The Profit First Method, with Mike Michalowicz

Great lawyers don't always know

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seconds in command. You know,

any seconds in command, Jeff.

That would be me.

Now.

That's exactly where I want to be.

Yeah, when I think of number

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Thank you Ben. I appreciate that.

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Welcome everyone to the Elawvate:

Build and Grow Your Law Firm

podcast co-host Jeff Wright, chief

Operating Officer at Gideon Asen.

Our regular host, Ben

Gideon, is unavailable today.

I'm very broken up about that.

So we are joined and pleased to

introduce the man who puts the

ace in and Gideon Asen.

Taylor Asen, founder, owner,

partner. Welcome Taylor.

Thanks. I don't get a lot of shout outs

this podcast, so I'm glad to be here.

No, usually it's Ben talking about

himself. So this is fantastic.

And in addition to Taylor, we have

a phenomenal guest here today.

Mike Michalowicz, bestselling

author, entrepreneur, speaker.

I could probably go on and on

Mike, but welcome to the show.

It's an honor to be here,

so thank you Jeff Taylor.

Thank you both for having me.

Good. Well,

Taylor and I just returned from

three days out in Denver for

a strategic retreat,

so we did our annual strategic

retreat and came back invigorated.

Is that the right word, Taylor?

I think that's right.

Yeah, I can see it.

So we're ready to kick off 2026 and hit

all our goals and exceed them.

I think Mike fits right into that with

his background and everything. So Mike,

do you want to give everyone

a little introduction?

Sure, sure. I didn't do a retreat yet,

but coincidentally I am

heading out to Denver,

so maybe I'll follow suit

with you guys. Beautiful.

Leaving actually just in a little bit.

Go to the rodeo if you can.

Do a rodeo this time of year.

Yeah, it's really a phenomenon

if you haven't ever been.

I have,

but not in Denver and I didn't think in

the winter they did that all times of

year. Now you got it on my list.

It was interesting. Yeah, they're.

Cowboys after all right.

Yeah, US east coasters. The

rodeo was an experience.

Yeah, yeah. So just my quick background,

I've been an entrepreneur my entire life,

but became an author 15 years ago

to really investigate all of the

established beliefs I had

around entrepreneurship as

to challenge them because

why as an entrepreneur, I wasn't

consistently successful. In fact,

I lost huge volumes of money and I went

in just to investigate everything and

challenge it.

What I found is there's established

beliefs or axioms around so many things,

and what I do is I look

at the outcomes we get.

I'll give you just a quick example.

I think we're going to touch on Profit

First, interview business owners,

and for myself, I said, why

did you start your business?

Part of it is for financial freedom.

There's other things that have impact

on community, have personal freedom,

flexibility, but financial freedom

is a big one. I said, okay,

that's why you started your business.

The data shows that 83% of

businesses are not profitable.

Most businesses in the US and globally

survive check by check. So I was like,

hold on,

lots of smart people are

starting businesses to make

money and almost no one's

doing it. What's wrong?

That's when I discovered, oh,

the formula of sales minus expenses

equals profit is a flawed formula.

I do this over and over.

I do it around every element

of entrepreneurship and

have authored 10 books on

different contrarian approaches

to achieving the outcomes we want.

I heard you talk at one point about

the fact that the common wisdom is

sort of the more money a firm has, the

more innovative it can be, but in fact,

there's a counterintuitive principle that

actually being lean can make you more

innovative. Could you

talk a little about that?

Yeah,

so that's a constraint theory and it's

based upon a behavioral theorist named

North Coat Parkinson.

This is the guy from the 1950s

who's studying how resources work.

His original research was around time,

but I think we all relate to this.

What he concluded is the

more time we avail to a task,

the longer the task takes to complete.

So you think back to the college

days when the exam was a month away,

how aggressively were you preparing?

For most of us, it's like a little here,

a little there.

We have a test sprung on is that the

professor says tomorrow morning there's a

test. We go into cram mode and we

get so much more studying done,

so the less time we're giving,

the more efficient we're in

utilization of that time.

Parkinson's theory translates to

all resources, including money,

as more revenue increases in a firm,

what typically happens is the spend

increases uncannily at the same rate,

but that's actually a subconscious

behavior, more income,

there's more available to spend. We

find more ways of spending. Conversely,

firms that run leaner,

make less money available and still want

to drive those growth results have to

find alternative paths instead

of just throwing money at it.

