Fix The Biggest Problems In Your Business | Mike Michalowicz | Modern Wisdom Podcast 165

Mike Michalowicz is an entrepreneur and an author. "An entrepreneur's biggest problem is they don't know what their biggest problem is" - hoooo boy if that ain't the truth. Expect to learn why running an effective company is so hard, how to bring order to the chaotic world of business, how to establish predictable sales, why it's crucial to transform that into permanent profit, how to identify your biggest problem and much more... Head to https://nadlab.uk and enter the code MODERNWISDOM for 5% off everything. Extra Stuff: Buy Mike's Book - https://amzn.to/2VLvDBy Follow Mike on Twitter - https://twitter.com/MikeMichalowicz Take a break from alcohol and upgrade your life - https://6monthssober.com/podcast Check out everything I recommend from books to products - https://www.amazon.co.uk/shop/modernwisdom #business #entrepreneurship #startup - Listen to all episodes online. Search "Modern Wisdom" on any Podcast App or click here: iTunes: https://apple.co/2MNqIgw Spotify: https://spoti.fi/2LSimPn Stitcher: https://www.stitcher.com/podcast/modern-wisdom - Get in touch in the comments below or head to... Instagram: https://www.instagram.com/chriswillx Twitter: https://www.twitter.com/chriswillx Email: [email protected]

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  Well, I sent out a survey about five years ago when I was first contemplating this book. I said, I want to know what your biggest challenge is. And hundreds and hundreds of responses came back. And some people responded multiple times with different challenges. It became very clear, very quickly, that the biggest challenge business owners and entrepreneurs have is knowing what their biggest challenge is. So the biggest challenge is simply knowing what the biggest challenge is. There's a lack of clarity. Everyone was rushing to the apparent. So that became the thesis of the book, to resolve that.

• 0:34Chris Williamson?

  Michael Michalowicz in the building. How are you doing, man?

• 0:38Speaker 00

  I'm in the house. I'm doing well, mate. How are you?

• 0:40Chris Williamson?

  Yeah, very good, thank you. Nice use of mate as well. I like that. Completely anglicized everything, haven't we? Yeah, it's good, it's good, man. So we're talking about business today. We're talking about how businesses can upgrade and uplevel themselves. You know, we've got a period of entrepreneurial turmoil at the moment.

• 0:57Speaker 00

  Gosh, yeah.

• 0:58Chris Williamson?

  Big challenge. Let's forget the current situation that we're in. Why can operating a business be so difficult? Because you've got your product or your service. And there's customers who need it. So why, why does chaos ensue? Why is it not just plain sailing?

• 1:15Speaker 00

  Yeah, because there's a million moving pieces. And I don't know if that's the exact number, but there's so many different elements that we need to do. So it's a prioritization problem. When, when everything comes at you equally, I think many people come to work with a vision or plan for their work, I do. And yet you open email and there's this incessant, unstoppable chain of questions and direction and demand, along with your vendors and clients. So it's about being pulled in all these different directions. We don't prioritize. We don't know how to prioritize what we need to do. And therefore, we try to do everything with equal urgency. So, you know, most business owners, it's just this circuitous circle of not making progress, but there's also this relentless need to do something, anything.

• 2:00Speaker 00

  You know?

• 2:00Chris Williamson?

  Yeah. You use a term in your book about putting out fires. And it's funny that you say that because that's what me and my business partner constantly feel like we're doing is just like, you know, that game of whack a mole?

• 2:15Speaker 00

  Yeah. Oh, that's exactly what this is. You can never win, right? But, but the funny thing is in whack a mole, you get points every time you hit the mole.

• 2:23Chris Williamson?

  Yeah, I get it.

• 2:24Speaker 00

  And so in our business, you know, every time we accomplish something, we give ourselves that conscious or subconscious pat on the back and say, ah, another thing down. Superhero swept in, saved the day yet again. But then the next mole presents itself and you're whacking it again. So this is actually human biology. We put extraordinary significance in recent emotion and wins. So completing something feels good, but we don't, we're not good at considering the long-term consequence. So we get this little endorphin release, completed a task, got that done. But we're not considering how that task will serve us in the long term. So it just becomes this perpetual series of just whacking things down.

• 3:03Chris Williamson?

  I mean, perfect example of this is people that will be working from home at the moment for the first ever time. I've had a lot of messages from people saying, mate, I have no idea how you do this on a daily basis. They're used to working in an office, perhaps with more structure, with a boss who's some combination of giving them a direction and breathing down their neck.

• 3:24Speaker 00

  Yeah.

• 3:25Chris Williamson?

  And they're struggling. They go to work and everyone that's listening will know this feeling because it doesn't matter. You can even be someone with a very prescriptive job, like an engineer and not just a knowledge worker, working in the chaotic kind of mental space.

• 3:39Speaker 00

  Yeah.

• 3:40Chris Williamson?

  You go to work, you're busy all day, you're adamant that you've done things. And then you look back at the end of the day and you say, what did I do today? And you know, I don't know. I know I was busy and I know that I did some stuff.

• 3:54Speaker 00

  Yeah.

• 3:54Chris Williamson?

  But upon reflection, I feel like maybe actually I didn't do anything.

• 3:59Speaker 00

  You know, it's funny. So when when someone else is giving us direction, they are theoretically doing the thinking for us. So it does become very task oriented. And we can at least say at the end of the day, I did what I was told. And that that feels like accomplishment. When when we're the ones telling us what to do, that's when it becomes the real problem. And so these these people that are working, a friend of mine is called the Distributed Workforce. As opposed to work from home, it's a distributed workforce. There's this autonomy now. You're at home and you're the one who has to tell you what to do. And therefore, there's this propensity to move to the apparent issues. It's such a trap. There's countless apparent issues. The question, though, is which one's the impactful one? And of all the things presented in front of us,

• 4:43Speaker 00

  mathematically, only one thing can be the most important at the time. We just need a tool or a way to differentiate that. Otherwise, it becomes this, you know, mouse in the spinning wheel. We keep on moving, but aren't making forward progress. It's very frustrating, but it's human nature.

