Mike Michalowicz's Blog, page 90

The Poem Of The Struggling Entrepreneur

One. Two. There’s anything I’ll do…

Three. Four. To serve the next knock at the door..

Five. Six. Even if it’s outside my offering mix…

Seven. Eight. Any opportunity of any type is great…

Nine. Ten. I’ll repeat this process over and over again.

Should You Raise Your Prices?

There is a danger when you raise your prices. You may lose customers.  It can (and does) happen. But you also need to realize that higher prices only result in the loss of certain customers called Price Shopper.

Customers that complain about price increases are called Price Shoppers. Customers who seek value are called Value Shoppers.  They both exist in all markets. Even you are both. Sometimes you just want the cheap solution, making you a Price Shopper in that situation. And other times you want the best solution, making you a value shopper.

When you raise your prices, your customers will reveal which category they fall in.

Price Shoppers want cheap. Value shoppers want value. The question is, who do you want? If you want customers to see you as cheap (I hope you don’t, but in some case it applies) then you need to reconsider your pricing if people leave. If you want customers who see you as valuable you should be grateful when the Price Shoppers leave to be cheap elsewhere.

Unlimited Wealth from One Simple Method

Have you heard the old story of the Mexican Fisherman and the American Tourist? It goes a little something like this:

Once upon a time, in a land far, far away…just kidding.

An American tourist was at the pier of a little coastal Mexican village when a rinky-dink fishing boat with just one fisherman docked.

Inside the little boat were several large Yellow-fin tuna. The tourist complimented the Mexican on the quality of his fish and asked him how long it took to catch them.

The Mexican replied, “Only a little while.”

The tourist then asked, “Well, why didn’t you stay out longer and catch some more fish?”

The Mexican said, “With this I have more than enough for my family.”

The tourist then asked, “But what on earth could you possibly do with the rest of your time?”

The Mexican fisherman replied, “I sleep late, fish a little, have fun with my children, take a siesta with my wife, stroll into the village each evening where I throw back some beers and play guitar with my amigos. I have quite a full and busy life.”

The tourist scoffed, “You need help and I can help you. You should spend more time fishing; and with the money you make from fishing, buy a bigger boat, a better boat, maybe even a yacht. With the proceeds from the bigger boat, you could buy a boatload of boats. Eventually you would have a fleet of fishing boats. Instead of selling your fish to a middleman, you would sell directly to the processor; by doing that you could eventually open your own cannery and name it something awesome like, “Oh My Cod!”. You would control the product, processing and distribution. You could leave this boring old coastal village and move to Mexico City, then Los Angeles and eventually New York where you could run your ever-expanding fish enterprise!”

The Mexican fisherman asked, “But, how long will this all take?”

The tourist replied, “15 to 20 years, maybe a few more.”

“But what would I do then?” asked the Mexican.

The tourist laughed and said, “That’s the best part! When the time is right you would sell your company stock to the public and become very rich. You would make millions!”

“Millions?…Then what?”

The American said, “Then you could sleep late, fish a little, have fun with your children, take a siesta with your wife, stroll into the village each evening where you’d throw back some beers and play guitar with your amigos.”

Many people seem to confuse wealth with money. To be wealthy, to many and perhaps even you, means to have an excess of money – more money than you need to accommodate your lifestyle. People (perhaps you, too) feel that financial wealth brings comfort, happiness and most importantly the ability to do what you really want. Here’s the irony, almost all of us sacrifice comfort and happiness to make money. We put our lives on hold for 20 or even 30 years. Maybe we end up putting our lives on hold for our entire life. All in the quest to make enough money to give us the freedom to be comfortable and happy. The actual definition of wealth, is a wealthy life. To be happy, secure, comfortable, safe and appreciative of ones own life experience.

I have had the good fortune of experiencing the lowest of financial lows and boat loads of cash… and guess what, I wasn’t happier or more comfortable at any of those times. Money didn’t bring happiness (can I say, duh?). My wealth (and yours) has always been direct result of my happiness, my security, my comfort and most importantly my appreciation for my own life experience. Now don’t get me wrong, when you experience a wealthy life AND you have financial wealth, that is a GREAT combination. It gives you the freedom to do even more with your wealthy life.

Now I know what you’re probably thinking. “I’ve been cheated! This article isn’t about wealth… this is total BS. I want to know how to get rich!” If you feel that way, I get it. I felt that same way for years, until one day it finally clicked. A dollar richer, a dollar poorer. A million richer and a million poorer makes no difference in the wealthy life.

