Episode 107 | Fix This Next with Mike Michalowicz
WITH Mike Michalowicz
- Episode 107 | Fix This Next with Mike Michalowicz 00:00
Hi Group Practice Listeners! In this episode, I’m talking with Mike Michalowicz all about his new book, Fix This Next, which will be out on April 28th.
In this episode we cover:
- Navigating how to find the next big thing that will help move your business forward
- The Entrepreneurial Hierarchy of Needs
- Base level needs vs. higher level needs
- When & how to do your Fix This Next analysis
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Hey, everyone, welcome to another episode of the Group Practice Exchange Podcast. I’m your host, Maureen Werrbach. I’ve got Mike Michalowicz on again, and I’m really excited because we’re gonna be talking about his newest book, Fix This Next. So hey, Mike, how are you?
I’m doing well. And thanks for letting me be a repeat guest on your show. It really is a privilege for me to be back. So thank you.
I am honored that you take the time out to do this. And I know that our listeners literally love listening to what you have to say. So I’m really excited because obviously the book is yet to be out. And when this episode does come out, it’ll be right before the book comes out. So it’ll be really great for people to get just a little bit of information about what they can expect from this newest book. So why don’t you start with giving us a little bit of information.
What made you start writing this book and what is kind of the theme of Fix This Next?
Yeah, Fix This Next and we can call FTN for short.
When I wrote Fix This Next, how it came about was I was asking my existing readership: What’s the challenge you have now? And that’s actually how I write all my books. I’m like, what’s the challenge you’re facing? When I wrote The Pumpkin Plan, a book I wrote a long time ago about sales, people said: well, I’m struggling. Now that I’m having more sales, I’m struggling with profitability. That’s how profit first came about. And clockwork came about after that.
What was the interesting thing is I’m now starting to see reader confusion, if you will, meaning they don’t know what needs to be fixed. And that became the thesis for this challenge.
What I’m saying now is the biggest challenge that business owners face is they don’t know what their biggest challenge is.
They can’t pinpoint it. And so I started to research and said, well, how do you find your biggest challenge? And I couldn’t find many resources for this. But particularly not a book, so I said, that’s it, I need to write a book on this. Now, let this be noted that this process started about four and a half years ago. I start playing with this concept and investigating it. And what I suddenly developed is a compass, if you will, to navigate you to where you need to work on your business.
What’s the most impactful thing that move your business forward, as opposed to all the hundreds of thousands of urgent things that are, you know, apparent and presenting themselves? How do you get through that chaff to get to the wheat? What is the one thing is gonna move your business forward? And you may find interesting based upon Maslow’s hierarchy of needs–
I was just gonna say, everyone’s gonna love the fact that you–at least who’s listening here because we’re all therapists–so the fact that your Maslow’s hierarchy of needs has a sort of similarity to it is kind of funny for our listeners.
Yeah, well, I steeped myself in this. So, you know, every book I write, and I think this is true for for any kind of research you will do is we look for, first of all the thesis or the challenge. In this case, it’s figuring out what your challenge is, then figuring out is there a solution already exists in some other variation?
Maybe there isn’t an established business solution, maybe there’s a solution in nature. And through some iterations of research, I came across Maslow’s hierarchy of needs, or have always known about on the periphery, but never really studied it, and I immerse myself in it. It’s fascinating. And my core understanding is that Maslow argued that there’s in this case, five stages of needs, but we always revert to the most basic need and if the base need is satisfied, only then can we address higher level needs.
The base level need is physiological needs, you know, food, water, shelter, the highest level needs, self actualization, and living your life’s purpose.
And you can be self actualizing with the best of them. But if you’re eating a hamburger and also start choking to death. Now we’re reverting to a base level need, living into purpose. All the things above it don’t mean anything until we dislodge what’s blocking our airway.
So the Maslow hierarchy of need is really not about climbing as much as going to the applicable level, resolving it so that you can elevate up again. And that’s what business is like.
This is not a ladder. It’s not like you constantly climb up. We bounced around. But we–and we naturally do this–we bounced around, often all over the place, but we’re not bouncing to the most imminent need that will drive further escalation or elevating our business up. So what I did is I made an entrepreneurial hierarchy of needs the EHN, and in my model, there’s five levels just like Maslow’s, but specific to the business needs.
And at any given time, if the business is gasping for air, it will immediately call us to revert to clear that lodging that problem that blockage then allow us to To live up to the highest levels that we intend for our business. So that’s how it correlates.
Okay, are you going to give us hints on what those stages are? Okay, awesome.
