I’m honored to share this week’s interview with DealQuest guest and Profit First creator Mike Michaelowicz with you. Over the years he has traveled the globe, speaking to thousands of entrepreneurs. On the show, he distilled that down into some of the absolute best wisdom that he’s learned. (Including lessons from his new book, Fix This Next!)
Mike is a natural fit for the DealQuest Podcast. So much of what he teaches helps companies build enterprise value that sets their owners up for an eventual exit. He is the author of multiple books, including Profit First, Surge, Clockwork, The Pumpkin Plan, and his latest release: Fix This Next. Today he is running his third multi-million dollar company, Profit First.
Foundations of Being Deal Ready
In my work, I talk a lot about being deal ready.
In fact, I have a theory that any company of any size can do some sort of deal. The truth is, however, that to be able to confidently benefit from consistent deal-driven growth, you absolutely have to put in the work! You can just suddenly take on new sales without having the right infrastructure. And you certainly can’t truly benefit from deals if you haven’t built a strong foundation to handle that growth.
Part of that foundation is exactly what Mike teaches in his Profit First work. Personally, it’s rare for me to say I’m devoted to much. Profit First principles, however, would make the list of tools and concepts that I am proud to stand behind. In fact, I’ve shared Mike’s book with over a hundred people. I can attest to the difference it has made in not only my life, but the lives of so many other entrepreneurs!
Fix This Next
If you’ve read any of Mike’s previous books, you know how powerful his work is! That’s one reason I was so thrilled to learn his new book, Fix This Next, was published recently.
As an entrepreneur himself, Mike shares that he is constantly curious about the challenges being faced by other business owners. So he asked!
And his readers responded with all sorts of answers that were all over the board. (Listen in to hear about the fluke double send that resulted in a really interesting find!) After distilling everything down, Mike’s big takeaway was that business leaders were struggling to know exactly what their own biggest challenges even were.
How could that be?
Well, it partly related to the fact that too many entrepreneurs were consumed with putting out fires. And that constant hustle from one issue to the next…to the next….to the next….
It was creating an issue with being able to step outside of the business and really SEE what the actual challenges were.
I really resonated with what Mike shared about this. It absolutely matches what I’m seeing. There’s this conversation about the constant need for “hustle” if you’re an entrepreneur. That results in a business (and leader) that is in reaction to everything that’s going on. Fix This Next is all about helping people stop running a million miles an hour. Once you’re able to focus on real priorities, you can transform your business!
Mike shares that entrepreneurs grinding and hustling in their businesses have proven that that model does not work for growth. Instead, leaders attempting to grow in this way get stuck in a self-defeating cycle.
Mike shares that we have to be very thoughtful with designing the outcomes we want. We also need to have clarity on where the business needs to go, and then organize our resources to get there. That’s our job.
When you peel back the outer skin of a business, they’re almost all identical. Essentially, there are five foundational levels. Similar to Maslow’s hierarchy, if the foundational level is not being addressed, we cannot grow in other ways. You don’t build the fifth story of a building up in thin air, because you know it will all collapse to the ground. You have to build the foundation first.
Once you have that, Fix This Next identifies the 5 essential levels of a solid business:
- Sales and the creation of cash are the foundational level of a business. Without cash flow, you can’t do anything.
- Profits provide stability for an organization; with no profit, your business is on extremely shaky ground.
- Order is a creation of efficiency, and the ultimate acid test is whether a business can run without the owner themselves. If I know I can leave my business and it will continue to grow without me being there, then I am on my way to true business success.
- Impact is the creation of transformation. NOT transactions. Transformations. How are you serving people’s lives? How are you changing people’s lives?
- Legacy is the fifth and highest level. When the business starts focusing on legacy, the business owner has a realization, and that realization is profound. I am not an owner but instead a steward of my business.
When a business owner is able to release their business into time and space in order for it to continue on to be of service in their absence, it’s at the legacy stage.
It’s Not All Linear
Those five levels don’t always happen in one neat line. It’s normal to bounce around a bit! For example, as we’re recording there’s mass economic turmoil. For many of us in business, what we were selling before isn’t selling anymore. So even if we were working at transformational levels of impact and legacy, we may need to refocus on our businesses and reinvent ourselves. That can mean going all the way back to level one. You may need to create new products or services that are relevant to the current times.
All businesses of all sizes will live in this hierarchy. As a result, we’re always moving around at different times, based upon what’s going on around us. There’s no shame in reaching back and making changes to fundamental parts of your business!
Building a Deal-Ready Business
Mike already talked a little bit how these levels impact deals. The ability to build a company that runs without the owner while building enterprise value apart from the efforts of the owner makes a company much more lucrative. Profit First/Fix This Next businesses that can run and profit without direct owner intervention are much more attractive to potential buyers.
Everything that Mike shared in terms of building out the 5 levels of a company are directly related to creating a company that is truly set up to be successful at deal-driven growth. And not just acquisitions! Any type of deal will be positively impacted by building your company on a strong foundation. You need to consider sales, profit, order, impact, and legacy.
Mike also notes that if you want your company to be in the position of acquiring new businesses, reputation is key. If you acquire or partner with a business for its excellent tools, assets, systems, or products, you can bring those to market in a powerful way. This requires your own company brand to be strong and trusted. Even if the acquired brand is relatively small or unknown, partnering it with your own solid, trusted brand can bring exposure that creates a win-win situation for everyone involved.
Your own brand’s reputation can allow an acquisition to quickly become a value multiplier from day one. This kind of growth also enhances a new brand’s ability to grow organically due to brand recognition.
Speaking of brands, Mike shares that the brands of yesteryear were built around awareness (via repetition of messaging). Now, however, brands are built through reputation. Messaging has to be backed by people’s experience. This requires you to have a reputation for excellence within your client base. Your reputation truly precedes you as a brand today.
The Best Work of My Life
What a statement! Mike shared that he considers Fix This Next to be the best work of his life. If you feel your business has hit a ceiling, if you’re constantly putting out fires, if it seems like working your business is some sort of recurring groundhogs day…
This book is for you!
Between every action and reaction we need thoughtful contemplation. However, many business owners and leaders don’t do that. Something happens, and we end up reacting by our gut instinct. And that reaction isn’t serving entrepreneurs and business leaders well because we’re biologically wired into ourselves. When it comes to making gut decisions for our businesses, we’re not wired into it the way we are to our bodies. Yet when it comes to our businesses, many of us just simply trust our gut. That’s the wrong move!
Fix This Next is a really simple tool that will help you move in the exact direction your business needs. It absolutely helps you focus on the one thing you need to do within that business hierarchy of needs we talked about above.
In the book, you’ll find a simple series of questions that allows you to very rapidly evaluate where you are. Then you concentrate your efforts on resolving that one thing. When you concentrate your efforts on resolving foundational needs that really need to be fixed, you create a foundation that you can continue to build upon.
Once you’ve done that, you can really maximize your own business in a way that makes sense for your own lifestyle. This allows you to achieve what Mike calls “lifestyle congruence.” Understanding what you want for yourself is a key piece of building a business that will support your life in the long run.
Listen in to the full episode to hear about the three trigger moments that Mike believes have impacted his own businesses! And if you’re interested in reading Fix This Next, you can pick up your copy here (and let me know what you think…I’ll be reading it too!).
Corey Kupfer is an expert strategist, negotiator and dealmaker. He has more than 30 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author and professional speaker who is passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.
If you want to find out if you’re an authentic negotiator, take the Authentic Negotiating Success Quiz today!