• 4:59Chris Williamson?

  That was a hammer blow that I needed reapplying to me when I read Fix This Next, your book. And that that point, there can only be one highest priority. There can only be one most important thing by definition.

• 5:16Speaker 00

  Right, by definition. And you know, these you hear these companies saying, here's our top 10 priorities for this year. It's like, that's bullshit. You can't have 10. What's the number one priority? Well, they're all important. Uh huh. And and that that caused the trap. And if we bring this down to more of a micro level on a daily basis or by an hourly basis for an individual business owner or employee, everything's a priority. Same thing, like all those little micro tasks are priorities. And that this is not mathematically possible. But what it allows us is to escape contemplation. What I believe between every action and reaction, there needs to be contemplation. What we default to though is in comes that request, action, I'm going to react and

• 6:01Speaker 00

  take an action around it, delete it or respond to it or complete the task. But contemplation is where we start prioritizing, the true nature prioritizing. What's important and needs our attention? What's important and can be deferred? What's unimportant and should be avoided? And then we can start, you know, differentiating things out, but we don't give ourselves time for that contemplation. That's the problem.

• 6:23Chris Williamson?

  I suppose as well, you can have too much time for contemplation, which is where that paradox of choice comes in, right? And you end up just wallowing around in your to do list with you just drowning in papers and you have no idea what's going on. So let's get into it. What is the problem that the fix this next analysis is solving?

• 6:42Speaker 00

  Yeah, so fix the core problem, I call it the survival trap. And how you can imagine this is if you take on a piece of paper, you write the letter A on a large piece of paper, right in the center, put a circle around it. That's representative of where we are right now, point A, right? It's the either crisis or maybe there's opportunity, but it's whatever we are considering in the moment. And in many businesses, particularly right now, it's crisis oriented. There's, there's demand on us. Well, any action, any direction we go away from point A will give us relief. So say the crisis is we need more sales. Well, if I draw an arrow from point A up saying, and that represents hiring a rainmaker employee. Well, I could also draw an arrow to the right that says we're going to cut prices by half.

• 7:26Speaker 00

  Draw an arrow to the left, saying that we can offer a prepaid coupon. You buy four products today and give us money and you'll get it in the future or whatever. You can keep drawing these arrows in any direction you go will get you out of point A, giving you relief. That's, but there's a problem here. If the business needs you going to point B and you can draw this out on that piece of paper in the bottom left corner of that paper, draw the letter B and put a circle around it. That's where the business needs you to go. You'll see that many of the decisions we made in this little example, the arrows weren't pointing in that direction. And in fact, in some cases, the arrow goes in the polar opposite direction, taking us further away from where the business needs to go. Well, I call this the survival trap.

• 8:07Speaker 00

  This, this urgent need to get out of crisis, but taking us yet to a new crisis. So what we need is a tool, and this is what I share and fix this next, a specific strategy to know where point B is. It's not about doing the right thing. It's doing the right thing at the right time. You know, sometimes we're doing the right thing. We're doing the wrong time. It's like, my business is working. Other times we're doing the wrong thing at the right time and it doesn't work. It's, it's the combination of two. We need to do the right thing at the right time. So we need clarity on where the hell we need to go in the first place.

• 8:38Chris Williamson?

  Yeah. Can you tell us that the biggest problem quote? Can you give us that? Cause I absolutely love that.

• 8:43Speaker 00

  Oh yeah, right. And this is the thesis of the book. I'll, I'll tell you how it came about, the conception. I, I have a sizable readership that I'm very blessed to have and in regular contact. Well, I sent out a survey about five years ago when I was first contemplating this book. I said, I want to know what your biggest challenge is. And hundreds and hundreds of responses came back. And some people responded multiple times with different challenges. It became very clear, very quickly that the biggest challenge business owners and entrepreneurs have is knowing what their biggest challenge is. So the biggest challenge is simply knowing what the biggest challenge is. There's a lack of clarity. Everyone was rushing to the apparent. So that became the thesis of the book to resolve that.

• 9:22Chris Williamson?

  I love it, man. If you can teach me and my business partner to work out what our biggest problem is, I will be, you, you will have done more than we've done in 13, 13 years of business because you're right.

• 9:34Speaker 00

  Well, that's my goal then we'll do it in the next 40 minutes.

• 9:36Chris Williamson?

  We got 40 minutes to go. Okay. So let's talk about the business hierarchy of needs. I recently had Scott Barry Kaufman on, the guy that hosts the psychology podcast, big time lover of Abraham Maslow. So we've recently, recently gone through Maslow's hierarchy of needs.

• 9:54Speaker 00

  Perfect.

• 9:55Chris Williamson?

  But today we're talking business hierarchy of needs. What are they?

• 9:59Speaker 00

  Yeah. And, and they're, they're very similar with one extraordinarily important and significant differentiation. So back to Maslow's, then you're very familiar with the basis physiological all the way up to self-actualization. What Maslow was arguing, and what's important as it translates over to the business hierarchy of needs, is that if a base level need is not being satisfied, that becomes a primary need. The example I use is the base level is physiological, breathing air, drinking water. The next level above that, safety needs, like seeking shelter from the elements, or clothing, or protection from harm. Well, if I'm outside, I live outside New York City, and some of these winters we get here are, you know, sub-zero, I'm talking Fahrenheit, so sub-thirties, minus thirty Celsius,

• 10:43Speaker 00

  you know, freezing temperatures. If I'm outside in a t-shirt, and these temperatures are coming in, I will biologically respond by seeking shelter and clothing immediately, because otherwise I will die from hypothermia. Conversely, if, while I'm out there, all of a sudden someone puts a plastic bag over my head and wraps duct tape around my neck, I'm now suffocating. My primary need has shifted to even a more base level need, physiological, I need air. I will tear at that bag to rip it open, because I'm dying for air. The freezing doesn't matter, until I get that bag open, then I'm running for shelter. So Maslow says if a base level need is not being satisfied, we revert to it. Well, our business has a similar structure, but there's one significant difference, and I'll explain the structure of business.

