Today's Guest

Rocky Lalvani is the CPO (Chief Profitability Officer) at Profit Comes First, where he helps entrepreneurs and small business owners grow their businesses profitably. Rocky is certified in the Profit First method first developed by Mike Michalowicz (see Winning on Main Street episode #75) and has hands-on experience increasing profits for multiple businesses. Rocky also hosts the Profit Answer Man and Richer Soul podcasts where he shares all the tips and advice he’s learned along the way. In this episode, Rocky breaks down the Profit First concept and shows us how Parkinson’s law can be used to help your business get more done with fewer resources.

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Episode Summary

I grew up in an immigrant family during the late 60s and early 70s. Because I wasn’t white but I also wasn’t black I struggled to fit in. What I learned early on is how to develop grit. I learned about money from my family and the other families around us. I grew up listening to stories about how people were leveraging what they had to generate an income and build wealth. 

From an early age, I had a strong desire to earn money. I had my first paper route around 12 or 13 years of age and that is where I learned that the better I served a client, the bigger the tip I would receive. Another example of money savviness -- we lived in New Jersey and when we would go into New York City I would buy various items in bulk at wholesale prices then come back home and divide the units out and sell them to my friends for double the money. Because of this, I was always the kid with pockets full of cash. But I hadn’t learned to save yet, so I would blow it all on worthless things.

While I did go to college, I didn’t get good grades because I was too focused on working and making money. At some point, I decided I wanted to get out of Corporate America and build my own business. Along that journey, I came across the concept that most business owners don’t understand their financials. Which didn’t make any sense at first because making money is the essence of business. Then it was explained to me that people go into business to do what they love and rarely is accounting at the top of their list. That is when I had my aha moment of what I could build my business around.

Profit First is a system that gives your money a job. Similar to how we taught our kids about money, we gave them an allowance, and in one envelope they have money to spend, in another envelope money to save, and in another, money to give. All we did with Profit First is turn the envelope system into a structure for businesses. Take all the money that comes in and put it in one envelope. Then take the money out and set aside money for profit, money for your pay, money for taxes, and then the remaining money is what you have left to spend on your business. What happens with most business owners is they see a pile of cash in their bank account and they just go spend it.

One of the concepts we talk about is Parkinson’s law, which means work expands to fill the time available for its completion. If your kid has 3-weeks to complete a book report, he or she will take three weeks. But even that is a lie because they waste the first 17-days and do nothing. It is the same with your business, Parkinson’s law tells us is if we constrain ourselves, we will find a way to use fewer resources. By taking the big bank account and turning it into smaller bank accounts, you will find a way to run your business on what you have leftover. This concept also works with your employees. If you tell them they have an hour to complete a project, guess what happens, over the next hour the job gets done.

Resources Shared

• Profit Comes First
• Profit Answer Man Podcast
• Richer Soul Podcast
• Thryv
  

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