Today’s guest is three-peat offender – Mike Michalowicz, author of the book “Clockwork” and we talk about what entrepreneurs need to do to reclaim their time.
By his 35th birthday Mike had founded and sold two multi-million dollar companies. Confident that he had the formula to success, he became an angel investor… and proceeded to lose his entire fortune.
Then he started all over again, driven to find better ways to grow healthy, strong companies. Among other innovative strategies, Mike created the “Profit First Formula”, a way for businesses to ensure profitability from their very next deposit forward.
Mike is now running his third million dollar venture, is a former small business columnist for The Wall Street Journal; is the former MSNBC business make-over expert; and he is a popular keynote speaker on innovative entrepreneurial topics.
In addition to Mike being a really smart guy, he’s a lot of fun to hang out with. You’ll see why in this podcast episode. Listen and leave a comment below about what you think about this episode. And, while you’re at it, subscribe and become a regular podcast listener. You’ll be glad you did.
In today’s episode you’ll learn:
- How to re-capture time as the business owner?
- What does it take to be true entrepreneur?
- Importance of delegation and how to do it properly?
- How to identify QBR of your business?
- How to design your business to run itself?
Narrator: Welcome to The Sustainable Business Radio Show podcast where you’ll learn not only how to create a sustainable business but you’ll also learn the secrets of creating extraordinary value within your business and your life. In The Sustainable Business, we focus on what it’s going to take for you to take your successful business and make it economically and personally successful. Your host, Josh Patrick, is going to help us through finding great thought leaders as well as providing insights he’s learned through his 40 years of owning, running, planning and thinking about what it takes to make a successful business sustainable.
Josh: Hey, how are you today? This is Josh Patrick. You’re at The Sustainable Business podcast. Today, we have a three-peat offender.
Mike: Nice, a three-peat.
Josh: A three-peat is third time on the show. We have Mike Michalowicz with us. Today, we’re going to talk about Mike’s new book Clockwork. He’s also the author of Profit First, Surge, The Pumpkin Plan, and The Toilet Paper Entrepreneur. I really want to know where the heck he comes up with those names because they’re really kind of cool. I want to talk to Mike today about Clockwork because I actually got interviewed for that book. It’s kind of an interesting thing. I want to see what he actually came up with. Let’s bring him on.
Hey, Mike. How are you today?
Mike: I’m doing well, Josh. Thank you so much. It’s good to see you again, man.
Josh: It’s always great seeing you. You’re one of these people who just always brings a smile to my face.
Mike: You should get a poster-size cut out of me then and put it above your bed. Every time you go to sleep, you can see me staring at you.
Josh: I think my wife would like that a lot because I was cranky this morning so [laughs]. She would think that’s great. Tell me, why the book Clockwork? What is it? Why do we need to pay attention to it?
Mike: The reason I came up with Clockwork, it was the next need that my readers – people that were reaching out to me, had. The book a wrote prior to it is Profit First: Bringing Profitability to a Business. People were saying, “Now that I’m achieving profitability, which is a great relief, I don’t have the relief of time. I am working like an animal.” I haven’t written this yet, Josh, I think that Maslow’s hierarchy of needs actually translates to the entrepreneurial hierarchy of needs. Maslow says it’s subsidence – food, water. I think the foundation for an entrepreneur is sales. If there’s no sales coming in to an organization whatsoever, the organization will die. That’s the oxygen for the organization. Once you get beyond sales, you need to go up the next level which I believe is profitability. All the sales in the world does nothing for you if there’s not sustained profitability. Yet, most entrepreneurs, many entrepreneurs revert to just trying to breathe in more oxygen when they’re starving to death. They’re trying to sell more.
Josh: Yeah, sure.
Mike: So then, we need profit. Once we have profit, now is the capture of time. I think that’s the next level up this hierarchy of needs. Once we have enough sales for sustainability, we have profit which brings about perpetual existence. It can go on inevitably with sustained profit. Then, we want to re-capture time. That’s why I wrote Clockwork, is to find ways to re-capture time for the business owner. What it boils down to, the essence of it, is I thought it was productivity but it really isn’t about productivity. It’s about organizational efficiency. I consider that the choreographed dance, if you will, of resources – putting the right people, the right things in the right places, in the right portions, doing the things right to move the business forward. At the same time, while extracting ourselves from the business so the business can run itself and we, as owners of the business, can avail of that time to live life the way we want to live. Maybe we still want to work inside the business but now we can do the things we want to do insider our business and, of course, do the things we want to do outside of our business.