• 11:28Speaker 00

  The significant difference is this: we are not biologically wired into our business. You know, we are biologically wired into ourselves. Therefore, if you're walking down a dark alley in Newcastle, and you, all of a sudden, get the creeps that someone's gonna attack you, you should turn, yeah, turn around and walk away. And the reason is, is your senses, sight, smell, hearing, are triggering that emotion. In our business, we're not neurologically wired, yet, business owners consistently say, Chris, "Oh, I trust my gut, I need more sales, I can feel it, I need it." No, you can't feel it, it's impossible to feel it, because you're not neurologically wired in. It's maybe a beacon, a call to action, maybe there's an instinct that's triggering, but we actually need the empirical data.

• 12:12Speaker 00

  Here's the business hierarchy of needs and you and your partner can start using this in your business right now. The base level needs for all organizations are sales. That is the creation of oxygen for a business. We need inbound cash flow, but immediately above that is profit. Profit is the creation of stability for an organization. Now, these two are already interrelated and all the levels are. The foundation must be strong enough to support the level above it, but it just needs to be adequate. For example, I need sales and I ask myself in my business, am I creating sales, any sales? And if the answer is yes, I then ask simply the next question, am I creating enough sales to support a degree of profitability? Are my sales adequate? And this is where businesses already get messed up. Many businesses owners don't consider the

• 12:55Speaker 00

  stability of the organization. They simply say, sales cures everything. We need to sell our way out of it, which is the biggest bunch of lies ever. Sales do not cure everything. Sales actually translates to organizational stress. The more sales I have, the more responsibility placed on my organization. And if I'm a small company and I run the business, that's more stress on me. So sales is important to the degree that it supports profitability. Profitability is stability. And sadly, right now with this crisis going on with COVID and stuff, I see business after business here in where I live outside New York City collapsing because all they cared about was

• 13:35Speaker 00

  sales. They don't have any runway of cash, no protection, no stability. And within weeks, some of them in days of the crisis are out of business for life.

• 13:44Chris Williamson?

  I mean, I think that reflects business owners and generally people's personal preclivities with the way that they set their own finances up, right? There's that statistic that I think 80% of Americans don't have more than one month of cash set aside. You know, like that month's gone.

• 14:04Speaker 00

  That month's been gone. That month's gone and we're done. It's abysmal. It's absolutely abysmal.

• 14:07Chris Williamson?

  When you ratchet that up to the business level and you're like, that's, we had five working days of capital. That's how much liquidity we were playing with.

• 14:18Speaker 00

  Yeah. So what happens is desperation kicks in. Now we start doing desperate moves to save the business. Big sales, big discounts, anything to save the business, which if it staves the immediate moment, if it saves you, you're simply a point A and you drew an arrow out, the crisis will be worse because now how are you going to recover from this? You're making less, you're making less profit. You've even undermined the company more. So people focus on how much they make, not how much they take. And those are radically different. Level two in the business hierarchy of needs, how much is your business taking? That is the stability of the organization. But once we achieve that, we simply ask ourselves, do we have a degree of stability? Do we have enough stability to support the next level in the business hierarchy of needs, which is order?

• 15:02Speaker 00

  Order is the creation of efficiency. Efficiency gives a business strength because organizational efficiency reduces the dependency on any individual. If the business owner gets sick, and that used to be an analogy, now it's very real, you can get sick, and are taking out of the business for weeks or months, can the business continue to deliver on its values and promises to its clients? And this isn't true for the boss, it's true for anyone in the organization. And there's other opportunities in efficiency that as a business delivers on efficiency, it can bring more value and more margin to a business benefiting profit. So these all work interrelated. The remaining two levels in the business hierarchy of needs are impact. Impact is the creation of transformation.

• 15:45Speaker 00

  This is where your business is beyond the transaction of the service or products it provides. It's about transforming the lives of the people it touches. And then the highest level of business is called legacy, which is the creation of permanence. When a business achieves permanence, what I've found is that's when the business owner realizes they were never business owners. They were stewards of this organization. It's its own entity, and it's meant to live on without them, beyond them. So these are the five levels. And the final thought I want to share about the business hierarchy of needs is this is not a ladder. It's not about climbing to the top and waving to your friends from the top. What it is, is a pattern of needs that need to be addressed. And we simply ask our questions, is the base adequate to support the level above it?

• 16:28Speaker 00

  Is that level adequate to support the level above that? And if not, we have to revert to the base. Like building a building, a structure of five stories, you don't start on the fourth story and say, that's what's put a building up here, and it falls into thin air and collapses. And at the same time, you don't build this massive basement foundation and put a little tool shed on top of it because it would fall in it. They have to work relationally.

• 16:51Chris Williamson?

  What are some of the common mistakes that you see business owners making, which go against the fix this next analysis or the business hierarchy of needs? How do people get this as wrong as they can get?

• 17:07Speaker 00

  Yeah, well, I'll give you the two most common because it comes right to mind. The first most common, particularly in startup businesses, is they focus at the impact or legacy level. They go into business saying, we want to change the world. I will do everything to be the business that just changes everything. And then they don't think or consider the foundation of sales. They don't master profit or efficiency. They just go, we're changing the world. And very quickly, the business has no structural rigidity below it and the business collapses on itself. There's these great ideas and concepts that just deflate upon themselves. So that's the most common problem. The second one is sales cures all. It is a horrible belief.

• 17:50Speaker 00

  They just build this foundation and foundation of sales. True story, I have a friend who, a dear friend, who had a company at the $250 million US in annual revenue. And yeah, exactly. And that's what people say, whoa, that's a big business. And sadly, it collapsed within two weeks, not of the COVID virus, of a bad strategic decision they made six months ago. And the entire business collapsed like that because they made a bad strategic decision. They didn't consider the next level of profit. They didn't bring financial stability to the organization. So it's a shame, but many business owners think that sales cures all and our ego is tied to it. That's the kind of a third component.

