Profit does not translate to greed. Profit translates to impact. Hello, architect nation and
welcome back to the podcast, helping architecture firm owners break free from the brainwashed masses of broken texts. Join me on my mission to revolutionize the architecture industry by empowering architects to combine great designs with the skill to actually make a lot of money. And today I'm joined by author and entrepreneur Mike McCalla wits. McCalla wits is the entrepreneur behind three multi million dollar companies and is the author of several books, including Profit First clockwork, the Pumpkin Plan and his latest book all in. Mike is a former business consultant for the Wall Street Journal and business makeover expert for MS and B, C. Now for a long time we've been having architects as part of our smart practice program, get involved with and and implement Profit First, so we're going to talk a lot about that Mike regularly travels the globe on his mission to eradicate entrepreneurial poverty.
This month 200 Club include Drew and Justin Tyndall, Christopher Brandon, Mark Elster, Sven Levine, Yost, Ben de Thomas Norton, Molly will lock in and Tony Wilson, Jeffrey frame, and Ryan Sollers. Welcome, guys.
And now a word from our sponsor and escape. Escape is a plugin software that simplifies real time visualization for us in the architecture, engineering and construction industries. So whether your go to design application is Revit, SketchUp, Rhino ArchiCAD or Vectorworks Inscape lets you instantly create high quality renderings by syncing data from your 3d model without additional import or export needed, easily navigate every aspect of your design in real time, and identify and resolve any issues that you come across quickly. Plus, you can immerse your clients in VR to provide that amazing tangible sense of the project. Now, if you didn't know and scape is the Trusted Choice of over 500,000 monthly users across 150 countries. Today is the final day event escapes Black Friday deal, you can still grab any yearly license at 20% off just head to Kaos dash n scape.com. And use code B f 23. At checkout to supercharge your design workflow. Again, that URL is chaos dash N scape. That's ch aos dash e n s ca p e.com. And the code is B as in boy F as in Frank 23. Use that at checkout to supercharge your design workflow. Welcome
and literally just got back from Australia, the UK, the Netherlands. I'm off to Mexico. Next I'm doing this kind of international tour. I'll talk about profit first mostly.
How was over what time period was this all six inches?
Six weeks? weeks? Yeah, one week in the UK one week in about 10 days in Australia, in the Netherlands was in and out for about three days.
But anyone who's traveled a lot knows that that's nuts. No small feat stinks.
It stinks. I was I remember I was on the flight back from Australia, which is I live outside New York City. So it was from Sydney to LAX, I think was a 18 or 19 hour flight. I'm not that into movies. I watched like six movies in a row. And I'm like exhausted for movies. I look up like we're not even halfway here yet. Oh my god going mad.
Kid out. Wow. So top takeaways from traveling the globe. What do you see as you traveled to these other countries being an American citizen? Yeah.
So what I see the entrepreneur communities constantly and I'm always I'm I shouldn't say surprised. But I was initially surprised now expected is almost every entrepreneur ever in the globe has the same challenges, including in communist countries. I was in Cuba for a while meeting with entrepreneurs. And it's the exact same challenges that they're having. Even when the government kind of suppresses their ability to do any form of work. They find a way so our challenges are the same and the innovative spirit. Oh my god, it's there with everybody. All these beautiful
I'm curious Have you noticed any sort of different ethos with the different countries that you've traveled to? I know there's there's big cultural differences between the UK we work with architecture firms there Australia Down Under New Zealand. How would you characterize what you see as you travel around the globe? entrepreneurially I
think you know, the US guy is seen as the maverick you come in here and you're kinda crazy. I think in the Netherlands and Europe there's a little bit of the you're not special enough to be an entrepreneurs come to this pull down mentality. But there's also a great camaraderie there. The UK seems to have a little more process orientation and formality, the Australians to seem to be taking kind of the most diverse business opportunities they go after these kind of More fringe kind of opportunities, it seems. But it's hard to see, you know, I haven't met everyone. I've met a very small scope people. So I gotta be very careful about basing a judgment on a small data set. You know, of course,
of course. Well, when you talk about eradicating entrepreneurial poverty, yeah. What do you mean?