So they find alternative

marketing methods,

they find ways to stand

on their community,

they find ways to get new business and

new ways that otherwise in the past they

would've thrown money.

Well, I was going to say, Mike,

you've always been very forthright and

open about some of your challenges with

your early success.

I guess what advice would the

mic of today give the mic of

back then?

So I started my first business right out

of college, not by the way I wanted to.

I couldn't get a job,

and so I started a business in computer

systems computer network and built that,

sold it to a private equity

organization and life-changing. Well,

for me it was life-changing money,

but it wasn't like billions,

but it was a lot of

money. I then said, oh,

I got pump and dump and grow lots of

businesses and sell these things off

quickly. So my second business was

in computer crime investigation.

My company was involved in the Enron

trial investigation that was put us on the

map and we just exploded. I sold that

to a Fortune 500 and I'm like, oh,

I've got this all figured

out, pump and dump. So I said,

I'm going to just build a lot

of companies. Simultaneously,

I became an angel investor.

I now call myself the angel of death.

I sucked at it. Businesses were

collapsing left and right, and I lost all.

I lost everything. I

thought I knew everything.

I didn't put significance in good fortune.

I didn't make an Enron trial happen.

It happened. I was in the right

place the right time. Now listen,

I grabbed that tiger by

its tail and I held on,

but lots of entrepreneurial success.

It's attributed to good fortune and good

luck, but we don't give it any value.

And so what I realized is I thought I

was just a genius and if I just showed up

to anything, I could make anything

work. And that was far from the case.

Once I lost everything, and I mean

I lost my house, I lost everything.

The only thing I didn't lose

was my family. Thank God.

I went through this reset of I have

limited talents in certain areas

and I need to lean into that. And the

best way to grab opportunity is the

environment around us is always changing.

When an opportunity presents

itself to ask myself,

am I really optimized to serve this?

Am I going to go all in to make

the most out of this moment?

So I've been much more selective in what

I do and make sure it's much more in

alignment with the few

talents I have. So younger me.

The other thing is younger me

would not listened. I'd be like,

don't believe your own bs. You're like,

screw you old man and your crusty beard,

you're an idiot. I had to

overcome that fat ego. I.

Well, I realized that when I

came to work in the legal field,

I am surrounded by ego,

which makes everyone here

extremely good at their craft.

But one of our tenants here and one of

our main core principles is we try and

make decisions on science

and data and not fear or ego.

And I think ego,

it can be such a detrimental

thing to any business owner or

entrepreneur, and obviously you are

kind of a living example of that.

Yeah, yeah. I think we

all are. Ultimately,

ego is wonderful because

it gives us confidence,

but when it's without control

or constraint, it can go wild.

So I think this constant self-reflection

and evaluation is very important for

ourselves and maybe it presents

itself in different ways.

I did find it a question and what I

asked myself, is this really true?

And then I look at the facts. So if

I think I'm great at public speaking,

I'm the best public speaker in the

world. I ask myself, is this really true?

What's the data that proves that?

And that's served me well in kind

of tempering the ego's still there.

It has to be.

Yeah. I just try to control it

because unwieldy out of control,

it's destroyed me once really much

pretty hard in my business life.

I'm not going to let that happen again.

My sense, and this might be a

bias because I'm in a profession,

but my sense is that Profit First really

resonated with a lot of professionals,

doctors, dentists, lawyers. First of all,

I'm just interested to know if you found

that, and secondly, if that's right,

why do you think that is?

Yeah, it's really resonated with the

professionals of the world. Interestingly,

I'm going to a law conference to speak

with lawyers on this exact subject in a

couple months, not in Denver,

but I think the reason it

lands with professionals is

Profit First is, if I may,

it's a radically simple system,

yet it's extremely effective.

Most professionals are,

so this is a generalization but so

capable at their craft that the flip

side is they have shortcomings

and weaknesses in the other

elements of their business, business

management and so forth. I surely did,

and I am doing air quotes

professional in computer services.

I dedicated everything to learning every

element about how a computer works and

how to manage it. I had no idea how

to manage cashflow in my business.

So what I did with Profit First is I

analyzed how I was naturally managing my

business,

and I think this is one of the better

and more important behavioral tricks we

can all benefit from irrespective if you

use Profit First or anything else. What

it is, it's called a commitment device.

So behavioral psychology is that the

common belief and conclusion is that if we

want to change something in our

lives, a habit or something,

it's very difficult to

break an existing pattern.

So an example of this is

about 15, 20 years ago,

I used to play sports in college,

and after that I was like,

I'm never going to exercise again.

And that didn't work out so well.

So about 20 years ago, I said,

I'm going to commit to exercise,

and the way to do it is

willpower, of course.

So next morning I wake up early in the

morning, I have this massive workout,

I'm going to do this every

single day and get back in shape,

and willpower is great for the first

iteration, but on day two, I'm sore.

I'm like, oh, I forgot how hard this is.

I'll just take the day off.

And the pattern broke immediately

and there was no pattern established,

but I did something interesting.

I said, why am I not working out?

And what I noticed is I'd wake up in

the morning, I go to the bathroom,

make a cup of coffee, I start

scrolling through the news,

and it was during this recurring habitual

pattern that I was not able to break

out and do the new thing.

So I set up a commitment device and

what it was was I put my sneakers on my

toilet seat at my house and

my wife was not thrilled,

and I still do and she's still not happy.

But gosh, it works. When I wake up,

I go to the bathroom.

The only way to use that toilet is

by grabbing my sneakers. It's forced.

So my pattern, my behavior stays the same,

but there is some mechanism that directs

me and starts giving me a little bit of

momentum toward where I want to go.

But gym with sneakers in my hand,

I can't deny that I want to

work out. I put 'em on my feet,

I walk over to the gym. It's not

always an extremely great workout,

but I never miss. So with Profit first,

what I realized is most professionals

are great at their craft,

but not managing a business necessarily.

And we try to use this willpower,

I got to go to accounting classes,

I need to learn leadership skills.

I call BS on that, and I

say, what do you normally do?

And what most people do is they log into

their bank accounts for their business,

they see how much money they have,

they determine how to run their business

based upon their bank balance that we

don't read accounting statements

and all that stuff necessarily.

So what I tell people is, well,

don't try to learn more. Instead,

if you're already logged

into your bank accounts,

let's set up multiple accounts at your

bank with labels that show its intention.

One is for the payroll for the company,

one is for the operations

and administrative fees.

One is to pay for the taxes that you as

a business owner are going to incur once

to pay your salary once for profit if

you have to buy equipment or something

like when I work with manufacturers,

you may have an account

that says equipment.

And then when money flows

into the organization, we

carve it up on a percentage,

sometimes a fixed dollar, but a percentage

basis to these different accounts.

And now when you log into your

bank something you normally do,

those sneakers are on your toilet seat.

You have to face the

numbers and understand what

they're going to be used for

because it's been pre allocated.

Now you can still break the system

and steal from one account to another,

but you can no longer deny that

you're breaking the system.

So that's why this works. It works

with our natural behavioral pattern.

You have a book coming out. It may

be out by the time this podcast airs.

It's coming out in the

end of the month, right?

Yeah.

Am I right?

That book is really more focused

on personal financial health than

business, than

entrepreneurship. Is that right?

That's exactly right. Taylor, the

book's called The Money Habit.

Why did you decide to make that change

to focus on people's personal financial

health?

Oh, that's such a great question.

So I am so happy and

excited that we have over

1.1 million businesses that

have deployed Profit First.

This is work I wrote 12 years ago now,

and it's in different countries

and so forth, and I get to travel.

I'm going to Denver to meet with

entrepreneurs, and in many cases,

they've deployed the system, and

I would argue in the majority,

they've improved their

financials substantially.

The reason is because

of what we talked about,

but I found that some business owners

have improved their business substantially

financially, but their home

finances are not so strong.

And what happens is the home

leaches off the business,

the business is crushing it.

Lifestyle expands uncontrolled

and it leached off the business.

And both collapse. And

I've seen the reverse too.

I've seen people who've prepared for their

future have secured live within their

means very effectively and happily,

and they start a business

that's struggling and the

business leeches off the

home and both collapse.

That was my aha that if

you are a business owner,

you need to nail the numbers on both

fronts. And that's why I wrote the book.

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You had some appearances

with Dave Ramsey, right?

Yeah, yeah.

Yeah. I got really into

listening to Dave Ramsey.

I mean partly because he's

just a great radio personality.

He was such a great orator.

And the stories,

I mean the messes people get

themselves into are just incredible.

It's almost like it makes you feel

better about yourself, but a little bit.

A little bit. Yeah, that's an

interesting space to go into.

I see a lot of similarities

between you two actually. I mean,

you both have sort of very simple systems

that can really radically change your.

Behavior,

and I hope that's what people see is

that when I wrote the Money Habit,

my intentionality behind it is

that it's a foundational system.

It's rooted in what we discussed.

There's other elements to it,

but foundationally, if you

log into your bank account,

don't try to change yourself.

Channel that, do more of that,

and we're going to set these multiple

accounts. It's the envelope system,

and it's just translated to

the bank level. Dave's work,

he's famous for the snowball effect and

all these other ways of managing debt

works in concert with it, but there's

other programs and systems out there.

There's thing called YN, you need a

budget. It works with that rocket.

Money is being marketed like crazy

right now. It works with that.

So this is simply cashflow management,

and then there's these

budgeting mechanisms that

are out there that I really

don't focus in on, and I think

it compliments those programs.

I had the privilege, I met with Dave

out at his house, I'll never forget it,

he's down in Franklin, Tennessee's

outside of Nashville and driving up,

I'm with a driver and I said, oh, I've

never been to Dave Ramsey's house.

We go past these gates and stuff.

And I said, is it past that hotel?

And he goes, that hotel

is his house. So yeah,

I was out there. He was having this

amazing cigar and whiskey party,

and it was just amazing to spend

some time with him face to face.

But it was also good to see that here's

a guy who sist that transformed his

life. And even at that

degree of financial success,

he's still adhering to the system.

It works at any income level.

And whatever you want to

say about him, I mean,

some of my friends who are in finance

would make fun of me for listening to him,

but I mean, he's changed a lot of

people's lives as of you, and it's.

Changed my life. I use this system too.

That's great.

Yeah, he's extraordinary. And I

was blessed to then be on his show.

We did some live broadcasts. I

actually keynoted entree leadership,

his organization, and it justs

fabulous what they've done. And yeah,

it transforms lives.

That's great.

I think no system's

perfect. That includes mine,

and I hope it's going to serve people,

and I know people will be critical of it.

I don't think there's a single system

that serves every single human.

So I think with Profit First, the Money

Habit, Dave's system, all these things,

we've got to find what lands with us

because when we're in our natural flow,

I have a friend sadly who passed away,

but he would always say the

key to life is row, row,

row your boat gently downstream. He's

like, whatever your natural flow is,

go with it and you'll

travel so much further.

Mike, I read a quote by you

and I'll get to my question,

but I'll paraphrase the quote. You

were talking about some family moments.

I think you were visiting your daughter

and you wrote it Hit me again while I

was there. This is real wealth,

not numbers in a bank account,

not bigger offices or fancier titles.

It's being able to be with the

people you love fully present.

So my question is,

and we realized this actually when

we were in Denver this past week,

we're very good at setting monetary goals.

We're very good at setting revenue

numbers and qualified cases and

everything,

but we realized we needed to

set a greater goal or mission

as to why we exist as a company.

And I guess how important is that

for an entrepreneur starting out?

Because everyone runs to

that monetary goal first.

Yeah, because it's easy. It's

easy to measure. I was there too.

The challenge is when you get there, at

least for me, it's never been enough.

It's like, well, okay, I got, and it's

kind of a deflating moment. It's like,

oh, I finally became a millionaire. Oh,

I finally became a deca millionaire.

It all sounds amazing when you're

not there and then you get there,

it's like that's all there is.

I remember there's a video that circulated

this meme about a valedictorian and

this graduate achieved all these

extraordinary accomplishments at his

university, and he's doing

the speech and he says,

when I was declared valedictorian,

he goes, I was thrilled.

This was a life's dream. And I was

thrilled for 15 seconds and said,

so now what?

And so my experience around money is it

is a great mechanism to amplify who I

am. And perhaps you,

maybe not a great analogy,

but if someone has an addiction of

some capacity and you simply say,

here's your cure, here's more money.

I think that addiction actually amplifies.

If I like the bottle, I'll

buy a lot more bottles.