Josh: That’s great stuff. You’re saying this in a different way for the exact stuff we’ve been talking about with people for 22 years now.
Mike: You’re saying this is rote, old established stuff [laughs]?
Josh: Well, no, no, no. It’s not so much that. It’s that nobody pays attention to it.
Mike: I know.
Josh: Especially, I think, the business owners that are most attracted to what you do are the companies with less than 25 employees.
Mike: Oh, no question. No question.
Josh: Those folks are a hot mess when it comes to running their business. The only thing I like about the E-myth, there’s only one thing I like in the E-myth and that is Gerber’s statement that business owners are typically technicians who have had an entrepreneurial cramp. It is a great quote because it’s so true.
Mike: I agree fully. I had dinner with Michael— this goes back about five years ago. I challenged him around E-myth. I said, “Listen, E-myth is a fabulous book but the one challenge I have is that it comes across– he doesn’t even say this, but it comes across it’s almost like it’s a switch. Like that famous saying, “Don’t work in the business, work on the business.” I think that’s how entrepreneurs see is that one day – one day, we’re going to stop this manic working inside of our business. Now, we’re going to be an owner of the business and it will all be strategic work, but the reality is it’s a throttle. It’s a throttle.
And so, that’s why I tried teaching in Clockwork is how to throttle through this transition of being that technician, working in the business relentlessly and becoming a true entrepreneur which is a person that allocates resources and people to get the work done. An entrepreneur is someone who sees a vision and outcome they want to achieve and then works and leverages other people, other resources to actually get the work done. They’re not the ones doing the work. That’s the fallacy that so many small business entrepreneurs have. They feel they need to do the work. And that becomes a self-fulfilling prophecy. They prove that they need do the work because “no one can do it as well as me.” They work their butts off. They work harder and harder and say, “Well, the business is growing because of my hard work, I need to work even more.” And they stay stuck in this trap of working in the business until the business ultimately fails.
Josh: There’s a point, they will never get their businesses past 25 employees if that’s their belief system.
Mike: They won’t get past three employees.
Josh: Now, look, I’ve seen a bunch of businesses built to 15 or 25 employees where the owner has a bunch of helpers.
Mike: Oh, I agree. At that level, from my experience, the system is all in their head. What they do is they become— I call it the deciding phase. There’s different phases, I call the Four D’s in Clockwork, of how an entrepreneur’s abilities shift. First, it’s the doing phase. That’s what we’ve been talking about, initially. The entrepreneur does everything. I’m doing the work. No one’s as good as me.
The next phase in what I feel you’re talking about is the deciding phase. The deciding phase is where I start hiring people to do the work but I don’t empower them to make decisions. What happens is that one guy that’s supposed to do XYZ runs off to do it. A second later, he comes back in my office and says, “Oh, I have a question.” What’s the question? Now, here’s your answer. He keeps coming back for me to make the decisions around all of the variables.
The problem here is that it’s one brain controlling multiple arms. This restricts our growth. We can only make so many decisions. It also inhibits us from doing the other up level work that we need to do. There’s not enough time because I make decisions for other people.
Now, in my experience, to get to 15 or 25 people doing that is extremely hard. You’ve got to be rapid fire all the time. I find many businesses, once they get like to three or four employees and are making decisions for other employees, the owner gets frustrated. He’s like, “Why do I hire these idiots? I’ve got to tell them everything to do. It’s just better that I do it myself.” And they revert back to the doing stage and do all the work themselves.
Many businesses, I think around 95% to 98% of small businesses have than three employees and the owner is always flopping between “I need to do everything myself” to “For God’s sake, I just need to hire some people to do this. I’ll make decisions for them” and then back to “I’ll just do it myself.” They keep flip-flopping for the entirety of the business.
Josh: Right. Of the 28 million businesses in the United States, 22 million have no employees.
Mike: Oh, yeah. There you go. Yeah.
Josh: Yeah. It’s an unbelievable number. I always find this really interesting. Here’s where I find – and I call, what you’re talking about, operational irrelevance where the owner becomes operationally irrelevant in the day-to-day operations of business and I find there’s a couple of roadblocks that get in their way. I just want to bounce these off you. One is, the owner will not tolerate mistakes by anybody but themselves.