I’ll give you the five levels. And I’ll tell you the one thing that we can’t rely on as we navigate these five levels. So here’s the five levels.
The base level for every business is sales.
And what sales is, is the creation of cash flow. It’s the inbound source of money. It’s the equivalent of blood or oxygen. If we want to use that analogy, it’s the only way our business can breathe, inbound cash flow. So, oxygen sales in this case, is the most critical base level need.
The next level above that is profitability.
Now profitability, creates sustainability, stability. You know, if we have profit, there’s money left the end of the day, it removes that stress from oh my gosh, we need to sell more and panic. So we can call profit, the equivalent of shelter for example. Now here’s the interesting thing is the instinct many entrepreneurs have is to constantly drive sales we refer back to the base. So even though the business may be, you know, it may be pouring rain and we’ve no shelter, it was more freezing. We try to breathe in more air the option of sales to get rid of the rain. It makes no sense. But instinctually and I’ll tell you why our instinct is very dangerous instinct and business makes us revert to I got sell more that will save me need to sell more.
And many therapy practices, now that I’ve sort of learned about your market, I see many therapy practices growing consistently on a sales basis, but the revenue expenses I should say, are growing just as fast if not faster, so the business is becoming more stressful.
So our base level need is we have to have sales, but you don’t continually grow that foundation of sales without then addressing the next level which is profitability.
I also equate to building a building. You know, if you’re, when you build a house, you got to get the basement in place first or the foundation and then you put the first level on and the second level. The thing is, you don’t create a foundation foundation is so big In New Jersey, we’ve basements you know, build this massive basement and put a little tool shed on top of it, it will fall within it. So it’s, it’s we don’t maximize our sales and then focus on very little profit and it drops in.
We need to build this so structurally sound throughout. So you start with a strong foundation, and you build that first level of profit, the next level, so sales profit, the next level up is called order.
This is what we talked about at your last event that I was at orders about efficiency. Clockwork is the book I wrote that addresses components of this. But basically, you have the inbound cash flow of sales, you have the stability of profitability. Now you’re the creation of efficiency throughout your organization. How do you make the business ultimately run without dependency on the owner and that’s what we talked about your event.
The next level up over order is called impact and impact is inherent to your industry.
But many businesses jump right to the impact level without considering the three levels we discussed below it. Impacted is where we transition from a transaction to a transformation. How do we take client from Point A to Point B, so their life is changed.
Now, in therapy business, that’s what you do.
And, you know, if you manufacture toilet paper, it doesn’t seem like a transformational thing until you realize it can be. It can be providing a commodity product. But maybe the toilet paper company says we are we’re all about environmental impact, we want to be supporters of nature. And so now becomes a transformational thing. The consumers of that are more than just getting a commodity item, they are getting something that speaks to their identity, and helps them move into a new definition of themselves. That’s what impact is about in every business can and needs to have impact play that higher level.
Therapy just happens that that’s actually where your starting point is for your mission is transforming people to a better place. But if you skip the foundation below it now you’re putting on this major floor and there’s no basement thing just collapses on itself.
So we need to get sales, profit, order, then impact.
The highest level is called legacy. Legacy as I define it, for the entrepreneurs hierarchy of needs, is where the business has the ability to survive and thrive in the sense of the owner. But the business is on a mission that’s going to live on into perpetuity. It’s a permanence that the business has. And so that’s the five levels.
The point I make in this book is, at any given time we need to concentrate our efforts in one level to address a vital need there. Then before we move on, we don’t just keep on climbing up, we look and say is the foundation shored up or has a problem present itself or revert back to a base, and we keep on navigating through and around the entrepreneurial hierarchy of needs.
I think that’s one of the things that new and sort of a newly established the first few years of a business owners get caught up in. I get this a lot just in my circle of group practice owners that I work with. They ask you know how to get to where I’m at. And I think they view it as like I’m at the top, at the legacy stage, and that’s I’m done now and I’ve, you know, I’ll never fall into any of the other, you know, levels anymore. And I like that you, you know, talk about it in this. It’s like fluid and we’re moving up and we’re moving down.
I just recently, last week, I shared that one of my headquarter locations is–the one that I usually work out of–I just got a 90 day notice new ownership bought it. Everyone has, we have to everyone has to be out of the building. And so I literally have till December 27, which is my birthday, and I’m really not happy about this. So you have to move out a whole location of people.
And so in that sense, I was like, you know, I had shared even well established businesses, because people I think, have it all wrong and thinking that, you know, I never have issues anymore. I never fall down those notches ever.
And that’s not the case right now.
