I love offering listeners fantastic benefits, such as some great discounts for products. These include the PM Grow Summit, website production through Property Managed Website, showing services through Tenant Turner, and more, with new offers coming all the time! You can see a complete list of the current offers at propertymanagementmastermind.com. For all of these offers, use the discount code “Brad” to secure your discount.
Today’s guest is someone truly special whose work spans just about every industry, not just property management. Mike Michalowicz is the author of the groundbreaking book Profit First, which revolutionized the way that many businesses handle making money. We’ve implemented his system in his business and are already seeing fantastic results.
Imagine this: you run your business solidly, and at the end of the year, you see a nice, fat number for your profit that year. Your bank account, though, doesn’t reflect this. In fact, if you’re like the majority of small business owners in the United States, your business is probably operating from month to month, and paycheck to paycheck. So where, exactly, has that profit gone? The sad fact is that it’s already spent and isn’t truly profit in the sense that we think of it.
Here’s why that happens: we think that the formula is sales - expenses = profit. Logically, that makes sense, but in reality it doesn’t work out that way. Instead, we need to swap the formula into a far more effective one: sales - profits = expenses. In other words, instead of running a business and thinking of everything left after we pay all the expenses as profit, we need to pay ourselves first. Whatever is left after you set aside a designated amount of profit is what you’re allowed to use on expenses.
This doesn’t mean you can jump right into setting aside 25% or 30% of your sales as profit. Instead, think of this profit-first methodology as being like exercise. You wouldn’t go straight from being a complete couch potato to running a full marathon, right? Doing so would just leave you injured and in worse shape than before. Similarly, you need to gradually build up your profit. Start with a very small percentage, and gradually increase from there.
Mike will explain all of this in depth, and I’ll talk about how it relates to the property management industry. We’ll also discuss why it can be a great idea to split your business into different parts if you offer different services. This is going to be a great episode, so tune in to learn all about how to truly see a profit from your property management business!
Here’s where you can find Mike:
Show Notes
[02:22] - Mike shares a bit about his background, explaining that he’s first and foremost an entrepreneur but has been an author for around 10 years.
[03:41] - Brad offers some background on his company and how the payment structure was set up, as well as what implementing profit-first can accomplish.
[04:45] - We hear a story of Mike’s about a moment in which he was confused about where, exactly, the profit was. He then shares the answer, and explains why the traditional formula for profit doesn’t make sense.
[07:58] - Mike explains how his companies function now, which involves setting aside a specific percentage of profit first, then running the business off the remainder.
[09:08] - Brad dives into some of the things that he’s doing now to implement this profit-first strategy. He and a friend are profit-first buddies who help each other stay accountable.
[11:03] - Mike clarifies that he didn’t invent this system; it’s been around for centuries as the “envelope system.”
[14:10] - One of the interesting dynamics of what Brad does involves having both a property management system and a maintenance company.
[16:13] - Mike points out why it was such a good decision for Brad to have his business split into two parts, and gives an example of another company that was far easier to evaluate after breaking it into parts. He also explains why it’s a great idea to face some hard questions today.
[20:57] - We hear about Mike’s great podcast, called The Profit First Podcast. He and Brad then discuss the changing roles of radio and podcasts.
[23:13] - Mike talks about his upcoming speaking gig in San Antonio with Dave Ramsey.
[25:13] - We learn about EO (Entrepreneurs’ Organization), a peer-to-peer group for entrepreneurs in various industries. Brad is applying for membership, and Mike is a member already.
[28:51] - When people ask Mike which of his books they should read next, he responds to the question by asking, “In your business today, what’s the biggest challenge you’re facing?” The answer about which book to read depends on this. He also describes how to get one of his books for free!
[31:45] - For people who are overwhelmed or confused by the process of switching to profit-first methodology, Mike started a company: Profit First Professionals. He also mentions ProfitCON.
[33:27] - We haven’t even scratched the surface on the profit-first system. Mike talks about where to get resources, and gives advice on how to get started.
[35:33] - Mike’s last tip for today involves removing temptation by transferring your profits to a different bank so it’s out of sight and out of mind.
[38:16] - How can listeners reach Mike if they want to learn more or get in touch with him?
Links and Resources:
Profit First by Mike Michalowicz
The Pumpkin Plan by Mike Michalowicz
The Toilet Paper Entrepreneur by Mike Michalowicz