Ep. 151 - Relish Your Ownership

[00:00:00] Welcome to Profit First Nation, the official podcast for entrepreneurs who are operating their businesses in the zone of permanent profitability.

[00:00:10] I'm Mike Michalowicz, the author of Profit First and now here is your Profit First Nation guide, Danielle Mulvey.

[00:00:17] Welcome back to another edition of Profit First Nation.

[00:00:24] And so today we are going to talk about relishing your ownership.

[00:00:30] You can put some ketchup and mustard on it, but we definitely want to relish our ownership.

[00:00:36] And what we want to do is we want to enjoy being an owner of the business.

[00:00:40] Now, what that doesn't mean is that you don't treat your business like a personal biggie bank.

[00:00:47] So a lot of people think, oh, I can be in business and I can be an owner.

[00:00:52] And then I can just write everything off and such.

[00:00:55] And when you treat your business like a personal biggie bank, then that is your profitability going out the door.

[00:01:02] And that is definitely no bueno and not going to work.

[00:01:08] So what we need to do is there are actually five key areas of ownership that you need to have.

[00:01:16] And they are number one, own your day, number two, own your numbers, number three, own Profit First,

[00:01:24] number four, own being a leader and number five, own being put on a pedestal.

[00:01:31] All right. So let's dive into the first one is that number one, you have to own your day.

[00:01:38] We've talked about this before and I will talk about it every day because even I need reminders about this.

[00:01:45] And that is that we have to own our day.

[00:01:48] We have to feed ourselves first in the day to make it a great day.

[00:01:53] I've talked about following the miracle morning and we've done an episode on that in the past.

[00:01:59] But basically following the miracle morning is waking up your day and doing the savers,

[00:02:04] the acronym for starting in silence.

[00:02:08] That's when I meditate. Number two, doing affirmations.

[00:02:12] Number three, having some visualization.

[00:02:15] I actually have a piece of paper that has my visualization like pictures for me to just look at and reflect upon.

[00:02:25] Then we move into exercising.

[00:02:29] So it's really important for me.

[00:02:31] I mean, the only time I could possibly exercise in my day is first thing in the morning because the day just kind of gets on a roll

[00:02:39] and hard for me to get off until it's time to go to bed.

[00:02:43] So exercising in the morning is a great way to get those endorphins going and really treat yourself and your body first.

[00:02:51] And then reading.

[00:02:53] So again, the time that you can read and just at least spend 10, 15, 20 minutes reading a day.

[00:03:04] It doesn't have to be business reading.

[00:03:06] It could be reading for pleasure, just some words to start feeding your mind for the day.

[00:03:11] And then the final in savers, the acronym for the miracle morning is to scribe.

[00:03:18] So that is going to be when you want to journal, when you want to write down what's going on in your head because it's so important to get those things that are in our head out of our head and onto paper.

[00:03:31] And that starts to kind of help make things flow and make things happen.

[00:03:35] So, so important that we get things out of our head onto paper.

[00:03:40] So starting your day and owning your day is so important.

[00:03:45] And then also what I do is I make sure that I kind of like map out my day and I see what's going on in my day.

[00:03:52] I look at all of my appointments for the day.

[00:03:56] I make sure everything's confirmed.

[00:03:58] And, you know, if I've got some space or if I need to move some things around, I kind of get that going in, in owning my day first thing in the morning before the phone starts ringing before I even open up email.

[00:04:10] Before my kids wake up, before my husband is up and such.

[00:04:13] And you know, I really kind of make sure that I'm able to get my top priorities for the day done.

[00:04:20] It's so easy for us to, you know, be pulled in a million directions.

[00:04:25] It's so easy for us to, to get hijacked.

[00:04:28] And we think that it's important.

[00:04:30] But what you have to do is you have to own your day.

[00:04:33] You have to determine what are the three key things that you need to get done in your business today that is going to allow you to continue to be an owner, right?

[00:04:43] It's going to keep you in business.

[00:04:45] You've got to prioritize owning your day and just, I mean, I can't emphasize this enough.

