In this unintimidating episode, Rocky Lalvani, Founder of Profit Comes First, shares his incredibly simple strategies for helping his clients become more profitable than it they have ever been before.
You will discover:
– Why Sales – Expenses = Profit is dangerously wrong
– HOW to get your business profitable at any size
– One simple hack to put your profit first
Episode Transcript
Scott Ritzheimer
Hello Hello and welcome welcome once again to the secrets of the high demand coach podcast and I’m here with you guessed it another high demand coach. I actually met rocky our guest today on his show and it was an absolute blast and knew instantly we had to have him over here so that he could share with you So who is this is the one the only Rocky Lalvani. He serves as the chief profitability advisor for business owners. He teaches them how to ensure that they get paid and make profit a priority as a certified profit first professional he implements Mike McCalla X’s I believe I got that right Profit First system Profit First remember that the the rest of you don’t need Nick Profit First system. And Rocky has actual direct real estate experience as well with rental and fix and flip properties. He’s worked with other real estate investors to ensure that they are consistently profitable, and has that story that you’ve heard it before. But that rags to riches stories really walked this road, his parents immigrated into the US starting over for a second time. And despite numerous numerous struggles, he’s been able to achieve both financial and life success. We’re Rocky, I’m so excited that we get to turn the mics around, I get to interview you this time. And really happy to have you on the show. Why don’t you tell us a little bit before becoming a profit first professional and, or even before helping business owners with their profitability? What were you doing? And how did that lead you to what you’re doing today.
Rocky Lalvani
So for me, this was a 180, I was still in something totally opposite was not at all what I wanted to do it, you know how life is sometimes you end up on a track and it takes you somewhere that you didn’t want to be that said it. It allowed me to do everything else I wanted. And so it was that love hate relationship. And I was allowed, or I was able to build my wealth, using the same principles that Prophet first uses. And so I had been doing this my whole life. And at one point, I finally said, you know, enough set up, you have the time and the freedom now to go do what you want. You got to make a decision before you have regrets. And so I walked away from a nice job and said, I’m gonna do what I want.
Scott Ritzheimer
That’s awesome. So what would you say that is the most important work that you’re doing today?
Rocky Lalvani
So I think the biggest thing is, and this is really the dirty little secret of owning a business, most business owners aren’t paying themselves what they’re worth, right. They’re not taking a salary that’s miserable with what they would pay somebody to do what they’re doing. And to a lot of them struggle with profitability. They’re constantly scaling and growing, and like, I’ll make a profit when it’s an event instead of a habit. And that’s the reality of what goes on. And I was shocked. Like, I’m like, wait a minute, you’re a business owner, you must understand the business a business, right? And, oh, wait a minute. They went into business to do what they love. And accounting and finance was not on the list in so what you don’t like doing what you don’t? Do you ignore it right? You push it off to the backburner or you hope somebody on your team is doing a job. And I think there’s a lot of misunderstandings in that space to have, who can provide good financial strategic advice, versus who can tell you what happened three months ago? Because there are two different things.
Scott Ritzheimer
Right. So I want to dive right in on this. Because I think it’s a really powerful model that you use, and I know you in particular, do some great work with it. So I’m gonna put Profit First, right? It’s the last thing that happens. You get your sales that come in, your expenses go out, and then you get the cream of what’s leftover, right?
Rocky Lalvani
Is that cream the leftover? Or is that like the but that’s the problem, right? Your accountant tells you sales minus expenses equals profit. Yeah. And so it is a leftover and what Mike did Mike’s a serial business owner, he’s a serial entrepreneur, had massive success, and then lost it all. And he’s like, How is this possible out, I screw up and in through that whole, you know, soul searching event, he said, Wait a minute, I got the wall formula for profit. And so he changed it to sales minus profit equals expenses. We’re all told to pay ourselves first, right? But do we? Right? If profits are priority, then shouldn’t it come off the top every time $1 comes into your business? And that’s literally what this is just flipping the equation. To lipping the mindset and then saying, Okay, let’s put Profit First and let’s make this The Habit instead of some event, five or 10 years down the road.
Scott Ritzheimer
And that event mindset is so big. You see in a lot of different places, but profit is a huge one, I’ll be profitable when right? What size business do you have to be to be profitable Rocky?
