The biggest problem entrepreneurs have is that they don’t know what their biggest problem is. Fix This Next author Mike Michalowicz believes that envisioning your entrepreneurial dream is the first step to building your legacy. Successful entrepreneurship is not easy, but Mike tells Tersh Blissett and Josh Crouch how to make it simpler. Mike shares a simple system that can get rid of unnecessary frustrations and get your business moving forward. Listen in as Mark shows you what we need to fix next to level up your business.
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How To Use “Fix This Next” To Build Yourself A Legacy HVAC Plumbing & Electrical Business With Mike Michalowicz
We have Mike Michalowicz on the show. Mike is a great guy. I talk about him all the time. I talk about Profit First, Clockwork and Pumpkin Plan. What we are going to talk about is one that I’m super excited about. I didn’t even write the book. I’m in the book. I like to share it constantly, but I’m trying not to be overexcited about it because it’s a cool story. A lot of my success in business wouldn’t have happened without Mike and his entire team. Welcome to the show, Mike.
Thank you for having me and being so candid in what you share. I followed your journey for a while now. You came to my offices. I remember when you shared that story of going through the BPP, The Business Priority Pyramid. My interpretation of it was, “Clarity on your avatar.” We had no clue. I always thought the summer would be the revenue-maker of the century for you. When summer hits, if you are doing an air conditioner, you are rich in air conditioning. You said, “We are getting more activity, but it’s repair work. We dropped in revenue. They make a ton of bricks.” I was like, “I never saw it from that perspective.” It led me up when you applied that process and then your summer was your best period ever.
It was awesome because I had realized that a couple of years ago. A lot of people that even read this show don’t realize until they watch their numbers that our average ticket would go from $400 in the wintertime and then it would drop down to $75. It would be ridiculous because people were running and gunning. I was like, “Try to catch 12 or 20 calls a day.” You can’t serve your client when you are doing that process. It’s one of those things where it brings to light gut feelings that you knew already. Once you can see it on paper, then it’s like, “You are right. I knew this was the case, but now I know it’s the case. Now, I have no excuse not to fix it.”
I love what you said. Serving twenty clients a day, I can’t even fathom that. How do you ping-pong between that many people? To your point, the only way to do that is by curtailing the service you provide for the current client because there’s a rush to get out to serve the next guy. We can’t serve him as well. We can’t see the opportunities for other considerations they have. Maybe they need to upgrade their system. Maybe there are other opportunities. We are such in a rush job that it’s like, “Do the minimal amount of work to get by so I get to the next guy.” It’s funny. It’s the antithesis of why we are in business. We want to serve the client exceptionally well and we want to serve ourselves by being profitable. Under that duress, it doesn’t happen.
I was listening to something you were saying. I believe it was on the drive. You were talking about the nonprofits and trying to go through this COVID period where you are giving back. If you are not there in the long run, you need to take the givers’ gain as a false thing. It’s something that I hear all the time. I have been guilty of saying it a lot, the givers-gain type mentality. You have to gain to give instead of to give to gain. I love that concept that you have mentioned. You have said it several times and it finally clicked in my head.
The Business Priority Pyramid has five levels. The foundation is sales, profit, efficiency and order. Ultimately, you can have an impact and legacy. Those are the giving stages. The first three stages are about getting. We need to get sales and profit in the organization because the only way you can contribute to your client is if you are profitable. Our clients want us to be profitable. They don’t use those words. I suspect you have never done a job where clients are like, “Can you double the rates on me? Screw me over on the pricing.” What clients do say is, “I want a great installation and a perfect job. I want there to be no mistakes and workmanship problems. I don’t want you distracted by worrying about how you are making money. Focus on me.”
The only way we can do our best, be focused and care for these customers is if we don’t have to worry about money. Most business owners are worried about money. While they are doing the job, they are worried about the next job. Therefore, they dilute themselves. They can’t focus on what they are doing. The active client gets an inferior experience because they are not profitable. If we focus on the get first, getting sales and profit and ensuring that our business is healthy, it removes all of that stress. It allows us to concentrate and be great contributors.