[00:04:53] I mean, I could go on for, for 60 minutes on this.

[00:04:57] This is such a make or break move is making sure that your day has intention.

[00:05:05] It has direction.

[00:05:07] It has the appropriate priority and it's not just letting it happen.

[00:05:11] All right, we all need sales.

[00:05:15] There's no business that doesn't need sales.

[00:05:17] So, you know, that is a priority in your business is making sure that the sales are happening.

[00:05:23] And what do you to do to ensure that that's happening in our construction material supply business?

[00:05:29] I don't make any sales.

[00:05:32] I really honestly don't know much about construction materials, but what I do know is I do know the numbers that we need to be hitting on a daily basis.

[00:05:42] I do know what type of projects we need in our pipeline and I do know how many projects and at what value we need at first base in our pipeline.

[00:05:52] At second base in our pipeline, at third base in our pipeline and at and coming home into our pipeline, which kind of I guess has put me into owning your numbers.

[00:06:03] You've got to own your pipeline.

[00:06:06] You've got to own what's coming in.

[00:06:09] How are you feeding that pipeline for sales?

[00:06:12] How is how how are those customers?

[00:06:15] How are those clients?

[00:06:16] How are those projects moving through your sales pipeline until they actually become a sale?

[00:06:21] And then obviously they move into, you know, the production pipeline or the customer service pipeline or whatever next pipeline it is.

[00:06:29] But you know, without sales, you're not in business without new revenue coming in.

[00:06:34] You're not in business.

[00:06:36] So the most important numbers for you to own honestly are your sales numbers, your forecasting, your pipeline, your actual sales.

[00:06:46] And your accounts receivables, your accounts payable.

[00:06:51] You have to own the numbers in your business.

[00:06:54] Now I'm not saying that you're the one entering the numbers into QuickBooks or whatever accounting software that you're using.

[00:07:03] But you are getting the reports that you need on a literal in most cases daily basis.

[00:07:10] All right.

[00:07:11] And you're you're tracking that against your forecast.

[00:07:14] So for us, I get our daily numbers in our daily huddle.

[00:07:19] Our daily huddle takes less than 10 minutes in our construction material supply business.

[00:07:24] Everyone goes around and says here are the three things I did yesterday.

[00:07:27] Here are the three things I do today.

[00:07:29] It's all tracked in an 11 by 17 page sheet in a notebook that accommodates 11 by 17 pages and such.

[00:07:40] But what I get from that daily huddle is I get what were what were our sales orders from the day prior.

[00:07:49] And I also get what we invoiced in the day prior as well.

[00:07:54] So you know, I'm seeing what's coming in now.

[00:07:58] I also have a weekly meeting with our sales team and that's when we're looking at the pipeline.

[00:08:06] That's when we're looking at an activity.

[00:08:08] That's when we're looking at touches to our top clients, both general contractors and subcontractors.

[00:08:15] You really have to have this down to a science and you have to own it.

[00:08:20] A salesperson is not going to own it.

[00:08:22] Your accounting department is not going to own it.

[00:08:24] Our contracts manager isn't going to own it.

[00:08:26] You have to own making sure that all the numbers are firing at the level that they need to be firing on on a daily and a regular basis.

[00:08:36] And that's why, again, it's so important that you're working on the business and not working in the business.

[00:08:40] When you're working in the business, you kind of don't have time to be working on the business.

[00:08:45] So I don't know that there is like a perfect combination.

[00:08:49] Your safest bet is to be spending 100% of your time working on the business and not working in the business.

[00:08:57] And then you're protecting yourself from that because it's also, again, so important to be on the business.

[00:09:03] Because when you're on the business, then your employees aren't competing for your time.

[00:09:09] I often see entrepreneurs, when they're working in the business and they have employees in their business,

[00:09:16] then it sort of becomes the fact that when the employee needs help,

[00:09:20] they see the owner is buried working in the business and doesn't feel like they can ask for help or get that support that they need.

[00:09:27] And so, you know, when you're working in the business, you're really kind of not getting very far because you're not being there in the on your business,

[00:09:36] on your employees to support your employees where you really should be in terms of the sweet spot of your business.

