On June 10th, our ‘Inner Circle’ members were joined by Mike Michalowicz as our newest ‘Book Club’ guest author to discuss how to grow your business profitably and permanently.
Mike is somewhat of a hall-of famer for small business, his book ‘Profit First’ is in the top 5 best-selling small business books!
Having been one of the most trusted small business experts on the planet, he’s connected with over a million small businesses and from his research, he has discovered a “Business Hierarchy of Needs” that outlines a specific sequence of things that must be done for a business to grow properly and permanently.
‘Fix This Next’ introduces this method by outlining your core needs and determines which of the vital needs needs fixing to move your business forward.
Phil discussed with Mike how Inner Circle members can create a clear strategy for smooth operations that will help you build and strong and healthy business.
Here are some key highlights:
Phil and Mike started with a discussion about some research he conducted where he asked what the biggest challenge was that business owners faced in the year ahead. Having accidentally sent the email out 3 times in a day, he noted that one respondent, in fact, responded to all 3, but with different answers each time.
The biggest challenge that entrepreneurs face is knowing what their biggest challenge is.
We see the same issues occur not just in one type or size of business – it’s in all sizes and types. And this came up in Mike’s research of 1000 businesses for the book that there were 25 recurring core needs that were common to all businesses. So according to Mike, the opportunity to resolve these issues is the also same.
The back cover image shows these steps – or as Mike points out, more needs and priorities than steps – in the form of a diagram:
You’ll note that it’s inspired by Maslow’s Hierarchy of Needs, but adapted as a principle applied to a new way of thinking. Mike saw a parallel and used a technique called “bio-mimickery” to align it with the needs of a business to become successful or avoid mistakes.
Mike’s intention for the book was that it was a tool to refer to, with action points and “homework” throughout.
How do we decide on our priorities now?
As per the title, Mike encourages us not to think too far ahead and reach for Legacy, without working through the stages below. Just as you can’t reach self-actualisation without addressing needs of security first, you can’t create the permanence of legacy if you haven’t mastered creating transformation and impact.
So the first job is to assess where we are now and what needs fixing next.
We are 99%+ the same
Phil notes that in hearing care we may think we are unique and have issues that are unique to our industry, but Mike reminds us that when we peel back the layers of any business, the core issues are the same. The same as us as humans – our core biology is the same.
So when looking to fix issues, the way in which we do it will be not the exact same, but at the heart of it will be very similar.
Why do we start our businesses?
One thing that we all have in common when asked why we started our businesses (and according to Mike’s research) is that personal and financial freedom are the core reasons for most people.
Does your business actually support your vision for your life? What changes need making for our businesses to do that?
How can your business support your vision for your life?
More sales is not the answer. In fact, Mike points out that less sales can actually be better for us. Think you can sell your way out of an issue? He challenges us to think otherwise and that more sales are not the only fix (and sometimes magnify issues further and create ‘organizational stress’).
A better metric for success
Mike has a frustration with more money being the goal and the only measure for “better”. What excites him personally is a small business that makes a good amount of cash that supports the lifestyles of him and everyone he works with.
Phil asks us to think and give attention to whether we are getting what we REALLY need from our businesses. Lifestyle Congruence seems a better metric for getting us closer to our real goals and make better high level decisions as a result.
Delivering on commitments
Moving on to how we do business, Mike mentions in the book that some business owners have an incorrect perception of when the sale is made or done. Is the sale made or done when somebody agrees to pay – or even pays – for a hearing aid?
The sale is really made when you deliver on your commitments.
If you fail to deliver the promise, you haven’t completed the sale.
So if the hearing aid fails to deliver on its promise or you fail to deliver on your promise to provide a service for the life of the hearing aid, then you have not made a successful sale.
Perhaps the thing to fix next is to look closely at whether you’re focused too much on the agreement to buy and not enough on delivering on promises to provide a long term service. And ask yourself “do I want to sell more hearing aids, or do I want to have long-term, loyal customers?”
Are patients delivering on their promises?
A sale is defined usually be a currency exchange, but the promise we talk about is also an exchange. Are patients leaving reviews or providing testimonials? Are they using the product as they should? Are they turning up to follow-up appointments?
Giving clarity on what you expect in return for delivery on your promises and enforcing – though not in a forceful way – those promises. You want them to gain maximum value, and that involves commitment from their side too. This is what feeds nicely into reputation building.
Let’s talk profit
Phil encourages everyone buy and not read, but STUDY, Mike’s famous book “Profit First”. In Fix This Next, Mike refers to “Debt Eradication” and we next discuss the specifics of manufacturer financing and how this presents a challenge.
First and foremost, Mike reminds us that our patients want us to be profitable so that we can focus on delivering the best possible service in the moment.