I was sharing, particularly in the COVID crisis, quite a few businesses made bold statements about how they are going to contribute. They followed up on their words to the community. I consider it the ultimate sin. I can’t think of one that’s not. They are all out of business. They said they were going to give by sacrifice. That’s the mistake. If you give until it hurts, it will hurt you at a certain point and defeat you from continuing on. These companies did great things for 2 or 3 weeks, but they committed the ultimate sin. They can’t be around for 2 or 3 years or decades and be a service to the community.
What you are doing is exceptional and I think it’s my own business too. I care for my customers. You care for your customers. You do it profitably because that’s caring for yourself. When we are fair to our customers and ourselves, it brings about sustainability and allows us to have a greater impact. I consider what you and I are doing as far more noble than flogging our business to death and sacrificing it. It’s about contributing in a way that is sustainable.
Tell us about Fix This Next for the people who are living under a rock and haven’t heard me talk about it or share it on social media. What is Fix This Next and quick through the Hierarchy of Needs?
It would be so cool if there is some guy reading this and he does live under a rock. Can you imagine that? He is like, “I built my house under this. I do live under a rock and I’ve never heard of this guy.” You were there as I was developing it. The premise was that business owners’ biggest challenge is knowing their biggest challenge. I would argue you are a great example. You were moving your business forward and addressing a thousand things. It was very hard to pinpoint, “What is that one thing with the greatest impact?” You did it. You found it and look what happened.
The biggest challenge entrepreneurs have is knowing their biggest challenges. I developed The Business Priority Pyramid. It’s a way to pinpoint the vital needs of your business. It’s the one most important thing. By definition, there can only be one most important thing. It’s a hierarchical structure. It’s translated from Maslow’s Hierarchy of Needs. Originally, you were there. I call it the ascension model. I was playing with it.
I thought it was cool back then the way you had it. I was like, “This is awesome.”
You remember that stuff and you can see its evolution as you tested it. There’s another guy, Aaron, who I’m working with. He was in the room and he had that manufacturing business with CNC equipment. There were about 30 or 40 people in the room and one person made candles. I have been in touch with everybody. Watching them progress in the mile has been changed and simplified. That was the key. What I found is there are five levels of business needs. This is true if you are an HVAC guy, author guy or whatever you do.
Foundationally, every business needs sales. Sales are the creation of cash for the business. If you want to equate this to human needs, it’s like oxygen. If you don’t have any sales, your business is not breathing. It’s going to suffocate. Once that’s satisfied, we then elevate to the next level. It simply needs to be adequately satisfied. The next level is profit. Profit is the creation of stability for an organization. Warren Buffett said, “As the tide goes out, you see who is swimming naked.” As the recession occurs, you see what businesses didn’t focus on profitability.You have to gain to give instead of giving to gain. Click To Tweet
Profitability translates to the stability of an organization. It’s the absorption of that oxygen to the bloodstream of the business. Sadly, even at these two basic levels, many business owners are confused, “We trust our gut.” We say, “We need to sell our way out of this.” That’s like saying, “I need to breathe my way out of this.” You are trying to build stamina and muscle for your business. You start hyperventilating, thinking that will make muscle. Sales do not cure everything. Sales are necessary, but it’s not sufficient. You have to have profit with all these other elements.
With bad profit, no profit or not knowing your numbers, sales could put you in more damage. If you have more sales, you could sell $50,000 worth of phones.
Sales are an obligation for the business. When I had a tech company doing computer systems, we had the opportunity to sell phone systems. This was when VoIP was starting out and 3Com had a system. I’ve got a client or prospect and I convinced him, “VoIP is the future.” He was like, “I’m all in.” I sold 50 phones and called 3Com. That was the provider of the phones. I will never forget it. I put it in the book. I called him and said, “We sold a 50-set system. We need to install this next month.” The engineer on their side goes, “Is it 50 phones?” I said, “Yes.” He punched me with a red flag and I was like, “Let’s do this.”
3Com, up to that point, even in their own lab, hadn’t done anything more than ten phones. They didn’t know if it would work or not, and it didn’t. It was a disaster. I put the obligation on myself responsibility, which felt like such a success, “I sold 50 phones. It was a $30,000 or $40,000 sale. For me, it was a big project.” The phone system failed. I had to refund that money and re-install his old phone system again back up and running. I had a client that hated me. I was done with that business forever. I was lucky he didn’t sue me because it devastated his business because he had no phones at work.