If you want a wealthy life, do everything to be truly yourself. Do your calling. Don’t know what your calling is? Make your calling finding your calling. Do everything to bring happiness to yourself (with the caveat of never hurting anyone else, of course). Be the Mexican Fisherman…. it will bring you unlimited wealth. And in some strange way, people who live an unlimited wealthy life, seem to always bring enough financial wealth into their life, too.

Helpful Money Metrics to Help Monitor The Health of Your Company

When most people want to know how they’re doing financially, they look at their bank balance and see what’s there.  Bank balance accounting – although wildly popular – is a lousy method for accurately assessing the health of a business.  Here are eight better ways to monitor how your company, or any company, is doing.

1. Current ratio = Current assets/Current liabilities.  While lots of folks get themselves needlessly worked up over five years’ worth of financial projections, an incredibly useful metric can be a company’s immediate ability to pay its bills.  If you divide current assets by current liabilities, you get the current ratio – a measure of a company’s liquidity.  If a business has little-to-no liquid value, that can be a red flag.

2. Profit Margin = Net Income/Sales.  If you divide income after expenses by total sales, you get an idea of what percentage of every dollar a company keeps – basically, the profitability of a company.  If you’re comparing several businesses, keep in mind that standard profit margins vary widely from industry to industry.  A profit margin that’s far too low indicates inefficiency and is a warning sign for sure.

3. AR Turnover Ratio = Sales/Average Accounts Receivable.  Knowing whether or not a company handles its accounts receivable in an efficient manner is a huge part of assessing that company’s health.  A high ratio demonstrates that a company extends credit carefully and collects receivables in a timely fashion.  A low ratio indicates that a company is extended too far and needs to step up its collection practices.

4. Debt To Equity Ratio = Total Liabilities/Total Stockholder’s Equity.  Dividing a company’s liabilities by the total of the stockholder’s equity gives you a read on how much debt the company is carrying compared to what the company is currently worth.  It shows you if a company is overextended or undervalued.

Metrics 1-4 are traditional accounting practices, but there’s more to assessing a company’s health than a look at where they are at any given moment.  What about the future and getting a general idea of where they’re headed?  Let’s look at the four steps to predicting future revenue.

5. Days To Convert A Lead To A Client.  This figure is based on the date of the first significant contact with a potential client and tracks how long it took your company to convert them to an actual client.  Perform this calculation for all your new clients, and you’ll get an average, a calculation – expressed in days – that you’ll use to arrive at other figures.

6. Conversion Rate.  Since no one converts every lead into a client, you need to know what you success rate actually is.  Divide clients by prospects to get this ratio.

7. Weekly Lead Generation.  How many leads per week do you have to work with.  For B2C businesses – like a coffee shop – this figure may be calculated daily, based on the high volume of small dollar purchases.  For B2B companies, you may be looking at a monthly, or even yearly figure.

8. Predicted Revenue = Conversion Rate X Weekly Lead Average.  Once you have numbers 5-7, you can calculate your anticipated revenue.  Multiply your conversion rate by your average leads per week, and based on your days that it takes to convert a client, you can predict when your revenue will come in.

So what do these numbers actually tell you, other than that you’ve passed our little basic accounting class?  If you’re looking at your own company, you’ll be searching for ways to assess what you’re doing well, and what you need to improve.  If your debt’s low, your sales high, and your predicted revenue looks great, but your AR Turnover Ratio is lousy, then you’ve learned that by improving your collections practices that you can make your company healthier.

If you’re looking at a competitor who’s really giving you a run for your money – fighting you hard for clients and bringing in large amounts of cash – discovering that they’re leveraged to their eyeballs – owing way more than the company’s worth – may tell you that if you’re strong and steady, you’ll win that war.  You’ll be in it for the long haul, while their unsustainable model falls apart.

Episode 30: Social Media Marketing with Shama Hyder and Tim Knox

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Show Summary

Shama Hyder and Tim Knox join us for Episode 30 of the Profit First Podcast. Shama and Tim discuss how you can use social media marketing to turn your business into a profitable one.

 

Our Guests

Shama Hyder (left)

Known as the “Zen Master of Marketing” by Entrepreneur Magazine and the “Millennial Master of the Universe” by Fast Company, Shama Hyder is a visionary strategist for the digital age.

She is the bestselling author of the Zen of Social Media Marketing and an acclaimed international keynote speaker who’s been invited to share the stage with the world’s top leaders, including President Obama and the Dalai Lama.