• 18:33Speaker 00

  It's like, it's all about the entreprenences. You know, I gotta keep up with you. You're doing a million, I gotta do two million. You're doing two, I gotta do five. It's this constant back and forth of the vanity metric of sales and revenue, without the consideration of sanity of cash profits.

• 18:49Chris Williamson?

  Man, top line is bullshit. Top line has been bullshit for as long as I've done business. So I'll tell you a little bit about what I do. I run nightclubs. That's been my job. I'm a club promoter in the UK. We're fortunate, we've got a lot of cities, Newcastle, Manchester, Leeds, some big party cities. People like to go out and they like to have good events to head to. And thankfully, we can service that need.

• 19:14Chris Williamson?

  In our industry, it's very easy. It's like, it's kind of like a football match or like a sports game. Yeah. Every week and you've got your match and your competitors, your rival teams have all got their matches. And they say, we did, we did 2,000 people tonight. Well, we did 3,000 people tonight. And you're like, well, I know for a fact that your venue capacity is only 1,800. Like, where did you fit the extra 1,200 people? But there's, so I see this, right? I see this manifest and everybody that's, that's listening will know the friend that talks about. Maybe they don't give out the pure figures of how much money they took, but it's, it was this busy. Or we did a restaurant owner that always talks about how many covers they did last night. It's like, you're not telling me

• 19:59Chris Williamson?

  about how your business rates on that in ridiculous location that you've got are completely pulling your arse out. And, and, and you're having to pay yourself dividends out of the company in a desperate time because your director's wage isn't covering the car payments that you've got to do or your mortgage or whatever it might be. And again, as a final example that kind of comes from my own experience with regards to this sales versus profit relationship.

• 20:27Chris Williamson?

  Typically, price elasticity of demand would suggest that when you put the price up, your level of demand goes down. So me and my business partner, you can imagine we have these club nights. Some of them are really cheap entry, you know, a one pound for a very early on entry and then it maybe goes up to five and six pounds later on. And, um, we were looking at, we were like, I just can't get this night to, to become as profitable as we want it to. We know it's popular. We know that it's good. How come? And we're looking at stripping back costs and doing this, that and the other. But you're always concerned about putting your price up because you know, there's so many competitors that can come in. They can always jump in and go and get it. And I, it's usually my business partner that's the, the guy that's kind of on the, the grind for the finances stuff.

• 21:08Chris Williamson?

  But for once I was like, look, man, let's just, let's see what happens if we put the entry price up across the board by a pound. We did it. The numbers didn't move and you add, because of the way that there's no, there's no variable costs. There's zero variable cost. If you walk past the front door or if you go in, it's the same. I don't have to make you the food. I don't have to sell you the drink. I literally take the money from the door. And it was like, that's 800 pounds a week on your bottom line, bottom line and top line for nothing. So to loop back around, top line's bullshit, bottom line's everything. I agree.

• 21:38Speaker 00

  Yeah. And people use, I call it entrepreneurial rounding, right? So it's like, oh, you know, you know, 10 people show, it felt like 50. So I'll say 50. And, and people say this with revenue too, you know, I can't tell you how many companies say they do a million dollars in revenue and I'll be shocked if they're doing 500,000 or, you know.

• 21:56Chris Williamson?

  It's rounded, is it rounded to the nearest million?

• 21:59Speaker 00

  Yeah, you round to the nearest million. Yeah. And it's funny, but we put such significance in it. I'm trying to change the question here. And when people say, how big's your business? And people may not be so bold to ask you your revenue, but they'll say, how many employees do you have? They'll try to guess it. I say, hey, before we have this conversation, let's talk about how healthy our business is. And that's when people are like, our deer in headlights. And, oh, what do you mean, how healthy? Well, let's just talk about the only number that matters. Let's talk about profit. And it becomes a uncomfortable conversation for people.

• 22:27Chris Williamson?

  Very uncomfortable.

• 22:28Speaker 00

  But that's, that's all that really matters. I don't believe a big business is better. I believe the right sized business that's very profitable is better.

• 22:35Chris Williamson?

  Both myself and you will know some business owners who have a couple of employees and turnover, the, the top line is okay, but their, their bottom line is the sort of figure that huge hundred person, medium sized enterprises would kill for.

• 22:55Speaker 00

  Yeah, I salivate when I, yeah, there's people that do that. And I aspire to be, I was the other guy. I was the guy who was bragging, hey, did seven mil this year. And I had, I had lawn furniture in my house because I couldn't afford furniture. I, I want to be, and I'm behaving consistently with it for quite a period of time now, is I actually am very proud of our small business. We have 12 employees and, and most of our employees are part-time employees. And I am proud of that. And we are achieving profit margins that are very comfortable and, and give us a lot of protection. And that's what I want to grow. And I know people that have achieved that 10 times even healthier than I have. And that's the aspiration for a good business. I really believe that.

• 23:38Chris Williamson?

  Well, man, look at this, this age of what we're doing right now, you know, your writing and podcasting. We've got some podcasters, even medium sized guys in the US, less so in the UK, some medium sized guys in the US that I know that are turning over a hundred grand a year as a, as a side hustle for doing their podcast.

• 23:58Speaker 00

  Yeah.

• 23:58Chris Williamson?

  Just for selling ads.

• 23:59Speaker 00

  And of that hundred grand turnover, they're probably keeping like 90 grand in their pocket.

• 24:04Chris Williamson?

  What are their costs? Oh, well, my, my camera lens broke because I sat on it. And oh, I need to pay for my, I need to pay for my podcast hosting and maybe, maybe get a new microphone or whatever. You're totally right. You can run these hyper lean businesses. So yeah, definitely. If there's any entrepreneurs that, that are listening and are thinking, yeah, I, I've kind of been a bit focused on, on sales. And now I'm being told by Michael, I need to perhaps flip that, look at, look at my profit a little bit more. But how, how do we move from sales to profit? I mean, there's only really two figures, right? There's how much are you taking and how much are you spending?

