 24 At this foundational level, the business must focus on the creation of 25 cash. Just as humans can’t survive without oxygen, food, and water, 26 if you don’t have sales, your company will not be able to survive for S27 N28

The Business Owner’s Compass 13

9780593084410_FixThisNext_TX.indd 12 1/21/20 4:01 PM 9780593084410_FixThisNext_TX.indd 13 1/21/20 4:01 PM 01 ▼ long. Heck, without sales, you won’t have a business at all. Address- 02 ▼ ing the five needs in the SALES level will ensure that your founda- 03 ▼ tion is working solidly and can support the next level, PROFIT. 04 ▼ Here are the five Core Needs and corresponding questions for 05 ▼ the SALES level: 06 07 1. Lifestyle Congruence: Do you know what the company’s sales 08 performance must be to support your personal comfort? 09 2. Prospect Attraction: Do you attract enough quality prospects 10 to support your needed sales? 11 3. Client Conversion: Do you convert enough of the right pros- 12 pects into clients to support your needed sales? 13 4. Delivering on Commitments: Do you fully deliver on your 14 commitments to your clients? 15 5. Collecting on Commitments: Do your clients fully deliver on 16 their commitments to you? 17 18 19 Profit 20 At the PROFIT level, the company’s focus shifts to the creation of 21 stability. Here, our business’s needs line up pretty closely with our 22 human needs for health, financial stability, and a secure and safe 23 environment. Massive revenue doesn’t mean much when you have 24 no profit, no cash reserves, and are drowning in debt. When all five 25 needs in the PROFIT level are satisfied, you are positioned to scale 26 your business without financial collapse. 27S Here are the five Core Needs and corresponding questions for 28N the PROFIT level:

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9780593084410_FixThisNext_TX.indd 14 1/21/20 4:01 PM 1. Debt Eradication: Do you consistently remove debt rather ▼ 01 than accumulate it? ▼ 02 2. Margin Health: Do you have healthy profit margins within ▼ 03 each of your offerings and do you continually seek ways to ▼ 04 improve them? ▼ 05 3. Transaction Frequency: Do your clients repeatedly buy from 06 you over alternatives? 07 4. Profitable Leverage: When debt is used, is it used to generate 08 predictable, increased profitability? 09 5. Cash Reserves: Does the business have enough cash reserves 10 to cover all expenses for three months or longer? 11 12 13 Order 14 At this level, the focus is on the creation of efficiency, and the 15 needs are related to ensuring that everything runs like clockwork. 16 With all of its organizational efficiency needs met, your business 17 can run— and yes, evengrow— no matter who is on your team. It 18 can even grow without you, the business owner. 19 Here are the five Core Needs and corresponding questions for 20 the ORDER level: 21 22 1. Minimized Wasted Effort: Do you have an ongoing and working 23 model to reduce bottlenecks, slowdowns, and inefficiencies? 24 2. Role Alignment: Are people’s roles and responsibilities matched 25 to their talents? 26 3. Outcome Delegation: Are the people closest to the problem S27 empowered to resolve it? N28

The Business Owner’s Compass 15

9780593084410_FixThisNext_TX.indd 14 1/21/20 4:01 PM 9780593084410_FixThisNext_TX.indd 15 1/21/20 4:01 PM 01 ▼ 4. Linchpin Redundancy: Is your business designed to operate 02 ▼ unabated when key employees are not available? 03 ▼ 5. Mastery Reputation: Are you known for being the best in 04 ▼ your industry at what you do? 05 ▼ 06 07 Impact 08 The focus now is on the creation of transformation. Many businesses 09 never properly address the needs at this level, because they either 10 don’t know this level exists, or misunderstand what it’s all about. 11 When we think of impact, we think of how our business impacts the 12 world. However, the needs that must be addressed at this level are 13 related to client transformation, and how your company aligns with 14 your staff, vendors, and your community, not to the wider world. 15 Here are the five Core Needs and corresponding questions for 16 the IMPACT level: 17 18 1. Transformation Orientation: Does your business benefit cli- 19 ents through a transformation, beyond the transaction? 20 2. Mission Motivation: Are all employees (including leadership) 21 motivated more by delivering on the mission than by their 22 individual roles? 23 3. Dream Alignment: Are people’s individual dreams aligned 24 with the path of the business’s grand vision? 25 4. Feedback Integrity: Are your people, clients, and community 26 empowered to give both critical and complimentary feed- 27S back? 28N

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9780593084410_FixThisNext_TX.indd 16 1/21/20 4:01 PM 5. Complementary Network: Does your business seek to collab- ▼ 01 orate with vendors (including competitors) who serve the ▼ 02 same customer base in order to improve the customer expe- ▼ 03 rience? ▼ 04 ▼ 05 06 Legacy 07 At this highest level, the focus is on the creation of permanence. 08 Ensuring that your business and the impact it delivers will live on 09 after you move on requires that specific needs are met. If you want 10 your business to continue to thrive for generations to come, you’ll 11 have to consider the big questions, such as what your long- term 12 vision for your company is, and how your business will adapt to 13 changes in your industry, in consumer demand, and in the world. 14 Here are the five Core Needs and corresponding questions for 15 the LEGACY level: 16 17 1. Community Continuance: Do your clients fervently defend, 18 support, and help the business? 19 2. Intentional Leadership Turn: Is there a plan for leadership to 20 transition and stay fresh? 21 3. Heart- based Promoters: Is the organization promoted by indi- 22 viduals inside and outside the organization, without need of 23 direction? 24 4. Quarterly Dynamics: Does your business have a clear vision 25 for its future and dynamically adjust quarterly to make that 26 vision become true? S27 N28

The Business Owner’s Compass 17

9780593084410_FixThisNext_TX.indd 16 1/21/20 4:01 PM 9780593084410_FixThisNext_TX.indd 17 1/21/20 4:01 PM 01 ▼ 5. Ongoing Adaptation: Is the business designed to constantly 02 ▼ adapt and improve, including finding ways to better and 03 ▼ best itself? 04 ▼ 05 ▼ To be clear, the BHN levels do not represent stages in business 06 growth. They are levels of needs. Your business will not climb the 07 hierarchy in a linear fashion, but move up and down levels as it 08 progresses. Like building and renovating structures, you don’t just 09 go up. You go back down to the foundation, shore it up, so you can 10 build higher. So, for example, while you may be dealing with a need 11 in the SALES level, that does not mean your company is still in the 12 SALES stage. You are simply strengthening the foundation. 13 I’m pretty sure I know what you’re thinking: This list may work 14 for your business, but my business is different. Your business may very 15 well have additional needs. While this list is not comprehensive, 16 each of the five Core Needs at each of the five levels are required 17 for every business to be healthy and thriving. If you have a need 18 that is not listed on the BHN, jot it down and save it for later. I ask 19 that you trust the process and, for this first go- round, focus on the 20 five essentials of each level on the BHN. 21 Most business owners try to master all things at once. It was my 22 modus operandi for years. I intended to simultaneously have impact, 23 make lots of money, work whenever I wanted to, create a legacy, 24 and have clients flocking to my company. The thing is, prioritizing 25 everything at the same time means that nothing is a priority. Just 26 like Maslow’s hierarchy, all these elements are in play at all times. 27S However, you can only concentrate your energy on solving one 28N

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9780593084410_FixThisNext_TX.indd 18 1/21/20 4:01 PM ▼ 01 ▼ 02 ▼ 03 ▼ 04 ▼ 05 06 07 08 09 10 11 12 13 14 15 16 Figure 3. The BHN with the Five Core Needs of Each Level 17 18 issue within one level at a time. The golden rule is always to satisfy 19 the most essential need (the one closest to the base), before ad- 20 dressing a need above it. 21 Let’s say you have a consistent stream of sales, and it supports 22 the goals you have clearly outlined. If that is true, then your busi- 23 ness has achieved the equivalent of breathing in air. The next level 24 is PROFIT, which translates to safety and security. If someone is 25 trying to rob you by holding a knife to your chest, you don’t worry 26 about air (SALES); you worry about getting out of danger. But if S27 N28

The Business Owner’s Compass 19

9780593084410_FixThisNext_TX.indd 18 1/21/20 4:01 PM 9780593084410_FixThisNext_TX.indd 19 1/21/20 4:01 PM 01 ▼ suddenly you and the guy with the knife are trapped in a room with 02 ▼ no oxygen (SALES), you would both be focused on the more urgent 03 ▼ need— finding the air you need to breathe. 04 ▼ You are instinctually wired to find the air you need to breathe, 05 ▼ the water and food you need to survive, and to avoid danger. But 06 for entrepreneurs, the solution to our business problems are in fact 07 not instinctual. The business is its own entity, so you don’t have 08 biological triggers telling you that your business is thirsty, or starv- 09 ing, or just needs some cuddle time. We think we are connected to 10 our business in that way. (We’re not.) So we “trust our gut” and 11 make what feels like appropriate decisions to grow. 12 If you find yourself walking down a dark alley and something 13 just doesn’t feel right, that is your instinct indicating something is 14 wrong. I suggest you turn around fast and find another way to get 15 where you are going, because if you don’t, you might just end up in 16 the hospital. Your senses— seeing, hearing, smelling— are all di- 17 rectly wired into your brain, providing immediate and helpful in- 18 sights. While we are wired into our bodies, we are not wired into 19 our business, and that poses a problem. Instincts save lives. Busi- 20 nesses? Not so much. 21 The thing is, we all believe we have good business instincts— 22 that we can trust our gut to help us make the right decisions. And 23 yet very often we end up like Amanda Eller, walking down a boar 24 path in search of our way out. We are fixing the wrong thing at the 25 wrong time. The most common, gut instinct solution that I see em- 26 ployed by entrepreneurs is this: sell more. For example, a business 27S may have a relatively consistent degree of sales, yet the business is 28N not profitable. Rather than try to resolve the PROFIT level, we

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9780593084410_FixThisNext_TX.indd 20 1/21/20 4:01 PM almost inexplicably revert to trying to sell more, believing that ▼ 01 more SALES (the most basic level) will fix the PROFIT level. ▼ 02 For Maslow’s hierarchy this is akin to being caught up in a brawl ▼ 03 (the Safety Level) and gasping for air to protect ourselves (the ▼ 04 Physiological Level). It makes no sense. Even though, biologically ▼ 05 speaking, we would have a fight-or -flight response; since we aren’t 06 wired into our business instinctually we gasp for air while we get 07 punched in the face, repeatedly. Other times, a business is unable to 08 deliver on time and as promised consistently, which is an ORDER- 09 level problem. Yet the owner’s instinct is to sell more, amp up reve- 10 nue, and expect that will somehow fix the business operations. It 11 doesn’t, and it won’t. 12 These trust- your- gut and shoot- from- the- hip methods of grow- 13 ing a business very often impede success. Some businesses are suc- 14 cessful not because of, but in spite of, the entrepreneur at the helm. 15 Without a specific, repeatable strategy to growth, their success is 16 more like a lottery win than an architected plan. 17 What we need is a compass. Something that we can use to 18 check our gut instincts, to make sure we are in fact moving true 19 north. That is what the BHN will do for you. 20 21 What We Believe May Not Be True 22 23 Recently, I became fascinated with the story of the Winchester Mys- 24 tery House, a sprawling, 160- plus- room Queen Anne Victorian man- 25 sion in San Jose, California. Once I read about this house, I immediately 26 booked a flight to San Jose, toured the bizarre structure, and discov- S27 ered an uncanny parallel to the typical entrepreneur’s journey. N28

The Business Owner’s Compass 21

9780593084410_FixThisNext_TX.indd 20 1/21/20 4:01 PM 9780593084410_FixThisNext_TX.indd 21 1/21/20 4:01 PM 01 ▼ When Sarah Winchester’s husband died of tuberculosis in 1881, 02 ▼ he left her a fortune worth more than $500 million in today’s 03 ▼ dollars. William Winchester was a gun magnate, and heir to the 04 ▼ Winchester Repeating Arms Company. Legend has it that Sarah 05 ▼ believed she was haunted by the ghosts of people who were killed 06 using Winchester rifles, and that she needed to build more and 07 more rooms onto her home to satisfy (and hide from) the evil spir- 08 its chasing her. 09 Sarah moved to California, bought a two- story, eight- room 10 farmhouse, and proceeded to build additions. Relentlessly. 11 Thirty- eight years later, she was still building. 12 With no rhyme or reason, and no architect to help her plan, 13 Sarah set out to add new room after new room. According to Mi- 14 randa of the Spooky Little Halloween blog, “Sarah would build what- 15 ever she felt like, often abandoning ideas and building around 16 errors her workers made. She met with her foreman every morning 17 to go over her hand- sketched plans for the day’s work.” Sarah would 18 start every day’s work by tackling the most apparent issue of the day. 19 I don’t know about you, but I think Sarah needed an architec- 20 ted plan (and maybe a skosh of therapy). She believed in her in- 21 stinct alone, and then every day she tried to figure out how to 22 appease or get away from the problems (ghosts) she saw. 23 Eventually, what was once a farmhouse became a seven- story 24 mansion with more than 160 rooms— rooms she built and then 25 never set foot in again. Doors and windows opened up to walls, 26 many fireplaces had no chimneys, and some staircases led to no- 27S where. 28N

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9780593084410_FixThisNext_TX.indd 22 1/21/20 4:01 PM When the San Francisco earthquake hit in 1906, all of the top ▼ 01 three stories were destroyed, and part of the fourth. The damaged ▼ 02 areas were not restored, but instead were picked for supplies to ▼ 03 build elsewhere. Today, what’s left of the Winchester Mystery Man- ▼ 04 sion covers roughly 24,000 square feet and has more than 10,000 ▼ 05 windows, and 6 kitchens. It’s one of the strangest houses I’ve ever 06 seen, and it is a weirdo’s paradise. (Between you and me, I think I 07 saw one of your bowling buddies there.) Get to Googling and see 08 for yourself. When you do, think about your business. Think about 09 all the choices you made based on instinct, or in response to a prob- 10 lem (an evil spirit), or to counterpunch a competitor (an evil- er 11 spirit), or just because it is what an expert said you needed. Think 12 about all of the “rooms” you built and maybe even abandoned try- 13 ing to jump on opportunities, or solve problems, or just because you 14 didn’t know what else to do. 15 Upon Sarah Winchester’s passing, construction immediately 16 stopped. Her house went on the market, yet the massive mansion 17 was unsellable. No one wanted the extraordinary, complex, and 18 confusing house, nor did anyone have enough funds or expertise to 19 fix it. Ultimately, an investor group purchased the house for pen- 20 nies on the dollar and made it into an exhibit for seekers of the odd 21 and extreme. A massive structure, under continuous construction 22 for nearly forty years, it was ultimately worthless (except as a per- 23 fect illustration of what I am about to tell you). 24 When you trust your gut alone instead of analyzing your busi- 25 ness, you could end up with useless fireplaces and stairs to nowhere. 26 Or lost in a Hawaiian forest. So as tuned in and savvy as I know you S27 N28

The Business Owner’s Compass 23

9780593084410_FixThisNext_TX.indd 22 1/21/20 4:01 PM 9780593084410_FixThisNext_TX.indd 23 1/21/20 4:01 PM 01 ▼ are, I’m asking you to forgo your reliance on instinct alone . . . at 02 ▼ least for as long as it takes you to read this book and implement 03 ▼ the action steps. Okay? Can we (virtually) shake on that? In other 04 ▼ words, humor me. 05 ▼ The BHN may not be as mystical as the séance Harry Houdini 06 held in the Winchester house one evening (true story), but give it 07 a try. It just may save your company, and your sanity. 08 × 09 10 Here’s a simple but powerful challenge: I have found that the most 11 effective way to improve your business is to commit to another per- 12 son your intentions to improve. So, here I am, your new account- 13 ability partner. Email me at [email protected] with the 14 subject line “I’m doing FTN!” so I can quickly find it. In your email 15 tell me why you’re committed to the FTN process and what it will 16 mean to you as you realize the dream you have for your business. 17 With your commitment documented, your likelihood of seeing it 18 through will skyrocket. Plus, it will be awesome for us to connect. 19 Let’s do this! 20 As I mentioned earlier, I have prepared free powerful resources 21 and tools for you that supplement this book. Go to FixThisNext 22 .com right now to get them. When you visit the site be sure to take 23 the free evaluation. It will pinpoint what you need to fix next in 24 your business. And you can be resolving it minutes from now. 25 26 27S 28N

24 Fix This Next

9780593084410_FixThisNext_TX.indd 24 1/21/20 4:01 PM ▼ 01 A QUICK NOTE ABOUT PROFIT FIRST ▼ 02 ▼ 03 Before we get rolling fully into Fix This Next, I need to address a ▼ 04 thought you might be having about another book I wrote: Profit ▼ 05 First. When talking about FTN, people ask me, “Mike, didn’t you say we should take our profit first? If profit always comes first, 06 how could you suggest addressing other things first in Fix This 07 Next ? You sound like a big, fat, smelly hypocrite.” 08 The smelly part you can blame on my bad genetics. 09 The rest simply needs clarification. 10 When I wrote , I challenged the traditional formula Profit First 11 of profitability: sales − expenses = profit. Simply put, traditional 12 thinking teaches us that profit comes last. That profit is the bot- 13 tom line. And that is the problem with the old formula. It is human nature that when something comes last, it gets delayed at 14 best and ignored most often. 15 Profit First means that profit comes before expenses. Sales − 16 profit = expenses. Take your profit first, put it into an account, 17 and hide it away from your business, before you spend a single 18 dime. Profit First means you allocate your profit first and then 19 you are forced to reverse engineer your way to achieving the profit 20 you already took. It is the pay-yourself- first principle applied to 21 business. Profit First does not mean that profit is the only thing you focus on and that you can ignore everything else. 22 To improve your business, identify the most important thing 23 your business needs at this moment and then fix it. At times it 24 will be at the level of SALES, or ORDER. At other times it will be 25 at the level of PROFIT, or IMPACT, or LEGACY. I suggest that 26 once you implement Profit First, you continue to use it— as in S27 forever. And once your profit is shored up, your next—as in, top, N28

The Business Owner’s Compass 25

9780593084410_FixThisNext_TX.indd 24 1/21/20 4:01 PM 9780593084410_FixThisNext_TX.indd 25 1/21/20 4:01 PM 01 ▼

02 ▼ or first—priority will be the next thing your Fix This Next com- 03 ▼ pass points to. 04 ▼ If you haven’t implemented Profit First yet, I suggest that you 05 ▼ put the idea on pause until you finish this book. Because, as strange as it may sound hearing this from me, your profit may not 06 come first (or next). You may have another Vital Need you must 07 address before profit. I am sure Profit First will serve you, but 08 until you finish this process, we can’t say in absolute terms when 09 it will best serve you. 10 Hope that clears it up. Profit First is the formula of taking 11 profit first. It is not about prioritizing profit at all times and above 12 everything else. We good? Good. 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27S 28N

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9780593084410_FixThisNext_TX.indd 26 1/21/20 4:01 PM 01 02 03 Chapter 2 04 FIND IT AND FIX IT 05 06 07 08 09 10 11 “YEAH, BUT . . .” 12 I’m always amazed by how many of us business owners have a 13 serious case of the “yeah, but’s.” We believe our companies are so 14 unique that simple solutions and strategies could not possibly help 15 us with whatever problem we think we have. “Yeah, but my busi- 16 ness is different,” we shout from the rooftops. I get it. I thought that 17 was true for my businesses too. Maybe you feel your business is spe- 18 cial too. But the thing is, it’s not even a wee bit true. 19 Just as our human DNA is 99.9 percent identical, the DNA for 20 all businesses is nearly identical. I don’t care if you run a farm or a 21 pharmacy. I don’t care if you invest, divest, suggest, or profess for 22 a living. Your business is 99.9 percent identical to all others— just 23 as they are nearly identical to yours. The remaining 0.1 percent of 24 our DNA is the skin of our corporate bodies. Our businesses may 25 look different on the outside. You may have different equipment 26 and people with different skill sets. Your office may be virtual or S27 N28

9780593084410_FixThisNext_TX.indd 26 1/21/20 4:01 PM 9780593084410_FixThisNext_TX.indd 27 1/21/20 4:01 PM 01 ▼ physical or nonexistent. That’s just the skin of the business. What 02 ▼ is under your corporate skin is nearly equivalent to all other busi- 03 ▼ nesses. 04 ▼ Before Ken Mulvey started his business, Supply Patriot, he was 05 ▼ a bodyguard to the rich and famous. In one of our conversations, he 06 shared some details of the protection services he provided for a key 07 executive of a major publisher. As he recounted the story, I was 08 thinking, “So the publisher gets a bodyguard, but the measly author 09 guy gets squat? Nice. Real nice.” 10 As part of his guard work, Ken attended board meetings. You 11 know, because you never know when a thug is going to break into 12 a conference room to steal old crusty doughnuts and stale coffee 13 from old crusty guys with stale breath. Ken’s job was to be on the 14 watch, and since there was nothing to watch out for (refer to my 15 prior point) he would listen. Closely. 16 “Mike, there were some of the biggest CEOs in the country 17 serving on that board,” Ken told me. “And they all had the identi- 18 cal problems that my friends’ small businesses had, only with five or 19 six more zeros at the end of every number. They had the same cash- 20 flow problems, the same hiring problems, the same profitability 21 problems. The same confusion over what to do next.” 22 Ken’s story reminded me of a conversation I had with a friend 23 who owns a $22 million company. We were in a room with one 24 hundred business owners at the Gathering of Titans annual meet- 25 ing in Dedham, Massachusetts. 26 I’ve known my friend Stu for almost twenty years. We grew up 27S together as entrepreneurs, and I’ve seen his company grow. A lot. 28N

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9780593084410_FixThisNext_TX.indd 28 1/21/20 4:01 PM Although it fits the U.S. government’s definition of a “small busi- ▼ 01 ness” (less than $25 million in sales), Stu’s company is the leader in ▼ 02 their space. In fact, I suspect you would recognize its name. You ▼ 03 would probably recognize Stu’s real name too, which is why I am ▼ 04 not using either in this book. ▼ 05 During a break, I asked Stu a simple question that, when you 06 have a true friendship, can open the door to deep conversations 07 and confessions. 08 “How it’s going, Stu?” 09 “Great,” he said with a half smile. 10 I know that smile. I’ve seen it on the faces of thousands of entre- 11 preneurs, and I’ve seen it on my own face when I look in the mirror. 12 “Oh, no. What’s wrong, brother?” I asked. 13 He sighed, did the look- over- both- shoulders move, and then 14 replied in a hushed tone, “I only have four weeks of cash left in my 15 business, Mike. I have no prospects. At least, not enough prospects 16 to keep us alive.” 17 This is not an unusual scenario for most small- business owners, 18 but how could this happen to a $22 million industry leader? It had 19 to be a fluke, right? Nope. Some of the most successful entrepre- 20 neurs in the world were in this room, and yet you might be sur- 21 prised to discover that, at any given time, 10 to 20 percent of them 22 are in deep shit. 23 Whether your business is big, small, or somewhere in between, 24 the needs are exactly the same. Size doesn’t matter, after all. Nor 25 does revenue or number of employees or the number of years you 26 have operated your (possibly crusty and stale) business. S27 N28

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9780593084410_FixThisNext_TX.indd 28 1/21/20 4:01 PM 9780593084410_FixThisNext_TX.indd 29 1/21/20 4:01 PM 01 ▼ I totally get that your business has unique qualities. Just like 02 ▼ mine. Just like all businesses. All people have unique qualities too, 03 ▼ yet we all share a common biology. These unique qualities are nec- 04 ▼ essary and critical, because we need differentiators to attract our 05 ▼ ideal customers. When we’re talking marketing and branding, dif- 06 ferent is better. But we’re not talking about that in this book. What 07 we are talking about today is the biology of your business. 08 Just as all humans need to follow the same basic parameters to 09 grow and maintain health, the methods to achieving growth and 10 sustaining health are nearly identical for almost every business. Ours 11 may look different from the outside. Ours may do different things. 12 But never forget this: the essential makeup of almost all businesses 13 is nearly identical. One guy may run a pizza shop and another gal 14 might have a flight- instruction business. But the way they sustain 15 themselves and grow, and the crucial needs they need to meet, are 16 the same. 17 In this chapter, you’ll learn a simple process to navigate the 18 BHN so you can find what to fix next, and a simple method to find 19 a solution so you can fix it and move on. 20 21 Find It 22 23 Let’s pretend we’re playing a game of tug-of -war, except instead of 24 a rope we pull on opposite ends of a metal chain, and instead of 25 trying to pull each other over a line, our aim is to find where the 26 chain breaks. You take one end and, standing a few feet away, I 27S have the other. Between us are twenty- five or so links of the chain. 28N On the count of three, we both start pulling to see where the chain

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9780593084410_FixThisNext_TX.indd 30 1/21/20 4:01 PM breaks. No matter how we pull on the chain, neither of us has any ▼ 01 control over where it will break. ▼ 02 The chain will always break at the weakest link. In other words, ▼ 03 any chain is only as strong as its weakest link. No matter what you try, ▼ 04 you can’t manipulate the process to make a different part it break. It ▼ 05 has a natural weak spot. If you want to strengthen the entirety of the 06 chain you must address its weakest link, which, in the context of your 07 business, I call the Vital Need. At any moment, of all the Core Needs 08 that exist within your business there is a single Vital Need that rep- 09 resents the current weakest link. You can’t manipulate the “game” to 10 make it something different. Your job is to find it and then fix it next, 11 before you move on to what emerges as the new Vital Need. 12 Within any business process, be it the finer details of how you 13 build your product, or the broader sequence your prospects go 14 through to become your clients, there are chains of events. At all 15 levels of a business’s development, from struggling startup to indus- 16 try titan, everything goes through a chain of events. Within this 17 chain there will always only ever be one link that is the weakest. 18 The goal of this book is to help you find that weakest link and 19 strengthen it, because when you strengthen the weakest link the 20 entire chain is strengthened. 21 Eliyahu Goldratt introduced the Theory of Constraints in his 22 must- read book,The Goal. According to the Theory of Constraints, 23 a business process can only operate as fast as its slowest part. There- 24 fore, if you want to improve the overall output of your business 25 process, you seek out the highest priority constraint, open it up, 26 and the entire business will now perform at the speed of the next S27 biggest constraint. N28

Find It and Fix It 31

9780593084410_FixThisNext_TX.indd 30 1/21/20 4:01 PM 9780593084410_FixThisNext_TX.indd 31 1/21/20 4:01 PM 01 ▼ As I shared in chapter 1, and as you undoubtedly know all too 02 ▼ well, the common approach to growing a business is to grow every- 03 ▼ thing at once. We need more sales! We need to make more money! 04 ▼ We need to hire employees who act like owners! We need to stand 05 ▼ out from our competition! We need to change the world! We need 06 better marketing, better sales, better products, better services, bet- 07 ter efficiency, better everything, and we better get a better attitude 08 from everyone, right now. Damn it!! While it may be true that your 09 business needs all of the above, if you try to make everything better 10 at the same time, you will dilute your energy, time, and focus, and 11 find yourself unable to meet even one of those needs satisfactorily. 12 Once you have identified the most Vital Need you face, you’ll 13 then apply the fix with all the available resources you’ve got. 14 Using the BHN as your checklist, here are the steps to figuring 15 out which Core Need is your Vital Need and the one you must 16 fix next: 17 18 STEP 1—Identify: Within each level, check off the Core Needs 19 that your company is adequately meeting to support the 20 level above it. If you aren’t adequately meeting a need or 21 don’t know, leave it unchecked. 22 STEP 2— Pinpoint: Evaluate the lowest level that has unchecked 23 Core Needs. So if you have unchecked needs in PROFIT, 24 IMPACT, and LEGACY, work at the lowest level of the 25 three: PROFIT. Of the needs you left unchecked at that 26 level, which one is most crucial at this moment? Circle this 27S as your Vital Need. 28N

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9780593084410_FixThisNext_TX.indd 32 1/21/20 4:01 PM STEP 3—Fulfill: Generate measurable solutions for the circled Vital ▼ 01 Need. Implement your solutions until the Vital Need is ad- ▼ 02 equately addressed. ▼ 03 STEP 4— Repeat: With the Vital Need fixed, find the next Vital ▼ 04 Need by repeating the three steps above. Use this process for ▼ 05 the life of your business to navigate through challenges, max- 06 imize opportunities, and continually uplevel your business. 07 08 Following this process doesn’t mean you can ignore the rest of 09 your business— you need to keep those plates spinning. It goes 10 without question that you need to service many parts of your busi- 11 ness at all times. You can’t suddenly tell your customers, “Hey! 12 We’re just going to ignore you for a few months, while we take care 13 of some internal stuff. Talk to you soon. Oh, and please keep send- 14 ing us your money in the meantime, my beeyotches.” 15 You can’t grind the business to a halt while you work only on 16 the next Vital Need. Using Fix This Next, we identify the biggest 17 problem that, when fixed, will unleash the most forward momen- 18 tum for the business. Instead of doing everything all the time, we 19 will continue to maintain the necessary and allocate remaining re- 20 sources to fully serve the next Vital Need. 21 Addressing your business’s most Vital Need may require you to 22 make tough decisions. You may need to make sacrifices to fix the 23 problem. For example, if you determine that your Vital Need re- 24 quires you to fix a collections problem, the only fix may be to fire 25 the clients who chronically pay late. Facing the loss of short- term 26 revenue, however temporary, may stop you in your tracks. The S27 N28

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9780593084410_FixThisNext_TX.indd 32 1/21/20 4:01 PM 9780593084410_FixThisNext_TX.indd 33 1/21/20 4:01 PM 01 ▼ temptation may be to take on less- than ideal clients or work you 02 ▼ are not well suited to do, or don’t like doing, so that you can “make 03 ▼ up” the temporary short- term loss. Welcome back to the Survival 04 ▼ Trap, buddy. The only way out is to hold the line— do what you need 05 ▼ to do to make sure that you build your business in a healthy man- 06 ner, not based on your desperation. 07 I feel there are a couple of sexy things about the BHN: First, the 08 whole “two birds, one stone” thing. When you identify a Vital Need 09 at a lower level, you may find that resolving that need resolves a 10 higher- level need. 11 Second, perhaps the coolest aspect of the BHN: as you fix the 12 Vital Need, it leverages all the work you already put into your busi- 13 ness. In fact, sometimes levels can be resolved and cleared with little 14 effort, maybe even in minutes. You do not need to reinvent the 15 wheel here. You just need to bring a Vital Need to conclusion, some- 16 thing you may already have been doing without acute awareness. 17 Using the BHN and these four steps will help you break through 18 almost any plateau, quickly resolve setbacks, and grow your business 19 in a sustainable way. Whatever goals you set for your business will be 20 much, much easier to reach and much, much more likely to sustain. 21 As you continue to repeat the four- step Fix This Next analysis, 22 your business foundation becomes stronger and stronger, ensuring 23 that your vision for your business becomes reality. 24 25 The FTN Analysis in Practice 26 27S When I first met Tersh Blissett, I instantly knew he was one of “my 28N peeps.” How did I know? Because he was wearing a vest.

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9780593084410_FixThisNext_TX.indd 34 1/21/20 4:01 PM I wear a vest every time I deliver a keynote. It’s my thang. My ▼ 01 team likes to make fun of me for my “costume.” Kelsey Ayres, who ▼ 02 I am beyond blessed to have as a colleague, occasionally wears a ▼ 03 T- shirt to work that reads “Live Your VEST Life” next to a picture ▼ 04 of me in one of my uncoolest denim vests. Cute. ▼ 05 Occasionally, I host a free conference at my offices in New Jer- 06 sey to share and test out my newest concepts. (If you want to attend 07 one of these free presentations, simply sign up to “get the tools” on 08 my website at MikeMichalowicz.com and keep an eye out for one 09 of my out- of- the- blue announcements inviting you to my next free 10 thing.) Tersh attended my first- ever live presentation on Fix This 11 Next. He sat near the front, and because he was wearing a pressed 12 shirt, narrow tie, and a killer vest, I assumed he had a financial busi- 13 ness, or that maybe he was, you know, a badass, awesome, amazing, 14 supercool business author guy. I mean, who else can pull off a vest 15 so well? I soon learned that I was dead wrong: Tersh owns IceBound 16 HVAC & Refrigeration in Savannah, Georgia. He doesn’t just wear 17 a vest, he’s an air- conditioning guru. Which makes him ridiculously 18 cool. (Get it?) 19 Talking with him for just a few minutes, I knew we had more in 20 common than our fashion sense; I had met a soul mate. Tersh is 21 kind, driven, and smart as a whip. He is an entrepreneur through 22 and through and is doing everything he can to grow a healthy 23 business. 24 After the conference concluded, Tersh was the first to give me 25 feedback on which aspects of Fix This Next were helpful and which 26 weren’t. As I further enhanced and simplified the system, I was in S27 constant touch with Tersh for his feedback. When I finally finished N28

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9780593084410_FixThisNext_TX.indd 34 1/21/20 4:01 PM 9780593084410_FixThisNext_TX.indd 35 1/21/20 4:01 PM 01 ▼ the system as you see it in this book, Tersh was my first call. I gave 02 ▼ him the lowdown and asked him to diagnose his business. He sat 03 ▼ down with his wife, Julie, who is a partner in the business and 04 ▼ called me back later that day. 05 ▼ “Mike,” he said, “Julie and I spent less than fifteen minutes with 06 the Fix This Next system and achieved a degree of clarity we never 07 had before. Fifteen minutes and our eyes were wide open. And the 08 funny thing is, ten of those minutes were spent brainstorming solu- 09 tions for the business’s Vital Need. It took only five minutes for us 10 to figure out exactly what we needed to do next.” 11 Prior to learning about the BHN, Tersh was trying to do “every- 12 thing” to move the business forward. In 2018, IceBound achieved a 13 respectable $750,000 in revenue and was on track to reach $1 mil- 14 lion in 2019. Following the Profit First system, his company had 15 reached 12 percent cash profit (in addition to a solid weekly pay- 16 check for Tersh and the business paying all of his personal taxes). 17 The business had been running, for the most part, without Tersh’s 18 active input. 19 Tersh’s instinct told him to focus on the IMPACT level of his 20 business. He was working on a structure that would be more and 21 more charitable. He believed that donating time and money was 22 the way to serve his community, and this would, in turn, bring in 23 more business. 24 Tersh then did the Fix This Next analysis. He moved through 25 the checklist level by level, starting at the foundational level of 26 SALES, moving up to PROFIT and so on until he got to LEGACY, 27S checking off the Core Needs his business adequately addressed at 28N each level, and leaving the others unchecked. Within the SALES

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9780593084410_FixThisNext_TX.indd 36 1/21/20 4:01 PM ▼ 01 ▼ 02 ▼ 03 ▼ 04 ▼ 05 06 07 08 09 10 11 12 13 14 15 16 Figure 4. The BHN with satisfied Core Needs checked 17 18 level, Tersh left Prospect Attraction and Collecting on Commit- 19 ments unchecked. At the PROFIT level, Margin Health, Profitable 20 Leverage, and Cash Reserves were left unchecked. In ORDER, IM- 21 PACT, and LEGACY, other items remained unchecked. 22 Then, he and Julie looked at the most foundational level with 23 unchecked needs. In the SALES level, they examined Prospect At- 24 traction and Collecting on Commitments. They were waiting on 25 nearly fifty thousand dollars of accounts receivable, which for a 26 company doing $1 million in revenue is a lot. While about 5 per- S27 cent of their revenue was waiting for collections, Tersh noticed that N28

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9780593084410_FixThisNext_TX.indd 36 1/21/20 4:01 PM 9780593084410_FixThisNext_TX.indd 37 1/21/20 4:01 PM 01 ▼ his poorly paying clients represented just a couple of big jobs. So 02 ▼ even if he resolved the collections issue, the clients he had were not 03 ▼ suitable. In fact, he noticed that his big corporate clients ignored 04 ▼ IceBound’s COD requirement and followed a net 90 payment cycle, 05 ▼ and some even reached out after ninety days to point to a “problem” 06 with the invoice or some other excuse that would inevitably stretch 07 the payment another ninety days to six months. These corporate 08 clients were crushing cash flow. It was also clear that they had an 09 attraction issue. Not in terms of quantity— they got a ton of inqui- 10 ries from corporations. The problem with Prospect Attraction was 11 the quality of customer they attracted. 12 The Vital Need for IceBound was Prospect Attraction. Tersh 13 realized he had been instinctually working at the wrong level. He 14 was focusing on IMPACT instead of SALES. Tersh’s business in- 15 stincts had him walking down the boar path, just like Amanda 16 Eller’s “internal guide” did for her. 17 So, with his BHN compass, Tersh immediately decided to stop 18 IceBound’s charitable efforts. This might sound cold and callous. 19 But it is not. The only way you can give effectively is if you have a 20 strong, healthy foundation of getting. Tersh had to strengthen his 21 business first so that he could give in a sustainable way next. 22 It took them only five minutes flat to find their Vital Need. 23 Then they focused on finding solutions to improve their Prospect 24 Attraction. They considered vehicle wraps, yard signs, search en- 25 gine optimization, proximity letters, and other marketing ideas to 26 attract their ideal client. That’s when the obvious hit them: Before 27S they could market to their ideal client, they first needed to define 28N

38 Fix This Next

9780593084410_FixThisNext_TX.indd 38 1/21/20 4:01 PM what they considered to be the ideal client. Any marketing effort ▼ 01 would be a hundred times better if it could target exactly the right ▼ 02 customer. ▼ 03 Fifteen minutes and Tersh and Julie had aligned their focus on ▼ 04 the next thing that would strengthen their business in a big way: ▼ 05 an avatar of the ideal customer. At first, coming up with their ava- 06 tar proved difficult. Tersh and Julie discovered that IceBound’s 07 customer demographics seemed to be all over the place. They had 08 a pretty even mix of male and female customers. Some were young 09 professionals; others were retiring executives. 10 To understand how Tersh and Julie settled on their avatar, you 11 need to get a quick primer on IceBound’s technology. Have you 12 ever found yourself sweating under the blankets and then shivering 13 as soon as you throw them off? Turns out, this is not a temperature 14 problem; this is a temperature- plus- humidity problem. According 15 to Tersh, the fix is having the right size equipment to manage both. 16 IceBound’s technology monitors the relative humidity, tempera- 17 ture, and dew point so homeowners can have maximum comfort. 18 Considering the information more deeply, Tersh and Julie real- 19 ized that what their best customers had in common was that they 20 all placed a high value on their overall comfort. Their ideal clients 21 were professionals in their late forties to early sixties who were 22 empty nesters and who wanted to replace their air- conditioning so 23 that they could avoid that nightly sweat/shiver dance and achieve 24 the perfect temperature. They wanted quality over everything else. 25 Once they figured out whom to sell to, Tersh and Julie could 26 concentrate their marketing on that avatar, change the sales scripts, S27 N28

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9780593084410_FixThisNext_TX.indd 38 1/21/20 4:01 PM 9780593084410_FixThisNext_TX.indd 39 1/21/20 4:01 PM 01 ▼ and likely allow them to be more specific in the offering. And it 02 ▼ might, just might, skyrocket their revenue and profitability within, 03 ▼ let’s say, thirty days. More on that in a bit. 04 ▼ Tersh and Julie were able to get laser focused on what their 05 ▼ company needed. You will achieve that for your business too, and 06 you might even do it in fifteen minutes or less. 07 Never forget this (as in, highlight this and tattoo it on your 08 forearm): among all the apparent issues your business has, one and 09 only one of them will be the most effective one at any specific mo- 10 ment. We can’t rely on our instincts to just magically pick it out 11 every time. We humans are fraught with bias and emotion, and our 12 humanness can get in the way of our finding the best solutions. The 13 BHN will become your handy- dandy compass from this day forward, 14 bringing an easy, thoughtful, and methodical process to all consid- 15 erations in growing your business. 16 17 How to Determine If You Got It Right 18 19 The question most entrepreneurs ask me when they go through the 20 FTN analysis is: how do I know I’ve fixed the problem? You want to 21 get it right, but how do you know if you did get it right? The answer 22 is: you don’t know instinctually. So the only way to be sure that your 23 solution worked is to measure it. (Highlight and tat that one too.) 24 I learned this lesson the hard way as a young man in college, 25 when I was entrusted by a group of peers to manage one of the most 26 important functions for all humankind: the Wednesday night fra- 27S ternity party. After successfully navigating the final hell night and 28N

40 Fix This Next

9780593084410_FixThisNext_TX.indd 40 1/21/20 4:01 PM being ordained a brother, it fell on me to pull off the next event. (As ▼ 01 a shocker to no one— including you— I was also given the coveted ▼ 02 Delta Sigma Pi Wise Ass of the Year Award. Which, for punitive ▼ 03 reasons, mandates you manage the next party.) ▼ 04 Wednesdays were the kickoff day for the party week at Vir- ▼ 05 ginia Tech (Go Hokies!). Wednesday parties built momentum for 06 the Thursday and Friday parties, which would get people revved up 07 for the Saturday all- nighter parties and the Sunday block parties. 08 The weekend parties would then roll into the Monday bar scene, 09 which often bled into the Tuesday house parties, which would get 10 people ready for the new party week . . . starting on Wednesday. It’s 11 a miracle any of us graduated college. 12 This was the first party I was responsible for, and I was clueless. 13 I had no idea great parties, even frat parties, were planned in ad- 14 vance. Even if I did know that great parties were planned out, I 15 wouldn’t have known where to start, or how to determine if my 16 efforts worked. For the Delta Sig Wednesday night party, my 17 goal was simple: have an epic party, dude. I didn’t really think 18 about how I would know if it was epic, beyond people telling me 19 how epic it was. I had already failed the “be specific and concise” 20 acid test. 21 I took the frat “investment fund” (which is what we called it) 22 and went to the hardware store. I bought one big rubber garbage 23 can, one sweeping broom, and one pool skimmer. I then went 24 to the grocery store and bought ten pounds of grape Kool- Aid 25 mix. Then I went to the liquor store and bought their entire grain 26 alcohol supply. If I tried to make the same purchases today, it would S27 N28

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9780593084410_FixThisNext_TX.indd 40 1/21/20 4:01 PM 9780593084410_FixThisNext_TX.indd 41 1/21/20 4:01 PM 01 ▼ look like a scene out of Breaking Bad. Oh, and I also bought one can 02 ▼ of Coca- Cola to be ironic. 03 ▼ Back at the Delta Sig house, I got to work. Meaning, I made 04 ▼ the pledges snake the garden hose in through the basement win- 05 ▼ dow and mix the Kool- Aid, hose water, and grain alcohol in the gar- 06 bage can. If you were smart and spent your youth doing productive 07 things rather than attending frat parties, you might be wondering, 08 Why did you need the broom and the water skimmer, Mike? You 09 use the broom to stir the mixture, and you use the pool skimmer to 10 sweep up the contaminants, Pledge. 11 I have now shared my entire planning and prep for the party. 12 You may notice, I fell way short on step two. I didn’t really have a 13 plan for my “epic party” outcome, I just did what my gut told me 14 to do, get grain booze and mix it up. I planned for nothing else. 15 No music. No food. No alternative drinks, except for the one ironic 16 can of Coca- Cola. Best of all, no invites sent to anyone, including 17 the brothers! I mean, I did mention it at the house meeting that 18 afternoon. I recall my announcement being something like, “My 19 bros, epic party tonight at the house!” 20 A few people showed, some got schwasted, but the party stunk. 21 In the folklore of Delta Sigma Pi’s Virginia Tech chapter, this went 22 down as the second- worst party ever. The worst one was hosted the 23 following week by brother Greg Eckler, whose fraternity nickname 24 is Elk- Terd, but I am strictly prohibited from sharing his nickname, 25 so I won’t. 26 I wish I knew then what I know now about how to measure 27S outcomes: 28N

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9780593084410_FixThisNext_TX.indd 42 1/21/20 4:01 PM 1. First, know what outcome you want to have. Then deter- ▼ 01 mine the best ways to achieve the outcome and pursue the ▼ 02 easiest, most impactful solution(s). ▼ 03 2. Next, determine how you will know if you have achieved ▼ 04 the outcome. This is the measurement that must both show ▼ 05 that you achieved it and indicate the progress you are mak- 06 ing toward your desired outcome. 07 3. Then, set an evaluation frequency to monitor your progress 08 toward your outcome. Don’t measure so often that you won’t 09 have significant data to review, and don’t measure so infre- 10 quently that you miss opportunities to improve. 11 4. If according to your measurements you are not making prog- 12 ress, adjust your approach. If you are making progress, keep 13 doing it. 14 15 Now that I am out of my frat- bro stage and in my author- guy 16 stage, I have figured out a few things. First of all, I was a moron. 17 Second, I was a complete moron. Beyond that, I’ve realized a few 18 more things: clarity and specificity about outcomes is key. Instead 19 of having an epic party as my plan, a more specific, measurable 20 outcome would have been better, such as, “I want at least 80 per- 21 cent of the brothers saying this was the best party of the year.” 22 (While 100 percent would be amazing, it would have been unreal- 23 istic. Elk- Terd always found a way to undermine me.) 24 Then I would have asked the brothers, “My dudes, thinking 25 about the, like, totally epic parties you’ve been to, what made 26 them, like, totally epic?” I suspect they would have wanted my grain- S27 N28

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9780593084410_FixThisNext_TX.indd 42 1/21/20 4:01 PM 9780593084410_FixThisNext_TX.indd 43 1/21/20 4:01 PM 01 ▼ punch concoction, but they also would have wanted other low- key 02 ▼ choices, like kegs of beer, soda, and water. They would have wanted 03 ▼ great music and some junk food. And, the number one best idea 04 ▼ would have been to tell the brothers in advance and, idea of all 05 ▼ ideas, actually invite guests. If I had set a desired outcome and then 06 put a measurement or two in place, I could have figured out how my 07 supplies were working out, and if the RSVPs were piling up to true 08 epic proportions. But I didn’t do any of that. And now I am legend 09 (along with Brother Elk- Terd) . . . for sucking at party planning. 10 Sadly, most entrepreneurs try to do epic things in their business, 11 too, and the outcomes fall flat. They sit there with not much to 12 show for their efforts but a garbage can reeking of the sweet stench 13 of grain- spiked grape Kool- Aid. The problem is, we don’t know 14 what to do next, and we don’t have specific target outcomes for the 15 strategies we do employ, nor do we have measurements in place to 16 determine if we achieved them. 17 Some entrepreneurs do have the clarity, using the BHN, and as a 18 result grow their business faster and more healthily than ever before. 19 Tersh and Julie knew that the next basic need their business had to 20 resolve was Prospect Attraction, and to do that, they created an ideal 21 client avatar by looking at the qualities of their best customers, those 22 customers who paid a premium for their HVAC services and valued 23 the work they did. Then they would start the cloning process, which, 24 if you want details, is explained in The Pumpkin Plan.* But remember 25 your new Fix This Next discipline: first pinpoint what you need to 26 fix before exploring books or resources to fix it. Okay? Okay! 27S

28N *Get the book and free resources at PumpkinPlan.com.