My focus right now can’t be on legacy. It can’t be on any of the higher level things. It has to be on making sure that I can find a space that my employees can work out of for that location. And so I think that’s a lot of what you’re talking about is certain things will happen where you just have to focus on a different area.
Yes, our business, the climate around all these different influences will cause us to revert to base level needs.
And base level needs versus high level needs are not better or worse. They’re just what your business is merely calling out to.
Typically as a business grows inside size, the needs become bigger. You got to move, you know, 20 people out. A small business, I worry about one person moving, so the problems actually become bigger problems. And we need to be much more thoughtful and the execution of that is 20 lives 20 plus lives that we’re managing here.
Now, the thing that we often rely to is our gut instinct, and we explain in the book is that this is the biggest risk we run. We have to understand that when it comes to instinct, it does serve us extremely well. And personal survival, our personal lives, like if I’m walking down a dark alley, and all of a sudden I get the heebie jeebies–that’s my senses triggering. That’s my eyesight, smell, feel touch. And I’m like, this is not safe. I better turn around like someone probably will murder me. Like, if your instincts trigger off, walk away, turn around, move, run, fight or flight, trust those instincts because our senses are physically wired into us our nervous system is a wiring structure.
Now, the thing is with our business, we are not wired into our business.
Our business is a etheral entity that we’ve created, but we’re not wired into it. So sometimes we have our gut instinct saying, Oh, I shouldn’t do this, or I think we have a problem here or I need more sales or I need more of this in our instinct calls out to do it.
But we’re not physically wired into our business. So we actually can sometimes confuse the issue.
Why businesses, the owners trusting their gut, but they are moving in this circuitous circle there. They’re going three steps forward, but four steps back, and they get frustrated. What the EHN is, what that model is, I call it a compass. It validates or discredits what an instinctual try, you know, our gut instinct is. What it does is it goes through a series of questions and says, you know, do we have these coordinates being addressed in our sales level or a profit level? If no, well, that’s maybe our issue. And then we look at the issue more in depth. And then we trust our instinct saying, does this reverberate with me? Does this resonate with me? Does this make sense? If so, then you’re honed in on it.
I remember one story that’s included this book.
There’s a fellow named Jacob Lemur and he’s owns a coffee shop called cottonwood coffee in South Dakota, a remarkable human being. He’s a nice man. And I introduced him to the entrepreneurial hierarchy of needs. Now three years ago, as I was developing it, he was one of my beta testers. And we’ve had subsequent many calls about it as I’ve refined the system.
He called me up and said, I gotta be brutally honest with you, because I’ve been in business for 13 years.
And he goes when I saw the entrepreneurial Hierarchy of Needs Once your business for 13 years, you better be performing a legacy. Because I went through this because I had a sales issue a fundamental sales issue that the system kept on pointing back to say, No, no, you got to fix this. It goes but my ego said I’ve been in business for 13 years. It was an ego punch his instincts that I might legacy, his ego that validated the system, the Eh, no, no, no, you have a sales issue we need to resolve to move this business forward. He said it really was kind of a wake up call.
And he’s hitting his ego and checked and how he played. He said, basically, I realized now I’ve been in business for 13 years, I’ve been repeating the first year over 13 times.
Because now with the system, are they able to revert and address a basic level? Basically, the there was a blockage in the airway of the business is able to resolve that. And now as businesses started the fastest growth trajectory it’s ever had the healthiest to in a very short period.
So one of the things that this does is it challenges our instinct, and also will challenge our established belief and as an ego is a bad thing. It just exists. Our egos say, but I should be here. So we start behaving where we should be, even though we have something over there, we need to address prior.
I was gonna say especially for therapists, it’s really common for therapists to have money mindset issues. And so your book Profit First was one very popular book that kind of shook our industry because it made us you know, we’re so focused on helping people and reducing our rates so that we can help as many people as possible. And it’s not about the money, it’s about helping. We’re taught this in school, that we’re not going to make money, we’re doing this to, you know, for the greater good of humanity to help people not to make money off of it.
And so, when we get into business, we, a lot of therapists have this opposing sort of themes of you know, owning a business needing to be profitable, but also, you know, having this money mindset of, we need to be helping and not be focusing on profits. So, one, your Profit First book really helped shake that up for our industry, which is why I think it’s really vital.
But also this hierarchy of needs, I think, as humans, in some ways we need steps, something to look at to say, for business, at least, you know, this is what this is what we should be focusing on. And so this hierarchy gives us a platform of like, this is where we should be looking, we should be looking at profit. So for especially, you know, for us who tend to be needing help with our mindset around money, it lets us know like, this is actually an important part of your business to focus on.