• 24:41Speaker 00

  Exactly, exactly. So profit is, is driven by exactly that thing, cost control, margin. Margin is the spread between what you sell something for and what you collect for, right? So we can always increase, or we should seek ways to increase margin and reduce cost. The interesting thing is cost can only be reduced by so much. There's a certain point you can't cut costs anymore because either you're cutting the muscle of your company, meaning you can't produce, or you've hit zero and you can't go below zero. Margin can always increase. So what I do with a lot of businesses is if they have some degree of sales, they have the, the base business hierarchy achieved.

• 25:19Speaker 00

  We then say, well, what are the necessary costs for that sales? And we can cut in many businesses, 10, even 15 or 20%, like, like that, unnecessary subscriptions and so forth. You can cut a certain amount of fat out of the business, but at certain points are cutting muscle and you gotta stop there. Then we look at the margin and that's where the big opportunity is. And your example at the door, one pound versus two pounds, like that's you doubled your margin. That is, it's a hundred percent growth. That's unbelievable and no one flinched. That's the big opportunity. And as I went through the business hierarchy of needs and fix this next, I was interviewing companies. I found that the biggest resistance about increasing margin is actually not from the clients themselves. It's from the business owner thinking that they can't do it in the first place.

• 26:03Chris Williamson?

  Oh man, you are, you are striking at the heart of entrepreneurs across the world at the moment. Like especially if you're a small business owner, you feel the fear that you have, the level of anxiety that you have. When you think about putting the price up is unbelievable. I remember the first time that we started, this was a long time ago now, first time that we were going to raise the price on the door. And I was adamant, I was like, right, no one's going to come, no one's going to come from two pounds 50 to three pounds 50 before 11 o'clock. And like, it's a Saturday, looking back now, I'm like, it should have been six pounds. It should have been two times, it should have been three times that. But at the time, you're just terrified, completely, completely terrified. No one's going to come, everyone's going to think it's shit, it's never worth anything.

• 26:48Speaker 00

  And the funny thing is, that is the exact feeling. We go through all of the worst case scenarios, we're going to lose clients and so forth. Here's the truth, if those people didn't come and when you're charging three pounds 50, when you're charging that and clients don't come, that means they don't value that venue as much as you want them to. If you're going to say, you know what, an extra pound, no way, this is not for me, those are cheap clients. Do you really want those clients in the first place? And that's what we got to consider. If people are not going to buy something at a higher price point, do they really value what we're offering? And that also means that then the onus is on us to share the value, to show the benefits of paying the additional money. And that's the, the challenge that many businesses have is actually just enunciating what value they deliver.

• 27:32Speaker 00

  Often they just increase price and they're afraid of increasing price because people will leave. But they don't even consider, if I do increase price, I need to tell them the value that they're really getting. That's inherently there in many cases, they just need to make it public and then. You know, when you do it, you're often surprised like, oh my gosh, no one blinked an eye. I should have done this years ago. I'm a fool.

• 27:52Chris Williamson?

  Well, in other businesses that aren't as easy to acquire customers, like I say, it's the same cost. There's no variable cost. There's essentially no extra work for us to do. A thousand people versus 500 people. DJ is going to be there, door staff and us and blah, blah, blah. It's the same. It's essentially the same event, but a lot of other businesses aren't. And the interesting relationship, I think you touched on it at the very beginning where you said that increasing sales actually increases headaches a lot of the time. And if you had the choice to make the same profit at half the sales that you're doing at the moment.

• 28:28Speaker 00

  That's heaven.

• 28:28Chris Williamson?

  You know, like there's a stage where you get to where you're like, well, I essentially could have the entire business running off the back of one client, which is why you're now no longer hedged against risk if that one client decides to go away.

• 28:38Speaker 00

  That's right.

• 28:39Chris Williamson?

  But everybody knows where that, or you should know where that kind of middle ground lies. And it's like, yeah, if you can continue to use price as an indicator of quality, continue to move your way up to higher and higher quality clients who mean business more and more, especially if you're looking at B2B, I'm going to guess, you know, if you're, if you're in that sort of a business and you keep moving up that better, better client range. Another perfect example, one of the co-hosts to the show, Johnny and Youssef, they used to do online coaching, PTs, doing diet plans, this, that and the other. 50 pounds, 100 pounds for an eight week beach body ready type thing.

• 29:13Speaker 00

  Yeah.

• 29:14Chris Williamson?

  They realized that the low cart value stuff, although that was what they understood, it wasn't what was getting them fired up, they switched and they started coaching coaches. So their cart value is now from 80 pounds to a thousand pounds.

• 29:28Speaker 00

  Yeah.

• 29:28Chris Williamson?

  And they'll do the same number of sales calls, but then now, and their conversion will be lower. They're not going to sell as many at a thousand as they were at 80, but the people that they work with, they love, they're serious. You don't have someone who just happens to spend a thousand pounds on a course. It's like, I'm putting enough money in for this to be serious. So there's two examples from people that the audience will know personally from listening to this show, who have had this very situation that you're talking about right now happen in their businesses.

• 29:56Speaker 00

  It reminds me of a story of the University of Mississippi and the power of this business hierarchy of needs and how making shifts like you're saying and just changing the perspective that you can generate the same amount of income with lot less effort. This story just shocked me. So, University of Mississippi is in what we call the Southeast Conference. This is a conference of universities and there's, I think, 15 universities in there. University of Mississippi, also called Ole Miss, Ole Miss had the lowest applicant rate of all the SEC schools back about 15 years ago. So, people were applying everywhere but Ole Miss and

• 30:38Speaker 00

  they realized that this is a sales problem, right? We're not getting enough applications, not enough prospects. Well, they do in a study and they realized that students pick a university within typically five minutes of visiting that campus based upon how the campus looks. It's a very instinctual, "I like this place, looks beautiful, I'm in", or "this place looks like shit, I'm out." Well, Ole Miss unfortunately had the reputation of looking like shit. So, that was a sales problem. They weren't attracting enough prospects. Sometimes in this business hierarchy, you can get two birds with one stone. Well, they realized they need to beautify the campus. They talked to, there's a guy named Jeff McManus there, he oversaw the landscaping of Ole Miss and found that the landscaping team couldn't

• 31:21Speaker 00

  maintain this 1,000-acre property adequately. They could just keep up with the mowing and that was it. They couldn't do the beautification projects, installing plants and flowers. Well, Jeff talks with his team and says, "Why are we struggling to beautify the campus?" And they said, "Because we're so inefficient." So, the team talked about a challenge at the order or efficiency level. He said, "Well, what's the problem?" These guys said, "We have these sit-on mowers that we go running down on the campus, mowing the lawns, but the tree limbs are so low that we have to..." jiggle back and forth around the tree limbs to mow. When we get to a mulch patch where we have all the mulch, they're square patterns and we have to do these angular cuts and it slows us down. So they made some suggestions.

• 32:04Speaker 00

  They said, let's just cut the tree limbs up about two or three meters so that we can go right under the tree limbs in a straight line. Let's make the mulch patterns oval shaped so we can do sweeping motions and keep going on. They made other changes too, but it was all about the efficiency of these mowers. They were able to mow the entire 1,000 acre property now in half the time, which meant the other half their time they had available to do beautification projects. Within a year of these changes, the efficiency at Ole Miss had improved so much. The beautification projects were implemented. Application rates started to skyrocket back in early 2000. Because now the students were coming to campus and saying, this is beautiful.

• 32:45Speaker 00

  Ole Miss today holds the prestigious title of having one of the most beautiful campuses in all of the United States. Because they identified the hierarchical needs. They said, we have a sales issue. The sales issue was triggered by another opportunity in efficiency. They combined the two, killed two birds with one stone and Ole Miss benefited in a significant way.

• 33:05Chris Williamson?

  I love that. So let's move, let's move from profit to order. How are we moving from profit to order?

• 33:11Speaker 00

  Yeah, so the question is, do we have enough stability in the organization to bring about organizational efficiency? Some businesses try to get more and more efficient. How do we get more done with less effort without considering the demand it puts on resources to do that? As you bring more efficiency to a business, it takes more effort to achieve it. One example too is in scalability, the bigger you get, efficiency works to your advantage. There was a manufacturer I interviewed in Pennsylvania. They make playsets. They were the, at the time before they sold their company, they were the biggest playset manufacturer. They're now a part of a conglomerate. And they had this massive, massive machine. And this machine would paint the playsets. What was interesting was the setup for a machine to get it ready to start running a run

• 33:55Speaker 00

  could take about three to four hours of effort, maybe even more time. So when, when you spend three or four hours doing it, if one playset goes through and it gets painted in five seconds, it didn't get painted in five seconds, it got painted in four hours and five seconds. Well, when the second one went through, it didn't get painted in five seconds. It got painted in two hours and five seconds, right? Cause that setup time has been split in half. As more would go through it, the setup time became less and less important. So once you really get the steam rolling and they were sending thousands of, of places through, they are making money big time. Well, that's why efficiency is so important at this level. We first need to have some kind of sales, consistent sales in there, profitability, sustainability. And that must be at a level of significant enough that we start focusing on efficiencies

• 34:40Speaker 00

  because it brings value back to the organization. That's how it works. And as you get more efficient, it may trigger you to say, now we can support more sales. Let's go back to the sales level. So instead of climbing a ladder here, we start cycling back down. We build the base of sales stronger, allows more profitability, allows more efficiency. We cycle back down and we'll start ping ponging around as the business grows. Kind of like a, like a volcano, a mountain is formed by a volcano flowing down more lava. And then yet again, and again, and the mountain gets bigger.

• 35:10Chris Williamson?

  Yeah, I get it. The, so order your middle section of the, of the pyramid. I think this is where me and my business partners spend a lot of our time. We're very process oriented. We like to have, there's a document written for everything. Anything that's ever happened that we think might happen again, there's a process written for it. And I think you touched on that about the, um, the owner or the CEO, the MD or the partner or whatever, being ill or being unavailable for a period of time and the business being able to continue without them.

• 35:40Speaker 00

  Yeah, I call it the four week vacation and sometimes four vacations are not planned.

• 35:45Chris Williamson?

  We're all on one at the moment.

• 35:47Speaker 00

  Yeah.

• 35:47Chris Williamson?

  We're all on one at the moment. Yeah. Well, well, I mean, it's a Corona vacation, isn't it? Yeah.

• 35:51Speaker 00

  Yeah. Yeah. Oh, yeah. Touche. We're all on that. But it was funny. You know, I speak a lot in the US occasionally in Europe. And in the US, no one takes vacation. You're actually considered weak if you don't work through vacations that you do take. And it's a horrible mentality because the problem is a business becomes, is being carried on the back by the business owner. And if they are taking, have a coronavirus or something, the entire business stops because the business owner has failed and it can go under. So the four vacation, the idea is if someone can leave a business for four consecutive weeks and the business continues to flourish with them fully disconnected physically and digitally, there's a business that's no longer dependent on the owner, it can grow on its own. Well, when I toured through Europe, I was in Germany recently, I'm like, you gotta take this four vacation.

• 36:36Speaker 00

  You know, people laughed at me. They said, welcome to August.

• 36:40Chris Williamson?

  Yeah.

• 36:40Speaker 00

  Europe shuts down.

• 36:42Chris Williamson?

  Yeah.

• 36:42Speaker 00

  And it's like, oh my God, this is predominantly an American phenomenon, but sadly, it's seeking, it's kind of seeping out all over the world that we need to be workaholics and that's wrong. We actually need to prove that we can remove ourselves from the business because it will happen. Maybe it's not a vacation, maybe it's an illness or you get hurt, but it will happen. And we need to remove that dependency of being on an owner.