So there's this gap in IQ of what we see ourselves, desire and what we want to be and how we behave and the reality. We see ourselves as you know, wildly successful personal freedom, financial freedom. And the reality for most entrepreneurs is check the check survival, working like an animal and that gap by call entrepreneur poverty. But I also want to share that that gap is necessary because it'd be very peculiar if I spoke loud and proud about my reality, I probably lose opportunity. Imagine I'm a surgeon, I provide surgery or services and so forth. And you come in, and that's an entrepreneur to they're running their own business, and you come in and you need surgery performed. And I'm like, Okay, I'm really struggling financially. I'm actually really desperate, I need more clients. Let's get this going. Because I get things rolling through. As a consumer, we'd have immediate hesitancy, I don't want to do business with you. Our clients actually want us to be very profitable, they want to know that we're sustainable, and that we are their number one client in that moment. So that that gap is something I'm trying to close, I believe we must be profitable, that we must have availability of time, all those things are of the greatest service to the clients we serve, to the colleagues that we hire and employ and to ourselves, our family, our communities, our globe.
Now, in a nutshell, tell us for those who may not are listening, and may not know what is profit first.
So Profit First is a cash management system was rooted in behavioral principles. That's a passion of mine. I love the concepts of behavioral psychology, neuroscience, not certified not qualified, but I read a lot about it, and I can see the applications in most businesses. They're surviving, check by check. When I interview these companies, I'm like, What's your situation? How do you manage your numbers, they're not using their accounting system. They're not using spreadsheets. And my argument is you shouldn't, is the best for to drive new results to not change who you are, but to channel who you are. So what I encourage and Profit First is continue that habit of running your business to your bank, but we need to channel that by Samson guardrails, we set up accounts at your bank, so that when money comes in, instead of seeing one big deposit as money available for your business, we carve it up into different envelopes. It's the envelope system, with its pre intended use. So now, when you log into your bank account where you what you normally do, you now see money carved up prior to spending it and you know, its intended use. That's the core principle. There's other techniques too. But the essence is part of one of those accounts is profit, when you take your Profit First, remove its availability from the business, you are forced to run your business off of the remainder it forces profitability, and for you to run your business more effectively.
That's amazing. Mike, I remember I first read the book, when I was on a flight to a Business Mastermind, I was absolutely blown away by the content of the book the way you I mean, the humor in it is fantastic. But at the stories in there, and then just the principle of it so simple, and yet so profound. I've applied in my personal business, it's allowed my family to take a trip to Europe, as a family to pay off, you know, pay off cars, pay off a house. I mean, absolutely. I mean, we're our families, you know, eternally grateful for what you created with profit. First of all, I love hearing that. Yeah, it's true. And I know that I can say that for a lot of the architects in our program. Now, how did you come up with this idea? Because Oh, and by the way, anyone listen to podcasts, please go get the book profit first. You can get on Amazon, any major retailer, you can go check out Mike's website. We'll put that in the show notes. But how do you it's so counterintuitive, because for years and years and years, it's been all about the three financial statements and traditional accounting. How'd you come up with this?
There was a I struggled with finances. I've been an entrepreneur my whole life. Today I own multiple businesses. And I always in the past struggle with finances. Something hit me that was profound. There was research that was released by the SBA, they did in conjunction with the bank, they identified of the then $30 million, about 30 to 33 million small businesses in the US and small business as they qualify as a company that's $25 million in revenue or less. That's a lot of business. 83% are in check to check survival. And what they meant was there was enough cash flow or or money in the business to pay all payroll, all the financial obligations, let alone the owner pay themselves. So the owner was compromising themselves. They were surviving check to check. And what hit me in that moment as like, hold on. I started my business for financial freedom. I don't want to worry about bills. everyone I've ever met. That's not foreigner started their business, in part, or in whole for financial freedom. And like what almost numbers are doing this? So then like, kinda Are we all not capable This is there something wrong with us and the eyes looking at the profit formula, sales minus expense equals profits, the foundational formula was taught in 1000s of accounting books. And looking at that, and like what's wrong with us, I was like, Holy crap, this formula is wrong. It's wrong. It puts profit the bottom now, logically, sales minus expenses does equal profit. It's a logical formula. It's not a behavioral formula. It's human nature. When something comes last, it means it's not important. You know, if you love your family, you don't say I put my family last. Now, your health matters, you don't say I'm put my health last first gets done, I put my family first I put my health first. So what I did is I just flipped the formula sales minus profit equals expenses, mathematically logically is the same, actually, exactly the same is called a variable swap. But behaviorally, there's a radical impact. Now every time revenue comes into the firm, we take a predetermined percentage of that, allocate to profit, remove it from the business, and then the remainder we run off of. And this is so core to who we are as humans, when something comes first, we'll actually get it done when you take your Profit First, I'll actually happen. Mike,
I know when in my business that I've run it, we also see that the architects we work with, which is we're so passionate about what we do, we're so excited to get the freedom, the flexibility of running our own business, often as we put ourselves last. Yeah, so oftentimes, if anyone gets paid, it's us last, we reduce our salary, we're paying our employees first, there's no profit on the table reinvest into the business. And it's easy to do out of I don't know if it's a martyrdom complex, or, or it's the hustle and the grind, you know, just wanting to like really, and there's, there's almost a bit of righteousness I get, or I feel in the past as I've done this, and maybe that's part of it, which is like kind of know, the nobility. Really, you know, self sacrifice. Have you seen any? Because you mentioned it's so important for people to take a profit you mentioned, it's essential. And I'm curious if you if you send any impacts, what's the psychological impact of people not compensating themselves well versus compensating themselves? Well, how does this relate to their psychology, their business? What have you seen in that area?
I've definitely seen an ongoing stress level and sometimes anger and disappointment in themselves and express toward others. When there is no financial security for themselves. It's this kind of seesaw sometimes just some money. Usually there's not. And it expresses itself. It I've seen it harm marriages, I've seen it harm families. And people report this to me saying this insecurity. But you're right, there's this perverted nobility, like Well, I'm, I'm a martyr, I look the way I do to support others. You know, what the most noble thing is, is being profitable, because that does support others, including yourself. And when you're able to come a business with a level head, you're not panicked about making money, you can make better decisions for the organization, you can grow healthily, you can be of greater support to your colleagues, your community, country, our globe. So we got to flip what we associate nobility with. Now I see the other side, two fellows, like you, I've experienced myself is when we get there. It's not like we become these money hoarding greed machines. You know, when people hear private first they're like, Oh, this guy is all about greed. He's the most evil human being on the planet. No, no, all it is, is about a principle to assure financial security, take your profit first. I've seen people be the greatest contributors and contribution through their business, they are hiring and be able to hire more employees, they're able to serve a client deeply because they're not worried about panic or panicking about money for the next client. They serve their clients more deeply. They start becoming bigger contributors to their community. They realize, wow, with this final security, maybe I don't have to have the business depend on me working like an animal. Let me start availing jobs for other people who want the jobs and reducing my active input and start working on strategic input and having a greater impact. So I see this cascade effect. I've literally seen marriages repaired. And this talks to Maslow's hierarchy of needs. Maslow explained that we have physiological needs, security needs, belonging and so forth. Well, is that security need, we need financial security, we need safe, roof overhead. If we feel financial insecurity. It compromises the next level above which is communal relationships, loving relationships, partnerships. So if there's no financial security, all that stuff above starts come crumbling down. We need that foundation in place to support higher levels of that hierarchy.
Have you ever seen or heard of entrepreneurial guilt or business owner guilt where they actually feel guilty kind of being profitable and taking profit off the table?
Yeah, I do. See in the beginning. I rarely see it with people who are profitable because then they get profit does not translate to greed. Profit translates to impact. So it's usually people who are not profitable, who have this negative association with profitability, say Oh, I can't do that. So that's, that's bad. I'm gonna go you've ever been profitable before? And if you think if you really think profit is bad, shouldn't you be the one who's profitable to start turning into a good thing? Because you're a good person? Isn't this aren't you the one who should be empowered that way? And I say these things that are kind of curtain kind of in your face, I want people to change their perspective, money at the end of day, is this a tool? It's an amplification, or kemin application of who we are. So if you express yourself as a good contributing person, that's the person I want to be empowered with money because now they have tools to put more good out in the world.
No. Skin given me speaking my language, Mike, it's given me goosebumps over here. As far as uh, you know, brought up with so many shame stories around money and money being evil. It's just been it's been difficult. So you are definitely on the front leading the charge. Thank you. How has how has profit first evolved over time? Has it always been this this mechanism? Or? Or has it from the beginning stages? Have you adjusted and tweaked it over time? How is it kind of shifted and evolved? Would you say the
the core system has never changed? It's been like this, I wrote the book 15. Now 10 years ago now, it's always been the core principle, the awareness of the behavioral psychology around it as changed inland. All these kind of adjunct accounts, you can add some profit. First, the core system is I call it the five foundational accounts for the five main purposes of business. One is to handle income depository account, there's one for profit, there's one for owners compensation, which is different than profit, and I explain the important differences. There's one for tax liabilities, the number one bill associated with operating a business that a business owner is least prepared for inevitably, is the tax bill, and your business can pay for that. So we reserve that, then the operating expenses, which is the operations the business, but, for example, there's some businesses that are seasonal. So we instituted another account that you can add in a seasonal business called a drip account. Maybe you earn all your money in one month, you know, the winter holidays are all your income in December, you crush it every month required. Well, what happens is that December month, needs to cover every other month. So 112 of that money is really available to support you in December 112, in January, and so forth. So we put all the income into the drip account, and it drips back out into the business. That's an example of how the money gets carved up. So Private First, we've introduced all these additional accounts. And that's been a big enhancement for people deploying it for the specific needs our businesses have.
Beautiful. One question we often get is people where the owners are on payroll, so and they often ask us about the owner's comp account, like keeping that separate versus having it as part of the operating expenses account, since the payroll company is going to pull all the payroll out of there. How do you usually direct people in that situation?
Yeah, so remember that profit versus a behavioral based system, we need to get these release mechanisms of dopamine, serotonin, endorphins, they come out when we feel a reward. So what happens in profit versus when we have money come into our income account, that's our depository account, where they're going to carve it up to these different accounts. It's a percentage based system. So logically, you could put any money anywhere as long as you follow the percentages. But remember, we are not logical, we're behavioral. So the first thing we do is we allocate money toward the profit account. What that does is it triggers a dopamine among other release in our mind, it feels good. We then allocate mine to owners comp, we've realized as an owner that our compensation is fine taken care that feels good. When payroll comes if you have a payroll account, we're going to sweep that money from ours comp into payroll. And I know it feels like oh, it's an extra step, I only take the steps, you have to take the step of that reward sensation of seeing money allocated to you. So that's why we take this extra step.
Beautiful, such a key distinction and so powerful. So thanks, Mike for clarifying that. To help your your entrepreneurial force of nature, you've written quite a number of books, this is no easy task. You're traveling you just got back from six weeks of travels, where you literally jumped around the globe. I'm just really curious in terms of your your principles, your operating mindset that drives this this life that you're living, Mike, because you're from outside, it looks like you're literally crushing your life. I'm like, I'm looking at Mike and I'm thinking here's a guy who's like playing the game of life at the top level. I'm just like, amazing. Well, well, well, um, you know, we all let's face it, we all have mistakes and our craft stinks. But what would you say would be your, your the principal, your guiding principles, that as well impactful for you?
I think foundationally I believe in exercise. Absolutely is a non consideration if I don't exercise consistently, then I'm compromising myself. I'm also compromising my business to have the energy necessary. Sorry to do what I do when I do it is is rooted in exercise.
And pleasure there, Mike. Yeah. What's what is your exercise which I'm looking at you? I'm like I could tell because you're a fit guy. So I'm like, okay, obviously Mike keeps himself in good shape. What what do you do, especially when you're traveling?
Yeah. So isolated. Today was a cardio day, tomorrow will be weights. And you have to do both I, I've read a lot of books on the subject, listen to the podcast, definitely listen to the human lab, or Peter Atea has a thing called outlive, er, that's actually his book, things called Dr. These amazing resources. And according to the research, they're sharing, we need summarizes in this cardiovascular for longevity of life, and muscular weights for quality of life. So you can't do one or the other you got you got to do both. I've also used this concept called The Five Minute Rule, we can always find five minutes. And so if you exercise for five minutes that those have a notable impact. But once you get started, maybe get seven minutes or maybe get 10 Or maybe it just becomes a full workout. I used to say if I don't can't get an hour workout in today, I guess I can't do it today. And now I'm like, I have to get five minutes and and usually it's an hour workout like it was this morning. On the road. I carry a little bands in my suitcase. It's amazing what those can do for resistance, just bodyweight and bands. And God bless YouTube. He's typing like, you know, 25 minute bodyweight workout. I come out in such pain, but the good pain, but it's it's pain. It's interesting. By following these YouTube videos, and so forth, I don't even know who will be watching tomorrow. It brings a variety in my exercise and I'll get stuck into the same regimen. So that's my exercise.
