How to Build Three Multi-Million Dollar Businesses
Latest posts by StartupNation (see all)
- The Importance of Executing Your Idea [Radio] - October 22, 2016
- Paws and Stripes Uses Google Tools to Build and Operate its Business - October 21, 2016
- Hellbender Brewing Company Uses Google Products to Engage with Customers - October 14, 2016
Mike Michalowicz is a serial entrepreneur who has launched three multi-million dollar businesses, is currently CEO of the business growth consulting firm Provendus Group, is a former small business columnist for The Wall Street Journal, and hosts the business make-over segment on MSNBC’s Your Business. On top of all of this, Michalowicz has written two business books, The Toilet Paper Entrepreneur, called the “must read entrepreneur’s cult classic” by BusinessWeek, and The Pumpkin Plan, with a 5-star rating on Amazon.
StartupNation had the pleasure of interviewing Michalowicz and gleaning his insights for repeatable 7-figure entrepreneurial success. His advice and guidance cut right to the heart of what makes a small business thrive. Read the interview below to learn how you can drive exponential growth for your business.
You’ve launched three multi-million dollar businesses, the first one by the time you were 24 years old. What is the biggest lesson learned with your first business? And what’s your biggest lesson learned most recently?
Michalowicz: That’s a good question. With the first business, the biggest lesson was the power of fear. Three multi-million dollar companies – it sounds impressive. Quite frankly, though, those are only the resume highlights.
Nobody hears about the behind-the-scenes misery and panic, etc. With the first company, Olmec, the big lesson for me was this: the day I started it, I was all fired up – “I’m going to start my business!” – and then I start looking over the cliff and I’m thinking I don’t know if I should do this. Then I take the leap and pure fear kicked in. How am I going to survive? How am I going pay my bills? Are people going to hate me? That fear stuck with me for years.
While the business was growing, I remember when we finally hit a million dollars in revenue. I was thinking, “I’m so rich, man.” Actually, no, I had nothing. I had nothing to show for it. I had less money than what I had started with. I was living off savings, which I didn’t have much of to begin with. I was living paycheck to paycheck.
But what I found out is interesting — that fear is a powerful and necessary tool for me and for many entrepreneurs in the early stages. It gets you up at five in the morning and works you until midnight. It gives you that energy. Fear is a good thing, in the initial stages.
The other part about fear I realized is there’s a point at which it no longer delivers benefit. If I continued this fear-driven thing – and I did for a while – it becomes an anchor. I was always putting out fires, the stress was building, and I just couldn’t handle it. I finally realized at a certain point that I needed to release the fear, understand my focus and achieve confidence. Then I could stop putting out fires and start building a real system, a real business. So that was the biggest lesson from my first company.
The biggest lesson from my most recent company is self-expression. Actually I have it on a wall in my office. I bought these paintings, and I have a quote below each one by someone famous. I consider these my board of advisors. I have one that states: “Be yourself, everyone else is already taken.” That is the biggest lesson I’ve taken in most recent times. If I’m really true to who I am – not playing to what other people expect or what I think other people expect – if I am just Mike 100%, then all the joy and happiness comes out, and ironically, a lot of financial reward comes out of it, as well. But I think the financial reward supports being more of yourself anyway – it’s a mechanism to express yourself further.
To me this has been my greatest lesson in my life so far. Just be 100% true and authentic to who I really am, and everything else will fall in line.
Can you speak to the difference between building a business and scaling a business?
Michalowicz: Building is doing. And building is a lot of the entrepreneur themselves. They have a talent that they are really unique at – they share it, they do it, they sell their talent, and so forth. And that builds a business.
But it really caps out. Because the entrepreneur has built a uniqueness that other people can’t do as well as they can, customers don’t want anyone but the entrepreneur. “You sold it to me, so I want only you managing the project.” They only want the entrepreneur.
But there’s only so much of you to go around. It will exhaust you, because the only way you can generate more income or grow further is to work harder. So, it definitely has a limit.
Scaling is where you build systems. And my third book [The Pumpkin Plan] is all about how to build systems. Here’s the bottom line. All businesses need to be scalable – attract prospects, convert prospects to customers, collect revenue from the customers, have the customer have a great experience and potentially refer you to other people. This is the full cycle that needs to happen while you’re unconscious.
We need to build systems so that other people or other things can deliver exactly what we define as perfect, independently of us. It’s weird – it takes more energy but less effort to develop systems. For me it really peaks out my mind to figure out and define what I do automatically so it is easy for anyone else to do. So much thought and analysis go into writing the instructions and purposing them down so that it’s really simple for someone else to do. It takes an extraordinary amount of energy and thinking, but ironically it frees you of effort. Because after that, you just watch the systems go!
There’s a great video of you online speaking about under-promising and over-delivering. Please share your thoughts on these two concepts.
Michalowicz. I really think it’s the essence to providing our customers a feeling of the “extraordinary.” I want to deliver to our customers that sensation of an extraordinary experience. Ironically we try to do that by promising an extraordinary experience.
I remember customers coming to me, saying they needed a new computer system and asking when they could expect a proposal. Right from that point I wanted to impress them so much, I told them I’d get it to them in three hours. I didn’t realize it then, but that didn’t impress the customer. They didn’t know how much effort it took to put a proposal together. They just said three hours worked for them. Then life would happen, there would be an hour left and I’d be in a panic. Sometimes I would get it done right on the nose and deliver, and the customer wouldn’t be thrilled, they would just say thanks because that’s what I had promised. Sometimes even with a panicked effort I’d be an hour late or even a day late. And then the customer would say, “You’re late.” And I’d think “Do they understand how much effort goes into this?” Meanwhile, they’d be thinking, “You promised three hours, and now it’s a day late. If you can’t even deliver a proposal, you can’t deliver anything.”
So I was losing business by setting the wrong expectations. Then I discovered something in Zappos and really employed it in my next company – I realized in the proposal stage to promise the customer something that’s reasonable and the customer still accepts as OK, but put it out in the fringe. So I would say that it will take us about five business days – today is Monday and I’ll have it to you next Monday. Most customers would say yes, that is fine. Then knowing my tendency to do things last minute I put myself in a forced panic mode to get it out in three hours. I would work like crazy – it would usually take me a day. Then I would send an e-mail, or back then it was by fax, and say “Great news, we’re running ahead of schedule and I was able to finish your proposal ahead of time.” The customer would be thrilled because they had an expectation of getting it Monday and now they’re getting it early. I started to get more business because I was getting proposals out earlier than I had agreed upon.
Now I apply the same way of thinking for almost everything. When I go to meetings, I show up a half hour to an hour early. I’ll sit in the parking lot, and then I’ll walk in 10 minutes early. And now I have a reputation of always being early or on time.
The biggest thing I found that when we make a promise and can’t deliver on it, the earlier we can the nip it in the bud and notify the client, the better. So I’ll be driving to a meeting and hit traffic and I’m going to get there, but I’m going to be flooring it. My mentality used to be to “just make it happen” and then I’d be running in just to be on time. Now the second I get caught up, even if it’s a half hour early I call the person and say, “Listen, I know I’m not supposed to be there for another half hour, but I’m hitting traffic so please give me an extra 20 minutes.” What happens is the customer says OK. It throws them off a little bit, but they appreciate the early notice – the new expectation. I still skid in at 3 o’click, and then sometimes they’re sitting there like, whoa, you said 3:20! And I say, “Well, traffic sped up,” and they’re thrilled again.
Whenever we have to address a problem, our natural tendency is to give just a little bit. We now under-promise so we can always beat the expectation.
Can you explain what a “superstrength” is?
Michalowicz: “Superstrength” is just a word I came up with. Many of us have been taught to fix our weaknesses. What are you strong at? That’s great. What are you weak at? Well, we have to fix that.
I came to realize I can’t change myself, so to fix a weakness, at least for me and I really think for all of us, is a mistake. We should focus on our strengths.
Then I found that there’s this thing I call superstrength, which is a combination of a few things. Often it’s a blend of your natural talents, idiosyncrasies, plus passion. Many say you should do what you’re passionate about. And that’s true. The thing is passion alone doesn’t make you unique. Where is your natural talent? Some people are just musically inclined, great public speakers, whatever. Identify your natural talent. And then the last part of that superstrength is your idiosyncrasies. The best way to define them is to identify the things for which you were picked on in grade school/high school. Chances are those are things that are unique about you. During those formative years it’s all about fitting into the pack. They’d push you back down if you could actually sing, or like me I was the class clown. I was pushed down by the teachers – you interrupt class, you fool around, etc. I was pushed down not to do certain things, and that was my idiosyncrasy. So the combination of my passion for business, my natural inclination/ability to do videos/communication and my class clown thing – that became my superstrength and that makes me distinct over any of my contemporaries.