[00:09:44] All right.

[00:09:45] So then we talk about owning your financials of your business.

[00:09:51] So, you know, yes, yes, yes.

[00:09:54] Profit First is amazing as a cash management system for your business,

[00:09:58] but that is not necessarily how where the buck stops in terms of your financials.

[00:10:04] You definitely need to be reviewing your income statement on a monthly basis,

[00:10:10] your balance sheet on a monthly basis.

[00:10:13] You need to be reviewing your accounts receivable aging on at least a twice monthly basis,

[00:10:20] but it should be on a on a consistent basis of when you're getting that reporting.

[00:10:25] So for us, I get that reporting on the 10th of the month and I get it at the end of the month as well.

[00:10:33] And, you know, I also know where those numbers need to be.

[00:10:38] I own what our accounts receivable is.

[00:10:41] I own the fact that, you know, we need to keep our over 60 days under 6%.

[00:10:48] I just want to brag about our accounting department in our construction material supply business.

[00:10:54] When when we were looking at the numbers yesterday for it for the October closing,

[00:11:00] we were at 2%, which is a record for us in terms of AR over 60 days,

[00:11:06] which is already pretty fantastic for a construction supply firm.

[00:11:09] I know where we need to be and that was a huge celebration.

[00:11:12] And you know what? I didn't do it. I had nothing to do with us being at 2%.

[00:11:17] It was our accounting department who, you know, has just been working it a little extra hard

[00:11:23] and and we had a big, a big payment come in that didn't hurt too.

[00:11:30] So so owning all of those financial statements of your business is really important.

[00:11:36] And again, working on your business, having a routine, you know, owning, owning how your business runs.

[00:11:43] Okay. And not letting your business run you is so, so important.

[00:11:47] That is the difference between success or failure in terms of being a business owner.

[00:11:52] And I think that, you know, for most of us business owners,

[00:11:56] I mean, our worst nightmare is to have to go work for someone else.

[00:12:00] Right? I mean, can you imagine being an employee for someone else after you've

[00:12:05] experienced being a business owner? It comes with risk, but it also comes with, you know,

[00:12:10] having to step up your level of discipline and step up your ownership.

[00:12:15] All right. You are an owner act like an owner if you want to stay being an owner.

[00:12:20] All right. You also have to own the taxes in your business.

[00:12:25] You have to own your, your, your business taxes, your local taxes,

[00:12:31] your city taxes, you have to own your sales tax.

[00:12:36] You have to own your personal taxes in your business.

[00:12:39] So just because you have a CPA just because you have someone in your department running things,

[00:12:46] just because you have maybe like us and an ERP system that is just really doing,

[00:12:54] you know, everything and such, you have to really own the numbers in your business.

[00:12:59] And I'm going to be honest. This was something that I thought, oh, this wonderful new ERP,

[00:13:06] it's just doing it for us. Like it's just magic. It just happens and it is perfect.

[00:13:12] And guess what? Wasn't really fricking perfect.

[00:13:15] And we were getting some reporting that didn't jive and, you know,

[00:13:23] but we thought we could trust the summary,

[00:13:26] but the detail behind it was, was flawed. Unfortunately, I'm not going to get into it and such,

[00:13:32] but lesson learned that, you know, you have to, you still have to look at things.

[00:13:38] You still have to put your eyes on things.

[00:13:40] If an accountant or CPA makes a mistake on a sales tax return or on a business return,

[00:13:49] guess what? It doesn't matter because they don't own the business.

[00:13:55] You, the business owner are liable for any errors that people, even professionals that you hire to do the work would make in your business.

[00:14:04] So ultimately you have to own this. And then again, why you can't be working in the business,

[00:14:08] why you have to be working on the business, why you have to own reviewing the reporting,

[00:14:14] reviewing, you know, the returns that are getting submitted and really understanding it and not just like saying,

[00:14:20] oh, okay, well, our CPA works with thousands of firms. They've got this.

