Take Your Profit First, Always
I want to hear about my background for the folks that note no on why I'm teaching profit first, um, at age twenty three, I think twenty three I was working for a computer store, and I was working for the boss. He was making all this money, and I was the kid up front in the room. You like jeff, you'd come in, you need to buy a computer if you want a printer with that, you know, I'm trying to sell it to you because I got five bucks in commission, baby, if I could sell you that. And so I was the sales guy. This small company was called micro age, a small computer store, there's a few in the area, and one day I went out for drinks with another one of the sales guys and said, yeah, this isn't saying I've been working for two years, I, me and sarah sales guy, we bring in all the money, and the owner of this business sits back, smoking a cigar, pride back there, it was pulling in the money, he's getting rich off of our sweat. I'm like this is nonsense and it's amazing what liquid courage will...
do for you, you know, throwing back a few beers and fucking soppy and like you know he's kind of a jerk anyway I don't know I'm working for him well throw back a couple more I'm like I'm gonna start my own business and uh the guy next to me is like well why side business now it's important to know that I am proud of the worst basketball player of all time so if there's any good basketball players in here just take me on you'll crush may and I had the tap the top of the lid of my peer with may and listen here's the deal if I could throw this thing in the garbage can over there and it makes them I'm sorry and business tomorrow morning right so I going this and now maybe I should play basketball drunk all the time because as I threw it it doesn't get perfect couple flips in the air j k o and lands dead center make all net right in the garbage can as I I'm starting a business defensively we started next thing I did because I picked up the phone and called my boss and by the way this is not a tip for how this sort of business if you're writing this down at home I call my boss anthony and I leave this nasty massive trick I'm like any here a hell a hole I've been worried every brazilian breeze out here making all your my off of me I quit here's another tip don't say what I said next it and I'm gonna start another business that competes directly with you and kick your ass that's the tips not too don't I do that I gotta drive home a ride home I did not drive home jake I know you were going to tell you I came home and I was already married at this time uh already have son so my wife and I got married and we already had our first child was born when I was twenty and I come home to my wife christa is a who does not think I'm the most handsome man in the world but I do appreciate you saying that and she goes what are you doing? I'm mike and this is now like there's a hangover the next morning the head's pounding I'm like I'm starting a business I'm starting a company and I said you know statistically I think we'll be millionaires within like a couple weeks I mean all I need to do is make like a couple hundred thousand dollars and then that all goes to me and you do that a few times over and like your millionaire ike I don't know why I didn't think this earlier and she's like I don't like the sound of this uh and she was right I started in my business the next morning by trying to get my job back on and the owner of that business I said, forget it, kid he's, like you're on your own because you're a total ass for what you said on the phone did so I'm gonna call everyone I know and tell him never to talk with you never do business with you and that's what he proceeded to dio he also sued me on the first day and remember setting up my fax machine and plugging it in and plug sounds like I wonder if it works. And as I was saying that the phone rings and the fact starts coming in and it says the city of denver that's where I lived see that I wow, I don't even know who they know I'm in business. A government moves fast, they're gonna buy stuff some like my first order's coming through, and this is nine pages on me. This is amazing, second page says, by the order of the court, you're required to appear here for soliciting clients. I didn't know you couldn't do this when I left my employer, I called some people have computers in the past, and today I'm starting my own little computer store. If you want computers for me, you can do it last call intellectual property theft, that's, private property, the customer list that company had developed I had not taken, so I was breaking a lot and realize that and I went to court the next morning and showed up and we settled very quickly, but it cost me a thousand dollars and I'll never forget cost me a thousand dollars on ly money I had a thousand dollars to start my business, which I thought would be enough it would over to an attorney's hands he said, thank you very much good luck here on your own and I wasn't allowed to solicit anymore clients I didn't have any clients and I started pounding the doors and trying to build a business there's a saying called burn the boats have you ever heard that saying burn the boats even burn the boats is a story I think it's like the medieval times but it doesn't really matter what century it wass there was a leader of the boat um who was an experienced general for the army and he was attacking a defensive position so vera ever doing a military things it's better to be on the defensive to the offensive but he had to attack this island it was ah stronghold and they sent the boat over against a superior army in a better position with more experience sure defeat they land the boat but they have to do this to defend their own country they land the boat the people get out of the boats, the soldiers gather boats and the captain tells us soldiers burn the boats immediately find the captain's their general they burn the boats and then he looked his team his military's army and said