• 37:04Chris Williamson?

  Anyone that's listening who runs a business or even is just in a business where you get to know who the CEO is, just take a second and think, what would happen if the boss left for four weeks now? And especially if you're a business owner, that visceral, that fear that you've got that's rising in your chest that makes you want to throw up onto your AirPods. That's, that is, that's how I, we felt for a very, very long time. And especially in this world now where increasingly you've got.

• 37:36Chris Williamson?

  Lots of small businesses, you know, I wouldn't like to guess what the average number of employees is in a business in the UK, but I'd guess maybe something like 20, probably, you know, like or 20 or 50, something like that, like a typical, typical sort of size company. And that means that the owners moved up through the ranks. They know the office, they, the landlord that owns the thingy, they go out for beers with the guy that owns the office block that, you know, everything, every little bit. And you've got your claws into all of these different sections of it. And every one of those claws needs unpicking, one by one, all the way along to allow you to relinquish that control. It's very emotionally for something that's supposed to be sales, profit, order, efficiency. It's actually, you get into the

• 38:20Chris Williamson?

  point now where you're like, it's an emotional interaction you need to let go of.

• 38:25Speaker 00

  And I loved your example because it is talents in the business and the removal is not like you just release it. Sadly, actually, though, that is the perception of many business owners, that one day there'll be a switch flipped somehow magically that all of a sudden the business runs itself. You're like, I'm retiring, I'm selling this and I'm going to make tons of money. But the reality is this is a throttle. We have to slowly and specifically and deliberately extract those claws, one step at a time, from the business. And it can take sometimes months, in many businesses, years to extract the owner fully. I've implemented it in my own business, and I've now reinserted myself. And what I mean by this is I was running the operations, I was involved in every little task. Well, I started to remove myself. I've now brought on

• 39:08Speaker 00

  a president that runs the company. Her name's Kelsey. She runs the organization. And now the business can run on the day to day completely without me. It's freed me up to do what gives me the most passion, which is be the spokesperson. I love talk and shop, like what we're doing now, Chris. I love this. And I love writing books. So now I can do the things I'm passionate about. But if I get sick or I leave the business, yes, the spokesperson role is not filled, but the core essence of the business will continue on.

• 39:35Chris Williamson?

  Here's a perfect way for people to frame this as well. If you're a business owner that's listening, and you've never relinquished that control, but as you've just explained there, Michael, you were able to bring someone on who was able to do the things that you were capable of doing. Think about that as a business owner, if you were able to bring someone on and write them a document that was how to be Michael doc doc X like and just write them a big thing. This is what this is how you do me. It's like, if someone can do the job that you are doing now, off the back of a document that explains how to do it, where is your unique talent being placed within this business? You're just, you're just a guy. You're just a bleep, bleep, bleep, bleep, input, output. Like, that's, that's it. There's no longer

• 40:20Chris Williamson?

  your unique creative vision that's being deployed to the business. You're just computer program.

• 40:27Speaker 00

  That's right. We're avoiding playing into our strengths. And the funny thing is, Kelsey doesn't replace me. Kelsey's like 10 times better than me. She understands, you know, her super strength is in human connection. She, my colleagues here have an adoration for her that supersedes the adoration or that they have for me. And it's almost painful to say that, but it's realistic. And I love, I love my colleagues. I will do anything for them. And I feel the same way about me. But Kelsey, Kelsey has that something special. They will take a bullet for her. They will protect and defend her because she protects and defends them. So not only does she replace me, she's amplified the strength of our organization. It's funny, as I was writing Fix This Next, I was looking

• 41:10Speaker 00

  at organizational charts and most org charts are pyramid structures. Up top, it says, it doesn't even say president, it says the word me. There's a long arrow, you know, long, long line going down to the minions down below. That's the vice president of sales, all these different things. Well, those structures are a, a structure that plays into titles, not into strengths. A better organizational structure is, is, is matching someone's tasks or talents to the tasks they have at hand. A web-like structure. We actually don't have, no one has titles here. I act as a spokesperson. I write books, but I don't have a title. Kelsey actually is the only one with a title. She's the president.

• 41:51Speaker 00

  Because we need that for certain discussions and stuff, and everyone needs to know that, you know, if you have a small business. But no one else has a title. They just serve roles. And what that's allowed is us to be very dynamic in our capacity. When we have a massive order for, say, books that we're shipping, usually our distributor does it, but if we have to do it, we have three people that can shift over to that, no problem. If we have a large amount of customer service calls, we have one person that caters to that. But with two other people cross-trained in that, we can shift resources there. So by doing role specialization and matching to people's talents and removing titles, it allows this almost organic shifting of the business. And people don't feel compelled to stick within their role of a title.

• 42:32Chris Williamson?

  Yeah, I love it. So we've got two left. Impact and legacy. Let's talk briefly about impact.

• 42:37Speaker 00

  Yeah, so it's a fascinating transition that happens at this level. The first three levels we talked about is about getting. We need to get sales, get profit, get efficiency in our organization. Impact, we flipped the models about contribution now of giving. Impact is where we are serving our client beyond the transaction. It's life-changing for them. And when I say life-changing, I don't mean like you've saved someone's life, but there's a shift in their life. There's some kind of meaning beyond the commodity, and they put significance in you. The example I like to use is Harley-Davidson. Anyone can sell a motorcycle. By Harley-Davidson, you now belong to the Harley-Davidson community. You're a weekend warrior, a tough guy, or whatever the title is. But you belong to a family. Now, you don't have to transform people by making them belong to a community.

• 43:20Speaker 00

  There's countless ways to do it. But we want our clients saying, wow, this is something greater in my life than I ever expected. And they see that value. That's transformation. And I will tell you this, you don't have to do it. I don't think Walmart transforms people's lives, at least not here in the US. They actually probably deplete people's lives, quite frankly. But they do deliver on the three levels very well. They're, they're, they offer sales, they offer a value of cheapness, they're profitable, and they're efficient.