This doesn’t make you greedy, this doesn’t make you money hungry to be looking at this. This is a normal business thing. Similar to the guy that you were just talking about, with, you know, the ego issue. I think, you know, with us, we have a similar thing when it comes to just mindset around money,
I would argue is a necessity. So there’s this concept of there of give to get. If you really want to be a contributor to society you have to give and you will receive in return. And in this book, I actually think it’s the reverse, I contest that. I think we have to get to give. What I mean is the only way we can be effective contributors to our society or community is if we have stability for ourselves.
It’s kind of like how in the airplanes they tell you, put your own mask on first.
So what the EHN teaches us is the first three stages are about getting.
We need to get sales in which there is a consistent flow of inborn inbound income. And we need to get profitability which brings about stability to your business confidence and assurance. We need to create efficiency in organization so we can deliver on a consistent basis. If we have those three foundational needs met, now we can be the ultimate contributor, someone that can constantly give.
Because if you have all the money that you need to support your own life, if you have no worries in the business can operate without any problems.
Well, now we have no worries and no worries means now we can focus on delivering the highest level of benefit to our clientele.
Actually, when it comes to profitability, I argue, your clients, your patients that are coming in are begging for you to be profitable. Now never use those words. I’m saying for this session, can I pay double the range? Rip me off, please. Of course, they won’t say those words. But here’s what they will say. My my session, I want your full attention on me. And it’s just not you providing whoever the practitioner is. I want their full attention. And I don’t want them to be distracted or worrying about anything. I want all concentration being on me to resolve the challenges I have. And that’s why I my insurance companies are paying you for the work you do. Right.
So the that’s the customer saying, the only way for you to have full concentration, full focus on not having distraction is if we have a healthy, sustainable business. A business that’s profitable, has inbound sales and is running efficiently. If we don’t have those things, worries are gonna be sitting in the back of our own mind while we’re trying to help someone else’s mind are sitting in our mind saying, Oh my gosh, how am I gonna pay the bills next week? Oh, my gosh, man, this worry, diminishes our ability to give. So you must get the three levels before you can give the last two levels.
Exactly. That makes a ton of sense. Tell me about the concept of vital needs. Yes, I think that’s something that’s also in this book.
Yes, it is. So every level I defined five vital needs. And honestly, I don’t have all 25 needs memorized, you know, five at each level. But at each level, there are specific needs I found that are basically wired into every company that exists there can be more need your need. Your company may have seven or eight specific vital needs at each level.
But for example, one of the vital needs in sales is to generate prospects, right? You have to have some source of inbound prospects. Another component is you need to convert those prospects into clients. Another part of sales that most people don’t think about is actually delivering your offering.
Part of the sales process is to do what we promised to do.
So you may have a client who even pays you a retainer in advance. And in the traditional kind of original thing of businesses, they say, well, I just earned all this money. You know, you haven’t actually even completed the sale. A sale is an agreement for one party to depart with money, the other party to depart with their service or product.
So the client gives you money, we still haven’t delivered on our part, the sales not complete legally, that money is still there. It’s just in a holding account with us.
One thing that almost no business thinks about when it comes to sales is the link of the sales objectives of the business back to our personal income requirements. Like what’s my comfort level, back to Jacob Lemur of Cottonwood Coffee. That was his fundamental challenge. He’s been running business for 13 years and just surviving off of whatever’s left. He went through the exercise in Fix This Next and specifically said what you need minimally to sustain a comfortable lifestyle not like what your big aspiration wasn’t minimally.
Now he lives in South Dakota. So he goes to the South Dakota budget he goes and South Dakota, you can actually support a family family for 4000 a month, where I’m in the northeast, that would be a dream. But South Dakota, he says you can actually you know, live comfortably it’s not an extravagant life by any stretch of imagination, but it’s comfortable.
Once he did that, he back calculated sales and said for my company ultimately yield $4,000 of regular compensation to me, we need to have sales $500,000 in sales for the first time he had a sales target targeted back to why he started the business in the first place his own comfort.
So that’s a vital need is to have that relation that correlation identified in the sales level.
As we go to profit there’s five more needs the ability to collect money like not only charge with the appropriate margins, make sure you’re you’re dictating a premium that delivers profitability and sustained to you, that you’re also collecting the money.
There’s other needs like that. Ordering efficiency, you know, removing the dependency on the owner empowering employees putting right the right people in the right places. Those are all vital needs.