Being indebted to others is only going to distract us further as well as putting us at the mercy of others. Eradicating this type of debt should be a priority.
How do we eradicate this?
Mike refers to Dave Ramsey’s technique of “The Snowball Effect” where rather than addressing debt logically, we have to look at creating early wins with the lowest amount due first, whilst maintaining minimum payments on larger debts. What then happens is what we are now not paying towards those lower debts starts to accumulate and contribute to paying off larger amounts. And so a snowball effect builds.
What’s really happening here is we are experiencing early wins that build positive feelings and an excitement to pay off the next.
Let’s talk margins
Phil then asks Mike to share some strategies for creating better margins. Mike tells us that the strongest form of marketing is price.
Price dictates perception. And higher prices create a higher perception of value. So he encourages us to consider increasing our prices, but appropriately.
In hearing care it’s possible to just look at the hearing aid as a product with a retail price that we sell on, with no opportunity to charge more. Packaging allows us to add significantly in terms of extra services and therefore charge more, but these services costing us next to nothing.
Packages are where margin is built.
But are hearing care practitioners still missing a trick here? We know that many manufacturers offer maybe 3 different tiers of product, and so we do the same with our packages – bronze, silver and gold sound familiar? Practices are still being dictated to by manufacturers here by following the products rather than creating a service package around them.
So what’s a healthier strategy for maximizing margins?
Packages are highly effective, but there’s always potential for better margin, so regularly reviewing margins and considering and checking transactions to see what can be tweaked makes sense.
Test your pricing on one thing at the time, leaving everything else as it is. By doing this we see the real impact and know that it was the price change that made the difference (either way).
Taking control with manufacturers and suppliers
Pushing back on price at manufacturers and suppliers has its own risks. Remember that price isn’t the only priority – convenience, reliability, etc are huge too. Plus the biggest one of relationships. If you push too hard, they may still work with you, but they may not give that extra attention to you as a customer in other areas.
Mike asks us to consider the fact that there will be customers or patients who we love working with. And often the reasons we love to work with them are not because they pay us more, but because they make working with them enjoyable.
Our vendors will feel the same for us. So use caution here!
How do you know you’ve fixed something?
To know if we’ve fixed something to then be able to know what to fix next requires us to use the framework of O.M.E.N:
Objective – e.g. To convert higher quality clients
Measurements – Define what this means and add metrics such as the clients are at X income level
(Most businesses stop here – we know we need better sales and this is how we know we’re getting better sales)
Evaluation – a CALENDARED event where we ask “are we achieving the results we set out to achieve?”
Nurturing – what are the tweaks we now need to make? Here we are ‘nurturing’ the measurements
Once we know we are achieving this sustainably, then we know we are ready to move on to the next thing to fix.
Fix This Next does not say that only one thing is important. It says that:
There’s only one biggest priority at any given time
The Chain Analogy
What business owners tend to do is try to fix everything at once – fixing all the links of the chain. But the chain won’t get stronger until one critical element happens. The weakest link needs to be strengthened and if we don’t and we pull the chain, it will always then keep breaking at the weakest link.
Once you’ve identified and fixed the weakest link in your business, your next job is to find and fix the next weakest, and so on.
What happens when we are the weak link?
Phil and Mike move on to the specific topic of time management. Erika tells us that time management is something she would like to fix as “I’ll do this when everything calms down” has been her line of thought since she opened her practice.
Mike talks about this being at the “Order” level of the hierarchy, where the business looks to run efficiently without any lynchpin employees, and it sounds like the day Erika needs to take a day off, the business is likely compromised.
Does your busyness stand in the way of your business?
To fix this, we have to let go of being the person who can do it best and train someone else to do it better. Start with the lowest hanging fruit – what’s the thing you dislike doing the most that you have to do regularly? Delegate that first, but assign it to them as the outcome that you agree on, not just the task. This adds extra strength to delegation, beyond just “the task”.
Using ‘time piles’
When addressing bottlenecks and inefficiencies, Mike suggests using “time piles” as a way to see where things typically come to a halt. Where in your processes do things sit or take the longest?
The solution is often more to do with adding resource and replication to minimise the delays and get things moving.
Looking after your people in the process
A couple of live attendees asked specifically about how they help their staff post-COVID to move forward and Mike talks about firstly making them feel cared for. For instance his staff celebrate their achievements at home and share them in a visual way in the office. They are also given a voice when it comes to ideas and contributing to what needs fixing in the organization.
Mike suggests we focus on our staff’s goals in the pursuit of our business goals, rather than expecting their priorities to meet ours.
Phil also recommends a fun card game called Vertellis, which has a series of questions that promote connection and togetherness and can be a great tool to help staff really feel valued and foster loyalty.
So what is the thing you’re going to fix now?
You can watch the highlights from this interview with Mike Michalowicz below: