Guest Blog – You’ll Have a Profitable Business by the Time You Finish this Blog

September 30, 2008

Congratulations! Your company has officially turned a profit! What? You didn’t get the memo? You thought your business was months, years away from the blessed black? Whoa! You must be thrilled to get this news. You must feel like doing a little happy dance, maybe even hopping down to the corner store for a celebratory six-pack.

Hold on, bucko. You’ve got two teeny, tiny, no-big-deal steps to take before you can count your chickens, err, cash. It will take all of five minutes, I promise. And then you can call your Mom.

-First, open an interest-bearing escrow account online, one that even the entire Ocean’s Eleven team can’t access. You’ve got to guard those pennies from that thief in your office – YOU.

-Next, transfer 5% of your last deposit into the account. That’s it. You’re done. (Until your next deposit, that is.)

Yeah!!! Tell all your Facebook friends, write your hometown newspaper, and stop total strangers on the street. Your business just officially turned a profit! And will do it CONSISTENTLY!

The simple truth about cultivating a profitable business is you already have a profitable business, you’re just putting the profit back in the pool to be spent on new desk chairs and late night pizza runs. You’ve got to take that profit FIRST and put it where the sun don’t shine – or in the bank. Whatever you prefer.

This system, what I refer to as the Profit First Account (PFA), allows you to make a profit off of every sale. Not bad. Not bad at all. I know, I know, you’re wondering how the heck you’re supposed to run your business when you’re skimming 5% off the top? Easy. You adjust.

Five percent is doable. After a few weeks, you won’t even notice. You will adjust your spending, planning, and even your thinking to accommodate the swelling profits in your PFA. You’ll forget about the things you thought you needed and make do with what you have. (Come on, do you really need all of those paper clips? Join Office Depot Anonymous and get on with your life!)

Better yet, you will come up with scathingly brilliant ideas about how to best use the remaining 95% of your inbound revenue. In fact, you may actually come up with a remarkable innovation, one that could, say, catapult your business into the stratosphere of success. Imagine that.

The cherry on top of the PFA? Every quarter you get to take some of the money out and distribute it – TO YOURSELF. Eventually you’ll increase your percentage, transferring 10%-20% of each deposit into your PFA (at my company, we take 20% of every deposit). Whoa! Now you’re turning a massive profit for every single sale, building a multi-million dollar business one deposit at a time. Nice.

So, are you ready to party? Or you do you need to wait a minute for that transfer to go through?


This post was written by Michael Michalowicz. Mike is a serial entrepreneur, having successfully built and sold two companies. He is currently the founder and CEO of Obsidian Launch, a company that partners with young entrepreneurs to help them grow their businesses. Mike is a regular guest on The Big Idea with Donnie Deutsch. Check out his new book, The Toilet Paper Entrepreneur, that hits the shelves today.


Reader Submission – Mine Field Combine

September 29, 2008

Since posting last week on the Google “10 to the 100th” project, I have received various emails from people on the subject. Some just wanted more information from me on the nature of the contest, some wanted to know what my ideas were for the project, and a few submitted their own ideas to me. One of the first that I got was very interesting.

It came from an engineer in Bulgaria (potentially my first Bulgarian reader).  The idea was a prototype for a robotized combine for cleaning minefields. He included a detailed report of how the system would work – robotized-combine-for-cleaning-mine-fields – based on a search and destroy method that would neutralize entire fields at once. Though I have a limited knowledge of this type of engineering process, the idea did seem to be within reach.

This would help many people living in areas that have a history of wars and violence. Mine fields are not only responsible for civilian casualties years after fighting is done, they also destroy soil that could be used for farming. A better system for clearing old minefields is clearly needed to protect future generations. Google would do well to pay attention to this specific submission.

Thank you to everyone that has submitted their ideas thus far, and please keep them coming.

10^100 Innovators

September 25, 2008

Though I am admittedly a little late on this one, I feel that this project deserves as much attention as it can get. And if my blog can alert one extra person to it, I will be satisfied. I hope that person is you.

The project I am talking about is Google’s “10 to the 100th”. Announced yesterday, Google is calling on the world to come up with the best ideas for helping people. They want user submissions of ideas, projects, organizations, inventions, etc. that they will fund to the tune of $10,000,000.

Submissions are already being taken, and will continue to be accepted through October 20th. Once they are all collected, they will be voted on by users, than reviewed by judges to determine 5 finalists. The goal here, according to the website, is come up with ideas big or small that will help a large amount of people. The ideas are broken down into categories, such as energy, environment, and health.

“There are so many great ideas out there that never get funded”, the website claims, “This offers people a way to voice their ideas to the public and have a chance to do something significant with them.”

I love this project. From Google’s end, they get interaction with internet users in a fun and interesting way. They use a contest to get ideas, and offer some great rewards to the most innovative people on the web. From a user’s perspective, this gives people a voice. The winners will be those people that have had this one great idea for a long time and nowhere to turn with it.

As you may have guessed, I have already turned in one suggestion. I would love to hear what you think about the project, and hear any submissions that you have entered as well. The best ideas may come from collaboration anyway, as most great innovations do.

Crisis Mode

September 22, 2008

If you read the news, it’s tough to stay optimistic. And because I sit at a computer most of the day, both at work and at home, and because I like to stay on top of what’s going on in my world, it’s hard not to read. There are a few pieces today that caught my eye today.

The first, on CNN, is about the impending oil prices that may have started to kick into gear. Though the prices had dropped over the past month or so, we saw a huge spike today and there is bound to be expensive gas in our future.

The second, from TIME, is a commentary on the state of the union in a post-bailout America. Through a unique comparison between what we are doing and the French system of government, it is apparent that we may be hurting our “capitalistic” ways.