With the sales process, you said sales first. If we are looking at a pyramid or triangle, sales are our base or foundation. It must be secured, but you said satisfied. Does it not have to be perfected before you move on to profit?
This is like building a structure that we continue to build. If you have ever built a house and you added on to it, this was similar. You build the foundation and structure above it, but then you say, “I want to expand my house.” You have to go back to the foundation. Maybe you expand the foundation or add a new basement here and then you start building up again.
The mistake is perfecting sales. You do need to perfect it for the moment but perfect it for the infinite future. Some businesses try to keep on growing sales more and more and then they are going to sell their way out of it. That’s not the goal. The goal is to build adequate sales so that we can extract profitability from it. Once you can extract profitability, we can focus back on sales and say, “How can we amplify sales because now we have a profit model? We expand sales some more and expand profit.”
Is that the cycle where we go to profit and then we start working on sales again or do we go up to the next level?
Not necessarily. We always have to find out where the next fix is. The next level is order. Order is organizational efficiency where it has no dependency on the owner. You are experiencing a demand on your own time. On the service side, you may have an order challenge in front of you. It seems like it is, but we always go back to the base and say, “First of all, do we have adequate sales going on? If we have a demand problem on your time and if we have a lack of sales, we have to fix sales first.” From our discussion, it’s pretty clear that it’s a sales problem.
We have sales. It’s just the order problem. It’s 100% my fault because I dragged my feet. We are taking it all in strides. We recognize the problem.
There’s no fault here. It’s the reality. That’s the next bottleneck. You’ve got sales and it’s profitable. Now, we are focused on order. Part of it is where we can extract the owner. If there’s a dependency on the owner in a small business, we haven’t achieved order. If you go to a McDonald’s, you will never see the owner there. That is a business machine. I’m not saying we need to be like the next McDonald’s and make shitty hamburgers. I’m saying we need to get to a level where there’s no dependency on the owner and ultimately not on any linchpin employee.
Once that order and efficiency are brought back, then we go back to sales and say, “Let’s expand this now.” You will ping-pong around. This is not a ladder. The level above the order is called impact. This is where we switch from getting for our business to giving to our community. The impact level is where you create transformation. Your clients see you beyond the transaction and they say, “You have changed my life.”
When you and I first met, that was my struggle. I was at impact, but sales sucked. I was at the impact level and I wanted to do the impact and leave a legacy. Our profit numbers were down. Our profit numbers were at 2% because we were doing profit first. I had finagled my percentages so that my profit was either 2% or 4% at that time because I was spending so much money on the legacy or the impact side of things. When you said that, I was like, “I’m having a hard time wrapping my head around this.” By the end of that day, I was like, “I have got it. We are changing this completely.” That was awesome.
It’s not true for every business. What you will find is that in the transactions themselves, you will start providing transformation. Remember, you are looking to give to the community. I believe perhaps your communities are your client base. When your clients are saying to you, “This wasn’t an HVAC job. This was something greater. You have changed my life,” we know we see the transformation. It can happen in any industry.
You may change people’s lives because they can find sleep through the night and sleep well. They are enjoying their family more. Maybe you find that there’s a community of highly allergic people, and your systems are preventing those allergies. You will find it is presenting itself. That’s when we start amplifying that. When it manifests through the job or the work we do directly, that’s the essence of transformation because that can be scaled bigger. It’s not just giving to our community.If you give until it hurts, it will hurt you to a certain point and it will defeat you from continuing on. Click To Tweet
Whether we are doing plumbing, HVAC or even home services, the over-communication is our feedback. We get that impact level because these people care about us. We had one client that moved into their house. They hadn’t even physically moved into their house yet and their grass was 2 feet high in the front yard. They were moving from Cleveland, Ohio, in a U-Haul truck. We were changing out the units before they moved into the house. They bought the house sight unseen. We sold them AC units sight unseen.
