Conversation with Mike Michalowicz
If you want to create a thriving yoga business, you will need to understand your finances!
That can feel overwhelming, but using the Profit First method really helps this! If you’ve listened to me pretty much anywhere, I’ve likely encouraged you to buy the Profit First book.
Profit First literally changed the way I look at finances in all aspects of life and business and it’s one of those things that I can’t stop talking about.
I’m incredibly honored to have had the opportunity to chat with Mike Michalowicz, the author of Profit First. Mike Michalowicz is an entrepreneur who has founded and sold 2 multi-million dollar companies. He has devoted his life to the research and delivery of impactful entrepreneurial strategies and he’s shared some of these strategies in his books. The Toilet Paper Entrepreneur, The Pumpkin Plan, Clockwork and Fix This Next are just a few of his books but the one that we’re diving into today is his book Profit First.
Profit First is a method to use with your business finances (and your life, really) that allows you financial freedom. It’s the method that changed the way I look at finances. I went into detail about the Profit First method in episode #73 if you want to check it out!
In today's conversation, Mike and I talk about money mindset as well as practical applications for his method as a yoga teacher. You can’t build the thriving yoga business of your dreams if it’s not stable financially, so this is a critical piece of the puzzle.
Let’s dive into the conversation with Mike!
Managing your finances can be fun with the Profit First method
Yoga teachers aren't usually taught in teacher training that you are an entrepreneur. You are doing this on your own! It's a whole new mentality you have to step in. And finance isn't necessarily FUN for most yoga teachers.
But I work with a lot of yoga teachers who have implemented the Profit First method and they actually love it! I have heard students say that it makes them feel like they are in control of their business. It gives them clarity and direction. It changes their mindset completely.
A few of my students have actually reached four-figure profit distributions. For a yoga teacher to say "I just gave myself a bonus of a thousand dollars - that's huge!
**This was also a podcast episode (episode #100). Use the player below if you'd prefer to listen to this message.
Your yoga students want you to be profitable
"Profitability brings about stability, and stability brings about the best of ourselves. That's why our clients want us to be profitable." - Mike Michalowicz
Your students want to be cared for. They want to be treated like they are everything to you because yoga is important to them! And the only way we can give students our best attention is if we're profitable.
If you are always worrying about how you are going to support your life, and you're constantly thinking you might need to add another class, introduce a new course, or do something else new to bring in money, then that keeps you from being present in the moment with your students. You can't be all there in the moment.
"I truly believe you have the responsibility to be profitable, and you should be very proud of that. When your clients know you're not worried about money, you're worried about them - that's when they will be clients forever." - MIke Michalowicz
How you’re rewarded through the Profit First method
Let's talk a bit about profit distribution and how it serves as a reward!
The idea of profit is to reward what's called the shareholder. And you as the owner of a small business, you are a shareholder in your business entity!
(If this all sounds like greek, remember that you can head on over to episode 73 to learn about the basic framework of Profit First!)
By starting a yoga business, you have taken on risk and you are contributing to our society.
Not only are you serving your clients, but you might have vendors, you get supplies, mats, and maybe you rent studio space. All of that is contributing to our economy! And for doing that, you need to be rewarded. There needs to be a thank you. That is what the profit distribution is.
What should you do with your profit distribution?
You can use profit in any of the following ways:
To pay off personal debt
To put toward your future
To do something FUN!
Sure, you may need to pay off debt, but Mike encourages you to use at least a small percentage to do something fun for YOU! That might be getting a pedicure, a new book, or meeting friends for lunch. As humans, we need that dopamine release. We want to reduce pain and increase pleasure. There is nothing more powerful than saying "my business paid for this."
Profit distributions are set to be every 90 days for a reason. It serves as a behavioral mechanism. If we give ourself a profit or reward every week or two, it becomes routine and expected. But every 90 days is a long enough increment that the anticipation starts to build, so it keeps the momentum going of anticipating the reward of profit. It's psychology!
Once your business grows and you hire people to work with you, you can share profit with your employees, too! Your team can rally around this method. It leads to more motivation. "I'd rather sleep in a Motel 8 and celebrate with everyone than have my team be unmotivated. By sharing a profit, my entire team has focused on the profitability of the organization and the entire profitability has improved that much more. It also helps the business fiscally by sharing with everyone. And it improves their motivation too, of course!" - MIke Michalowicz
Why to use all the bank accounts in the profit first method
I hear all the time that the multiple bank accounts are overwhelming. In that case, start small! Start with just a couple of accounts and see how it serves you. Then add on.
This is what I did. I started with just two bank accounts and then I grew and grew. And now I love having all of the bank accounts!
"Start slow and let it grow." - MIke Michalowicz
There's a psychological concept called "behavior intercept" and why our multiple accounts are necessary has everything do with this.