[00:14:25] Okay. You have to own it because everyone makes errors, but ultimately if there's errors made,

[00:14:31] it's your sole responsibility as the owner. The government is not going to say,

[00:14:36] oh, okay, yeah, we understand you hired this person.

[00:14:39] You paid them a lot of money to do this and they made a mistake.

[00:14:42] Okay. Yeah, we'll go after them. No, it doesn't happen that way.

[00:14:46] So again, why you have to own the financials of your business.

[00:14:51] And if there's something that doesn't seem right to you.

[00:14:54] So again, Drew's story, you know, our CPA who's our part-time controller presented me with some information and I was just like,

[00:15:08] well, this doesn't make sense.

[00:15:10] And she said, no, no, no, here's why I did it.

[00:15:13] And I was like, I still felt uncomfortable with it.

[00:15:16] And so when you feel uncomfortable with something, you have to speak up.

[00:15:21] You're paying these people and if they can't explain it to you in a fashion that if you were the government

[00:15:29] and they have to, you know, defend against the government, then you have to push back and you have to say,

[00:15:36] no, you have to get more documentation.

[00:15:40] You have to get more detail.

[00:15:41] You have to get more reasoning until you are 100% positive that what they're giving you,

[00:15:48] you understand and you fully support and because you have to own the decision that this is correct or this is incorrect.

[00:15:57] And it needs to be correct before you can move forward with things.

[00:16:00] Does that make sense?

[00:16:02] And of course you have to own the payroll in your business, the numbers associated with the payroll in your business.

[00:16:10] So, you know, you have to be watching what that number is.

[00:16:13] You can't just be hiring employees to hire employees.

[00:16:16] You need to be making sure that, you know, depending upon how big your organization is,

[00:16:21] that everyone in the organization is producing a 3x return on payroll.

[00:16:26] I mean, payroll is usually a business's largest expense.

[00:16:31] And so we know in profit first, there's only two ways to increase profitability,

[00:16:37] increase margin and decrease expenses.

[00:16:40] So the more that you're spending in expenses is the less you're making in profitability.

[00:16:45] And if your largest expense is payroll, then you need to be very cognizant of,

[00:16:51] you know, what kind of return are we getting?

[00:16:54] Do we have the right staff? Do we have the right people?

[00:16:57] You know, can we get a 3x return on five people or can we get a 4x return on three people?

[00:17:05] You really have to be watching those numbers.

[00:17:07] And, you know, I kind of laugh because sometimes people get so insane about a subscription to Calendly

[00:17:17] or a subscription that's $10 a month.

[00:17:21] But you've got maybe three employees who are average home or worse that you're paying $50,000 to.

[00:17:28] Let's not even get into the employer taxes and benefits you're paying on them.

[00:17:31] Let's just talk about their gross salary being $50,000 each.

[00:17:35] And you've got three people at that.

[00:17:37] That's $150,000 in payroll that is just kind of like they're collecting a paycheck.

[00:17:43] They're not giving you much of a return.

[00:17:45] And you're freaked out about, you know, five people having a $10 a month subscription for a year.

[00:17:52] I mean, let's get our priorities straight people.

[00:17:55] Payroll is your number one priority when it comes to your operating expenses, to be honest,

[00:18:02] and keeping on track with that.

[00:18:04] And again, you know, owning your business, owning what the people that are doing in your business

[00:18:11] are actually producing that 3x return on payroll.

[00:18:15] Of course, you do need to own expenses as well.

[00:18:18] You do need to own those subscription costs that can creep up and such.

[00:18:22] But you know, it's all about prioritizing things and such.

[00:18:26] And so, you know, just don't be obsessive about the pennies.

[00:18:30] Focus on the dollars.

[00:18:32] And then you have to own your pricing as well.

[00:18:35] You know, you've got to own what you need to be charging.

[00:18:39] You've got to own making regular price increases.

[00:18:43] I mean, it's insane.

[00:18:45] I read the other day where a Big Mac Happy Value Meal,

[00:18:51] can't call it much of a value is like $18 for a Big Mac fries and a drink from McDonald's.

