In this episode, we meet Mike Michalowicz, serial entrepreneur and multiple best-selling author.
Self-defined as a normal guy with a normal upbringing, by his 35th birthday, Mike had founded and sold two multi-million dollar companies. Confident that he had the formula to success, he became an angel investor…and proceeded to lose his entire fortune.
Then he started all over again, driven to find better ways to grow healthy, strong companies. Among other innovative strategies, Mike created the “Profit First Formula”, a way for businesses to ensure profitability from their very next deposit forward.
Mike is now running his third million dollar venture, alongside keynote speaking and is also the author of Profit First, Surge, The Pumpkin Plan and The Toilet Paper Entrepreneur, which BusinessWeek deemed “the entrepreneur’s cult classic.”
In this episode we talk about:
- How his early success ultimately proved to be a fallacy and led to his downfall;
- Why workaholism is not a badge of honour and must be defeated in our culture;
- How to reframe your value in the marketplace by choosing to become dispensable instead of indispensable; and
- Why having no cash, experience or contacts are your biggest assets when it comes to starting a business.
Connecting with Mike
Thanks to Jeff Brown for recommending Mike.
On a story from his childhood that impacted his life
- I was typically average! It's funny, I hear stories of other people that have gone through extraordinary trauma or had some kind of awakening to their calling in their childhood, and that wasn't me. But one thing I think that was interesting, whenever my parents would talk about work, is that I had to find that one job working for that one big corporation because that's the safest way to navigate through life. And even today, they still are confused by the path of the entrepreneur. So maybe that's the thing that kind of triggered my desire to explore.
- I think the greatest lesson I learned in lacrosse was the power of the mind. One of the necessary skills in lacrosse as a middie was to face off. When I did, I realised my thoughts were determining how successful I was on these face-offs. If I thought I could beat the person I was going against and had a plan of where I was gonna move the ball, I was wildly successful. But if I ever felt intimidated or lacked confidence, I would falter. And in business, I realised the power of thought dictates our subsequent actions.
On why early success was his undoing
- My first business was in IT Support and my exit was via private equity. The second business was in computer crime investigation and I was in the right place at the right time. First six months I think we did over half a million dollars. The first full year, we did around one and a half or two million. And then in the second year in business, we were on a run for seven million dollars in revenue. In the moment, I thought I was just super smart, but my company got part of the Enron trial.
- We were racking up debt, borrowing from the banks, pulling credit lines. I think at one point when we sold the company, we maybe had a half a million dollars of debt. But it was acquired by a Fortune 500 because we were on such a fast growth trajectory, and then it started to instil in my thoughts that, “Oh, you don't need to run a business that's healthy financially. Just go all in on it. And if you do, someone somewhere will buy you.”
- This concept of grow-at-all-costs is insidious. You see on the cover of every magazine for entrepreneurs and business leaders, “Grow, grow, grow, workaholism, grind it out, push yourself.” And we're not considering the health of the organisation or the health of ourselves. And I learned that the hard way, and now I'm on a mission to fix that.
- It seems the way to climb up the ladder as a leader is to outperform everyone else, to hustle and to grind out effort. That translates into workaholism. It's become a badge of honour, like “I work x number of hours.” Of course the trade-off for workaholism is you've got to sacrifice your family, your interests and passions outside work.
- Sam Walton, the founder of Wal-Mart, on his deathbed he was quoted of saying, “I blew it.” Why? Well, he was surrounded by his family who didn't know him, who didn't care for him; he barely even knew his own wife. I think that's the definition of what we need to avoid.
On being dispensible
- Previously, I would say to my staff, “If you want to make a big salary here, if you want to achieve your vision of employment, your job is to become indispensable; if you're indispensable, I am so dependable upon you, you can dictate your own salary.”
- And then I changed, and said I want to be dispensable; if we're dispensable it means we have the ability to create the systems and structure around us where systems, technology, maybe other people can carry the workload. And therefore if we go away for a week or two because we're sick or want to take a vacation, the business hums along. I think the greatest leaders understand that.