Rocky Lalvani
I’ve seen people who are startups put this system into place day one. And they were technically profitable the first time they made a sale, and they put, they took the profit out of that sale. Now there’s startup cost, and there’s investment costs, and I understand all of that. But the point is, you build the habit now, like people say to me, Oh, I’m gonna go to the gym when I lose weight. Uh huh. Sure, you are, right. I’ll be profitable when it’s that same concept. So I think you have to start now. And you have to change the way you behave.
Scott Ritzheimer
Yeah. So a couple of things I’ve heard people pushing back on is, maybe they work in an industry where 3060 90 Day delays happen quite often in their receivables. So they feel like, Hey, I can’t do it, because it doesn’t come later. What would you say to that?
Rocky Lalvani
So that this is not an accounting system, it doesn’t matter when the money comes in. So if you don’t get paid for 90 days, question for us, are you going to be profitable on day 90? When the money finally does come in? Are you taking your profit? Because if you’re not, then there is lies the problem? So there’s nothing wrong with being 3060 90 out. But I’m going to ask you a question. If you’re 90 days out. Are you getting paid for being 90 days out? Because you just became a bank? You loan someone else? 90 days of your worth? Are they paying you commensurate with the extra 90 days? Yeah. And if you’re not, then you got to ask yourself, Hey, maybe I need to change my terms. Or maybe I need to change my pricing. So that I get paid for the fact that you’re holding on to my money for 90 days, you’re not supposed to be a bank, I must set to your business.
Scott Ritzheimer
Yeah, that’s so true. There’s another one that, that I’ve seen and even alluded to this earlier, as we’re growing, right? Shouldn’t we be investing in our growth? Or, you know, we’re not taking profit? What do you how do you help folks navigate that?
Rocky Lalvani
So let me ask you a question. If I came to you, and I said, I’m a growing company, I want you to invest in me. Are you just going to hand me money? Now, what do you want to know? What am I getting my money back? And what’s my return on investment? Right? And if I don’t pay you back, you’re gonna be mad at me? And maybe you’ll come after me? Correct? If those are the terms? So if you’re going to invest in your own company for growth, okay, first of all, you need to be profitable, because otherwise you have nothing to invest. And now, why are you treating yourself any different than you would treat an investor? The same thing? Why are you treating yourself as the owner is the last guy who gets paid or GAO, if you’re an investor, expect a return. So there’s nothing wrong with reinvesting in the business. But I want to know from you, if you take 100,000 In you invest in this business, when are you going to get that return? What are the terms? How quickly is it coming back? And are you going to refill your profit bucket with the 100,000? Plus, we wanted to return on our 100,000. So am I getting the return? And then after that, is the company getting a return? And so it’s literally discipline? And if you’re not doing that, then in reality, we’re fooling ourselves.
Scott Ritzheimer
Yeah. I love that. You said that, because I’ve bumped into a couple people that like we use profit. First, we use profit person as a goal. What’s your profit margin? 0%? What Why does it How does that happen? And we put it in there. And then whenever we need it, we use it. Right? And so it’s like it’s not in Profit First is not about having different bank accounts. But it’s a mindset, right more than it is the actual transactions that you guys teach?
Rocky Lalvani
Well, it is having the bank accounts, each bank account has a purpose, but you’ve got to stick to the purpose of that bank account. And so those business owners are not removing money from their company. At the end of the day, you need to remove money from your company go. And that’s a big part of it. And a lot of these I think the reason these things are happening is because people don’t understand the math of their business. And what I mean by that Profit First is like the beginning of what we do. It’s like step one, it’s a cash flow system, what we really do is a whole bunch of other things behind the scenes. And so we look at a business from three different buckets, the first bucket that we look at is revenue generation, what is your system of revenue generation that looks at leads retention of customers average sales, you multiply all those things out, and you build metric for that. And I can tell what your revenue is, we can go backwards and forwards and figure out what you need to do to generate revenue. Yeah, the second part of your business is what we call, it’s the p&l bucket, which is okay, you brought in all this revenue, where is all this money going? It’s going to overhead employees, marketing, all those other things? What does that look like? And then the third bucket is where the cash disappears, right? This is the kind of the balance sheet bucket, this is the bucket where you talk about, oh, my accounts receivable is 90 days. And so all my money is actually lent out to all my clients. That’s why you don’t have any, and the people are supposed to pay in 90, didn’t pay in 90, some of them paid in 120. And oh, they hit a bad a bad spot. Now they’re not paying me and now everything disappeared. Yeah, it disappears in inventory. Oh, all my, my profit is sitting on inventory on a shelf. And maybe the inventory disappeared, too. Who knows? You know, it depends on how well you are in your business. Or you’re paying back loans, and all of that. And so money disappears from the business. And so we look at everything from those three buckets. And really what it really comes down to in the simplest of terms, you’ve got money coming in to your business, you’ve got money leaking out of your business everywhere. How much is left for you, the business owner to take home and enjoy the life you didn’t go into business to lose money? So are you removing that money both in the you know, in terms of getting paid a reasonable wage for the work you do, and then making a profit for the time in the investment you made into your company?