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9780593084410_FixThisNext_TX.indd 44 1/21/20 4:01 PM With this realization, Tersh and Julie put a measurable plan in ▼ 01 place. Instead of their traditional marketing house by house, Ice- ▼ 02 Bound saw the opportunity in the C-suite. Tersh knows how many ▼ 03 prospects he needs each week for growth, so coming up with the ▼ 04 specific outcome was easy. He told me, “If I can get three new ex- ▼ 05 ecutive prospects a week, that will position me for serious growth 06 with my best customers.” See how simple that is? All IceBound has 07 to do is track their number of qualified prospects each week. If they 08 get at least three from the C- suite, they’re golden. If they fall short, 09 they need to adjust their marketing. 10 Tersh targeted the ideal avatar on social media so only home- 11 owners who were professionals with older children saw the ads. 12 Then he went for the mother of influencers: real estate agents. 13 When you buy a house, often you address the HVAC systems. Real 14 estate agents know the demographics, so Tersh set up a referral sys- 15 tem, thanking agents for introductions to his avatar with a referral 16 fee and impossible- to- get tickets to events. Like, true story, tickets 17 to see my pals the Savannah Bananas. I love it when something 18 comes full circle.* 19 He also declined marginal opportunities, saying no to people 20 who were not the ideal avatar. He said no to price shoppers and 21 sent them to the competitors. As Tersh said, “Our avatar wants 22 superior service over a cheap price, and if someone asks for a cheap 23 price, we know they are not our avatar and we decline the opportu- 24 nity immediately.” 25 26 *I have documented the Savannah Bananas’ growth trajectory in Profit First, Clockwork, S27 and here in this book in chapter 7. The Bananas used Fix This Next to identify their greatest opportunity to date, and it is not what you think! N28

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9780593084410_FixThisNext_TX.indd 44 1/21/20 4:01 PM 9780593084410_FixThisNext_TX.indd 45 1/21/20 4:01 PM 01 ▼ The results were remarkable. In a summer season when the aver- 02 ▼ age ticket (job) price declines due to overwhelming small- job repair 03 ▼ demand, for the first time ever, IceBound increased their average 04 ▼ ticket price from $7,300 to $12,500. This jump is unheard of in their 05 ▼ industry— and it happened within four weeks! It took fifteen min- 06 utes to pinpoint the Vital Need and, after coming up with a fix, just 07 four weeks not only to solve it, but to break industry records. 08 You need to do the same process for any Vital Need you resolve 09 in your business, because numbers don’t lie. 10 11 Fix It 12 13 As I was reading John Doerr’s book, Measure What Matters, I was 14 reminded of the simplicity and impact of measurements. Doerr calls 15 them objectives and key results (OKRs). In other words, determine 16 your goal (objective) and how you are going to measure your move- 17 ment toward it (key results). Doerr goes on to explain how mega- 18 companies such as Google and Intel used OKRs. The story that hit 19 home with me was about Intel. 20 Intel identified a threat as Motorola started to gain ground in 21 the CPU (central processing unit) market. Andy Grove, the presi- 22 dent of Intel, responded with Operation Crush, a very simple plan 23 to take back the market from Motorola. To track their progress, 24 they put in a simple metric: units sold of the 8086 processor. Ob- 25 jective: beat Motorola. Key result: units sold of the 8086 CPU. 26 It’s a simple equation, but the fascinating part is the strategy 27S that came about. The commission- based salespeople were retrained 28N

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9780593084410_FixThisNext_TX.indd 46 1/21/20 4:01 PM to understand that while the money was not in the 8086, what it ▼ 01 did do was lock the client in with Intel. The other technology they ▼ 02 sold that supplemented the processor was where Intel (and the ▼ 03 salesperson) made profit. Marketing strategies were developed. New ▼ 04 education and marketing material was created, showing the bene- ▼ 05 fits to the customer of Intel over Motorola. The plans were sorted 06 out, the key result was tracked, and within less than a year Intel was 07 king of the game again. 08 Metrics are the scoreboard. They are how you measure whether 09 you are winning the game. Set up the scoring system, and the game 10 reveals itself. No score, and you have no idea if you are winning or 11 even if what you are doing is working. 12 Measurements are the scaffolding of the BHN. As you build 13 your business, moving up and down the pyramid to strengthen the 14 foundation and build out the higher levels, you will depend on the 15 scaffolding— the things that give you access to the structure and 16 put you in the right spot to build the structure correctly. 17 Once you identify your Vital Need within the BHN, you then 18 build the scaffolding (measurements and tracking) around it to 19 ensure you properly fix it. Specifically, I suggest you use a somewhat 20 more comprehensive method than OKRs, a method that instills pro- 21 gress checkups and appropriate improvements in the objectives and 22 measurements. I call it the OMEN method: 23 24 O— Objective. What is the result you intend to achieve? 25 M— Measurement. What is the most straightforward way to mea- 26 sure your progress toward your outcome? S27 N28

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9780593084410_FixThisNext_TX.indd 46 1/21/20 4:01 PM 9780593084410_FixThisNext_TX.indd 47 1/21/20 4:01 PM 01 ▼ E— Evaluation. With what frequency will you analyze your mea- 02 ▼ surements? 03 ▼ N— Nurture. If necessary, how will you tweak the objective and/ 04 ▼ or measurements? 05 ▼ 06 1. Objective: What is the outcome you want to achieve for your 07 Vital Need? Where does it currently stand (the baseline)? 08 Identify the requirements for your goal to be considered suc- 09 cessful and how you are going to move from your baseline to 10 your objective. 11 2. Measurement: This includes the metric(s) for your outcome, 12 within a specific time frame. What is the simplest way to 13 effectively track your progress toward the objective? The 14 fewer metrics the better. Minimize the number of metrics to 15 avoid distraction and confusion, but have enough to give 16 you an adequate reading of your progress. 17 3. Evaluation: Determine the frequency with which you will 18 check your metrics and set interim goals on your way to the 19 intended outcome. 20 4. Nurture: As you progress, you may notice that your objective 21 isn’t quite right or you aren’t measuring it effectively. Make 22 the objective and measurements highly visible/accessible to 23 the relevant people. Then give you and your team permission 24 to change the settings (objective, measurements, and/or evalu- 25 ation frequency) to improve the progress toward the objective. 26 27S The OMEN method gives scrutiny and attention to the Vital 28N Need you identified to resolve it as efficiently as possible. When

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9780593084410_FixThisNext_TX.indd 48 1/21/20 4:01 PM the objective is achieved, you then remove the scaffolding of con- ▼ 01 stant scrutiny and focus, and leave a key metric or two behind to ▼ 02 ensure sustained results and signal if a new problem arises. Then ▼ 03 move on to the next Vital Need and set up new scaffolding using ▼ 04 OMEN. This is the building of a Dashboard, an important process ▼ 05 I detailed in Clockwork.* 06 07 × 08 Now that I live by the BHN, I have the least stress I have ever ex- 09 perienced in my life. That doesn’t mean I have no problems in my 10 business; I constantly have challenges and problems and issues. 11 Now, though, I know exactly what to do next: pinpoint the fix that 12 will have the most impact and don’t get distracted by the countless 13 obvious but superficial issues. 14 When I complete the resolution to a current challenge, I go 15 right back to the BHN to pinpoint exactly what I need to do next, 16 regardless of all the urgent issues that constantly spring up. I wish I 17 understood this a long time ago, and I’m glad to be able to help you 18 understand this now. Because, you see, the only way to get unstuck 19 quickly, to unlock a new level of growth for your business, is to stop 20 wasting precious time and resources trying to fix the wrong prob- 21 lems, and instead zoom in on the right problem and fix it. 22 In the next five chapters, I’ll go over each level of the BHN and 23 help you zero in on your Vital Need. Addressing the Vital Need is 24 the opportunity to strengthen your weakest link so that you can 25 realize the vision you have for your company. You don’t have to 26 S27

*You can get the book and free resources at Clockwork.life. N28

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9780593084410_FixThisNext_TX.indd 48 1/21/20 4:01 PM 9780593084410_FixThisNext_TX.indd 49 1/21/20 4:01 PM 01 ▼ carry around the secret about how frustrated you are with your busi- 02 ▼ ness, or how long your business has been stuck at a plateau, or how 03 ▼ your $22 million company is four weeks away from shuttering the 04 ▼ doors. You don’t have to live in fear that you may never make a go 05 ▼ of it, that the naysayers in your life were right. Please don’t let the 06 good fortune of luck make you believe that success happened be- 07 cause of your skill, and please don’t let your skills be discounted as 08 luck. Take a breath and focus on what is really going on in your 09 business. Pinpoint the most impactful issue. And then apply the fix. 10 Entrepreneurship is a challenge of epic proportion. You must 11 build your wings only after you have made that leap of faith off the 12 cliff. Whether you are years or decades into your journey, or even if 13 this is day one, I know you’re up for it. I am sure of this. 14 I know this, because even if you and I haven’t met in person yet, 15 we have something in common: the DNA of our businesses. Every 16 business is built on the same DNA. It’s only the choices we make 17 that differentiate them. That’s it. And with your new BHN compass, 18 you will make different choices. Better choices. The right choices. 19 You were meant to avoid the boar paths of business and the oft- 20 misguidance of your gut. You were meant for greatness. There is not 21 one doubt in my mind. Grab your compass, my dear friend, we’ve 22 got some business navigating to do. 23 24 25 26 27S 28N

50 Fix This Next

9780593084410_FixThisNext_TX.indd 50 1/21/20 4:01 PM ▼ 01

TUNNEL VISION IS also a challenge for, well, all of humanity. But ▼ 02 it can keep an entrepreneur stubbornly stuck in the same spot. ▼ 03 We get frustrated because we are not seeing results, so we often ▼ 04 respond by doing what’s not working, only harder. This can be ▼ 05 frustrating for people on the outside, because it is so obvious that 06 tunnel vision is the problem. That is why I encourage you to 07 engage the services of a qualified business coach. For decades 08 I have employed business coaches to give me an outside perspective on my businesses, and I can’t say enough positive things 09 about the experience. In short, the good ones are trained to iden- 10 tify core challenges, giving guidance (or bringing in resources) to 11 fix them, and are not emotionally attached to the business like you 12 are. The Fix This Next model is an ideal way for you and your busi- 13 ness coach to diagnose what your business needs next, and then 14 you can get to it with your coach and fix it. Go to FixThisNext.com 15 to get the free tools and coaching resources. 16 17 18 19 20 21 22 23 24 25 26 S27 N28

Find It and Fix It 51

9780593084410_FixThisNext_TX.indd 50 1/21/20 4:01 PM 9780593084410_FixThisNext_TX.indd 51 1/21/20 4:01 PM AVAILABLE THROUGH THESE RETAILERS

MikeMichalowicz MikeMichalowiczFanPage FixThisNext.com A SIMPLE STRATEGY TO GROW A REMARKABLE BUSINESS IN ANY FIELD

THE PUMPKIN PLAN

MIKE MICHALOWICZ A U T H O R O F THE TOILET PAPER ENTREPRENEUR 01 02 03 04 05 06 07 08 THE 09 10 PUMPKIN PLAN 11 12 13 14 15 A Simple Strategy to Grow 16 17 a Remarkable Business in any Field 18 19 20 MIKE MICHALOWICZ 21 22 23 24 25 26 27 28 29 S30 PORTFOLIO / PENGUIN N31

99781591844884_PumpkinPlan_FM_pi-x.indd781591844884_PumpkinPlan_FM_pi-x.indd iiiiii 11/4/12/4/12 99:29:29 PMPM 01 02 03 04 05 INTRODUCTION 06 07 08 09 10 11 12 13 Let’s pretend you’re in the market for a good pumpkin. You pack 14 the kiddies in the car and drive out to the local pumpkin patch. 15 When you get there, you see row after row after overwhelming row 16 of orange, green and brown. You’re looking for the perfect pump- 17 kin, but they all seem to look the same. It is easy to pick out the 18 bad ones, though— they’re smashed, or dented, or bruised or look 19 hauntingly similar to your mother-in-law. 20 You keep searching, and just after you get through the corn 21 maze you spot it— the biggest pumpkin you’ve ever seen. It’s like 22 Charlie Brown’s “Great Pumpkin” big. It’s so big, it’s hard to be- 23 lieve it’s even real. 24 Suddenly your kids start running toward this freak of nature 25 like it’s the greatest thing ever, and you’ve got to admit, it kind of 26 is. The gigantor pumpkin dwarfs all of the other pumpkins in the 27 fi eld. As you walk over to it, you don’t even see the other pump- 28 kins, and you wonder how you didn’t spot it right off the bat. Al- 29 though it is surrounded by red tape and signs saying “prize- S30 winning pumpkin, not for sale,” your kids are begging you to buy N31

99781591844884_PumpkinPlan_TX_p1-230.indd781591844884_PumpkinPlan_TX_p1-230.indd 1 11/4/12/4/12 22:44:44 AMAM THE PUMPKIN PLAN

01 it. “Please? It’s the only pumpkin we want!” You walk around it, 02 marveling at its size. At its remarkableness. You get out your phone 03 and take pictures of your kids standing next to it, and text your 04 friends, telling them they have to come see the most awesome, 05 gigantic pumpkin in the world. 06 Like a magnet, the pumpkin draws a continuous stream of 07 other people, too. They pass by the other, smaller, pumpkins, their 08 eyes glued to the orange wonder before them. The bald guy says, 09 “How is this even possible?” The buttoned-up woman says, “It’s 10 clearly a genetic mutation.” The wide- eyed grade- school boy says, 11 “The farmer must have some super secret veggie vitamins or some- 12 thing.” And the dazed and confused teenager says, “Dude, it looks 13 like Jabba the Hut knocked up a basketball.” 14 There is something absolutely irresistible, something magnetic 15 about being the extreme. Be it the strongest, or the fastest, or the 16 most unique. The farmer with the most extraordinary pumpkin in 17 the fi eld wins. Every. Single. Time. 18 The same is true for entrepreneurs. Yet most entrepreneurs 19 work their tails off, only to end up with small, ordinary, unre- 20 markable pumpkins. Compared to the giant pumpkin, the compa- 21 nies these struggling entrepreneurs grow are insignifi cant, so 22 insignifi cant that customers often don’t see them, or squash them, 23 or leave them to rot in the fi eld without a second thought. 24 To grow a successful business your company must be irresist- 25 ibly magnetic. The average lose and are left to rot. It’s the most 26 unique— the best—who win. 27 You’re probably thinking, “Duh! Do you really think I’m work- 28 ing my ass off to build an average company? What more do I have 29 to do to be the best?” 30S Simple. You don’t need to do more. You need to do different. 31N You have to pretend you’re a pumpkin farmer.

99781591844884_PumpkinPlan_TX_p1-230.indd781591844884_PumpkinPlan_TX_p1-230.indd 2 11/4/12/4/12 22:44:44 AMAM INTRODUCTION

Yup. You read that right. Pumpkin farmers. But not just any 01 pumpkin farmers. Only the freaky, geeky, overall- wearing, straw 02 chewing pumpkin farmers, those county fair folks who dedicate 03 their lives to growing the half- ton pumpkins you see on the eve- 04 ning news. Turns out that they, of all people, hold the “secret 05 formula” for big- time entrepreneurial success: plant hearty seeds, 06 identify the most promising pumpkins, kill off the rest of the vine, 07 and nurture only the pumpkins with the biggest potential. 08 In this book I reveal how, by implementing the same strategies 09 pumpkin farmers use to grow their massive gourds— and which I 10 have, with great originality deemed “The Pumpkin Plan”—I was 11 able to launch two multimillion- dollar companies by my thirtieth 12 birthday, gain notoriety with top fi rms, and in turn help them 13 radically grow their businesses. Not only will I share my stories 14 and their stories of success, but, most importantly, I will teach you 15 how to apply the same ideas and lessons to your own business. 16 Never forget this: Ordinary pumpkins are always forgotten. 17 Only the giant pumpkin draws a crowd and lives on holiday 18 cards, refrigerators and grainy YouTube videos . . . forever. The giant 19 pumpkin is legend. And when you’ve grown one . . . you will be a 20 legend, too. 21 You didn’t start your business because you wanted to blend in, 22 make enough to get by and save enough to pay for the nursing 23 home. You went into business because you wanted to grow some- 24 thing amazing, something that would dramatically change the 25 quality of your life, something that could make a difference in the 26 world. 27 The late Steve Jobs has been lauded for his many accomplish- 28 ments and innovations, and there’s no doubt that Apple is one of 29 the truly remarkable companies on the planet, thanks in large S30 part to his vision. But his contribution goes beyond innovation. At N31

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01 the time of Jobs’s death, Apple employed almost 47,000 people, 02 hired thousands of subcontractors and, by necessity or associa- 03 tion, inspired countless entrepreneurs to create businesses that 04 served Apple and its customers. That is a huge contribution to our 05 culture, one that goes way beyond how we listen to music or com- 06 municate with the world. 07 Now that’s legend. 08 And you can grow a legendary company, too. 09 I know you already know this. You know that if you want to be 10 wildly successful, you’ve got to be the most unique pumpkin in 11 the patch. I didn’t write this book to tell you that. I wrote this book 12 to show you exactly how to grow it, to teach you a proven system 13 that will free you from the entrepreneurial trap and create the 14 most magnetic business in your industry. 15 I wrote my fi rst book, The Toilet Paper Entrepreneur, for those 16 who want to start a business but think they lack the education, 17 resources, momentum, expertise and capital to do so. I wrote it for 18 the millions of hopefuls who aren’t afraid to work hard and take 19 chances in order to reach their goals. And I wrote it to empower 20 entrepreneurs with the tools they need to succeed in the start-up 21 phase of business ownership. That book was about planting the 22 seed; this book is about growing it . . . big- time. 23 Since the release of The Toilet Paper Entrepreneur in 2008, I’ve 24 talked with thousands of entrepreneurs— at conferences I key- 25 noted throughout the world, as an expert on various business tele- 26 vision and radio programs, through discussions of articles I have 27 written for publications both large and small, through my (nota- 28 bly whacky) blog, and face-to-face— who are looking for a way 29 up . . . or a way out. 30S So I know fi rsthand that the sobering statistics are spot on. En- 31N trepreneurs are struggling, trapped in a neverending cycle of sell

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it– do it, sell it– do it, sell it– do it that leaves them feeling desper- 01 ate, hopeless, trapped. No matter how many all- nighters they pull, 02 no matter how many kids’ soccer games they miss, most entrepre- 03 neurs can’t seem to get anywhere near the multimillion- dollar 04 mark, much less beyond it. 05 I wrote The Pumpkin Plan for all of those entrepreneurs who 06 reached out to me and said, “Help! Something’s got to give.” I 07 wrote it for the entrepreneurs who are exhausted from an en- 08 trepreneurial dream that has turned into a real- life nightmare. I 09 wrote it for the entrepreneurs who need a proven system to help 10 them get over the hump and cruise into greatness. I wrote it for 11 every entrepreneur who is committed to having a wildly success- 12 ful business. And I wrote this book for every entrepreneur who 13 wants to make a signifi cant contribution to the world. 14 This book holds the key to your entrepreneurial liberation. 15 By following The Pumpkin Plan step by step, you will build a 16 business that blows the competition away, magnetically attracts 17 clients and, as clichéd as it sounds, fi nally gives you the life of your 18 dreams. 19 20 21 22 23 24 25 26 27 28 29 S30 N31

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01 Oh. That guy. 02 Frank gave it to me straight: “If you don’t change your business 03 strategy, you’ll never make it. You’ll kill yourself trying to build a 04 multimillion- dollar business, but in the end you’ll be a broken, 05 bitter man living off Social Security and looking back on a lifetime 06 of disappointment.” 07 Wow. Okay. That would suck. So much for my retirement plan 08 of sipping margaritas on a beach somewhere, looking at a gor- 09 geous sunset with my gorgeous wife. Worse, I knew I was already 10 heading in that direction. Five years as an entrepreneur under my 11 belt and I had nothing. Well, almost nothing— I still had both of 12 my nuts . . . so far. 13 I was a freakin’ slave to my business and all I had to show for it 14 was stress- induced red blotches all over my face (never did fi nd out 15 what those were). The hours were insane, and when I did spend 16 time with my wife and our fi ve- year- old son, it was fake time— I 17 was on my laptop, or on the phone, or talking business, or think- 18 ing about business— completely unfocused on the two most im- 19 portant people in my life. I was completely out of balance. Maybe 20 you’re familiar with this scenario. Maybe you’re intimately familiar 21 with it. Maybe you’ve got red blotch grossness on your face, too. 22 In four years Olmec, my computer technology company, had 23 grown from nonexistent to almost one million dollars in revenue. 24 Huge, right? Nope. Total bullshit. Our costs were so high, our cash 25 so not fl owing, that bringing in close to a million felt like a joke— 26 a cruel, cruel joke. Gross revenue means nothing when your recep- 27 tionist makes more than you do. I could barely support my family 28 and I was under constant pressure to make payroll so that every- 29 one on my team could support their families. 30S I suffered from the “if only” disease that plagues most mid- 31N stage entrepreneurs. I kept thinking, “If only I could work harder”

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or “If only I had an investor” or “If only I could land one big client, 01 I’d be living the dream.” So I pushed on, and on, and on, believing 02 I was this close to making it. But like a hamster on a wheel, I was 03 working my ass off and getting nowhere. Something had to give. I 04 didn’t want to end up a one- nut drool factory. 05 I sighed, pulled out my notebook and said, “Okay, Frank. What 06 do I have to do?” 07 08 09 10 WHAT GOT YOU HERE 11 WON’T GET YOU THERE 12 13 The idea for Olmec started where most brilliant ideas are born— 14 in a bar. (Raise your hand if you wrote your fi rst business plan on a 15 beer- stained cocktail napkin. I thought so.) I was twenty- three at 16 the time, and I worked as a technician at a computer services com- 17 pany. One Friday night I went out to blow off steam with Chris, 18 my friend since kindergarten. I was pissed at my boss— for what, I 19 don’t remember— but really, I was looking for a way out. My rant 20 quickly progressed from, “I’m smarter than him, I work harder 21 than him, and I know more about this business than he does” to 22 “The boss is an asshole!” Fourteen (cheap) drinks later, Chris and 23 I had agreed to quit our damn jobs and start our own damn com- 24 puter services business . . . damn it. 25 It was a classic retaliation story, and I very quickly fi gured out 26 that this scenario has (at least) three problems. First, while liquid 27 courage can help you get over your initial fears, planning a busi- 28 ness in a drunken stupor completely obliterates all rational thought, 29 which, as it turns out, you need to start a business. (Go fi gure.) S30 Second, there’s a lot more to running a business than just showing N31

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01 up and doing the work. (Who knew?) Third, and perhaps most an- 02 noying of all, owning your own business will not automatically 03 free you from the grind that inspired you to get drunk in the fi rst 04 place. (Surprise!) 05 Remember when you started your business, all amped up on 06 adrenalin and hope? Your dream was huge, epic, because you need 07 a big- ass dream to pull you off the wannabe couch and actually do 08 something awesome. When I closed my eyes, I could see my dream 09 in full color: I was a millionaire, at the helm of a mega- successful 10 company, living the good life without a care in the world. 11 But when I opened my eyes, the harsh reality set in. We had no 12 clients, and worse, we had no idea how to get them. So you can 13 imagine why, within a week of quitting my job, I was consumed 14 by fear. Total. Complete. Soul- quaking fear. You know the con- 15 stant “I’m a failure” thoughts that run around in your head while 16 you struggle to do something great? Well, they ran through my 17 head like a weather warning at the bottom of the TV screen. What 18 if I can’t sell? What if I fail? What if I have to crawl back to my 19 asshole boss and beg for my job back? 20 Fear propelled me to take action. There was no other option. 21 Except for one little problem: I had no idea how to get clients. So 22 I started knocking on doors. Literally. (What? That’s how they 23 do it in the movies, right? Old movies.) I went after any and all 24 clients— big, small, near, far, taxidermists to insurance agents— 25 and said yes to any of them who expressed the least bit of interest 26 in what I had to offer, no matter what their demands. 27 “Will I drive six hours to install your computer mouse? No 28 problem.” 29 “Would I give you a fi fty- percent discount and a 120- day net? 30S Absolutely.” 31N “Could I service your ancient computer system, even though I

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know nothing about it and will have to spend two days reading 01 the twelve- inch- thick manual . . . that’s written in French . . . by a 02 Chinese guy who doesn’t speak French? Sure. Why not?” 03 In those fi rst few months after we launched, both Chris and I 04 ran around like Tasmanian devils. Did I keep regular hours? Sure 05 I did. If I was awake, I worked. Regularly. I had no pride, so to save 06 money I pulled all- nighters, or slept in clients’ offi ces. I moved my 07 wife and fi ve- year- old son into the only safe place I could afford— 08 an apartment in a retirement building, where the average age was 09 somewhere between eighty and dead (most, I believe, were slightly 10 older than dead) and where the residents got up at three in the 11 morning to vacuum, or pace the fl oor, or watch PBS so loud only 12 deaf people could stand it. And, if you haven’t put one and one 13 together, most of them were deaf. 14 Olmec started making decent money, then better money, then 15 good money. But no matter how much money the company made, 16 we still had very little left over. And even though we now had cli- 17 ents, I still worked fi ve to nine (that’s a.m. to p.m.,) eight days a 18 week. I still chased after clients. I still said yes to every Tom, Dick 19 and Harriet who called. The punishing grind never let up. 20 After two years in business, I hit the wall. I was a burned- out, 21 unhealthy mess, and so was Chris. But still, the fear of failing and 22 losing everything kept me going. This was right about the time the 23 sexy red splotches showed up on my face. In our family Christmas 24 photos, my face had more color on it than the tree. Still, like a lu- 25 natic, I kept telling myself, “There has to be a sweet spot, a moment 26 when this business shifts into second gear and all of this hard 27 work pays off.” To me, the solution was clear: Just keep racing the 28 engine; work harder and harder till it breaks or I break. 29 Two years later, in 2000, the Small Business Administration S30 (SBA) named me New Jersey’s Young Entrepreneur of the Year. A N31

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01 heartbeat later, the president of a prestigious bank offered me a 02 $250,000 expansion loan. So I must have been raking it in, right? 03 Nope. To the outside world it looked like I was living the dream, 04 but the truth was, nothing much had changed. I was still chained 05 to my business, pushing just as hard as I always had. No matter 06 how much we earned, money was still tight. I thought, “If being 07 an entrepreneur leads to wealth, why am I so freakin’ broke?” 08 Enter Frank, my personal Yoda. I met him at my fi rst ever cham- 09 ber of commerce meeting. In a room full of overconfi dent, desper- 10 ate salesmen, he was the only guy who didn’t pitch me. He just sat 11 in a corner and watched. He really didn’t care if you hired him to 12 coach you. He didn’t have to care— as president of a major medical 13 services company, he had taken the company from $8 million to 14 $80 million without breaking a sweat, so he didn’t need the work, 15 or the money. This was his fun stage of life— he wanted to coach 16 (maybe adopt is a better word) young entrepreneurs. 17 I did hire him, and I tried to follow his advice. (Really, I did.) 18 I tried to become Frank’s defi nition of an entrepreneur, which, 19 I later learned, is the only defi nition of an entrepreneur: “You’re 20 not an entrepreneur yet, Mike. Entrepreneurs don’t do most of the 21 work. Entrepreneurs identify the problems, discover the opportu- 22 nities and then build processes to allow other people and other things 23 to do the work.” But since my main objective was getting more 24 clients and keeping them happy, I was a C student at best. 25 Frank is the type of guy who loves white boards and charts and 26 graphs. Maybe I was getting high off the dry- erase markers, but 27 every time he coached me, I left feeling dazed and confused. What 28 Frank said made sense, but I could not see how to do what he told 29 me. He mapped out Point B, and I was at Point A, and I couldn’t 30S see the line that connected the two. Later, I would make a half- 31N

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assed effort to apply his strategies . . . when I had time, which I 01 never did. 02 It was in one of his coaching sessions that he showed me a 03 glimpse of my wretched colostomy bag of a future. Frank said, “If 04 you don’t want to end up like the one- nut guy, you’re going to have 05 to cut your client list.” 06 Cut our client list? Was he crazy? I busted my ass for that client 07 list. If anything, we needed more clients. How would we make it if 08 I started cutting clients? 09 “List your clients in order of revenue,” Frank told me. “Then, 10 take your top- paying clients and separate them into two catego- 11 ries: great clients and everyone else, from the ho-hum clients to 12 the clients who annoy you so much, you cringe when they call 13 you. Keep the great, top- paying clients, and cut the rest. Every sin- 14 gle one.” 15 Yowza! Frank was crazy. He must’ve been the one sniffi n’ the 16 dry- erase markers. I told myself that if I get rid of all the clients 17 who make me cringe or who don’t bring in the big bucks, I won’t 18 make enough money. I’ll have to fi re people; I’ll have to close the 19 big offi ce and get a small one . . . or, more likely, I’ll have to get a 20 third- shift job at Denny’s. 21 I could see it was a simple strategy. And it had obviously worked 22 for Frank. Frank had the proof: boatloads of cash. Legit. Liquid. 23 Assets. But still, it scared the crap out of me. I just couldn’t wrap 24 my head around actually getting rid of the clients I had worked so 25 hard to fi nd and keep happy. It seemed absolutely crazy— saying 26 no to a client, to money, to potential referrals . . . 27 But ending up like the one- nut guy scared me more. 28 I did follow Frank’s advice— sort of. I drafted a rough list of 29 great clients and not-so-great clients. I happily fi red a few jerkwad S30 N31

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01 clients who’d taken advantage of me about a thousand times too 02 many. But I didn’t fully commit. The thing is, Frank had given me 03 a lot of homework, and fi nishing all of it while chasing after 04 clients— yes, I still wanted more clients— proved to be impossible. 05 Every time I tried to focus on “the list” I got distracted putting 06 out fi res, or dealing with demanding customers, or juggling pay- 07 ments so I could cover payroll. Like most entrepreneurs, I was the 08 jack-of- all- trades. I wore the term “workaholic” like a badge of 09 courage. And because I never made it out of survival mode, I still 10 ran the business— and my life— with the same frenzied energy. 11 The one- nut guy haunted my dreams. He sat on my shoulder and 12 taunted me with his relentless cackle. Yeah, that’s right, he sat on 13 my shoulder . . . and I don’t even want to tell you where his nut 14 was hanging. 15 Okay, I was mental, but not that mental. I knew the one- nut guy 16 was a fi gment of my stress- induced delirium. But I did worry. 17 Would I ever get off the grind? Would I ever make the kind of 18 dough people thought I made? Or would I end up toothless, drool- 19 ing, bald, blotchy and broke? 20 Then one day, a half- ton pumpkin saved my life. 21 22 23 24 THE HOLY GRAIL IN THE 25 PUMPKIN PATCH 26 27 It was October, and the local newspaper ran an article about a 28 farmer who grew a gigantic, prize- winning pumpkin. This guy was 29 not your typical farmer. He was a geek farmer, obsessed with grow- 30S ing mongo pumpkins. He’d dedicated his life to breaking the state 31N

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record, and there he was, perched on his fl atbed truck, smiling like 01 he’d won the lottery, with the biggest- ass pumpkin I’ve ever seen 02 right behind him. I just had to know— how the hell did he get the 03 pumpkin to grow to mammoth, half- ton, blue- ribbon size? 04 Here’s how the article broke down the pumpkin- growing pro- 05 cess: 06 07 STEP ONE: Plant promising seeds. 08 STEP TWO: Water, water, water. 09 10 STEP THREE: As they grow, routinely remove all of the diseased or damaged pumpkins. 11 12 STEP FOUR: Weed like a mad dog. Not a single green leaf or root permitted if it isn’t a pumpkin plant. 13 14 STEP FIVE: When they grow larger, identify the stronger, 15 faster- growing pumpkins. Then, remove all the less- promising pumpkins. Repeat until you have one pump- 16 kin on each vine. 17 18 STEP SIX: Focus all of your attention on the big pumpkin. Nurture it around the clock like a baby, and guard it like 19 you would your fi rst Mustang convertible. 20 21 STEP SEVEN: Watch it grow. In the last days of the season, this will happen so fast you can actually see it happen. 22 23 Holy crap, I thought. Pumpkin farmers hold the secret for- 24 mula for big- time entrepreneurial success. My get- out-of-jail- free 25 card. The Holy Grail. The missing link. My golden ticket. (Yes, it 26 was all of those things to me . . . and more, so much more.) There 27 it was, in black and white . . . and orange. The answer I’d been 28 looking for, for years. I needed to treat my company like a giant 29 pumpkin! S30 N31

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01 In case you’re wondering if I’d offi cially lost it, here’s what I 02 understood when I read the article: 03 04 STEP ONE: Identify and leverage your biggest natural strengths. 05 06 STEP TWO: Sell, sell, sell.

07 STEP THREE: As your business grows, fi re all of your 08 small- time, rotten clients. 09 STEP FOUR: Never, ever let distractions— often labeled as 10 new opportunities— take hold. Weed ’em out fast. 11 STEP FIVE: Identify your top clients and remove the rest 12 of your less- promising clients. 13 STEP SIX: Focus all your attention on your top clients. Nur- 14 ture and protect them; fi nd out what they want more than 15 anything, and if it’s in alignment with what you do best, 16 give it to them. Then, replicate that same service or product 17 for as many of the same types of top client as possible.

18 STEP SEVEN: Watch your company grow to a giant size. 19 20 With the visual of this pumpkin farmer watering, feeding, lov- 21 ing, guarding and caring for his one big pumpkin to the exclusion 22 of everything else, my next steps became crystal clear. His mania- 23 cal focus on growing huge pumpkins was second only to that of a 24 serial killer, and all he did was follow this simple formula over and 25 over again and he grew crazy big pumpkins. If I followed the same 26 method the farmer used to grow giant pumpkins, a method rooted 27 (pardon the pun) in Frank’s “client list” strategy, and focused on 28 my top clients like a crazed farmer, I could grow my business to be 29 a giant “pumpkin,” too. It was clear now. This was the path from 30S today (Point A) to where I wanted to be (Point B). 31N I fi nally had my fi rst major “duh” moment. The fear- driven

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strategy that got Olmec just shy of a million in gross revenue 01 wasn’t going to get us to millions in gross revenue. Frank’s advice 02 started to make sense. The say- yes-to-everyone strategy could not 03 be sustained over time, and it was actually stunting growth. I was 04 spread too thin, wasting energy serving clients who made me 05 crazy and would never make me rich; and in serving them I was 06 taking precious time away from the clients with whom I enjoyed 07 working, and who could make me rich. 08 I was also using my time to handle things that didn’t come 09 naturally to me, when I should have been focused on doing the 10 few things I did well. I was writing advertising and marketing 11 messages to get everyone and their mother to walk through our 12 door. I was doing new work for rotten clients, trying to fi gure out 13 how to serve them better. I was ignoring my best clients, who were 14 just starting to grow. Instead of watering them, I was throwing 15 seeds on top of them, crowding them out. Always seeding, hardly 16 watering. Never weeding, and never nurturing. 17 I knew I was really good at fi guring out how to serve clients bet- 18 ter and at developing systems to replicate that service— but how 19 could I do that for my best clients if I was so busy trying to keep 20 my rotten clients— all of whom wanted different things— happy? 21 Once you’ve moved passed the early stages of entrepreneur- 22 ship, success isn’t a quantity game anymore. If I wanted my busi- 23 ness to dwarf the competition, I would have to cut the clients who 24 were actually holding me back, cut the aspects of my business that 25 weren’t serving growth and fi nd unparalleled ways to serve my 26 best clients. Like a geeky, freaky farmer of mammoth pumpkins, I 27 would focus all of my attention, time, love, support, creativity and 28 energy on the most promising clients in my “patch.” 29 I shared my revelation with Chris and we followed the Pumpkin S30 Plan in earnest. Almost immediately, everything became easier. We N31

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01 saw results lightning fast— so fast that within a couple of months, I 02 was able to jump off the hamster wheel for good and stop freaking 03 out. Our top clients felt like rock stars. Our employees were happy. 04 Our bottom line moved up a few notches. Then a few more. And 05 then, for the fi rst time in four years, I felt like a real entrepreneur. 06 You know, the kind of person who takes a risk and makes it happen. 07 We weren’t millionaires yet, but now I knew there was a better 08 way to become one. And man, I was on fi re! I tweaked the Pump- 09 kin Plan, made it my own, and in that process I truly fell in love 10 with the art of entrepreneurship. Scratch that— I fell in love with 11 the science of entrepreneurship. 12 Two years after I implemented my fi rst Pumpkin Plan I opted 13 to let Chris buy me out so I could go my own way. I wanted to 14 apply the Pumpkin Plan from the ground up. The very next day I 15 started a new, different company. Chris continued to apply the 16 Pumpkin Plan and Olmec is doing so well they’re practically print- 17 ing money, and in a crappy economy, no less. 18 And me? Well, folks, I became one of those oddballs . . . those 19 freaky pumpkin- farmer types who obsesses and obsesses over one 20 thing— growing super successful businesses. I tweaked my revised 21 Pumpkin Plan over time, improving systems, and within two 22 years, eleven months and eight days (but who’s counting?) I sold 23 my second company for millions to a Fortune 500 fi rm. 24 Kiss my ass, one- nut guy. 25 26 Work the Plan— 27 28 Take Action in 30 Minutes (or Less) 29 30S 1. Find the “why.” If your dream is to just be big and get rich, 31N that’s not enough to grow a signifi cant, successful business. Ask

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yourself why you started this business and not another business. 01 What purpose are you serving? What gets you stoked? If you know 02 your “why,” it will resonate with your clients. More importantly, it 03 will be your compass, and boy oh boy, do you need one of those. 04 (Have you ever tried to fi nd your way out of a forest without one?) 05 06 2. Set a revenue “pulse” goal for this year. In order to get the heart 07 of your business beating again (meaning you can survive without 08 perpetual panic), how much revenue do you need to generate? 09 Don’t put yourself last on the list. Start by fi guring out what you 10 personally need to be comfortable, to know that you’re back on 11 your feet. Then fi gure out how much revenue your company needs 12 to make to actually support that. Remember, we just want to hear 13 that beep beep beep on the heart monitor again. Later, you can adjust 14 your revenue goal to include all of your aspirations (send less- 15 advantaged kids to college, see the world . . . and buy Twinkies 16 whenever you damn well please). 17 18 3. Ask better questions. Really big pumpkins have really strong 19 roots. We can only fi nd the best answers when we ask great ques- 20 tions. Rather than ask, “Why do I struggle?” ask, “How can I earn 21 $2,000 a day, every day?” Either way, your brain will fi nd the an- 22 swer. Write down the one big, bad question you always ask when 23 you’re beating your head against the wall, and then reverse it. 24 25 26 27 ABOUT THE STORIES IN THIS BOOK 28 29 I love a good story. So I wrote a bunch of them to help you envision S30 how you could Pumpkin Plan any industry, even— no, especially— N31

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01 yours. These stories use all of the strategies detailed in this book, 02 including stuff you haven’t read yet, and are denoted with the title 03 “How To Pumpkin Plan Your Industry.” 04 And to be clear, I made them up so you can see the endless pos- 05 sibilities the Pumpkin Plan offers. The stories follow each chapter 06 and are designed to show you that the Pumpkin Plan formula 07 works, no matter how tough your competition is, no matter how 08 much (or how little) money you have in the bank, no matter 09 how many clients you have (or don’t have). It just works. 10 Each story includes examples about how to employ most or all 11 of the strategies detailed in this book, not just those explored in 12 that chapter. So you may want to go back and re-read the stories 13 after you’ve fi nished the book and learned all about how to Pump- 14 kin Plan your business. 15 And just so we’re absolutely clear, there are loads of true stories 16 in this book, too— both about me and about other people. They 17 are woven into each chapter as real- world examples of entrepre- 18 neurs who rocked some aspect of the Pumpkin Plan to great effect. 19 For the true stories, I name names. Obviously, none of these sce- 20 narios will match yours 100 percent, but I hope you fi nd them 21 inspiring, or at least, thought- provoking. 22 Enjoy! 23 24 25 26 HOW TO PUMPKIN PLAN YOUR 27 INDUSTRY— TRAVEL 28 29 Let’s pretend you’re a partner in a small airline. Stow your carry-on, 30S fasten your seat belt and put your tray into an upright position, 31N we’re going to Pumpkin Plan your industry!

