50: How Ego Can Sabotage Success with Mike Michalowicz

Ben Kahle 0 Comments

By his 35th birthday Mike Michalowicz (pronounced mi-‘kal-o-wits) had founded and sold two multi-million dollar companies. Confident that he had the formula to success, he became an angel investor…and proceeded to lose his entire fortune.

Then he started all over again, driven to find better ways to grow healthy, strong companies. Among other innovative strategies, Mike created the “Profit First Formula”, a way for businesses to ensure profitability from their very next deposit forward.

Mike is now running his third million dollar venture, is a former small business columnist for The Wall Street Journal; is the former MSNBC business make-over expert; is a popular keynote speaker on innovative entrepreneurial topics; and is the author of Profit First, The Pumpkin Plan and The Toilet Paper Entrepreneur, which BusinessWeek deemed “the entrepreneur’s cult classic.”

Time Stamped Notes

[6:00] Mike tells us about the two businesses where he was an angel investor, both in the technology area. One of them was born after watching CSI and asking and betting to a friend if what they did on their computers was possible.

[7:45] Timing is a massive factor in success, as Mike found with his first business out of college. That time the ‘genius’ formula was born: Start a company, build it super fast, sell it and repeat.

[9:45] The formula of ‘start it, build it, sell it’ was the motivation behind the angel investing decision. With money in his pockets, the ego took charge thinking he knew the answers.

[10:50 ] Everything was a downward spiral since day 1 of his angel investing ventures. From food items delivery system to a manufacturer of leather products, businesses were all over the place and no value was being added. Ego was blinding.

[12:30] The only criteria for finding entrepreneurs was that the idea sounded cool. To them, he provided office space and everything behind the scenes of the business. He controlled the outflow of money… through the window.

[14:00] After a call from his accountant in 2008 telling he wouldn’t be able to pay his taxes, Mike came to the realization that he was aware of his businesses not going right but wasn’t acknowledging it.

[16:56] Then, it was time to start a new path. To learn about managing money and businesses, while building a path of impact, serving others and not just of making money.

[20:00] An expensive lesson was learned with the failed business angel investing and success trophy life of living in an expensive town and buying all the luxuries.

[21:48] Mike thinks of what impact he wants to have and how to fix himself. That’s when he came to the circular system where what he needed to fix himself is what he needed to teach. He talks us through his journey of becoming an author.

[24:52] Failing Forward Segment

  • What is the bottom line reason of this failure? – “Because of ego alone. I let my mind… egotistically take over and dominate everything.”
  • What is the single most important lesson you learned from this? – “Journaling. It’s a powerful outlet for your challenges and also a powerful form of self discovery.”
  • What are the major ways you protect yourself from future failures? – “I surround myself with mentors.  I also implemented a financial system to protect myself from myself”
  • Who do you turn to when you need help? – “My business partner, my wife, my mentors”
  • What advice would you give to someone in a similar position? – “Finding one other person who’s not emotionally attached to the situation… to help you out”

[31:42] Profit First is a system developed around the natural behaviour of looking at our bank balance. With the envelope system, money comes and is divided into the needed parts of business like profit, tax liabilities and such. This way a business can the run effectively.

[33:50] Mike tells us a story about how a baseball team in Georgia was saved by his books Profit First.  

[43:25] You can find all about Mike’s most recent book Profit First at http://profitfirstbook.com/

[45:45] Mike’s final thought: “When it comes to your wealth (personal or business): If you get more satisfaction on spending money than saving money you’re in a losing battle. The day you decide to get more satisfaction at saving than spending is the day you’ll never lose.”

To hear this episode and many more like it on your mobile device, you can subscribe to How To Lose Money on iTunes or Stitcher.

Quotes:

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