There are problems in this country right now, there is no denying that. And this election can do a lot to define where we are headed as far as fighting those problems. But there is too much work to be done to rely on candidates and government alone. Despite the recent doubt in many large companies, the best solutions to our problems have always come from the private sector.

Innovative minds must prevail. Think long and hard about where we are and how we’ve gotten here. A lot of times there are easy solutions out there if you just approach the problem from a fundamental point of view. We need to solve the energy crisis now, before it becomes as bad as the financial crisis, which is not that far off. And we can do it in a way that helps to rebuild our country.

In the next ten years, what we do as far as energy is concerned will determine the fate of our planet. New companies will form around the clean energy platform. Existing companies will shift focus to address new concerns. Huge amounts of capital will be laid out to develop infrastructure and materials. But in the end we will succeed, and success will come from the ground up. Be innovation, think clean.

When You Need an Innovative Leader

September 18, 2008

Turmoil. That’s the state of the financial industry right now. Just a few months after the collapse of Bear Stearns, and a few weeks after we were told that the “crisis” was not as widespread as we thought, Merril Lynch was sold to Bank of America, Lehman Brothers went bankrupt, AIG was bailed out by the U.S. government, and Washington Mutual and Morgan Stanley are struggling to stay afloat. Needless to say, this is not your average week on Wall Street.

I had a conversation with a friend about the kind of leadership that huge corporations need in times like these, and the kind of leadership both inside and outside of the company that allowed this to happen. We had mixed thoughts on the matter but what came out of this discussion was an interesting debate on government as well as corporate CEO’s.

Let’s start with Government and Industry Leaders. The current situation did not just pop up out of nowhere. It is the coming together of years of decisions, good and bad, that have shaped the financial industry in our country. It is the result of self-regulation, meaning no regulation, of an industry perhaps most responsible for the wealth of this country. It is the result of risky moves by companies that are supposed to be safe and secure. It is the result of pushing too hard affordable loans to people we knew would never be able to pay them back. And it is a direct correlation to the mindset we have taken in this country when it comes to money and debt, that we can buy today with the hope of tomorrow’s fortune.

In America, we have a history of being far too nearsighted, seemingly ignoring the future implications of our decisions today. It’s a flaw of the system in which the leaders lead. Election and appointment to government positions are temporary, and temporary positions lead to short term solutions. Even when long term solutions are put in place, there is nothing forcing the next in line to maintain those initiatives. So they usually get changed, or cancelled, or replaced with new solutions. The market crisis has been a long time coming.

As for the question of leadership within the companies at this time, there were two points argued. I will always argue that companies need innovative CEOs, or at least CEOs that empower innovators around them. In a time like this, it seems that innovation may be less important as compared to a steadfast determination and calmness, someone who possesses the power to ease fears and show us the light.

Why can’t that be both? Isn’t that a part of innovation? When you think of innovation in a leadership role, you have to consider things outside of product and service innovation. CEOs must be able to motivate and inspire in times of utter chaos through innovative thinking and new ways of communicating old ideas. The CEO who stands in the face of conflict and struggle and leads his team through it must have the insight and courage to think differently. Good luck.

Code Green

September 15, 2008

This is an unplanned post that has suddenly become important to me.  I received the new book I ordered from Amazon earlier this afternoon by Thomas Friedman.  The book is called “Hot, Flat, and Crowded: Why We Need a Green Revolution and How it Can Renew America”.  This best seller has been generating some buzz among its readers as the popular New York Times columnist releases his follow up to his best selling book, The World is Flat.

I ordered it after a recommendation on Seth Godin’s blog and I am happy I did.  Since opening the cover I have not been able to put it down.  Though I am only three chapters in, I can see why this book is getting so much attention.  Friedman’s raw presentation of the facts mixed with expert opinions and cutting edge thinking builds with every page.  This book has the potential to be a defining book of the times, as the thoughts and ideas presented challenge the very way we live.

Yesterday I wrote about America’s potential place in the global economy, and really the mindset that we have to take on to rebuild our country and thrive again.  This book hits on those points hard, with one of the main messages coming across as part warning, part challenge, and part hope.  Friedman paints us as a society whose lifestyle and policies have done all but ignore and deny the biggest problem facing our planet, but as a society with the ability within to lead the way back.

His brilliant commentary on historical events and turning points that have led up to today only fuels the hopeful empowerment that he delivers page after page.  As Americans, what we need to do is admit that we have all been part of the problem, then work to solve it.  Don’t be so cocky as to ignore the issues, but be cocky enough to believe we can fix them.  Because in the past, any time we united for a common cause, we came out on top.

This book is the most recent addition to my recommended reading page.  It calls on innovation from every perspective, and a must read for anyone wishing to move this country forward.

Cooperative Economics in a World Economy

September 14, 2008

I was drawn to a very interesting article on the current state of the American economy and its outlook.  It appears here, in Business Week.  The title of the article is “Can American Invent It’s Way Back?”.  It brings to light a lot of different feelings that we have as Americans, and how we hope to return to our status as world leader.

Innovation has long been at the forefront of a strong economy.  It used to be, the country with the most money and the brightest workers had a clear advantage in a local world.  Then something happened.  The world got smaller.  Developing countries caught up to us in a hurry.  And now, innovation is at the forefront of growing economies like China, India, Brazil, and some Eastern European countries.

There is no such thing as a world economic power, because the economy of each individual country is so tied up in every other country.  Businesses, organizations, governments, consumers and currencies all cross borders.  In the U.S., we need to stop worrying about controlling or dictating the way the world economy works, and get back to what has always made us great, our ability to foresee people’s needs and act to fix them.  We need to harness the strength and determination of our leaders, while empowering the small business innovators that guide us through new territory.

Continued growth is only possible in a cooperative economy.  We need to accept that, nurture it, and work towards it.