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Your airline can’t compete with the big boys or girls, or even 01 with the medium- sized airlines. You’ve got fi fteen planes running 02 short routes to and from major cities like New York, Boston, Phil- 03 adelphia and Washington, D.C. Your planes are never full, unless 04 there’s a problem with another airline. Hardly anyone even knows 05 the name of your company— Eastern Airlines. 06 You try to compete on price, but Southwest and Jet Blue have 07 you beat. You try to compete on convenience, but United, Delta 08 and American have more planes, more fl ight options and more 09 everything else, so they have you beat. You try to compete on 10 rocking it out with cool extras and stuff, but Virgin America has 11 you beat on that by a mile. You try to compete on all three at the 12 same time, and that’s when things get hairy. Like, really hairy, as 13 in Chapter 11-on-the- horizon hairy. You’re killing yourself trying 14 to get an edge over the competition by playing their game, follow- 15 ing their curve. You can blame it on the economy or the price of 16 gas all you want, but Eastern Airlines is going down. 17 That is, until you decide to Pumpkin Plan your business. You 18 start with the Assessment Chart, which you have trouble fi lling out 19 because you really don’t have a lot of repeat business. Still, you fol- 20 low through and realize that your worst customers are tourists who 21 make unreasonable demands in fl ight— better movies, new head- 22 sets, more snacks— and only use you when you have a half- off pro- 23 motion or some other limited- time offer. You really, really don’t 24 want to fi re any clients, because you’re clamoring for passengers. 25 But you want to save your business, and then grow the heck out of 26 it, so you do it anyway. It’s pretty easy to get rid of this type of client; 27 once the special discounts are gone, so are the “diseased” clients. 28 You fi gure out that your best customers are last- minute custom- 29 ers, the passengers who, ironically, only use you because they have S30 a last- minute meeting and every other airline is booked. There’s N31

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01 no built-in loyalty with these customers— most of them will never 02 fl y with you again. Still, you call ten of them up with the goal of 03 getting their Wish List. 04 When you ask, “What could we do better?” they say, “Nothing.” 05 When you ask, “What frustrates you about my industry?” they say, 06 “Nothing.” Hmm. This is going to be a little tougher than you 07 thought it would be. Thinking on your feet, you say, “What frus- 08 trates you most about traveling?” 09 And that’s when the dam bursts. Suddenly you’re getting an 10 earful of complaints about how, because of transportation to the 11 airport and the security line, it takes half a day to take a one- hour 12 fl ight. Your top clients, the last- minute travelers who use you only 13 when there is no other option, are all business executives and pro- 14 fessionals living in the suburbs of major cities, and they lose pro- 15 ductivity when they travel. They can’t work in the back of a cab. 16 They can’t work when they’re driving to the airport. They can’t 17 work when they’re standing in the insanely long TSA line. 18 You thank them for their input, and then start brainstorming 19 with your team. How could you turn their frustrations into a 180- 20 degree turn for Eastern Airlines? You ask a bunch of really awe- 21 some questions, but the one that sticks is, “What if we could cut 22 the time it takes to get to the fl ight in half, or better?” You come up 23 with a great solution to run buses out to pick up passengers at 24 various locations, buses that can use the carpool fast lane. And un- 25 like the other airport bus companies, you’ll take them directly to 26 the Eastern Airlines entrance. And because they lose precious time 27 traveling to the airport, you’ll outfi t each bus with tray tables, out- 28 lets and WiFi for laptops. 29 You decide to run the idea by a few of the clients who shared 30S their frustrations with you, and they love the idea, but not enough 31N to break up with their favorite airline and start going steady with

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you. So you go back to the drawing board, and add a few other key 01 points. First, you work out a deal with the local churches in your 02 pick-up areas, allowing the commuters to park their cars in their 03 empty lots for free, Monday through Friday. (You pay the churches 04 a fee, of course.) Then, you assign a gate agent to every bus, and 05 check everyone in when they get on the bus. If they have luggage 06 to check, you just do it right there, stow it in the bus and have sky- 07 caps take it to the baggage scan for them when they arrive at the 08 airport. 09 Then, you decide to pull out all the stops and create a dedicated 10 security line just for your passengers. You have to pay a premium 11 for this, but it will be worth it if you can make your top clients’ 12 dreams come true. 13 With your revised plan in place, you go back to these clients 14 again and ask for more advice. When you hear, “When will you 15 start implementing this new system?” you know you’re on to some- 16 thing. 17 Knowing that your top clients would rather be super produc- 18 tive than be entertained on their fl ights, you get rid of the in-fl ight 19 movie and radio your eliminated clients wanted, but were never 20 quite happy with. Then, you get rid of the kiddie snacks. Now 21 you’ve eliminated expenses related to unwanted clients, and you 22 can funnel some of that into offering free WiFi on the plane, or 23 concierge service, or a live feed of CNN or MSNBC. 24 Before you roll out your new fancy service, you decide it’s time 25 to stand out from the crowd, time to stop competing with all of 26 the other airlines. So you re-label yourself. Now you’re Elite Com- 27 muter Express— you’re not even calling yourself an airline any- 28 more. Your niche is business folks who don’t want to waste their 29 time getting to and from the airport, and you’ve got a lock on that S30 service. You invented it! N31

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01 Your top clients, who probably took your fi rst call because they 02 were stuck in a cab and had nothing better to do, now want to sign 03 up for your VIP club and start booking fl ights immediately. They 04 identify with your new name, because they are commuters. They 05 start telling everyone about your service, and now most of your 06 fl ights are full well in advance. 07 You start moving in concentric circles, placing ads in entrepre- 08 neurial magazines, in The Wall Street Journal and on popular 09 business- focused blogs. You sponsor charity golf and tennis tour- 10 naments in the suburban communities where your top clients live. 11 You show up at trade shows geared toward entrepreneurs. 12 Then, you launch an Under- Promise, Over- Deliver (UPOD) 13 program that knocks the blazers right off of your (now happy as 14 clams) top clients. You make deals with other companies who 15 cater to executives and commuters, and offer product testing on 16 your planes. You’re passing out noise- canceling headphones, top- 17 quality pens, new wireless cards, cell phones— it’s like Christmas 18 on the freakin’ Oprah Winfrey Show on your plane. But not all 19 the time. Passengers never know when they will be given a new 20 product . . . which means your fl ights are always full. 21 Before you know it, Elite Commuter Express is the go-to airline 22 for business executives and entrepreneurs on the East Coast. Your 23 service is so unforgettable, you get frequent press about it, and 24 soon you’re getting requests to expand your service for routes to 25 and from Los Angeles, Las Vegas and San Francisco. (Good thing 26 you changed your name to Commuter Express . . . Eastern Air- 27 lines running routes on the West Coast just doesn’t fl y, does it?) 28 And how about your prices? You are dictating top dollar now. 29 Cutting travel time in half— and cutting aggravation completely— 30S is worth a lot of green. 31N Guess what? You’re going to need more planes.

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A SLOW, MISERABLE DEATH

I met Bruce while I was coaching my son’s soccer team. I guess he recognized me because he made a beeline for me after the game. Bruce is an aging, Jersey Shore type who looks like he was probably pretty ripped back in the day. “I read The Toilet Paper Entrepreneur and I’ve been following you for three years,” he said. (I can’t tell you how thrilled I am to meet readers of TPE, and how grateful I am to hear how the book may have helped them. It is exciting and humbling all at the same time, because it is the fulfi llment of what I have defi ned as my life’s purpose. And when people ask me to autograph their book . . . I practically soil myself—it is the “rock star” moment that I dreamed of since childhood. Not the soiling part. The autograph part.) After I thanked Bruce, he said, “I need you. I didn’t know how to approach you, but this seems like serendipity, so . . .”

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Bruce explained that although he was bringing in $700,000 a year in revenue, he was nearly bankrupt. A fl orist for weddings and other events, he also rented out equipment for weddings and operated a showroom/retail space that leased space to other wedding vendors. I agreed to meet him at the showroom later that week. As he gave me a tour of the space, Bruce told me he’s so broke, he’s had to borrow money from his parents. (To be clear, he’s no college kid who bit off more than he could chew. He’s been at this for twenty years.) I ask, “Of the vendors you lease space to, who is making the most money?” Turns out, the photographer is making the most, by a mile. He’s got the tiniest little space in the showroom, yet he’s bringing in ten times as much as Bruce does. And, believe it or not, Bruce typically deals with the photographer’s clients for him . . . because he’s too busy working to show up at the showroom. Bruce wears so many hats, he’s not only broke, he’s a freakin’ mess-o-stress. No big shocker here— there is always a direct correlation between diluted focus and a diluted bank account. As we settle into his expensive showroom furniture for a brief “next steps” chat, he’s saying all the right things: “Things have to change. I can’t go on this way. I have to focus.” But I know he’s not ready. He thinks he’s ready because his life is a train wreck, but really he’s just desperate. He feels defeated, but not enough to make the hard, bold decisions that will help him save his business. How do I know he’s not ready? Because out of the corner of my eye I can see his Cadillac Escalade parked outside. If I were in his position, that sucker would have been sold ages ago. When our businesses are in a state of collapse, entrepreneurs go through three stages. First, we deny that we’re struggling. You know what I am talking about. Someone asks how your business is going and you say, “Great! Just landed a big client!” But inside

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you can feel your lungs compress as the stress builds. Things aren’t great. Money is draining away, fast. But you’re afraid to admit you’re struggling because what if people think you’re not capable? What if future prospects ignore you? What if your team begins to doubt you? In Stage One of the collapse, entrepreneurs deny the truth because our egos can’t handle it. Only when the business is knocking on death’s door do we admit that we’re struggling. Enter Stage Two. For many, the stress at this point has become a fact of life. Wake up stressed. Go to bed stressed. Have stressful dreams. Stress about being stressed. Re- peat over and over. In some perverted way, you start to be proud of how stressed you are. “You think you have it bad?” you say. “Well, let me just tell you how crappy my life is.” Even at this stage, no corrective action happens because people get temporary relief by blowing off steam and reciting their sob stories. It looks a little different, but it’s still ego. In Stage Three we just throw our hands in the air (there’s that defeatism again) and say, “Life sucks,” as if fate had anything to do it (it doesn’t) and our success or failure is completely out of our hands (it isn’t). You know this stage— it’s the one where you shake your fi st at the sky and shout, “Why me? Why am I being punished? Why can’t I catch a break?” (with maybe a few colorful expletives thrown in). This is the point at which most people give in. They stop making an effort but continue working— strike that, slaving—and accept that it will never get better. All the fi ght is gone. Bruce was a classic example of someone in the “life sucks” stage, but his behavior hadn’t changed to refl ect his situation— hence the pimped- out ride. Many entrepreneurs continue on like this, year after year, always behind the eight ball, under constant stress, doing the same shit they’ve been doing since day one.

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Nothing changes; nothing is on an upward trajectory except their blood pressure . . . and debt . . . and taxes. But that’s it. A few weeks after our fi rst meeting, I agreed to meet Bruce for a beer and talk about his options. He said, “I can’t afford to pay you, but I need you.” I could see from his haggard appearance that the imminent demise of his business had taken a toll on his health. As a practice I rarely do any business coaching, and I have never done it for free. I don’t know why, but I agreed to take on Bruce’s case. “I’ve never done this before, and I will never do this again, but I will help you for the cost of this one beer,” I said. (There has to be an exchange of some sort, even if it’s only a glass of tap.) A look of relief washed over Bruce’s face. I went on, “I will work with you for three sessions. I will be absolutely clear with you about what you need to do to save your business, beginning with killing all of these bullshit costs— including the car. All the unnecessary expenses— gone. All of the side projects— gone. All of the clients who are really the other vendor’s clients— gone.” As I laid out exactly how we would Pumpkin Plan his business, Bruce’s expression changed. He looked concerned. Maybe even a little scared. I could see his mind rolling over the expenses he “had” to keep, the projects he “had” to keep alive, the chaos he “had” to keep feeding. “You will resist me,” I said. “But if you follow my plan, you will save your company.” I wanted to add, “and your life,” but since he seemed overwhelmed enough already, I decided against it. And then he said the words I hear every day from entrepreneurs all over the world: “But I’m just one client away from making it. I’ve just got to close that one big deal.” Nope. Bruce wasn’t ready. He still thought all he needed was

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one killer client and all of his problems would be solved. Problem was, he’d been one client away from making it for twenty years. No matter how much Bruce wanted these words to be true, believed these words were true, they weren’t. And they never are. No one is ever one deal away from making it. You might be one payment away from saving your ass— this week— but making it? No. To really make it, to become the industry leader you set out to become, you need a sound business to begin with. You need strong roots, a carefully planned, effi cient infrastructure, a maniacal focus on the one thing you do very, very well. Rather than fi x what’s not working, you need to cut it out like the cancer it is. Then, you need to expand on what is working. People like Bruce aren’t really trying to “make it” make it; they’re just trying to make it to next Tuesday. Eric, on the other hand, is making it just fi ne— at fi rst glance. A Formula1 race car driver, engineer and all- around racing maven, Eric started driving very young (barely legal) and doggedly pursued a career in the industry. Over the past twenty years he has built up quite a business. You know those twenty- four- hour races? He wins them. You know those big exhibitions put on by luxury car manufacturers like Porsche? He helps launch them. You know those driving schools where everyday schmucks (ahem . . . me) can come and learn how to drive Formula1 cars? He develops them. As a race engineer, he also helps drivers win races. And he makes deals. Lots of ’em. The only problem is, Eric’s business is pretty much just Eric. While he does build and manage teams who handle much of the grunt work for him, he’s still pretty much a one- man band. You see, early on in Eric’s career, he had an epiphany. “I realized the chances of becoming a superstar driver were about the same as

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becoming a movie star, and I noticed that the people who stayed in one specialized area of racing rarely made the kind of money I needed to make to support my family,” he told me. “So I learned how to do all of it really, really well.” As we talked, I couldn’t help but notice Eric’s constant refrain: “I do everything I do to support my family.” Now, I realize that I’m an amateur observer of human behavior at best, but I have seen this before. Refrains are defense. Something in his heart is out of sync with his actions, and his mind is trying to protect him. Eric wasn’t repeating this because I needed to believe it; he was repeating it because he needed to believe it. The realization that his real sacrifi ce was his freedom and time with his family would be too much to handle. Eric is all work, all the time. And he is the go-to guy for, well, just about everything to do with Formula1 racing. Calling me from a track in Wisconsin just two days before he heads out to a track in Montreal, Eric explains why people hire him. “I can tell you exactly how much everything costs— the trailer, the tires, the tent we’re standing under, the payroll for every one of these guys, everything— and I can tell you the details of the sponsorship deal, and if the driver is ready, and how the car tests, and what needs to be tweaked and which engineer is the best person to tweak it. I’m not here because I know one thing inside and out; I’m here because I know everything inside and out.” When I ask Eric to tell me one thing that helped him become fi nancially successful, he says, “Early on I decided on a rule for myself: always answer the damn phone. I used to rack up $3,000 cell phone bills keeping up with this. If it rings in the middle of the night, I answer it. If it rings in the middle of dinner, I answer it. My clients know they can always get me, and that has helped my business tremendously.”

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I can see that. I get that. But I also know that this commitment has put Eric’s clients center stage in his life. He’s running himself ragged trying to keep up with all of the fi nancial success, all of the new opportunities, all of the potential. Eric is making more money than most people in his fi eld, and he has sustained a career in a highly- competitive industry he absolutely loves. This wouldn’t be a problem if Eric wasn’t perpetually working, missing out on time with his family, answering phone calls from clients 24-7. He’s become a slave to his business because it is a hundred percent dependent on him— his knowledge, his contacts, his unique approach to racing. Eric has fallen into the other trap— trading time for money. He’s maxed out. He has no balance, becoming more machine than man. The irony. He’s just as stuck as Bruce is, only he makes more money. When I asked Eric how he could scale his business he said, “When you fi gure it out, let me know.” Like so many one- man bands, Eric believes his knowledge and skill set isn’t teachable, and if you can’t teach it, you can’t systematize it. And if you can’t systematize it, you can’t grow it. Period. If you’re making good money doing what you do, you can get stuck in the mindset that you’re the only person on the planet who can do what you do. You become blind to the trap you set for yourself. I share Eric’s story to show you that there is a second way to be stuck. Like Eric, you may be doing just fi ne. You might earn more than enough to live a good life. You may not have debt or cash fl ow challenges. You might be in high demand within your industry; you might love what you do. But if your business is dependent on you doing all the work, or even most of it, you’ll never grow a giant pumpkin. Remember Frank’s defi nition of an entrepreneur: Entrepreneurs identify the problems, discover the opportunities and then build processes to allow other people and other things to get it done.

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Like you, Bruce and Eric had dreams when they fi rst started out. I’m not sure what Bruce’s dream looked like exactly, but his Escalade is a big clue. He probably wanted to “make it big” and “live the life,” complete with all of the trappings of success. And Eric— well, I do know what he wanted, because he told me: “I got started because I just loved racing.” Eric is in it for the pure joy of it, for the thrill of it, because he’s a competitor, because he is made to win. Whether you’re barely getting by, doing “okay” or seriously looking for a way out (like now, please), you’re probably thinking that once- promising entrepreneurial dream is just a fantasy, something for the lucky few (or the silver- spooned— yeah, I am talking to you, Donald Trump). Even if it were possible for you to dominate your industry and rake in buckets of cash, you’d probably die trying. Who has the time? You certainly don’t. You’re already working twenty- fi ve hours a day, eight days a week. You rarely see your family, and when you do make time for your daughter’s dance recital or happy hour with your buds, you’re not there. Not really. You’re thinking about the latest problem and how you’re going to fi x it. Every second of your waking life is spent trying to fi gure out how to hang on to this fl edgling business of yours. You’re busy wearing all of your many hats, worrying about making payroll and if Social Security will be enough to keep you in ramen noo- dles when you retire. Who the hell has time to go for the dream when you barely have the time or the money to eat? Can you even remember the dream? Let me refresh your memory. You want the freedom to live, work and express yourself as you choose. You want the power to infl uence the marketplace, your culture, your community. You want to make a difference. You want

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to grow something amazing from nothing, something people want and love and rave about. You want to succeed in the truest sense of the word. And if all of that translates to you earning heaps and heaps of cash, all the better. Instead, you’re a slave to your business. It owns you— and it’s kicking your ass. And if you’re being really honest, even though the rest of the world thinks you’re a big- time (or rising) entrepreneur, sometimes it feels like your business is quicksand and you’re sinking down right in the middle of it, not a tree branch in sight. Every day, I see a media story or read a blog post about how entrepreneurs are poised to jump- start the world economy. In reality, many entrepreneurs are poised to jump off a bridge. In case you’ve missed the news for the last few years— which, considering your schedule, is a good possibility— each year, according to the U.S. Department of Labor, Americans start one million new businesses, and yet nearly eighty percent of these businesses fail within the fi rst fi ve years. Eighty percent, people. The problem is, entrepreneurs are stuck. Bruce is stuck because he’s a slave to money (because he doesn’t have it) and Eric is stuck because he’s a slave to time (because he doesn’t have enough of it). You’re stuck because . . . well, you tell me. Not sure if you’re stuck? Let’s fi nd out. If you’ve heard yourself say, “If I could just get one more client (or project or deal or major sale), I would fi nally make it,” or if your business is dependent on you to do the work, or if you think your dream is just that— a dream—you’re trapped. But I know a way out. A way out for Bruce. For Eric. For you. You’re not going to want to do some of the things I call on you to do in this book. Like Bruce, you’ll resist part or all of my advice. Like Eric, you will tell me it can’t be done in your industry

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“because it is so unique”—or specialized, or different. You’ll hold out on me (and yourself) and pick and choose which steps you’ll skip over, and which steps you’ll follow. Not because it seems too good to be true, but because so much of what I have to say— what I know to be true— goes against your natural instincts. This stuff may mess with your ego a bit, challenge your self- perception and maybe even freak you out. So if you’re not sure if you should continue, ask yourself one question: Do you want your business to die a slow, miserable death? I’m just going to go ahead and assume you’ve answered no. I’m not trying to be harsh, but it’s important for you to understand that unless you’re already the best, unless you’re dominating your industry, unless you aren’t suffocating under a weight of bills and expectations, there’s a good chance you’ll end up the one- nut guy. And I really, really don’t want to see that happen to you. I hate that guy. Work the Plan— Take Action in 30 Minutes (or Less)

1. Revisit the dream. You had a dream once, and you knew exactly what your life would look like, exactly what you would do with your buckets of cash, and exactly how you would feel when you pulled it off. When all you can think about is how to cover next week’s payroll, that dream may seem out of reach. Still, it’s that dream that keeps you from giving up. You need that dream now, more than ever. So, right now, the visit the dream that inspired you to launch your company in the fi rst place. Write it down and

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keep it handy to review it . . . because we’re about to make it happen.

2. That’s it. Yup. That’s it. Just take some time— the full thirty minutes or longer, if you need it— to really think about the dream you envisioned for yourself, your family, your business when you fi rst started out.

HOW TO PUMPKIN PLAN YOUR INDUSTRY— ONLINE

Let’s pretend you’re an online retailer, selling costume jewelry. Tear your eyes away from your stats, push those packing boxes to one side and let’s Pumpkin Plan your business! You’ve got a nice little business selling original and reproduc- tion costume jewelry online. You have the fl exibility of working from home, which means you get to spend more time with your kids, and you love that. But you’re not making nearly as much money as you’d like to make, as you thought you’d make, and every time you stay up until three in the morning stuffi ng boxes you begin to wonder if it’s all worth it. It’s all of those individual pieces, one here, one there, that eat up your profi ts . . . and your time. So you fi ll out the Assessment Chart, noting your top clients and your not-so-top clients. Since you’re an online retailer with many one- and- done clients, you really don’t have to “fi re” any of the diseased clients. Instead, you focus on getting the Wish Lists of your top fi ve clients. And oddly enough, even the top clients

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who keep buying from you still have a high rate of merchandise returns, especially when they buy your newest designs. So, you pick up the phone and call the top fi ve. They are thrilled to know there is a “real person” behind the business, and doubly pleased that the actual owner of the company is making the call. During the client interview, you learn that three of your fi ve clients operate vintage clothing stores and sell a lot of jewelry to brides looking for jewelry to wear on their big day. They all express frustration at being unable to fi nd matching pieces for brides and bridesmaids. And online jewelry is a little bit of a necessary risk for them; a new piece may look great in a picture but when they get it and match it to the dresses, many times it doesn’t work out— hence the high degree of returns. You ask, “If you had a line of costume jewelry for the bride and her attendants, would you carry it in your store?” All of your top clients respond with an eager “Yes!” So you do some research and discover that no one is doing this. No one. You call your best designer/manufacturer and tell them about your idea— to design a line specifi cally for brides. You agree that your online store will be the exclusive distributor of the line, and then you go back to the top clients to bounce more ideas off them, until you’re absolutely sure you know exactly what they want. You re-brand your online store to gear it specifi cally to bridal boutiques and retailers. First you line up all your top clients with jewelry to stock at their stores. They only need one or two samples of each design, since they just use it to show to the dozens of brides that come through their stores each day. And when a bride likes a piece, it’s the shop owner who orders it online. This is working great . . . time to expand! You start with the people you know— those who operate small

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shops and vintage clothing stores— and show up everywhere they are. You’re at the right trade shows and festivals and events. You place an ad in the handful of targeted trade magazines and news- letters, and on industry- related blogs. And you show up at all of the runway and trunk shows for new designs. Soon, you have dozens of retailers carrying your lines. And, because you’ve moved in concentric circles within your industry, you also have new relationships with designers who ask you to collaborate on the design of a new line specifi cally for their own bridal attire. Your company is written up in magazines and on major bridal blogs, and soon brides from all over the country are buying jewelry directly from your website. And because you’re selling an entire collection of jewelry (necklace, earrings, rings) in one shot, rather than just one piece at a time, you can generate more profi t per sale . . . not to mention, you use up fewer resources (time, shipping supplies, etc.) to get them out the door. Most importantly, you killed the costume jewelry curve and created your own, niche- specifi c curve within the bridal industry. Even though you now have competitors, you’re the dominant player because a) you were fi rst, b) you know this industry inside and out and c) you have fantastic relationships with designers and retailers because you listened and responded to their frustrations and wishes. Now your business is a giant in the industry, and you’re getting a full night’s sleep every night. Life is sweet.

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TESTIMONIALS FROM EARLY READERS AND TESTERS OF CLOCKWORK

“Clockwork had a radical impact on my personal approach to business. One of our companies acquired a record-breaking 22,000 customers in just five days, and our other one just had its three most profitable months in eight years of business, with no sign of slowing down. Oh, and both happened during an extended sabbatical largely made possible by internalizing and working toward the designing phase (the fourth and highest D).” —RYAN LANGFORD, CEO, Ultimate Bundles

“Implementing the Clockwork principles into our business this past year has been a total game-changer. As the visionary and chief content creator, I’ve been freer than ever before to do the things that only I can do, while I trust my team to take care of the rest. We’ve eliminated bottlenecks and learned how to use tracking and measuring to make much smarter decisions. Even better—my team is actually happier as a result!” —RUTH SOUKUP, author and CEO and founder, Living Well Spending Less Inc.

“Since implementing the framework and principles taught in Clockwork, my business has released me. I am no longer being run by my business; rather I am running the business. Thanks to Clockwork we are about to set off on a four- week trip as we travel across Canada work free for the summer—a dream come true to be able to fully step away from the business and the business still fully operational.” —ASHLEY BROWN, owner and creative director, She Implements and Nuvitzo Dance Studio

9780525534013 Clockwork_4.indd 1 6/14/18 1:42 PM “I was constantly spinning my wheels coming up with more ways to convert sales and hit our quarterly goals. Thanks to Clockwork’s ACDC bottleneck framework, I realized I was converting people just fine, but what I did have was a prospect problem! Using Clockwork principles, I created a system to track how many people were coming through my doors and where they were coming from, which empowered me to make the right decisions on what to focus on each week. As soon as I started focusing on bringing more people into our business, we nearly tripled the number of prospects!” —CARLEE MARHEFKA, CEO, Eat The 80

“As a business owner, I often overcomplicate things, so the frameworks in Clockwork helped me clearly identify where I was getting in my own way and what aspects of my business I needed to outsource to grow (and still get to sleep at night). Doing this alone has made a massive difference in what can be accomplished with the same or even less time working on my business.” —TARA HUNKIN ARYANTO, CEO, My Child Will Thrive

9780525534013 Clockwork_4.indd 2 6/14/18 1:42 PM CLOCKWORK

9780525534013 Clockwork_4.indd 3 6/14/18 1:42 PM ALSO BY MIKE MICHALOWICZ

The Toilet Paper Entrepreneur

The Pumpkin Plan

Surge

Profit First

9780525534013 Clockwork_4.indd 4 6/14/18 1:42 PM MIKE MICHALOWICZ C L C K W R K DESIGN YOUR BUSINESS TO RUN ITSELF

PORTFOLIO / PENGUIN

9780525534013 Clockwork_4.indd 5 6/14/18 1:42 PM Portfolio/Penguin An imprint of Penguin Random House LLC 375 Hudson Street New York, New York 10014

Copyright © 2018 by Mike Michalowicz Penguin supports copyright. Copyright fuels creativity, encourages diverse voices, promotes free speech, and creates a vibrant culture. Thank you for buying an authorized edition of this book and for complying with copyright laws by not reproducing, scanning, or distributing any part of it in any form without permission. You are supporting writers and allowing Penguin to continue to publish books for every reader.

Most Portfolio books are available at a discount when purchased in quantity for sales promotions or corporate use. Special editions, which include personalized covers, excerpts, and corporate imprints, can be created when purchased in large quantities. For more information, please call (212) 572-2232 or e-mail [email protected]. Your local bookstore can also assist with discounted bulk purchases using the Penguin Random House corporate Business-to-Business program. For assistance in locating a participating retailer, e-mail [email protected].

Library of Congress Cataloging-in-Publication Data

Names: Michalowicz, Mike, author. Title: Clockwork: design your business to run itself / Mike Michalowicz. Description: New York City : Portfolio, 2018. Identifiers: LCCN 2018015553 (print) | LCCN 2018021396 (ebook) | ISBN 9780525534020 (ebook) | ISBN 9780525534013 (hardback) Subjects: LCSH: Small business. | Time management. | BISAC: BUSINESS & ECONOMICS / Entrepreneurship. | BUSINESS & ECONOMICS / Small Business. | BUSINESS & ECONOMICS / Time Management. Classification: LCC HD2341 (ebook) | LCC HD2341 .M524 2018 (print) | DDC 658.02/2--dc23 LC record available at https://lccn.loc.gov/2018015553

Printed in the United States of America 1 3 5 7 9 10 8 6 4 2

Book design by Pauline Neuwirth

While the author has made every effort to provide accurate telephone numbers, Internet addresses, and other contact information at the time of publication, neither the publisher nor the author assumes any responsibility for errors, or for changes that occur after publication. Further, the publisher does not have any control over and does not assume any responsibility for author or third-party websites or their content.

9780525534013 Clockwork_4.indd 6 6/14/18 1:42 PM For Jake Michalowicz. Wuz up, my brah?

9780525534013 Clockwork_4.indd 7 6/14/18 1:42 PM CONTENTS

INTRODUCTION • ix •

CHAPTER ONE WHY YOUR BUSINESS IS (STILL) STUCK • 1 •

CHAPTER TWO STEP ONE: ANALYZE YOUR COMPANY’S TIME • 20 •

CHAPTER THREE STEP TWO: DECLARE YOUR COMPANY’S QUEEN BEE ROLE • 56 •

CHAPTER FOUR STEP THREE: PROTECT AND SERVE THE QBR • 71 •

CHAPTER FIVE STEP FOUR: CAPTURE SYSTEMS • 101 •

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CHAPTER SIX STEP FIVE: BALANCE THE TEAM • 121 •

CHAPTER SEVEN STEP SIX: KNOW WHO YOU’RE SERVING • 152 •

CHAPTER EIGHT STEP SEVEN: KEEP AN EYE ON YOUR BUSINESS • 170 •

CHAPTER NINE PUSHBACK (AND WHAT TO DO ABOUT IT) • 204 •

CHAPTER TEN THE FOUR-WEEK VACATION • 217 •

CLOSING • 237 •

Acknowledgments • 241 •

Glossary of Key Terms • 243 •

Author’s Note • 246 •

Index • 247 •

9780525534013 Clockwork_4.indd 10 6/14/18 1:42 PM INTRODUCTION

t’s two a.m. and I am writing you out of desperation.” That is the opening line from an email I received from “ICeleste,* an entrepreneur who reached out to me for help. Over the last eight years, I’ve received countless emails from readers and from people who have heard my message about eradicating entrepreneurial poverty in my books, my speeches, an article, or on a video or podcast. I respond to all of them and save quite a few, and this is the one that lit a fire under me to finish this book. The email continued: “I own a preschool. We make no money. I haven’t taken a salary since we started. I’m racking up debt. And tonight, I am broken. Not just financially, but in my soul. I am convinced an immediate termination of my life would be the fastest resolution to my predicament.” Reading that email, I felt as if my heart dropped to my stom-

* Name changed.

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ach. I was concerned—no, terrified—for Celeste’s life. At the same time, I recognized her vulnerability. “Please understand, I am not sending you a suicide note,” Ce- leste went on, “and I am not at risk for such stupidity at the moment. That decision would just leave the burden to my family. But if I was single, I would be gone. You see, I have double pneumonia right now. I can’t afford someone to clean our preschool, and for the last four hours, I have been scrubbing the floors and cleaning the walls. I am exhausted. I am crying, and stop only because I am too exhausted to cry. I am starving for sleep. I am so ill, yet I can’t sleep because my worry keeps me up. The only thing I have left to give my business is my time and that is now depleted, too.” My heart broke for Celeste. I’d been in a similar state of mind a few times in my life as an entrepreneur, and I knew countless others who had been lower than low, desperate for a solution. The last lines of the email will stay with me forever: “What has become of my dream? I am trapped. I am exhausted. I can’t work more than I already do. Or maybe I can. Maybe my work is the slow suicide I am thinking of.” What has become of my dream? Does that question ring true for you? It did for me when I read the email. We work, and work, and work, and work, and before we know it, the business idea we once proudly shared with our friends, the plan we outlined on a white- board, the vision we shared with our first employees, all seems like a dim memory of an unobtainable goal. Normally, I would ask permission to share an email from a reader, but I’m not sure how to reach Celeste, and I’m hoping that maybe she will read this and get in touch. I responded to her email multiple times, but I never heard back, and I didn’t have any luck tracking her down. I still think of her today, and share her story as a cautionary tale.

xii

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Celeste, if you’re reading this, please email me again. I will help you. If you’d rather not contact me, then please know this: It’s not you that is holding your business back. It’s surely your systems—and those systems can be fixed. Perhaps you can relate to Celeste; perhaps (I hope) you’re in a less dire situation, managing to keep up the grind week after week and keep the wheels of your business turning. Whatever the case, chances are you don’t ever feel like you can ease up, or spend less time and effort on your business. Why is that? Most entrepreneurs I know do everything. Even when we bring on help, we spend just as much time, if not more, telling the staff how to do all the things that we are supposed to no longer worry about. We put out fires. We stay up late. We put out more fires. We work weekends and holidays, flake on commitments to family, and bail on nights out with friends. We put out even more fires. We push on, we push harder, we don’t get enough sleep. But here’s the irony: Even when things are going well with our business, we are still exhausted. We have to work even harder when things are good, because “who knows how long this will last?” And the growth opportunities we know we should grab by the horns, the visionary work that is crucial to explosive growth, the stuff we love to do, is set aside day after day until that notepad with all of our ideas is lost under a sea of papers and to-do lists, never to be found again. We’re blowing it. We’re all blowing it. “Work harder” is the mantra of both the growing and the collapsing business. Work harder is the mantra of every entrepreneur, every business owner, every A-player employee, and every person just struggling to keep up. Our perverted pride about working longer, faster, and harder than everyone else in our industry has taken over. Instead of running one marathon, we are trying to sprint ten. Unless something changes, those of us who

xiii

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buy into this way of life are headed for a breakdown. And maybe double pneumonia to boot. Maybe you can relate. If you can, I want you to know you are not the only one who is going through this. You are not the only entrepreneur who feels they must work harder, who is exhausted and wondering how long they can sustain this level of work. You’re not the only business owner who wonders why all your improvements haven’t improved your bottom line, or garnered you more clients, or helped you retain employees, or simply given you back just a little bit of your precious time. You’re not the only person who is reading this book because you feel stuck, and you’re desperate for answers . . . and a nap. According to an article on 20SomethingFinance.com, the United States is the “most overworked developed nation in the world” (G. E. Miller, January 2, 2018). And here’s the irony: Americans are 400 percent more productive than we were in 1950. And yet, as employees, we work more hours and get less time off than employees in most coun- tries. As entrepreneurs and business owners, our workload is even greater. As for time off? We don’t take any. I started writing this book when I asked myself a key question: Could my business achieve the size, profitability, and impact I envisioned without me doing all (or any) of the work? This question triggered my half-decade quest for answers—for me, and for the business owners and entrepreneurs I serve. For you. If you’re unfamiliar with my previous books, or if you’ve yet to hear me speak, I want you to know that my mission in life is to eradicate entrepreneurial poverty. I am committed to never again letting an entrepreneur live with lack: Lack of money. Lack of time. Lack of life. In my book Profit First, I sought to defeat one of the monsters that drives most entrepreneurs to despair: the lack of money. In this book, I’m going to help you slay an even bigger monster: the lack of time.

xiv

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Whatever answers you are looking for, in this book you’ll find real, actionable business efficiency strategies that have worked for countless entrepreneurs, numerous business owners, and for me, too. The goal is not to find more hours in your day. That is the brute force approach to business operations, and even when you pull it off, you’ll just fill that time with more work, anyway. The goal is organizational efficiency. In this book you’ll learn how to make simple but powerful shifts in your mind-set and day-to-day operations that will make your business run on automatic. I’m talking predictable outcomes, my overworked friend. I’m talking real, sustained growth. I’m talking a thriving workplace culture. I’m talking freedom to focus on what you do best, and what you love to do. And that, compadre, is the only way to build a truly successful business—by freeing ourselves to do the work we do best and the work we love most. We are also going to free you from the grind. We are going to relieve you from the constant pull on your time, your body, your mind . . . and your bank account. Yes, it is possible to feel at ease about your business. Yes, it is possible to regain the optimism you felt when you first started your company. Yes, it is possible to scale your business without killing yourself or sacrificing your own happiness. You need to stop doing everything. You need to streamline your business so it can run itself. I’m talking about your business running like a well-oiled machine, run by a highly efficient team that is aligned with your objectives and values. A business that runs, well, like clockwork. The process you will discover in this book is ridiculously simple. You will not find shortcuts, tricks, or hacks to packing more in. Instead, you will discover how to get the work done that matters most, avoid the stuff that doesn’t, and have the wisdom to

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know the difference. (Yeah, I borrowed a little bit from the Seren- ity Prayer. Serenity may seem like an impossible goal for most overworked visionaries like you. Heck, you’d probably settle for sanity at this point. But by following the seven steps I outline in this book, serenity is definitely back on the table, baby!) Life is about impact, not hours. On my deathbed, I will be asking myself if I fulfilled my life’s purpose, if I grew as an individual, if I truly served you and others, and if I deeply and actively loved my family and friends. If I may be so bold, I think you will be asking the same. It’s time to join the elite Clockwork Club. Seriously, make your stance and join us, first at our website, Clockwork.life,* and then at the beach one day soon. It’s time to get back to what you love— in your life, in your work, and in your business. It’s time to implement strategies with ease and joy. It’s time to bring balance back to your life. This book will help you do all of that. That is my wholehearted promise to you.

* To make it super easy for you to get all the free resources for this book, I created a site called Clockwork.life. Everything you need for this book, including a Clock- work Quick Start Guide, is there. Additionally, if you want professional help from a noncorporate consultant, a get-your-hands-dirty expert, I have a small business that does just that at RunLikeClockwork.com. Note that Clockwork.life is not a .com, but a .life, because the Clockwork Club is a lifestyle. And RunLikeClockwork.com is a .com, because it is all about our company serving your company.

xvi

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9780525534013 Clockwork_4.indd 17 6/14/18 1:42 PM CHAPTER ONE

WHY YOUR BUSINESS IS (STILL) STUCK

s is traditional for many people born and bred in the Garden State, every summer my wife and I pack up the kids and meet Amy sister and her family for a week of fun at the Jersey shore. Up until a few years ago, our summer trip went something like this: Everyone would spend the day at the beach and then the adults would start happy hour around four p.m., talk a big game about hanging out until the sun rises, and then promptly fall asleep by seven p.m. Except I hardly ever made it to happy hour or spent much time at the beach. I was working. Always. When I wasn’t focused on completing a project, or in a meeting, I was trying to sneak “a few minutes” to check emails. When I did make it outside to join everyone, I was so distracted by thoughts of work that I wasn’t really there. This caused me stress and annoyed the heck out of my family. Every year, I tried to break the “workcation” habit. I had the same plan: I would get all of my work done in advance so that

9780525534013 Clockwork_4.indd 1 6/14/18 1:42 PM CLOCKWORK

“this time,” I could finally enjoy my vacation and be fully present with my family. Then, I thought, I would return from vacation with no work to do, or at least very little, and easily get back up to speed. But my plan never worked out. Often, it was just the opposite of what I planned. The last time I tried to prove that I really could work this vacation plan was a total disaster. A problem with a client came up the afternoon of the day before we were to leave. I can’t even remember what the problem was, but, at the time, I thought it was important enough to work on the solution well into the night. Then I stayed up even later to finish the work I had to do before the client crisis. It was nearly dawn before I made it back home from work. I slept for three hours, then headed to Long Beach Island. (If you aren’t from New Jersey, I want you to know that LBI is the real Jersey shore, not the boozefest of a show that lays claim to it.) Before I went to the beach, I decided to check my email to “make sure everything was okay.” It wasn’t. The rest of my day was spent making calls and sending emails. Even when I made it to the beach the next day, my mind was on the business and my body was dying for sleep. Yet again, I wasn’t really there. My family’s vacation was compromised, too, because my tension spread like smoke in a bar. One person can really stink up the place and ruin everyone else’s fun. My wife was frustrated with my workaholic ways, and so, one afternoon, she sent me for a walk on the beach—without my phone. As I looked at the beachfront houses, I thought, “The people who vacation at those mega-mansions have it all figured out.” They had financial freedom. They could take vacations and not worry about work. They could enjoy themselves and come back to a business ticking along, still growing, still making money. That’s what I wanted.

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But as I looked closer, I saw person after person sitting on their decks frantically plugging away on their laptops. I even saw people on the beach, with laptops perched precariously on their knees, scared of sand getting in the keyboard while they tried to shield their screens from the glare of the sun. The people I assumed had it all together weren’t any different from me. They were all working on vacation. What the f? At this point in my life, I had built and sold one multimillion- dollar business to private equity and another one to a Fortune 500 company, written two business books, and spent a good part of my year speaking to thousands of entrepreneurs about how to grow their companies quickly and organically. Sounds like I was living the dream, right? You would think that I had retired my workaholic badge for good. But stressing out about work on yet another vacation proved I hadn’t. I wasn’t even close. And it was clear: I was definitely not alone. Neither are you.

THE SOLUTION IS NOT THE SOLUTION

I thought the cure for my workaholicism was better productivity. If I could just do more, faster, I could find more time for my family, for my health, for fun, and to get back to doing the work I really loved. The work that fed my soul. I was wrong. In an effort to be more productive, I tried it all: Focus apps, the Pomodoro method, working in blocks. Starting my day at four a.m. Ending my day at four a.m. Lists on yellow notepads. Lists on my phone. Lists of just five things. Lists of everything. Back to lists on yellow notepads. The “Don’t Break the Chain” method, which quickly led me to the “Chain Myself to My Desk” method. No matter what hack or technique I tried, no matter

9780525534013 Clockwork_4.indd 3 6/14/18 1:42 PM CLOCKWORK

how productive I became, I still slipped into bed at night long after I should have, and woke up the next morning way earlier than I should have, with a to-do list that seemed to have magically grown overnight. Maybe I did things faster, but I surely didn’t work fewer hours. If anything, I worked more. Maybe I was making progress on many small projects, but many more new projects were filling up my plate. And my time was still not my own. All my years of studying productivity had given me nothing but more work. It was an epic fail. If you haven’t tried some of the productivity strategies I rattled off like bad failed diet plans, I’m sure you have your own list. An entire industry is built around the desire to do more, faster. Pod- casts, articles, and books; mastermind groups and coaches; productivity challenges, calendars, journals, and software. We buy into the next productivity solution someone recommends because we’re desperate. Desperate to grow our companies by getting more done faster, and managing all our work without losing our minds. Some productivity experts are getting out of the “time hacks” game. As I was doing the research for this book, I befriended former productivity maven Chris Winfield. He had just completed one of his fabled retreats where he teaches twenty or so business leaders and professionals how to do more things in less time. We met for coffee in New York City near Lincoln Center so he could teach me what it really took to be productive. I was ready to finally discover the productivity secret that would release me from my stress-ridden life. I arrived forty-five minutes early. I couldn’t wait to find the ultimate hack. Chris arrived exactly on time, to the minute—typical of a productivity expert. After we made the obligatory “this coffee is really good” com- ments, Chris looked me right in the eye and said, “Productivity is shit.”

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“Wha . . . ?!” I said, nearly spitting out my deliciously balanced Fazenda Santa Ines coffee. I can become a bit of a coffee snob (or, my preferred title, a “beanologist”) when I have forty-five minutes to kill before a meeting. “It’s shit, bro. I have been teaching productivity for years and everyone I have taught is actually working more, including me.” I said, “I don’t get it. Why is that?” “Because productivity leaves everything on your plate. Produc- tivity allows you to do more, faster. The pivotal word being ‘you.’ You can do more, therefore you in fact do more, and you do it all. Even when you say you are outsourcing the work, you really aren’t, because you can’t outsource the decisions. You are giving one task to someone else, but they come back at you with one million questions. You actually need to work even more, when you try to not do the work.” Chris continued. “I’m telling you, Mike. Productivity is hurting a lot of people. I’m done dying from it, and I’m done preaching about it, too. I am leaving the industry so that I can start working less, begin making more, and live life.” Mind. Blown. It turns out that productivity doesn’t get you out of the doing; it just gets you doing more. I had started my clockwork quest by seeking the wrong holy grail!