Okay, beautiful. It's always the morning. Okay, so we have Okay, so we have exercise, right? Sauna.
So this is big for me. I love it. And I don't even know if it's because there's health benefits. And I think there are, but I do it because it causes a meditative state for me. The temperatures are so extreme. And I'm sweating profusely. I actually notice I can't have rambling thoughts. I just have to sit still and endure this was actually becomes meditative. And I come out of there, every single time my mind is just flush. The other thing is, when I'm home, my wife will go with me to the sauna, and we'll do it together. Usually we don't say the temperature is high then. And it's at a temperature where it's uncomfortable. But we can have a conversation. You can bring phones in there, it can have a TV playing, you just look at each other and talk and it becomes a great point of connection. I also do meditation, independently of that. And then I also tried meditation routine, like like I do TM Transcendental Meditation. It's mantra based. Honestly, I don't know if it's any better than anything else. But that's where I start mantra based. And I'm trying to do some of the other breathing based meditations. I also have a singing bowl. That was singing bowls. I have I'm not Buddhist, I don't practice Hinduism. But I have a Ganesha, who's a Hindu gods sitting there, I have my singing bowl, I do have some Buddhist literature that I read. I'm just a dude who tries to see. But those all seem like good little effects. And those are things you can carry with you. You can meditate in your hotel room, and you can do it at your house. Then the last thing I do is I play guitar every day, for at least 2030 minutes. I think I'm not necessarily good guitarist, but I'm practicing the habits that stretch me this morning is practicing Michael Jackson's Beat it, bandana, and Dan and that's I hadn't tried that before by hitting the radio mic. Oh, that's the next thing I got to learn. It just causes a little bit of a stretch in the mind. Push me a little bit further. And that stretch, then I think applies to business. Like when I'm writing my books. I'm like, I gotta push myself. I gotta do a little more research that I'm not there yet. And I think that habit of this case playing guitar but trying to do things I can't do. Get me this mindset of stretching myself. What
would you say are some of your guiding principles with regard to your work ethic or getting things done or success in business that you feel really drive what you've been able to achieve in addition to these foundational habits you mentioned,
I think I'm very, we're very service oriented. I'm going to share something I've never shared before. It's not a big secret but as thought of this every time before I do a keynote speech. I have a ritual of playing some songs there's one song called times like these by the Foo Fighters is like kind of a pump up song. But there is a guitar riff that I can say I am here to serve them to matches up perfectly. I'm here to serve them. I'm here to serve them. And it forces me to repeat that 100 times. I believe why on this planet and why you're on this planet and why we're on this planet is to be of service to each other and selfish and there's a selfish motivation. The more that we contribute, the more we're actually learning. The best student is always a teacher. So every time in everything I do, I'm like, How can I be of greater service to others? And selfishly, I know because it's being of greater service to myself.