there's only two ways off this island now we either die or were victorious and they were victorious. You see, when we burn the boats when there is no alternative path it's consistently surprising how effective we are and getting things done now I realise I had burned the boat of my own situation. I burned the relationship I had with this guy burning the bridge with him I don't have any other contacts I could pursue I had three mouths to feed when there is no alternative but making it successful your odds are pretty good it seems so my business within it wasn't a few years but within I think five years we achieved a million dollars in revenue which does not mean a million dollars coming home. By the way I was break even I was like, oh, so then success was probably the two million dollars point so I might want to get the two million there'd be all this profit scale ability hit two million nothing coming home yet a little trickle but not much more than working at the computer store is it three million four million I sold that company I found that when you sell company and someone buys it from me there's actually a good chunk of money so what happens as our business revenue goes like this starts going up like this our expenses seemed to go nearly the same ring have you experienced that every time there's a bump in income the expenses seem to go the exact same rate but what happens when you sell a company there's a big surge of income okay but it's momentary and then I sold my company and I have started new business news again what happens with expenses I realized is expenses can't climb that fast so you have this big gap of income here a huge amount of profitability in the moment as like that's the solution but then what happens is this continues to climb now I should be a club member at the local unity club I mean I'm worth it I should buy the nice car cars on so forth so this my span keep climbing in my income dropped it very quickly then this big gap was here and I started losing money again why it started growing my second company by this point and it was in computer crime investigation it took off explosively ended up eyes at the right time at the right place are three place the right time and the enron trial broke and we got part of the enron trial so the business took off, but my my income, my spend was not match my income, but I sold that company in two and a half years ago later, so I had another big spike that one like this and there was when I had that spike of income coming from selling my company had all this money, and I said, ok, I've figured out the formula for profitability if you want to become truly wealthy, pumping, dump, built a company and salad, just do that repeal e that's the formula for success. So I said, well, if this is the formula for success, that's we're gonna do is a living. I'm going to start little cos I'm not going to run them because I now know the form. You know, I'm just going to find an entrepreneur that has a business that has a good idea and become an investor in the business, and I will pump and dump all these companies ever hear of the term angel investors ok, that's what an angel investor does. Is there an investor in small startups and take the risk with them? And I became an angel investor. I now call myself the angel of death because I sucked at it I was so bad as these businesses were getting started very quickly, I was realizing that they weren't good businesses they weren't good concepts or I wasn't an asset to the business, and all this money I was spending was going out faster, faster. Nothing was coming in two thousand eight february fourteenth is the day when I take my final breath on this planet. I realize that that is going to come back to me like this is valentine's day balance today at the mccallum it's house. I don't j k o if it's the same at your house, I our houses like thanks. I don't know why I said quirkyalone day and white house. Okay, quirkyalone day. Yeah, saving our house everything so are just like thanksgiving. And, um, we sit down around the table and my wife and myself and our children will cook a meal together. And, uh, what we'll do is exchange cards with each other will write him there. So if we were saying the table together, I would look atyou and write my card on the moment and that's it it's really a cool experience and we just write why we love each other, what we experience with each other over the last year what we appreciate about each other so it's like littering my favorite holiday that morning I received a call from my accountant after becoming the angel of death here and he said, I got some good news and bad news I said, well what's what's the good news he said, I got your taxes done way early you want the panto april fifteenth because you don't have much going on your business you're basically just losing money everywhere but you owe some taxes I said, how much do I owe? He said, you know about twenty thousand bucks twenty thousand bucks now realise two years part of this I'd achieved millionaire status um and when I achieve million ourselves as millionaire for a day I understand my second company I just enough money to have cash assets of a million dollars and then taxes came on guys back out of millionaire status so this is what a day millionaire looks like and but within two years I was able to lose every penny I had is made in the other two businesses and on february fourteenth, two thousand eight I came home with a twenty thousand dollar tax liability and only ten thousand dollars left to my name and it was a humbling moment. I remember walking into my house and I just I was stonewalled bread coming just came in with this and I sat down the table over there we dave, my wife and children were just finishing the meal they prepared because I worked late I sat the computer just staring at it and my wife said the words that just broke the damn she said what's wrong what's wrong I started crying and uh I've lost everything every penny I have need to support our family is gone I effectively have stolen every penny I have I lied about it to is lying by omission I wasn't telling my wife and my children how bad things were stealing money because every time a business was not working for me as putting more money into it just needs needs more money to get it going it's good finally hit the turn that's how is stealing the money and I said our house our couple cars all the club membership it's gone there's nothing left like it's gotta end today um and credit cards have been piling up behind the scenes to and I would say you could hear a pin drop but you couldn't because I was it was like an ugly cry at this point e o thanks for laughing um and uh you know, we know each other that way now and I'll never forget my daughter uh, which was nine years old the time of day of ah ran out of the room uh and remember her running out saying I cannot handle this myself I want to run away is so bad on ly two about second later a minute later she came back with her piggy bank and she put right down in front of me and she says daddy I'm gonna help us out and she slid it over um I'll never forget that moment till the day I die I'll never forget that moment and what happened then was of weird rush of emotions first well utter embarrassment that I put my family in this situation humility um pride in my family my daughter that she would do something like this um and realizing awakening that there's got to be a better way the way I've been living in just grow grow grow grow is how you become profitable doesn't seem tto work it wasn't just me like other people I knew yeah I was talking about grow bigger get bigger bigger stage bigger sales bigger, bigger, bigger but my friends to we're just struggling along so I endeavored that day toe to find something new and it didn't happen that moment that day every fourteenth it wasn't like oh my god, I have the answer but I did say I have to find the answer and I spent about a year has suffered from depression functional depression is a very mild level depression but I removed myself from any social scenes anything I watched mohr infomercials and I think when this planet has about the freaking thigh master andrea sydnor class over sitting there with a thighmaster clapping together drinking a beer cheetos on my shirt you know depression so I also discovered in that day something very profound profit is a habit, not an event she's a an event profit is a habit, not an event most entrepreneurs myself included I thought that profit happens in moments the big sale comes in that one great investor comes in and really boost the company up some something big happens it will make our money what I realized is that profit has to happen every single day god make a profit today and you make one tomorrow it's a siri's of these small winds strung together that make a wildly successful business so what we're gonna do in this first segment is we're gonna cover ah, a couple of things I want to talk about the formula john was kind of turns onto every business uses I want to share a statistic about small business specifically I don't even know if I have a slide for that. So explain that now and some other things you could just look at here but hear this statistic blew my mind twenty one million businesses out of twenty eight million there's twenty eight million small businesses in the u s alone twenty one a million of those businesses are checked by check businesses twenty one million businesses if they don't have a deposit coming this week we're going to struggling next week and they want a deposit come within two weeks they're out of business and this is a global statistic to the exact same ratio, which I'm not sure if that's eighty percent or whatever the exact number is somewhere around there may be something online could figure out the percentage, but this is a global statistics too. Most businesses are just making it if something doesn't come in today, they're in trouble it's that means most of us in this room are experiencing the same thing, and what blew my mind away is how can there be so many smart entrepreneurs? I mean, jeff, you had the courage to start your own business to seek out clients t try to break that paradigm how accounting and book keeping works you're smart and you get and you're growing a business, but how come I'm not saying you're not profitable? Maybe you're not? How come you're not making money? How could we refuse this amazing idea? You're breaking the expectations of what speakers talk about and bring about his whole paradigm. If you're smart enough to start a business, build a business, attract people, break the rules, how can you not be smart enough to make a profit like something? There didn't make sense every entrepreneur in this room, every entrepreneur watching every inch from in the world has the courage to start business, break the rules, change things, attract prospects, get customers, negotiate deals but we're not profitable something doesn't make sense here you were smart enough to do ninety eight percent of stuff but not smart enough for two percent camp be they can't be there's gotta be something else going on and I found there's a formula flawed formula that we've been told to follow um you know I called the doctor frankenstein syndrome um you probably know that moment where you first thought of your business and it was like frankenstein's miracle moment like you stitch together some money some resource is some ideas you go into your lab back here you stitched together all these ideas and thoughts and then the miracle happens you start a business nous and it comes to life and it's like oh my god, this is actually happening I did this and then it's like a day or a week or a month later and it's like not no customers thought what people aren't buying stuff and then you realize this this miracle he brought to life is akash eating monster it's frankenstein if you ever read mary shelley's book frankenstein is exactly what happens dr frankenstein brings us monster to life it is a miracle in the moment baby re animates life very quickly realise this thing is a monster and starts destroying him kills his family physically it kills him emotionally it's very similar to ah business ironically and it puts us in this thing called the survival trap something I wanna show next great saying I've explained I've heard uh defining those twenty one million businesses right there's twenty eight million businesses twenty one million are not profitable don't forget this well dressed poverty is still poverty well dressed poverty is still poverty we as entrepreneurs have been trained to brag about the top line how's business going oh graves hire new employees fantastic you know money's coming in sound hard well there's poverty is still poverty how healthy is your business? Just curious what your relationship with that how's your businesses that feel kind of true frankenstein for you little frank yes baby frankenstein hay in the little pod comes out and makes you mean do you all feel that way a little bit which I'm curious online to how we feel jacob to get his check out if folks listening in feel the frankenstein syndromes attacking them this is how it's defined by the way I called the survival trap if you look at this this chart it's real simple we've all been told this in our business today we stand at point a our moment where we are right now now I add the word crisis because for most businesses we're in crisis but we're point a and we're told we want to go to point b which is the vision okay, so point is where we are and point b is where we want to go to the vision we have for a business was the store's distance between two points? State line. Thank you, someone's very good geometry. You're totally right. So we've all been told, just go down this path. Envision your business. This is where you want to go to start walking down that path. It's that simple. If you go in a straight line, you'll get there quickly. Problem is point a is often crisis. I got pay rent today I got a couple of mouths to feed or employees to pay or I got make some sales or we're in trouble. So what happens if your point a is crisis any way to get any direction? You go to get out of point? A alleviates the pain of the crisis if business is hurting right now and we're in a financial struggle and we just you can take on an unfit client on if you can see it in the live organ. So if you can see online but you take on an unfit client a bad client it's money, baby out of crisis momentarily until next week's bills come on next month's bill, and it pulls you back into crisis. Then you're well all this introduce a new product I'll just do a new offering something never done before but I have a captive audience I have customers that probably want this was going to sell that to them and wait do a new product we offer something new we get our crisis again we feel the pain alleviated momentarily just for a little time and we get sucked back in and you can go in any direction to get out of crisis here's the problem the survival trap it makes you survive for a day or a week or maybe a month but it keeps you stock at point a for the internet e of your business because you get sucked right back in in fact I don't know if you can see these faint dotted lines can you you'll see that the vertical line here statistically half decisions we make in crisis actually take us directly opposite of where we want you go we want to go we have a vision for a business like this but half the time we're going the exact opposite direction of where we intended to be half the time we're killing our business by trying to survive this is about fifteen maybe twenty percent this is maybe same thing fifteen to twenty percent total say twenty percent twenty percent of time you take direction that's not where your vision is but you know it feels okay and you do it this is there's a great analogy about stuff like this is if if a plane takes off from new york, where I love the new york area and supplies to san francisco, if that's the flight took from new york to san francisco if he was off its path only by five percent the further it traveled, the further gets away from destination. So many businesses go down paths like this they're kind of where they envisioned it going, but they continue down this path and ultimately our business a year or six years or whatever it is years later say, how did I end up here? But this is never where I thought I don't like it, I resent my business, it kind of stinks ten percent of the time when we're living in the survival mode we by chance, get the perfect client at the perfect time. It's a great experience and that's what we say it's finally all coming together businesses clicking now baby it's working? No, it was just happenstance. It wasn't deliberate that wasn't intentional. It just happened in two weeks later panics and sews bad client comes on your gods it's coming unraveled again the survival trap is this constant happenstance and we constantly get stuck in point and we just get pulled back in and then by implementing profit first I'm gonna show you actually how it forces you to live in this channel. The on ly way of business can survive if it's takings profit first is focusing on space clients doing its best offering becoming really capable at a few things how many of you lived in the survival trap? Okay, okay, good, good. Jeff, give me an experience about your survival trap model. I think you kind of always not always, but, you know, you kind of think, oh, this this client's really gonna help me out, aiken, maybe I'll give him a low price now, but in six months I'll raise the price and it'll be great. But you never end up raising the price. Yeah, you're always stuck down in the low, you know, pay level, right? Right. I'll just mingle. Sacrifice now, that's. Exactly it it's always and use the exact words is my thought. I thought this the survival trap it's a head game going on in his constant conversation going on up here and it just puts us in this trap.