REVISITING PARKINSON’S LAW

You and I both know extremely productive people who work sixteen hours a day. You and I absolutely know the “I do best when I cram” people. Maybe it’s you. Once upon a time, it surely was me. It took me about fifteen years to figure this one out. I actually wore the productivity master’s badge of honor—the workaholic

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badge. I was a proud member. I was the fastest task-ticker-offer in the land. (What? It’s a thing.) In my book Profit First, I applied Parkinson’s Law—“our consumption of a resource expands to meet its supply”—to profit. Just as we use all the time we have allocated for a project to finish it, we also spend the money we have, which is why most entrepreneurs rarely earn as much as their employees, much less turn a profit. The more money we have to spend, the more we spend. The more time we have, the more of it we spend working. You get the idea. The fix to this behavior is ridonkulously simple: limit the resource and you limit your utilization of it. For example, when, after you collect revenue, you allocate profit first and hide it away (in a remote bank account), you have less money to spend. So guess what? You spend less. When you don’t readily have access to all the cash flowing through your business, you are forced to find ways to run your business with less. And now that we’re talking about time, Parkinson’s Law is even more relevant. Whatever time you give yourself to work, you will use. Nights, weekends, vacations—if you think you need it, you’ll work right through your time off. This is the root cause of the failure of productivity. The goal of productivity is to get as much done as quickly as possible. The problem is, because you’ve pri- oritized a seemingly endless amount of time to running your business, you’ll continuously find a way to fill up the time. The more productive you are, the more you can take on. The more you take on, the more productive you have to be. Do you see how productivity is a trap? If you’re like me and most entrepreneurs I meet, you use the time you saved to do more work—just as Chris said. And not the work that feeds your soul. Not the work that could truly make a difference for your business. No, you do the next urgent thing.

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You put out the fires, and then you do the next tasks that will be the next fires, until you’re interrupted by some other even more urgent thing that pops up. You keep working your ass off and feeling as though the more progress you make, the more work you have. It was only after I met Chris Winfield that it dawned on me: Yes, productivity is important; we all need to make the best use of our time. To be unproductive is like sinning against the business gods. (Plus, sittin’ around eating Cheetos and watching Thigh- Master infomercials all day isn’t going to move anyone’s business forward.) But in time, I came to understand the real holy grail is organizational efficiency. Productivity gets you in the ballpark. Organizational efficiency gets you hitting home runs. Organizational efficiency is when all the gears of your business mesh together in harmony. It is the ultimate in leverage, because you design your company’s resources to work in concert, maximizing their output. Organizational efficiency is where you are accessing the best talents of your team (even a team of one) to do the most important work. It is about managing resources so that the important work gets done, instead of always rushing to do what’s most urgent. It is not about working harder. It is all about working smarter. For far too many of us, twenty years of business ownership is celebrated by realizing that we survived twenty years of a continuous near-death experience. But it doesn’t have to be that way. You are not alone. There are millions of people just like you. I was one of them, and I’m here with you. In fact, I’m still progress- ing further and further on this stuff, even as I write this. I still have to remind myself to work smarter, not harder; it’s so easy to fall back into believing there’s a magic productivity hack that will save the day. Whatever choices you made to get you to this day, it’s okay. It got you here. You’re in the park. Now, put down that

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frankfurter and sauerkraut, and step on the field, crackerjack. You are about to hit the entrepreneurial homer of a lifetime. You can take a selfie right now, pointing to the stars, because you and your business are about to launch. Take your time and make a great pose. I’ll wait. So what’s the fix? We change the system around us so that we don’t need to change (we really can’t change much anyway) and set up the system so that it will channel our natural tendencies to achieve the outcomes we want. Part of the Clockwork solution is to actually restrict time, to use Parkinson’s Law to our advantage. But that alone won’t get us off the hamster wheel. When we give ourselves less time, we also need to figure outwhere to focus the remaining time. It’s not about doing more with less. It’s about doing less with less to achieve more. You need to do the right tasks with your restricted time and have other people do the right tasks with their restricted time. In other words, a business that runs like clockwork is about selective efficiency, not mass productivity.

PLAYING IT SAFE

My first business coach, Frank Minutolo,* saw me through three startups and two acquisitions, including one sale to a Fortune 500. Frank brought the Japanese company Konica to the United States, and grew it from a startup to $100 million. After he exited, he pursued his life’s calling: coaching a handpicked group of young(ish) entrepreneurs. I was one of the lucky thirty or so who could call him their adviser.

* I still see Frank on occasion, even though he is long retired now. The man can’t resist a lunch on me, and I can’t resist learning from him.

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I’ll forever be indebted to Frank for his no-nonsense, sage advice. I based my book The Pumpkin Plan on the simple strategy to rapid organic growth that he taught me. It started with our first face-to-face meeting. He had spent four hours with our team evaluating every aspect of our businesses, and then we had a one-on- one immediately after. Frank looks a little like Regis Philbin and sounds a little like the Godfather. “Mike,” he told me, “you need to get smarter about growing your business. You don’t want to put in all this effort, endure all this stress, only to end up with nothing to show for it. Your retirement will be spent in a rusty lawn chair with one nut hanging out of your shorts, while you regret your life of toil.” One nut? What the hell? That description was the weirdest thing I’d ever heard. It is just something that once you picture it, it can’t be unseen. It turns out that vividly descriptive visions of your client in a decrepit state, peppered with some flagrant genitalia references, is a shockingly effective sales strategy. I hired Frank that day, and he subsequently ensured that I avoided that nasty future by helping me rapidly grow and sell two companies. But it was only after ten years of working together that I finally got what he was trying to tell me. Fear can be a massive catalyst for change. One afternoon, I took Frank out to lunch at Fuddruckers and finally asked him why he would share such a bizarre story on the very first day I met him. Frank chuckled one of those old-guy chuckles where laughter turns into a minor fit of choking. “The point of that story,” Frank explained, “is that the road- block is you. The problem is the draw of the familiar. Entrepre- neurs aren’t that different from any other human, in that when something is familiar, it becomes comfortable. Entrepreneurs— you included, Mike—work like animals. And while you say you ‘hate it’ or ‘won’t do it anymore,’ the truth is, you are familiar

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with it. And when you are familiar with something, as ugly as it is, it is easiest to keep doing it. Doing what’s familiar will land you in that rusty lawn chair, with a nut hanging out of your shorts. “My goal is to make you more fearful of doing what’s safe and familiar, than taking the leap to the promising new. I wanted you to be terrified of the path you were on. I used your fear of where you were comfortably headed to move you to the new uncomfortable place you needed to go.” As painful as it can be to be stuck in the grind, our belief that we need to “work more” and “work harder” becomes familiar. Despite our exhaustion, the situation is comfortable, so the same problems yield the same solutions. Working long hours does not require us to step out of our comfort zone, or learn something new, or let go of our ego-driven need to micromanage. Entrepreneurs have become way too comfortable with the hardship, so they keep doing the things that keep them in that state. If you want to make your business the most efficient it can be, you must stop doing what you are doing, which is getting in your own way. You doing the work, or inserting yourself in other people’s work, may be all you know to this point. It may be very comfortable by now. Stop doing it.

THE SURVIVAL TRAP

If you’ve read my previous books, you have probably heard about the Survival Trap. I have talked about the Survival Trap for a long time now. And, still, I’m going to return to the Survival Trap because, unfortunately, this is the state most of us entrepreneurs end up in, and very few of us ever escape from. The Survival Trap is what I call that never-ending cycle of re- acting to whatever comes up in your business—be it a problem

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or an opportunity—in order to move on. It’s a trap because as we respond to what is urgent rather than what is important, we get the satisfaction of fixing a problem. The adrenaline rush of saving something—the account, the order, the pitch, the entire damn day—makes us feel as though we are making progress in our business, but really, we are stuck in a reactionary cycle. We jump all about, fixing this, saving that. As a result, our business careens to the right, then to the left. Then we throw it in reverse, and jam it forward. Our business is a web of misdirection, and over the years it becomes a knotted mess—all because we were just trying to survive. The Survival Trap is all about getting through today at the utter disregard for tomorrow. It’s about doing what is familiar, as Frank warned. We feel good that we survived the day. But then, at some distant point in the future, we wake up and realize that years and years of work didn’t move us forward one iota, that merely trying to survive is a trap that results in a long, drawn-out drowning of our business and our willpower. Sadly, you will discover that living in the Survival Trap leads to a very trashy day-to-day life of quick highs, deep lows, and doing anything to make a buck. Quite frankly, it is not the life of the coveted entrepreneur; it is the life, shrouded in shame, of the entreprewhore. I too was one. I was addicted to doing whatever anyone wanted at whatever price they offered. I prostituted my business to survive just one more day, and then I continued that behavior as I expanded into multiple disastrous businesses. Ten years ago, I cleaned up my act, and got out for good. I started by taking my profit first, as I shared inProfit First. Then, by focusing on my Top Clients, my business grew fast and organically. Today, I am in the final stages of reclaiming my life because I have designed my business to run on automatic. You are about to do the same.

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In Profit First I wrote a little section that was the seed of this book: “Sustained profitability depends on efficiency. You can’t become efficient in crisis. In crisis, we justify making money at any cost, right now, even if it means skipping taxes or selling our souls. In crises, the Survival Trap becomes our modus operandi—until our survival strategies create a new, more devastating crisis that scares us straight or, more commonly, scares us right out of business.” Was Celeste, the preschool owner I mentioned in the introduction, caught in the Survival Trap? Most definitely. She was experiencing the extreme version of the trap. You may be comfortable in your trap. Maybe it’s manageable. Maybe you take pride in managing it. But what does that matter if you’re still in the trap? The Survival Trap is what’s keeping you from driving toward your vision, or meeting short- or long-term goals. In some sense, we know this. We feel guilty about that five-year plan we haven’t looked at in seven years. We see other businesses launching new initiatives or products in alignment with trends, and we wonder how they found the time to predict and respond to the changes in our industry. (They must have superpowers, right?) We know we’re behind in terms of making the best use of innovations in technology and workplace culture. And we know that in order to take our business to the next level, we need to get back to our visionary roots—the ideas and plans and heart we had when we first started our business. It’s hard to escape the Survival Trap because your business constantly pulls you back into keeping it afloat. But I’m going to show you how to escape it for good by designing your business to run itself and freeing yourself to do only what you want, when you want. So let’s get busy getting unbusy, why don’t we?

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THE SEVEN STEPS OF CLOCKWORK

In the next seven chapters, we’ll cover the steps you’ll need to take to make your business run like clockwork. One step may take longer than another, and you may find yourself having to go back and improve one of the steps from time to time. This process may take you two days or two months, but if you follow the steps, you’ll get there. For a business to grow and serve its client base, it needs to get things done. This is the Doing part of a business. The business must also orchestrate its efforts so that all the people and systems are moving the business forward in a complementary fashion. This is the Design of a business. As people on your team work together, their communications will consist of making De- cisions and Delegating work that must be accomplished. How you allocate your business’s time between the Doing, Deciding, Delegating, and Designing functions is called your 4D Mix, and getting it in the right proportions is crucial to helping your business run itself. Most micro-enterprises and small businesses spend too much time Doing. Imagine that solopreneur who is running around like a chicken without a head doing everything, or that small business where everyone—including the boss—is working crazy hours with no time allocated for planning. The goal of clockworking your business is to move you toward Designing it to run itself while other people or resources take care of the Doing part. To make this happen, we need to start with you and get clarity about how much time you spend Doing, and to do that we need to analyze your 4D Mix and that of your company. As is true with any problem or opportunity in life, if you want to improve things, you need to know your baseline. Once we know that, we take deliberate and direct steps to get your com-

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pany (and you) where you want it to be. The optimal 4D Mix is when the business spends 80 percent of its time Doing, 2 percent of the time making Decisions for others, 8 percent of the time Delegating outcomes, and 10 percent of the time being Designed for greater efficiency, better results, and less cost in the process. Regardless of whether you have one employee, one thousand, or somewhere in between, the optimal 4D Mix stays the same. Here are the seven steps to make your business run itself:

1. Analyze the 4D Mix—Set the benchmark levels for the blend of Doing, Deciding, Delegating, and Designing at which your business is currently operating. A clockwork business balances getting work done, managing resources, and constant improvement. In the first phase of making your company run itself, we will do a simple time analysis to see how much is being spent in each of the four categories. And once we know, then you can adjust your company to the optimal 4D Mix. 2. Declare the Corporate Queen Bee Role—Identify the core function in your business that is the biggest determinant of your company’s success. Within every company there exists a single function that is the most significant determinant of the company’s health. It is where the uniqueness of your offering meets the best talents of you and/or your staff. It is what you declare the company’s success will hinge on. I call it the Queen Bee Role, or QBR. When this function is at full throttle, the business thrives, and when it is slowed or stopped, the entire business suffers. Every business has a QBR. You must identify and declare your company’s QBR, and as you improve its performance your entire business’s performance will elevate.

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The QBR is the “thrive factor” for your business, and you must decide what you want it to be. 3. Protect and Serve the Queen Bee Role—Empower your team to ensure the biggest determinant of your company’s success is guarded and fulfilled. The QBR is such a critical role to your business that every employee, even if they are not the ones serving the QBR, needs to know what it is and how to protect and serve it. In a highly efficient business, the QBR is always the priority and systems are in place so that the people and resources who serve it are not taken away from it. Only when the QBR is humming along, can all people in the business do their own most important work (this is called their Primary Job). 4. Capture Systems—Document or record the systems you already have in place so your team can do the work the way you want them to. Even though it may not seem that you have systems, you do. In fact, every business at every stage has all the systems it needs. Those systems simply need to be captured, trashed, transferred, and/or trimmed. Every entrepreneur and employee has a way of executing various tasks, but often they are undocumented and non- transferable. Using a simple evaluation and capture method you will impart that information to your team or freelancers with ease. Hint: You will not be creating a manual. Both the creation and consumption of manuals is inefficient and therefore has no room in a clockwork business. 5. Balance the Team—Adjust roles and shift resources to maximize the efficiency and quality of the company’s offering. Businesses are like organisms; they grow and contract and change. To perform optimally you must match the inherent strength traits of employees to the jobs that

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need them most. Instead of a traditional top-down organization chart, an optimized company is more like a web. You never restrict employees to one job function. In- stead, an efficient organization identifies the natural- strength traits of the employee and matches them to the tasks that benefit the most from those traits. 6. Make the Commitment—Devote your process to serve a specific consumer need in a specific way. The biggest cause of business inefficiency is variability. The more services you provide to a wider mix of customers, the more variability you have, and the harder it becomes to provide extraordinary and consistent services. In this step, you will identify the best type of customer to serve, and determine the fewest products/services that will serve them at the highest level. 7. Become a Clockwork Business—Free the business from dependency on you, and free yourself from dependency on the business. A clockwork business is a business that delivers consistent results, including growth goals, without your active involvement. As you are less available for the business, it will naturally become designed to run without you. In this step, you will learn how to create a business “dashboard” that enables you to stay on top of your business, even if you’re not there.

That’s it. Seven steps. In that order. You will discover and execute these seven steps throughout the rest of the book. As you go through this process, you will feel frustrated, or stuck, and want to give up. Don’t freak out; those are just signs that you are getting comfortable with the uncomfortable new stuff I am teaching you. Again, don’t freak out, and don’t you dare ever stop. And as a result, you will experience a business that runs on automatic, just like clockwork.

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SEVENSEVEN STAGES STAGES OFOF CLOC CLOCKWORKKWORK

STAGE CORE CONCEPT KEY ACTION

THE 4D MIX 1 The four types of work are Doing, Conduct a time analysis and Deciding, Delegating, and Designing categorize the type of work

THE QBR 2 The core function you decide to Declare your company’s QBR and hinge your company’s success on identify who is serving it

PROTECT AND SERVE THE QBR 3 The core function of your business is Educate your team on the QBR and always the priority empower them to guard and/or fulfill the QBR

CAPTURE SYSTEMS 4 You already have all the systems Use the trash, transfer, or trim method created for your business to free time for Design work, QBR work, and Primary Job work

BALANCE THE TEAM 5 An optimized organization chart is a Match the strongest traits of team web-like structure members to the tasks that most need those traits

THE COMMITMENT 6 Your business strength comes first, Identify, focus, and cater to the then you target the customer who will consumers who will most benefit from benefit most from it your unique o ering

BUSINESS ON AUTOMATIC 7 Doing makes you work for the Take the four-week vacation business, Designing makes the business work for you

FIGURE 1

Time is everything. Every. Single. Thing. Time is the only thing in the universe (until someone invents a time machine) that is not renewable. Either you use it wisely, or you don’t. Time will still tick, tick, tick away no matter how you spend it. I suspect even right now, you may have made a few nervous looks at the clock, as time races by, hoping you can cram in this book (and your

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work) faster. Am I right? Even just a little bit? If you are experiencing that, I want you to know it’s not your fault; it’s Parkinson’s Law. And I want you to know you are actually in a good position. Better said, you are in a salvageable position. Your business likely has demand and you are delivering on it (although not efficiently). What we are going to do is make a few simple tweaks to make your business run like a well-oiled machine and, in the process, give you back that ever-precious time that seems to move, more slowly and comfortably. I want to be clear that this book is not about doing more with the time you have. It’s about your business doing more with the time it has, and about giving you freedom to do other things with your time. It’s about getting your life back while you grow the business of your dreams. That can happen. Actually, it does happen, all the time, for other businesses. Our job, today, is to do it for yours. But for this to work, you need to be all in on this with me. Are you ready? Good. Let’s get to work. Scratch that. Let’s get to less work.

CLOCKWORK IN ACTION

Your primary focus is to design the flow of work through your company so that other people and other things can get the work done. Commit to putting your company’s output first and your productivity second. How do you do this? Simple . . . you will find better answers when you ask better questions. Stop asking “How do I get more done?” and start asking, “What are the most impor tant things to get done?” and “Who will get this work done?” At the end of each following chapter, I’ll share action steps you can accomplish quickly—usually in thirty minutes or less—and still experience big progress. For this first chapter, I only have

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one action step for you, but it is perhaps the most important. It will force an immediate adjustment in how you view your role in moving your business forward. The step? I want you to commit . . . to me. Send me an email at [email protected] with a subject line that reads: “My Clockwork Commitment.” That way, I can easily spot it among the other emails I get. Then, in the body of the email, please write something like: “Starting today, I commit to designing my business to run itself.” Include any other information you think is relevant, such as why you won’t stand for the old way of running your business anymore or what this means to you and your family. Why email me? Because, if you’re like me, when you commit to someone else, your follow-through skyrockets. Remember, I personally respond to all emails from readers (albeit super slowly at times). I look forward to receiving yours. P.S. Make note of that unique domain for my email, Opera- tionVacation.me. I know it might not make sense at the moment, but it is me who gets it. And soon enough, very soon in fact, you will learn what Operation Vacation is all about.

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STEP ONE: ANALYZE YOUR COMPANY’S TIME

he first time Scott and Elise Grice visited me in my New Jersey office, we talked about laundry for a solid twenty minutes. TYes, you read that right. Laundry. Specifically, how they do three weeks’ worth of laundry—for both of them—in an hour and ten minutes . . . while running errands. I’ve never given more than a passing thought to laundry, and yet, as Scott and Elise explained how they streamlined it, I was riveted. Seriously, they are systems ninjas. As our conversation progressed, I learned why systems are so important to Scott and Elise. Founders of Hey, Sweet Pea, a branding team originally based in Austin, Texas, the couple has taught and developed brands for more than 1,400 creative entrepreneurs (think photographers, writers, stylists, graphic designers). Two years into their business, they were handling thirty to forty custom branding clients at a time. To give you a sense of how successful they were, other companies in their industry typically handled four to five custom branding clients at a time. They were rocking it—until life intervened.

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In 2013, Elise contracted West Nile virus, which landed her in the hospital, and it quickly escalated to bacterial meningitis. Over the next two months, she spent six weeks in the hospital and two more completely immobilized at home or in an ambulance going back to the hospital. Because of her illness, every time Elise so much as looked at a screen—her phone, her tablet, her laptop— she experienced shooting pains in her head. Too exhausted to even type on a keyboard, Elise couldn’t work at all. She had to call it quits, and that meant she and Scott would also have to quit their business, because when Elise “The Coach” Grice couldn’t work, the business team couldn’t run any “plays.” “We had a team of nine contractors producing work, but Elise was the creative director, and we couldn’t send anything to the clients until she approved it,” Scott explained. “Since she couldn’t look at a screen to approve work, everything backed up. The business came to a grinding halt and we couldn’t invoice anyone.” Two months after she contracted the disease, Scott and Elise found themselves sitting on her hospital bed, surrounded by medical bills, wondering what they would do if she never got better. “We were both crying. I said to Elise, ‘If you don’t fully recover, we can’t run this business. You are the only one who has the ability to approve this stuff, no one else, including me, can.’ We were making payroll out of our savings account. I was terrified for my wife and I was terrified for our business. I had no idea what we were going to do.” Their business was entirely dependent on Elise, and in just two months without her, the wildly successful company was in wildly dire straits. It took only two months. This is what we business owners fear the most—that if we step away from our businesses, if we check out, even for a few days, our businesses will suffer or die. I know I’ve felt this countless times, and used this fear as a justifi- able reason to work, work, work, and then work some more. I

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suspect you have, too. (Here’s a little secret: The work is never done.) We’ll return to the Grices and find out whether their business survived in a few pages, but if you fear what will happen to your businesses if you take a break—or are forced to take a break—it’s a big sign, as in flashing-neon-billboard big, that your business needs to be designed to run itself. If you had systems in place to keep your business running with or without you, you wouldn’t worry about taking time off. I think you know that, because you’re reading this book. What you may not realize is that getting your business to run without you begins with you, and how you view your role in your company. We first must move you from Doing to Designing. As I said in the previous chapter, productivity is a trap because, ultimately, the work is still being done by you. Most of us are used to doing whatever it takes to keep our businesses afloat—and the operative word here is “doing.” In the early days, we have no choice but to take on every role in our hopeful startups. There is even that cheesy phraseology that circulates with us entrepreneurs, “I’m the CEO, the CBW, and everything in between.” I’m sure you have heard that one. You know, the chief executive offi- cer, the chief bottle washer, and everything in between. Cute. But not a way to grow an efficient business. Entrepreneurs are natural DIYers—HGTV has nothing on us. Shoot, we should have our own channel! We do everything as we build an early stage business, because we must do everything. We can’t afford to hire others, and we still have the time to do everything. We aren’t usually that good at most of it (even though we convince ourselves we are), but we get the stuff done well enough. While it makes sense that we have to take on many different roles when we first get our business off the ground, keeping it up is not healthy and not sustainable. Finally, we

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make that first hire, and even with the added financial pressure,* we feel some relief since we couldn’t keep up the insane pace of doing everything. But the sprint-like pace in fact does not go away. Even when we hire people to help us—employees or subcontractors—we often still end up “doing” a ton of work— scratch that, more work—because we, like Elise in her branding business, are the linchpins. Designing a business that runs itself is doable. In fact, it is very doable. To pull it off, you have to shift away from Doing and focus more and more of your time on Designing the flow of your business.

THE FOUR DS OF RUNNING A CLOCKWORK BUSINESS

There are four phases of activity that you engage in as an entrepreneur. These are “the four Ds”—Doing, Deciding, Delegating, and Designing. Although you are engaged in all four of these phases to varying degrees during the course of your business’s evolution (you spent some time Designing your business before you launched it), and while your business will always have a mix of all four Ds, our goal is to get you, the entrepreneur, Doing less and Designing more. Shifting from Doing to Designing is not a “Monday morning makeover” kind of shift. It’s not a switch you flip; it’s a throttle.

* The financial dilemma of hiring people is very difficult for small business owners. When you hire an employee, you might have to cut your own compensation, which is already sparse. So we delay hiring until we can afford the employee, but never get there. We are stuck between a rock and a hard place. Work even harder, which you can’t. Or hire someone, whom you can’t afford. There is a solution, though, which I explain in Profit First. I made a video explaining exactly how to address this situation successfully. It is available on the Clockwork.life page.

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You build toward this. You become more and more of a designer over time, and there is no finish line.

1. Doing: This is the phase when you do everything yourself. You know it well and you do it well (enough). When you’re a solopreneur, doing everything yourself is a necessity. This is where almost every startup starts, and where most of them get stuck, permanently. Of the twenty-eight million small businesses in the United States, more than twenty-two million don’t have a single employee.* In other words, the owner is doing everything. 2. Deciding: In this phase, you assign tasks to other people. Whether they are full- or part-time employees, or freelancers, or contractors, they are really only task rabbits. They try to do the one task you gave them and then come back to you to ask questions, get your approval, have you solve problems, and help them come up with ideas. If there is any unexpected anomaly to the task at hand, the person comes back to you for your decision. When they finish a task, they either sit idle or ask you, “What should I do now?” Most entrepreneurs confuse Deciding with Delegat- ing. If you assign a task to someone else but need to answer questions to get the task done, you are not Del- egating—you are Deciding. Business owners who have two or three employees can get stuck spending most of their time in this phase. Your employees do the work, but because you make every decision for them, you’re never able to grow beyond two or three employees. Work becomes a constant and distracting stream of

* www.forbes.com/sites/jasonnazar/2013/09/09/16-surprising-statistics-about -small-businesses/

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questions from employees. It eventually gets so bad that you throw your hands up in frustration and make the decision to “go back to how it was before” and do all the work yourself. You get rid of your help, go solo for a while (because it is easier to just do work than to decide for everyone else), only to soon enough get overwhelmed with the work and then hire again, and return to getting frustrated with the Deciding phase. You flip- flop back and forth for the life of the business between doing the work and deciding for the few employees, over and over again. 3. Delegating: In this phase, you’re able to assign the task to an employee as well as empower them to make decisions about executing that task. The person is fully accountable for the completion of the task. They are on their own. As you spend more of your time in the Delegating phase, you will start to feel some relief from your workload, but only if you delegate in the right way. Initially, you must reward your employees’ ownership of a task— not the outcome—because the goal is to shift the responsibility for decision making from you to them. If they are punished for wrong decisions, you will only be training them to come back to you for decisions. You, too, have made wrong decisions in the past; that’s how you grew. They will make wrong decisions, and that is how they will grow. The Delegating phase can be extremely difficult for entrepreneurs, because we can do everything perfectly (in our mind) and get frustrated when they don’t. You must get past this perfection mind-set if you ever want your business to successfully run itself. 4. Designing: This is when you work on the ever-evolving vision for your company and the flow of the business to

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support that vision. The business runs the day-to-day on its own. Shoot, you could even take a four-week vacation without the business missing a beat. (Put a pin in that.) When you are in this mode, you will not only be free from the daily grind, but you will also experience the most joy in your work. Your job is elevated to managing the business by numbers and fixing the flow of business when things aren’t the way they are supposed to be. This is when you are no longer needed to do the work; you are now overseeing the work (to the degree you want to) and doing only the work you want to. This is the good life, my brothers and sisters.

DOING IS GETTING YOU NOWHERE

I can read your mind. I know, it’s a little creepy. But you are my kindred spirit BFF, and I am sure I know what you’re thinking right now: “I can’t stop doing the work. I’m the only person who really knows how to do the X, Y, and Z around here. My staff is great and all, but they can only do their stuff. When it comes to the stuff I do, no one else can even come close. I am that committed. I am that good. I am the only one who will ever be able to do what I do. And when the sheeyat hits the fan, it’s all me, baby. All me!” Am I close? I think I am. It’s not hard to read your mind, because I suspect you and I are not that different. It took me years to stop believing my own hype, and, truthfully, I still struggle with the urge to “just do everything myself.” In my more than twenty years as an entrepreneur, “doing everything” was something I expected of myself. I was a “serious” entrepreneur. I did “whatever it took” to grow my business. And because I succeeded, I

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attributed much of that success to my “tireless” work ethic. Even when I had a staff of nearly thirty employees, I still burned the midnight oil, doing much of the work and overseeing the rest of it because “no one can ever do the stuff only I can do.” I just wished that my employees would “step up” and “act like an owner.” But they didn’t. They just bothered me with an endless stream of questions. Notice all of the quotation marks in this paragraph? That’s because most of my perceptions were, like I said, hype—total BS. Again, as a business leader, your time is best spent Designing the work, not Doing the work. What do I mean by “Designing the work”? Let’s use a football analogy. (Go Hokies!) It’s the story of the team owner, the coach, and the players. The players are empowered to make split-second decisions in the field of play, the coach creates the game plan and calls the plays, and the team owner designs the team. The owner lays out the vision for the franchise, picks the coach(es) to manage the team, and then watches from afar as the team puts the game plan into action. For the outsider, it may be a bit confusing. It just looks like a rich old guy eating mini-wieners in the glassed-in suite. But there is much more going on than you can see. The owner is always optimizing every element of the franchise: the team, the sponsor deals, the seat sales and the up-sells, the marketing, the budget, etc. As a designer, you think several steps ahead. You are strategic. You measure opportunities and risk. Is every move you make the right one? Of course not. But you measure the outcomes of your moves and make adjustments accordingly on your subsequent moves. And to be your company’s designer you must get off the field and up in the suite. Just avoid those mini-wieners. Nothing good ever comes from those things. Every entrepreneur starts out as a doer, because doing things is what we’re good at. The problem arises when you get stuck in

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that phase, and all the Doing keeps you from your bigger vision of building a business. You’re already familiar with Design work. It’s what you loved when you first started—creating a vision for your company and considering the big, bold strategic moves you could make. So this is also the work that you have the firsthand knowledge to do effectively—direct the flow of the business. When you are spending most of your work time in Design mode, your company achieves absolute efficiency and scalability potential. As designer, you are giving your company your best—your genius, the genius that started it all. You are also removed from the day-to-day operations so that your business can run without you, which means it can also grow without you. Your purpose is to design the flow of your business, point it in the direction of growth, and then make strategic decisions to fix, change, and/or improve things when the flow is not right. Even when we appreciate the value of Design work, most of us still devote too many hours to Doing. This doesn’t just apply to the solopreneur who hasn’t delegated anything yet, but also for leaders of teams of five, or fifty, or five hundred. Owners, manag- ers, and C-suite teams can get trapped in the Doing just as much as any solopreneur. A 2009 study by the Max Planck Institute for Biological Cyber- netics in Tübingen, Germany, confirmed that people trying to find their way through a forest or a desert devoid of landmarks (and without the sun as a beacon) tend to walk in circles. People walked in circles as tight as sixty-six feet while thinking they were walking perfectly straight. That is like putting a blindfold on and trying to walk across a football field, the short way, one sideline to the other, and never making it across. Researchers concluded that in the absence of clear markers of distance and direction, we make a continuous stream of micro adjustments to what we think is straight, but those adjustments

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are biased to one side more than the other. Our constantly changing sense of what is straight keeps us walking in a loop. We circle and circle, ultimately perishing, when we could have easily gotten out of the weeds by just walking straight. You can overcome this tendency if you have a distinct landmark to move toward, and if you are lucky enough to be equipped with a compass or GPS. The distinct and distant landmark allows us to constantly recalibrate our direction and stay straight. Even when an obstacle presents itself, we can avoid it, move around it, or run from it, and then again spot our landmark and use it to correct our course. Why am I telling you this? Because a business that doesn’t devote time to determine where it wants to go, seek ways to get there, and identify the landmarks that will offer the most direct route is destined to spin in circles for eternity. The struggle to escape the Survival Trap is constant. The business owner and team toil away, month after month, year after year, hoping to move forward, but in the absence of a clear sense of direction, they are surprised and frustrated when they keep circling back to the same spot. By becoming a designer of your business, your role is to define what your company is marching toward, identify the landmarks that signify progress, equip yourself and your team with the tools (for example, a dashboard that acts likes a business’s GPS), and establish strategies to make the path safer, easier, faster, and more efficient (like building a bridge across a river). A business can only experience extraordinary progress with extraordinary design. And you can only do that if you devote time to this most important endeavor. Time to establish what your company’s Big Beautiful Audacious Noble Goal is. Time to think about the impact you are intending to have on your clients. Time to figure out the right strategy to achieve that impact. And time

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to determine what metrics you will use to measure the progress of your company and your team. This is your company’s destination and your vision for it. The worst part about walking in circles? We don’t believe we are doing it even when we see proof. In the study by the German research group, participants were dropped in the middle of a German forest and another group in the Sahara Desert. With GPS tracking devices attached to them, they were given simple instructions: walk straight for a few hours. When the sun or moon was visible, people stayed on a somewhat direct course. But on a cloudy day or a night with no moonlight, people reverted to their looping pattern immediately. Worse yet, the terrain caused even more complications with direction, creating a channeling effect. People can’t walk straight without a landmark, and when complications present themselves, they often put people in a whole new direction yet again. Trying to build a business by just Doing and without Designing is like walking through a dense forest while blindfolded. It is in- evitable you will walk in circles and be thrown into another course if you come across a substantial obstacle. Navigating the terrain of growing an organization needs a designer who looks beyond the constant stream of challenges and opportunities immediately in front of them and instead charts a path to success. And that designer is you. Yes, even if you’ve lost touch with the vision you once had, even if you feel you haven’t seen your creativity in the last decade, and even if you wonder if you truly have what it takes to navigate your ship to new, prosperous shores—you are the best person for the “design” job. You can do it.

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THE DELEGATION COMPLICATION

When you first want to scale your business, the Deciding phase comes quickly. The process is easy—hire people and tell them what to do. Getting them to do the work without your input? Not so easy. And we bring this problem on ourselves. Every time my staff had a question and came back to me for a decision, it made sense. They were new employees and they needed to learn the right way to do things—my way. So I gave them the answers they needed and sent them on their way to do the work. Plus, every time they had a question that only I could answer, it pumped my ego and fulfilled my need to feel important. I’m just being real with you here. And you need to be real with yourself, too: knowing what others don’t is an ego boost. I thought the need to answer everyone’s questions would be short lived. They were learning the tools of the trade, and I expected the questions to slow down. But, oddly enough, they increased. The problem that I didn’t realize, until it was too late, was that I was teaching them to always get the answers from me. All they ever mastered was the BuTSOOM system that I taught them. You know, the Bug the Shit Out of Me system. I bet you have taught your team the BuTSOOM system, too. And I will bet you are all too familiar with how it goes down. It starts with the “better than sliced bread” moment. You bring on virtual help, or a part- or full-timer. On the first day, the only person more excited and anxious than that employee is you. Within days you’re thinking, “This new hire, she is taking so much work off my hands. Why didn’t I do this sooner? She is ‘better than sliced bread.’” The newbie has tons of questions, but that is to be expected. In fact, that is what you want: a learner. But a few weeks later, this person still has tons of questions. She’s asking questions she should know the answer to by now. What is going on? Then, in

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a few more weeks or months, that new “bread” is now a total distraction. The questions never stop. You are pulled from your own work constantly to serve her. That is when you realize this bread is that lamely made, gluten-free kind. You know, it is about as flexible as concrete and has the rich flavor of cardboard. That is when you start to think, “It’s just easier to do all the work myself.” When you give your employees all the answers, you block their learning. I suspect that when you first learned to drive a car, you only figured it out, for real, by driving the car. Yeah, you went through that six-hour, in-classroom driver’s-ed course where you were told the gas pedal is on the right and the brake is on the left. But even with those instructions, when it actually came to driving the car, chances are you overaccelerated or hit the brake too hard. I bet that as you learned to steer a car, you went a little too tight and crushed a cone or two. The learning—the true learning—is in the doing. You must experience it for it to become ingrained in you. Our employees must experience the decision making for it to become ingrained in them. The irony, of course, is when you hire someone to do the work, you specifically are doing it so you can reduce your work. But if you allow yourself to make all the decisions for them, your work increases, and their growth stops in its tracks. Having to oversee my staff didn’t reduce my hours. I actually worked more, because I was constantly pulled away from the work I should have been doing to make a decision for someone else. Then, when I got back to my work, I would have to sync up again, which as you know all too well, takes time. The distraction of being the decider made me super inefficient. Employees would put their work on hold as they waited their turn to ask me a question. They literally stopped taking action until I gave them direction. My work stopped and so did theirs! Trying to do my job and

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supervise my staff was like trying to type a letter and handwrite instructions at the same time. Try it. You can’t do it.* This experience led me to believe I had to get more work off my plate, so I would hire another person. And another. And another. Until I was making decisions for an entire team and trying to do my work at night, on weekends, at the crack o’ dawn. As a result, the company became more inefficient, because all of those people were waiting for me to make decisions. Instead of capturing and utilizing the most powerful resource I had—their brains—we were all dependent on mine. As an added bonus, all those salaries drained my bank accounts. I decided to get back to what worked—me and me alone. I fired everyone to get back to gettingmy stuff done. I thought that would be easier. I had romanticized notions of being the lone wolf entrepreneur who “Gets Shit Done.” I was delusional; it was as if I forgot what it was like to do every job. The cycle started all over again. Flipping between Doing and Deciding is more common than you think. That’s why most businesses don’t ever get past one or two employees. Answering their questions made my work wait, and doing my work made my employees wait for my answers. According to Dan- iel S. Vacanti, author of Actionable Agile Metrics for Predictability: An Introduction, more than 85 percent of a project’s life span is spent in queue, waiting for something or someone. While waiting time is inefficient, it’s also exhausting. If we can reduce waiting time, we can improve growth—and gain sanity. Many businesses with fewer than three employees get stuck playing the waiting game, and in the back-and-forth between the doing and deciding phases. Business owners start with “I need to

* If you want to try to prove me wrong, please send me a video of you typing and writing at the same time. I would love to see it.

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do it all” and move to “I need to hire people to do it.” Then, when they discover their workload hasn’t lightened up, and they are more stressed and strapped for cash than ever, they end up thinking, “Everyone is a moron, and I will fire them all and just do it myself,” which eventually leads them back to “Oh, God, I can’t keep doing this, I need to hire people desperately,” and back around to “Is everyone on this planet an idiot?” No, your people are not idiots. Far from it. They just need you to stop Doing and Deciding and start Delegating not just the deeds, but the decisions. For real. I was chatting with Scott Oldford, founder of INFINITUS Mar- keting & Technology, when he said, “The biggest problem is that no one has taught entrepreneurs the mind-set of delegating. It’s not that they don’t know they need to delegate. They just need to get into the mind-set of letting go. Then, when they are committed to it, they need to do it the right way.” Scott explained that the delegating is a process. “First, you assign a task. Then you assign the responsibility. Then you ask them to own the results. Finally, you ask them to own the outcome, which is repeated results over time.” What could you accomplish if your staff was not focused on completing tasks, but on delivering outcomes for your company? That’s a game-changer, right? We’ll cover this in more detail in chapter four, but for now, let me just get your buy-in on the delegating concept. Ask yourself: Would my life be easier if my employees were empowered to make decisions, and I felt confident that they would routinely make decisions that would sustain and grow my business? Would my life be easier if my employees acted like owners? It’s a no-brainer, right? The only answer is, “Damn straight, Mike! My life would be an endless string of awesomeness, bee-yotch!” When your desired outcome is also their desired outcome, you are better able to let go and let your team do their jobs. And it will

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be okay. It will be more than okay. You’re going to be a delegating machine. You’ll be the Oprah Winfrey of delegators: “You get a project! And you get a project! And you get a project!” If you’re going to save your Saturdays and your soul and scale your business, being acutely aware of what phase of the four Ds you are in is essential. Will you ever stop Doing entirely? Maybe not—but you will do a fraction of the work you do now, and you will transition to doing only the work you love. Think for a moment about Jeff Bezos, the mastermind behind Amazon. On Thursday, July 27, 2017, the news broke that Jeff Bezos had unseated Bill Gates as the wealthiest person in the world. It was a momentary topping, as the stock market played back in favor of Bill Gates by the end of the day and Gates once again was the richest person on the planet.* Pick either entrepreneur. Gates and Bezos have both focused their energies on the Design phase from the get-go. But even today they do a little bit of the doing. You can bet your bottom dollar, when a major part- nership is negotiated, Bill Gates participates in the deal. And when Amazon rolls out another game-changing product, not only does the design team test the prototypes, Bezos does a little test run himself. The Doing phase will never disappear fully for an entrepreneur; it will simply take up the least amount of time. Deciding every little thing—you can kick that phase to the curb. You won’t stop Deciding entirely; you will just move from making minor decisions to making only the most critical decisions as the people to whom you delegate become more comfortable making

* Within days of the announcement of Jeff Bezos momentarily being the world’s richest man, with a cumulative wealth of more than $90 billion, Bill Browder, the CEO of Hermitage Capital Management, announced that Russian president Vladimir Putin was in fact the world’s richest man, with estimated assets in excess of $200 billion. Gates and Bezos are duking it out at the $90 billion mark, and then this Russian monster of money walks into the ring and knocks everyone out. It sounds like Rocky IV to me. However, in this book I will not be using Putin as an example of how to run a business.

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decisions on their own. As for Delegating, because your business will evolve and change, you’ll have to dedicate some time for Del- egating. You will delegate until you hire a delegator, whose Primary Job is to continually empower the team to make on-the-field decisions and protect you while you do the Design work. Reminder: This is not a switch from one phase to another; it is a throttle. The goal is for you to spend most of your work time controlling the flow of work and designing your company’s future. If you want your business to run like clockwork, as Gates and Bezos have done, you must concentrate the majority of your effort into being a designer.

THE 4DS—TARGET PERCENTAGES

If you want to improve your body or your business or anything for that matter, you need to know what you intend to accomplish and where you are today. Setting a goal of losing one hundred pounds is not a good idea if you only weigh one fifty. Clarity comes from knowing your ideal target and where you are starting. That is what we are going to do for your business in this step.

FOUR TYPES OF WORK FOUR TYPES OF WORK

DEL IDE EGA EC TE D

ASSIGN ASSIGN

D ACTION OUTCOME E

S I O G D N EXECUTE CREATE TASK FUTURE

FIGURE 2

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There are four ways in which people who work for a business serve that business. Every person in an organization is either Do- ing the work, Deciding for others about the work, Delegating the work to others, or Designing the work. As mentioned earlier, collectively I call this the 4Ds. The 4Ds are being executed within your business and every other organization on this planet. This is true if your business is a company of one, one hundred thousand, or any number in between. And this is true for every single person at your company. From an intern to an executive board member, from the nice folks in C-suite to the sweet folks with feet on the street, everyone is working the 4Ds. Each person in your organization is doing their own blend of the 4Ds, although you may not (yet) be deliberately directing it. Some people may be Doing work constantly. Another person may be Deciding what other people should be doing while Doing the work of ten people, and with the few seconds left trying to Design a forward-looking strategy. Sound familiar? Collectively, the 4D work of each person combines to form a 4D Mix for your business. If the business is just you, the solopreneur, your own 4D Mix is the company’s 4D Mix. If the company is multiple employees, the aggregation of each employee’s 4Ds is the company’s 4D Mix. The ideal mix for a company is 80 percent (Doing), 2 percent (Deciding), 8 percent (Delegating), and 10 percent (Designing). (See figure 3 on page 38.) Why does a business need to dedicate so much time for Doing? Because businesses need to do things that customers want, and that creates value in the marketplace; that’s how businesses make profit. The other 20 percent of that ideal company mix is spread over managing and guiding the business. For you to design your company to run itself, you need to master the mix. Simply put, you need to know what your com-

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pany’s 4D Mix is as compared to the optimal 4D Mix, and then use the Clockwork system to continually optimize your business. Critically Important and Helpful Shortcut: Analyzing for the optimal ratio can be arduous and time consuming. Since business is dynamic, it is very difficult (perhaps impossible) to constantly nail down that ratio. So the one thing you should focus on, above all else, is the big piece, and that is the 80 percent of Doing time. Is your company spending most of its time serving clients (that is the 80 percent Doing), but not all of it? If you are at 95 percent Doing, you can tell instantly that there is not enough Designing or other work going on because there is only 5 percent of company time left for the other three Ds. If the Do- ing is at 60 percent, that also tells you that you’re in trouble, since your business isn’t spending enough time getting things done. So if you simply track the Doing and target 80 percent, the other three Ds will often come into alignment. Focus on spending as much of the remaining 20 percent on Designing, and the Dele- gating and Deciding will often just fall into place, as long as you

OPTIMALOPTIMAL 4D 4D MMIXIX

80 81 82 83 84 85 70 86 87 60 88 50 89 90 40 91

C 92 30 93 L 94 95 20 O 96 97 10 98 99 0 100 DOING: DECIDING: DELEGATING: DESIGNING:

FIGURE 3 (Note: This graph is not drawn with balanced increments to make the chart easier to read.)