And if you're someone who is driven to

be very present with your family or in

whatever capacity it is and you

throw money toward that person,

that person likely will use those

funds to amplify that addiction.

I realized to accumulate more money

without a greater vision behind it was

fruitless. And so I'll show you,

I'm actually in my home office right now

because I'm flying out. I write down,

and this is a little bit absurd, I did

a personal, not a business retreat,

but this says Mike's life's

intentions 2026. I write it down,

everything around my health,

my family and being present.

Do you share that with somebody

to keep you sort of honest?

I rarely share it. I rarely

share it. My wife knows it.

I have it pinned here so if someone

walks in my office, you can see it.

I get very real with myself.

I ask myself, is this true?

As we talked about earlier, and so

I challenge myself in many ways,

but in there inevitably is presence

being with my family and I call 'em,

remember when I think the day

that I leave this planet and

expire,

that what we left over is remember

when that I hope my children outlive

me by decades and decades and

decades, but I hope also they go, oh,

remember when dad, we went for that hike.

My son is interested in doing the

Appalachian Trail, the entire trail,

and we've already done sections of it

together. It's grueling by the way,

but amazing. And it's

trigger, remember when.

And so I write down all these things

that will be future. Remember,

wins and money is an

extraordinary gateway and tool to

make those things more accessible,

easier to accomplish, easier to get.

There's no question about it, but

money for the sake of money for me,

and that's how I lived for quite a

period of my life was just a big flop.

Before you have to go, Mike, I wanted

to ask you quickly about Clockwork,

which I have to admit I haven't read.

In part because of this issue

as a professional, as a lawyer,

it's very hard for me to imagine how to,

the idea of growing your business and

then being able to step away from it,

right? We don't make a widget.

So it feels like the idea that I'll

ever be able to really step away

from doing the making seems implausible.

The book Clockwork apply to

professionals or just not really.

100%. Since we're short on time.

I'll tell you that the definitive

thing is it's about identity.

Are you a lawyer or are you

someone who owns a law firm?

And those are two

radically different things.

What I tell people is in the

grand scheme this is the facts.

Only 17% of the population ever

attempts to start a business.

Only 20% pulled off

successfully, sustainably for

an extended period of time,

profitable. It's 3% of the population.

That means 97% of the

population is looking for good

jobs with good companies to

do good things. The number one job of

a business owner is not to do the job,

it's to create jobs. And that's

what clockwork's about our job,

and I would argue your job if you

choose so is not to do the job,

to create jobs. And if

we're doing the job,

we're blocking other people from doing

the job. But it is a massive mental

shift. I had to go through it,

and I remember once I actually pulled

this off and there's steps to getting

there, I remove myself. I

went on a long vacation,

not because I needed a vacation. The

business needed a vacation from me,

identity crisis hit and said, am I a

business owner or am I a business doer?

And I had to come to that realization

that I'm choosing to be a business owner.

No question. I still do things I love.

I'm honored. You guys interviewed me,

this is still work.

But if I left for a month or a year and

I just got back from taking a month off,

my business will continue on because

I've chosen to be a business owner.

Yeah, that's great. Thank you so much.

Jeff Taylor. But thank you both for

having me. I really appreciate this.

The new book's called The

Money Habit, it's everywhere.

Whoever your favorite retailer is,

you can get it. I encourage people,

if you like it or have a

local bookstore, go to them.

Let's support local bookstores.

And if they don't have it in stock,

just ask 'em. They can get shipped to you.

And then if you want more information

on me, my last name Mitz is Impossible.

Spell. So my website's Mike Micha.

Forget it. I bought the domain.

Mike Motorbike. It's a nickname from

grade school. It's the only PG nickname.

I have other nicknames. They ain't

pg. But if you go to Mike Motorbike,

like the motorcycle, you'll

get my information there.

Great. Mike, if you do the Appalachian

Trail, we're up here in Maine.

You call us ahead of time.

You can either stay at our house

or we can do food drops for you.

We'll make sure you're in

a good place. Showers, I'm.

About to tear up. Yeah, food angels are

miraculous when you're on the trail.

I've done 15 days on

the trail in segments,

but we're doing the Georgia

to Maine hike. I'll take you.

I'm not joking. Take us up on

it. We'll take care of you.

Good. I'm not joking

either. I'll eat you out.

Of house and home.

Perfect. Thank you, Mike.

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