Scott Ritzheimer
Yeah, that’s so good. And it’s so simple. I feel like of all of the different areas that business owners don’t have to be the best but have to be competent and proficient, I feel like finance is the most intimidating of them right across the board.
Rocky Lalvani
It’s intimidating, but it’s not hard. And I think part of that is you’ve got all these people with degrees and certificates, telling you it’s hard or making you not feel good about it. There’s also a whole nother layer through some motions and money. And a lot of people don’t realize how much emotional baggage comes with money, and how much their money scripts prevent them from having good money habits. So I think between the two of those, and the fact that some people are told math is hard, everything we do, it’s less than fifth grade math, like you don’t have to be smarter than a fifth grader to make this stuff work. At the end of the day, you as a business owner can do this yourself. Or if it’s not what you love doing, then go do what you love doing and generate revenue and put somebody in the seat to do it well. And I think that’s what the smart thing to do is wherever it’s appropriate.
Scott Ritzheimer
That’s so trueRocky, so true. So there’s a question I like to ask all my guests and it is this what would you say is the biggest secret you wish wasn’t a secret at all? What’s that one thing that you wish everybody watching you listening today knew.
Rocky Lalvani
So there’s no reason than I personally am financially successful. And it’s the same principle is profit. First, you have to automate your money, just like you automate the rest of your business. If you automate the money when it comes into your business and say, this money is for my pay, this money is for profit. This money is for taxes. And this money is for what I can truly spend in my business and you send it to do that job. Everything flows in you learn to stay within your constraints, because a million dollar business owner is struggling just as much as a $5 million dollar business owner is struggling just as much as a $500,000 business owner. And that’s the dirty little secret that people aren’t talking about. They’re just working harder and harder. And they’re not making more and more.
Scott Ritzheimer
So true. I found that businesses get bigger, they don’t get better, not unless you put intentional work into it. So folks are listening and they frankly they’ve had enough they’re tired of not being profitable. They’re tired of not paying themselves a decent wage. They need someone to help them get out of it. How can they Get in touch with you and learn more about the work that you do.
Rocky Lalvani
So before they do that, y’all do me a favor. Somewhere where you’re listening to Scott there’s a light button can you like hit that button? Give him a little love. It’s always nice Scott likes that. You know, maybe you know another business owner who would enjoy this he give a little share. It’s called you know, given a little love out there. After you do that, wherever you’re listening to podcasts. Scott was on The Profit Answer Man podcast. That’s where you can find me. Come check us out. Listen to us see if it’s worth having a phone call after that.
Scott Ritzheimer
Fantastic. Well Rocky, thank you so much for being on the show. It’s just a privilege to turn the mics around. Have you on The Secrets of the High Demand Coach, wonderful job. Thank you so much for simplifying this this often intimidating, but like you said, not actually all that difficult world. What you do is really important. I appreciate you coming on and for those of you watching listening today, you know that your time and attention means the world to us. I hope you got as much out of this conversation as I know I did and I cannot wait to see you next time. Take care
Contact Guest Name
Rocky Lalvani serves as Chief Profitability Adviser for business owners. He teaches them how to ensure they get paid and make profit a priority! As a certified Profit First Professional, he implements Mike Michalowicz’s Profit First System. Rocky has direct real estate experience with rental and fix and flip properties. He works with other real estate investors to ensure they are consistently profitable. Rocky started with nothing when his parents immigrated to the United States when he was two years old. It was his parents’ second time starting over in life as they moved here to experience the American dream. Despite a lot of struggles, he has been able to achieve financial and life success.
Want to learn more about Rocky Lalvani’s work at Profit Comes First? Check out his website at https://profitcomesfirst.com/ or his Profit Answer Man podcast
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