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commit to empowering your employees to take ownership of their work. Now that you know what the optimal mix is, let’s figure out where your business is right now. We ultimately need to evaluate how all the people in your organization are utilizing their time, but since you are the one reading this book and quite possibly serving the QBR (more on that later), we need to analyze your mix first. And if you are a one-person business, thenyou are the business. No matter how many employees you have, it is impor tant you understand this process and what it reveals about your own 4D Mix. This process will help you understand how to evaluate your company’s 4D Mix. Review the last five days you worked. If you maintain a calendar or task tracker, this may be relatively easy to do. To the best of your ability, write down each task you did and action you took for the five days we are evaluating.

1. On a piece of paper create six columns, titled Date, Ac- tivity, Start, Finish, Total Time, and Work Type (I also created a chart you can download at Clockwork.life). This is your Time Analysis Worksheet.

TIMETIM ANALYSISE ANALYSIS WORWORKSHEETKSHEET

DATE ACTIVITY START FINISH TOTAL TIME WORK TYPE

DO | DECIDE | DELEGATE | DESIGN

TOTAL TIME DOING: DECIDING: DELEGATING: DESIGNING:

FIGURE 4

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2. Fill out the form by writing down each work task or action you took during each of the five days. To make the process as easy as possible, do your best to recall one complete day at a time, and then repeat this for each of the five days. 3. In the Date column, write the day of the activity. 4. In the Activity column, write a few words that describe the task or action you took. 5. In the Start and Finish columns, write the times you started and finished the task. (This is only necessary when you do an Active Time Analysis. Since you are doing this one from recollection, skip the Start and Finish columns, and simply fill in the Total Time you spent on the task.) 6. As the final step, categorize the task as a Doing, Decid- ing, Delegating, or Designing activity. Or if you are using the form you downloaded from Clockwork.life, simply circle the appropriate activity category. 7. If you don’t have good calendar records and are struggling to remember your last five days of work (welcome to the life of an entrepreneur), just complete the Time Analysis Worksheet as you go through the next five days. As you dig deeper into the Clockwork system yourself, and roll it out to your employees and colleagues, an Ac- tive Time Analysis is the most accurate approach. In this process, you will track the actions you take as you take them, ensuring you don’t miss a thing.

THE ACTIVE ANALYSIS

Hang on—I’m about to throw a bunch of numbers at you. Like Dorothy in The Wizard of Oz, you may not want to walk through

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the woods to get to the Emerald City. For her, it was scary. For you, it may seem tedious or overwhelming. Percentages, percentages, percentages, oh my! I realize you might not be a business geek like me, who gets turned on by allocation exercises and analysis. But stick it out for me, would ya? You need this information to get where you’re going. (Which, incidentally, I hope is the great land of Oz, not the dust bowl of Depression-era Kansas. Why did Dorothy want to go back, anyway?)

1. Get a fresh Time Analysis Worksheet as described in step 1 above. 2. As you go through the day, write down the date and the activity you are working on, along with the time you started it. Then get to work on that activity. The moment you shift to different work, any work—including a distracting question from a colleague, answering an urgent email, or heading out to lunch—quickly jot down the finish time for the current task (even if it is not finished . . . it is just finished for the moment). Then write down the new activity (e.g., answering your colleague’s question) and when you start it. Then, once that activity is complete, fill out the time you finish it. Then do the same for the next task. Repeat for the entire day. 3. When the day’s work is done, make sure all the date fields are completed. A line from top to bottom is adequate and effective (this is a book on efficiency, after all). Then look at each task for the day and mark the type of work it is on the sheet: Doing, Deciding, Delegating, or Designing. Only choose one for each task. If you are unsure, choose the lowest of the levels you are considering (Doing being lowest and Designing being highest). I know this is laborious, but it is only five days of your life,

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it is very revealing (you may be surprised by the gap between your perception and reality), and it is a critical step in getting your business to run on automatic. You need clarity on where you are right here, right now, so that we can quickly move you to where you need to be. 4. Once the Time Analysis Worksheet is completed for all five days, add up the total time you spent Doing. Then add up the total time for Deciding. Then Delegating. And, finally, do it for Designing. Put the totals on the bottom of the form, and keep the form for future analysis. 5. With the totals for each of the 4Ds, create a gauge graphic (or fill out the one I created for you below or download one at Clockwork.life) that shows your 4D Mix. Calculate the percentages by dividing the total of each D into the sum of all 4Ds. For example, if you spent forty-five hours Doing, fourteen hours Deciding, one hour Delegating, and zero hours Designing, the total of the 4Ds (45+14+1+0) equals sixty hours. To get your Do- 4D MIX 4D MIX 80 81 82 83 84 85 70 86 87 60 88 50 89 90 40 91 92 30 93 94 95 20 96 97 10 98 99 0 100 DOING: DECIDING: DELEGATING: DESIGNING:

FIGURE 5

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ing percentage, divide forty-five hours by sixty hours to get 0.75, meaning 75 percent. Continuing the example, Deciding is 23 percent, Delegating is 2 percent (both with rounding), and Designing is 0 percent. With the percentages calculated, fill in each D category at the bottom of the graph. 6. As the final step in the analysis, fill in the “pie wedges” for each D to represent the proper percentages in the graph (the 4D Mix). The wedges will show the distribution of your work types (the 4Ds). You can also download this on the resources page at Clockwork.life.

While each work type is necessary, many businesses are unbal- anced. We will look at the entire business later, but for now let’s start by just looking at where you stand. And again, if you are a solopreneur or have a small business of five employees or fewer, either you are the business or you are a major part of the business. What do you notice? What are your realizations? Many solopreneurs fall into the trap of having 95 percent or more of their time allocated to Doing. They are living in a time- for-money trap—the Survival Trap—where the only way to grow is by Doing more, but you can’t, because there is no time. I’ve also seen solopreneurs trap themselves in a Design-heavy 4D Mix. Putting 40 percent of your time in Designing (which is way more than the optimal 10 percent) may indicate you are a dreamer, but it surely means you aren’t spending enough time Doing the work to turn those dreams into reality. Warning! Since we analyzed only five days of your life, you may have analyzed a week where, for example, you were doing a quarterly tacking plan. I detail the tacking strategy in my book The Toilet Paper Entrepreneur, but the core essence is simple: tacking is a quarterly protocol where you observe the market around you

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and the influence it may have on your overarching goals, and then adjust your business strategy to realign with your Big Beau- tiful Audacious Noble Goal. If you do your time analysis during a tacking (i.e., planning) period, your analysis is not representative of your typical allocation of time. Here is the deal: you can and should trust yourself. You know what your typical workweek is like, because it is the workweek that you live. So you have permission to go back to step 1 and write down what you think is a typical week. The optimal 4D Mix, of course, works for multi-employee companies. For example, if you have two employees (you being one of them), the average of both your individual 4D Mixes constitutes your company mix. So, if your 4D is 50 percent Do- ing, 0 percent Deciding, 0 percent Delegating, and 50 percent Designing, and the other employee’s is 80 percent Doing, 20 percent Deciding, 0 percent Delegating, and 0 percent Designing, it is the average of each category that gets you your business mix. (Note: I realize you may work seventy hours a week and your employee forty hours a week, and therefore more emphasis should be put on your percentages. But that level of detail does not do much at all to impact the results, so let’s not get that nitty- gritty. Plus, our goal is to reduce your time from seventy hours and get it way down. Remember?) In this example, the company’s mix is 65 percent Doing (the average of 50 percent and 80 percent), 10 percent Deciding (average of 0 percent and 20 percent), 0 percent Delegating (average of 0 percent and 0 percent), and 25 percent Designing (average of 50 percent and 0 percent). So this business is 65/10/0/25. Compare that with the optimal 4D Mix of 80/2/8/10, and we can see we need to ramp up the Doing (getting things done) and reduce the Deciding for others (perhaps we outsourced to virtual help, and they need way too much direc-

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tion). There is no Delegation going on, and we want about 8 percent of the time spent on empowering others to drive outcomes. Twenty-five percent of the time between these two people is spent on the Designing (vision and future thinking) of the business, which is too much (it should be around 10 percent). If you have a large company with dozens, hundreds, or thousands of employees, you can still do this exercise for everyone. But do it in groups by department and responsibilities. For example, say you have two hundred employees, and your accounting department has ten people. Have each person in the accounting department do a 4D Mix analysis. Then average out across the department. Now you will have the 4D for your accounting department. Do the same for other departments and then create charts for each department. Add up the department 4D Mixes to see what your company 4D Mix is.

START WITH 1 PERCENT

I realize the shift I’m asking you to work toward can seem overwhelming, especially if, at the moment, you can’t imagine how you’d free up any time to focus on Designing your business. This is why, as you begin this process, I’m asking you to set aside just 1 percent of your work time for Designing. If you work forty hours a week, that’s twenty-four minutes a week, rounded up to a half hour. If working sixty hours a week is closer to your reality, that can be rounded to just one hour of Design time. You don’t even have to block off an entire hour (or whatever your 1 percent equivalent is) for Design work; you can break up the time. With even 1 percent Design time, you can focus on optimizing your 4D Mix and other strategies to help you streamline your business. You know what else you’ll be able to do? You’ll finally be able

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to pick up that folder of “someday” ideas you keep in the drawer and figure out if you still want to pursue them. The articles about industry trends and new technologies you’ve been meaning to read, the video trainings you’ve paid for and haven’t yet watched— you can use your 1 percent time to finally get around to doing that important research. Even with just thirty minutes a week, you’ll have time to do one of the most important analyses of your business: ask what is working and find ways to do more of it, and ask what is not working and find ways to do less of that. Once you get in the habit of setting aside the time, you’ll become more comfortable taking the time—and making good use of that time. You’ll start to see changes in your attitude toward your business, and changes in your business as you begin to implement some of the ideas and strategies you came up with during Design time. And once you get used to taking Design time as a matter of course, you’ll want more of it.

YES, YOU CAN MAKE ANY BUSINESS RUN JUST LIKE CLOCKWORK

If you’re a creative entrepreneur, or an entrepreneur with a special skill set on which your business depends, how do you shift from Doing to Designing? I get this question from time to time. It’s important to remember that Doing, Deciding, and even Del- egating maintain your business. Designing elevates your business. And even if you are in an industry as specialized and indepen- dent as painting, you can be the designer of the business. Don’t believe me? I’ll let Peter explain. Seventeenth-century German artist Sir Peter Lely was certainly not the first artist to systematize his art, but he was arguably the first to make his company run like a well-oiled cuckoo clock. (See

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what I did there?) Lely painted in the Baroque style that was popular at the time. After he moved to London, he quickly became the most sought-after portrait artist and then the “Principal Painter” for the royal family. He was best known for a series of ten portraits of ladies of the court—the “Windsor Beauties”—that hung in Windsor Castle. His work in high demand, Lely opened a workshop and trained other painters to help him complete his paintings. This fella didn’t just have a few assistants; he had a massive operation that allowed him to do what he was known for, what he did best: paint faces, leaving the rest of the portrait to his assistants. When customers wanted some of that “Windsor Beauty” magic, it was all about the face. But if Lely painted every portrait in its entirety, including the subject’s attire and surroundings, he would be spending the majority of his time working outside his zone of genius, i.e., capturing faces. If he stayed in the Doing, Designing, and Delegating phases exclusively, the only way he could scale was to work harder and longer. So, jumping right into the Designing phase (while never fully abandoning the other phase), Lely sketched a variety of poses and numbered them. He often used the same dress design and the same props. After he finished a subject’s face, his lead artist would assign someone on the team of artists to use a template for the numbered pose required and paint the rest of the painting. Cleary, Lely was the Godfather of paint by numbers. Business boomed because he delivered on the one thing his clients wanted most: Lely’s interpretation of their face. The rest— the setting, the color of the dress, the props used—didn’t matter much. And because he was able to focus his Doing solely on painting faces and Delegate the rest, he was able to turn out thousands of paintings over his lifetime while his contemporaries were lucky to turn out a hundred.

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The next time you dare to say “my business can’t be streamlined” or “I need to do all the work,” take a pause. You are lying to yourself. Your business can run on its own. If an old-school painter can do it, you surely can, too. For the longest time, I struggled with the idea that, in my business, others could do the core work or, from my lips to God’s ears, all the work. My enemy was my ego. I believed I was the smartest person in the room—at least when it came to my business. But it all changed when my friend Mike Agugliaro told me about a simple change he and his partner made. Mike and his business partner, Rob Zadotti, grew a plumbing business from the days of the two of them racing around in a beat-up truck to a $30 million home-service business. How did Mike make the shift from Doing to Designing a world-class business (which was acquired in the summer of 2017 for, as Rob put it, “a sick amount of cash on the barrelhead”)? They did it by changing the question they asked. They no longer asked, “How do I get the plumbing work done?” Instead, they asked, “Who will get the plumbing work done?” That simple change of question started to bring the answers that made them business designers. For you to become your business’s designer, you can no longer ask “how,” but “who.” That one question, “Who will get the work done?” will open your eyes to a business that will cruise right to the design phase. I can’t tell you how many times entrepreneurs say to me, “My business is too unique. It can’t be systematized.” Sorry to break it to those people, but they’re not that special. Yes, they have a few things that are special to them, but 90 percent of their business is the same as everyone else’s. So is mine. So is yours. Few businesses in the world are that unique. And when they truly are unique (and successful doing it), everyone else copies them. Say goodbye to the uniqueness. Now don’t get your undies

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in a bunch. Your mom was right, you are special and different and all that. I’m just saying the business fundamentals stay constant for all businesses. Since you’re reading this book, I’m going to assume that you are at least willing to put your ego aside and attempt to run your business using the Clockwork system. The best part is, streamlining your business doesn’t take a ridiculous amount of work to build a bunch of new systems. In fact, it is ridiculously easy when you realize that you already have all the systems. The goal is to simply extract them from where they are already documented—in your head. You’ll learn how to do that in chapter five. And when we do that, you will be free to do what you do best. Whatever work you do, it can be broken down into steps and delegated to someone else. And if you don’t want to give up too much of the Doing because that’s what you love? Then by all means, do what you love. Your business should make you happy. The point is, you can delegate more than you realize. Even if your business is a work of art.

OPERATION VACATION

At the start of the chapter, I told you the first part of Scott and Elise Grice’s story. Elise spent a total of six weeks in the hospital, totally unable to work on her business. Most of us cannot imagine taking six hours off from business, let alone six weeks. It’s not just entrepreneurs. Employees are taking less and less vacation time. A 2017 study* showed that of US employees who are eligible to take paid time off, only about 50 percent of them actually do it.

* Harris poll on behalf of Glassdoor: Amy Elisa Jackson, “We Just Can’t Unplug: 2 in 3 Employees Report Working While on Vacation,” May 24, 2017. www.glassdoor .com/blog/vacation-realities-2017/.

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And, no surprise, two out of three US employees who do take vacation time end up working for at least part of their vacation. It’s not just an entrepreneurs’ issue—it’s part of our work culture. But what if you were forced to take the time off? In our conversation that day, Elise said, “We’re thankful for my stay in the hospital because it was a turning point for us. That day when everything seemed hopeless, we decided to wipe the slate clean and ask different questions. Instead of asking ourselves ‘How are we going to get through this?’ we asked the question ‘If we could be paid to do anything in the world, what would we want to do?’ We were at rock bottom, and that actually freed us up to ask that question.” I can relate to rock-bottom freedom all too well. I am sure you have heard the popular question about discovering your passion and purpose: “If you had all the money in the world, what work would you do?” It is a great question, but it has bias built into it. It suggests that whatever you choose does not need to offer sus- tainability. You could say, “I would watch Curb Your Enthusiasm reruns morning to night,” and since you have a continuous stream of cash, your Larry David binge would be a fine choice. The goal of course is to find an activity that satisfies you and is not trumped by the need to make money. I have discovered a second, rarely asked question that is equally important, and works in concert with the first: “If you had no money at all, what work would you want to do to support yourself?” When the answer to both questions is the same, you have found your direction. That is how I found my life’s passion of being an author. I had fantasized about being an author “one day” when I asked myself the “if I had all the money in the world” question, but I never pulled the trigger. When I nearly bank- rupted myself (and my family), I was forced to ask the question “What do I want to do, now that I have no money?” The answer

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was the same. I wanted to be the most prolific small-business author of this century. Same answer and my path was clear. While only time will determine whether I achieve my Big Beau- tiful Audacious Noble Goal—being the most prolific small- business author—the journey has been the closest to experiencing heaven on earth. I love what I do. Elise and Scott loved branding, and they wanted to scale their business, but they couldn’t pull that off with their established business model. And they wanted something different, something more. Elise said, “Before I got sick, I had been slipping Scott little ‘I quit’ Post-it notes, mostly because my role in the business was very confrontational. I routinely had to tell our clients they were wrong about their branding, and I didn’t want to do that anymore. I really just wanted to get paid to go to coffee with people.” Scott’s answer was rooted in his passion for business systems: “I wanted people to experience freedom in their personal lives because of their business.” When Elise started to get better, they scaled back their team, finished their client work, paid off their hospital debt, and began building a business with a new model that would allow them personal satisfaction and freedom. They shifted their business model to focus on delivering training and content to groups rather than to individual clients. They no longer managed client projects; through online classes, they began advising their former clients, new students, and followers how to manage their own projects. Though they weren’t aware of the term at the time, they successfully balanced their company’s 4D Mix. Within seven weeks, they had created a streamlined business that educated their existing clientele—and a new, growing client base—about branding and business systemization through online courses. Today, Elise and Scott run their business from a twenty-eight- foot camper van. They regularly take four- and six-week vacations

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from their business, vacations where they are completely out of the day-to-day operations. And what happens to their business when they’re away? It grows and grows. “Last summer, we both took three months off from our business and traveled through Europe together,” Elise said. “We completely checked out. No social media. We didn’t write a newsletter. Didn’t answer one email. We built our business so that, if we wanted to take a break, our business would still grow. We streamlined the entire process. And when we came back from Europe, we had more business and more revenue than we had before we left.” Elise and Scott did something critical to bring operational efficiency: they stopped doing what they didn’t like doing. They didn’t just delegate it; they restructured their entire business so they no longer did things that they didn’t like to do and only did the things they liked. Then they sought out ways to do what they wanted with the flexibility they wanted. Where you stand in your business is a direct result of your thoughts about what you need to do to be where you are. If you believe you need to work your ass off to grow, you will prove yourself right. If you believe you can make your business scale with little effort, you will prove yourself. But it only happens if you believe it can happen. And the only way to come to believe it can happen is to start asking empowering questions. Just like Scott did. Just like Elise did. In my own quest to develop a simple way to make my own business run on automatic, I’ve met several other people who took sabbaticals from their business only to come back to a more successful business than when they left it—including one person who left for two entire years! I’ll share more of those stories with you throughout the book. Hearing their stories made me realize that taking a long vacation was the best test for a streamlined business, and committing to taking that vacation is the best incentive to streamline your business in preparation for that vacation.

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Then I had an epiphany: Committing to a four-week vacation—the length of most business cycles—is the perfect incentive to streamline your business. During a four-week period most businesses will pay bills, market to prospects, sell to clients, manage payroll, do the accounting, take care of administrative tasks, maintain technology, deliver services, ship products, etc. If we know we’re going to be away for four weeks without access to our business, we’ll do whatever it takes to get it ready for our absence. If we don’t commit to the vacation, we’ll take our own sweet time getting through the streamlining steps, and since we’re humans, we’ll probably stop before it offers us any lasting relief. The ego is strong, and the grind is all-consuming. And the draw of the all-too-familiar grind, painful as it is, is the easier choice to make, simply because it is familiar. Without the forced goal, we may never do this. With this book, I’m launching Operation Vacation. You and I and everyone, we’re all in this together, and we can support one another in taking the steps we need to take to grow our businesses and get our lives back. My challenge to you is to commit to taking a four-week vacation sometime in the next eighteen months. And when I say commit, I mean book that vacation. And to make sure you never back out of it, tell your kids, tell your mom, write it in your diary. Or, make the boldest declaration of all: post it on Facebook so the world will be up your butt if you don’t do it. No matter what, make sure you email me your commitment (I’ll tell you how in a second). Maybe we will end up on vacation at the same time in the same place. We can throw back a margarita while your business grows in your absence. In chapter ten, I give you a detailed, step-by-step timeline that will help you get your business ready for your four-week vacation. If you’re a rebel, or a nonbeliever, and you have already decided not to take a four-week vacation at some point in the next couple

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of years, please read the chapter anyway. The timeline provides a framework for clockworking your business using seven steps. Let me clarify that I am not suggesting that you can only take a four-week vacation. For some people, four weeks may seem too short. Or, if you’re thinking about having a baby, you may want to take three to six months off, or more, and you may not have a clue how you’re going to pull that off while keeping your business alive. That’s why we are going to plan to take a four-week vacation, so we can get your business running itself. Once that happens, you can take as much or as little time off as you want or need to do. Imagine that—you may not have to put off major life decisions in order to keep your business running and growing! As I am writing this book, I too have committed to taking my very first continuous monthlong vacation in December 2018. To be exact, the trip will start on December 7 and end on January 7. I started the plan for the monthlong sabbatical eighteen months prior, and have already run multiple one-week tests away from my business to prove that it is ready. And throughout these eighteen months, I have been thinking about my business in a whole new way. Knowing this trip is coming, I am focused on removing myself from all critical roles. I’m working toward the optimal 4D Mix. Would I have done that without forcing the issue? No, I think not. And I don’t think you would have, either. As my extraordinary business coach, Barry Kaplan of Shift 180, says, “Sometimes the only way out of the weeds, Mike, is to simply get out of the weeds.” That’s it. Stop spending all the time contemplating how to get out of the weeds. What if things don’t go as planned? What if the business collapses? What if? What if? Just get out of the weeds and then measure the results. Book that vacation now! Get outta Dodge (which ironically is known for its voluminous amounts of weeds). The moment you are solid on your trip, your mind will

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shift and you can get to work on moving yourself to the Designing phase of your business.

CLOCKWORK IN ACTION

1. It’s time for you to get some Design time. In Profit First, I implored readers to commit to setting aside a minimum of 1 percent of their revenue for profit. Even if they didn’t follow any of the other steps in the book, I knew that the action of taking 1 percent profit would accomplish two things: They would discover how easy it was to set aside that money, and they would learn to live without it. For this action step, I’d like you to set aside 1 percent of your work time to focus on Designing your business. Just 1 percent. No matter how big your to-do list or how demanding your customers and staff, your business can survive you taking a tiny amount of time each week to do the work that will help your business move forward. 2. Block out this time, every week, for the next eighteen months on your calendar. As you move along, you will be expanding the amount of Design time, but for now, you and I just need to ensure that 1 percent is protected for a long time. 3. Just as you need to take your profit first in your business, you need to allocate this 1 percent of time first in your week. Don’t wait for the end of the week to do the design work. Instead, allocate the time right at the beginning. By working on the vision at the start of the week, the rest of the week will naturally support that vision, therefore getting you to it faster. Run the time analysis on yourself for the next five business days, and determine your 4D Mix.

9780525534013 Clockwork_4.indd 55 6/14/18 1:42 PM Excerpted from Clockwork: Design Your Business to Run Itself by Mike Michalowicz with permission of Portfolio, an imprint of Penguin Publishing Group, a division of Penguin Random House LLC. Copyright © Mike Michalowicz, 2018. Now that you have read the first two chapters of Clockwork, you are ready to master the process!

CLICK HERE TO CONTINUE READING

If you’re like most entrepreneurs, you started your business so you could be your own boss, make the money you deserve, and live life on your own terms. In reality, you’re bogged down in the daily grind, constantly putting out fires, answering an endless stream of questions, and continually hunting for cash. Now, Mike Michalowicz, the author of Profit First and other small-business bestsellers, offers a straightforward step-by-step path out of this dilemma. In Clockwork, he draws on more than six years of research and real life examples to explain his simple approach to making your business ultra-efficient. Among other powerful strategies, you will discover how to: • Make your employees act like owners: Free yourself from micromanaging by using a simple technique to empower your people to make smart decisions without you. • Pinpoint your business’s most important function: Unleash incredible efficiency by identifying and focusing everyone on the one function thatis most crucial to your business. • Know what to fix next: Most entrepreneurs try to fix every inefficiency at once and end up fixing nothing. Use the “weakest link in the chain” method to find the one fix that will add the most value now. Whether you have a staff of one, one hundred, or somewhere in between, whether you’re a new entrepreneur or have been overworked and overstressed for years, Clockwork is your path to finally making your business work for you.

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Chapter 1

YOUR BUSINESS IS AN OUT- OF-CONTROL CASH- EATING MONSTER

o matter how many years you’ve been at the grind, you are probably well aware of the statistic that roughly 50 percent of N businesses fail within the first five years. What they don’t tell you is that those failed entrepreneurs are, in fact, the lucky ones! The majority of the businesses that survive are racking up debt, and their leaders are perpetually stressed. Most entrepreneurs are living a financial nightmare, one that’s populated by Freddy Krueger or Frankenstein’s monster in its raw, unadulterated scariness. In fact, I am convinced that I am Dr. Frankenstein. If you read Mary Shelley’s classic, Frankenstein, you know exactly what I’m talking about. The good doctor reanimated life. From mismatched body parts, he stitched together a living being more monster than man. Of course his creation wasn’t a monster at first. No, at first it was a miracle. Dr. Frankenstein brought to life something that, without his extraordinary idea and exhaustive hard work, could not exist. That’s what I did. That’s what you did. We brought something to life that didn’t exist before we dreamed it up; we created a business out of thin air. Impressive! Miraculous! Beautiful! Or at least it was until we realized our creation was actually a monster. Stitching together a business with nothing but a great idea, your unique talents, and whatever few resources you have at hand is most certainly a miracle. And it feels like one, too, until the day you realize your business has become a giant, scary, s oul- sucking, cash- eating monster. That’s the day you discover that you, too, are an esteemed member of the Frankenstein family. 12 PROFIT FIRST

And just as happened in Shelley’s book, mental and physical torment ensues. You try to tame the monster, but you can’t. The monster wreaks destruction at every turn: empty bank accounts, credit card debt, loans, and an ever- increasing list of “ must- pay” expenses. He eats up your time, too. You wake up before sunrise to work, and you’re still at it long after the sun goes down. You work and work, yet the monster continues to loom. Your relentless work doesn’t free you; it further drains you. Trying to keep the monster at bay before it destroys your entire world is exhausting. You suffer sleepless nights, worries about collection calls—s ometimes from your own employees—a nd a near-c onstant panic about how to cover next week’s bills with a few dollars and the lint in your pocket. Didn’t you start a business so you could be your own boss? Now it looks as though this monster is the boss of you. If you think operating your business is closer to a horror story than to a fairy tale, you’re not alone. Since I wrote my first book, The Toilet Paper Entrepreneur, I’ve met tens of thousands of entrepreneurs; and let me tell you, most are struggling to tame the beast that is their business. Many companies—e ven those that appear to have it all together, even the big guys who seem to dominate their industries— are one bad month away from total collapse. My own wake-up call came in the form of my daughter’s piggy bank.

THE PIGGY BANK THAT CHANGED MY LIFE I lost my way the day I received a check for $388,000. It was the first of several checks I would receive for the sale of my second company—a multimillion- dollar computer forensic investigations business I had c ofounded— to a Fortune 500 firm. I had now built and sold two companies, and that check was all the proof I needed that my friends and family were right about me: When it came to growing businesses, I had the Midas touch. The day I received the check, I bought three cars: a Dodge Viper (my college-f antasy dream car, and what I have subsequently found many people identify as the “ that- guy- must- have-a-t iny- penis” car), something I’d promised I would get for myself “one day” when I’d “made it,” a Land Rover for my wife, and a s pare— a tricked- out BMW. YOUR BUSINESS IS AN OUT-OF-CONTROL CASH- EATING MONSTER 13

I had always believed in frugality, but now I was rich (with an ego to match). I joined the private club: the one where, the more money you give, the higher they place your name on the members’ wall. And I rented a house on a remote Hawaiian island so my wife, my children, and I could spend the next three or so weeks experiencing what our new lifestyle would be like. You know, “how the other half lives.” I thought it was time to revel in the money I had created. What I didn’t know was that I was about to learn the difference between making money (income) and taking money (profit). These are two very, very different things. I launched my first business on ambition and air, sleeping in my car or under conference room tables in order to avoid the cost of hotels when visiting clients. So imagine the surprised look from my wife, Krista, when I asked the sales guy at the dealership for “the most expensive Land Rover you have.” Not the best Land Rover. Not the safest Land Rover. The most expensive Land Rover. He skipped his way to the manager, doing a giddy hand clap. Krista looked at me and said, “Have you lost your mind? Can we really afford this?” Full of snark, I said, “Can we afford it? We have more money than God.” I will never forget the stupidity coming out of my mouth that day; such disgusting words, such a disgusting ego. Krista was right. I had lost my m ind— and, at least for the moment, my soul. That day was the beginning of the end. I was well on my way to discovering that while I knew how to make millions, what I was really, really proficient at was losing millions. It wasn’t just the lifestyle I bought into that caused my financial downfall—t he trappings of success were a symptom of my arrogance—I believed in my own mythology. I was King Midas reinvented. I could do no wrong. And because I had the golden touch and knew how to build successful businesses, I decided that investing in a dozen brand-n ew start- u ps was the best way to use my windfall. After all, it was only a matter of time before my entrepreneurial genius rubbed off on these promising companies. Did I care whether the founders of these companies knew what they were doing? N o— I had all the answers (read that with a massive douche 14 PROFIT FIRST emphasis). I assumed that my golden touch would more than compensate for their lack of business expertise. I hired a team to manage the infrastructure of all these start-u ps— accounting, marketing, social media, Web design. I was sure I had the formula for success: a promising start-up; the infrastructure; and my incredible, superior magic touch (more douche emphasis). Then, I started writing checks—$5,000 to one person, $10,000 to another, every month more checks, and still more. One time, I cut a check for $50,000 to cover expenses for one of these companies. I was focused on one thing and one thing only: growth. Mindlessly throwing money at start-up companies wasn’t even in alignment with my values about money; I was a bootstrapper and proud of it. Still, I was blind to my mistakes. I was all pump and dump. Grow the businesses, then sell them. In retrospect, it was clear that I would not be able to grow all of these companies to the point where they would eventually become niche authorities, as I had with my two previous companies. There was never enough revenue to cover the ever- increasing mountain of bills. Because of my massive ego, I didn’t allow the good people who started these businesses to become true entrepreneurs. They were just my pawns. I ignored the signs and kept funneling money into my investments, sure that King Midas would be able to turn it all around. Within twelve months, all of the companies I’d invested in, except one, had gone belly up. When I started writing checks to pay bills for companies that had already folded, I realized that I was not an angel investor; I was the Angel of Death. It was a monumental disaster. Scratch that; I was a monumental disaster. Within a couple of years, I lost nearly every penny of my hard-e arned fortune. Over half a million in savings gone. A much larger (embarrassingly larger) amount of investment money gone. Worse, I had no incoming revenue. By February fourteenth of 2008, I was down to my last $10,000. I will never forget that Valentine’s Day. Not because it was so full of love (even though it was), but because it was the day I realized that the old adage “When you hit rock bottom, the only way to go is up” is total bullshit. I discovered that day that when you hit rock bottom, sometimes YOUR BUSINESS IS AN OUT-OF-CONTROL CASH- EATING MONSTER 15 you get dragged along the bottom, scraping your face on every one of those rocks until you’re battered, bruised, and bloodied. That morning I got a call at my office from Keith, my accountant (not to be confused with Keith, the hot-a ir balloon guy). He said, “Good news, Mike. I got a jump start on your taxes this year and just finished your return for 2007. You owe only twenty- eight thousand dollars.” I felt a sharp pain in my chest, like a knife stabbing me. I remember thinking, “Is this what it feels like to have a heart attack?” I would have to scramble to get the $18,000 I didn’t have, and then figure out how to cover my mortgage the next month plus all of the small recurring and unexpected expenses that added up to a whole lot of cash. As Keith wrapped up the call, he said that the bill for his services would arrive on Monday. “How much?” I asked. “Two thousand.” I felt the knife twist. I had $10,000 to my name and bills totaling three times that amount. After I ended the call, I put my head on my desk and cried. I had gone so far astray from my values, from who I was at my core, that I had destroyed everything. Now, not only could I not pay my taxes; I had no idea how I would provide for my family. At the Michalowicz household, Valentine’s Day is a legit h oliday— on a level with Thanksgiving. We have a special dinner together, exchange cards, and go around the table sharing stories about what we love about each other. This is why Valentine’s Day is my favorite day of the year. Typically, I would come home with flowers, or balloons, or both. That Valentine’s Day I came home with nothing. Though I tried to hide it, my family knew something was wrong. At the dinner table, Krista asked me if I was OK. That was all it took for the dam to break. The shame was too great. I went from offering up forced smiles to sobbing in a matter of seconds. My children stared at me, shocked and horrified. When I finally stopped crying enough to speak, I said, “I lost everything. Every single penny.” Total silence. I slumped over in my chair; the shame was too great for me to face my family, not when all the money I had earned to support them was gone. Not only had I failed to provide for my family; my ego had stolen it all away. I felt pure, unadulterated shame about what I had done. 16 PROFIT FIRST

My daughter, Adayla, who was nine years old at the time, got up from the table and ran to her bedroom. I couldn’t really blame her—I wanted to run away, too. The silence continued for two painfully awkward minutes until Adayla walked back into the room carrying her piggy bank, the one she had received as a gift when she was born. It had clearly been cared for; even with all those years of use, there wasn’t a single chip or crack on the bank. She had secured the rubber stopper in place with a combination of masking tape, duct tape, and rubber bands. Adayla set her piggy bank down on the dining room table and slid it toward me. Then she said the words that will stay with me until the day I die: “Daddy, we’re going to make it.” That Valentine’s Day I woke up feeling like Debbie Horovitch felt after her Instant Assessment: like a fool. But by the end of the day I’d learned what net worth really is, thanks to my nine-y ear- old daughter. That day I also learned that no amount of talent, ingenuity, passion, or skill would change the fact that cash is still king. I learned that a n ine- year- old girl had mastered the essence of financial security: save your money and block access to it so it doesn’t get s tolen—by you. And I learned that I could tell myself that my natural aptitude for business, my relentless drive, and my solid work ethic could overcome any cash crisis, but it would be a lie. Running the Instant Assessment can be like having a bucket of ice water dropped on your head (if you did the “ice bucket challenge” a couple of years ago, you know the spine-s huddering chill I am talking about). Or it can seem like the most humbling moment of your life, like when your daughter volunteers her life savings to save you from the mess you made. But no matter how sharp the pain is, it’s better to face it than continue to live and operate your business in denial.

MONEY PROBLEMS You have probably put a lot of work into growing your business. You are probably good or great at that part. That’s awesome. And that’s surely half YOUR BUSINESS IS AN OUT-OF-CONTROL CASH- EATING MONSTER 17 of the equation. But colossal growth without financial health will still kill your company. With this book, you have an opportunity to master money. Money is the foundation. Without enough money, we cannot take our message, our products, or our services to the world. Without enough money, we are slaves to the businesses we launched. I find this hilarious because, in large part, we started our businesses because we wanted to be free. Without enough money, we cannot fully realize our authentic selves. Money amplifies who we are. There isn’t a single ounce of doubt in my mind that there is something big you are intended to do on this planet. You wear the cape of what I believe is the greatest of all superheroes: the Entrepreneur. But your superhero powers can only yield as much power as your energy source provides. Money. You need money, superhero. When I sat down to evaluate where I went wrong, I realized that while my own spending and arrogance definitely played a part, I also lacked knowledge. I had mastered how to grow businesses quickly, yet I never really graduated to understanding profitability. I had learned how to collect money, for sure, but I had never learned how to keep it, how to control it or how to grow it. I knew how to grow a business from nothing, working with whatever resources I had; but as revenue increased, so did my spending. I discovered that this was the way I ran both my personal life and my business. I took pride in making magic happen with pennies in my pocket, but as soon as I got some real cash, I made sure that I had a very good reason to spend it. It was a check-to-check lifestyle, but sustainable— as long as sales were sustained and did not dip. While my companies grew explosively, I still operated them on a check-to-check basis— and I had no idea that this was a problem. The point was to grow, right? Increase sales and the profit will take care of itself, right? Wrong. Money problems occur when one of two things happen: Sales slow down. The problem here is obvious when you operate check-to-check and sales slow down: when your one big client goes out of business, or that big deal you were banking on falls through, you won’t have enough to cover expenses. 18 PROFIT FIRST

Sales speed up. This problem here is not obvious, but it is insidious. As your income climbs, expenses quickly follow. Big deposits feel great, but they are irregular. Consistent incoming cash flow is hard to sustain. A great quarter can trick you into believing your business is on a permanent upswing, and you start spending like this is the new normal. But drought periods come quickly and unexpectedly, causing a major gap in cash flow. And cutting back on expenses is nearly impossible because our business (and personal) lifestyle is locked in at our new level. Exchanging the newly leased car for a rust bucket, laying off employees because we’re overstaffed, saying no to our partners— all of this is very hard to do because of the agreements and promises we made. We don’t want to admit we’ve been wrong in how we’ve been growing our business. So rather than reduce our costs in any meaningful way, we scramble to cover ridiculously high expenses. We steal from Peter to pay Paul, hoping for another big payout. Sound familiar? I thought it might. Over the last eight years I’ve connected with entrepreneurs at every level of growth, and this “top line” ( revenue-f ocused), check-to-check methodology is more common than you may realize. We assume that m ultimillion- dollar companies are turning big profits, but it’s rare to find a truly profitable business. Most entrepreneurs are just covering their monthly nut (or worse) and accumulating massive debt. Without an understanding of profitability, every business, no matter how big, no matter how “successful,” is a house of cards. I made a lot of money with my first two businesses, but not because I ran a tight fiscal ship. I was just lucky enough to keep the plates spinning fast enough and the company growing big enough that someone else was willing to buy it and fix the financial problems.

BIGGER IS NOT BETTER Why the hell is success constantly defined by applying the Super Size Me principle to your business? Does more revenue mean you are more successful? No. I know far too many big businesses with owners who are in pure panic and use lawn furniture to decorate the inside of their houses YOUR BUSINESS IS AN OUT-OF-CONTROL CASH- EATING MONSTER 19 because they have to funnel every spare penny into their businesses to keep them from sinking. Is that success? Hardly. Growth is the battle cry of nearly every entrepreneur and business leader. Grow! Grow! Grow! Bigger sales. Bigger customers. Bigger investors. But to what end? Bigger business means bigger problems for sure. Yet it surely does not guarantee bigger profits, especially when profit is a hopeful residual. Growth is only half the equation. It is an important half, but still only half. Have you ever seen the guys at the gym with the massive arms and heaving chests, the ones as big as oxen who also have toothpick legs? They’re only working half the equation and have become unhealthy freaks as a result. Sure, that guy can throw a monster punch, but God forbid he needs to step into it, or move a little. His puny legs will give out instantly; he’ll curl up on the floor and cry like a baby. A little mutant baby. Most business owners try to grow their way out of their problems, hinging salvation on the next big sale or customer or investor, but the result is simply a bigger monster. (And the bigger your company gets, the more anxiety you deal with. A $300,000 cash-e ating monster is much easier to manage than a $3,000,000 one. I know; I have survived operating both.) This is constant growth without concern for health. And the day that big sale or customer or investor doesn’t show, you will fall to the ground and curl up crying like a baby. Jason Fried, cofounder of Basecamp, wrote an article for Inc.* in which he talked about the demise of his favorite Chicago pizza joint. The owners did everything right— except that they grew too fast. After building their business slowly, they suddenly scaled from twenty to forty locations. Sales could not outpace their debt, and Fried’s beloved pizza chain was forced to close. The perfect size for your business? It will happen naturally, when you take your profit first. You will reverse engineer all the elements of your business, and as Fried says, “the right size will find you.” So why are entrepreneurs programmed to pursue bigger and bigger and bigger? Because of an assumption that at a certain point all that revenue will yield a profit. You think you just need one more big project or one more new client or just a little bit more time, and finally that profit 20 PROFIT FIRST will pour in. But it never does. Profit is always within sight, but never attainable. It’s like the donkey with a carrot dangling over its head. The jackass keeps working harder and harder, but never gets to the carrot. It’s always just one more step away. The problem is, that jackass . . . is you. (Sorry about the brutal honesty. I hurt you because I love you.) Here’s the deal, my friend: Profit is not an event. Profit is not something that happens at y ear- end or at the end of your fi ve- year plan or someday. Profit isn’t even something that waits until tomorrow. Profit must happen

* “Why Growing Fast Will Make Your Company More Mediocre,” May 2016. now and always. Profit must be baked into your business. Every day, every transaction, every moment. Profit is not an event. Profit is a habit. Do you know the saying “Revenue is vanity, profit is sanity, and cash is king”? It is a succinct reminder that your job is to maximize profit, regardless of the current size of your business. As you focus on profit, you’ll discover new ways to both streamline and grow your business. It doesn’t work the other way around. The lemming mentality of growing first with the hope of finding profit in the process, is so bass ackward it drives me nuts. Recently I delivered a speech in tiny Georgetown, Colorado, at an event hosted by my dear friend Michelle Villalobos. As often happens in my Profit First presentations, one of the entrepreneurs said, “This sounds great and all, but I need to grow. I need to put all of my money back into my business to do that.” Perhaps you’re thinking the same thing right now. If you are, it’s because you’re stuck in the mode of “grow now, profit someday.” I asked her, “Why do you want to grow?” “I want to grow so that my company can manage more clients and generate more sales,” she said. “Why do you want that?” She looked at me as if I were an alien. “So that my company is bigger, Mike.” “Why do you want a bigger company?” I asked. “So I can make more money,” she responded. I could tell from her tone that she was getting exasperated. YOUR BUSINESS IS AN OUT-OF-CONTROL CASH- EATING MONSTER 21

“Aha!” I said. Now we have peeled back that good ol’ Georgetown, Colorado, onion (which, let me be clear, is not known for its onions.) “Why not just make more money now?” She wants to grow, grow, grow so that she can make a profit one day. Alternatively, if you want to grow for ego, and to boast, that is just dumb ( cough— that’s exactly what I did in the past— cough— so embarrassing— cough). If you want to grow to make money for yourself one day, you are playing a game of kick the profit can down the road. Here’s the reality if you want healthy, sustainable g rowth— which, not so surprisingly, will spawn more healthy g rowth— you need to reverse engineer the profit. Take profit first. You can’t grow out of your profit problem. You need to fix profit first, then grow. You must figure out the things that make profit and dump the things that don’t. When you focus on growth, it is inevitably a scramble to grow at all costs. Yes, at all costs (including the quality of your life). When you focus on profit first, you inevitably figure out how to make a profit consistently. Profitability. Stability. Sanity. Forevermore.