• 43:50Speaker 00

  But I don't know if we're transforming lives. Some businesses can make this election. And this is when you start realizing to the degree you are a steward of something good here. You, you have a platform now of service. But it's a choice to be there and I don't think it's better or worse. It's just a choice. The highest level is impact. Impact is the creation of permanence. And this is where you

• 44:10Chris Williamson?

  Legacy.

• 44:11Speaker 00

  What was that?

• 44:12Chris Williamson?

  Legacy, not impact.

• 44:13Speaker 00

  Legacy, I'm sorry, legacy. Legacy is the creation of permanence. And legacy is where you set your business to live into perpetuity. It's where you realize even you, the founder, aren't important in this. I mean, you are significant. You served a role, but it's the business that's important and I can continue to have its impact as a legacy into perpetuity.

• 44:32Chris Williamson?

  This was a question you've already touched on it there. I asked, should every business aim towards impact and/or legacy? You know, it's gonna be, it's gonna be challenging for me as someone who gets 18 to 21 year olds drunk for a couple of years while they're at university to have a legacy, you know? And I, I, I appreciate that. I understand what it is. So how, how do I know? How do I know whether I should let go? And also you've said as well, some people kind of set the sights on the peak of the mountain and everything else falls away.

• 45:04Speaker 00

  Yeah, yeah. So the answer is no, not everyone should do it. We should speak to what our heart calls out to do. I have a friend who's got a business that does 15 million US. It is efficient. It doesn't need them. He's making money and he's like, I'm off to the golf courses. He's like, I'm gonna go golfing every day of my life now. Yeah. And, and I'm like, that is good. And I actually would argue it's more than good, it's noble because the company is providing for employees. It is giving great services. It's, it's supporting the economy. But I also feel one day he'll wake up and say, is this all there is? And I think that's the calling. When there's that sensation, is this all there is? We realize that our business or a new business can be a platform for expression. I've had, for me, that transition.

• 45:49Speaker 00

  I had businesses that made money and I became a millionaire and I thought it was all about the cars and the big house and the vacation house in Hawaii. I thought that's what it was. And then I had the awakening for me, I said, no, no, there's something else going on. And that's when I decided to devote myself to having impact and legacy. Additionally, I'm absolutely responsible to master sales profit in order. You can't skip levels here. You can't just go out and say I'm going to change the world. That's a business that'll collapse on itself. So I am very regimented in driving sales that are adequate to support profit, profit that can bring about efficiency in order for me to have impact and legacy.

• 46:27Chris Williamson?

  Man, I love it. Before we go, I know that we're tight on time. I got one final thing. Upon you speaking about the fact that you manifested some of this material wealth, then got red pilled either by a combination of yourself and the way that you placed it you were in your life and then realized that wasn't it.

• 46:45Chris Williamson?

  I was listening to Naval Ravikant on Tim Ferriss and he gave this quote and man, it just hit me straight between the eyes. And he said, "It is far easier to fulfill your material desires than it is to renounce them."

• 47:02Speaker 00

  Very true.

• 47:03Chris Williamson?

  I wonder whether or not part of your transcendence, this fulfilling of potential and the change of dynamic has been serviced by the fact that that box has been ticked, that Michael no longer has anything to prove on the, "Yeah, I've had the home in Hawaii. I've had the this."

• 47:23Speaker 00

  Yeah.

• 47:23Chris Williamson?

  I think, I think a lot of people might need to go through that fire and actually tick those boxes. Does that make sense?

• 47:33Speaker 00

  It totally makes sense. Like, it's funny. So we all know or heard that it's not about the money. It's not about the acquisition of stuff. But I also agree that the only way for most of us to discover that is to go through the experience.

• 47:49Chris Williamson?

  It's all well and good, someone telling us that, but look at the people who say it.

• 47:53Speaker 00

  I know, and they fly in their private jet over you and say,

• 47:56Chris Williamson?

  Fuck you, Warren Buffett. Like, stop telling me about how zen you can be and how easy and simple life is because you no longer have to play that game. You have already done it. So man, I've absolutely loved today. Fix This Next, your book will be linked in the show notes below. If people want to hassle you online, where should they go?

• 48:15Speaker 00

  Go to MikeMotorbike.com. It's actually Mike Michalowicz, but no one can spell Michalowicz. Mike Motorbike, as in the motorcycle, is my nickname from high school.

• 48:24Chris Williamson?

  Yeah.

• 48:24Speaker 00

  So thou forward to my site. My books are there, free chapters. I used to write for the Wall Street Journal. You can get that. And I have my own podcast there, too.

• 48:32Chris Williamson?

  What's the podcast called?

• 48:33Speaker 00

  It's called Entrepreneurship Elevated.

• 48:35Chris Williamson?

  I love it. That'll be linked as well. You know what to do. If you've enjoyed this episode, like, share and subscribe. All of the stuff that we've gone through today will be linked below. Man, I think I really love the framework. I think it's, it's great. And it's nice to read a book. I did five years at Newcastle Uni Business School. And I constantly read things which didn't reflect my experience in, as a young business owner. And this is the precise opposite. I'm coming up with stories that tell you the concept from your book, because I'm seeing it happen. So, man, awesome. Thank you so much for your time, Mike.

• 49:10Speaker 00

  Brother, thank you.

• 49:28Speaker 02

  Mr. President, my company told me of the explosion on our rig on October 2nd. Causing massive water displacement and triggering a tsunami. They all heap the blame on me.

• 49:38Speaker 03

  Tom Cruise is. Digger got us into this mess and Digger's gonna dig us up. From the director of Birdman and the Revenant.

• 49:45Speaker 04

  What would happen if I stopped drilling? You're stalled, you're freezing there, that's what.

• 49:49Speaker 03

  With great power comes great deniability.

• 49:52Speaker 04

  I'm not the first nanny.

• 49:54Speaker 03

  Digger. See the trailer online. Only in theaters October 2nd. Rated R. Under 17. Not a middle without parent.