I had the lawn care guys come and cut their grass for them. When they arrived, the grass was cut. It’s one less thing they had to do. Nobody asked me to do it with anything else like that. I’m not patting myself on the back. It was one of those things that we have seen it. Instead of complaining, “I got to walk through this grass,” we took care of it. This guy is such a cheerleader for us. Anytime somebody posts anything on Facebook, he is on it. He is like, “Call Tersh and Julie. They will take care of you.”
What is so powerful about that story is I strongly suspect your intention was not to get a guy bragging about you. It was the benefit of being you because I know you well enough. That’s the guy you are. That’s powerful and transformational. When you care for the customer more than they can even care for themselves, they will notice and take an accounting of that. That is transformational to care. It doesn’t mean businesses don’t do that, but that is the opportunity. This isn’t a ladder that you climb to the top and stay there. That’s around its legacy.
What is fascinating from my research is legacy is where business owners told me they had a great realization. They were never business owners. They have always been business stewards. Meaning that they realized they had a responsibility to bring this business to life, but it’s about the life of the entity more than it is their involvement in the business. It’s about the continuation of the business. Legacy is where we have created impact and now it’s like, “How is this going to live on regardless of me?” That’s what legacy is.
If people can go and see how they stack up on this, where can that happen?
You can go to FixThisNext.com. There’s a big red button that says, “Take the free evaluation.” It’s a great way to evaluate your business. You don’t even need to read the book to do the evaluation. It takes five minutes or less. It will pinpoint your next vital need in your business and where you need to concentrate your energy. These elements we talked about all of them play out at all times. Our business is always in the ballpark of this.
You have an impact. You do are forming a legacy. You have sales and profit. It will pinpoint where we need to concentrate our energy on the next resolution, which in your case, it’s order. Maybe in my case, it’s sales. It will pinpoint where to work while maintaining the others. Once that has resolved that order need, a new need will present itself. That same test will point to the next need and the next after that.
Do you use this process for every task or decision that you make throughout the day? Do you think that this should only be used in a month-long planning project?
I use it as a prioritization tool. If I sit here, I will say, “I don’t know what I should be doing.” If I’m answering emails and then there are emails, I’m like, “Should I be doing this?” I go to the tool and say, “What is the corporate problem?” Once I identified the corporate problem, we all have our jobs here, but I concentrated a team on it. It’s maybe myself or someone else. Once the team is working on it and I don’t need to be involved, it doesn’t mean I need to find the next fix. That’s my businesses’ need. They got to get that fixed or at least on the pathway to fixing it before we identify the next need. It’s not in every task. It’s just in the prioritization of our strategic plan.
What book should you read first?The biggest challenge business owners face is knowing what their biggest challenge is. Click To Tweet
I get asked that regularly and I usually say, “Read Profit First or whatever got hyped up.” I realized the biggest challenge business owners have is knowing their biggest challenge. Fix This Next will find it. It’s a great starting point. Check out Eradicate Entrepreneurial Poverty.
I’m honored that you came to the show. I appreciate you taking some time out to come on the show. I look forward to talking again soon.
I appreciate you. I hope I will see you in Savannah sometime soon.
At a Bananas game?
Yes, I would love to hang out with you at a Bananas game. We will be finding down some beers.
- Profit First
- Pumpkin Plan
- The Business Priority Pyramid of Needs
- Fix This Next
- Eradicate Entrepreneurial Poverty
About Mike Michalowicz
Let’s start with my fancy schmancy resume: I have been blessed with over half a million readers of my books. I have keynoted at the world’s biggest business events. I have built four multi-million-dollar companies and sold two of them: one to private equity and another to a Fortune 500. Nice stuff for a resume (and I am truly grateful), but those are just peak moments from decades of entrepreneurial struggles.
During that time, I repeatedly fell victim to my own arrogance and ignorance. In addition to those successes, I have also: lost my house once, lost my entire fortune twice, launched ten failed businesses, and experienced years of depression. For nearly two decades I have lived a life of “entrepreneurial poverty” – where I was broke financially, emotionally and physically.
I became a business author with a clear mission: Eradicate entrepreneurial poverty. I have devoted my life to fixing those struggles for you, for myself, and for every entrepreneur I have the privilege to connect with. Successful entrepreneurship is not easy, but it can be a whole lot simpler. That is what I am here to do with you, right now.