Mike: Right. Isn’t that funny?
Josh: Yeah. Well, it’s really true. And, two, they don’t trust their employees.
Josh: Have you read the book The Trust Equation by Charles Green and–?
Mike: I actually have not.
Josh: Oh, it’s a great book. In there, there’s this formula which is the whole book as far as I’m concerned, which is reliability + competence + intimacy / self-interest tells you how much trust somebody else is going to have for you.
Mike: Oh, yeah.
Josh: And it also tells you how much trust you have in others. Where I see business owners falling down on the trust factor is they have a poor belief in competence in those they delegate to. The truth is most of these owners, when they first learn how to delegate, they don’t delegate, they abdicate.
Mike: Oh, my God, yeah. And myself, the king abdicator. I’ll tell you how frustrating it was for me. I hired an employee to do something. They say, “What do I need to do?” I say, “Social media – take care of our social media.” That was my abdication.
Mike: Now, they’re running. They come back to me and the work is, according to me, crap. And they said, “Well, what did I do wrong?” I said, “Well, you didn’t do what we needed done.” They said, “Well, what do we need done?” I’m like, “Social media.” Right? [laughs] I’m not giving them the explicit instruction. I’m not even giving them — is it called complicit instruction? I’m not even giving them kind of the outcomes that we’re looking to achieve. I’m just saying the one edict but it’s all in my head. I believe that what we need to do is extract that.
The irony is I think most entrepreneurs think that we don’t have systems for our business and developing them through SOPs and checklists and all this stuff is going to be too time consuming. Here’s the reality, we actually do have the systems. They’re just in our head. We’re executing the routine ourselves.
I think there’s a far simpler extraction process. With modern technology like what we’re doing now, I can just record the instructions. I can actually record the screenshots as I’m doing stuff on my computer. Or, on my phone, I can record an audio or film a video and create the explicit instruction set for doing an activity. I then can give to my employees and say, “Here’s how you do it based upon how I’ve been doing it. First, here’s the outcome which is most important. Here’s what we’re looking to achieve.”
It’s funny. I just actually had a social media meeting with my team just about 10 minutes before this interview. I told our team. They said, “What are we looking to do?” I said, “We want our arm over the shoulders of our readers. We want them to feel embraced.” The team was like, “Oh, I get it.” I want our readers to be super engaged but also feel this one-to-one relationship with us to have that intimate dialogue.” They now know the outcome. They have the explicit instructions that we really can get there but they also have the ability now to improve the instruction set to achieve that outcome on an even better fashion. That is delegation.
The last part, of course, is measuring it. Having a regular dialogue, are we achieving the outcomes that we agreed to and that I expected? And having a dialogue with that. It’s taken me a long time but I’ve become a delegator and no longer an abdicator. The improvement, of course, in the business is tremendous.
Josh: Oh, absolutely. My first mentor had a great saying. It was called E-I-A which stood for expect – inspect – accept. Business owners are pretty good at setting the expectation. There’s very few business owners I know that say, “Go and do social media.” They’ll actually tell you, “I want you to do Facebook. Here’s what I want you to do.” And then they walk away. Invariably, the person they’ve delegated to has made some mistakes. The owner doesn’t go back for weeks. And then, finally, the owner goes back four weeks later and blows up because everything is done incorrectly and blames the person who made the mistakes. In reality, it’s the owner who made the mistake because they never bothered to inspect what they expected.
Mike: Yeah, that’s so common. I think the easiest way to inspect is a dashboard, but I think the relevance of a dashboard is very important. It requires a higher level of thinking.
Mike: It actually takes the least energy to just do the stuff myself, even though it doesn’t feel that way.
Mike: When I do the work, the reason it takes the least energy is because it’s become routinized in my mind. Okay, just step one, step two, step three. Let me bang it out, right? If I have to think about how to measure the progress of other people doing it, it now actually consumes more energy like, “Oh, how am I going to measure this? What are the relevant numbers or other metrics that should be presenting themselves that if something goes astray, that it will red flag the situation and I can address it?” That requires such a high level of thinking and so much energy, many entrepreneurs – myself included, often will just revert back to just doing It which puts us back in the trap. I believe the best way to inspect is metrics which requires some sophisticated thinking to get to the simple numbers that will trigger when events happen – a negative or a positive, so that you know that action needs to be taken like, “Let’s keep doing more of this positive stuff. Or let’s fix the negative stuff.”