CHECK-TO-CHECK AND PANIC-TO-PANIC Have you ever had the thought that the universe knows exactly how much extra money you have? A customer pays up on a $4,000 p ast- due invoice you wrote off months ago and later that week your delivery truck breaks down—f or good. Bye-b ye, $4,000. You land a new client and a wad of cash drops into your lap; only minutes later you remember that this is a three- payroll month. Oh well, at least now you’ll almost be able to cover it. Or you get a credit on your credit card account for an accidental billing ( woo-h oo, found money!), only to discover another charge on your credit card for something you forgot all about. It’s not the universe that knows how much we have in our bank accounts. It’s us. We default to managing the cash of our business by doing what I call “bank balance accounting.” If you’re like most entrepreneurs, and me, this is how it works: You look at your bank balance and see a chunk of change. Yippee! You feel great for about ten minutes, and then decide to pay all the bills 22 PROFIT FIRST that have been piling up. The balance goes to zero and very quickly you feel that all- too- familiar tightening in the chest. What do we do when instead of a decent bank balance, we see that there’s next to nothing there? We immediately panic. We hit “go” mode: need to sell fast! Need to make collection calls! Need to pretend the bills never arrived, or send out checks and “accidentally” forget to sign them. When we know our bank balance is super low (I’m talking limbo, “How low can you go?” low), we’ll do anything to buy the only thing we can afford: time. I’m going to go out on a limb and guess that you only look at your income statement on occasion. I suspect you rarely look at your cash flow statements or balance sheet. And if you do, I doubt you review these docs on a daily basis or understand exactly what they say. But I bet you check your bank account every day, don’t you? It’s OK. If you look at your bank account daily, I want to congratulate you because that means you are a typical—s cratch that—a normal business leader; that’s how most entrepreneurs behave. It is our natural desire as entrepreneurs to find problems and fix them. This is how we manage money. When we have enough money in the bank, we think we don’t have money problems, and so we focus on other challenges. When we see that we don’t have enough money in the bank, we go on red alert and take immediate action to fix our money problems, usually by trying to collect revenue quickly, or selling a big-t icket item, or some combination of the two. We use the money we have to pay the bills we owe; when we don’t have enough to cover everything, we try to get more money through sales and collections. Except that to support new revenue, we now have a host of new related expenses, so the cycle starts all over again. If you haven’t relied on it from the start, eventually the only “solution” is to take on debt— a second mortgage on your family home, a line of credit tied to your building, a stack of credit cards three inches high. This is how many entrepreneurs end up operating their businesses check to check and panic to panic. So let me ask you a question. How confident are you that you could grow your business if you operated this way? Do you think you’d ever be YOUR BUSINESS IS AN OUT-OF-CONTROL CASH- EATING MONSTER 23 able to get off this r oller- coaster ride? Could you dig yourself out of debt using this system? Of course not. And yet bank balance accounting is human nature. We humans are not big on change. Change is hard. With your very best intentions, changing your human tendencies to operate your business based on how much cash you see in your account would take years. I don’t know, you tell me— do you have years to make your own transformation before your very own monster destroys everything? I sure as hell didn’t. This is why, if we are to free ourselves from living check to check and panic to panic, we must find a method that works with our nature, not against it. Without an effective money management system that does not require massive mind-s et change, we get stuck in trying to sell our way out of our struggles. Sell more. Sell faster. Get money any way you can. It is a trap— a dangerous trap that would even have Frankenstein’s monster poopin’ his panties. It’s the Survival Trap. 24 PROFIT FIRST

THE SURVIVAL TRAP

Point A Point B

(Crisis ) ( Vision)

My lawn guy, Ernie, is a good example of someone caught in the Survival Trap. As is true for most lawn guys in the Northeast, Ernie makes good money removing leaves from lawns. Despite this, Ernie is always in need of more revenue. This past fall he knocked on my door and said that he noticed leaves in my gutters and would gladly clean them up. He had a captive client (me), and could now sell me another service. Easy money. When he was on the roof, he noticed my shingles needed repair. He offered roofing services. Why not repair my chimney, too? Sounds like a smart guy, right? Except that he’s an idiot. (Let me be clear: Ernie is a great person. He truly is. Ernie has great goals and ambitions. It’s his decision to expand his offering and expand his offering further that is pure idiocy.) Any sale feels like a good sale because sales help to temporarily lift us out of crisis. YOUR BUSINESS IS AN OUT-OF-CONTROL CASH- EATING MONSTER 25

Take a look at Figure 1. Ernie is at point A (which is really called crisis) and he wants to get to point B (which is his vision for our future). The thing is, as is the case for most of us, his vision is very vague. Instead of a clear statement of his products or services and the clients he wants to serve, Ernie might have a goal like, “I want a lot of money and need relief from stress.” The connection between point A and point B is never defined beyond, “Sell, baby! Just sell anybody anything!” Looking at the figure, you can see that many of the decisions we make around “just selling” in fact take us further away from our true vision. When Ernie offers me a new service, because it will make fast money, he hasn’t considered that it has nothing to do with what he wants his company to become or whom he wants his company to serve. It is very easy to go from being a guy who rakes lawns to a guy who fixes chimneys because of the opportunity for “easy money” with captive clients. The money may be easy, but what about the costs to do it all? Rakes and blowers for yard work are useless when working on roofs or chimneys. Now this guy needs ladders, roofing gear, bricks, and other materials. And most important, he needs the skills to complete the tasks, which means hiring skilled labor or going back to raking, gutter cleaning, roofing, and chimney school. Each new “easy sale” took Ernie further from his lawn- raking business. The Survival Trap promises fast money, but when we’re caught in it, we, like Ernie, rarely think about the massive cost of opportunity; and most of the time, we can’t discern profitable income from d ebt- generating income. Instead of being the world’s best at one thing, mastering the process of delivering perfectly and s uper- efficiently, we end up doing a greater variety of things and becoming less and less efficient at each step while our businesses become harder to manage and costlier to run. The Survival Trap is not about driving toward our vision. It is all about taking action, any action, to get out of crisis. Any of the actions shown in Figure 1 will get us out of an immediate crisis. But by taking actions like those on the left of the circle, we get out of crisis, sure enough, but we are going in the opposite direction from our vision at point B. We take money from anyone (and I mean anyone) willing to pay us. Money from bad clients. Money for bad projects. Money from our own pockets (if there’s anything left in them besides two dimes, a stick of gum, and a wad of lint). 26 PROFIT FIRST

In this way, we stay stuck on the roller-c oaster ride that is surviving check to check and panic to panic. Other actions shown on the diagram don’t take us in the opposite direction, but they are askew. Only when you stay in the channel of the horizontal dotted lines do you make your vision for your business a reality. The Survival Trap is deceptive because it fools us into thinking we are at least inching toward our vision, as if our reactionary behavior is actually “smart” or evidence of our good instincts, and will eventually lead us to the promised land: financial freedom. Consider the actions on the right side of Figure 1. For instance, a “just sell” approach will, by pure happenstance, also occasionally move us toward our vision, and we can easily trick ourselves into believing that we’re on the right track. Sometimes we make a crisis decision without considering our vision or the path to get there, and we get it right. Happenstance happens. At that point, we say, “See! I’m getting there. Things are clicking. Things are coming together.” But this is random chance, resulting from crisis, not focus or clarity, and is therefore false. It is like believing that because you once won on a scratch- off card, the lottery is a good investment strategy. And it is this kind of thinking that quickly lands us back in crisis mode. The Survival Trap is an ugly beast. It buys you time, but the monster gets bigger and bigger. And at some point it will turn on you and destroy you ruthlessly. Sustained profitability depends on efficiency. You can’t become efficient in crisis. In crisis, we justify making money at any cost, right now, even if it means skipping taxes or selling our souls. In crises, the Survival Trap becomes our modus operandi— until our survival strategies create a new, more devastating crisis that scares us straight or, more commonly, scares us right out of business. Part of the problem is bank balance accounting—l ooking at the money in your bank account as one pool from which you can operate your business without first addressing tax issues or your own salary, never mind profit. This leads to top line thinking—f ocusing on revenue first, last, and always. That thinking is further supported by the traditional accounting method public companies must use and most small businesses elect to use: GAAP (Generally Accepted Accounting Principles). YOUR BUSINESS IS AN OUT-OF-CONTROL CASH- EATING MONSTER 27

TRADITIONAL ACCOUNTING IS KILLING YOUR BUSINESS Since the dawn of time—o r shortly thereafter— businesses have kept track of their earnings and expenditures using essentially the same method:

Sales − Expenses = Profit

If you manage the numbers like most entrepreneurs, you start with sales (the top line) and then subtract costs directly related to the delivery of your offering (product or service). Then you subtract all the other costs you incur to run your business: rent, utilities, employee salaries, office supplies, and other administrative expenses, sales commissions, taking your client out to lunch, signage, insurance, etc., etc. Then you pay taxes. Then, and only then, do you take your owner’s distribution (owner’s salary, profit distribution, etc.). Let’s be honest, entrepreneurs hardly ever take anything close to a real salary, and good luck telling the government that you decided to skip taxes this year so that you could pay yourself. Finally, after all that, you post your company’s profit. And if your experience is like the majority of entrepreneurs, you never get to “finally.” When you’re waiting for the leftovers, at best you’ll get scraps. The traditional accounting methods we use today became formalized in the early 1900s. The particulars are updated regularly, but the core system remains the same: Start with sales. Subtract direct costs (the costs you directly incur to create and deliver your product or service). Pay employees. Subtract indirect costs. Pay taxes. Pay owners (owner distributions). Retain or distribute profit (the bottom line). Whether you outsource your bookkeeping or keep a shoebox of receipts under your bed, the basic idea stays the same. Logically, GAAP makes complete sense. It suggests that we sell as much as we can, spend as little as we can, and pocket the difference. But humans aren’t logical. (One episode of Bridezillas pretty much proves that.) Just because GAAP makes logical sense doesn’t mean it makes “human sense.” GAAP both supersedes our natural behavior and makes us believe bigger is better. So we try to sell more. We try and try and try to sell our way to success. We do everything we can to make the top line (revenue) grow so that something, anything, will drip down to the bottom 28 PROFIT FIRST line. It becomes a relentless cycle of chasing after every shiny object disguised as opportunity (that’s “little pumpkins” to my peeps— you know who you are). Throughout this haphazard, desperate growth process, our expenses are lost in the wash—w e just pay as we go. They’re all necessary, right? Who knows? We’re too busy hunting down sales and trying to deliver on all our promises to worry about the impact of expenses! We try to spend less without considering investments versus costs. We don’t think about leveraging our spending to get way more mileage out of way less expense. We can’t. The more variety of stuff we sell, the more our cost of doing businesses rises. They say it takes money to make money. But no one ever tells us what that translates to in the real world: It takes more money to make less money. As our monster gets bigger, its appetite gets out of hand. Now we’re faced with covering expenses for more employees, more stuff, more everything. The monster grows. And grows. And grows. Meanwhile, we’re still dealing with the same problems, just bigger ones: more empty bank accounts, higher stacks of credit card bills, bigger loans, and an ever- increasing list of “ must- pay” expenses. Sound familiar, Dr. Frankenstein? GAAP’s fundamental flaw is that it goes against human nature. No matter how much income we generate, we will always find a way to spend it—a ll of it. And we have good reasons for all our spending choices. Everything is justified. Soon enough, whatever money we had in the bank dwindles down to nothing as we struggle to cover every “necessary” expense. And that’s when we find ourselves in the Survival Trap. A secondary flaw is this: GAAP teaches us to focus on sales and expenses first. Once again, it works against our human nature, which urges us to grow what we focus on. It’s something called the Primacy Effect (more on that in the next chapter)— we focus on what comes first (sales and expenses) and actually become blind to what comes last. Yes, GAAP makes us blind to profit. There is a saying: “What gets measured, gets done.” GAAP has us measure sales first (it is the top line, after all), and therefore we sell like mad while expenses are treated like a necessary evil to s upport— you guessed it—m ore sales. We spend all that we have because we believe YOUR BUSINESS IS AN OUT-OF-CONTROL CASH- EATING MONSTER 29 we must. And we use terms like “plowback” or “reinvest” to feel good about it. Profit? Your salary? Mere afterthoughts. Leftovers. Another problem with GAAP is its overwhelming complexity. You need to hire an accountant to get it right, and when you ask the accountant the details about GAAP, he is likely to get confused. The system changes and is up for interpretation. And we can play games with GAAP: move some numbers around and post stuff in different spots, and the numbers look different. Just ask Enron—t hey were able to post profits as they were going bankrupt. Yuck! Before we go any further, I want to make sure you and I are on the same page when I talk about profit. Because the way accountants think about profit can be very different. Here’s what I mean: A couple of years before I wrote The Toilet Paper Entrepreneur, I was sitting in my accountant’s office, watching him scratch down some notes with a pencil on a legal pad. He erased something, then wrote down another note. Then he looked at his computer, clicked and clacked a few buttons, and the dot matrix printer spit out a report. “Yep. Just as I thought, Mike,” Keith said, peering over his John Lennon wannabe glasses. “What?” I said. “You had a $15,000 profit this year. Congratulations, that isn’t too bad.” For a second I felt pride. Damn straight there is a profit. I patted myself on the back. Then I had a sinking feeling. Where was the cash? There wasn’t a penny in the corporate coffers, let alone in my pocket. Then, feeling embarrassed that I didn’t know the answer, I asked, “Hey, Keith, where is the profit?” He pointed to the paper report that the printer had just spit out. He circled it on the paper with his fancy- schmancy number 2 pencil. “Yes, Keith, I can see that profit on the paper. But where is the cash? I want to take it out and celebrate a little. I want that profit for me.” There was a moment of awkward silence. Keith did his best to avoid making me feel stupid. He stared at me. Then he said, “This is an accounting profit. You spent the money in some way already. It doesn’t mean there is any money actually there right now. In fact, in your case it’s already gone. This is just the accounting of what already happened.” 30 PROFIT FIRST

“So are you saying I have a profit, but there is nothing in the bank for me to take as a profit right now?” “Exactly,” said the John Lennon poseur. “Damn! This sucks.” “Maybe next year,” Keith said. Next year? Why next year? Why not starting tomorrow? I thought. Accountants define profit differently than entrepreneurs. They point to a fictitious number at the bottom of an accounting report. Our definition of profit is simple: cash in the bank. Cold. Hard. Cash. For us. At the end of the day, the start of a new day, and every second in between, cash is all that counts. It is the lifeblood of your business. Do you have it or not? If you don’t, you’re in trouble, and if you do, you are sustained. GAAP was never intended to manage only cash. It is a system for understanding all the elements of your business. It has three key reports: the income statement, the cash flow statement, and the balance sheet. There is no question that you need to understand these reports (or work with an accountant and bookkeeper who do), because they will give you a holistic view of your company; they are powerful and highly useful tools. But the essence of GAAP (Sales − Expenses = Profit) is horribly flawed. It is a formula that builds monsters. It is the Frankenstein formula. To successfully run a profitable business, we need a super simple system to manage our cash, one we can understand within seconds, without help from an accountant. We need a system that is designed for humans, not Spock. We need a system that can instantly tell us the truth about the health of our businesses, one that we can look at and know instantly what we need to do to get healthy and stay healthy; a system that tells us what we can actually spend and what needs to be reserved; a system that doesn’t require us to change but automatically works with our natural behaviors. Profit First is that system. PROFIT FIRST IS BUILT FOR HUMANS How many times did Spock stare into Captain Kirk’s eyes and say, “That is highly illogical”? Well, just like you, Captain Kirk was a human, and humans are not logical. We are emotional beasts with monkey brains. We YOUR BUSINESS IS AN OUT-OF-CONTROL CASH- EATING MONSTER 31 like shiny objects; we stuff ourselves when there’s free pizza; we buy twelve pounds of cat food just because it’s on sale, even though we don’t have a cat. (OK, maybe that’s just me.) But we also know to trust our gut, go with our instincts, take shortcuts, and be inventive on the fly so we can move on and get more things done. If you were Spock, the relentlessly logical Vulcan on Star Trek, in addition to your pointy ears and awkwardly tight uniform, you would follow all the accounting instructions necessary to pinpoint your numbers. On a weekly basis you would study your income statement, tie it into you balance sheet, and, of course, do an analysis of your cash flow. Next you would run the critical ratios, like the OCR (operating cash ratio), and tie all this into your budget and projections. Then you would evaluate the associated KPIs (key performance indicators). You would do it all, and you would know exactly where your profits stand at any time. But you don’t, do you? Not even close. I don’t. In fact, I still can’t read those documents well. (That’s why I employ a couple of S pocks— my accountant and my bookkeeper.) I am a human. And so are you. And I strongly suspect you are a Captain Kirk. And that is a good thing, because you are the perfect person to lead your corporate ship to profits at warp speed. As a human, you likely have certain tendencies. Chances are you log into your bank account every few days, or maybe a few times a day, to see what your bank balance is. You probably make gut decisions based upon the balances you see. A lot of deposits and you feel good. Business is cooking! Let’s take our clients out for bottomless margaritas! Let’s buy that foosball table for the office! No money and panic sets it. Need to start making collection calls! Sell the foosball table! Sell the rad vending machines! Sell all the chairs! Sitting is bad for you anyway! All while praying that someone buys you a bottomless margarita. This and other normal human behaviors put businesses, unintentionally, into a constant state of flux. But I have good news, people. I designed Profit First so that you don’t have to change yourself at all. This is a critical point. You have always had an opportunity to change yourself and read your financial statements, sync your accounts payable and accounts receivable, make sure you are within 32 PROFIT FIRST budget, and make sure all the financial ratios are right. If you did all that, you would know where your profit stands all the time. But only Spock and accountants (and actually not that many of them) can and do that. Most entrepreneurs revert to checking their bank balance and going with their gut. Why? As Charles Duhigg explains in The Power of Habit, it is human nature to revert to established habits in times of stress. And guess what? The definition of entrepreneurship is constant stress. So we look for shortcuts and quick answers, especially with our finances. The great news is that Profit First is within your natural path. It is directly in alignment with the shortcut of looking at your bank account. It is unavoidable, designed to complement your natural human behaviors; therefore, it works. Established habits die hard, so why try changing your habits? Instead, use a system that works with your existing habits. Profit First sits in front of your accounting. It will tell you when you have a red flag and need to dig into the complex accounting stuff (with your qualified* accountant or bookkeeper), and it will show you exactly where your cash stands at any given moment. You’ll know your profitability, your reserves for taxes, what you are getting paid, and the amount you have to run your business operations. All that and more.

HAPPILY EVER AFTER The ending of Frankenstein (spoiler alert) is one of the most heartwarming happy endings in literature. Dr. Frankenstein and the monster talk it out

* To find a qualified accountant, bookkeeper, or coach to support your business, I encourage you to visit ProfitFirstProfessionals.com and choose the FIND option. I have vetted the best of the best providers throughout the globe, trained them in the nuances of Profit First, and continually work with them— as they work with their clients— to grow their profit skills. My team will gladly introduce you to a Profit First expert who we believe will be a perfect match for you. And if you act within the next fifteen minutes, you will get a free set of Ginsu Knives. (That’s a joke, people. The part about the Ginsu knives, I mean. The Profit First Professionals are very real, I assure you.) and reconcile their differences, become best friends, and go into business together to create a hugely successful and beloved ice- cream brand, Frank & Stein’s. Leaves me in joyful tears every time. YOUR BUSINESS IS AN OUT-OF-CONTROL CASH- EATING MONSTER 33

Just kidding. If you’ve read the book, you know that the monster destroys everything in Dr. Frankenstein’s l ife— his wife, his family, his hope for the f uture— so he sets out to exact revenge and kill his creation. The hunt for the monster takes a toll on Dr. Frankenstein and he dies a wrecked man, the monster close behind him. Frankenstein is a scary parallel to the extremes of entrepreneurship. Monster businesses have killed marriages, torn apart families, and for some entrepreneurs, decimated any hope for the good life. That miracle of a business we created can end up causing untold suffering; when that happens, the hatred Dr. Frankenstein had for his monster is all too often the chief emotion entrepreneurs have toward their businesses. But your story doesn’t have to end that way. You can have your happily ever after. The good news is that while your business may seem to be a monster controlling your life, it is also powerful. Whether your annual revenue is $50,000, $500,000, $5,000,000 or even $50,000,000, your business can become a profit- generating workhorse. Never forget the power of your “monster”— you just have to understand how to direct and control it. When you learn this simple system, your business will no longer be a monster; it will become an obedient, pasture-l oving cash cow. A damn strong one, at that. What I am about to share with you is going to make your business profitable immediately and determinately. I don’t care what size business you have or how long you have been surviving check to check and panic to panic, month after month and year after year. You are about to be profitable. Forevermore. No more leftovers for y ou— it’s time for you to eat first. Here’s the deal. There is only one way to fix your financials: by facing your financials. You can’t ignore them. You can’t let someone else take care of them. You need to take charge of the numbers. But there is good news— the process is really, really simple. In fact, you will fundamentally understand it, and implement it, within just a few more chapters. TAKE ACTION: SEND ME AN EMAIL It’s time to draw the line in the sand and get some accountability. Email me right now (my email is [email protected]) with the subject line “I’ve Drawn the Line in the Sand,” and tell me that you are committed to profitability. And tell me that you will do what it takes to 34 PROFIT FIRST once and for all become permanently profitable. If you are all in on this, I want to know it. Email me. Commit. Let’s do this.

Chapter 2

THE CORE PRINCIPLES OF PROFIT FIRST

ou would think that my daughter presenting me with her piggy bank as a way out of our financial ruin would have compelled me to change. Y You’d be wrong. That Valentine’s Day was a defining moment, for sure. The problem was, I had no idea where or how to begin. In reality, wake-up calls are rarely as depicted in the movies. I didn’t hear “Eye of the Tiger” playing as the soundtrack of my life, spurring me into an inspired training montage; there was no drinking raw eggs, punching my debt into submission, or running up the steps to raise my fists in the glory of an entrepreneurial turnaround. Instead, I entered a very dark period of depression and insomnia. The shame I felt was o verwhelming— ashamed of my idiocy, of my lies of omission, of my lack of courage to tell my wife the truth about how bad I’d made things. I share this with you not to seek your pity, but because I think you may have your own version of the story, and I want you to know you’re not alone. And if you haven’t gone to the dark place, know that it can be avoided. I emphatically believe that. Profit First is the solution to pending disaster in business. Here is how I dealt with depression: I hit the bottle (beer bottles actually . . . and lots of them). I’m really not much of a drinker at all. But I started to rely on it as my escape. That choice just led to more shame, and I hid it as best as I could—i f slumping on the couch, watching infomercials, surrounded by Bud Light cans is hiding it. Imagine me in a white undershirt covered with Cheetos stains. It’s not a pretty picture. And I don’t even like Cheetos. 36 PROFIT FIRST

Why was I watching infomercials, when we now have 2,976 channels to choose from? Because when I blew it all, cable TV was the first thing to go. That left me with a rabbit ear antenna (Google it, young padawans) and five network channels that, at three a.m., regress to pitching the latest vegetable pulverizing box or electrocuting b elt— all promising ripped abs. Tired of infomercials, I turned on PBS. A fitness expert was explaining to the studio audience that the quick fixes lauded by late-n ight diet infomercials didn’t work and weren’t sustainable. He said that what we really need are simple lifestyle fixes that change how we eat without our even really noticing. And his first fix suggestion? Smaller plates. Now riveted, I watched as the man explained that our natural human behavior is to fill up our plates with food, and because Mom said so, clean that plate by eating everything on it. (I still don’t get Mom’s logic—t here are children starving in Africa, so I need to stuff myself?) The c lean-your- p late behavior was instilled in me, and probably in you, too. The message is ingrained. Changing that habit for a day is a no-brainer. But changing it permanently? That’s hard. This is why so many people who diet gain the weight back; why people rarely follow through on New Year’s resolutions past the end of January; and why it’s so difficult to be disciplined with your spending. As I continued to watch the program, the expert went on to say that when we use smaller plates, we dish out smaller portions, thus eating fewer calories without changing our ingrained behavior of serving a full plate and eating all of what is served. I sat up straight on the couch, my mind alert with this new revelation. The solution is not to try to change our ingrained habits, which is really hard to pull off and nearly impossible to sustain, but instead to change the structure around us and leverage those habits. It was then that I realized: every penny my company made was going onto one huge plate, and I was gobbling it all up, using every last scrap to operate my business. Every dollar that came in went into one account, my operating account, and I was “eating it all.” It hurts to admit this, but I was never good at money management. While my businesses were doing well, it was easy to think I knew how to THE CORE PRINCIPLES OF PROFIT FIRST 37 manage money well, but looking back, I realize that that was never the case. I thought I was frugal in principle, or because I was a savvy entrepreneur. But in truth, I was frugal only when it was forced upon me. When I started my first company, a computer network integrator (today it would be called a managed service provider), I had no money. I was able to sell, service, run my office— I found ways to do all that with practically no money because I didn’t have any. As the business grew, I started to spend. The more money came in, the more I spent, and I believed—s cratch that, I was convinced—t hat all expenditures were necessary. We needed better equipment, a better office (an unfinished basement is no place for a business), and more employees to do the work so I could focus on sales. Every step forward in sales growth required an equal step up in my infrastructure, human resources, grade A office space— all fancy terms for expenses. After losing it all, I discovered that I work with whatever is put in front of me. Give me a hundred dollars and I will make it happen. Give me a hundred grand and I will make it happen. And while it’s easier to make things happen with a hundred thousand dollars in hand, it’s also way easier to make mistakes. Totally waste a few hundred dollars when you have a hundred thousand at your disposal, and you feel nothing. Totally waste a few hundred bucks, when you only have a few hundo to your name, and you feel that pain fast and hard.

38 PROFIT FIRST

Fig. 2. Income Versus Cost. Looking back at my companies, I realized that I grew them quickly but still survived check to check, only making the real money when I sold them. As my incoming cash increased (the dotted line in the chart), my expenses increased at a similar rate (solid line). The only time I would have a profit was when income jumped up, and I didn’t have time to spend at the same rate (point A). However, I would quickly ramp up my expenses to serve my “new level of sales” (point B). Then sales would settle back down, or drop, while my new level of expenses remained higher (point C), which meant I started to accumulate losses, making me desperate to sell more and sell faster at any cost (which could, in turn, further increase my expenses). As the PBS show shifted into early morning kids’ programming, I muted the television and began to connect the dots (which Count von Count, the vampire on Sesame Street, was also doing, literally connecting dots on the screen). If I reduced the “plate size” of my business’s operating account, I would spend differently. So rather than try to curb my spending habit, I would create the experience of having less cash on hand than I actually had, and then would find ways to still make things work. How did I know this would work? Because it already works for millions of people with every paycheck—t hink 401(k) deductions. As Richard Thaler and Cass Sunstein explain in their fascinating book Nudge, when people start participating in 401(k)s, they rarely stop. The key is to get started so both the savings accumulate and the lifestyle adjusts to meet their residual pay. If 401(k)s were like regular savings accounts, people would find it way too tempting and easy to dip into their savings anytime they felt like it. The reason they don’t is because investment accounts charge penalties and make it difficult to withdraw money whenever you want. In the same way, I could make myself believe and behave as if I had only my “small plate” money to work with (and not a small plate plus a big Crock Pot at the table). But what would I do with the “other money?” Could I use it t o— shock of shocks— pay myself a salary? Pay my taxes? Hey. Hey, wait. Wait one stinkin’ minute. Could I actually set aside some of it for profit— before I paid bills? And that’s when it hit me— what if I took my profit first? THE CORE PRINCIPLES OF PROFIT FIRST 39

For a guy who built two businesses on top line ( revenue-f ocused) thinking, this idea was a revelation. At six a.m., with beer breath, Cheetos stains covering my undershirt, and hair going in more directions than Einstein’s, it sounded like crazy talk. Who would have the audacity to take profit first? I would.

THE FOUR CORE PRINCIPLES OF PROFIT FIRST Let’s take a moment to talk dietary science. No groans, please. This stuff is fascinating. In 2012, a report by Koert Van Ittersum and Brian Wansink in the Journal of Consumer Research concluded that the average plate size in America had grown 23 percent between the years 1900 and 2012, from 9.6 inches to 11.8 inches. Running the math, the article explains that should this increase in plate size encourage an individual to consume just fifty more calories per day, that person would put on an extra five pounds of weight each year. Year after year, that adds up to a very chunky monkey. But using smaller plates is just one factor. A Twinkie on a small plate is still a Twinkie. There is more to a healthy diet, and it is based on four core principles of weight loss and nutrition.

1. Use Small Plates— Using smaller plates starts a chain reaction. When you use a small plate, you get smaller portions, which means you take in fewer calories. When you take in fewer calories than you normally would, you start to lose weight.

2. Serve Sequentially— If you eat the vegetables, rich in nutrients and vitamins, first, they will start satisfying your hunger. When you move on to the next c ourse— your mac and cheese or mashed potatoes (they don’t count as veggies!)—y ou will automatically eat less. By changing the sequence of your meals by eating your vegetables first, you automatically bring a nutritional balance to your diet.

3. Remove Temptation— Remove any temptation from where you eat. People are driven by convenience. If you’re anything like me, when there’s a bag of Doritos sitting in the kitchen, it calls out to you 40 PROFIT FIRST

constantly— even when you aren’t hungry. If you don’t have any junk food in the house, you’re probably not going to run out to the store to get it. (That would mean putting on pants.) You’re going to eat the healthy food you stocked instead.

4. Enforce a R hythm— If you wait until you are hungry to eat, it is already too late and you will binge. Then you are likely to eat too much and stuff yourself. You go from starving to stuffed, and back to starving again. These peaks and valleys in your hunger result in way too much calorie consumption. Instead, eat regularly (many researchers suggest five small meals a day) so that you never get hungry. Without the peaks and valleys, you will actually eat fewer calories.

Though they don’t realize it, the folks in the diet industry know quite a lot about growing a healthy business. Let’s examine these principles one by one:

1. Parkinson’s Law: Why Your Business Is Like a Tube of Toothpaste In the years since I discovered these four physical health principles, I dug further and further into why they matter. The four principles that the PBS fitness expert shared are all rooted in behavioral science. When you know what makes you tick, it gives you a massive advantage over yourself. Behavioral science gives you the advantage to subdue your biggest competitor, namely, you. Let’s start with small plates. In 1955, a modern philosopher named C. Northcote Parkinson came up with the counterintuitive Parkinson’s Law: that the demand for something expands to match its supply. In economics, this is called induced d emand— it’s why expanding roads to reduce traffic congestion never works in the long term because more drivers always show up in their cars to fill those extra lanes. In other words, if you went to a Spanish tapas bar that served those tiny plates, you would eat less. But if you went to a Ponderosa all- you- can- eat buffet, where they have plates the size of manhole covers, you would eat until the food was coming out your ears. (It’s an all-y ou- CAN- e at buffet . . . Challenge accepted!) THE CORE PRINCIPLES OF PROFIT FIRST 41

Similarly, if your client gives you a week to turn around a project, you’d likely take the whole w eek—but if she gives you just a day, you’ll make it happen in a day. You see the more we have of something, the more of it we consume. This is true for anything: food, time, even toothpaste. How much toothpaste do you use when you have a brand- new tube of toothpaste? A big ol’ glop of it, right? I mean, why not? After all, you have a full tube of toothpaste. So you put a nice long bead on that brush of yours. Then before you start brushing, you turn on the faucet to moisten up the brush a little. Then it happens . . . damn it, the paste falls into the sink. But who cares, right? You just opened up that tube, for God’s sake! You have tons of this stuff. So you put on another big ol’ glop and brush away. But when you open that cabinet drawer and find a nearly empty tube . . . my oh my, how the game changes. It starts off with an insane amount of squeezing, twisting, and turning. You reach for your toothbrush, momentarily releasing a little bit of your viselike grip on the tube, and with that, like a tortoise’s head when a t hree- year-o ld comes at it with a stick, the paste shoots back into the tube. You could shout out some expletives at this point, but you can’t because you are already onto stage 2 of toothpaste extraction: biting down hard on the tube. With a precarious balance of biting, one hand squeezing and tube twisting, while your other hand somehow tries to get the brush bristles to scoop out toothpaste, you have a victory. One droplet of toothpaste. Which is just enough for that fresh- mouth sensation. Isn’t it funny how much we change based upon what is available? Here is what’s fascinating: Parkinson’s Law triggers two behaviors when supply is scant. When you have less, you do two things. The first is obvious: you become frugal. When there is less toothpaste in the tube, you use less to brush your teeth. That is the obvious part. But something else, far more impactful happens: you become extremely innovative and find all sorts of ways to extract that last drop of toothpaste from the tube. If there is one thing that will forever change your relationship with money, it is the understanding of Parkinson’s Law. You need to intentionally make less toothpaste (money) available to brush your teeth (to operate your business). When there is less, you will automatically run 42 PROFIT FIRST your business more frugally (that’s good) and you will run your business far more innovatively (that’s great!). If you first extract your profit and remove it from sight, you’ll be left with a nearly empty toothpaste tube to run your business. When less money is available to run your business, you will find ways to get the same or better results with less. By taking your profit first, you will be forced to think smarter and innovate more. 2. The Primacy Effect: Why the First Part of Profit First Matters The second behavioral principle you need to understand about yourself is called the Primacy Effect. The principle is this: We place additional significance on whatever we encounter first. Here’s a little demonstration that may help you understand. I am going to show you two sets of words. One set describes a sinner and another describes a saint. The goal is, as quickly as possible, to determine which one is which. Got it? Good. Now look at the two sets of words below and determine which one describes the sinner and which one the saint.

1. EVIL, HATE, ANGER, JOY, CARE, LOVE 2. LOVE, CARE, JOY, ANGER, HATE, EVIL

At first glance you likely identified the first set of words to be the sinner and the second set of words to be the saint. If you did, that is wonderful news, because it means you are a human being and are experiencing the Primacy Effect. In other words, you will thrive under Profit First. If you tried to figure out the catch as you were going through the exercise, that is awesome news, too; it means you are an entrepreneur and are more than willing to break old systems (like reading left to right only), which also means you will thrive under Profit First. Now look at the set of words again. You will see that both sets of words are identical, just in the opposite sequence. So when you see EVIL and HATE at the start of a set of words, your mind assigns greater weight to those words and less weight to the remaining words. When the set started with LOVE and CARE you put the weight there. THE CORE PRINCIPLES OF PROFIT FIRST 43

When we follow the conventional formula of Sales − Expenses = Profit, we are primed to focus on those first two words, Sales and Expenses, and treat Profit as an afterthought. We then behave accordingly. We sell as hard as we can, then use the money we collect to pay expenses. We stay stuck in the cycle of selling to pay bills, over and over again, wondering why we never see any profit. Who’s the sinner now? When profit comes first, it is the focus, and it is never forgotten. 3. Remove Temptation: Once You Take Your Profit First, Put It Away My greatest weakness is Chocodiles: Twinkies covered in dark chocolate, filled with cream, and wrapped in love. Fortunately, they stopped making them.* But if one sneaked into my house, even if it had expired in 1972, I would devour that delicious elixir of love and monounsaturated fats. Now I always make sure I have healthy options with me, and the junk is nowhere around. Money works the same way. As you implement Profit First, you are going to use the powerful force of “out of sight, out of mind.” As you generate a profit (which, remember, starts today), you are going to remove the money from your immediate access. You won’t see it, so you won’t access it. And just like anything that you don’t have a reasonable degree of access to, you will find a way to work with what you do have and not worry about what you don’t. Then, when Mr. Buffett (ahem, your profit account) releases money to you, it will serve as a bonus.

4. Enforce a Rhythm

Just as it keeps us from starving and bingeing on food, enforcing a rhythm works with money, too. When we get into a rhythm (I will explain in Chapter 6 a twice-a-month method that I call the 10/ 25 rule), we don’t get into the reactive mode of crazy spending when we get big deposits and panicking in the face of big cash dips. I am not saying the money will automatically appear and you’ll always have cash at your disposal, but establishing a rhythm will get you out of the daily panic. In fact, establishing a rhythm will also be a great indicator of overall cash flow. This system is the easiest way to measure cash flow. Instead of reading the cash flow statement (which, honestly, when was the last time 44 PROFIT FIRST you did that?), you can measure your cash flow by just checking your bank accounts, which you do anyway.

* For my Chocodile-loving comrades: Supposedly Hostess has reintroduced the product, albeit slightly reformulated. Distribution is sparse, yet I have got my hands on a few. If these are the new formula, they taste like they have been on the shelf since 1972 . . . and they are still delicious. When you get into a rhythm with your cash management you’ll have your finger on the pulse of your business. You will monitor your cash position every day by just looking at your bank account. Log in. Spend two seconds looking at your balances. Log out. You will know where you stand that quickly. Think of your cash flow as waves rolling onto the beach. If the cash wave is big, you will notice and take action (this is when looking at the reports with the guidance of a pro is helpful). When the waves are small, you will surely notice that, too. Most of the time, I expect the cash waves will be normal, and no action will be required. But no matter what, you will always know. Because you will continue to do what you normally do: log into your bank account.

BUT IF I SET ASIDE MY PROFITS, HOW WILL I GROW?

This is a question I get asked a lot. By now I hope I’ve convinced you that chasing growth for its own sake is how you wind up broke and out of business. But that doesn’t mean growth doesn’t matter, or that you shouldn’t want it. Growth strategies have been part of my spiel for years. I have now written multiple books on the idea of fast, organic growth (like my book Surge). But like most entrepreneurs, I always used to think it was one or the other. Either you could grow or you could be profitable—y ou surely couldn’t do both. I was wrong. What I’ve found is that the fastest, healthiest growth comes from businesses that prioritize profit. And it is not because they plow money back into their businesses. Businesses that plow back their profits aren’t truly profitable; they are just holding money temporarily (feigning profit), then spending it, just like any other expense. Profit First sparks faster growth because it makes you reverse engineer your profitability. When you take your profit first, your business will tell you THE CORE PRINCIPLES OF PROFIT FIRST 45

immediately whether it can afford the expenses you are incurring; it will tell you whether you are streamlined enough; it will tell you whether you have the right margins. If you find that you can’t pay your bills after taking your profit first, you must address all those points and make the fixes. Taking profit first will help you figure out which of the many things you do makes money, and which don’t. Then the direction is obvious— you do more of what is profitable, and you fix (or dump) what is not. You will focus on what makes profit for you, naturally, and you will get better and better at it. And when you get better at what your customers already want and like, they will like you more. All this translates into fast, healthy growth. Boom! Specialists, such as heart surgeons, know the secret. Keep doing a few things (like heart surgery) really, really well, and you will attract the best customers, dictate the biggest premiums, and see your practice grow to be world renowned. Alternatively, the general practitioner does everything (from hangnails to rashes, coughs, and colds), but never specializes and therefore attracts the general customers. And when things get serious for the patient—that cough is actually indicating heart disease—the general practitioner refers the work to the specialist (who then collects all the premium money for her services). Specialists own the biggest houses in town, while general practitioners can’t pay off their student loans. To grow the biggest and the fastest, you need to be the best at one thing you do. And to become the best at something, you need to first determine what you are best at and do it a whole lot better. To get there, you take your profit first and the answers to being the best at something will reveal themselves.

THE NEW ACCOUNTING FORMULA Now you know the psychology behind how you work. The next step is to put a system around the normal you. And we start with a simple new Profit First formula:

Sales − Profit = Expenses

What you are about to learn isn’t anything new (not even to you). It is something I suspect you have been aware of—i n full or at least in part— 46 PROFIT FIRST but have never done. It is the concept of “pay yourself first” meets “small plate servings” meets “Grandma’s envelope-m oney management system” meets your preexisting natural, human tendencies. Here’s how you apply the four principles:

1. Use Small P lates— When money comes into your main INCOME account, it simply acts as a serving tray for the other accounts. You then periodically disperse all the money from the INCOME account into different accounts in predetermined percentages. Each of these accounts has a different objective: one is for profit, one for owner compensation, another for taxes, and another for opera ting expenses. Collectively, these are the five foundational accounts (Income, Profit, Owner’s Comp, Tax, and Operating Expenses), and where you should get started, but advanced users will use additional accounts, outlined in Chapter 10.

2. Serve Sequentially— Always, always allocate money based upon the percentages to the accounts first. Never, ever, ever pay bills first. The money moves from the INCOME account to your PROFIT account, OWNER’S COMP, TAX, and OPEX (OPERATING EXPENSES). Then you pay bills only with what is available in the OPEX account. No exceptions. And if there isn’t enough money left for expenses? This does not mean you need to pull from the other accounts. What it does mean is that your business is telling you that you can’t afford those expenses and need to get rid of them. Eliminating unnecessary expenses will bring more health to your business than you can ever imagine. 3. Remove Temptation— Move your PROFIT account and other “tempting” accounts out of arm’s reach. Make it really hard and painful to get to that money, thereby removing the temptation to “borrow” (i.e., steal) from yourself. Use an accountability mechanism to prevent access, except for the right reason.

4. Enforce a R hythm— Do your allocations and payables twice a month (specifically, on the tenth and twenty-fi fth). Don’t pay only when there is money piled up in the account. Get into a rhythm of allocating your income, and paying bills twice a month so that you can see how THE CORE PRINCIPLES OF PROFIT FIRST 47

cash accumulates and where the money really goes. This is controlled recurring and frequent cash flow management, not by-t he- seat-of-y our- pants cash management.

By the time I started applying this small plate philosophy to my company’s finances, I was doing consulting work and speaking on entrepreneurship. I also applied my new Profit First system to my one surviving investment, Hedgehog Leatherworks. I had given up booze and infomercials as coping mechanisms, and my depression had lifted. At the time, I was putting the finishing touches on my first business book, The Toilet Paper Entrepreneur, into which I inserted a small section about the concept of Profit First. After the book came out, I continued to refine the system, exploring and living it, and everything changed. I started implementing it with other entrepreneurs. And it worked— for me, for them, and for my readers. Fueled by my passion for entrepreneurship and my determination to be profitable now, not at some indeterminate date in the future, I set about to perfect my system. In that process I discovered other entrepreneurs and business leaders who were running their businesses check to check and desperately needed the Profit First system. But I also found entrepreneurs and business leaders who had been implementing a similar system with great success. People like Jesse Cole, owner of two AAA baseball teams, who, while growing his businesses, paid off nearly $1 million in loans. And Phil Tirone, who, while building his first, highly profitable m ultimillion- dollar business, continued to rent the same studio apartment until he determined that he had secured enough profit to u pgrade— to a one bedroom. In the coming pages, I will share stories about people who are in lockstep with their profits, and stories about other folks, like you and me, who were giving it their all but still ended up breaking even only on their best days—p eople who now turn a profit every month and enjoy the fruits of their labors. People like José and Jorge, two entrepreneurs who started using Profit First in the first few months of launching their business and have experienced not only very respectable growth, but have continually taken in a 7 to 20 percent profit month after month. 48 PROFIT FIRST

LOWER THE BAR In their book Switch, Chip and Dan Heath explain the concept of “lowering the bar.” We entrepreneurs are all programmed to “raise the bar.” Go bigger. Live bolder. Take on more. But I have found that isn’t always the best way to gain momentum. And if you intend to be profitable, it is time we start with a small “low bar” step. I want you to take one small, simple, and easy action that will start you down the path of permanent profitability. There is no excuse because it is so easy. Right now I want you to set up your PROFIT account. It is the first step in the Profit First system, so do it right now. Call your bank (or do it online) and set up one new checking account. Don’t get mired in whether it should be a savings account or a sweep account or any of that. The five seconds you spend thinking about it cost more than the little dribble of interest it will yield. Your goal is just to get started and not to slip back. After setting up this new checking account at your bank, nickname the account PROFIT, and from this moment forward from any deposit you put into your normal checking account, transfer 1 percent of that deposit into your PROFIT account. Then proceed with your business and processes and money management as you have in the past. Just add to the PROFIT account, and never touch it (until you get to the section of this book where I explain what to do with it). If you get a $1,000 deposit, I am telling you, starting today, transfer $10 into your PROFIT account. If you could run your business off $1,000, you can surely run it off $990. If you get $20,000 in deposits, you transfer $200 into your PROFIT account. If you can run your business off $20,000 you absolutely can run it off $19,800. You’ll never miss that 1 percent. It is a low bar. But something magical will happen. You will start proving the system to yourself. You won’t get rich overnight this way, but you will get a wealth of confidence. You will have a flavor of how powerful it is to reserve your profit in advance. Your job is to stick with this small step for a while. Watch your profit accumulate. Yes, it is notably small, but it is profit nonetheless. The goal here is to win over your mind. The goal is for you to realize that this unfamiliar process of taking your profit first isn’t so scary after all. Then once you are digging the Profit First vibe, you are THE CORE PRINCIPLES OF PROFIT FIRST 49 set for greater success. Because you will be staged perfectly to do the rest of the system, and your heart will be in it. Big-time.