As the CEO of the award-winning Marketing Zen Group, an integrated online marketing and digital PR firm, she’s led the organization through explosive growth, averaging 400% growth annually since its start in 2009. Shama was named as one of the “Top 30 Under 30” Entrepreneurs in America by Inc Magazine in 2013 and was honored at the White House as one of the top 100 U.S. companies to be run by a young entrepreneur by Empact100.

A trusted media expert and sought-after TV personality, Shama has frequently appeared on Fox Business, CBS, CW33 and Fox News. As a thought leader, she’s been featured in many major publications, including The New York Times, The Wall Street Journal, Entrepreneur, Inc Magazine and Forbes.

She was recently named to the Forbes 30 Under 30 list of movers and shakers for 2015.

 

Tim Knox (right)

Tim Knox is a serial entrepreneur, bestselling author, syndicated columnist, and a nationally recognized expert and speaker on the topics of marketing, leadership, and entrepreneurship. He is also the host of the popular podcast Interviewing Authors, which features interviews with authors, agents, publishers, and other publishing industry veterans.

 

Show Quotes 

Start with the “Why” and the “What” when starting to use social media.

Use the ACT Model: How do you get a stranger to become a customer/client? Attract, Convert, Transform.

Social media is great for sharing your success stories and attracting people to what you do.

It’s all about the engagement. If you’re B to B company, LinkedIn is a great targeting opportunity to bring in clients. If you’re a B to C company, take advantage of reaching out to people on Facebook and Twitter.

If you have a lot of information you want to set out into the world, using certain apps like Buffer and Hootsuite to help with time management is essential.

 

Show Links

Shama Hyder

Personal Website: http://shamahyder.com/

Company Website: http://marketingzen.com/

Twitter: @Shama

LinkedIn: https://www.linkedin.com/in/shamahyder

Tim Knox

Personal Website: http://www.timknox.com/

Company Website: http://interviewingauthors.com/

Twitter: @timknox

LinkedIn: https://www.linkedin.com/in/timwknox

 

Corporate Partners

Nextiva – VOIP phone providers for small businesses.

Fundera – Single source online funding for entrepreneurs. Also offers an adviser program for CPAs, bookkeepers and business coaches.

TSheets – The #1 customer rated time tracking solution!

The Inevitable Entrepreneurial Question: How Much You Should Pay Yourself?

Every entrepreneur stumbles sooner or later with the question of what they should be paying themselves. It is a fair question and one that you shouldn’t ask without doing a little fact checking about your business. Once you do that, you will be ready to determine a salary that your business will, most likely, be able to sustain. Believe it or not, choosing what salary to pay yourself is actually must easier than you may think!

The problem with determining what salary to pay yourself is that most entrepreneurs pick a number and say, “I want to make X number of dollars this year.” Then they try to pay themselves accordingly. However, that number was based off of nothing more than wants, rather than needs or what the business can actually eek out each paycheck.

What happens with many entrepreneurs is that they find they are not able to make as much as they had hoped right off, and they start living off the profit. The profit, however, ends up usually being little, or often, nothing at all in the beginning, so they start to skip taking checks all together. In effect, they pay themselves last, which is a big mistake!

I’m sure that you realize just how important it is to pay yourself first. Without doing this, you will have a real difficult time paying your own bills, and quite possibly, keeping the business going. Doing this may have you running back to beg for your cubicle back faster than you can imagine!

So yes, you need to pay yourself first. But the key here is that you need to do it in a specific way. Here’s the best way to determine what you should pay yourself:

1. What you are going to do is take a percentage of the top line revenue. If you are a solo entrepreneur, meaning you have no employees, you will aim to take up to 40 percent.

2. For those businesses that have employees and revenues of up to $1 million, aim to take 20 percent. For example, if your business were bringing in $1 million each year, you would be taking a salary of $200,000.

3. For those businesses that have employees, and a revenue of over $1 million, plan to take 10 to 15 percent.

The key factor here, and what you may be wondering about, is what if you can’t take that amount of the revenue. If you can’t take that amount, then it is clearly a sign that your business needs more efficiencies. This formula is a great way to not only determine how much you should pay yourself, but also whether or not your business needs to be run more efficiently.

If you find yourself falling into one of the three categories above and are unable to take a salary of the suggested percentage, take a close look at your expenses, profit margin, etc. Somewhere along the way, you are not being efficient enough to support your own salary, which needs to be remedied right away.