Josh: Yeah, absolutely. What I ask people to do, when we put together dashboards, is to not look at the profit and loss statement or the balance sheet because those are historical numbers. Important, yes, but they tell me nothing about what’s going to happen in the future. A good dashboard is what are the numbers that drive your business forward? They’re almost never on the P/L or balance sheet. An example might be how many sales calls are we making? Forget how much we’re selling because without the input you don’t ever get an output.
Mike: Yeah. Yeah, I think the income statement, balance sheet, I think is a result of those metrics, right?
Mike: And so, like one thing, I’m just thinking of my own business, reader engagement, the arm on the shoulder, that’s the big, main– I’d say that’s the big differentiator. It’s driving that that matters the most.
It’s funny. I was presenting on Clockwork at a conference and it hit me during the conference. And so, I just brought it to the group and I said, “Listen, I just had an idea. I’d love to present it to you and get your feedback.” Just to give you some background, in the book I talk about this thing called the QBR. It stands for the queen bee role. My argument is every business has one thing that it really hinges its success on. They may not know that one thing is. And while their success is hinged on it, they may only be kind of touching on it but they’re not concentrating on it. But once you identify this QBR, this one critical thing you’re going to hinge your business success on and you concentrate effort on it, it elevates the entire business.
What’s that one thing? Well, the epiphany I had or realization is, it goes back to Simon Sinek’s concept of this golden circle. He said that a business really stands out by starting with its why. What’s the impact you’re having? What’s the greater purpose you’re serving? That’s what magnetizes a community. Then, he built out the circle so the next level is, how are you doing this? And ultimately, what is the product or service?
The QBR is the how. Meaning, if I want to eradicate entrepreneurial poverty. That’s actually our why – to eradicate entrepreneurial poverty. The how is by embracing readers, to get them so fully engaged and so supported that they actually are perpetuating the message and helping other entrepreneurs get out of this impoverished mindset. That’s the how.
Everything we need to do, in our organization, has to be around that arm over the shoulder, focusing our efforts on that. Everything else becomes secondary to it. What I need to do– and because there’s a simple instruction set with my employees is saying, “Whatever your job is, how are you embracing our readers through this experience?” Even to the point of like invoicing, if someone buys a service contract from us or something like that beyond just reading a book, they engage our consulting services, “How are they feeling totally embraced and loved through this?”
You experienced it, Josh. Maybe you didn’t feel this way. We were very privileged to have you come and speak with members of our organization. The person who was coordinating this was saying, “Our arm over the shoulder with Josh.” And so, she did some research and said, “This guy is the biggest Deadhead fan I’ve ever seen in my life. We’ve got to get some Deadhead memorabilia.” And so, we reached out and got something, something specific to your interest, to show that we really care about you beyond the amazing stuff you’re giving us but to embrace you.
Josh: That was like the coolest thing of all times, by the way.
Josh: Yeah, it’s hanging in my office.
Mike: Oh, oh. I love it. I love it.
Josh: I love it. What Mike got me was a Grateful Dead skull and roses head done in wood. It was the most amazing wonderful thing. It kind of just set me up for it. I went to see them play a couple of weeks ago again. Your piece was just part of that whole thing. It was really very, very cool. Yes, I did feel arms around me and it showed that you really cared about me as a person. What did that do? It raised the amount of trust I had in your organization so high, it was ridiculous.
Mike: Right. And you delivered amazing content. Another thing, on the back of that, every person there signed it. That’s what we consider arm over the shoulder. This isn’t like just a “Here’s a gift, hope you enjoy it.” It’s really much more of an embracing experience.
We believe that our company’s QBR is that arm over the shoulder of everyone and that if, for all other faults and problems that our business has, we can kind of grease the wheels for those squeaky problems by focusing on that QBR, that number one thing.
I think, for folks listening right now, if we want to grow our business, identify the one thing that you differentiate on. What’s the big promise you’re making and how— that’s the QBR, how do you deliver on that? Make sure all of your employees put their best effort in elevating that how. How are you doing it? And then you let them do it on their own.
I didn’t find that Deadhead carving. One of our colleagues found it here. I didn’t research out that you’re a Deadhead fan. I knew it from our prior conversations but I didn’t come to them and say, “We’ve got the biggest Deadhead fan ever here.” They found it. They were assigned the outcome of embrace this guy and they did it. I think that’s the definition – going back to delegation of delegation, assign the outcome – not the edict, if you will.