TAKE ACTION: EASY FIRST STEPS

1. Trust the process. This works, but it is unfamiliar. So you will resist. Commit to, for now, relinquishing your resistance and comfort in doing what you did in the past. First, trust the process. Then prove it to yourself.

2. Open just one new account: PROFIT. For simplicity’s sake, make it a checking account. Don’t worry about the insignificant interest implications of savings and other accounts. Your goal for now is to get started immediately and decisively.

3. Transfer 1 percent of your current money into the PROFIT account. You have “seeded” the account. Don’t touch it. Never transfer it. Just let it sit for now.

TIME THE MARKETPLACE, RIDE THE WAVE OF CONSUMER DEMAND AND BECOME YOUR INDUSTRY’S BIG KAHUNA

BY MIKE MICHALOWICZ Publisher: Obsidian Press Print Management: Book Lab Cover Design: Liz Dobrinska Book Design & Typesetting: Chinook Design, Inc. 2 3 4 5 6 7 8 9 10 © 2016 by Mike Michalowicz All rights reserved. Published 2016 ISBN-10: 0981808247 ISBN-13: 978-0981808246 Printed in the United States of America

Disclaimer: No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without the prior written permission of the publisher, Obsidian Press.

Limit of Liability/Disclaimer of Warranty: This book contains the opinions and ideas of its author. It is sold with the understanding that neither the author nor the publisher, through the publication of this book, is engaged in rendering financial, legal, consulting, investment or other professional advice or services. If the reader requires such advice or services, a competent professional should be consulted. The strategies outlined in this book may not be suitable for every individual, and are not guaranteed or warranted to produce any particular results. No warranty is made with respect to the accuracy or completeness of the information contained herein. Both the author and publisher specifically disclaim any responsibility for any liability, loss, or risk, personal or otherwise, which is incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this book. CONTENTS

Acknowledgments xi Introduction 1

Chapter One The Power of Waves 9

Chapter Two Finding Your Wave 29

Chapter Three Separate 51

Chapter Four Unify 63

Chapter Five Rally 79

Chapter Six Gather 97

Chapter Seven Expand 117

Chapter Eight Wipeout! 131 Conclusion 145 For my son, Tyler. You’ve caught life’s surge. I can’t wait to see how you carve it up. ACKNOWLEDGMENTS

This book became a reality because the imminent swell was spotted by Lee Strayer. Thanks, Lee, for pointing it out and helping me start paddling. If there is one person who has put my books in the most hands it is Yaniv Masjedi of Nextiva. You are a wonderful friend and a true class act. Not to mention you and your family know a bit about growing massively successful companies. I have never seen a group of entrepreneurs consistently catch so many surges. Thanks to Ron Saharyan for promoting the hell out of this book (and all my books), because “people gotta know this shit!” Thanks to Ron (same Ron), Kristina Bolduc, Jackie Letkowski, and Erin Mojer (and the soon to be discovered new talent we invite to join our crazy crew) for running, growing, and maturing our company while I am flying all over the planet talking about this stuff. A massive outpouring of appreciation and gratitude to Donna Leyens. Donna has been a champion for all my projects for so long and has turned so many people on to my books! I can’t wait to see the organization you launch, Donna. And I can’t wait to see the book you write. Thank you for allowing me to share your story in Surge. Thank you to the other rock star entrepreneurs, business owners and surfers who shared their stories with me for this book: Holly Beck, Jabe Blanchard, Becky Blanton, Tomas Gorny, Bert Jacobs, Dr. Venus Opal Reese, Paul Scheiter, David Schnurman, Brian Smith and Cyndi Thomason. SURGE

Chris Curran, the man who can make anyone’s voice velvety, thank you for the powerful support and direction on building a podcast that just plain ol’ rocks. A huge hug of gratitude to Li “Sid” Hayes for helping me get the word out to every nook and cranny on this planet. Plus you have always been a great Big Sid. But you know that. A major shout-out to all Profit First Professionals. You are a courageous group of folks boldly serving entrepreneurs to grow in so many ways. To me you are the Green Beret of surging profit. You are the force eradicating entrepreneurial poverty. Thanks to all the “in the trenches” editors who gave me feedback and were willing to be guinea pigs. I am wishing a wonderful surge for all of you: Debra Angilletta of DebraAngilletta.com; Debbie Bilello of Virtual Office Solutions; Michelle Bredell of Account Tally; Karen Dellaripa of Beyond Your Books; Jill Frillman of Bookkeeping Etc.; Billie Anne Grigg of Pocket Protector Bookkeeping; Tina Forsyth, the author and coach at TinaForsyth.com; Peg Hill of Adjusting Entries; Martin Horton of Rivington Accounts Limited; Ann Jewell of Common Cents Books; Jennifer Juguilon-Hottle of J2H Consulting Group; Benita Königbauer of Benita Königbauer Steuerberaterin (Ich danke Dir); Gary Martin of Back To Black Bookkeeping; Susan Penner of Susan Penner Bookkeeping; Kerry Postel of Abacus Bookkeeping, LLC; Janet Redford of MindBlown; Jason Spencer of Spencer Weddings & Entertainment; Dr. Sabrina Starling of Tap the Potential LLC; Derrick “DP” Storey of Derrick P. Storey & Associates Limited; Jillian Verdun of JMV Financial Services; Michele Williams of Scarlet Thread Consulting and Chris Woodard, an entrepreneur and supporter extraordinaire. You are all extraordinary people, and I hope the readers of this book work with you to achieve their surge. Gracias por mi familia Mexicano–Rodrigo Laddaga, Maru Medina, y Juan Manuel González Ponce. And all thanks to mi

xii ACKNOWLEDGMENTS familia Americano. Krista, I live you (that is not a typo). Brah, Slaps, and Palzy, I love you. As always, I tip my hat, my head, and my heart to Anjanette Harper, my co-writer, my friend, and a master of one liners. Finally and most certainly I want to thank the readers of my books who email me (I hope you will too). I love hearing your stories of success. I love hearing the impact my words and, more importantly, your actions, have had on your business and life. I am blown away that Profit First has saved so many businesses from financial ruin and saved some marriages in the process (seriously). I am humbled that The Pumpkin Plan has played a role in growing so many companies. I can’t believe that The Toilet Paper Entrepreneur continues to inspire entrepreneurs to take the leap, without a para- chute (the only way to successfully leap). Every morning I read the emails and letters (shout out to the old-schoolers) and videos (shout out to the new-schoolers, too) that you send me. I love hearing how you have fixed, grown, changed, and improved yourselves and your businesses. It touches my soul every time and affirms I am living my life’s purpose. Thank you. From the entire essence of my soul, thank you. Email me any day, any time, with your stories at [email protected]. Old schoolers can mail me at Obsidian Press, ATTN: Mikey M, P.O. Box 73, Mountain Lakes, New Jersey, 07046.

SURGE ON!

xiii “The entrepreneur always searches for change, responds to it, and exploits it as an opportunity.” Paul Drucker INTRODUCTION

ou can’t manufacture luck. It just happens. Or it Ydoesn’t. For most of my life, I believed that to be true. One morning I’d find a ten-dollar bill on the street and call it a lucky day. A few weeks later I’d realize I lost a twenty somewhere between meetings and call it a crappy day. To be in the right place at the right time, or the wrong place at the wrong time, seemed simply to be a matter of happenstance; it was completely random and out of my control. Or was it? A few years ago, Becky Blanton’s story came up at one of my Entrepreneurs’ Organization (EO) meetings. You may have seen her moving TED talk about being homeless for eighteen months. Her story is powerful and a must-watch, but the discussion at EO was about Becky’s unique ability to find lost money on the street. She developed a method based on identifying patterns and, using that method, picked up five to fifty dollars a week. Every week. If I found fifty bucks over the course of a week, I’d think the seas had parted and pigs had learned to fly. Talk about luck, fifty bucks a few weeks in a row would clearly mean I had massive amounts of luck on my side. But for Becky, luck had nothing to do with it. She expected it. She created it. I started to think about that elusive “good fortune” so many big business success stories seemed to feature. I thought about how, no matter how hard I worked, or how well I networked, or how many books I read (or wrote, for that matter), my current business SURGE still wasn’t taking off. I’d had success in the past, but not this go- round, and had started to buy into the theory that most entrepreneurs subscribe to: Sometimes you do everything right, and you still can’t make your business work. Sometimes you just can’t predict the trends that shake up your industry. Sometimes luck is not on your side. Right? Wrong. I was wrong. So wrong. After hearing Becky’s story, I began to change my belief about the concept of luck. What if luck had nothing to do with it? Or— and here is where I began to have a radical thought—what if I could create my own luck simply by paying attention to the patterns in my own industry? Maybe Becky was on to something. Maybe spotting a trend before it took off wasn’t a skill exclusive to media darlings and wun- derkinder. Maybe I could manufacture luck. In the years since I heard Becky’s story, I studied “luck” and applied what I learned to my businesses. Sometimes I failed; sometimes I succeeded. Eventually, I came up with my own method for spotting what others are not trained to see: the next trend in my industry. I figured out how to be in the right place at the right time, over and over again. The more I practiced it, the easier it was to implement. And now that I know my method works, I’m ready to let you in on it. When I sat down to write this book, I contacted Becky Blanton to ask if she would agree to an interview. I wanted to hear her story firsthand. As luck (ahem) would have it, we were able to meet for breakfast at a Waffle House on the outskirts of Charlottesville, Virginia. After the death of her father in 2006, Becky packed everything she owned into a 1975 Chevy van and set out to travel the country with her dog and cat. It was a grand idea, but more difficult in practice. Despite her success as a journalist, despite her education and experience, she ended up homeless for more than a year.

2 THE POWER OF WAVES

Though she had a job at a camping store at the time, Becky often went without food for two or three days in a row. In search of enough money for a cheap meal, Becky began looking for money people dropped on the street. “I’d be at Walmart, three dollars to my name, and look around the parking lot for change,” she said. “I started thinking, ‘Where do I usually find money?’ Whenever I found money, I’d notice the things those places had in common. Then I’d ask myself, ‘What do those places have in common with other places?’ Then I would start looking for that pattern in my environment.” Becky noticed she often found money where it could be trapped, usually wherever she could spot a ninety-degree angle. “There’s always a corner or a curb. Phone booths. Milk crates lying around are like money butterfly nets. Finding money was like learning the good fishing spots, except I was learning the good money ‘catch and hold’ spots.” Another pattern Becky discovered yielded her even more cash: She tended to find money in places where people most frequently take bills and coins out of or put money in their pockets, or where money might fall out. “It sounds gross,” Becky said, “but people always drop quarters and nickels and dimes around toilets. Nobody wants to dig around on the floor and pick up their own change. People also drop money at bus stops, but don’t even notice because they’re in a hurry to get on the bus. The clanking of coins is covered by the buses’ engine noise, and dollars float away in silence.” Paying attention to this pattern, Becky consistently found money near hot dog vendors and parking meters, in arcades, at bus stops, of course, and—duh—in couches at furniture stores. “Almost no one sees the money that is constantly around them. But I find dimes, quarters and dollars all the time,” Becky said. “You have to train your eyes for it. Once it’s on your radar, you do it all day. I still do it, because it’s a habit. My friends ask all the time, ‘How do you always find money?’ I just know what to look

3 SURGE for. Once you’ve seen the pattern, you spot it all the time. You see opportunity everywhere. And once you learn the practice, you can do it anytime, anywhere.” As I dug into my fried eggs and my sweet cream waffl e, I thought about the Big Kahunas, the business legends. Every successful business you can think of had a big dose of good fortune; they were at the right place at the right time: AirBNB, Facebook, Uber, Google, Apple, Microsoft , Ford, the company leading in your industry, every single industry leader. Most people would say the founders of

Luck is about foresight paired with strategic actionaction.. these companies got lucky, that opportunity just landed in their laps. Th ose people would be only half right. Th e founders of rock star companies truly were lucky… but I was starting to see that good fortune didn’t just fall into their laps. It was a revelation to realize that being in the right place at the right time doesn’t have to be some arbitrary force of the universe. Luck isn’t about fate, or worth, or karma, or tiny green Irish men. Luck is about foresight paired with strategic action. Luck is about planning. Luck is about deliberately putting yourself in the right spot at the right time. Spot the next trend wave that is almost upon you, position yourself in front of it and you’ll capture a surge of consumer demand for your product or service. I know the prospect of spotting and riding trend waves can seem daunting. It would be so much easier if we could just buy a crystal ball or master time travel. As I was fi nishing the edits on this, my fourth book and the fi rst in my “Sweet Spot” series, we offi cially entered the future—the future in Back to the Future Part II, that is. When I was but a wee lad, suff ering through acne and getting

4 THE POWER OF WAVES stood up for awkward teenage group dates (I didn’t even know that was possible… until it happened), I watched Marty McFly travel to 2015 to save his future son. As an adult, I often wished I had my own DeLorean time machine so I could travel to the future and figure out what the heck consumers want, before they know they want it. It’s beyond frustrating to build a business only to have everything come down to happenstance. Spotting and riding a trend wave might sound about as doable to you as finding your very own DeLorean time machine. I know you’re eager for answers. You’ve done everything you can for your business. You took a risk on your big idea. You worked your butt off, sacrificed your retirement fund and time with your family, and educated yourself about better business practices. You sucked it up and learned how to network. You found your way over, under, or around every challenge that came your way. So why isn’t your business the Big Kahuna in your industry? Why is your company still limping along, yet to live up to the potential you envisioned? What will it take for your business to experience a powerful surge of consumer demand? The answer is simple: You have to be in the right place at the right time. (Yes, it all comes back to that essential truth.) When I give keynote speeches on this topic, this is usually the moment when I hear groans from the audience. I’m always surprised (but grateful) that people don’t throw tomatoes at me or rush the stage in an angry mob. I suppose no one lashes out at me because they know I’m right. Anyone who has been in business for a few years knows that no matter how hard you work, or how brilliant your idea is, you haven’t got a chance if you haven’t accurate- ly anticipated market demand. So why the groans? Because most people believe luck is something out of their control. I did—until Becky Blanton’s story inspired me to think differently. I’ve been in the entrepreneurial trenches for twenty years now, and if there’s one thing I know for sure, it’s that conventional

5 SURGE wisdom is usually a bunch of B.S. When it comes to business, luck is entirely within your control. I’m sure plenty of people will dis- agree with me; I’m used to it. I’ve ruffl ed a few feathers via my books (one Amazon review of my books hints that I am the devil child, saying, “He’s the devil child.”) and speeches (I was invited to keynote a CPA conference, and when I said I would explain why profi t

Once you’re aware of the patterns, you’ll notice them everywhere. should never be the bottom line, but the top line… I was promptly disinvited). But it is only by busting myths that you successfully build a business. I’m all about doing what works, not what should work. I’ve seen a lot of businesses fail simply because the leaders at the helm followed the status quo without question. Aft er all these years, I can say with absolute certainty that timing is everything. I built and sold two multimillion-dollar businesses, launched two other successful businesses—including another multimillion-dollar business)—and built a career as an author and speaker. I also had more failures than successes, and aft er I made ridiculous amounts of money with my companies, I became ridiculous and wasted away all my money. But unlike most people, I no longer believe good timing is reserved for “the lucky ones” who stumble upon a once-in-a-lifetime opportunity, or the geniuses who have some “sixth sense” about commerce. Nope. Being in the right place at the right time is a process that anyone can master. As Becky said, you just have to notice the patterns. Once you’re aware of the patterns, you’ll notice them everywhere. You might think this is where I tell you that Surge will teach you how to build your own DeLorean time machine. I mean, not really, but, you know, metaphorically speaking. Nope. You don’t need

6 THE POWER OF WAVES it. The five-step SURGE process I detail in this book will not only teach you the method of identifying the next wave of demand in your business, but also how to capture its energy and ride that wave like a pro. I don’t just write about this stuff. This method isn’t merely a concept or a simple derivative of the clarity of hindsight. SURGE is the process I used in my own business. After implementing some of the SURGE techniques, I modified some of what I learned to better meet my own needs and objectives (you should do the same) and boiled the steps down to the simple process I share in this book: the essence of SURGE. You see, you and I are in the same boat. As I wrote this book, I was deep in the surge of my newest company, Profit First Professionals (PFP). To get PFP off the ground, I made extensive use of the exact SURGE method you are about to learn. Not only did SURGE work for me… it worked fast. And it will for you, too. After I finished my second serving of Waffle House coffee, Becky and I walked out into the parking lot to bid each other adieu. I fumbled for my keys while Becky, almost unnoticeably, scanned the curbs. A crumpled twenty-dollar bill sat right next to the gutter, hidden in plain sight. She picked up the bill, flattened it out, and exclaimed, as she put it in her pocket, “It’s gotta be my lucky day… again.” Settle in. You’re about to get lucky too.

THE POWER OF WAVES 1

ou can call me Bob. No, it’s not my secret given Yname. It’s not a nickname, either. At least not a nice nickname. And it surely isn’t my safe word. Here’s why some people call me Bob: For the past ten years or so, my December festivities have kicked off with a “Man Day” trip. My mastermind group just happens to be all guys, and together we spend an afternoon doing “manly things”:

1. We must shoot some kind of weapon at a target. Last year we shot apples off the heads of plastic zombies with cross- bows. (No one actually hit a single apple, just the zombies… because that is the manly way it is supposed to be.) 2. We must compete in some kind of high-speed race. Go- karts, without speed limiters, are usually our go-to choice. Snowmobiles (with speed limiters… we’re not that crazy) are a popular alternative. 3. We must only eat meat, with an optional side plate of more meat. One preparation is permitted: rare or don’t eat at all. 4. We must end the day smoking a cigar and drinking whiskey. And if you don’t like that, you can smoke another cigar and drink another whiskey until you do. 5. And, of course, no feelings are permitted. Not on this day. Not a word. SURGE

I have met face to face with these same guys once a month for the past ten years. And while Man Day is the only day in the year we allow ourselves to act like meathead ogres, every other day we meet is about feelings. We support each other in the growth of our businesses and in navigating the intricacies of life. These guys have witnessed my transition from selling my companies to becoming full of myself and placing too much importance on my newfound wealth. They watched me lose it all. They have seen me fall to my knees sobbing and have picked me up (figuratively and literally). They helped me become an author. And most recently they have been firsthand witnesses to my most recent struggle… failure to launch. These guys know me better than I know myself. And they know that often, an honest—albeit blunt—observation is far more effective than a kumbaya session. A couple of years ago, on the morning of Man Day, we each shared a “quick” assessment of our individual businesses before heading out to shoot things. At the time, I was a co-owner in a few businesses. The businesses were all led by amazing people, but for some reason none of them experienced strong, fast growth. All were profitable. All had carved out a niche. All were innovative. But for some reason they weren’t sailing forward. I was really frustrated. Things were okay, but stagnant. I was ready to replicate what I had done with my prior businesses, ready to grow, but for some reason I couldn’t get that spark. Something was missing. I thought I had all the answers (which, by the way, is the first indicator that you don’t). It is truly demoralizing to be the guy shouting from the rooftops—ahem, writing books quietly on airplanes and in the basement—and sharing the steps it takes to grow the business of your dreams, and then failing to do it for yourself. Just before my turn to speak, I thought, For God’s sake, I write books on this crap, and now look at me. I am standing here with a finger and thumb in the shape of an L for Loser on my forehead.

10 THE POWER OF WAVES

“Okay, Mike. You’re up.” As I got rolling with my own little State of the Union, my peers inquired about my businesses. They dove into everything I was doing. They asked me about the clients I served. They asked me about my offerings. How about the marketing? How about the specializa- tions? The unique-nesses? The systems? Then my friend RJ Lewis asked, “Where is the surge?” “What?” I asked. “Where is the customer surge, Mike?” “What are you talking about?” RJ said, “Where are your customers going? What are they doing, completely regardless of you? What is the biggest change that your customers are dealing with? Where is the surge?” I ordered a few more pots of coffee for our unexpectedly long session. The zombies were going to have to wait, which, by the way, is the golden rule of Man Day: Nothing is more important than doing whatever it takes to support the other guy, even if that includes cancelling Man Day. I guess Man Day isn’t that ogre-ish after all. RJ went on to explain the surge. In the past five years, the company he launched, Ad-Juster, had become the number one player in “online advertising discrepancy resolution.” I don’t know what that means either. But I do know he had top-shelf customers flocking to him and a wallet representative of that. RJ and the guys went on to explain that surge is the force of the marketplace, so powerful that it rolls forward, crushing what is in its path and carrying that which rides on top of it. A few more hours in and it was clear: picking a niche is critical, but not enough. Serving that niche with singular focus is not enough. Ensuring your business is profitable in that niche is mandatory, but profit surely doesn’t ensure growth. There is more to it—the natural direction your niche is moving. Like a massive herd of animals, your customers may be seeking out a new source of food or water or shelter. They may be seeking comfort or fighting

11 SURGE for survival. Of course, herds run from things, too. Danger, for example. And so do niches… like the danger of new competition that is wiping them out. RJ made it clear: My job, your job, our job is to find the surge. Where is your target market headed? Where are they surging? When you find the surge, you can position your company in front of it and ride it all the way to remarkable growth. “Of course, you could just bob up and down in the marketplace,” RJ added. “You could paddle around in circles. You could ignore the waves and instead of riding them, just bob up and down. The choice is yours, Bob.” I was floored. Waiting for a response, RJ stared me down. The other guys looked at me and asked, “Where is the surge, Bob?”

TIMING IS EVERYTHING My Uncle Bill had a favorite joke and he would tell it every time my family visited him. With all of us sitting around the dinner table, Uncle Bill would instruct my father to ask him a specific question: “To what do you attribute your extraordinary comedic talent?” As my Dad started to faithfully recite the question back to Uncle Bill, “To what do you…” Uncle Bill would interrupt mid-sentence and say, “Timing!” Get it? Timing. LOL. Uncle Bill was right. Timing is everything. Everything. Let’s talk about Skype for a moment. Skype didn’t become a massive success because of video conferencing; that technology already existed when the company launched. Skype was in the right place at the right time. It caught the customer surge. “What surge,” you ask? The surge of people turning their cameras on themselves. Skype launched in 2005 as an alternative to making costly international phone calls. Though Skype experienced consistent growth every year, for its first four years in business its customers

12 THE POWER OF WAVES used a fraction of the billions of minutes burned up on international phone lines. Th en, in 2009, the tide turned. Skype-to- Skype customer usage more than doubled that year, and was equal to the number of minutes used in traditional international calls. As in, wait for the tone, then dial 011, the country code and the number, and then wait for that bizarre sounding ringtone on the other side. So what happened? What caused the surge in Skype’s business? In 2006, Apple put a camera into a laptop. Th e technology to do

When you find the surge, you can position your company in front of it and ride it all the way to remarkable growth. this existed before 2006, but at that time, most people had to attach a camera to their laptops to use video conferencing. Aft er Apple included a camera in all of their laptops, other laptop manufacturers quickly followed suit. And because laptops have a life span of about three years, by 2009 most people owned laptops with built- in cameras. By 2012, Skype outpaced the growth of the traditional international phone industry. And in 2013, Skype’s growth rate was fi ft y percent higher than all the international phone companies combined. Skype sold to Microsoft for $8.5 billion. Th e company’s success is in part credited to its technology. No question. But its meteor- ic rise was due to the fact that it was at the right place at the right time. Skype was primed and ready to take advantage of the built-in camera surge. Your success is more about timing than anything. Yes, you need to have a great off ering that is distinct from your competition— that’s the “right place” part. And the “right time” is all about catching the marketplace wave as it rolls through. Miss it, and you can

13 SURGE paddle all you want and still not be successful. You can’t beat the tide. No one can. If you want to experience stratospheric growth, you need to master timing. You need to intentionally be in the right place at the right time. Will you get it perfect each and every time? No. Most businesses don’t, and I certainly didn’t. But when you concentrate your eff orts to capture the surge, you can greatly improve the odds of achieving colossal success.

If you want to experience stratospheric growth, you need to master timing.

Timing the market is the Holy Grail of investors, aft er all. Th ey know that if they can get ahead of the market by a day, by hours or even by a few seconds, there’s money to be made. If they can do that repeatedly, there are billions to be made. Brokerage fi rms spend massive amounts of money to get even a millisecond in timing advantage. My neighbor and poker buddy Scott Dages is the head of IT for one such fi rm. His team constantly upgrades their connectivity to the trading fl oor. New fi ber, shorter connections, streamlined code, faster servers—everything is improved for effi - ciency. If new code allows servers to process an order even a millisecond faster, Scott makes the change. Huge money is to be had for Scott and the fi rm if they constantly work on timing. Huge losses are to be sustained if they ignore it. Brokerage fi rms invest in an endless stream of companies and if they get the timing right even a modicum of the time, they make millions. Th eir method is one way to make money, but you’re in a far better position. You don’t have to string together a stream of successes. You don’t have to time things perfectly over and over. You just need to catch the wave once and you will skyrocket to

14 THE POWER OF WAVES being your industry’s authority. You are not betting on a small por- tion of someone else’s company. You are betting one hundred percent on your company. And the reward for getting the timing right for your own business will put all those brokerage guys to shame. The founders of Google didn’t nail it because their search engine was better, even though some would argue that it was. Google became huge because of timing. Yahoo!, Alta Vista, and other search engines were around before Google, but with the stratospheric volume of content being produced on the web, a growing surge of users were becoming distracted by the web’s countless rabbit holes. Yahoo! and other engines were pumping news, email, ads—everything they could get on the screen—distracting users from the little search box. Users of these search engines were frustrated; they simply wanted to find what they were looking for. Google entered the market with a single input box and logo on the screen. It introduced the right solution (a screen with no distractions) at the right time (as people were getting seriously distracted by an overwhelming web and just wanted answers to their question fast). Better search engines have come into existence since Google’s rise, but because that wave passed, Google has maintained its position as industry leader. The founders of Skype didn’t have the experience, knowledge, or history to be successful. But they were, and wildly so. Why? Timing. The stratospheric rise of Uber? Timing. The massive success of AirBNB? Timing. Apple? Timing. Ford? Timing. Edison? The master of timing, repeatedly. Wright brothers? Timing. Galileo? Good timing. Copernicus? Better timing. The guy who invented the wheel? Serious timing. Bill Gross’s wildly popular TED video explaining why timing is the single biggest reason why startups succeed? He timed talking about timing perfectly. The successful rich guy down the street? Timing. The successful businesses in your industry, on your block, down the hall? Timing. Every successful person you know? Timing. The success of your business? Timing.

15 SURGE CAPTURING WAVES Surfers know the importance of timing. Patience is paramount—an inexperienced surfer simply tries to catch the next wave, while an ace surfer patiently waits for the right wave. Of all the factors that come into play in their success—experience, knowledge, and expertise—nothing is as important as timing. As I write this, Garrett McNamara holds the record for the largest wave ever surfed. His 78-foot ride in Nazaré, Portugal is world-famous. But if he had tried to do it a month earlier, or a day later, or simply decided to sleep in that afternoon and head out to the water whenever, that wave wouldn’t have been there. He would have missed that massive surge and his chance to break the world record. You can only ride the biggest marketplace wave when it appears. You don’t make it happen. And you can’t have a killer ride on a rip- ple. It’s impossible. Passion is mandatory. Skills are important, of course. Experience (usually) helps; a history translates into confidence, without a doubt. But all that stuff is useless if you don’t have a wave to ride. And all that stuff is insignificant when the wave presents itself. I was so green when I started my first business that it took a lot of trial and error to finally accept that I likely won’t get rich, or happy, or fulfill my purpose on this planet by trying to figure out what’s hot and then trying to serve that guess. Thankfully, the SURGE process isn’t about making waves or watching the ones others are already surfing. SURGE is about capturing waves—spotting the imminent market trend that is on the verge of swelling and then riding it all the way to industry domination. Have you ever gone into a pool with a floatie and bounced around in the water making “waves?” That might be cool for the little kiddies, but nobody is going to surf those waves. Now imagine taking that blow-up floatie of yours into the ocean to bounce around. Making waves in a pool was hard enough; in the ocean it just isn’t going to happen. Plus, you’ll kind of look like an idiot.

16 THE POWER OF WAVES

Just as you can’t make your own surfable waves in the ocean, you can’t create your own waves in the markets. Yeah, you may make that killer app that everyone swarms to, but you didn’t make the market wave. at energy was already pent up in the customer base. ey were already moving and looking; they just found you because you were in the right place at the right time. You capture waves; you don’t make them.

SURGE is about capturing waves—spotting the imminent market trend that is on the verge of swelling and then riding it all the way to industry domination.

Trying to create your own wave is exhausting and just leaves you tired, bobbing around in the same place. Most of us struggle with a day-to-day scramble, seeking new customers and new sales. We exert extraordinary e ort prospecting, marketing and selling. Soon enough, it’s an all-consuming obsession to get that next client. en, when that sale does come in, we stop everything else we were doing to exert extraordinary e ort delivering on our promises. And then we have little time or energy to sell more or educate the market. e work needs to be done. When the job is complete, the cycle starts anew, and we are desperate to sell again, because the marketplace has dried up. Panic-fueled sales lead to exhausting work, which leads to more panic-fueled sales, and so forth and so on. Sound familiar? is ip- opping around in the ocean is our attempt to make our own waves, or an attempt to paddle like mad to catch a wave that has already passed. It is not a mere coincidence that all this desperate splashing and gasping for air looks like drowning, because it basically is. Struggling businesses are always paddling, but seldom get anywhere.

17 SURGE

Real, lasting success depends on finding a way to align your company with the natural, powerful waves that are already rolling through the ocean that is your industry, every day. In nature, a wave is a confluence of events: storms and winds, the moon’s gravitational pull, even landslides and earthquakes. A wave is really a movement of energy. The water isn’t necessarily moving; energy is moving through the water, causing the surface to rise and fall. Because of the way waves form, any surfer will tell you that you need to start paddling in the same direction the wave is moving before it arrives, so that you get carried by the momentum of that wave. If you aren’t already moving in the right direction when the wave shows up, you’re likely to get tumbled or left behind. In business, waves are also a natural confluence of events: the changing winds—and storms—of customer demand, the gravitational pull of the economy, the industry-shaking quakes caused by advancing technology, and the landslides of collapsing competitors. All of these factors cause waves. As entrepreneurs, our job is to look for these waves as they begin to roll in on the horizon. And if we catch one for the ride of a lifetime, we’d better start paddling like mad in the same direction before it arrives. When I discovered that there is a process to catching waves, it occurred to me that surfing was a great analogy for my SURGE process. Surfing waves and catching industries trends is a perfect analogy. First and foremost, surfers always follow these five steps:

1. Look—Be on the lookout for swells in the distance and identify those with the most potential. 2. Paddle—As the swell approaches, paddle in front of it to best match the direction and speed of the wave so that you have the greatest chance for it to carry you. Find the shoulder, the least steep part of the wave and the easiest to ride.

18 THE POWER OF WAVES

3. Pop Up—Feel the wave to first lift you up and then push you. This is the energy of the wave transferring to you and your board. In one smooth move, stop paddling and stand up on the board to ride. 4. Confirm—Now that you are standing on the wave, determine if the wave has a pocket. The pocket is the heart of the wave that allows surfers to gain speed and perform maneuvers. Some waves don’t have pockets, and surfers are forced to ride the shoulder. If your wave does not have a pocket, it’s time to dump it and look for the next. Always look for the wave’s pocket and adjust as it moves. 5. Ride—Now that you are up on a good wave, there is only one thing left to do: Ride it for all it’s worth.

A MASTER CLASS IN SURFING Arguably, nobody knows how to ride a marketplace wave better than Brian Smith, the founder of the iconic footwear brand UGG. When Brian graciously agreed to be interviewed for this book, I was stoked. His story is legendary. If you know me at all, you know my deal is figuring out how to apply—and sometimes upend—successful business strategies for my own businesses. Then, when I figure out a system and master it for myself, I write a book and teach you how to do it. That’s my happy place. Getting a chance to talk extensively with Brian about his massive business success was a huge honor and had me buzzing with excitement throughout our conversation. As Brian and I spoke, he explained that he grew up surfing the beautiful beaches of his native Australia before becoming an accountant back in the 1970s. He hadn’t been an accountant long when he realized that he wanted to do something different. Something bigger. He wanted to start his own company, a company that created products he would want to buy. If only he could find

19 SURGE a trend to ride with a product that appealed to his surfer lifestyle, he could create a company he would love. And if he got the surge right, so would the rest of the world. Like any good surfer, Brian started looking to the horizon to see where those new trends, those waves, were coming from. He thought about some of the coolest products that appealed to surfers, like waterbeds and Levi’s jeans and cutting-edge boards, and he noticed that those things were all coming from California. “The California surfing scene was my lifestyle, and the products I liked all came out of California,” Brian explained. “So I decided that I would go to California to find the next big thing to bring back to Australia.” In other words, plant yourself where the waves are forming. Lesson one. Brian moved to Santa Monica to saturate himself in the California surfer culture and find his product “wave,” but even after a couple of months of relentless research he still hadn’t hit on anything of interest. Waiting for waves requires patience, persistence and perspective. Lesson dos. Then, on a nondescript day in 1979, Brian’s surfing buddy Doug Jensen brought a copy of Surfer Magazine with him for a day of riding the waves at Malibu. Brian recalled flipping through the monthly rag: “I got goose bumps. There was an ad for an Australian company, with a picture of this pair of legs wearing sheepskin boots in front of a fireplace, and I thought ‘Oh my God, there are no ugg boots in America!’” Brian spotted a cresting wave heading in a totally different direction than he expected. He wasn’t going to bring a hot new product back to Australia as he originally planned. He was going to bring Australia’s iconic sheepskin footwear to the United States fashion market. Massive waves initially start as little bumps, far out in the ocean, and aren’t necessarily heading in the exact direction you expect. Once you spot your wave, you must never take your eyes off it. Lesson trois.

20 THE POWER OF WAVES

“Doug! Do you see that?” Brian remembered telling his friend. “We’re going into business and we’re going to be millionaires!” According to Brian, one in two Australians had some type of sheepskin footwear. In Australia, sheepskin shoes were like flip- flops. Everybody had a pair. They called them “uggs.” But the boots also matched a confluence of events in the world of surfing. Surfing was no longer just a summer hobby; it was a year-round sport. Advancements in wetsuits and materials such as neoprene, the rise of competitive surfing for cash prizes, and the fashion-setting standard of the California surfer were all changing the surfing lifestyle. And as part of this changing tide there was a small, yet powerful, wave forming: cold feet. Literally, cold feet. A professional surfer would finish a set in the chilly Pacific Ocean and end up standing on the beach with freezing feet. That distant bump was there; serious American surfers needed something to keep their feet warm and fashionable during cooler surfing months. Brian scraped together five hundred dollars to buy six pairs of sheepskin boots from the company that ran the magazine ad, and he also got the okay to be their US distributor, six pairs of boots and all. It was time for Brian to start paddling. Lesson wyoorg. (That’s “four” in the Wookie language of Shyriiwook. You know, from that unlikely little movie that surged: Star Wars.) Brian’s buddy Doug served as the lead salesman, and Brian did what he thought he did best: accounting. After a couple of weeks on the road Doug came back with hundreds of business cards from all of the American shoe retailers he had visited, but no orders. Undeterred, Brian managed to get a last-minute space in a New York footwear show, but the results were more of the same. “In three days, nobody spoke to me. I might as well have been selling car parts, because the buyers didn’t get it,” Brian said. Brian was trying to sell to everybody, yet nobody got it. Time to paddle harder.

21 SURGE

A few weeks of marketing to the masses and it was clear: There was no wave in the retail footwear industry. But he could see the wave forming with a small, specialized customer base, and he knew he had to keep moving in the right direction if he was going to catch it. The coolest of cool Californian surfers were already heading to Australia on surf trips and bringing three or four pairs of sheepskin boots back for their buddies. The coolest and edgiest of the community—the early adopters—were revealing themselves. That’s when the niche became obvious. Brian couldn’t sell to the mass market yet, but he could sell to the surf market. So he started selling to surf shops exclusively. And the surf shops, albeit slowly, started to buy. Brian had to paddle his hardest at this point, because he was about to jump up on his board and ride that wave. That first season selling to California surf shops, Brian remem- bers they sold exactly twenty-eight pairs, which came to a thousand dollars. A weak start for what would become a worldwide fashion brand that today sells over one billion dollars’ worth of product annually. But Brian had confidence—or ignorance, as he puts it—on his side. “To be a successful entrepreneur, you have to have a certain level of ignorance, because if you knew what was ahead when you started out, you’d never start.” Brian was also ignorant of an important marketing problem. Unlike Aussies, Americans associated sheepskin with spun wool, which meant Americans assumed the boots were hot, prickly, and delicate. Far from comfort for your feet. But to Australians, sheepskin is rugged. It breathes. It even wicks moisture, so you can put it on wet feet. That really appeals to surfers, because within ten minutes of putting uggs on, all the moisture is wicked out and your feet are warm, comfortable, and dry. And because sheepskin has natural antimicrobial properties, it doesn’t collect bacteria; hence, no odor.

22 THE POWER OF WAVES

Sheepskin was perfect for footwear; Americans just didn’t know it yet. Scratch that—only the über-early adopter Americans who surfed in Australia knew. The rest of America was primed to find out. Even if they weren’t aware of it yet, the target customers had a common, fast-growing need, and Brian had the solution. The next season of sales was far from a barnburner, but that’s often how the paddling part intrinsic to this stage goes. The wave is still behind you, and it is hard to measure how big it is. Brian’s job during this stage was to paddle hard. He had to get moving on his effort so that he would have enough speed to catch the surging wave building behind him. The indicators of a surge coming your way? There are typically three. First and foremost, there is extreme loyalty and commitment from the early adopters, either to you or, more often, the concept. In Brian’s case it was the use of sheepskin boots. Few American surfers were wearing UGGs at this point; there were only six pairs in circulation a few seasons before, after all. From the very few boots out there, a key surge indicator was visible, albeit barely: The customers using the product were very loyal to it. They only wore sheepskin boots; there was no alternative. This little bump in the ocean is the energy within the water revealing itself: Customers using your product bring credibility. Customers using your product exclusively bring unquestionable credibility. Second, those loyal, über-early adopter surfers were encour- aging their friends to get a pair, too. And the friends did. For the surge watcher, the key indicator is this: Do the early adopters who are loyal to the new product have enough stick-to-it-iveness to fight through social pressure and inertia to convert more early adopters? The third indicator, as Malcolm Gladwell so eloquently described in The Tipping Point, is this: Are the cool kids loyal to the new movement? Brands become statements. A newbie surfer who has a crap board, steals waves from the pros, and just sucks at

23 SURGE surfing is not one of the “cool kids.” If the uncool guy is wearing UGGs, that will actually repulse other surfers from the boots. But if some of the cool kids are sporting the shoe, the initial surge elements are there, and word begins to spread. Word-of-mouth sales mean your offering stands on its own. It’s not only delivering on its promise to your customer, it’s selling itself. Your product is literally creating its own demand. Time to rally the troops. The cool people in any surge can’t be manufactured, but Brian tried anyway. He hired the most beautiful, sleek-looking models he could find. He put UGGs on their feet and longboards by their sides and ran the ads in Surfer Magazine. Beautiful for sure. But cool? Not at all. Brian told me, “Over beers one day, I explained my trickling sales to one of my surf retailer friends, Robert. He yelled out to the back of his shop, to a couple of local surfer dudes, and said, ‘Hey! What do you guys think of UGGs?’ And they all said, ‘Aww, those UGGs, man, they’re so fake! Have you seen those stupid ads? Those models are posers! They can’t surf!’ I instantly knew I was sending the wrong message to my target market.” People who want to be cooler rally around cooler people. People who want something rally around people who already have that something. Are the “cool kids” of your industry using your thing, or at least something like it? No? Get your thing to the cool kids. Fast. That’s what Brian did. The next season, the skinny models who couldn’t tell the difference between a longboard and a cutting board were dumped. FYI—A cutting board is not a surfboard; it’s the board on your kitchen counter that you use when you cut up your veggies (or raw meat on Man Day). Brian grabbed his own camera and took a couple of up-and- coming surfers named Mike Parsons and Ted Robertson out for a photo shoot. Together, Brian, Mike, and Ted hit all the iconic surf walks, and Brian snapped away. Surfers recognized the authenticity

24 THE POWER OF WAVES in the new ads, lift ing UGG from sales of thirty thousand a year out of a van on the beach to over four hundred thousand that year. Brian had positioned his business to be in the pocket—the specifi c spot where the vast majority of your niche marketplace is infl u- enced to make a “go with you” purchase decision. Brian was ready to build to what he always thought the company could be: a fashion brand. “Everybody thinks I came to California to exploit the surfers, but it was totally by default.” Surfers were simply the initial source of energy that started the wave for UGG.

You can’t make waves, but you can find them..

Surfers started wearing UGGs to school, and other kids wanted them. Remember? Wannabe cool always emulates already cool. And the moms (cough—wallets—cough, cough) of “wannabes” hit the streets seeking UGGs. Brian went on to fi nd other ways to expand his market and exposure, eventually creating the phenomenon that made it onto the pages of People magazine, the runways at New York Fashion week, and the feet of every cool girl in the great US of A. I’ll share more of how he did it in later chapters. For now, I want you to get this one crucial point: You can’t make waves, but you can fi nd them. Yes, that does mean you, too. Your business is not too small for a surge. Your idea is not too narrow for a surge. You are not too inexperienced for a surge. Th ere are no special snowfl akes in business. Th e only diff erence between you and Brian Smith is, he already rode his wave. Th is isn’t rocket science. If it were, no way I’d be doing it. You can do this. You can be the next legend in your industry, and your story begins now.

25 SURGE ACTION STEPS If you have read my other books, you know I always include action items at the end of each chapter. Why do I do this? Because, if you are like me, you like to read a book through and then go back to it to take action. But, for me, there’s one problem with that strategy: I don’t go back. Instead, I dig into the next read. Like many people, I discovered I was filling up on great ideas and doing nothing about any of them. But no more. I committed to always taking specific action while I am reading a book. And surprise, surprise—I see results. The same opportunity exists for you. While you could plow ahead and just read (I totally get it, that may work for you), I have found that small but deliberate actions will have an immediate, positive impact on getting your business where you want it. You will find action items at the end of this chapter and every chapter for which action is required in the remainder of this book. I strongly encourage you to do them, immediately. Most tasks take only a few minutes. Some longer. But if you commit to doing them, you will see results. To catch a wave, you can’t just stand on the beach watching. You actually need to get out there in the ocean and start paddling. Start by doing these tasks now.

26 THE POWER OF WAVES

ACTION STEPS

1. To see the true opportunity that lies ahead for your business, you must (for now) pull your business out of the equation. Ask yourself, right now—and every day until you find the true answer—“What are my customers doing, regardless of me?”

2. If you think you see a wave, validate it by looking for the cool kids. The nature of being a cool kid is showing off. The early adopters of the Tesla, just like all cool kids, find a way for everyone to know about it. The question is, are they cool? And the answer is quite simple: Cool kids will convince others to do the same; uncool kids won’t. Whenever you find potential cool kids, try to find out if they have convinced others to buy. If so, you likely have an imminent wave—a surge.