It is important that you always take your percentage first. If there is not enough money left to pay the bills, you need to become critical of the bills. Find ways to slice the costs and/or to increase the efficiencies.

Being able to determine your own salary is one of the perks of being an entrepreneur and one of the reasons you may have become one. But getting it right is crucial so that you make sure you get paid and the business runs smoothly. Following this will help you stay within a realistic salary that your business can survive with, as well as helping to keep your expenses in check!

What Do You Stand For?

What do you stand for?

What is your purpose?

How is your company a platform for your purpose?

So, tell me. What do you stand for?

Got it? Good.

Now go tell the world about it.

Overcoming Burnout (6 Tips And One Escape Plan)

Feeling a little burned out in your job or career? Perhaps you are feeling it and don’t even realize that’s what it is! Whether you already recognize burnout or not, it’s a good time to evaluate whether you have it and what to do it about it, if you do. Burnout can be disastrous for both you and the company, so the sooner you spot it and address it, the better off everyone will be.

First, however, it’s important to identify exactly what burnout is. My definition of burnout is when you feel your efforts are fruitless and that you have lost all enthusiasm for work over a sustained period of time (typically at least four consecutive weeks). If you have just a few lackluster days, or even a few weeks of them, it could just be a simple anomaly. But when that “lacklusterness” goes on for a month or more, you, my friend, are burned out.

Here are six tricks to overcoming burnout:

1. Take an extended break. There is a saying, “everything in moderation.” That includes work. Burnout is often a loud and clear signal that you need to take a break. Take a break from work, even if it is a few days. But here is the key: it must be a complete break. No laptop, no iPad, no cell phone, no nothing.

2. Start relaxed – Too many people jump out of bed, race through breakfast and on to work. In other words, stress, stress, and more stress. Instead, start relaxed. Adopt a morning ritual that includes stretching, exercising, relaxing, meditation and/or reading. Just like you slowly warm up before exercise, you want to slowly warm up your mind & body before working.

3. Regular breaks – Working straight through the day is not productive and has even been proven scientifically not to be effective. Change your schedule to work in a short burst (ideally 60 to 90 minutes), then take a 15 to 20 minute break. Make sure the break allows your mind to totally disconnect from work. Go for a walk, talk with friends about the past weekend, or read your favorite magazine.

4. Avoid the news – In some cases, burnout is a result of depression. The constant negativity perpetuated by news reports, over time, gives many people the false belief that all of life is horrible. And with that comes depression and burnout. Try not watching or reading the news for 30 days. It may be the perfect burnout cure.

5. Change what you eat – Similar to keeping negative junk out of your mind (as in the previous point), you need to keep junk out of your stomach. A poor diet can not only suck the energy out of you, it can also mess with your mind. Improve your diet and, in many cases, you will see a rise in energy and a rise in your attitude.

6. Write down why – Spend the time necessary to figure out why you are doing what you do. Is it a stepping stone to another goal? Is what you do serving a greater purpose than just making money? Once you know why you do what you do, the passion may return and the burnout out will go away.

If all else fails, it may be an indicator that you need to permanently leave the situation you are in. When this is the case, you need to figure out your escape path. Specifically, determine where you ideally want to be in life (not just monetarily, but also what you wand to be doing, etc.). Then determine all the steps you need to take to get there. Can you find a career in that field? Can you take a small immediate step in the right direction? Can you take a night class? Whatever you do, once you have the “escape plan,” start working on it immediately. After all, it is your best means of escape to a better, more fulfilling way of life.

Get Happy About Your Work Again! Here’s 8 Ways To Do It

Hate your work? Do you know why? It’s because you’ve lost your purpose. I mean you could happily carry a load of rocks on your back for 100 miles if you knew it would save the people you loved. The load would be a lot lighter because you knew what your purpose was. It’s the same with work. So here are the 8 steps for rediscovering your purpose and getting happy about work again:

1. Define your life’s purpose – This is something you can assign your self, or rely on divine intervention or serendipity to do. The thing is once you have a purpose, you can now investigate your work and determine how to use it as a vehicle for delivering on your purpose. And by the way, if you can’t figure out what your purpose is, then make your life’s purpose to be finding your life’s purpose. Use your work as the great investigation of what you like and don’t like. Don’t judge yourself. Just keep asking why you don’t like things and why you do. Become really, really curious about you.

2. Choice – Everything in life is a choice. If you start the morning and say it’s going to be a bad day. It likely will be. If you say it will be great day, it likely will be. It is not what happens, but the meaning you assign to what happens. Recognize you have the power to choose not only what you see, but also how you see it. Choose to be happy at work.

3. Chunk Your Day – It’s far too easy to become unhappy when there’s no end in sight. So intentionally break up your day into one or two hour chunks. Position yourself to have something completed during that time… even if it is just the completion of one step. Then go take a break to celebrate. Come back and tackle the next step. Regular intervals of completion of small tasks give us a string of small accomplishments that make us happier than infrequent success and long intervals between big accomplishments.

4. Stop Watching TV – Studies indicate that unhappy people watch more TV. This is not a chicken or the egg question. When unhappy people started watching less TV, they became happier. TV may be your outlet from an unhappy day at work, but it’s probably just adding to your unhappiness. Try to spend that time with some (happy) friends.

5. Birds of a Feather – The old saying, “birds of a feather, flock together,” is true. Vulture or Bluebirds, it’s your choice. We are the aggregate of the five people we spend the most time with. Those five people are usually the people we work with. If they’re negative you probably are too. If they are unhappy you will be sucked into the same misery party. Pick happy positive people to hang out with. It won’t be an instant cure… but the more time you spend with them you’ll change for the better.

6. Get a Life – You need a life outside of your job to be happy at your job. Having something to look forward to, something to share with co-workers or friends when you’re at work, all make you happier at work. Hobbies are great, but also consider joining a meet-up group that has fun and plays if you’re not the hobby type. There are meet-up groups for sports, movies, dining out, hiking, running, book clubs or even playing board games. To find a group in your area just go to http://meetup.com. It’s free to join.

7. Make friends – Don’t be the weird guy (or gal), who comes in, does their thing, eats lunch huddled in a corner (or their car) over a book or magazine and then schleps home every day without engaging in any social chit-chat. Find and make a friend with someone at work. It will make the day pass faster and you’ll feel better having someone you can run ideas and other things past, or talk to that understands what you’re talking about.

8. Grow – Yes, take advantage of every training opportunity, brown bag lunch, seminar or On The Job Training you can. Not only will you feel better about yourself, you’ll be developing job skills that will take you into a better job (either at the company or somewhere else). If you’re an entrepreneur, take a continuing education class, go to a conference or meet-up, read or hang out with other like-minded self-improvement types. You’ll grow your confidence, skills and networking opportunities.

Remember, your state of mind, or happiness is a choice. To get out of the situation you’re in, or to improve it, choose to do something different. Yeah, it’s that easy.

Episode 29: Profitability and Proactivity with Erik Knight and Jon Wood

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Show Summary

Erik Knight and Jon Wood join us for Episode 29 of the Profit First Podcast. Erik shares his expertise on how hackers go after your business. Jon talks about how he ended up on his entrepreneurial journey.

 

Our Guests

Erik Knight (left) is the CEO of SimpleWan. He is a computer and network security veteran. SimpleWan is a cloud based firewall company designed for IT & Service Providers. This cloud based technology allow service providers to locate, monitor, manage and quantify Broadband Internet connections. The SimpleWan solution gives carriers and managed service providers the tools to increase their customers retention with advanced security monitoring and troubleshooting tools at a very low cost. SimpleWan won Product of the year in 2014 by TMC Magazine.

Jon Wood (right) Jon started a low-risk, low-reward, pooper-scooper business while he was a senior pre-med student. After graduating with his degree in biology, Jon decided instead of medical school to scratch his entrepreneurial itch, and see where it took him. The first 2 years were about just scraping by and paying his bills through other full-time jobs. The next few were about growing and milking every experience as a learning opportunity. And the last few have been about preparing (and as of last week completing) the sale of his business

 

Show Quotes 

Hackers will go after easy targets; there are about 4,000 hacking attempts per day for a small business.

If a credit card gets hacked from your business, it will cost the merchant (you) about $250.00 per record between legal costs and fines.

How can small owners protect themselves? Be proactive.

Never count your chickens before they hatch.

Take your profit first! This forces you to change your spending habits. The more something is available, the more you will use it.

 

Show Links

Erik Knight

Website: www.simplewan.com

 

Jon Wood

jon-wood.com

www.linkedin.com/in/jonwoodleader

tulsapoop911.com

 

Corporate Partners

Nextiva – VOIP phone providers for small businesses.

Fundera – Single source online funding for entrepreneurs. Also offers an adviser program for CPAs, bookkeepers and business coaches.

TSheets – The #1 customer rated time tracking solution!