Josh: It was such a cool thing. It’s a great example of how to make a supplier fee loved. If you do that with suppliers, I can only imagine what you’re doing with customers. It’s really true. Too many of us, we don’t treat our suppliers well. One of my rules by the way, and it has been for a long time, I go out and have a meal with the supplier, I always pick up the tab – and have for 40 years.
Mike: Yeah, it’s awesome.
Josh: It always comes back to reward me because nobody else is doing that.
Mike: Right. This is an interesting kind of caveat. I was in the forensic business and I read about– we did computer forensics. When there was a computer crime that broke out, we were often doing the investigation. It’s a very timely thing. Evidence gets mailed back and forth between the two sides following a chain of custody and there’s all these different things but timeliness mattered. We’re in the northeast – not as northeast as you are, but we get snow here in New Jersey, too. Sometimes, deliveries get delayed. What we found was the UPS guy, if we had a cup of coffee and some donuts waiting for him, consistently, that we sort of stand out in his mind. Now, this wasn’t something we kind of thought of. I read about another company that did this. They said, take care of your suppliers. Our UPS guy would always get his cup of coffee, donuts. We knew him by his first name. We really cared about him.
Well, the day came when a critical case was on the line, a Nor’easter comes tearing through. Guess who comes down the one highway that’s closed with our delivery – UPS. It wasn’t that we said, “Hey, one day this is going to happen. You’ve got to do this for us.” We just had that inherent rapport now because we had been serving him. I guess, it formed this reciprocity that he delivered to us when we most needed him.
Josh: That’s absolutely true.
Hey, Mike, unfortunately, we are out of time for our podcast. I have read all your other books.
Mike: Thank you.
Josh: I’ve liked all your other books.
Mike: Thank you.
Josh: I’m looking forward to reading Clockwork when it comes out. When does it come out? How do I find it? Once I find it, what should I be doing with it?
Mike: This goes live August 21. It’s on Amazon. You can find it on Amazon, Barnes & Noble, your local bookstore. It’s on Audible. I’m a big audible fan now. Find the book there.
What you’re going to discover is how to design your business to run itself. But also, I think, you’re going to find the how-to method. It’s not theory. This is practical stuff.
My big goal for people that read this book is to devote or commit to a four-week vacation. Although I know it sounds absurd but once you do this, and I give you a strategy how to build toward it, when we can actually extract you from your business for four weeks – four consecutive weeks and it can run on its own, we now have a business that’s designed to run itself. That’s the ultimate goal that this book’s going to get you to.
Josh: Cool. That’s a great thing.
Well, I also have an offer for you and I have to go get it.
Mike: It’s this Deadhead wood carving that you don’t want. It’s available for anyone.
Josh: No, no, no. It’s my book. The one that you wrote the introduction on.
Josh: Mike actually did write the introduction on Sustainable: A Fable About Creating an Economically Sustainable Business. It was my first shot at writing a book. I’m not as accomplished as Mike is but maybe someday we might actually talk about my next book.
Mike: I read the book. The content is remarkable. It’s fable written too or you know a story.
Josh: Yeah, it’s a parable.
Mike: Parable, yeah. I love that angle because it gets much more engaging. Please don’t discount yourself. The content in there is truly extraordinary.
Josh: Oh, great. Thank you.
To get it it’s really easy. You just go to www.sustainablethebook.com or you can go to our friends at Amazon and download it either as a Kindle or physical book. If you buy the book from my website, you get to have a free 20-minute conversation with me. I wrote a 37-page how-to guide because in the book we talk about the issues not necessarily how to solve them but what you need to do but here’s is a system you can put in place to create a truly sustainable business.
Mike: Oh, my God. Yeah, you’ve got everything you need.
Josh: Yeah, there you are.
This is Josh Patrick with Mike Michalowicz. You’re at the Sustainable Business. Thanks a lot for stopping by. I hope to see you back here again really soon.
Narrator: You’ve been listening to The Sustainable Business podcast where we ask the question, “What would it take for your business to still be around a hundred years from now?” If you like what you’ve heard and want more information, please contact Josh Patrick at 802-846-1264 ext 2, or visit us on our website at www.askjoshpatrick.com, or you can send Josh an email at email@example.com.
Thanks for listening. We hope to see you at The Sustainable Business in the near future.