[00:18:59] I mean, you know, the big corporations have no shame in their game when it comes to increasing prices

[00:19:07] and decreasing their expenses by making portions smaller, et cetera.

[00:19:12] And again, raising those prices.

[00:19:15] So you have to own that in your business.

[00:19:19] I know it's a lot to own, but oh my gosh, it's much fun and so much better than having a J-O-B, right?

[00:19:25] All right.

[00:19:26] And then, you know, kind of going on from owning your numbers is that you have to own profit first.

[00:19:33] You have to own knowing what your current allocation percentages are.

[00:19:39] You have to own your profit first allocation rollout plan,

[00:19:45] knowing, okay, this is where we want to get to in terms of our target allocations.

[00:19:49] And then you, you know, reverse engineer to where you are now

[00:19:53] and then what you need to do quarter over quarter to adjust those allocations

[00:19:57] to get to that target allocation percentage.

[00:20:00] You have to own that.

[00:20:03] You have to be the one that says, all right, it's the start of the new quarter.

[00:20:07] And so we need to, you know, move our allocation percentages to these new percentages

[00:20:12] as our current allocation percentages until you get to that target allocation percentage.

[00:20:17] Profit first is not a set it and forget it system.

[00:20:20] And even when you get to those target allocations, my guess is, is that, hey,

[00:20:25] you know, your revenue probably has maybe even increased and bumped you up into the next tier of target allocations and such,

[00:20:33] which is amazing and great.

[00:20:35] But it's kind of like we need to make those adjustments again to the business.

[00:20:39] So you have to own profit first in your business.

[00:20:42] And I'm going to say absolutely you have to own allocation day in your business at the minimum.

[00:20:48] What you have to own is you have to own doing the allocations.

[00:20:55] So for my business, what that means to me is on allocation day, I get what our income balance is from our accounting department.

[00:21:04] I open up the allocation day calculator, which is a free resource at profit first nation and I input that income number.

[00:21:13] I verify that the current allocation percentages are correct.

[00:21:17] Those just get adjusted at the beginning of the quarter and I plug in the date and when I plug in that income number, boom,

[00:21:24] all the numbers fall into place.

[00:21:26] It's automatic and then I look at it and I know kind of what our income number needs to be on ideal average.

[00:21:34] And when it's higher than that, I kind of need to understand why and when it's lower than that, I need to understand why.

[00:21:41] And then I'm just seeing the dollars and then I take, I send that allocation calculator back to our accounting department

[00:21:48] and they're the ones that actually do the transfers at the bank and such.

[00:21:52] And that's great but I own allocation day.

[00:21:59] I'm not necessarily making the transfers at the bank but I own allocation day.

[00:22:03] I own knowing what our income number is for that day, plugging it in and seeing where the numbers fall.

[00:22:09] All right? And you need to own it too.

[00:22:12] And then what you need to do is you need to own being a leader in your business.

[00:22:18] All right? You are an owner and you have to own leading your clients.

[00:22:24] You have to own leading your vendors.

[00:22:27] You have to own leading your employees and you can let someone else lead your community.

[00:22:35] All right? This is where I say you don't need to own is in your community.

[00:22:40] Let me explain.

[00:22:41] So, it's important that you are operating your business in a direction on a path that is just going to help you keep moving that ball forward,

[00:22:54] moving that ball down the line.

[00:22:56] And so you have to lead your clients.

[00:22:59] Don't let your clients hijack you.

[00:23:02] Don't let your clients hijack how you do things.

[00:23:05] Don't, you know, have clients be all of these exceptional exceptions to your sweet spot in terms of how you deliver your product and service.

[00:23:15] Same thing with your vendors.

[00:23:17] Lead your vendors, you know.

[00:23:19] Make sure that you're having conversations with them.

[00:23:21] Make sure that, you know, you guys are on the same page in terms of the direction of things and how things are working between you guys,

[00:23:30] what you're paying for things, you know, understanding what's coming down the pike in terms of potential projects and such.

[00:23:38] But be the leader.

[00:23:40] Be the leader with your clients.

[00:23:42] Be the leader with your vendors.