FINDING YOUR WAVE 2

emember the movie Working Girl? I’ll give you the Rlowdown, just in case you were born after 1975 (gulp). I just politely ask that you don’t share with my Man Day compadres that I have both seen this movie and can recite lines from it. If they find out I am a closet fan, I would never be invited to a zombie-shoot again. The movie is about Tess McGill, an executive secretary from Staten Island who is trying to climb the corporate ladder on Wall Street—complete with teased-out hair and an accent straight out of Real Housewives of New Jersey. Played by Melanie Griffith, Tess is a real go-getter and she has great ideas, but no one takes her seriously. They think she’s “just a secretary,” that she couldn’t possibly have the smarts or the ingenuity required to put together big deals. Because she wants to better herself, Tess makes it a habit to research her industry. She reads the industry news. She asks questions. She pays attention and she keeps track. She clips interesting articles for her personal files and jots down ideas. Early in the movie, she learns that her boss’s client wants to invest in the media, but can’t seem to get past the restrictions placed on broadcast television ownership. I can still see the scene on the Staten Island Ferry, when she tears an article about a celebrity DJ out of a newspaper and the lightbulb goes on over her head. Radio! It’s that eureka moment we all have sometime, we hope many times. It usually starts with, “Hey! What if…?” Don’t you love those moments? SURGE

Tess ends up posing as her boss and gets in a big ol’ mess of trouble, but finally is able to prove her idea was her own thanks to her handy-dandy files. Now, obviously we as entrepreneurs are not Wall Street folks in mergers and acquisitions; far from it. I am bringing up Working Girl because Tess’s story is an example of an average person finding opportunities simply by paying attention to her industry. (And if you need a pick-me-up when you’re feeling less than successful, watch the movie—yeah, it even inspires guys. The last scene will make you think you can do anything. And the last song, “Let the River Run” by Carly Simon, is an entrepreneur’s anthem. I dedicated The Pumpkin Plan to Ms. Simon, so you know how deep my love goes.) As you read Surge, remember this: You don’t have to prove yourself before you can spot the next wave of opportunity for your business. You don’t have to be experienced or brilliant; you don’t even have to fully understand my wave analogy. Start by paying attention. Watch the horizon. Take note and, when you can, connect the dots. The beginning of your surge could be one random article away—as Tess McGill discovers while freezing her ass off on the Staten Island Ferry, on her way to work.

WAVES IN BUSINESS As I explained in the first chapter, ocean waves are formed by a confluence of various external forces. Storms, the moon’s gravitational pull, earthquakes, landslides, and wind. Science, man. Just science. Some waves are created in an instant. Take tsunamis, for example. A large piece of land falls into the ocean, or an under- ground earthquake occurs, and massive amounts of energy are instantly transferred into a wave. It reminds me of the 1970s. Back in my preteen days, I would lie in my parents’ waterbed to watch black and white television. My dad would come out of

30 FINDING YOUR WAVE nowhere and jump on the side of the bed. A massive wave would form instantly and throw me sky-high. (My dad would catch me every so never.) Th at was an equivalent to a landslide tsunami: completely unsurfable. Th e physics make it impossible. Surfers know to avoid or ignore the unsurfable waves and concentrate their energy on seeking out long waves. Short waves have little energy and tend to move slowly. Long waves have the most power and move the fastest. If you have ever been to the beach and observed the long waves that surfers love—the ones that go as far left and as far right as you can see— you know just what kind of power can be contained in one of these waves. Th e ideal long waves don’t break all at once. Instead, they break at a peak part of the wave—the best place to start

The waves of industry are the constantly changing demands of the consumer.consumer. surfi ng—and the break continues to peel down the wave as it approaches the beach. A long peeling wave is a wave you can ride hard for a long time. It’s the perfect scenario. Surfers learn to fi nd these best waves not only by watching weather conditions, but also by recognizing the natural patterns and geographic formations that cause great waves to form in the same areas on a regular cycle—very similar to marketplace waves, which are just as surfable. You don’t need a science degree to fi gure out how to identify the patterns in your industry. Heck, you don’t even need to have passed science to fi gure it out. Just as Becky discovered when she started looking for lost money on the street, once you spot the pattern, you’ll see it everywhere.

31 Now that you have already started digging into Chapter 2 of Surge… master your surge by reading the rest!

CLICK HERE TO CONTINUE READING

To achieve the ultimate in entrepreneurial breakthrough success requires an uncanny ability to spot the next big wave of consumer demand—but how do you do that? For most small business owners, the true cash cows seem to be reserved for lucky people who were in the right place at the right time.

In his newest book, Surge, prolific small business author Mike Michalowicz shares the 5-step process for identifying trends in your marketplace. After reading his from-the- trenches stories and no-nonsense approach you’ll realize you don’t need to wait for a lucky break. You can make it yourself.

EXCLUSIVELY AVAILABLE AT: 1 Page left intentionally blank

2 The Toilet Paper Entrepreneur

3 The Toilet Paper Entrepreneur

The tell-it-like-it-is guide to cleaning up in business, even if you are at the end of your roll. Mike Michalowicz

OBSIDIAN LAUNCH

4 Copyright © 2008 by Michael J Michalowicz. All rights reserved. Published by Obsidian Launch, LLC; Boonton, New Jersey. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, expect as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without the prior written permission of the publisher, Obsidian Launch. Requests to publisher for permission should be addressed to the Permissions Department, Obsidian Launch, 239 Myrtle Avenue, Boonton, NJ 07005, or by email at [email protected]. Limit of Liability/Disclaimer of Warranty: This book contains the opinions and ideas of its author. It is sold with the understanding that neither the author nor the publisher, through the publication of this book, is engaged in rendering financial, legal, consulting, investment or other professional advice or services. If the reader requires such advice or services, a competent professional should be consulted. The strategies outlined in this book may not be suitable for every individual, and are not guaranteed or warranted to produce any particular results. No warrant is made with respect to the accuracy or completeness of the information contained herein. Both the author and the publisher specifically disclaim any responsibility for any liability, loss, or risk, personal or otherwise, which is incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this book. For information on discounts for bulk purchases, please contact Obsidian Launch at [email protected]. Library of Congress Cataloging-in-Publication Data is available. ISBN-13: 978-0-9818082-0-8 ISBN-10: 0-9818082-0-4 Manufactured in the United States of America 10 9 8 7 6 5 4 3 2 1

5 DEDICATION

Krista, Tyler, Adayla, & Jake Michalowicz – Thanks for supporting me unequivocally and letting me sleep in after the all-nighters on this project. Success is never the result of one-person endeavors. Never. It takes a team. Thank you team. Thank you from the bottom of my heart. Patty Zanelli, Anjanette Harper, Mini Sankara, Matt Maher, Scott Bradley, Stephanie Cavataro, Howard Hirsch, Lauren Lombardo, Sean Moriarty, Lisa Mason, Mike Maddock, Zach Smith, and everyone who helped in making this book great—thank you for taking the stones and making a sculpture. It will never cease to amaze me how much a small, focused, relentless, passionate group of people can accomplish. Everyone - We’re done for now, until the masses beg for another book! (If you are one of the masses, please feel free to beg for another book.)

6 CONTENTS

FOREWORD...... 9

MY THREE-SHEET STORY...... 14 Answer the Urge...... 20 Obliterate All The Excuses, Except For One...... 23 One Day Still Hasn’t Come...... 26 Nature vs. Nurture...... 26

CHAPTER 2 - A LITTLE PEACE AND QUIET (IN YOUR MIND)...... 28 The Wall Of Limiting Beliefs...... 30 Envy This...... 32 The Channel Of Enabling Beliefs...... 33 Getting Past Day One...... 35 Mission I’m Possible...... 37

CHAPTER 3 – THE FIRE IN YOUR BELLY...... 39 What To Do? What To Do?...... 39 What Do You Stand For?...... 41 Immutable Laws (A Filter for Everything)...... 41 The Why Guy Finds His Why...... 45

PART TWO: THE TPE FOCUS...... 47 Focus Small to Get Big...... 48 How to Drive Dangerously Fast, Safely...... 50 The Focus Five...... 50 You Gotta Do Better...... 53 Your Area of Innovation – Quality, Price or Convenience...... 54 Who’s Your Ideal Customer?...... 56 You Are Really, Really Good At Very, Very Little...... 58 A Junk Man’s $1B Prosperity Plan...... 60 Create a Prosperity Plan...... 61 Always Be Tacking...... 66 Quarterly Tacking...... 67 Every Day, Review Your Metrics...... 71 Gold Bullions Everywhere...... 73 It’s Just Like Driving to Albuquerque...... 73

PART THREE: ACTION...... 75

CHAPTER 6 – ARE YOU READY NOW?...... 75 “No” Your Way To Success ...... 76 The Top Nine List ...... 77 The Dark Side...... 79 Haven’t Been There, Haven’t Done That...... 79 What You Don’t Know Can’t Pervert You...... 80 Burn the Boats...... 81 The Secret Behind The Secret...... 83 Just In Case You Haven’t Started Yet, Here’s How ...... 84 Action, Lights, Camera...... 86 Happily Walk Out Of A Once-In-a-Lifetime Meeting...... 87 Act As If, But Only On The Inside...... 88 The 16,107 Steps You (Don’t) Need To Take...... 89

7 Know When to Say When...... 91 Accountability...... 92 A Good Night’s Rest in the Hotel Parking Lot...... 92 Plenty of Somethin’ from a Whole Lot of Nothin’...... 95 Anything for Nothing...... 96 Sometimes You Need to Borrow...... 97 Bankers Are Anchors...... 97 Trade a Paperclip for a House...... 99 Funds from the Folks...... 100 Vendors Have Your Money. Borrow it Back! (Plus Other Options)...... 101 Don’t Borrow To Cover Your Mistakes...... 102 Don’t Give Personal Guarantees...... 103

CHAPTER 9 – A GOOD, SOLID FLOW...... 105 Applying the PFA Process to Your Business...... 106

CHAPTER 10 – KEEP YOUR BUSINESS TO YOURSELF...... 109 Partners without Equity...... 110 Watch Out for VIPs (Very Inordinately Paid Specialists)...... 111 Ideas Are Worth the Time Spent On Them...... 111 Angels and VCs Suck (Kinda)...... 112 The Right Way to Balance Equity & Partnering...... 113 It’s A Big Deal To Be Small...... 113 Throw Out the Way It Has Always Been...... 115

BONUS – THE YOUTH (AND YOUNG AT HEART) ADVANTAGE...... 116 Ivy League or County College – So What! ...... 117 Move In With Your Mom (And Other Painful Thoughts)...... 118 Master Bocce Ball...... 118 Still In School? Graduate Profitably...... 119

8 Foreword So everyone told me I had to get some bigwig to write the foreword to my book. Turns out my book is just a bit too controversial, a bit too blunt, and may have a slight amount of bathroom humor – in other words, no foreword. But I’m a Toilet Paper Entrepreneur (TPE). I get it done. So I wrote my own damn foreword, which is a crash course in the attributes of the Toilet Paper Entrepreneur - what you must embody if you are going to be one of the people who makes it in business. Here are my Top Eight TPE Attributes: 1. The TPE Cultivates a Powerful Foundation of Beliefs – A TPE knows that success is nearly 100% determined by his or her beliefs, not education, means, or circumstance. When TPEs believe they will achieve something and then back it up with relentless, persistent action, it will happen. 2. The TPE Has Passion – A TPE always, unequivocally, works in his or her field of passion. The passion might not be obvious or apparent to an outsider, but it is to the TPE. 3. The TPE Slants Toward Premature Action – A TPE will take action over sitting still every time. Taking action too soon may burn them, but inevitably TPEs are rewarded for taking action too early rather than too late. 4. The TPE is Extremely Great at Extremely Little – The TPE discovers his or her few strengths and exploits the living hell out of them. Whatever he or she sucks at gets outsourced. 5. The TPE Uses Ingenuity Over Money – Money can be like a drug temporarily covering up all your problems. Money allows you to do stupid things without painful consequences, hence keeping you stupid. The TPE knows that entrepreneurial mastery is determined by ingenuity and a razor- sharp focus. 6. The TPE Dominates a Niche – The TPE chooses a market wherein the competition is weak or does not offer the angle of products, services, and values that the TPE can. Then the TPE dominates that niche. 7. The TPE Marries Long-Term Focus with Short-Term Action – The TPE knows with absolute certainty where his or her final destination is but doesn’t have a detailed play-by-play on how to get there. Instead, TPEs take action in the short term (90 day increments) to make substantial progress. Then they reevaluate their goals, create plans for the next 90 days and execute them. 8. The TPE is NOT Normal – TPEs are risk takers. They are a little weird and

9 possibly a little crazy. They are definitely different. TPEs do not adhere to rules or abide by social norms. They bust the status quo wide open. Do you see yourself in this list? If you do, or if you just wish you could, this book is going to rock your world.

10 INTRODUCTION “The world is more malleable than you think and it's waiting for you to hammer it into shape.” - Bono I’m tired…tired of the hundreds, if not thousands, of business books that are all title and no content. Most of those books should be distilled to one or two pages of valuable content. The others should be used to wipe your ass. I can’t tell you how many books I’ve started pouring through and in minutes found myself “boring” through until I finally gave up. Only a select few business books are truly great and need to be read cover to cover. My goal for The Toilet Paper Entrepreneur is to be different and far better than the traditional business books and burned-out grad school rhetoric, from the first word to the last. You’ll find no outdated concepts in this book and no “optimized entrepreneurial execution methodologies.” This book is straight from the trenches. I’ve put all of my effort, experience, and resources into making The Toilet Paper Entrepreneur one of the best. You decide if it is. This book is about getting real, dispelling the naysayers and kicking you in the butt to get up and do it. The less you have of something critical, the more important it becomes and the more wisely you use it. This is true with everything - love, food, money, and even (or especially) toilet paper. Have you ever been doing your business with your pants hugging your ankles and, when you are ready to wrap things up, notice that you are extremely low on toilet paper? Don’t deny it! You know exactly what I am talking about. Three tattered sheets of TP hang off the edge of the cardboard roll, mocking you. This is a crappy position to be in (pun intended). There are only two or three options. You could call for help, which is WAY too embarrassing, but it’s an option. Of course you could do the humbling, hunched shuffle of shame and pray you find a roll somewhere nearby. That’s horrible, but it’s an option. The final option, usually the best option, is to manage with what you’ve got. And when you apply your entrepreneurial mind, you quickly recognize you have more than a mere three sheets. Here’s the play-by-play. You go with the final option and decide to manage. Let’s be honest; you have a reputation of using more than three sheets. You gotta see what else you can… wait a minute. Ah ha!!! Yes! The wastepaper basket! Like a master gymnast performing a two-handed straddle over a pommel horse, you hold yourself up and stretch your leg out. Just… far… enough. With your leg quivering from the strain, you precariously hook your toes over the garbage pail and start

11 dragging it in. “Come to Momma. Come to Momma,” you repeat over and over in your head. Time to examine your newly found treasure trove: A used snot-rag. Good, very good. A Q-tip. Oh, the inhumanity! Useable, if you must. A few cotton balls. OK, you can work with that. And… dental floss? No way! You draw the line at dental floss. So with three sheets of TP, a few cotton balls, a used tissue and a little poking around with a Q-Tip, you walk out fresh as a daisy ready to face the world. Of course, you don’t reload the toilet paper for the next guy. Let him learn the hard way! The story doesn’t end there. The next time you visit the john, you check the TP supply immediately. With a ready supply you tear through the paper like it is going out of style. Within a few weeks of “the incident,” though, you return to your old ways without a fleeting thought to being caught short-handed. Sure enough, before long you get caught again with your pantaloons kissing your ankles and an empty roll, praying you won’t need the dental floss this time. Do you see the amazing entrepreneurial lessons here? In this most challenging, most human moment of all we demonstrate our infinite ability to pull “miracles” out of the trash. When we literally have no option to just get up and walk away, we find a way to get the job done. With three sheets, some wastebasket scraps and possibly a torn up cardboard roll, the impossible becomes very possible. It’s awe-inspiring how careful, thoughtful, and innovative we are when our supplies are scarce. But it’s also confounding how quickly we use and abuse our resources when we perceivably have a lot. The problem is how our heads work. When we have knowledge of abundance in a specific instance (e.g. a full roll of TP), we convert this into a careless perception of perpetual abundance (e.g. an endless supply of TP within arms reach). Hence, we waste what we have. Even worse, we don’t check to make sure it isn’t running out. We just assume it’s going to be there. We sit down, do our business, and THEN grab thin air. Damn! Here we go again. Now, what if every time you sat down there were only three sheets of toilet paper left on the roll? When you always expect scant resources, you quickly get in the habit of being very careful in your cleanup, every time. You sure as hell would ensure the garbage basket was in your lap before you got rolling. You may even adjust your behaviors to preserve what you have, possibly making other “stops” before you got home or eating more rice or something. Your mindset, your focus, and your actions would all change in anticipation of having less to work – or wipe - with. Your success is completely determined by your ability to break free from the one and

12 only approach everyone else is following. Your success is completely determined by how you use your mind, how you manage your critical resources and how decisively you act to achieve the “impossible” with very few traditional resources. Your success is completely determined not by giving up and waiting for some extra rolls but by going with what you’ve got. The people who elect to master this knowledge and exploit it in their business are the few, the proud, the Toilet Paper Entrepreneurs! The Toilet Paper Entrepreneur is Not for Common Thinking People The Toilet Paper Entrepreneur is not for the faint of heart or for those with an intolerant colon, for that matter. This book is for people who have a desire to achieve entrepreneurial success, know it’s gonna be tough and have the guts to stick it out. It’s not for the wannabes and the talkers. This book is NOT for people who are willing to “try” something new simply to identify all the “problems” to prove that they were right in the first place. You know who you are. And this book is definitely not for people who think a single book or a series of materials can take them from rags to riches. This book is for people who want to challenge the status quo. This book is for people who will take lessons, use them to exploit their strengths and then go for it with all they’ve got. Most importantly, this book is for people who take sole responsibility for their own success or failure. Success in business isn’t about being right; it’s about being committed. So, do you want to be right or do you want to be successful? I pick success. Your Success Is Up to You The safety of a lifelong career with a large company died out long ago with one final dying Enron gasp. The security, the fun, and all the rewards exist in entrepreneurialism. Think about it: You can’t trust or depend on anyone more than yourself. And I am willing to bet that you already have all the skills you need to get started – you probably just need a better awareness of what you already have, as well as a swift kick in the ass. That’s my job. It’s time you hear the truth and not some sugarcoated nonsense or formula for quick success. Launching and building a company is freaking hard. It is scary, time- consuming, frustrating, and sometimes life-draining. And quite frankly, you might fuck it up and ruin yourself financially. But financial disaster is unlikely if you relentlessly commit to your own success. If you exploit your strengths you can create a company that feeds your wallet and your soul, a company that exhilarates and frees you. If you have the destination, this book is the map.

The thing I can’t do is travel for you. You must be willing to try something new, push

13 beyond your perceived limitations, and grow. The responsibility for your entrepreneurial experience sits squarely on your shoulders. The meek may inherit the earth one day, but they sure as hell won’t be entrepreneurs. Having been down the road of building three companies of my own from scratch, partnering in the launch of many others and researching hundreds of other startups, I have discovered commonalities with successful company launches, which I outline in this book. I’ll tell you one thing right off, it sure isn’t common thinking. So ignore what you were told in business school, forget what you think you know about startups and throw out your dad’s method of money management. There is a new generation of entrepreneurialism, and it is time for a new modus operandi. Are you ready to get off the pot?

MY THREE-SHEET STORY Facebook, Google, and YouTube all rocketed to incredible success faster than you can say the words “holy sheet.” They are worth hundreds of millions, or billions, or hundreds of billions. The surprising thing is that the founders were all twentysomethings when they launched AND made their gazillions. Holy sheet! Their success is amazing and for that they get the lion’s share of media attention. They are heralded as the best of the best and the foundation of the new economy. My experience was different. Way different. And the main difference between my story and those of the “Media Darling Entrepreneurs” (MDE) is how we launched and built our businesses, but we’ll get to all of that later. The successes of the Toilet Paper Entrepreneurs are rarely discussed, let alone heralded in the media. Yet it is these “everyday” entrepreneurs who are slowly but surely marching along, creating amazing companies and achieving remarkable results. Google is not “real” in that it is not a typical experience. However, its success is achievable for your own business if you truly believe it (more on that later). But Google should not be seen as the path to success, simply one path. There are many other paths traveled by the likes of the well-known and the unknown. These are the paths of the TPEs. Some of them are well-known, such as Bill Hewlett & David Packard, who started their company with $538 and a garage workshop, ultimately yielding today’s $100 billion conglomerate; some of them are somewhat lesser-known entrepreneurs like Brian Scudamore of 1-800-GOT-JUNK? who took a summer dream and turned it into a junk business now approaching $200 million in revenue. Dave Packard, Bill Hewlett, and Brian Scudamore are all Toilet Paper Entrepreneurs. So am I. And, I expect, so are you. I am here to tell you their stories and the stories of others as well as the lessons learned. I am here to tell you the real deal of successful entrepreneurship. It is

14 bloated with failures, drenched with progress, marred with mistakes and peppered with major achievements. So who am I to talk about this stuff? I am a Toilet Paper Entrepreneur. My journey was a fight in the trenches, but I learned how to get out and make it big. Often funny, sometimes a struggle, my entrepreneurial adventure has been far from glamorous. I even moved my wife and infant into a retirement village to save money – nothin’ glamorous there, believe me. Unless you like shuffleboard and funky- smelling old people. And I have found myself stranded on the toilet bowl once or twice. I’ve worked forty-eight hours straight because I had to, sleeping in clients’ conference rooms to save on hotel bills. And as I write this I’m sitting at a used desk I scavenged to save bucks, even though I have more than enough dough to swing a trip to Office Depot. The odds are that your path will be more like mine than Mark Zuckerberg’s of Facebook. But I want you to know that success can be achieved following any path. You don’t need to have a “full roll” to walk out winning; you can do it with just three sheets of TP. And no matter which path you choose, you have to do it with strong beliefs, absolute focus, and loads of effort. Here’s a quick look at my three-sheet story vs. the MDEs: Media Darling Entrepreneur Mike’s “Three Sheet” Path

Age 6 - Starts a lawn mowing business Age 6 - Still in diapers. by recruiting teenagers in the neighborhood. Buys parents a house.

Age 12 - Sits on the board of major Age 12 - Rushed to a major hospital for toy company. eating a toy.

Age 18 - Is recruited by top Ivy Age 18 - Picks a college based upon the League schools but rejects them to favorable guy-to-girl ratio. Arrives and launch a VC-funded company. is instantly rejected by the girls.

Age 19 - Masters the management of Age 19 - Masters the inverted keg tap. a multi-million-dollar company.

Age 21 - Goes public. Ages 21 - Goes home.

Age 24 - Retires. Age 24 - Drinks too many beers and starts own company because “any idiot can do it.”

Age 24 and 1 day - Comes out of Age 24 and 1 day - Launches a new retirement. Celebrations ensue. company, finds out that any idiot cannot do it. Panic ensues.

Age 27 - Has another super success Age 27 - Company succeeds because because everyone expects it. there is no alternative.

15 Age 30 - Is no longer in the news Age 30 - Finds his passion, launches because the next 18-year-old phenom another company, grows fast and is all over the headlines. strong.

Age 33 - Seeks psychiatric help to Age 33 – Found himself! Is living his “find himself.” passion. Business and life are great.

Age 36 - Writes book on life story. Age 36 – Inspires a new breed of Doesn’t sell. Goes to work for a TPE. business leaders – the TPEs. TPEs go on to hire failed MDEs.

So what are my successes? I have the list of obligatory accomplishments, but more importantly I have discovered my passion and am living it! I love launching startup businesses, making them great and doing it fast. I love the underdog, the unsung hero, the people who are committed to their goals but maybe aren’t given a fair chance. I love helping people even out the odds, showing them how to exploit their natural strengths so they can go out and kick ass. My life’s vocation is all about working hand-in-hand with first-time entrepreneurs to grow their concepts into industry leaders. I love doing this. As a result, I am extremely happy, making a great living and feel constantly energized. I have achieved health, wealth and happiness all at once. To me this is my greatest success. What will yours be? My List Of Obligatory Accomplishments In case you don’t want to Google my ass, here are my resume highlights:

I started my first business, a computer integration company, at twenty-four. I sold the company on December 31, 2002, through a private transaction. It lives on today as a thriving company.

On January 1, 2003, I started a new company. Yes, the very next day. That company came into national prominence in three short years and was subsequently acquired by a large public firm in 2006.

I started my third company, Obsidian Launch, in the summer of 2005. The name was different back then and so was the preliminary concept. It changed because I took time to look introspectively, to discover what I really loved to do and slowly build the concept around my interests and life goals. My prior companies, while very successful, were built on concepts that were desirable to the market but didn’t exploit my talents and my passion to its fullest. My latest company has all that covered, so I’m good.

I have followed the path of the Toilet Paper Entrepreneur, early on unintentionally and unaware, but over time deliberately and with stronger focus. Throughout, I have

16 valued my beliefs, discovered, and exploited my strengths and, most importantly, never stopped pushing ahead, even during the toughest times. The results?

In addition to selling two companies for lots of cash;

. I now partner in the launch of a new company approximately every four weeks; . I am a reccurring guest on The Big Idea with Donny Deutsch and other television programs; . I have received multiple entrepreneur awards, including the SBA’s Young Entrepreneur of the Year Award; . I have been interviewed in multiple national media outlets; . I have presented at some of this country’s most prestigious universities. And I barely had a B average at Virginia Tech - go figure. . I am the author of this book and intend to write many more; . And most importantly I continue to quickly grow revenue and profits for all my companies!

My goal is not to be a braggart here but to simply point out that if I can do this, so can you. Also, make sure you don’t mix up media exposure with a Media Darling. Exposure in the media is a great thing – I strongly suggest you seek it out, as I do. Being an MDE is something different than mere exposure; it is more about the overnight successes who actually do achieve success over night. MDEs should be an exulted group, no question. But they should not be perceived as an exclusive group.

You can and will achieve success, too, if you want. Your overnight success just may take time to build. Ultimately you can achieve any goals you desire, and you can do it all by following the path of the Toilet Paper Entrepreneur.

Clearly I have not followed the path of the MDE, but most entrepreneurs don’t. You too will most likely launch your business with three sheets, a wing, and a prayer. My job is to help you get rid of the wing and prayer part. Your job is to succeed on your three sheets.

Let’s get started, shall we?

17 PART ONE: BELIEFS

“God didn't have time to make a nobody, only a somebody. I believe that each of us has God-given talents within us waiting to be brought to fruition.” – Mary Kay Ash At the start of my presentations I use the old Jack Canfield demonstration, the one with the $100 bill. It goes something like this: I start out by asking, “Who here wants to be a multi-millionaire?” A room full of hands go up. “Who here IS a multi-millionaire?” The hands go down. “Who wants to have a positive impact on this world?” Hands go up. “Who has accomplished it?” Hands go down. “Who wants to be known for the good they did?” Hands up. “Who has achieved this?” Hands down. After I explain to the attendees that these are all inspiring aspirations but are truly unattainable in this one moment, I fish through my pocket, pull out a $100 bill and hold it up. I say, “This is something we can all see and talk about. Who wants this $100 bill?” All the hands go up. I ask again, “Who wants the $100 bill?” The hands stay up, accompanied by strange looks. The third time I ask, I get the same response. Often it takes four or five times before one person sheepishly gets out of his chair, walks over and cautiously takes the $100 bill from my hand. The rest of the audience looks stupefied. When the $100 guy returns to his seat, we go through an exploration of our beliefs. Even though all raised their hand saying they wanted the money, their beliefs prevented them from taking it. The beliefs are always the same: “It’s a trick;” “It’s embarrassing;” “You’ll just take it back;” “Someone else deserves it.” These powerful limiting beliefs keep everyone’s butt stuck to the seat, even though each wants the $100. But that one person, maybe out of pure frustration, elected to change his beliefs. “I’m going to go for it.” “What’s the worst that can happen?” “So what if it is a trick, at least it will be over.” “Maybe I can just take it.” “Maybe it’s not a trick. I’m going for it, now!” The only thing between the audience and that $100 bill is air. There is nothing else, yet the forces of their beliefs are so powerful that they are literally immobilized. I wonder how many $100 bills and other opportunities they regularly miss out on because of fear. Imagine yourself at that presentation. I bet you would have raised your hand like everyone else, stating you wanted or planned to be a millionaire. But like everyone else, I bet you wouldn’t have grabbed the money from me. If you aren’t going to get

18 out of your seat to take a $100 bill, what in the world makes you think you will do anything to make $100 mil? You won’t. You can’t do anything if you don’t have the beliefs to back it up. And don’t try to fool yourself and say it will be different when the stakes are higher and that then you would do whatever it takes to make millions. If you can’t get yourself to grab the first $100 toward your millions when it is literally waved in your face, what makes you think you will behave any differently in business? If you are going to succeed, you need to destroy your limiting beliefs and create enabling beliefs. About forty-five minutes into my presentation I do a wrap-up that ties back to the opening demonstration. I tell them I can prove that they all have in fact changed their beliefs. I reach back into my pocket and hold up another $100 bill. Before I can say a word everyone makes a mad dash toward me, and in an instant the money is gone. That’s the power of an enabling belief. Your entrepreneurial success depends on it.

19 CHAPTER 1 – NATURE’S CALLING “To succeed, we must first believe that we can.” - Michael Korda Two great warriors are about to fight. One of the warriors volunteered because of his undying love for his country, the other was simply paid handsomely to fight. Which one would you bet on? Always bet on the individual who is serving his calling, not the guy who is doing it for the money. It is the person who is serving his purpose and fulfilling his heart’s desire who will see his business through the good times and the bad. Those that are following their path will relentlessly march forward during the ups and downs, even as others give up to pursue something else. They will be there when the paid guys walk away. If you try to get rich by doing the next big thing, but it isn’t your passion, the competitor who really is passionate about it will eat you up and spit you out. Passion begets persistence. And persistence begets success. TPE TIP The Business –While not the best form of legal protection, Sole Proprietorship is a cheap way of getting started, since there are no setup costs. There are fees associated with setting up an S-Corp, C-Corp and limited liability corporation (LLC). Of course, as you make money you will need to pay taxes just like anyone else, and you will want to incorporate down the road. Consult with an accountant (not one you pay for, but one who is a qualified expert from a local college) on next steps. An LLC is often the most economical and effective way to go.

Answer the Urge

For you to launch a dominant business, you must first find what you thirst for. This took me years to discover. When I started out I had this belief that entrepreneurs should do what they know, not what they want. I knew computers and liked working on them, so I launched a business related to that. But I didn’t love computers. It was my vocation, not my passion. My first two businesses were successful, but not because I was passionate about technology. I didn’t eat, sleep, and breathe tech. But I loved entrepreneurialism. I could talk about business all day, read every magazine, attend every seminar, and still my thirst would not be quenched. It took me a few years to figure out what was sitting right under my nose the entire time: That I loved launching businesses. Once I came to the realization that it is the birthing and maturing of a business that I love, I knew the path my future would follow. It doesn’t have to take years to discover what really gets you jazzed. The key is to

20 reflect and take the time now, rather than figure it out through trial and error. What would you volunteer to do simply because of your love for it? What activities bring you the most happiness, energy and satisfaction? What makes you lose track of time, complete tasks almost effortlessly and come out even more energized? When you are talking with friends, what is the one subject you can just go on and on and on about, to the point they are rolling their eyes? Answer these questions and you’ve found your heart’s desire. And when you have found your insatiable thirst, your passion, you will have taken the most important step to launching a company that will excel. Perhaps you’ve had a fleeting thought of starting a business, or maybe you are on fire with ideas and ready to jump in full swing. Either way, you need to get started by stopping. No, that’s not a typo. The best response to a waterfall of what-if dreams is a deep, thought-provoking breath. A successful launch is more about you and your beliefs than anything else. Committing to a business without intimately knowing yourself is a fool’s dream. Going “all-in” on a bad hand is a stupid move, and so is jumping feet first into business with out knowing the cards you’re holding. To get started at launching your company or to clean up a mediocre start, you must start by discovering yourself. You need to understand and acknowledge your heart’s desire, your mindset, and beliefs. You need to lead with introspective thought. You need to learn all about what you’re all about. Just for a minute, if there were no limits to what is possible, what would you envision your entrepreneurial company providing you? The first thing that pops into almost everyone’s mind is financial independence. I agree. I totally agree. But there is more, isn’t there? What if building your business made you feel emotionally satisfied, totally happy? What if your business made a difference? What if you woke up every morning excited to work? What if people loved your company? What if the world heralded what you did and happily consumed what you had to offer? Owning a business is NOT about working your ass off for the sake of trying to squeeze out a living. It is NOT about making tons of money at the expense of losing tons of life. It IS about maximizing life, bettering your life and the lives of others, which, not so ironically, fattens your purse. The greatest example of work-your-ass-off business ownership came from the quintessential entrepreneur himself, Sam Walton, founder of Wal-Mart. Walton started a company based upon a simple dream and went on to become one of the richest men in the world. The lesson? “I blew it.” Those are the words Walton reportedly voiced from his deathbed. By his own measures he was a failure - a billionaire who barely knew his youngest child and was married to a woman who

21 stayed with him for reasons short of a fulfilling relationship. What final words would you like to utter? I hope they are words steeped with feelings of contentment, words that say that you lived life to the fullest, pushed beyond your limits and built a company that you are proud of both for how much it accomplished and how much it made. If this is the type of success you want, you can have it. It all starts and ends with you. It doesn’t start with where the market is headed. It doesn’t start with the latest and greatest trends. It doesn’t even start with what you believe the customers want. Your business starts with you. Yesterday’s financially-fat companies were able to market their way out of a crap product. If they ran enough late-night television ads and made big, albeit false, claims in the magazines, they were guaranteed tons of customers. Disappointed customers, but customers nonetheless. That was then and this is now. Today’s successful businesses are growing because they are truly great. They are providing unmatched services and products, and the word is getting out, virally. No longer can you count on a marketing budget alone to bring loads of customers. Today you need to provide unmatched services and products. The marketing is done virally - at summer barbeques, in Internet forums, and on perpetual blogs. It’s that simple. And for you to provide the best that you imaginably can, it needs to come from both your head and your heart. When your company comes from your soul, when your company is all about you, it becomes a formidable force. Years ago a major corporation invited me to speak to a group of about forty marketing specialists that sold an insurance product and were trying to break into the small business market. They wanted to learn how to “speak” to the entrepreneur. The presentation was scheduled to start at 9 a.m., but we couldn’t get started until 9:20 because everyone was late. I started by asking them who woke up that morning excited to come to work. The few who raised their hands clearly did it for political posturing, not out of sincerity. Then I asked who loved their job so much that they came in an hour early to work, not because they had to but because they wanted to. All of them scoffed at me. I then explained that for this meeting I had arrived at 7 a.m., just to make sure I found the building and was ready to go. I then had breakfast next door and walked in 20 minutes early to set up. In this one example I have explained the difference between an entrepreneur driven by passion and someone who just has a job. When we love what we do, we do it to our heart’s content, and we naturally excel. I arrived at the presentation early not

22 because I needed to but because I wanted to. I love entrepreneurialism, and the opportunity to discuss it drives me to be ready to roll, day and night. TPE TIP Web Presence – Every business needs a web presence, right? Absolutely. But that doesn’t mean you need a website. Those are two very different things. You can establish a web presence by using Facebook.com, MySpace.com, Squidoo.com or a million other social sites. Spread the word about what you are doing through these social sites and set up free email. Supplement your social networking site with a free blog at Blogspot.com. That’s more than enough to get some business rolling in.

Obliterate All The Excuses, Except For One

“Excuses are like assholes. Everyone has one, and they all stink.” I don’t know who came up with this quotation, but I have a feeling I would really like the guy. Excuses are a great mechanism to apply logic to our fears. They are simply the machinations we go through to defend our inner fears. I have heard and experienced them all. And they are all BS. All, that is, except one, but I’ll save that one for last. The economy is not strong enough to start a business - Everyone is experiencing the same economy as you are, so you are on equal footing. If the economy is in a recession, buyers may slow down their activity, but competitors will also fall by the wayside. A weak economy is like a forest fire; it kills off many of the plants, but the seeds that take hold now have the most room to grow as the forest comes back to life. A weak economy is often the best time to start. Entrepreneurship is very risky - Anything that you go into without preparation and knowledge is risky. So go in prepared! The funny thing is, you are already mostly prepared and don’t even know it. If you listen to your inner emotion, your calling, you will naturally be led down a path where you already have strengths. You probably have mastered many of the critical learning steps, and you’ll pick up all the new stuff like a sponge. A job with a big company is far more secure - Tell that to the folks who got fired from Enron, Arthur Anderson, Bear Sterns, or any of the other hundreds of large companies that have collapsed or downsized. When you work for someone else, you can be fired at whim. If he screws up, you pay. When you work for yourself, you can’t get fired, and the only limit to your success is you. I’m too old to start a company - So what are you going to do about it? Wait until you are younger? There is no time like the present. Life has yet to offer a rewind or a redo. Don’t live with regrets. Get started now, regardless of your age. The self-

23 discovery process you will go through creating your new company is well worth it. Plus you can leave a little inheritance to the next generation. I am too young to start a company – What?!?! Did you know that you could legally start and incorporate your own business at any age? You literally can start your own company before you can legally work for someone else. One of my friends, Cameron Johnson, started his first business at age seven and incorporated his first company by age twelve. Why don’t you be the first to start a business at age six? No matter how old or how young you are, start today! I won’t make enough money – A recent study by the National Association of Colleges and Employers (NACE) stated that the average starting salary for an Accounting major is $46,292. Not bad. If you took that job and received an annual raise of 10% each year for the next ten years, you’d be making $120,069. Not bad at all. Now if you start your own company, your salary the first year will average at $50,000 according to World Wide Learn. Not bad either. If you run your company well and you elect to give yourself a 25% raise every year (I give myself an average of a 50% raise every year), on your tenth anniversary you will be earning $465,661. Now that’s sweet! I don’t have the proper education - If you feel you need a college degree to succeed, you are sorely mistaken. I’ve met with PhDs from Harvard and dropouts from high school; their entrepreneurial successes were directly tied to their beliefs, desire, passion, and thirst to learn through the school of hard knocks. Your scholastic pedigree has basically no influence on your success. None! I don’t have enough money to start - That’s great! If you had enough money to “properly” launch your company, I would fear you might go bankrupt. The fact that you have no money (or very little) simply means you need to apply your head right from the get go. There is a reason they say necessity is the mother of invention. Money covers up problems and weaknesses. Without money, you’ve got to bring your A-game every day. Lack of funds forces you to optimize everywhere and grow the right way. The competition is too strong - My mother always told me that no two people are alike. She was right. If you think the competition can do a better job than you ever can, then you aren’t properly positioned to exploit your strengths. Find an angle to apply your strengths, your innate talents, and your passion in a way that no one else is doing, or no one else is doing well. No one will buy my product or service - Good thing you caught that now, but it’s not an excuse not to launch a company. It simply means you need to reinvestigate what you want to do and determine a new way of delivering it so that you can build

24 a customer base. I am not ready - I agree; you’re not. You never will be. This excuse is simply a combination of all the others. When I ask people why they think they’re not ready, they resort back to some semblance of one of the other excuses listed. They are all nonsense. Go time is now! I am sure you can think of many other creative excuses not to start a business. You need to put these rationalizations aside, look ahead, and take action now. We rarely regret the things we did in life when we have followed our passion and taken risks. Too often, though, we regret the things we didn’t do. If your heart is calling you to take action, don’t use any one of these excuses to squash your desire. There is one reason not to start a business. Don’t start a business if your reason is to simply get rich quick. Greed is not becoming and is not long-lasting. Regardless of when you are presented with barrels full of money, you DO pay for it. Even if you collect your money prior to any effort, like a lottery winner, for example, nature has an uncanny way of still making you earn it. If you’re lucky, your windfall may be earned through the rapid mastery of a new financial discipline. But all too often the earning comes in the form of despair, disaster, and bankruptcy. Just look at what happens to some big lottery winners – it isn’t pretty. Jack Whittacker sure wished he’d torn his lotto ticket up. A TPE, he had plugged away for years, building a construction company that grossed $16 million a year. But after Jack won $315 million, his life became total hell. He lost friends, family, and had four hundred legal claims against him. I’m not trying to talk doom and gloom here; I am just trying to point out that getting rich quick rarely happens, is not satisfying, and in some cases has disastrous results. Quick money is very alluring. It is rare to meet someone who isn’t dying to win the lottery or receive some windfall of cash. Most people, of course, never get a dime wishing for a big payout. It is a shame that the majority of us waste even a second of life hoping something will be handed to us instead of using our talents and passion to make it ourselves. Money is an amplifier of habits. If you have bad habits and receive lots of money, you will simply repeat your bad habits more often. If your habits are good, it will amplify those good behaviors. Money allows us to be more of who we already are. So we better have a strong mindset and have established good habits before we get gobs of money. When you have achieved a strong, focused, happy mind and are executing on good habits, money will come easily. And money will build more money. And good habits will grow. Happiness, too. That is the healthy way to get rich.

25 Launch a company to get rich right, not to get rich quick. It works. TPE TIP Product Sales – You don’t need an ecommerce site when eBay has already created one for you. While not free, this is a really inexpensive way of getting your products into the hands of consumers. And you don’t have to auction off product; you can set up an eBay store where you sell things at fixed prices. There are also a number of niche auction sites out there, so start searching!

One Day Still Hasn’t Come

If I only had a nickel for every time I heard an aspiring entrepreneur say, “One day.” One day I will launch a company. One day I will be this, one day I will do that. Would someone please tell me what the date is for “one day,” because it sure as hell isn’t posted anywhere on my calendar? It is now or never. One day is a dream. One day is a hope that if everything magically falls into place, success will land in your lap. So if you are at all serious about launching your first company, put an actual date on “one day.” Is it one month from now, six months, a year? Tell everyone close to you the day you will be opening the doors of your new company. Then back-calculate all the things that you need to do, back to today, back to this moment right now, and start taking action. NOW!!! Maybe it is setting up a phone line or establishing an LLC or taking a class. The key is to start doing it now and don’t stop. Oh yeah, I almost forgot. Tell your biggest, smelliest, hairiest, zit-ridden friend that you need him to keep you accountable to your goal of starting your first company. Promise him that if you miss it, you will let your friends take a picture of you kissing his naked keester and allow it to be posted all over the internet. If that doesn’t get you in gear, I don’t know what will.

Nature vs. Nurture

I find it laughable the amount of time experts spend debating the entrepreneurial nature vs. nurture argument. Let’s settle this once and for all: IT’S NATURE. No one can teach you to have entrepreneurial passion. You can’t learn how to grow a burning, unquenchable desire for business. No one can train your attitude or make you intelligent. This is all stuff that nature has either given you or hasn’t. You better have the entrepreneurial bug in you or you’ll struggle to have even a modicum of success. You can water the soil all you want, but you won’t grow a tree unless there is a seed first. If you have it naturally, then it can be nurtured into something great. There is an important thing to note about nature; it doesn’t always present itself at

26 birth or even in the early years. Sometimes your natural thirst for entrepreneurialism beats out of your chest when you’re twenty years old. Other people don’t feel it until they are collecting social security. Me? It took four cold ones at the local bar. Regardless of when the urge presents itself, when you feel it, go for it. Nature’s calling. Answer it. TAKE ACTION NOW! Small steps lead to big gains. At the end of each chapter you’ll find three action steps you can complete in under half an hour. So you have no excuse! 1. What’s your heart’s desire? What gets you totally juiced up, so much so that you think you could be happy doing it every day? Write it down in as much detail as possible, paying attention to what you really get out of it. Sometimes we think we want something tangible when really we want to feel a certain way or experience something over and over again. 2. Make a list of every single excuse you have used to put off starting your business. If you’re already operating a business, write down other little lies you tell yourself that keep you from your heart’s desire. 3. Debunk your list of excuses. Write down every reason why your excuse doesn’t ring true. If you’re really feeling pumped, convert your excuse into a positive statement about your abilities.

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