Amazing. Mike, speaking of being of service, you have a new book coming out all in, that's going to be released on January 2. And it's about a topic that I'm super excited about, give us a little preview of the book was the subtitle
is How Great Leaders build unstoppable teams. What I did was I investigated, recruiting, retaining employees, raising the bar for an organization and no surprise, it's all rooted in the quality of leadership. What was surprising is the methods we've been taught like profit. First, are the raw methods. So profit, first, we were told, read those three accounting statements in recruiting, we're told, run an ad somewhere online, and go through an interview process. And it is unquestionably the worst, least effective process ever. There's a better method, and I share that it's profound. And I'll give you a little insight because I think it's important to read the book or not. I looked at all industries that says there any industry that successfully recruits at a high level all the time, and sure enough, there is is the sports industry. So I deconstructed it, lots of professional college level sports run camps. And like, that's what we need to do a camp. I played sports in high school, and I went to a camp for lacrosse. And what they were doing is they're teaching all students, 300 students, everyone was getting better. But certain students were tapping on the shoulder said, Hey, you're showing talent here. We'd like to bring it to another field to practice a higher level. They were using it as a basically a vetting process. They cherry picked three or four of those athletes, and they went to play for that school. The rest of us all got better, though I ended up playing in college, in part thank you to that camp. So it camp elevates everyone and gives the facilitators an opportunity to pick the best fits for the organization. So we can run camps. And I'll give you just one last little story because businesses do already do this. We just need to do it. Home Depot. Next time. You see we're building birdhouses. Watch what they're actually doing. It's a recruiting camp, go there with some kids. You assemble a birdhouse, they want to ingratiate it with a store. They hope you like the experience and buy more. But they're also observing your participation. If you're the most engaged parent, you're helping out other folks, they will tap you on the shoulder and say, Hey, have you ever think about thought about working at Home Depot? Because what you're doing here is what we do at Home Depot, we'd love to talk with you. It's a recruiting camp, we can do the same thing with our businesses. Wow.
Wow. Amazing, amazing. So glad that you're bringing this new innovation in small business, recruiting, hiring so great. Any other any other little sneak peeks you can give us for the content of the book? Oh,
yeah, the last one, I'll give you a super quick as the vision of the business does not matter, not nearly as much as everyone's independent vision. Ultimately, the vision for the business is the vision of the leaders, I want to achieve $10 million, I want that. But what does everyone want in the organization, the job of the leader is to recognize everyone's desires. And it may be I want to learn speak Spanish or play guitar or buy a new house. All of them are a priority. And when we lock arms in helping people realize their vision, then they will help us realize the corporate vision, the vision we set out. So prioritize everyone's individual visions. I'm not saying satisfy them by saying buy them guitar lessons or pay for it or don't buy them the house. I'm saying make sure that vision is a priority. And you're always addressing that because when you prioritize their vision, they'll prioritize yours.
A question that often comes up in terms of incentivizing people is the idea of bonuses. Is this something you talk about in the book is the best way to or best practices for giving bonuses to employees? Bonuses
are actually a way to recognize past performance but can become a precedent that traps people. So what we do is profit share the the performance of the entire organization, we divide up that money equally to every single employee so that the common goal is achieved, as opposed to individual bonuses. So I do talk about that in more detail. Great,
Mike. I didn't realize the time ran so quick. You are thank you so much for being with us today. Amazing.
Isn't it dry? Thank you for having me. Okay, you're
most most welcome. Thanks, Mike. Architect nation. That is it for today's episode with Mike McCalla wits to get more information on what Mike's up to and to discover more about how you can use his tools and resources to escape your own entrepreneurial poverty wherever you happen to be on that journey. You can go to his website, Mike McCalla wits.com. Now this is going to turn up through a simple Google search. Or you can visit the Business of Architecture website and view the podcast notes on that page. Oh, yeah, one more thing. If you haven't already, head on over to iTunes and leave a review. We'd love to read your name out here on the show. And now a word from our sponsor and scape. And scape is a plugin software that simplifies real time visualization for us in the architecture, engineering and construction industries. So whether your go to design application is Revit, SketchUp, Rhino ArchiCAD or Vectorworks Inscape lets you instantly create high quality renderings by syncing data from your 3d model without additional import or export needed, easily navigate every aspect of your design in real time, and identify and resolve any issues that you come across quickly. Plus, you can immerse your clients and VR to provide that amazing tangible sense of the project. Now, if you didn't know and scape is the Trusted Choice of over 500,000 monthly users across 150 countries. Today is the final day event escapes Black Friday deal. You can still grab any yearly license at 20% off just head to chaos dash n scape.com. And use code P F 23. At checkout to supercharge your design workflow. Again that URL is chaos dash N scape. That's ch aos dash e n s ca p e.com. And the code is B as in boy F as in Frank 23. Use that at checkout to supercharge your design workflow. The views expressed on the show by my guests do not represent those of the hosts and I make no representation promise guarantee pledge warranty contract, bond or commitment except to help you conquer the world. Carpe Diem