[00:23:43] And then you have to be the leader with your employees.

[00:23:46] So, you know, if you are having a kind of crummy morning, it doesn't matter.

[00:23:52] You have to lead your employees with a big smile and a happy face and energy and bring everyone up for the day in the morning.

[00:24:03] And you have to lead your employees how you would want to be led.

[00:24:08] So again, if you have a bad morning, if, you know, you get some bad news or, you know, something just kind of goes wrong in the morning,

[00:24:17] you have to shake it off and you have to just put that smile on your face and you have to lead with positivity, with encouragement.

[00:24:27] And now what you can let someone else lead is leading your community.

[00:24:32] So, you know, too often you have so much to own in your business.

[00:24:37] And again, do you want to own your business or do you want to be an employee and have a J-O-B working for someone else?

[00:24:45] So, I oftentimes see business owners get maybe too involved in the community, the Chamber of Commerce, the Rotary Club, those kinds of things.

[00:24:58] And it comes at a cost of their business.

[00:25:02] They think they're doing networking, but they're not really doing networking.

[00:25:05] They're working for free for a community organization.

[00:25:09] So you have to be very, very cognizant that your business is in a position where you can step away from that and spend time on that.

[00:25:18] I mean, I'm going to be honest.

[00:25:20] I had running our businesses takes about 10 hours a week overseeing the operations of those businesses.

[00:25:28] And I had been doing that for a long time, small children at home.

[00:25:34] So, you know, I was able to come into the office, but then leave early to pick them up, et cetera and such.

[00:25:40] And so it was years of doing that when it was finally like, okay, well, the kids are a little bit older.

[00:25:46] And so, you know, that's when I started this community.

[00:25:49] I didn't start the Profit First Nation community when I was working 40 hours a week in my business and such.

[00:25:56] I had gotten my businesses to the point where I was, you know, only having to spend 10, 15 hours a week overseeing the operations.

[00:26:03] And then I could move into giving and being, you know, leaving a community like I do here with Profit First Nation.

[00:26:11] All right. And then the final, this is probably, oh gosh, maybe one of the most uncomfortable things for a business owner to own.

[00:26:22] And that is own being the owner and own being put on a pedestal.

[00:26:29] You know, I know it feels uncomfortable, but you have to own and relish your ownership and let your employees look up to you.

[00:26:40] All right? You're a positive person in their life.

[00:26:44] We need positive people in this world.

[00:26:47] And so, you know, you have to just kind of, you have to accept it.

[00:26:51] I know it's awkward. I know you don't feel special.

[00:26:54] I know you think that you're like everyone else.

[00:26:56] But I see it so many times how people want to treat owners like celebrities.

[00:27:03] All right? And you just have to relish it.

[00:27:05] You have to enjoy it. You have to appreciate it.

[00:27:07] And you have to, you know, go all in on your employees on that.

[00:27:11] And when you do that, when you go all in on supporting them and giving time to them and appreciation,

[00:27:18] I'm not talking like taking, you know, spending an hour or two hours with them every day, just a little bit here and there.

[00:27:25] And showing that support, that appreciation, that attention, that will make them go all in on you.

[00:27:34] And so it's okay that they want to put you on a pedestal.

[00:27:37] Just appreciate it because it will, it just plays out in the end so well that there'll be lifers to you.

[00:27:48] You want employees who appreciate and understand all that you do being the owner of the business.

[00:27:55] So relish your ownership. All right?

[00:27:59] Cheers to another profitable day, my entrepreneurial friends.

[00:28:03] Thanks for tuning in to the Profit First Nation podcast.

[00:28:09] We hope you found today's episode valuable and that it's inspired you to take action towards achieving permanent profitability in your business.

[00:28:17] If you want to learn more about how to implement Profit First in your business and connect with a community of like-minded entrepreneurs,

[00:28:24] be sure to visit us at profitfirstnation.com to download our how-to guides and resources.

[00:28:30] Remember, permanent profitability is within your reach and we're here to support you every step of the way.

[00:28:37] So let's do profit first right together.