And they all have the same opportunity. If we all play into our idiosyncrasies, our talents and our passion, we become this unique amalgamation of something. The final thing is it’s a mistake if we try to copy other people. I’ve had some people say they love what I’m doing, and they’re going to try to do the same thing. I say that’s great, take anything that naturally plays into you. But some of them say “I’m going to copy you. You’ve been successful through your approach I’m going to do the exact same thing.” This is going to come across so inauthentic it’s not going to be legit. You’re going to smell it a mile away that this is someone just trying to play into some other character and it just doesn’t work. You have to play into your own superstrength.
Let’s say someone wants to go really big. They want 600% in revenue growth. What are your recommendations to them?
Michalowicz: The key is to get all the players on the same team. Let me give you an analogy: can you imagine a football team where half the players have never played the sport before and don’t know the rules. Two players are actually infiltrated from the other side in direct opposition to you and only three guys know the plays. It’s a disaster.
But if a team is congealed, focused on a common vision, know the rules and everybody’s excited about it, a team can become a dominant force. You can have the most skilled, the world’s best players that don’t know what’s going on vs. amateurs that are passionate, and the amateurs will win because they have the congealed vision. Same thing is true in business. If we want to have 600% or 1,000% growth, every person has to have a very clear understanding of what the vision is and the rules to play by.
Here’s what I suggest: One, you have to have systems. On top of that we have to have immutable laws – most people call them core values. I wanted to come up with my own term. The only reason I came up with the term immutable laws is that they are unchanging. This is what defines our character. We need to define our immutable laws, usually an expression of ourselves for our entire business. One example is I say, “No jerks allowed”. If I’m ever being a jerk – not permitted. If any of my colleagues is being a jerk – not permitted. If a vendor or a client is a jerk – not going to be working with us.
We have these rules, and then we have to have a common vision. What are we trying to achieve collectively? How are we trying to change the world? I say that authors move minds, we are shifting souls. So I want to capture and communicate that bigger vision.
The final thing I talk about in my book is a company called Lawline. I started working with them 5-6 years ago, and their business continues to grow explosively. What they did was set their vision for what Lawline would do. The owner got his five colleagues in his office together and said as they make progress in attracting the right type of clients they were going to start making a pyramid out of gold bullion – spray-painted fake gold bullions. If they made this pyramid within one year, everyone was going to get a real gold bullion. Every time I’d walk into Dave’s office I’d see on the reception desk the pyramid was getting bigger. Everyone knew it. It was the pulse of this vision. I think within nine months they achieved their annual goal and the company has continued to tear along since that time.
What’s the single most important piece of advice that you would give to someone who wants to start a business today?
Michalowicz: The single most important piece of advice is to actually START it today. A lot of people I run into say “I’m going to start a business!” and then they are in the “going” mode for a decade.
There’s always a reason not to start a business – I’m still not yet ever prepared to start a business. So I jump in feet first and it’s terrifying. But as you’ve heard a million times, you learn more by doing than by other ways.
One of the biggest challenges of starting a business is to just getting started. You’re 80% of the way there, just open the doors.
I also believe and this may not be right for everybody, I burn the boats. I jump into a business and I make it all I’m betting on. I’ve invested in the stock market and I probably make 1% on my thrill – but I found there is one stock that appreciates every time. It’s the stock in my own business. Every single business that I’ve grown, the dividend has been huge. It’s salary. Even if I made $10,000 in one year total, that’s a dividend of $10,000 that no other company has ever given me. And then the selling of the business has been huge.
When people want to talk about how to get started – just start it and make it an all-in bet. That’s a big step. You’re going to find there’s a lot to learn, it’s not going to go exactly as planned, you’re going to be in the corner crying, saying, “What in the world did I do?” But I tell you, if I knew the commitment and effort it would take to do it, I would never have jumped in. It’s too scary in retrospect, so just f-ing do it!
Follow Mike Michalowicz on Twitter for more business insights: @MikeMichalowicz