As we move up to impact, it’s about defining the transformation we’re looking at for clients, how are we changing their lives on a permanent basis? And how does that correspond to all the efforts we’re making our businesses, everything aligned with that legacy is about this permanence, where the company even at the highest level even competes with itself.
Here’s an example. There, I have my own business and computer crime investigation. And every year we go away and do a retreat. And we do this exercise called Utopia Corp. 30 employees at the time, and we’re broken into teams of two, so 15 teams. And then each of those teams would come up with a concept or idea that would beat our own company.
And the imaginary game we played is that this is a big pitch.
We’re making one company is our established forensics company versus this new concept. And these team players were supposed to pitch why their concept is better than what our current company’s providing. We generate all these ideas, ultimately starting to change how the industry operated, we stayed in front of it.
And that’s what legacy is, there is no such thing as permanence.
You can’t do the same thing forever and expect it to work forever. Everything morphs and changes over time. So how do you put in your position, put your business in a position to be challenging itself? That stuff is great and important.
The problem is some business owners start reverting to I got to work on my legacy, we got to start morphing and changing and tweaking and they haven’t even mastered the sales part yet. So we always have to revert the base mastered first before we move up a level and if anything of the base gets compromised, we have to go back down, shore it up and start moving up again.
How often would you say people should be paying attention to this?
Yeah, yep. So you do an FTN– Fix This Next –analysis whenever there’s a new consideration coming up.
And once you identify what your vital need is, we have to make sure that while need is either fully addressed, or is on the path of being addressed, where there is available resources to do the next thing.
So it’s one thing at a time in progression, the mistake many entrepreneurs make is they have like 10, or 20, or hundred things that need to be done. And it’s the next urgent thing that presents itself because the email just came in, or someone just walked by and said, we have a problem. And now all tension gets reverted to that.
It’s our ping ponging around the business.
So we do is these hundred needs come up, we take pause, stop for a second, read through the FTN analysis, you can complete it once you know the system, usually within five minutes or less. It pinpoints a need, and you say we got to move forward on this first, let’s work on this next. Let’s address it next. And then once there’s progress on it, you can go through analysis again, and they’ll pinpoint the next need that needs to be addressed. The thing is, is that first need you’re addressing if it’s not fully resolved, the system will keep pointing back to that to be resolved. Before you go on to the next thing fully.
It sounds really dummy proof.
Well, yeah, that’s my goal. Like, you know, it’s funny. So I defined a mission and a purpose. I’ve come to clarity, they’re different things.
My life’s purpose–you kind of let me share this to my presentation at your event is to eradicate–entrepreneur poverty. There’s this gap between where the world thinks we are, you know, the day you open your therapy practice. Everyone’s like, Oh my god, you’re a millionaire now. Or said, all you do sit back and you know, you sit on your couch, you have a few questions and you get a drink and you walk home with a million dollars. The reality is no, we have no money, and we’re working our asses off. That gap is entrepreneurial poverty. So my life’s purpose is to close that gap.
I believe business owners should be financially successful. We’re the ultimate contributors to our society, in our financial success will drive the incomes of other people. It’s necessary. I don’t believe believe we should be doing the work, I believe we should be navigating how to get the work done so others can be empowered so others can be employed. I think that’s how we close the gap. That’s my purpose.
My mission is to simplify the process. I call it Entrepreneurship Made Simple. So the purpose is to eradicate entrepreneur poverty. The mission is to make entrepreneurship simple. And so every book I write, Fix This Next being one of them, I’m trying to make it foolproof to break it down to the fundamental elements that make significant progress.
I also acknowledge it’s not the perfect system, meaning it won’t fix 100% real problems 100% of time, but it will fix 80% your problems 100% of time, it will get you to the core stuff to move you forward.
The very high technical stuff, there’s these micro refinements, which I think a book could never address. That’s where you start bringing in coaching experts and so forth.
Just like therapy. I can read as many you know, Anthony Robbins self help books in the world and you know what, it will have an impact on me to a degree. There’s a certain point that I need to get professional care, professional help. And that’s where the individual dials are addressed. So the book, it does make it simple. It isn’t foolproof, but it does move the ball pretty far down the field.
All right, so I want to give you your time back. For those of you that are listening, the book is coming out. April 28, right? Correct. You can get it now on pre order on Amazon. I’ll link to it as well in the show notes. And wherever else I put this. And then for those of you that want to get even more support around this idea, get the book, read it and then be sure to come to our conference in July of 2020. Because you’re going to be there again and this time talking about Fix This Next. So thank you again, so much for coming on.
It was an absolute joy and I hope to see them at the conference! We had so much fun last year and this year is gonna be bigger and better for sure.
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