- What small business owners think is that if we can do more of that, it'll bring us to the levels of Amazon and Google. The whole way to get there as leaders is to extract ourselves, to find ways for the technology and for others to carry the business forward. That's the definition of an extraordinary leader.
On rewarding truth
- If I want to get the truth from my staff, I have to speak the truth. If I want to get loyalty, I have to give loyalty. I found that as the leader of my organisation, I always have to take the first step in a behaviour that I want. So I will be loyal to them, I will defend and protect my colleagues like they're my family. I will do everything to serve them. That's the first step to getting truth from them.
- The second thing is I will put them in a position where they are actually rewarded for speaking the truth. So when someone says, “Mike, you made a mistake,” I say, “First of all, let's give you a surprise!” Whatever it is; a bonus or a gift or just a wholehearted thank you. And then they put the truth on the table.
On moments of doubt
- I have doubt right now in this interview, but it's just a story in my head. A friend of mine calls it the monkey brain and a great way to navigate it is to vocalise it, wherever you are. Step two is to envision that you're driving a car and so you strap those negative monkey mind thoughts in the back seat. And you say, “Listen, you're staying back there, and I gotta move forward now. But I acknowledge that you exist.”
On how to spot the business wave worth catching
- Pick a wave to evaluate, and then insert yourself into the community. Go to the conferences, talk with the attendees to see what the chatter is, read the magazines, listen to the podcasts.
- Like a surfer, many waves you just let roll by. You don't pick the next wave; you evaluate the next wave and then pick the one that you can ride all the way home.
- You can read more about these in my books Profit First and Surge.
On why having nothing is your biggest asset
- If you lack cash, lack experience, lack a network of contacts, lack of prospects, those are actually your biggest assets. And sadly, it holds so many people back from starting a business. So in The Toilet Paper Entrepreneur, I explore why lacking each of those is a good thing.
- They say necessity is the mother of invention. Well, a lack of money forces innovation, to be creative, which challenges the industry norms, which is a beautiful thing.
- The lack of experience means you don't know the rules of the industry. Therefore you become known as the business that breaks the industry norms.
- The lack of prospects means you have to learn how to sell. If you go into a business where your friends and colleagues, they'll say, “Oh yeah, I'll buy that,” and they help you get started, I know they're doing the socially appropriate thing, but they're not letting you learn early and fast and hard. It's the lack of an ability to sell in the beginning that forces you how to figure out how to sell.
On the similarities between pumpkin farming and growth businesses
- Within the community of pumpkin farmers, there's a very tiny faction called colossal pumpkin farmers. They grow these pumpkins that are the size of trucks. What's fascinating about them is they change the growing process only by a small percentage. So I ran the analysis in The Pumpkin Plan and sure enough, when I found colossal growth companies – companies that grow organically ridiculously fast – they have the same kind of process that they do with colossal pumpkin farming.
- One was seed selection – colossal farmers match seeds to their soil content and the climate they're in; growth businesses exploit their uniqueness in a community that resonates with it.
- Another was discipline – colossal farmers cut away weak pumpkins regularly; what I found in these businesses was the best leaders were phenomenal at removing distraction. The best leaders were disciplined in turning down opportunities, and the weakest people, while the businesses that struggled actually took on the most opportunity. It takes the word “no” to grow.
- If we're not willing to immediately stop everything we're doing and abandon everything immediately to take on this new task, it's not important enough and we have to say no to it.
On the routine that makes the most difference
- I love two moments about exercise: right before I exercise, I love the idea, there's like a dopamine release of how I'm gonna feel after I'm done. I don't like doing the activity, but I do like the end, the feeling that inspires. Those two moments of excitement sandwich the actual effort.
Final message of wisdom and hope
- Every human on our planet is going through a life experience that is not better or worse than anyone else. It's just different. We're all in this brother and sisterhood and all have something to learn from each other.
This episode is sponsored by UnrushedExperiences.com